HK GmbH Close to defaulting on bonds/loans

[High Exposure 5,670]

Uh-Oh!! Get your HKs and spare parts now while you can! Buy a VP9 and do your part!

 

Seriously, it is a troubling bit of news, but I doubt the German Government will let HK go under - especially as the HK416 and HK GPMG were just chosen as the service weapon for their militaries. But this is definitely a strike against agencies in the US choosing HK products as duty weapons.

 

http://mobile.bloomberg.com/news/2014-09-16/lara-croft-gunmaker-primed-for-interest-distressed-debt.html

 

Lara Croft Gunmaker Primed for Interest: Distressed Debt

 

Heckler & Koch GmbH, the gunmaker that’s seen its bonds tumble 26 percent in the past month, says a check from a customer this month will give it enough cash to make a 14 million-euro ($18 million) interest payment.

 

The manufacturer of guns carried by heroine Lara Croft in the Tomb Raider movies is expecting to get 8 million euros in cash, according to Niels Ihloff, managing director at Heckler & Koch. Moody’s Investors Service cut the small-arms manufacturer to within one level of a rating it reserves for borrowers “likely in or very near default” after the company said cash fell to 13.6 million euros, short of the amount needed for the debt payment in November.

 

“The cash that’s coming will allow us to make the coupon payment,” Ihloff said in an interview on Sept. 10. “We will pay our interest as we have for the last 11 years.”

 

Delays in government approval of export licenses hurt the company’s income, Oberndorf, Germany-based Heckler & Koch said in an earnings report to bondholders seen by Bloomberg News. The German Federal Security Council, which meets in secret and regulates German weapon export, turned down two-thirds of the requests it reviewed in its last meeting, according to German publication Der Spiegel in May.

 

The gunmaker’s 295 million euros of 9.5 percent bonds tumbled 26 cents on the euro in the past month to a record low of 72.4 cents, to yield 20.6 percent, according to data compiled by Bloomberg.

 

Rating Downgrade

 

Moody’s cut the company’s rating one level to Caa3 on Sept. 8. Although Heckler & Koch expects the government to clarify its export license policy by the end of the month, “evolving events” in the Middle East may postpone the decisions, Moody’s said in the statement.

 

“Even if it receives 8 million euros in respect of one customer payment we still anticipate cash at Heckler & Koch to be substantially lower than it has been historically,” Jeanine Arnold, a Frankfurt-based senior analyst at Moody’s, said in a telephone interview on Sept. 12. “The shift in liquidity is largely driven by the fact that these licenses haven’t been approved.”

 

Revenue at Heckler & Koch declined to 64.4 million euros in the six months ended June 30 from 100.8 million euros in the same period of 2013, according to the closely held company’s earnings report. Earnings before interest, tax, depreciation and amortization fell to 10.8 million euros in the period, compared with 28.3 million euros the previous year, the report show.

 

Earnings Forecast

 

If the export license policy remains unresolved Ebitda will total 25 million euros to 30 million euros for the full year, the company forecast in the report. Sales may reach 145 million euros to 155 million euros in 2014, it said.

 

The company, founded by Edmund Heckler, Theodor Koch and Alex Seidel after World War II, sold 295 million euros of notes in 2011 to refinance existing debt, according to data compiled by Bloomberg. The notes, which mature in May 2018, were used to repay 125 million euros of bonds and 170 million euros of payment-in-kind loans, where the borrower repays interest with more debt.

 

“We consider the current capital structure unsustainable,” Matthias Hellstern, managing director at Moody’s in Frankfurt, said in a telephone interview. “If a company six weeks before 14 million euros is due is dependent on receiving 8 million euros from a customer, longer term the company is not in a good situation,” said Hellstern.

 

Weapon Exports

 

Heckler, Koch and Seidel were former employees of the arms producer Mauser, according the company’s website. They started Heckler & Koch in 1949 with the production of some arms as well as parts for household appliances and bicycles, according to the website.

 

As conflicts go on near the North Atlantic Treaty Organization’s borders, arms sales to non-NATO countries are being debated. In August, Chancellor Angela Merkel’s government cleared the way for Germany to supply Iraqis with weapons to fight Islamic State militants.

 

Germany was the third-biggest arms exporter behind the U.S. and Russiabetween 2009 and 2013, accounting for 7 percent of world deliveries, according to a report by the Stockholm International Peace Research Institute in March.

 

“We’ve started focusing on the civilian and sporting markets but so far we’ve mainly catered to the military and law enforcement.” Ihloff said. “Ninety percent of our business comes from government and federal law enforcement contracts.”

 

Legal Risk

 

Lack of clarity on the government’s licensing policy may weigh on close to 50 million euros of orders mostly bound for the Middle East, according to Ihloff and Moody’s. Heckler & Koch is also facing investigations into claims it violated export licenses after their weapons turned up in some Mexican states, according to the ratings company.

 

The arms producer has a “meritorious defense” to the allegations and has “fully cooperated” with the investigation, the company said in its report to bondholders.

 

Though no negative impact on export license approvals can so far be attributed to the investigation, if Heckler & Koch is found at fault its future licenses will be at risk, according to Moody’s.

