Remington Outdoor Company is headed to Delaware with a prepackaged bankruptcy reorganization plan that will not only grant it bankruptcy protections, but will include a deal with their lenders that grants ownership of the 200 year-old company.
Under the terms of the agreement, holders of the $550 million term loan get 82.5 percent ownership and third lienholders will get the remaining 17.5 percent. The creditors will also supply a $100 million debtor-in-possession (DIP) loan to finance operations through bankruptcy.
After coming through the bankruptcy process, the loan will convert into an exit term loan.
It’s a slick bit of financing that will keep the 200-year old company operating.
But it also converts a crushing debt while simultaneously providing a much-needed capital infusion of $145 million into Remington’s operating subsidies.
If you’re into financial lingo, it strengthens the company’s “consolidated liquidity, balance sheet, and long-term competitiveness.”
“Difficult industry conditions make today’s agreement prudent,” said Remington Executive Chairman Jim Geisler, “I am confident this regrouping ensures that Remington will continue both as a strong company and an indelible part of our national heritage.”
Don’t know that that rhetoric isn’t slightly overheated, but it is the equivalent of once again pulling a rabbit out of the proverbial hat.
Especially at a time when the industry is still trying to determine the “new normal” for sales under an administration that has pledged “never to come after the Second Amendment.”
According to Remington CEO Anthony Acitelli, the fundamentals of the business remain strong.
That’s despite Remington having posted a precipitous drop over the past year. For the nine-month period ending October 1, for example, revenues were down 27.5 percent over the same period.
New regulatory filings outlining the restructuring plan also show the company’s sales in 2017 dropped more than thirty percent to $603.4 million compared to the $865.1 prior year’s results.
Margins also tightened as the company deeply discounted product.
The new agreement doesn’t mean Remington’s about to reverse several years of lagging sales, but it does mean the 500 or so employees in Huntsville, Alabama will be keeping their jobs.
That validates Huntsville Mayor Tommy Battle’s faith in Acitelli’s team and their ability to assemble a deal that would not only be palatable to investors, but acceptable to the regulators, and bankruptcy court.
The financial reporting on yesterday’s developments made it patently obvious that despite their supposedly dispassionate reporting on financial matters, some in the business media were willing to stretch logic to equate Remington’s financial situation with yet another sign that the “gun culture” was either dying out or reducing itself to a hard-core group of gun owners.
One group went so far as to headline that “Trump’s election may have been the final nail in the coffin” for Remington.
Others quoted anti-gun organization leaders as “industry observers” - and they couldn’t wait to pronounce the industry as on the way to extinction.
One thing that wasn’t said - at least not out loud: the industry is quietly pleased that this latest financial arrangement will take Cerberus Capital Management out of the gun industry.
In the bankruptcy reorganization, Cerberus will lose its ownership, and the company’s creditors -which include Franklin Templeton Investments and JPMorgan Asset Management will swap their debt for equity.
Freed from that crushing debt load, Remington has a new lease on life.
Now it’s up to Remington and its associated brands to produce quality products that consumers want to buy.
We’ll keep you posted.
--Jim Shepherd
Editor’s Note: You can read the required filing here