Citing decling sales, Remington goes bankrupt again

[0ddl0t]

Cliffs: Remington has declared chapter 11 bankruptcy again, hoping to reorganize its debt to keep operating while searching for a buyer. The Navajo Nation was in talks to buy Remington, but those talks recently broke down. Remington says gun sales are still about half of 2016 and that its COVID shutdowns haven't allowed it to meet current surges in demand.

https://finance.yahoo.com/news/remington-outdoor-returns-bankruptcy-chapter-033424046.html

[LittleLebowski]

Raped by a management company.

[Stephanie B]

Raped by a management company.

Vulture capitalism at its finest.

[Zincwarrior]

I recently shot some Remington 9mm ball ammo for the first time in years. It was surprisingly accurate and nonproblemmatic.
They will be missed.

[Baldanders]

Vulture capitalism at its finest.

I'm starting to think of it as a cancer in America's economy.

Any chance the asset strippers get called out in a big way during this crisis where we need all the robust manufacturers we can get?

[Baldanders]

I recently shot some Remington 9mm ball ammo for the first time in years. It was surprisingly accurate and nonproblemmatic.
They will be missed.

Even if the company goes down the tubes, I would hope someone would buy up the ammo-making capacity of Remington given the extremely robust market for ammunition now.

I have found Rem "green box" good target fodder. Hope it doesn't go away.

[Stephanie B]

I'm starting to think of it as a cancer in America's economy.

Any chance the asset strippers get called out in a big way during this crisis where we need all the robust manufacturers we can get?
Not with Team R. The junior senator from Utah made his money as one of those pirates.

[psalms144.1]

To think that anyone making firearms, ammunition, or components is NOT making money hand over fist right now is astounding.

[farscott]

I am not fan of vulture capitalism, but there is a place for private equity to come into a distressed business and make changes that fix it for the long term. And some private equity companies do that. It appears the owners of the company formerly known as STI are going down this path. The other companies take the easier path of making money today at the expense of the long-term outlook for the business. That is who owns Remington. We saw the same thing with Colt's owners, Zilkha & Co.

[entropy]

“Team D” would have them sued into oblivion, anyone owning an 870 paying retributions, and the assembly line reconfigured to make statues of Che.

Give it a break already.

[Seven_Sicks_Two]

Remington has had a tough row to hoe in the last few years to get back into the good graces of firearms dealers and consumers. There was some resentment regarding a real or perceived drop in quality from brands like Remington and Marlin, and a ton of competition in the AR space for DPMS and Bushmaster. Other brands came in and ate up market share in segments that Remington used to do very well in. Compounding that, the market for everything was pretty soft in the aftermath of Trump's election. I'm not qualified to speak to financial issues at the macro level, but these would have been difficult problems for any company to navigate.

[UNK]

Not with Team R. The junior senator from Utah made his money as one of those pirates.

More like team swamp . Theres not enough bad words in my vocabulary to accurately convey my feelings towards that vile pos.
I just hope I can score of of those shorty birds head semi autos before they go under.

[0ddl0t]

To think that anyone making firearms, ammunition, or components is NOT making money hand over fist right now is astounding.

It is a great business, but about 15 years ago a private equity firm bought Remington for a couple hundred million dollars and used the clean balance sheet to borrow over a billion dollars which the private equity firm then used to pay themselves fat bonuses. They then left Remington saddled with the debt and nothing to show for it.

Remington paid down the debt from $1.2 billion to ~700 million on their previous bankruptcy and have paid it down under 400 million now so the underlying company is still generating hundreds of millions of dollars in cash each year, they just aren't generating quite enough cash to handle the massive debt they were saddled with.


(disclaimer: I haven't looked closely at the financials in over 6 months so these numbers may be off slightly, but they're in the ballpark)

[Sanch]

I'm starting to think of it as a cancer in America's economy.

Any chance the asset strippers get called out in a big way during this crisis where we need all the robust manufacturers we can get?

Not directed at you personally since several people made similar comments. But I never understood the hatred against “vulture capitalists”

Imagine there’s a company that is losing money and about to go bankrupt. In a free market where people understand the risks of vulture capitalists, then accepting a deal with them would truly be a last case scenario right? Remington didn’t blindly enter in not knowing they’d get asset stripped.

So we have to agree that the company has only two options. Shut down completely, walk away from debts, liquidate assets at pennies on the dollar and fire all employees immediately OR accept a deal with a vulture capitalist.

