Last year, the nation’s oldest gun manufacturer went bankrupt, but it continues to operate as a market leader in the firearms industry. Remington’s resilience provides an excellent case study on the bankruptcy of a business that continues to operate, and the actions its creditors took to save it.
A perfect storm
Remington’s bankruptcy was unexpected, to say the least. Over the past decade, the gun market has been booming. Experts in the industry claimed President Obama was the best gun salesman ever since 2nd Amendment enthusiasts feared he would curtail their rights, and therefore stockpiled guns and ammunition.
But when President Trump was elected, things changed. People were no longer buying out of fear, so gun sales slowed dramatically. Around this same time, Remington was sued by the relatives of the victims of the Sandy Hook massacre. The shooter favored Remington guns.
The bad press and drop in sales couldn’t have come at a worse time for Remington, which had a great deal of debt foisted upon it by the private equity company that bought it back in 2007 — they did some sort of financial wizardry that sort of made the company pay for its own acquisition and then some. Remington couldn’t make the hefty payments and was forced to declare bankruptcy.
Down but not out
Instead of liquidating its assets and closing up shop, the century-old company negotiated a debt-for-equity swap with its creditors. Creditors took ownership stakes in the company in exchange for forgiving more than $775 million of debt. Remington also received $193 million in new financing.
It is on this new financial footing that the company will move forward. It has a state of the art factory in Alabama and sportsmen across the country who are loyal to the brand. Thanks to the bankruptcy system, it can capitalize on these assets and perhaps stay in business another 100 years. As Anthony Acitelli, Chief Executive Officer of Remington put it, “It is morning in Remington country.”
Not as unique as it may seem
Remington’s story is not uncommon despite the fact that there are not a lot of news articles written about companies that successfully navigate the bankruptcy system or debt-for-equity swaps. Every day the Hanson and Payne team helps Wisconsin businesses who are contemplating bankruptcy, or who have already filed, find a path forward. And we are just as frequently called on by creditors who are looking for guidance when a debtor is in financial trouble.
The sooner a business comes to us for help, the more options are available to it. We have lots of experience helping debtors and creditors avoid bankruptcy altogether by negotiating business workouts or creative financing options. Debt-for-equity swaps are just one option.
Whether you or one of your clients are facing challenging market conditions or made poor financial decisions, there is a path forward. The Hanson and Payne team can help your business out of even the most difficult situations. Contact us today to schedule an initial consultation.