Remingtons Bankruptcy May Be the Tip of the Iceberg

Firearms companies face declining product sales, falling stock prices  and great debt. Gunmaker American Outdoor Brand names Corp., formerly known as Smith & Wesson, has seen its share plummet by almost half through 2017. On Monday,   Remington Outdoor Co., an iconic, 200-year-old American firearms manufacturer,   introduced it’ s planning to file for bankruptcy.    

With Republicans in control of Wa, there’ s little chance of gun regulation— even in the face of Wednesday’ s massacre in Florida. Whenever Barack Obama was president or even Democrats controlled Congress, gun product sales would generally rise after a bulk shooting for fear of more limited laws. The gun lobby pressed these worries despite a lack of substantial legislative effort  by the Obama administration. Since Donald Trump is in the Oblong Office, fear of new gun laws and regulations has receded, industry executives possess said. And so have sales, harming both retailers and manufacturers like Remington.

In December, James Debney, ceo of American Outdoor, said “ fear-based ” buying of guns had stopped.   According to information collected by the  FBI’ s i9000 National Instant Criminal Background Check Program, a barometer for firearms product sales, January 2018 was the slowest in gun purchases since this year . Even on Thursday, after  gunmaker stocks rose in premarket trading, shares headed down again by afternoon. (The assault rifle used in the Parkland high school attack was the Smith & Wesson AR-15, law enforcement said . )

Following gun stores and producers, the next victim of the industry’ t political success could be distributors. Mainly because most are  privately owned, cash flow data  are hard to come by. Still, organization debt can offer a glimpse to their financial health. The declining overall performance of  a $140 million mortgage to distributor  United Sporting Cos., for example ,   suggests there may be an issue.  

United is a private equity-owned holding company whose subsidiaries consist of Ellett Brothers and Jerry’ ersus Sport  Center, two gun marketers that work with more than  30, 500 independent retailers across all fifty states (Sturm,   Ruger  & Co. says  15 percent from the sales are to the two subsidiaries).   They distribute  hunting plus shooting-sports products, including handguns, ammo, silencers  and holsters. In 2016, Jerry’ s was named “ distributor of the 12 months ” by Marlin Guns, a company owned by Remington.

A $140 million mortgage extended to United fell in order to less than half of its face value this past year, according to U. S. Securities plus Exchange Commission filings by the loan’ s holder, the business development corporation Prospect Capital Corp.  

Since Prospect makes financial loans to private companies but provides issued shares to the public, it’ s required to disclose its financial records, even when the companies on the hook for that loan are not. In Prospect’ s  annual report for 2017, the organization said a fair value of its mortgage to United was almost $47 million— about 33 percent from the face value. That was down through 94 percent  in its report for your quarter ended March 31, 2017.

Michael Grier Eliasek,   a director of Potential customer, said in the securities filing that will United had been hit by a cyclical slowdown in gun sales, and also by the bankruptcy of a major consumer, sporting goods retailer Gander Mountain.  

Usa and Prospect didn’ t instantly respond to requests for comment.

“ When there are polls that go a certain way, right now there tends to be a slowdown in product sales to the firearms sector for the very first six or nine months approximately, and then there’ s a more of the normalization thereafter, ” Eliasek stated in an August conference call  whenever he was asked about the writedown, which at that time was 59 % of face value.