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America’s Oldest Gun Maker Went Bankrupt: A Financial Engineering Mystery

nytimes.com

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Re: America’s Oldest Gun Maker Went Bankrupt: A Financial Engineering Mystery

#111

Post by omegaham »

TallGuyShort wrote: post #87
dba7dba wrote: post #76

Earlier quoted context omitted.

Lol, you forgot to mention buying ones for family and friends, like Matt Carriker of offtheranch channel. I agree free market (with certain safeguards) is usually the best path for a society to sustain itself and prosper. But I feel private equity firms are definitely not good for a free market to sustain itself. And yet they and their lobbyists will insist free market is the best for our society, use that line to pr…

I don't see the market not sustaining itself, though. As a consumer, if I'm not satisfied with Remington, I just buy a Mossberg instead of an 870, or a Bergara instead of a 700, or literally anything but an XD. There's a lesson to be learned that if you open your investment to the public or get in bed with a private equity firm, you may now be pressured or forced into short-term thinking that isn't aligned with your…

Yep. The gun market is saturated right now. Literally everything that Remington makes is also made by half a dozen (or more) competing companies. If they make stupid decisions and build garbage, that's tough for them.

We don't have any pity for auto manufacturers who make garbage and lose badly. Why would anyone have pity for gun manufacturers who do the same?

Re: America’s Oldest Gun Maker Went Bankrupt: A Financial Engineering Mystery

#113

Post by omegaham »

madengr wrote: post #45

Remington just doesn’t have that many interesting guns. There are a ton of firearms manufacturers in the last 20 years. I’m guessing the AR-15 market alone is billions in revenue.

I'd argue that you don't need interesting guns if your basic offerings are really high-quality. There's room for "plain oatmeal" in pretty much any market.

The problem is that even their basic offerings have drastically declined in quality. If you make plain oatmeal, you'd better be really, really good at it, or else you have absolutely nothing going for you.

Re: America’s Oldest Gun Maker Went Bankrupt: A Financial Engineering Mystery

#114

Post by MrMorden »

sn0n wrote: post #98

I especially liked this bit "The pension fund for the Boston-area public water utility invests in Cerberus. The California State Teachers’ Retirement System, CalSTRS, is a Cerberus client, as is a pension fund for the Presbyterian Church as well as many university endowments, sovereign wealth funds and philanthropic foundations." Made me chuckle a bit inside, as I know a couple people who are less on the side of guns…

American universities have rushed to move as much lecturing as possible to adjuncts, and cap as many employees as possible at 29 hours/week to avoid the ACA. Just like with a fire-and-brimstone televangelist, it's only immoral if other people do it.

Re: America’s Oldest Gun Maker Went Bankrupt: A Financial Engineering Mystery

#115

Post by matthewaveryusa »

The part I don't get is how Cerberus made money. It seems like it was a zero-sum for Cerberus. They loaned the holding company 225M, and presumably got that money back through the holding buying the stock back from Cerberus after the holding sold the 11% corp. bonds.

Is it that between when the holding bought the stock back from Cerberus and Cerberus (via the holding) sold the bonds Cerberus had control of Remington (via the holding stock) and therefore effectively sold Remington's assets, paying themselves through the holding's stock. Then, when Remington was valueless, the holding bought the stocks back from Cerberus as if Remington still had value leaving the bond holders hanging?

That's such a dumb scam. Why would anyone buy those bonds, and how was Remington able to get a loan to buy the holding's stock if Cerberus raided it?

Re: America’s Oldest Gun Maker Went Bankrupt: A Financial Engineering Mystery

#116

Post by _bxg1 »

iscrewyou wrote: post #101
_bxg1 wrote: post #77

"Financial engineers" aren't interested in building a sustainable business; they want to play a game cleverly, make a cash-grab, jump ship, and leave thousands dealing with the fallout. It's a similar short-term strategy to that taken by many SV founders who build a company only to sell it, though obviously the latter don't cause nearly the same degree of harm to society. But they still pass on opportunities to creat…

I love the term financial engineers. In my head, it defines the person, the procedure, and the purpose.

