HK HUNDREDS OF MILLIONS IN DEBT: German Firm Heckler & Koch Reportedly €170 MILLION

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HK HUNDREDS OF MILLIONS IN DEBT: German Firm Heckler & Koch Reportedly €170 MILLION

http://www.thefirearmblog.com/blog/2017/07/13/hk-hundreds-millions-debt-german-firm-heckler-koch-reportedly-e170-million-red/

Via a press release published earlier this month, German gunmaker Hecker & Koch announced it had reduced its financial debt to a mere €170 million (~$194 million US), thanks to an equity increase of €50 million via a capital shares increase. With this, the company will issue approximately 6.6 million new shares, backed up by a capital injection of €50 million, and assistance in refinancing its 9.5% Senior Secured Notes at significantly lower debt. According to the release:

These funds will be provided initially in the form of a shareholder loan to be converted into share capital during the share capital increase to meet the time line of the refinancing of the 2011 9.50% Senior Secured Notes. Minority shareholders of H&K will have the possibility to subscribe for new shares on a pro-rata-basis and on the same economic terms against payment in cash.

Being almost two hundred million dollars in debt does not necessarily mean the German firm is in dire trouble, however, as they have recently gained significant contracts that will help offset this burden. Chief among those is the French AIF contract, estimated to be worth over €300 million ($342 million US). The revenue from this contract alone could offset the debt of the company, which as of 2013 was pegged at slightly higher than the company’s net worth. How the company’s finances will shake out, though, isn’t easy to predict, especially given the outstanding $27 million lawsuit from Orbital ATK over the failure of H&K to deliver XM25 CDTE grenade launchers. Still, the company being in debt to the tune of the entirety of or higher than their net worth does raise cause for concern, if they cannot significantly offset or restructure that debt.
 
Despite a huge drop in the Euro since 2008 which males their products cheaper to other countries, they are still so loaded with debt that they had to do an equity financing and dilute their existing shareholders.

What is the story here?
 
Pretty typical of most companies, if you applied the same principles to personal debt load, 80 percent of the western world should be bankrupt.
 
Unsurprising, this is what happens when you shun the civilian market and try to pander to militaries. No country in their right mind is going to buy an MP5 when it costs $5k. They're also probably taxed to hell and back, being in the EU and all.
 
CopperCoatedCandy said:
Unsurprising, this is what happens when you shun the civilian market and try to pander to militaries. No country in their right mind is going to buy an MP5 when it costs $5k. They're also probably taxed to hell and back, being in the EU and all.
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They are probably also subsidized to hell and back, and getting paid well above fair market value for their products, being in the EU and all.
 
enefgee said:
Explains why the French bought HK rifles, instead of going with a DI from virtually anywhere else, which would have been cheaper.
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No one had sent a DI gun to the French bid. SCAR, VHS-2, SIG MCX, HK416, ARX160. Weapons must be made in the EU.

I quickly flip through their fS, which only shows 2 years of comparison. Looks like currently HK is doing pretty well operational-wise.

That 210 million is giving them grief . Will have to look at all the prior years to figure out what happened.

I wonder if BAE had debt loaded HK before selling it back to the german at a fire sale price. That will be harder to look for because we will need to flip through BAE FS where HK was probably not even big enough to be separately disclosed.
 
Why not start selling a few firearms at decent prices on the civi market and grow your business. Instead of looking to mil contracts.
 
greentips said:
I wonder if BAE had debt loaded HK before selling it back to the german at a fire sale price. That will be harder to look for because we will need to flip through BAE FS where HK was probably not even big enough to be separately disclosed.
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Would not have been out of Character for BAE. Buy profitable company. Extract all profit. Sell barely profitable company.
 
The VP 9 has sold well in the US due to it's HK namesake, reasonable price, and good quality. They need to make more affordable rifles and pistols otherwise and sell more guns for less per item cost. The fact they haven't put out a REAL copy of the 416 and 417, and no, I'm not counting the MR series there because of the numerous differences between them and the 4 series rifles. Why not make MP5 clones as well, and again, at a reasonable price. Drop the price, drop the elitist attitude, make some guns that people actually want, and they'll be fine, assuming they get their finances and management in order, which I've heard is a recurring issue for them.

If they fail it will be no one's fault but their own.
 
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