Remington Outdoor Co., one of the largest firearms makers in the United States, said on Monday it planned to file for a Chapter 11 bankruptcy deal as part of a plan to lower its debt and turn around its slumping business.
The company, which is controlled by private equity firm Cerberus Capital Management, will shed some $700 million in debt in the prepackaged reorganization that will be filed soon with federal bankruptcy court in Wilmington, Del. The move comes amid declining sales linked, at least partly, to reduced fears among gun owners that the U.S. government will impose more regulations on buying firearms. Last year, President Trump called himself a “true friend” of the gun industry. In the first three quarters of 2017, Remington’s sales fell 27.5% to $466.7 million, pushing it into the red.
The company also faced intense, unwanted attention in the aftermath of the 2012 massacre at Sandy Hook elementary school in Newtown, Conn. where 26 people, including children, were killed by a gunman armed with, among other weapons, a Remington Bushmaster assault rifle. That made it hard for the company to attract new investors. After the Sandy Hook shooting, Cerberus Capital failed to sell Remington, then known as Freedom Group, even as some investors exerted pressure on Cerberus to do so.
Remington’s plan calls for it to receive $145 million in bankruptcy “debtor-in-possession” financing as it winds its way through the Chapter 11 process. Cerberus will no longer own the 200-year-old Remington, while creditors will get equity in the company in exchange for the debt being written down. The company will have to contend with the prospect of lower sales for some time. According to the FBI, the number of background checks of prospective firearms buyers, a proxy for gun sales, fell again in January compared to a year earlier, continuing a trend of declines for nearly every month in 2017. For the full year in 2017, background checks fell 8.4% to 25.3 million.
In a statement, executive chairman Jim Geisler said, “Difficult industry conditions make today’s agreement prudent.”