The election of Barack Obama was a huge boon to the firearms business, with gun sales in 2008 shooting (get it) through the roof in anticipation of jackbooted lib thugs taking them away.
One gun distributor, United Sporting Cos., tried to keep the good times rolling in 2016 by bulking up its inventory ahead of an expected Hillary Clinton presidency and another mass rush to buy guns. That obviously didn’t happen, and since Donald Trump took office, gun sales have plummeted. So has the South Carolina-based United Sporting Cos.’ fortunes.
Bloomberg reported yesterday afternoon that the company filed for Chapter 11 bankruptcy on Monday in Delaware after sales last year ($557 million) paled in comparison to an average of nearly $900 million the company sold per year from 2012 to 2016. The bankruptcy filing reportedly came after the company was forced to “discount its bloated inventory to stay competitive,” lost valuable rebates and discounts from vendors, and tried and failed to sell itself last year.
But that’s not the whole story. Per Bloomberg, there are also allegations of mismanagement against Wellspring, the private equity company that owns the controlling stake in United:
Some of the company’s lenders balked at Johnson’s explanation of United’s descent into bankruptcy. In an objection filed Monday afternoon, attorneys for Prospect Capital Corp. — one of United’s lenders — blamed mismanagement at the hands of its largest equity owner, Wellspring Capital Management.
A few years ago, United was the largest distributor of firearms in the U.S., according to the objection. But Wellspring “cashed out” more than $183 million through dividend recapitalization deals in 2012 and 2013, then appointed fiduciaries who “grossly mismanaged the business and depleted all reserves necessary to weather the storms and the headwinds the business would face,” the dissenting lenders said.
Prospect Capital and other term loan lenders have a lot to lose. The objection states that the second-lien lenders will likely recover “a small fraction” of their $250 million loan.
It’s genuinely difficult to pick the most villainous company in this story. Is it the company selling guns who made a big bet on people’s deepest fears and insecurities and then shit the bed? The private equity company bleeding the gun distributor dry and then running it straight into the ground? Or the other private equity company that is now mad it likely won’t get anything near what it paid out in the original loan to the distributor? Folks...let them fight.
As Bloomberg notes, United isn’t the first iconic gun distributor to go bankrupt during the Trump era. Remington Outdoor Co. filed for bankruptcy in March 2018 and then emerged two months later. Looks like giving right-wing gun nuts and capitalist vultures more power isn’t good for business after all.