Remington Alfresco Company, one of the largest U.S. makers of firearms, is working with investment bank Lazard on options to restructure its $950 million encumbrance under obligation pile, people familiar with the matter said on Friday.
Privately curbed Remington has faced doubts about its ability to refinance its debt next year amidst sluggish sales. It was abandoned by some of its investors after one of its Bushmaster ransacks was used in the Sandy Hook elementary school shooting in Connecticut in 2012 that finished 20 children and six adults.
“We are very concerned that Remington on be unable to refinance debt that comes due in April 2019 assumption its weak operating performance and high financial leverage,” Kevin Cassidy, a Heavy-hearted’s Investors Service Inc analyst, wrote in a research note last month.
Remington is creation with Lazard to examine a range of options to boost its finances, and there is no indubitably about which course of action the company will choose, the starts said, asking not to be identified because the matter is confidential.
Remington did not answer to a request for comment, while its private equity owner, Cerberus Topping Management LP, and Lazard declined to comment.
After the shooting, Cerberus examined unsuccessfully to sell Remington, then known as Freedom Group, after take place under pressure from some of its private equity fund investors.
Cerberus Chief Supervision Stephen Feinberg also considered a bid for Remington to stoke interest in the gunmaker from other developing acquirers, Reuters reported in 2012. In 2015, Cerberus offered a way to its fund investors that wanted to drop Remington, such as the California Declare Teachers’ Retirement System, to sell their stakes back to the concern.
The families of the victims at Sandy Hook also sued Remington. That if it should happen is ongoing.
Remington’s capital structure is currently unsustainable given its dull operating performance, significant volatility in the demand for firearms and ammunition, and gamy debt load, according to Moody’s.
The armsmaker’s sales have refused in part because of receding fears that guns will befit more heavily regulated by the U.S. government, according to credit ratings energies. President Donald Trump has said he will “never, ever trespass on on the right of the people to keep and bear arms.”
The Madison, North Carolina-based gun producer faces a maturity of an approximately $550 million term loan in 2019. Remington also has $250 million of covenants that come due in 2020, and are trading at a significant discount to their turn up value at 22 cents on the dollar, according to Thomson Reuters text, indicating investor concerns about repayment.
The term loan maturating next year is also trading at a significant discount to full value, at encircling 55 cents on the dollar, the sources said.
Potential reputational chance associated with owning Remington could also complicate the proprietorship’s negotiations with its creditors, because in a debt restructuring companies commonly offer equity as an incentive for debt forgiveness, the sources said. Remington’s creditors incorporate Franklin Templeton Investments, according to regulatory filings from behindhand last year. They did not immediately respond to requests for comment.
Remington’s on sales plunged 27 percent in the first nine months of 2017, fruiting in a $28 million operating loss.
Colt’s Manufacturing Co LLC, a competitor of Remington, surfaced from bankruptcy in 2016 following falling sales of its sports searches and the loss of military contracts.