Moody’s downgrades Heckler & Koch

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Moody’s Investor Service has downgraded Heckler & Koch GmbH’s (Germany) Corporate Family Rating because the company may not have enough cashflow to pay the semi-annual $14 million of interest it owes on its EUR295 million debt.  From the research report (emphasis added) …

Today’s rating action reflects the recent reduction in HK’s underlying liquidity owing to a marked weakening in the company’s operational performance. Unrestricted cash amounted to around EUR8.3 million as of 30 June 2014, representing a new low in the level of HK’s cash balances. We now believe there is a heightened risk the company will be unable to pay the semi-annual interest of around EUR14 million due on 15 November 2014 in respect of its EUR295 million bond. Payment will be highly dependent on favourable working capital movements, which can be unpredictable, including the receipt of a EUR8 million customer payment relating to the completion of a long-term project.

HK’s rating benefits from its strong brand recognition and solid position in the small arms market, which is also reflected in a strong profitability such as EBIT margins of above the high teens for the last couple of years. However, the company remains exposed to a degree of customer concentration and ongoing legal and regulatory risks. Furthermore, we view the current capital structure as unsustainable in the absence of capital injections. With the exception of the last few months, where earnings were impacted by the delay in export licenses, HK’s operating performance has been strong compared with peers, but very burdensome interest payments have prevented, and are likely to continue to prevent, positive free cash flow generation.

H&K now faces a lawsuit from GSG and ATI. They do not have a lot of cash on hand to pay for any settlement if they lose.



Steve Johnson

Founder and Dictator-In-Chief of TFB. A passionate gun owner, a shooting enthusiast and totally tacti-uncool. Favorite first date location: any gun range. Steve can be contacted here.


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  • H&K has been sold to BAE Systems (Royal Ordnance) in the past when they were in dire straights. Hell, I know a 20 year HK employee who says that unless big things happen soon, HK GMBH will either be sold or go out of business in the next 5 years.
    Frankly, the name HK will never disappear. The name and their IP and products may be made elsewhere and whatnot, but the name HK will live on no matter what (like Springfield Armory today, which has no affiliation with the original Springfield Armory). Just please, for the love of God do not let Freedom Group acquire them 🙁

    • A.g.

      A big things like “to win french famas replacement program” for example ?

      • The French government is not really interested in buying many rifles; the military budget is low and suffered another cut – might as well say they’re broke. So uh, yeah, even if they win that program, it’s not like they can pay for it for the time being.

        • A.g.

          According a decent, rigorous and accurate specialized newspapers it’s still a contract about 90 000 rifles !
          If the budget is low,the actual Famas have far away exceeded his service life, wear accentuated by the many foreign theaters. That’s a kind of cost who can’t be reported, unfortunately for the Ministère du Budget. Too many operationnal impact and risk of bad humor on the army, yet “annoyed” by all the efforts needed. “We are on the bones” was said by a high ranked officer to the press who interview him on the budget shortcuts. Unusual frankness. If they are chosen because they have no option to say no due to the military satues -no union, low sympathy capital in population…-, they can’t dig anymore without facing real contest. At least on this particular point.
          Concerning H&K, they have always provide Hk 416 and 417 to some units (at hk price of course…), have furnished all the police services with G36, they have the industrial capacity to respond effiency to the order…
          For political proximity, I see better HK winning this “competition” than Beretta or FN. It will be a “compensation about the individual police pistol win by SIG despite the eval made by all the services who have choosen H&K.
          Thales seems to be out for due to australian outsourcing in the making process, according with the contract (wich include ammo -38Millions- and 40mm grenades -92 000, all types-.

          • toms

            I think Thales will get the nod for that contract. Just a guess though.

          • A.g.

            Always according to the article you’ve got two clauses in the contract. The first one, the company should have three years of 80millions € of average turnover with an existing product, who exclude in fact somes french companies.
            The second one, they should have their line of production in the EU territory or the EU economics area. One probleme encountered by Thales could be, as wrote upper, that the rifle is proposed by the australian based division Thales. Not sure than their competitors won’t jump on this gap in this case to denounce the deal.
            The article note that the F88 rifle itself, despite the small improvements (electrical pincatiny rails for the Felin system) will stop his operationnal life sooner. The bullpup config seems to not have anymore the french army favor too.
            Nonetheless as the political struggle or the the friendly connection between industrie and politician outpast often other considerations. To have a clear view on this sector is really uneasy…For me a good surprised could be the polish MSBS as the competition allow three to five industrial if Radom is enough solid.