Because if a bank loan or other way to raise capital was possible, they’d have done that, so we have to agree the alternative to venture capitalist is immediate closure and termination of employees.

So they take the vulture capital deal, and instead of going bust immediately, the Vultures allow the company to remain solvent for 6 more months, maybe a few years because of the investment capital they bring.

The end outcome is the same usually, but employees got another few years of paychecks and had ample time to find new jobs knowing the vultures are actively stripping the firm. Versus immediate termination, and collect a couple months unemployment benefits at $250 a week (during normal non covid stimulus time) and desperately seek new work, taking any shitty job they can find.

Meanwhile customers, who have Remington products, have time to buy spare parts, get last minute warranty work done, and make plans to change guns if they require a company that’s still in business for support needs. Versus the company immediately shuts down with no notice and your gun that you sent in for warranty last week gets mailed back undone. Sorry.

Now we might argue, “but why do the vultures have to strip the company?” And the answer is that it’s the most profitable use of their capital and there’s risks involved, they aren’t doing this out of the kindness of their hearts. And if they can turn around the company and make it profitable, instead of stripping it, they’ll sell it whole to someone else and cash out that way. Whichever has the most profit.

If we banned them by law or encouraged them through political pressure not to strip companies, they’ll take their balls and go home to play with someone else. It’s not worth their capital risk to try to fix a broken company to return it to being a whole company again. It’s only worth their time/money if they can strip it. So take that away and they cease to exist. And the only option is the company to go bankrupt and fire all workers immediately.

Same deal with “predatory payday lenders” who charge 300% interest. Take that away and their customers may literally starve or go homeless because that deal was better than the alternatives and if we demand by force of law these lenders charge a “reasonable” rate of interest to their subprime customers who can’t get credit at a regular bank for “reasonable rates” because they’re a bad risk, and these lenders shut down completely since the risk isn’t worth the capital. Sure they make 300% interest on a few people because most others default completely and leave them empty handed.

And if you think you can run a profitable payday lender business charging “reasonable rates” go ahead and do it and put these assholes out of business using the free market via competition. But I think you’ll fine lending subprime people with 300 FICO scores out of their eyeballs in debt money at 5% will result in your bankruptcy.

Similarly, if you think you can turn around failing businesses as good as a vulture capitalist and keep them viable long-term then get a few hundred of your friends to kick in $50k each from your retirement accounts and start your own ethical capital investment firm. But if those don’t exist today then it’s probably because they aren’t profitable relative to the risk.

[Sanch]

It is a great business, but about 15 years ago a private equity firm bought Remington for a couple hundred million dollars and used the clean balance sheet to borrow over a billion dollars which the private equity firm then used to pay themselves fat bonuses. They then left Remington saddled with the debt and nothing to show for it.

Remington paid down the debt from $1.2 billion to ~700 million on their previous bankruptcy and have paid it down under 400 million now so the underlying company is still generating hundreds of millions of dollars in cash each year, they just aren't generating quite enough cash to handle the massive debt they were saddled with.


(disclaimer: I haven't looked closely at the financials in over 6 months so these numbers may be off slightly, but they're in the ballpark)

I’m not aware of these specifics but assuming they’re true, and I have no reason to doubt you, they seem true, the problem isn’t Cerberus or the free market, the problem is the government. The fed had enacted a ZIRP policy for over a decade now. This allows this predatory type of behavior to occur. Because investors who need to get a certain rate of return, like pension funds who need a 7% annual return by mandate, can’t get it with government treasury bonds or even with blue chip company bonds like Apple or IBM because the government has pushed down rates super low.

Investors who need a higher rate of return may lend money to Cerberus, which is riskier and thus returns a higher yield, and allow Cerberus to strip the company. But imagine if the fed didn’t have such crazy rates. A Treasury bond would yield 7%. Why would anyone lend money to Cerberus who we know will probably use the money to pay exec bonuses and then declare bankruptcy, if we can get a 7% risk free return? Cerberus would have to pay a 20% return in that environment to get anyone to lend them money.

Thank the government for pushing investors to risky propositions like Cerberus because of government monetary policy. Investors have no choice but to lend Cerberus money at 7% when the federal yield is 1.2% for a 30 year bond and a safe company like Apple might only have to pay 3% out on their long term bonds.

