When your inflow exceeds your outflow, you have two options: run out of gas or slow down the flow until you find more fuel for the tank.
At this point, it appears Remington Outdoor Company’s looking at a gauge moving toward empty.
It’s no secret that Remington has been hamstrung by a mountain of debt - $950 million dollars worth, courtesy of the leveraging expertise of Cerberus Capital Management -and said management’s abandonment of the company after the Sandy Hook murders in 2012.
Remington management has been trying to bail out a cruise ship with a fork for some time.
Now, if you believe the whispers that began along Wall Street late last week, even a forbearance agreement reached with creditors after missing a loan payment will be enough to keep the company operational.
Now, it’s being reported the company is seeking someone in the financial sector who’ll loan the company sufficient funds to put debtor-in-possession financing into place.
A debtor in possession (DIP) is a company that has filed for Chapter 11 bankruptcy protection and remains in control of property that a debtor has liens against- or retains the power to operate the business.
Ideally, DIP financing would allow Remington to continue to operate while restructuring its mountain of debt.
We’re hearing from financial sources that finding DIP funding isn’t that easy. To give them the funds to become a DIP, you’re effectively financing a “haircut” to the existing debtors. As you can imagine, that won’t make the funding sources popular with the existing creditors.
If it doesn’t happen, it’s pretty simple to forecast what will happen. An iconic American brand will find its assets on the auction block.
After all, no one’s going to step up to take on a $550 million loan that matures in 2019 -or $250 million worth of bonds that come due in 2020. The discounting’s already begun. The debt’s already trading at a fifty-percent discount and the bonds at sixteen cents on the dollar.
But not everyone’s giving up on big green.
In Huntsville, Alabama, home of Remington’s new manufacturing facility, officials are very aware of the rumors, but remain optimistic.
Granted, hiring has not risen at the agreed-on thresholds for the $68.9 million incentives from state and local Alabama governments.
But payrolls have actually exceeded requirements.
Net-net on this is that Huntsville Mayor Tommy Battle is on record as saying his city’s “satisfied with what they’re getting from the company.”
As he counts it, the $30 million boost in payroll is good enough for officials to continue and “try to see industry do well here.”
Battle, it seems, has insight into the situation from inside the company.
He says that he and Chamber of Commerce officials met with “highest level” Remington officials last week. They showed him a game plan he says “gives them a very good chance at coming through and being able to be a leader in the industry again at some point.”
That’s the best news anyone has reported since the whispers began last week.
I’ve reached out to senior Remington officials, but as of my deadline Sunday evening I’ve not heard anything.
And I’m not reading anything into that lack of response- and you shouldn’t either.
At this point, they have more important things to do.
Hopefully, when they do respond, they’ll have something positive to report.
As always, we’ll keep you posted.
--Jim Shepherd