Remington agrees restructuring to be implemented through Chapter 11

New York, Feb. 12 – Remington Outdoor Co. said it reached agreement with creditors on a restructuring that will be implemented through a pre-packaged Chapter 11 filing to be filed in the U.S. Bankruptcy Court for the District of Delaware.

Creditors holding a majority of the term loans due 2019 borrowed by FGI Operating Co., LLC and the 7 7/8% senior secured third-lien notes due 2020 signed a restructuring support agreement on Sunday backing the plan, according to company announcements.

Under the restructuring, Remington’s debt will be reduced by $700 million and the operating subsidiaries will obtain $145 million of new capital.

“Importantly, the fundamentals of our core business remain strong,” said Anthony Acitelli, Remington’s chief executive officer, in a news release. “We will emerge from this process with a deleveraged balance sheet and ample liquidity, positioning Remington to compete more aggressively and to seize future growth opportunities.”

The restructuring will leave unimpaired existing unsecured and priority claims of Remington Outdoor and its subsidiaries other than funded debt claims.

The term loan lenders will receive 82.5% of the equity of the reorganized company and $2.67 million in cash.

The remaining 17.5% of the equity will go to third-lien noteholders through the conversion to equity of a debtor-in-possession loan. Noteholders will also receive four-year warrants for 15% of the equity at a strike price that gives an enterprise value of $700 million.

Causes of action not settled by the conclusion of the reorganization will be transferred to a litigation trust, to be funded by $5 million from Remington Outdoor.

Remaining cash at Remington Outdoor will be distributed to noteholders.

As part of the agreement, on Monday Remington Outdoor provided a $45 million delayed-draw first-out first-lien term loan to FGI Operating to be used for working capital and general corporate purposes.

When Remington Outdoor files for Chapter 11 this delayed-draw loan will be rolled into a DIP term loan. On completion of the restructuring, this loan will be converted to equity, providing the third-lien noteholders with their equity distribution.

The creditors signing the restructuring support agreement will also provide a $100 million DIP term loan to fund the Chapter 11 cases. On exiting bankruptcy, the loan will be converted into an exit term loan.

The company will also obtain a new asset-based loan on its exit, with the proceeds going to refinance its existing ABL facility.

On Monday the company amended its ABL facility to reduce the commitments to $204 million.

Remington has also obtained forbearance from its term loan B lenders with Bank of America, NA as administrative agent. The forbearance applies to events of default and remains in effect until the restructuring support agreement terminates.

Additionally, Remington disclosed financial information.

It projects adjusted EBITDA of zero for January, $2 million for February, negative $1 million for March and April, negative $2 million for May and negative $1 million for June.

Free cash flow before adjustment for the restructuring is projected at zero for January, negative $20 million for February, negative $29 million for March, negative $27 million for April, negative $17 million for May and negative $12 million for June.

Remington is a Madison, N.C., maker of guns and ammunition.

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