Pension funds MUST get 7% or they default on their pensioners — teachers, firefighters, cops, teamsters, etc. so these institutional investors buy up vulture capital debt because the government forces them to by taking away any other reasonable less risky choice.

[SecondsCount]

Not with Team R. The junior senator from Utah made his money as one of those pirates.

He's scum, leans farther left than he does right, even further left than the D he ran against.

Remington has some great products but they decided to race to the bottom against Savage and Mossberg, and they lost.

[fixer]

“Team D” would have them sued into oblivion, anyone owning an 870 paying retributions, and the assembly line reconfigured to make statues of Che.

Give it a break already.

I guess we are still on the "Democrats don't want to take away your guns" gaslight.

[fatdog]

...resentment regarding a real or perceived drop in quality from brands like Remington and Marlin, and a ton of competition in the AR space for DPMS and Bushmaster. Other brands came in and ate up market share in segments that Remington used to do very well in. Compounding that, the market for everything was pretty soft in the aftermath of Trump's election. ....

I think you nailed, it, balance sheet aside. They also had some other market losers in the portfolio like ParaOrdinance, Tapco, etc. Product wise, more losers than winners in the competitive marketplace the last few years. No successful innovation at all.

They had a plan to abate their higher cost labor and taxes with the relocation and centralization of their manufacturing operations to that facility in Huntsville. I think that was a drop in the bucket financially if it worked at all.

I am sure the PE thing with the debt loading was not a help. On their best day most PE types are like bankers, except half as bright and 4 times as ruthless.

[JAD]

I can't like Sanch's first post because I think there's a difference between corporations and individuals*, and therefore can't agree with what he says about payday loans. But he is dead nuts on VC; they are organisms that evolved because they have a purpose, and employees and creditors of failing companies do better overall because they exist.


*to wit: the decay of a company through the VC process is part of corporate life cycle; it's a process they go through before they completely go away. When a person uses a payday loan, they're still going to wind up in the same place -- the safety net -- but they'll hit it harder, from a greater height, with more massive debt.

[Sanch]

I can't like Sanch's first post because I think there's a difference between corporations and individuals*, and therefore can't agree with what he says about payday loans. But he is dead nuts on VC; they are organisms that evolved because they have a purpose, and employees and creditors of failing companies do better overall because they exist.


*to wit: the decay of a company through the VC process is part of corporate life cycle; it's a process they go through before they completely go away. When a person uses a payday loan, they're still going to wind up in the same place -- the safety net -- but they'll hit it harder, from a greater height, with more massive debt.

I think you’re saying that payday loans are parasitic and serve no benefit because safety nets in modern societies exist and the individual would be better off if they skipped the payday loan and went right to the safety net. This is a tough one to discuss because we’d get close to have to discuss whether government safety nets should exist or if they should be private charities.

Let’s agree government safety nets exist. Because they do. And ignore whether or not they should. Suppose Lisa is living paycheck to paycheck and takes out a payday loan. She eventually fails down to government safety net but now she’s strapped with extra debt. But she used less of the government safety net because she used payday loans for a few months. Tax payers may be better off since Lisa used less government assistance. However, if she’s so far in the hole that now she’ll be on government assistance longer because of the deeper hole payday loans got her into, then the taxpayer is on the hook for more in the long run.

Suppose Mary uses payday loans but doesn’t get too deep in. She really just needs cash flow for a couple weeks and she is able to use it responsibly. Like someone who can take opiates for a broken bone but not get addicted. She never needs government assistance and thus taxpayer is better off. Mary has some extra debt to dig out of, but never needed government assistance.

Depending on the ratio of Lisas to Marys may determine which is better for the taxpayer.

But as a taxpayer, I don’t want to be the safety net of first resort. Before you send a cop to my house with a gun to take half of my annual salary, maybe get help from family, friends, and yeah, that predatory payday company. Maybe you’ll hit rock bottom and be less likely to relapse into whatever caused your catastrophic debt spiral. For some people it’s unavoidable, I get it, and I’m sympathetic. But for others who are driving leased BMWs to the food bank looking for a handout with the newest iPhone In their pocket, I’m less sympathetic towards.

So if we made the safety net harder to use, then it may cost more in the long run for the taxpayer to help that person out of their deeper hole, but it may discourage others from getting into that situation by setting an example. So we may have less people making bad decisions in the future. Resulting in lower tax burden on us all.

