Remington Was Turned Down by 30 Lenders After School Shooting

Updated on
  • Remington needed funding for bankruptcy but found few takers
  • After school shooting, lenders reluctant to deal with gunmaker
Guns in America

For Remington Outdoor Co., one of the oldest firearms makers in the U.S., not even going bankrupt is easy these days.

At a time when gun-control demonstrations have unfolded across the nation and the world, 30 lenders declined to provide bankruptcy financing for the company, according to court filings. In the end, two prominent financial companies -- Franklin Resources Inc. and a unit of JPMorgan Chase & Co. -- ended up giving Remington the bulk of a $100 million loan. The names of other lenders that agreed to provide financing were blacked out from court documents.

Gunmakers have fallen on hard times. An expected jump in sales stemming from the expected election of Hillary Clinton never materialized due to her defeat, and retailers such as Dick’s Sporting Goods Inc. have restricted sales. Remington, burdened by debt from its 2007 acquisition by Cerberus Capital Management, filed for Chapter 11 on March 25, a day after throngs energized by student survivors of a February mass shooting in Florida rallied for the passage of tighter gun laws. The skittishness of Remington’s potential lenders could be the first sign that Wall Street is listening to them.

Remington, to speed through Chapter 11, needed three new forms of financing to help it stay afloat through the bankruptcy process.

Bridge Loan

The company was able to secure a $45 million bridge loan from its parent, which is owned by Cerberus, to give it enough cash to make it to the bankruptcy in the first place.

The company also had to negotiate debtor-in-possession loans to finance operations through the Chapter 11. Remington sought a $100 million term loan from outside investors to provide a large chunk of the cash. It had no takers.

“The vast majority of lenders contacted, however, indicated that they were reluctant to provide financing to firearms manufacturers,” according to a court filing. The company’s adviser, Lazard Freres & Co., said it approached 30 potential lenders -- not just banks but hedge funds specializing in distressed debt who are usually hungry for such opportunities -- and found no appetite among them. After eight parties agreed to further talks, most declined, citing timing factors as well as “concerns about investing in the firearms industry.”

Names Redacted

Finally, existing term-loan lenders agreed to extend the $100 million loan -- but their identities remained anonymous. Their names are redacted from court documents. They’re supposed to be repaid through stock in a new, reorganized company.

Spokesmen for Franklin, JPMorgan and Cerberus declined to comment. A Remington representative didn’t respond to requests for comment.

Remington appears to have had an easier time negotiating with parties to an asset-backed loan, which will be repaid in cash and not stock when Remington exits bankruptcy. Eventually, the lenders provided $193 million. Their names are disclosed in the court filings. Among them are Bank of America Corp., Wells Fargo & Co., Regions Financial Corp., Synovus Financial Corp., Fifth Third Bank Bancorp and Deutsche Bank AG.

In a filing, Remington acknowledged the effect of media attention on its business. “Negative attention will likely have a negative influence on public opinion” and “may impact the long-run demand for Remington’s products,” it said. The company also talked about its litigation risk.

Madison, North Carolina-based Remington is involved in a lawsuit concerning the 2012 mass shooting that left 26 dead at Sandy Hook Elementary School in Newtown, Connecticut. Bushmaster, owned by Remington, manufactured the firearm used in those killings. The company is also entangled in litigation over trigger defects on guns such as its iconic Model 700 rifle.

The AR-15 assault rifle used in the Florida school killings was made by another gunmaker, Smith & Wesson, a unit of American Outdoor Brands Corp.

The case is: In re Remington Outdoor Company Inc., 18-10684, U.S. Bankruptcy Court, District of Delaware (Delaware.)

— With assistance by Steven Church, and Polly Mosendz

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