Remington reaches deal with creditors to file for bankruptcy
Remington Outdoor Company Inc, one of the largest US makers of firearms, said on Monday that it had reached a deal with its creditors to file for Chapter 11 bankruptcy to slash its $950 million debt load.
The planned bankruptcy filing follows a decline in sales at the arms maker, in part because of receding fears that guns will become more heavily regulated by the US government, according to credit ratings agencies.
US President Donald Trump has said he will “never, ever infringe on the right of the people to keep and bear arms.”
Since Trump’s election victory i n November 2016, American Outdoor Brands Corp has lost almost two thirds of its stock market value, while Sturm Ruger & Company Inc has fallen by a quarter. By comparison, the S&P 500 has increased by a quarter in the same period.
Remington said it would receive $145 million in bankruptcy financing to fund the company through the Chapter 11 process.
The company plans to file bankruptcy in US Bankruptcy Court in Delaware, seeking to write off about $700 million in debt.
Cerberus Capital Management LP, the private equity firm that controls Remington, will lose ownership of the company as a result of the bankruptcy.
The company’s creditors, which include Franklin Templeton Investments and JPMorgan Asset Management, will exchange their debt holdings for equity in the company.
“Business operations including employee wages and benefits and payments to trade creditors will continue as usual through the bankruptcy,’’ Remington said.
“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,” Remington chief executive Anthony Acitelli said in a statement.
Reuters had reported last week that Remington was looking for financing to file for bankruptcy.
Remington was abandoned by some of its investors after one of its Bushmaster rifles was used in the Sandy Hook elementary school shooting in Connecticut in 2012 that killed 20 children and six adults.
After the shooting, Cerberus tried unsuccessfully to sell Remington, then known as Freedom Group, after coming under pressure from some of its private equity fund investors.
Cerberus chief executive Stephen Feinberg also considered a bid for Remington to stoke interest in the gunmaker from other potential acquirers, Reuters reported in 2012.
In 2015, Cerberus offered a mechanism to its fund investors that wanted to drop Remington, such as the California State Teachers’ Retirement System, to sell their stakes back to the company.
The families of the victims at Sandy Hook also sued Remington. That case is ongoing. Remington’s sales plunged 27% in the first nine months of 2017, resulting in a $28 million operating loss.
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.