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Remington has reached a financing deal that would allow it to continue operating as it files for Chapter 11 bankruptcy protection. Time
The announcement that Remington Outdoor plans to write off $700 million in debt in a planned bankruptcy filing marks a new financial wound for the firm that proudly bills itself as “America’s Oldest Gunmaker.”
Sales at many U.S. firearms makers have dipped over the last year. The decline may be partly linked to the public perception that Washington won’t impose new restrictions on gun ownership during the administration of President Trump, a National Rifle Association supporter.
Financial rating company Moody’s Investor Service downgraded Remington’s corporate family rating to Caa3, a highly-speculative level, in December. Moody’s simultaneously said the probability of a Remington default had increased.
“We are very concerned that Remington will be unable to refinance debt that comes due in April 2019 given its weak operating performance and high financial leverage,” said Kevin Cassidy, the senior credit officer at Moody’s Investors Service.
On Monday, Remington said it had reached a restructuring agreement with creditors that would enable the company to write off $700 million of the company’s estimated $950 million debt.
The deal calls for a pre-approved bankruptcy filing that would also pump $145 million of new capital into Remington’s operating subsidiaries and provide $100 million in creditor-funded money as a debtor-in-possession term loan. The company’s announcement did not give a timetable for the expected filing in Delaware bankruptcy court.
In conjunction with the announcement, Remington disclosed unaudited and preliminary 2017 data that showed the company as of December had net revenue of $603.4 million, down from $865.1 million the previous year. Remington also said its 2017 gross profit percentage was 20.9%, down from 27.4% in 2016.
“Importantly, the fundamentals of our core business remain strong,” Remington CEO Anthony Acitelli said in a statement issued with the restructuring agreement. “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.”
200-plus years of weapon-making
The company traces its origin to 1816, the year when Eliphalet Remington II handcrafted his first rifle barrel at his father’s forge and then had a Utica, N.Y., gunsmith fabricate it into a flintlock rifle.
The new firearm proved to be a major upgrade on other home-forged rifles of the time. Remington soon founded a rifle-making business in which he forged and sold thousands of his creations to gunsmiths across the country, according to the history on the website of the private-equity backed company that’s now headquartered in Madison, N.C.
Over the ensuing decades, Remington hit the target with other successes.
In 1845, he negotiated a contract to craft 5,000 Model 1841 rifles for the U.S. Army Ordnance Department, the company history says.
Remington died three months after the Civil War began in 1861. His three sons, Philo, Samuel and Eliphalet Remington III, kept the family business supplying pistols, carbines, rifles, and muskets to the federal Army and Navy during the war.
The company continued to manufacture firearms for America’s military forces during succeeding U.S. wars.
In 1988, Remington introduced the M24 Sniper Rifle, which the company says remained the U.S. Army’s standard sniper rifle through 2010 and continues in use by other nations’ armed forces.
Remington’s more recent financial fortunes have been mixed.
In 2007, the company at that time known as Remington Arms was bought by New York private equity firm Cerberus Capital Management for $118 million. The deal also called for Cerberus to assume Remington debt totaling $252 million, up from $157 million seven years earlier.
The sale came just before U.S. gun sales rose. But in 2012, Remington took a hit on the news that Adam Lanza used one of the company’s Bushmaster XM15-E2S in the Connecticut massacre in which he killed his mother and 26 children and educators at Sandy Hook Elementary School.
Remington was cleared of any wrongdoing in the tragedy. But Cerberus investors pressed the private equity firm to sell Remington. Failing to find a buyer, Cerberus agreed to let the investors sell their Remington stakes in 2015, The New York Times reported.
Ian Hockley, whose son Dylan was killed in the 2012 Newtown school shooting, spoke outside the Connecticut Supreme Court after lawyers asked to reinstate a lawsuit against Remington Arms, the maker of the gun used by shooter Adam Lanza. (Nov. 14) AP
Contributing: Associated Press
Follow USA TODAY reporter Kevin McCoy on Twitter: @kmccoynyc