          • 90.000 rifles to replace a fleet of 700.000 rifles…?
            Yup, looks like the FAMAS still has a few days ahead…

          • A.g.

            All The famas were ordered when all the population have to past one year under the flag for national service, an conscription model army. Since the late nineties and the abandon of this doctrine for a professional army, the need of small arms are not so high. This explain the low number of the first contract.

    • dp

      They could merge with KK…. if it was not for those damn politics.

      • kev

        If they want to stay in Europe they could always merge with BAE or Rheinmetall.

    • Aaron E

      or ATK …

    • DiverEngrSL17K

      Very good point, Alex, especially about the “Freedom Group”.

  • Tallbear

    Or a Chinese company will buy them up…..?

    • dp

      Entirely possible. Nowadays, all is looked at as consumables (including people), as long as they make profit.

    • Brocus

      Won’t happen due to German laws.

  • Yellow Devil

    It’s the ammunition’s fault. Nothing to see here.

  • Zachary marrs

    Maybe they will soon see the value of civilian sales, they have a u.s. factory, they should use it

    • Write the German government and ask them to change the laws regarding the exportation of firearms related intellectual property over there.
      I am sure HK USA and even HK GMBH would love to sell you their whole products line if it werent for US and German laws prohibiting this.

      • Wait wait wait. H&K can’t sell their whole product line in the US because of what exactly? US import restrictions I can understand, but Germany prohibits the exportation of FIREARMS RELATED INTELLECTUAL PROPERTY?

        What kind of absolute retardation is this?

        • It’s true though. It’s almost like Germany is trying not to allow it’s companies to make money. I do know H&K Germany gives the US H&K hell and micro manages everything.

          • LongBeach

            Germans micromanaging things!? That, sir, ist ridiculous.

          • big daddy

            LMAO, they invented micromanaging….that was sarcastic and funny.

          • Good gods. This is appalling.

        • John

          When your country started and lost two world wars, you tend to be a little skittish about building more military material.

      • Sadler

        Could you cite the law or regulation that bans the export of defense related intellectual property from Germany?

      • dsafds

        They obviously wouldn’t love to as much as they’d like to, since they aren’t doing it, while many other companies that were struggling seemed to be able to find the time to set up shop over here.

    • Dan

      As much as I hate to defend H&K, in all fairness it should be mentioned that while building certain products in the US may be legal under US law, it may still violate German export regulations (which includes designs as well as actual arms and parts). For the record, no, I do not own a single H&K product or clone.

      • barry

        I don’t think so. Walther seems to not have that problem. I distinctly remember the Walther P99 being made by Smith & Wesson as the SW99. If HK wants to save itself before being bought out, they need to rethink their commercial sales strategy.

      • Sadler

        Could you cite the law or regulation that bans the export of defense related intellectual property from Germany? No matter how many times I’ve tried, I’ve never found anything that prohibits the export of IP. Unless the German gov’t is the one that holds the patents.

      • Schlomo

        H&K 416 designs gets “stolen,” easy. Nobody’s fault.

        H&K sues company(actually owned/set up by H&K employees/trustees) violating H&K’s patents, cannot get the company to stop producing them, but wins royalties, H&K purchases stock in said company, H&K now operating in USA without old man government poking in his butt about exports or designs.

  • Soooo, H&K, what’s that about us dirty civilians not deserving a semi-auto MP7 again? Are you sure you hate our money that much? Just sayin’…

    • John

      The thing is, would you want one? It looks like a rebuilt Mac-10 with a curved magazine and a couple of rails. That’s it.

      Only a few people want that MP7, and it’s not what they’re known for. The MP5, on the other hand, is iconic as hell and highly desirable.

      • I don’t. See above: I was being sarcastic.

        On the other hand I -do- want an MP5.

        • mark

          I’ve wanted an MP5 my entire life. Companies on the internet are getting $2500-3500 for quality copies and can’t make enough to satisfy demand. You’d think H&K could find a way past the red tape to make a decades old stamped sub gun in the US.