 

“Export licenses are fundamental to this business,” Moody’s Arnold said. Their “delay limits the company’s room to maneuver.”

[JayWilling 33]

From what I hear it couldn't happen to a nicer bunch. Maybe they should have paid more attention to customer service.

[MidwestPX 172]

Yikes. 300M Euros in debt, 14M in cash, and expecting a check for 8M to make interest payments...that's just ugly.

[jrfly3006 42]

Seems their book keeping wasn't as precise as their...ehem...product...

[Worn_Holster 2]

They will pull it together. They still produce a product that is miles above the competition. HK haters relish in this news but have no understanding of how their business operates and how German governmental policy effects their cash flow.

[bhunted 887]

They will pull it together. They still produce a product that is miles above the competition. HK haters relish in this news but have no understanding of how their business operates and how German governmental policy effects their cash flow.

For sure.... Won't stop me from buying more of their product. They ain't going no where.

[Oakridgefirearms 224]

The German government will float them if necessary, there's too many jobs at stake. The socialist ways of Europe are not shy about using government bailouts to protect jobs.

[MidwestPX 172]

The German government will float them if necessary, there's too many jobs at stake. The socialist ways of Europe are not shy about using government bailouts to protect jobs.

I'm certain the "too big to fail" card will get played. Besides, HK has to replace those crappy G36s that weren't even minute of barn after heating up.

[302w 83]

I'm certain the "too big to fail" card will get played. Besides, HK has to replace those crappy G36s that weren't even minute of barn after heating up.

 

You wouldn't know anything about shooting a G36, because you aren't a real operator. Because you suck, and we hate you.

[raz-0 1,259]

The German government will float them if necessary, there's too many jobs at stake. The socialist ways of Europe are not shy about using government bailouts to protect jobs.

They'd have to buy their debt AND offer them further loans. They were managed badly enough to be carrying that much debt and have profitability low enough to not be able to pay interest.

 

They are in deep doo doo

[High Exposure 5,670]

You wouldn't know anything about shooting a G36, because you aren't a real operator. Because you suck, and we hate you.

:ROFL:

[mipafox 438]

F them. What have they done for us?

 

And F them. Die. Die!

[bhunted 887]

OMG! What is wrong with you people. I have owned their products for decades and have never had probs with their guns. In fact, if I called them for anything like ordering parts, they were stellar. You haters need to come up for air for crying out loud!

[Sota 1,191]

bh: don't bother. If they spent even a minute researching HK's CS practices, as well as googling that meme (hint... TFB has an article that should be read first) they might learn something.

[monmouth 19]

You can't borrow your way out of debt......unless you're America.

[Carcano 14]

F them. What have they done for us? And F them. Die. Die!

 

HK could care less, they sent a ton of MP5's to the Jamaican Govt. around 2007 and they were all defective and needed to go back.

 

If you are a civilian, good luck getting support from HK that matches the Mil/Govt support they offer.

 

Rememeber, NO COMPROMISE!

[Sota 1,191]

caracano: you mean like the frequently same day turn around time for HK45c "false reset" trigger repairs that were done for free and shipping paid both ways by HKCS? Or the numerous number of people who've sent their guns in for a variety of reasons (especially user-related fuckups) and HKCS not charging them to put their gun back into working order and even giving it a free cleaning and thorough inspection before sending it back? Or having some quite honestly ridiculously low costs for simple repair work? Or being some of the NICEST people I've ever had to contact over the phone? If that's your idea of "suck" then I'll take it.

[Babyface Finster 45]

How many of you saying that HK service is terrible actually have any person experience with it? How many have even owned an HK product?

[jrfly3006 42]

No experience with CS but cam tell you that our work MP5s are living the safe queen life because everytime they get range work theres a $200 repair bill afterward and a 2-3 week wait for parts..

[Carcano 14]

No experience with CS but cam tell you that our work MP5s are living the safe queen life because everytime they get range work theres a $200 repair bill afterward and a 2-3 week wait for parts..

 

That's strange, what's needing repair on the MP5 so often?

[bhunted 887]

No experience with CS but cam tell you that our work MP5s are living the safe queen life because everytime they get range work theres a $200 repair bill afterward and a 2-3 week wait for parts..

Stop breaking them!

[High Exposure 5,670]

In my experience the most current MP5 failures are revolving around the bolt group with failures occurring at the:

 

Extractor

Extractor spring

Roller lock

Roller lock holder pin

Roller lock holder plate

Clamping sleeve

Stop pin and rivet for recoil spring

 

Keep in mind, the last 15 years has seen a shift away from the pistol caliber sub-machine gun to the rifle caliber carbine (and for good cause considering the difference in terminal effects and penetration between the rounds - with the superior TE and less penetration through typical domestic construction materials - of the rifle rounds). Ergo, most of the MP5s still in service are over 20 years old and preventative maintenance has been lacking due to loss of institutional knowledge as the old timers are leaving and the new guys having only AR platform experiences.