The problem with engineers (speaking as one myself) is that we're prone to focusing only on the mechanism itself, abstracting away the details and ignoring the parts of the system we can ignore. In software we can often get away with this because the rest of the system is just further machinery; there are benefits to taking it into consideration, sure, but nobody gets hurt when you don't.

But business and finance are not software. Their systems are made of people. When you waste a CPU's time by ignoring its nuances, you simply get less out of it. When you shuffle money around, writing off the nuances of industry and economics as blips in a monetary machine, you destroy lives. I understand the appeal of the engineering mindset, but you have to be a psychopath to continue in it while leaving such destruction in your wake.

Re: America’s Oldest Gun Maker Went Bankrupt: A Financial Engineering Mystery

#117

Post by freyr »

ptah wrote: post #29
bluejekyll wrote: post #20

Earlier quoted context omitted.

I’ve read about this scenario many times, but I’m curious about why any creditor would lend money to a company that’s poised to do this. Wouldn’t these private equity firms lose the ability to borrow money based on past practices like this?

the pe firm never borrows, the company they own does the borrowing to pay the pe firm for "services rendered"

Yes, but why does the creditor play along?

Re: America’s Oldest Gun Maker Went Bankrupt: A Financial Engineering Mystery

#118

Post by ahupp »

dractori wrote: post #99
paganel wrote: post #36

> Because private-equity firms appear frequently as villains in the press, many people assume that they cater mostly to the superrich, earning high returns on investments for billionaire clients. They do. But by far the most important piece of their business — 48 percent, according to the data-analytics firm Preqin — is investing capital for American pension funds. This doesn't get mentioned often enough when talking…

The top 1% own 40% of the wealth and have realized 95% of the increase in wealth over the past decade: https://en.wikipedia.org/wiki/Wealth_inequality_in_the_Unite... "More recently, in 2017, an Oxfam study found that eight rich people, six of them Americans, own as much combined wealth as half the human race."

Both of these things can be true: that the top 1% own a large fraction of wealth, and that an even larger fraction is owned by the pensions and retirement plans of the non-wealthy.

Wealth comparisons are tricky, e.g they'll show that Americans are some of the poorest people in the world because there's a large fraction with debt (e.g homes, credit cards, student loans). While technically true, that doesn't really match our intuitions for what wealth means.

Re: America’s Oldest Gun Maker Went Bankrupt: A Financial Engineering Mystery

#119

Post by anonthrowaway2 »

dractori wrote: post #99
paganel wrote: post #36

> Because private-equity firms appear frequently as villains in the press, many people assume that they cater mostly to the superrich, earning high returns on investments for billionaire clients. They do. But by far the most important piece of their business — 48 percent, according to the data-analytics firm Preqin — is investing capital for American pension funds. This doesn't get mentioned often enough when talking…

The top 1% own 40% of the wealth and have realized 95% of the increase in wealth over the past decade: https://en.wikipedia.org/wiki/Wealth_inequality_in_the_Unite... "More recently, in 2017, an Oxfam study found that eight rich people, six of them Americans, own as much combined wealth as half the human race."

That study is super flawed. Its conclusion is directionally correct, but aggregating negative wealth just doesn't make sense in this context, so the numbers "8" and "half" are meaningless except insofar as you interpret them only with the precision "few" and "lots".

Re: America’s Oldest Gun Maker Went Bankrupt: A Financial Engineering Mystery

#120

Post by martin1b »

froindt wrote: post #108
systemkei wrote: post #93

Earlier quoted context omitted.

>employed in corporate IT since I was 19 unlikely you'll ever collect from that 401k friend!

>unlikely you'll ever collect from that 401k friend! Like WillPostForFood, I'm baffled about where you're even getting this idea. The 401k is their money. Right now they could withdraw all the money. If their employer goes bankrupt, the 401k balance didn't change at all. The only part that could potentially go away would be unvested company contributions (I'm not sure on this - it's all I can think of though). If we…

I think he's inferring to the government being able to get to it in the future. Whether it be by future legislation of extended early withdrawal penalties, or new tax laws. Yes, it is your money but is still subject to federal and state laws. It's different than a bank account.
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