May 2, 2018 5:47 p.m. ET
5 COMMENTS
Remington Outdoor Co. saw its bankruptcy process move swiftly toward an end Wednesday when a judge said he would approve the firearms maker’s reorganization plan, which will place the company under the ownership of its creditors.
Judge Brendan Shannon of the U.S. Bankruptcy Court in Wilmington, Del., indicated he would sign off on
the plan, subject to changes, despite attorneys for the U.S. trustee and Securities and Exchange Commission
arguing against the broad protections offered to third parties that could shield them from future litigation.
“I attribute great weight from the support of the creditor body,” Judge Shannon said Wednesday after overriding the objections.
Remington’s plan was
fully supported by its lenders and creditors, court papers show. In addition, the plan includes a $5 million litigation trust that could be used in the future to bring certain claims against stakeholders.
The historic gun maker
sought chapter 11 protection in March as it struggled with nearly $1 billion in debt, declining sales and lawsuits tied to the Sandy Hook school shooting. Since the outset, Remington planned for a quick process, with a plan to exit bankruptcy protection in just 45 days.
The reorganization plan, which Remington ironed out with its creditors in the weeks leading up to the bankruptcy filing, will see the company’s ownership shift to its prebankruptcy creditors, which include
Franklin Resources Inc. and
JPMorgan Chase & Co.’s asset management arm.
The creditors agreed to take control of the company in exchange for wiping out much of its debt.
Remington’s bankruptcy filing had been delayed for some weeks as negotiations ran longer than expected after the
Feb. 14 school shooting in Parkland, Fla., which left 17 dead, reawakened the national debate surrounding gun regulations, The Wall Street Journal previously reported.
Although the creditors recently reached this deal to take over the company, the new owners plan to unload the asset to another buyer as soon as they can profitably do so, the Journal previously reported.
Remington’s plan will see the term loan lenders receive an 82.5% stake in the reorganized company, and third-lien noteholders will take a 17.5% stake and a $39.3 million cash distribution, court papers show.
Meanwhile, the company’s $338 million bankruptcy financing package will be converted into an exit term loan after Remington emerges from bankruptcy. Among the bankruptcy financing lenders is Remington’s holding company.
Judge Shannon’s green light for the reorganization plan will bring to an end private-equity firm Cerberus Capital Management LP’s tumultuous ownership of the firearms maker.
The buyout firm bought Bushmaster Firearms International in 2006, and in 2007 acquired Remington, putting the two firearms companies under the same umbrella to form an entity that would eventually become Remington Outdoor Co.
Cerberus experienced a series of ups and downs with its investment, however. The private-equity firm planned to take Remington public, but a number of management and manufacturing setbacks complicated efforts to revamp operations.
In December 2012, a Bushmaster rifle was used to kill 20 children and six staff members at Sandy Hook Elementary School in Newtown, Conn. In the following years, nine families of victims
filed a wrongful-death lawsuit against Remington, alleging the gun maker was liable for producing and selling a weapon unfit for civilian use. The matter has since reached the Supreme Court in Connecticut.
Meanwhile, the gun industry has been faced with flagging demand and excess of inventory after manufacturers boosted output ahead of the 2016 presidential election, where a victory for Hillary Clinton was expected to trigger tougher ownership rules.
Gun sales are largely connected to the political atmosphere, and gun makers’ fortunes tend to rise and fall depending on who is in the White House, analysts have said. While gun sales rose in the years that Barack Obama was in office because of fear of greater gun control, demand has plummeted since President Donald Trump took office.
Remington, like its competitors, ramped up its production in 2016 in anticipation of higher demand in 2017. “Those demands, however, ultimately did not materialize,” Chief Financial Officer Stephen Jackson Jr. said earlier in court papers.
Remington was founded in 1816 and is one of the country’s oldest and largest gun and ammunition manufacturers. The company manufactures its products in seven different facilities in the U.S., and delivers its products throughout the U.S. and about 52 countries globally.