WILMINGTON, Del (Reuters) - U.S. gunmaker Remington Outdoor Co Inc won court approval on Tuesday to borrow an interim $75 million to sustain its business during its Chapter 11 bankruptcy, which will allow the company to carry out a $775 million debt-cutting deal.
Remington filed for bankruptcy on Sunday, a day after hundreds of thousands of Americans took to the streets to demand tougher gun laws to prevent school shootings like the one in Parkland, Florida in February that left 17 dead.
The Madison, North Carolina-based gunmaker was nearly out of cash when it filed for bankruptcy, prompting it to seek fresh financing from its lenders.
U.S. Bankruptcy Judge Brendan Shannon in Wilmington, Delaware said he was convinced the financing was necessary to avoid irreparable harm to the company and its creditors.
“A lack of disruption is key to preserving value,” he said in approving the loan.
Remington said its bankruptcy will not impact its customers, suppliers or unsecured creditors, which would include those pursuing lawsuits. Families who lost loved ones in the 2012 Sandy Hook school shooting in Connecticut have been trying to hold the company liable because one of its assault rifles was used in the attack.
Little was said at the hearing about the student-led push for increased gun control. One of Remington’s lawyers, Tyson Lomazow, briefly mentioned that the company was “operating in a difficult political climate” during his arguments in support of the company’s request for fresh financing.
Remington is borrowing the money from its current lenders.
Sources told Reuters the banks were providing the loans to prevent the company from going out of business, leaving the banks with large losses and potentially spawning litigation.
Banks often sell loans as a borrower heads into bankruptcy. Sources told Reuters the hedge funds that usually buy such loans were reluctant given the pressure on the industry from gun control advocates after the Florida school shooting, and because the prices offered were not attractive.
Firearms makers have been stuck with a glut of weapons after the election of U.S. President Donald Trump, who says he is a strong advocate of gun ownership. Fears of restrictions on gun ownership tends to boost U.S. sales of weapons.
Reporting by Tom Hals in Wilmington, Delaware; Editing by Susan Thomas
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