[jrfly3006 42]

FWIW..im not an HK hater...im actually intrigued by their VP9 offering...from chatting with the staff that fixes them its usually annoying little items in the bolt group..trigger group..rear sight and telescoping stock assemblies...it really isnt the time required to fix them ...its the time and expense getting the parts...

And HE beat me to it...there is a "shift" underway from the subs to the AR platform

[Carcano 14]

Stop breaking them!

 

Guns are not toys, they should be able to take abuse and lot's of it. The MP5 is still over $1K on a Govt. contract and for that LE and Mil units want the damn things to take abuse and keep on running.

 

In my experience the most current MP5 failures are revolving around the bolt group with failures occurring at the:

 

Extractor

Extractor spring

Roller lock

Roller lock holder pin

Roller lock holder plate

Clamping sleeve

Stop pin and rivet for recoil spring

 

Keep in mind, the last 15 years has seen a shift away from the pistol caliber sub-machine gun to the rifle caliber carbine (and for good cause considering the difference in terminal effects and penetration between the rounds - with the superior TE and less penetration through typical domestic construction materials - of the rifle rounds). Ergo, most of the MP5s still in service are over 20 years old and preventative maintenance has been lacking due to loss of institutional knowledge as the old timers are leaving and the new guys having only AR platform experiences.

 

I have had an extractor and roller pin fail but that's about it.

 

Also, while most of the MP5's are 20+ years old and with 20+ years of wear things are going to break the MP5 is still produced by H&K (I have the 2014 catalog in front of me, shows them still).

 

The ones the Govt. of Jamaica had from H&K were new off the factory line (2007 or 2008) and had problems out of the box with fit and finish, etc. so they were shipped back and repaired, many of the MP5's still had problems after being repaired and returned.

 

The head space was a problem on a lot of them, along with bad trigger packs.

 

I do not hate H&K, I own several H&K weapons and several clones from Vector Arms, PTR, etc.

[raz-0 1,259]

How many of you saying that HK service is terrible actually have any person experience with it? How many have even owned an HK product?

Myself? I owned a usp. Bought it back around 97. Their ads proclaimed how you could swap out the safety setup for different configs. Asked if they could send me parts to try a different setup. Nope. Asked if I could send it in for them to do it. Nope. Asked if they could fix the POS first gen trigger when they improved it (somewhat) finally. Nope.

 

They were neither helpful nor friendly. Especially when I indicated a was a retail customer. They may have changed, but they earned their rep.

[Carcano 14]

In my experience the most current MP5 failures are revolving around the bolt group with failures occurring at the:

 

Extractor

Extractor spring

Roller lock

Roller lock holder pin

Roller lock holder plate

Clamping sleeve

Stop pin and rivet for recoil spring

 

Keep in mind, the last 15 years has seen a shift away from the pistol caliber sub-machine gun to the rifle caliber carbine (and for good cause considering the difference in terminal effects and penetration between the rounds - with the superior TE and less penetration through typical domestic construction materials - of the rifle rounds). Ergo, most of the MP5s still in service are over 20 years old and preventative maintenance has been lacking due to loss of institutional knowledge as the old timers are leaving and the new guys having only AR platform experiences.

 

Funny, in the US every dept. wants to get away from pistol SMG's and go for M4's and other compact rifles in 556. The Govt. of Jamaica actually started to move away from the 556 carbines and towards the 9x19 subguns again after people claimed the 556 was too powerful.

[Carcano 14]

Myself? I owned a usp. Bought it back around 97. Their ads proclaimed how you could swap out the safety setup for different configs. Asked if they could send me parts to try a different setup. Nope. Asked if I could send it in for them to do it. Nope. Asked if they could fix the POS first gen trigger when they improved it (somewhat) finally. Nope.

 

They were neither helpful nor friendly. Especially when I indicated a was a retail customer. They may have changed, but they earned their rep.

 

They have always been more of a LE/Mil company (that's who they market towards) and as a result customer service is leaned towards the LE/Mil users of the H&K weapons system and not the average civilian user.

 

Of course, if you are in charge of filling a Govt. contract for a Military/LE unit with hundreds of thousands of dollars to burn you might get somewhere with H&K

[High Exposure 5,670]

Funny, in the US every dept. wants to get away from pistol SMG's and go for M4's and other compact rifles in 556. The Govt. of Jamaica actually started to move away from the 556 carbines and towards the 9x19 subguns again after people claimed the 556 was too powerful.

Ahhhh.... Jamaica. The last bastion of true CQB TT&E from the 80's.

[Carcano 14]

Ahhhh.... Jamaica. The last bastion of true CQB TT&E from the 80's.

 

Most guys in the JCF carry an MP5 w/ collapsible stock and two 30-round mags, almost all of the trigger packs have 2 or 3 round burst (2-round burst trigger group & 3-round burst trigger group). Want retro? they are still using the FAL rifle and lots of old Vietnam era M16A1's, also some Sten guns are still in use. .40 Glock is the sidearm (no H&K pistols) with a lot of Browning HP's still in service.

 

CQB is daily in Kingston (St. Andrew) as the police often conduct high-risk searches and with that comes room clearing.

 

Patrol team in Kingston:

 

[n4p226r 105]

love the tactical red tshirt and jeans