Remington Files for Bankruptcy
Jon Stokes 03.26.18
We reported a while back that Remington was looking to file for bankruptcy, and today the news has broken that the venerable armsmaker has filed Chapter 11 in US court.
Remington’s bankruptcy filing is being portrayed by partisans on the anti-gun side as some sort of victory in the gun control wars (it isn’t), and on the pro-gun side as the sad story of a once-great brand that just gave up on innovation and quality (also not the real story).
The real story begins and ends in the same place as the recent bankruptcies of Toys-R-Us, the Sports Authority, and many other retailers that are currently in trouble: with private equity (PE).
PE works as follows: they load up on debt in order to buy an existing business, then they put that debt on the books of the business they bought. So in Remington’s case, Cerberus borrowed to buy Remington on the premise that they could use the cash flows from Remington’s business to pay off the debt they borrowed to buy it.
What typically happens in these cases is that in order to service the new debt load, the target company has to either increase sales, cut costs, or both. In Remington’s case, the company cut corners and costs, leading to a string of product problems and recalls. The bad PR drove down sales, and then the Trump Slump hit and they just couldn’t service their debt.
So, they’re in bankruptcy court, which is where a shockingly high number of other consumer-facing businesses are going to find themselves in 2018. The company will reorganize, creditors will take a haircut, and it will hopefully emerge from bankruptcy protection with a reduced debt load and as a going concern.
We wish Team Green the best in this difficult time, and we look forward to seeing a renewed focus on quality and innovation come out of this dark chapter in the brand’s history.