Remington enters bankruptcy following agreement with creditors
April 2018 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING
Financier Worldwide Magazine
April 2018 Issue
One of the largest firearms manufacturers in the US, Remington Outdoor Company, has filed for Chapter 11 bankruptcy protection to reduce its $950m debt load by around $700m.
The company will receive $145m in bankruptcy financing in order to maintain normal operations throughout the Chapter 11 process. Remington has also confirmed that employee wages and benefits will continue as normal, as will payments to trade creditors.
As a result of the restructuring, Cerberus Capital Management LP, the private equity firm that controls Remington, will lose its ownership stake. The company’s creditors, which include Franklin Templeton Investments and JPMorgan Asset Management, will exchange their debt holdings for equity in the restructured company.
Jim Geisler, executive chairman of Remington, said, “Since its founding over 200 years ago, Remington has been a uniquely American company and brand. Our longevity is owed to generations of loyal customers and hard-working employees who met challenges and delivered results. Difficult industry conditions make today’s agreement prudent. I am confident this regrouping ensures that Remington will continue as both a strong company and an indelible part of our national heritage.”
Anthony Acitelli, Remington’s chief executive, said, “Importantly, the fundamentals of our core business remain strong. We have an outstanding collection of brands and products, the unqualified support of a vibrant community across the industry, and a deep and powerful culture. We will emerge from this process with a deleveraged balance sheet and ample liquidity, positioning Remington to compete more aggressively and to seize future growth opportunities. We look forward to serving our customers, our partners throughout the industry, and our many fine employees, now and long into the future.”
Remington’s collapse comes at a delicate time for the gun industry. Colt’s Manufacturing Co LLC, a competitor of Remington, emerged from bankruptcy in 2016 following falling sales of its sports rifles and the loss of military contracts.
Declining sales have become a feature of the gun industry in recent years. Remington’s sales in the first three quarters of 2017 fell 27.5 percent to $466.7m. However, the issue has been sector-wide. Gun sales have been down since the election of Donald Trump and the future of the industry has come until intense scrutiny in the wake of several high-profile school shootings.
Remington was vilified after the Sandy Hook elementary school shooting in Connecticut in 2012, which saw 20 children and six adults killed by a gunman using a Remington Bushmaster AR-15-style rifle. Though the company was cleared of any wrongdoing in the aftermath of the massacre, it is being sued by the parents of the victims in the Connecticut supreme court. Investors, spooked by the incident and subsequent lawsuit, fled the company. Cerberus did try to sell Remington amid pressure from some of its private equity fund investors; however it was unable to find a buyer and allowed Remington’s investors to sell their holdings in the company instead.
During the Obama presidency, gun purchases caused the FBI to process a record number of background checks. It is believed that the number of background checks is a reliable barometer of gun sales, and the number of checks carried out has increased steadily over the last decade. There are suggestions that a spike in gun ownership has occurred due to fearmongering over a potential crackdown on guns by the Obama administration. President Trump, during the 2016 election campaign, told the NRA that he was a “true friend and champion” of gun rights. After his election, gun purchases slowed down. Firearm background checks fell faster in 2017 than in any year since 1998, when the FBI first began compiling the data. It is believed that the decline is due to consumers no longer fearing that they will lose their ability to buy a gun.
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