RLPC: Freedom's loan dips after Cerberus sale sign

NEW YORK Wed Dec 19, 2012 12:37pm EST

NEW YORK Dec 19 (Reuters) - Freedom Group, the maker of the Bushmaster AR-15 semiautomatic rifle used in the Sandy Hook Elementary shooting, is seeing its term loan B decline after its private-equity owner Cerberus Capital Management put the gunmaker on the auction block.

Freedom Group's TLB is trading more than 2 points lower, down to 98-99 today, from its above par price prior to last Friday's shooting.

The TLB is moving lower today even from yesterday when pricing fell to 98.75-99.5 on news Cerberus, pressured by investors, said it would try to sell Freedom Group. The company's loan had been steady around 100.25-101 previously.

The California State Teachers' Retirement System (CalSTRS) said on Monday it was reviewing its investment with Cerberus in the wake of the Newtown shooting. And the New York State Public Pension Fund late yesterday said it supports Cerberus' move to sell its stake in Freedom Group.

As the nation digests the tragedy, there has been a proliferation of calls to rethink gun control policies and the flourishing gun culture in the U.S., and investors are beginning to question their stakes in gunmakers. California's Treasurer has asked both CalSTRS and the California Public Employees' Retirement System (CalPERS) to look at their investments in gun companies. New York's Controller said its pension fund's stakes in firearm manufacturers is under review. And other states are following suit.

In July, Freedom Group successfully marketed a $75 million add-on TLB that priced at LIB+425 with a 1.25 percent Libor floor and a 99.5 OID. Bank of America Merrill Lynch led that covenant-lite deal.

In April, Freedom priced a $330 million TLB at LIB+425, with a 1.25 percent Libor floor and a 99 OID. During syndication, pricing on that loan was tightened from an earlier LIB+450. The seven-year term loan, which is covenant-lite, has 101 soft call protection.

Cerberus bought firearms maker Bushmaster in 2006 and later merged it with other gun companies to create Freedom Group. The company reported net sales of $677 million for the nine months ended September, up from $565 million in the year earlier period.

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (2)
A2er wrote:
If they go bankrupt we won’t be shedding any tears.

Dec 19, 2012 1:09pm EST  --  Report as abuse
WithOpenEyes wrote:
Whoopee Do. Talk about propagandistic lip service. If you finally realize you have been funding something bad and you really want to do the right thing, you don’t sell your evil company to someone else who will just keep doing the same evil. You use your capital power to dismantle the company while retaining all the related patents and intellectual property such that no one else can exploit it.

Dec 19, 2012 2:58pm EST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.