I’m sorry if I offended any LEOs here with my comment of seizing half my salary at gun point with threat of murder, but if you dig down, that’s what taxes are. If you don’t pay them, the irs sends you a letter. If you ignore the letter, they’ll send men to your house in suits and ties. If you ignore those guys, they’ll send guys with guns, if you ignore them, they send more guys with guns to lock you in a cage. If you refuse to go, they’ll draw their gun, and if you struggle they may murder you. Over paying for the safety nets of society.

I doubt any cop here murdered anyone for unpaid taxes but the implication is there and that’s why we all pay them. I don’t have a better method except smaller government and to remind everyone the income tax is less than 100 years old in our country and was started to tax the Uber wealthy 0.01% of the time. The early 1900s equivalents of Bill Gates and Bezos. And now we all pay it, before we even get our paycheck. Our employer sends the government their cut.

Sorry for the rant. Back to Payday loans, it’s a tough one, it may reduce burden on tax payers or increase it on the net. Depending on the ratio of Lisas to Marys to Julies who saw the two of them get in trouble and made better life decisions.

But if we scrapped government handouts, then the free market would take over and payday loans would play an essential part. And private charities would make up the rest, as they did for hundreds of years in this country before SNAP and section 8 housing. Which is part of the government’s agenda to make us more reliant on them. Break our legs, hand us a wheelchair and demand we thank them for their help. Since no one can remember to 100 years ago when churches and private charities did all of the safety net stuff. Like no one can remember 14 year old boys with 22 rifles in school so they can go in the woods after school and plink.

[BehindBlueI's]

I can't like Sanch's first post because I think there's a difference between corporations and individuals*, and therefore can't agree with what he says about payday loans. But he is dead nuts on VC; they are organisms that evolved because they have a purpose, and employees and creditors of failing companies do better overall because they exist.


*to wit: the decay of a company through the VC process is part of corporate life cycle; it's a process they go through before they completely go away. When a person uses a payday loan, they're still going to wind up in the same place -- the safety net -- but they'll hit it harder, from a greater height, with more massive debt.

There's a difference between investing in distressed companies with a plan to revitalize them and an alternate plan to break them up if that proves impossible. That's not vulture capitalism. Vulture capitalism has no purpose other than to further concentrate wealth in a few hands at the expense of the rest of us.

It follows the following plan:

Buy a business, largely with debt.

Borrow more money against the business.

Strip assets, pay yourself first then pay some of the debt, preferably the debt that you and your buddies hold.

Use some of that debt to buy back your own stock to artificially drive up stock value.

Sell yourself assets, such as the real estate the businesses sit on to yourself, then rent them back to the business. Then you can also keep the property when "your" business defaults.

Cash out.

Chapter 11 and scoop out a few last assets.

Default.

If you'd like an example, look up Lampert and Sears as an extreme one. When otherwise viable businesses are bought, loaded up with debt, stripped of assets, then cast adrift leaving everyone else holding the bag. That's not of benefit to anyone but the vulture and his buddies. Bonus points for blaming a union for the companies demise.

[BillSWPA]

In addition to the point made by BehindBlueIs', one of the critical differences between a legitimate investor and a vulture capitalist is the honesty with which they represent their intentions to those with whom they make deals. Many who have found themselves dealing with vulture capitalists were given every reason to believe they were dealing with legitimate investors who shared the goal of partnering for the long term benefit of the business and everyone involved, only to find out that the vulture capitalists only intended to take what they could.

Any time a partnership is entered, it is critical to be careful to ensure that the partners share your values and goals. It is equally critical to ensure that all deals are in writing, with experienced business attorneys drafting and reviewing the terms to ensure that they do not provide opportunities for manipulation by unscrupulous partners.

Taking on investors is often a critical and necessary step, but it is also one that must be undertaken with extreme caution.

[0ddl0t]

It's tough. The people who owned Remington before Cerberus obviously wanted to sell it for as much money as possible and Cerberus gave them the best offer. But plenty of business owners choose to sell for a little less to new owners they feel will safeguard their company's legacy (Warren Buffett makes this case when people sell to him for less than they could otherwise get).

[okie john]

Even if the company goes down the tubes, I would hope someone would buy up the ammo-making capacity of Remington given the extremely robust market for ammunition now.

I have found Rem "green box" good target fodder. Hope it doesn't go away.

This. I recently bought a case of their cheap 150-grain CoreLokt load for my 308. It shoots like match ammo.


Okie John