Thu 07/09/2020 13:32 PM
Relevant Documents:
Legislative Summary Sheet
Sandy Hook Scheduling Docket
Remington Appeal to Supreme Court
Sandy Hook Initial Complaint
Sandy Hook Amended Complaint

Remington Arms Co., a Madison, N.C.-based manufacturer of firearms and ammunition, is working with O’Melveny as legal advisor and Ducera Partners as financial advisor as it explores a chapter 11 filing that could include a sale process with the Navajo Nation as a bidder, according to sources. A bankruptcy filing would come about two years after the company’s previous chapter 11 case and as it prepares to go to trial in 2021 as defendant in a lawsuit related to the Sandy Hook Elementary School shooting.

Remington’s capital structure includes a $192 million ABL revolver and $55 million first-in, last-out, or FILO, term loan due May 2021 and a $100 million first lien term loan May 2022. The existing debt was issued as take-back paper as part of the company’s emergence from a chapter 11 process in 2018. Under the plan of reorganization, the company equitized about $775 million of debt, with term lenders receiving 82.5% of the reorganized equity and third lien noteholders receiving the remaining 17.5%.

A legislative summary sheet dated June 12 from the Navajo Nation’s Budget and Finance Committee shows an action to approve a “direct equity investment” of up to $300 million in an unnamed company, described as “a non-native owned nationally recognized manufacturing entity that enjoys worldwide brand recognition.” The document notes that the Navajo Nation’s investment committee contracted outside counsel to perform due diligence under a nondisclosure agreement. “The due diligence and negotiations concerning the Company indicate that a direct investment in the Company of up to $300 million in the form of equity will produce a projected annual rate of return of more than the five (5) year average rate of return of the Master Trust,” the findings read.

The resolution from the June 12 meeting references a DIP facility, stating that the up to $300 million investment will be “pursuant to the terms and conditions set forth in the Nondisclosure Agreement, attached hereto as Exhibit E; and the Debtor-In-Possession Loan, Security and Guaranty Agreement, attached hereto as Exhibit F; and the Asset Purchase Agreement, attached hereto as Exhibit G.” None of the exhibits, however, are attached to the document.

In December 2014, nine families and a survivor of the Sandy Hook school shooting in Newtown, Conn., filed a wrongful death lawsuit against Remington. In August 2019, Remington appealed to the Supreme Court to challenge a Connecticut state court ruling that allowed the case to proceed. In the filing, Remington said, “Allowing this case simply to proceed will inflict on the firearms industry the very harm the PLCAA (Protection of Lawful Commerce in Arms Act) was meant to address - massive, unsustainable litigation expenses, which threaten to destroy an industry that makes lawful products whose possession and use the Constitution specifically protects.”

The Supreme Court denied Remington’s petition to block the lawsuit in November 2019. The case is scheduled to go to trial in September 2021.

Remington’s emergence from chapter 11 in May 2018 coincided with an escalation in the national debate about gun control legislation after the February 2018 mass shooting at a high school in Parkland, Fla. Retailers including Walmart, CVS and Walgreens have adopted stricter gun policies following mass shootings in California, Ohio and Texas in 2019. Gun background checks, as an indicator for consumer firearm demand, have declined since President Donald Trump took office after hitting a peak of 27.5 million in 2016 under the Obama administration, according to the FBI’s National Instant Criminal Background Check System. Since Trump took office, the number of background checks declined to 25.2 million in 2017 and 26.2 million in 2018, though they rose again to 28.4 million in 2019.

Founded in 1816, Remington designs, manufactures and markets firearms, ammunition and other related products for various industries, including hunting, shooting sports, law enforcement and military markets.

Remington, O’Melveny, Ducera and the Navajo Nation did not immediately respond to a request for comment.

--Millie Dent, Andrew Berlin, Harvard Zhang

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