This is a harbinger of things to come. Vendors are unsecured creditors and many manufacturers are owed millions that they likely may never see. In this market, that loss of revenue may be fatal. For buyers, this will result in fewer mechanisms for firearms, accessories, and ammo to get to the market. I know my local FFL used Ellett Brothers as a source of inventory. At least, he has no financial exposure, but hard-to-get items, like the Ruger Wrangler, will be harder for him to get. SportCo which is the parent company is reorganizing and plans to liquidate Jerry's and Ellett Brothers as part of the reorganization. Plus, there is a civil lawsuit arguing the owners of SportCo engaged in fraud.
https://www.thetacticalwire.com/feat...k9kWCsObc6xIO4
Yesterday, the “other shoe dropped” in the matter of SportCo Holdings, the company that owns, among others, Ellett Brothers and United Sporting Co. After months of rumors concerning their overall fiscal health, the company filed for Chapter 11 bankruptcy, saying it planned to liquidate it’s holdings.The top ten major unsecured creditors in the SportCo filing are (from #1 to #10) : Vista Outdoors ($3,299,326.61), Sturm Ruger ($3,196.842.10), Magpul Industries ($2,078,353.17), Savage Arms Rifles ($1,927,392.50), Bushnell Corp. ($1,879,795.66), Navico Company ($1,743,684.04), Henry RAC Holding Corp. ($1,467,618.00), Smith & Wesson Corp. ($1,386, 714.26), Garmin USA, Inc. ($1,150,579.41), and Fiocchi of America ($1,096, 632.70).According to the filing, that listing of individuals, managers and entities were collectively loaned a total of $188,864,420.94, ostensible to build Ellett Brothers LLC and the various affiliated subsidiaries. Instead, the suit alleges is the funds never used for their intended purpose. Instead the borrowers used them - along with proceeds of additional loans from other lenders- to enrich..themselves. In fact, the lawsuit claims that $183,169,466.94 of more than $188-million went to Wellspring IV- the controlling and largest shareholder of the borrowers. If that’s the case, this would unquestionably be the largest fraud case -ever- in the firearms industry.More information on the lawsuit: https://www.thestate.com/news/busine...231381818.htmlThe story went on to report that H&K was losing a financial battle due to lagging sales, In fact, the report said, 2018’s losses were so significant that financial issues were only cushioned by “two bridging loans from an unnamed major shareholder.”
So severe was the situation that KPMG inserted a warning in their 2018 audit. The passage reads: “the lack of liquidity endangers the continued existence of Heckler & Koch. To ensure continued existence, significantly more revenue would have to be generated in the current year than the previous year.” Indications are that the necessary revenue generation hasn’t happened yet. Last month, H & K’s German workers approved a wage waiver, agreed to increase weekly working hours from 37 to 37.5 hours with no overtime, and cancelled a planned one-time payment of 400 Euros per worker. Earlier this year, H&K was forced to pay a multi-million fine over illegal arms exports to Mexico. H&K, meanwhile, remains in the competition for the new assault rifle for the Bundeswehr - which currently carries the company’s G36. But an issue outside rifle performance stipulated in the Ministry of Defense specs - is causing concern that H&K may be disqualified.
The issue? The overall fiscal health of companies being considered. H&K has asked for a change in the fiscal requirements, but the German report quotes politicians as saying any lessening of the fiscal requirements would be a very “political decision” -and not likely.