Remington Outdoor Company has announced its intention to file for bankruptcy protection. Remington, however, will not be dismembered to feed scraps to creditors in this softening gun-sales market.
Remington will go through a managed bankruptcy that will allow the 200-year-old company to stay in business while restructuring its debt. The negotiated plan basically allows Remington to reduce its debt by $700 million while also contributing $145 million of new capital to the company.
So, after being freed from crushing debt, Remington will have a chance for a fresh start.
Remington said in a statement that its operations “will not be disrupted by the restructuring process” and that “employee wages and other benefits, support for customers, and an ongoing high level of service to consumers will continue without interruption.”
Remington was purchased in 2007 by the private equity firm Cerberus Capital Management, but Cerberus will give up that ownership once the restructuring is complete.
Though “bankruptcy” is a term loaded with bad connotations, most financial analysts are reporting that this is a good thing for Remington and for the millions of Americans who grew up shooting the iconic company’s Model 870 pump-action shotguns, Model 700 rifles and more.
Under the terms of the agreement with creditors, holders of a $550 million term loan with the company will 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 getting through the bankruptcy process the DIP loan will convert into an exit term loan. This will keep the historic gun company operating while also alleviating a crushing debt and providing $145 million in capital.
With gun sales dipping overall in the U.S. after years of breaking records, it’s not surprising that Remington, which has long been a Goliath of a gun company, found itself overextended. Remington also still has an aging factory located in Ilion, N.Y.—right where the company was founded in 1816. The Remington Arms factory in Ilion is a historical wonder with a museum well worth visiting, but like old houses aging factories can bring costs.
To stay competitive, develop new products and evolve as a manufacturer in America, Remington has been investing in new CNC machining and more in its Ilion plant, and it opened a plant in Huntsville, Ala.
In February 2014, to consolidate production and lower production costs, Remington announced its plan to build a new state-of-the-art plant in Huntsville. Remington decided to move two production lines from the Ilion plant to Huntsville after the state of New York passed the Safe Act, a massive gun-control and gun-ban piece of legislation. Remington now makes its Bushmaster and DPMS modern sporting rifles, Model 1911-style pistols and more in the new plant.
So the good-news spin from Remington on this bankruptcy filing isn’t just wishful thinking, but rather looks to be a savvy plan to bring the iconic American company back to what it has always been, an American gun maker producing quality firearms for average Americans, police departments and the U.S. military.
Remington is, after all, the oldest American manufacturer that still makes it original product—guns. Given the details of this deal, maybe the company has a few more centuries in it after all.
