How Chapter 11 bankruptcy can help dig Remington Arms out of debt

27 March, 2018, 19:07 | Author: Austin Daniel
  • The Remington RM380 first gun to be made by the company in its new Huntsville Ala. plant is displayed at the 2015 NRA annual meeting in Nasvhille Tenn

America's oldest gun manufacturer, Remington, has filed for bankruptcy after a weekend where millions of students marched across the US against gun violence in the wake of the Florida school shooting.

The move by Remington Arms and it's parent company Remington Outdoors is what the company's CEO says a decline in gun sales over a 12 month period.

Reuters reports that Remington's creditors, including Franklin Templeton Investments and JPMorgan Asset Management, have agreed to exchange debt for equity in the company.

That type of gun has also come under increased scrutiny in recent years by gun control advocates because of its use in mass shootings. That attack has led to huge protests around the country and a new student-led movement to tighten gun laws. Sunday, the manufacturer filed for bankruptcy due to declining sales and legal troubles over its production of the Bushmaster AR-15 rifles, the one used in the Sandy Hook School shooting in Newtown, Connecticut and potentially defective triggers on its Model 700 bolt-action rifle.

Remington employed 1,300 people in Ilion in 2014, but its workforce in Central New York today is closer to 1,000. As a result, the families of the victims sued the gun maker.

Remington plans to keep on making guns. Perhaps most significantly, having an National Rifle Association-approved Republican in the Oval Office may have actually hampered gun sales, as the Chicago Tribune has reported.

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The company is one of the oldest gun manufacturers in the U.S.

With a pre-packaged bankruptcy plan, the North Carolina-based company will reduce the debt size by some $620 million, according to filings with a DE bankruptcy court.

In addition to its heavy debt load, Remington has seen sales drop since the election of Donald Trump as president. Industry observers have dubbed the current downturn in sales the "Trump slump".

"The average American gun owner owns three guns, according to a 2015 survey conducted by Harvard and Northwestern University".

That smaller base of what are sometimes referred to as super-owners has made the industry more unstable.

But that only bought time for it to seek Chapter 11 bankruptcy protection, which will allow the company to reorganize under the court's supervision rather than completely cease operations.

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