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RLPC: Freedom's loan dips after Cerberus sale sign
December 19, 2012 / 5:40 PM / 5 years ago

RLPC: Freedom's loan dips after Cerberus sale sign

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.

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