          • Bruce Brunken

            I’m going to save you the let down–they suck ass in so many ways. 9mm sub guns are obsolete except as range toys, and the MP5s are 1960s technology. If you still want a 9mm carbine just to screw around with, get a 9mm AR that is a clone of the Colt design.

            If you’re talking about a real full-auto sub gun, find yourself a Sterling.

      • Schlomo

        You’re wrong. Everyone wants an MP7. The ammo is cheap enough to produce almost cheap enough like 5.56NATO or something, or it could be chambered in 5.7×28 to take the heat for ammo off their back, if H&K could swallow their pride.

        There is a big market for a rifle that has less penetration than 5.56NATO, but still VERY easy to shoot, tiny, and slightly greater capacity.

        People want the MP7 for the same reason SEAL dog handlers want the MP7… it’s convenient to carry, very useful(with all the correct modern controls), and significantly lighter than a rifle(which the MP5 is not).

        The MP5 market is a pretty niched place, I thnk. It’s a cool gun, but Americans mostly only want it for novelty/because they’ve been unable to have one for so long(until the Pakistani imports came in). Now that it’s available, it’s actually not the best selling thing since sliced cheese.

      • Bruce Brunken

        Pretty sure the SEALs are rocking MP7s, among many other weapons, of course.

    • The German government effectively owns the patent. Also, you do realize that the MP7 requires an armorer to rebuild it after 500 rounds right?
      It is easy to regurgitate what you have read from armchair commandos on the Internet, but difficult to learn about and decipher information for yourself.

      • big daddy

        Part of being a top company is finding ways to do it not sit back and say we can’t. That’s the whole issue with H&K they are a “We can’t” operation. A great company with great leadership finds a way to overcome these things with creative thinking out of the box, either technically or going around even changing the laws themselves.

        • mark

          So much this. A top company isn’t restricted by xyz government nonsense. If it were in H&K’s will to get permission to manufacture some of there more popular products outside of Germany they would find a way.

          • Schlomo

            Exactly. Look at IWI. IWI wanted to export raw rifles converted to semi-auto to the USA, but the USA wouldn’t let them, so woah and behold, IWI did their best to make it happen, and is doing damn well because of it.

            Same story with FNH. If your product is good, be smart and do what you can to make it possible to let people give you their money for it.

          • Bruce Brunken

            And the Tavor is better than anything H&K would provide the civilian market. The 416 is fine, but the AR thing has been done 100X over already now.

      • It’s called humor and sarcasm. Come on, I was being openly snarky.

        I am very interested, however, to know why the MP7 needs armorer intervention after what constitutes a dozen of magazines’ worth of ammunition. Actually I’d love to see an article about it.

        • If they send me an MP7, I will do the best goddam review the likes of which the internet has ever seen pertaining to a firearm.
          Yo HK, for reals.

      • Schlomo

        Just shrink a SCAR 17 action down to MP7 size, give it a stumpy AR-15 charging handle, boom, MP7… except it’s user serviceable without a punch set/spare roll pins etc. Somebody ought to start producing this.

  • Toms

    The export lic reqs and slow innovation speed hurt an otherwise top shelf company. They should just move to the US permanently and thrive. The cut in production costs alone would be substantial.

    • Schlomo

      “Top shelf”… the only things we know H&K still produces that are cool are their 416, and now their striker fired pistol. Their stuff is pretty cheezy, though they would be able to save themselves if they took the hit and just set up shop in the world’s biggest arms market(even if that means foreign production, because exportation has been litigated into impossibility), like IWI, FNH, and so many others have done.

      • mark

        I second this. It has always blown my mind how H&K hasn’t set up production in the US for long arms. They have MP5/G3/etc. tooling all over the globe. How hard is it to load up the dies and related equipment on a ship to the US, rent a large warehouse, source the barrels from FNH, and start putting together the G3/MP5/HK33 and flooding the US market with them for $1250 a pop. People who grew up watching 80’s action flicks are 30-40 years old now so the demand and disposable income is there.

        • Bruce Brunken

          Not sure if you have noticed or not, but the market is completely flooded right now. Old roller lockers are a bit passé, besides.

  • dp

    They lost some markets in SE Asia and south America. It’s tough living in this business. Hope they make it thru; the French order would be salvation

    • big daddy

      They had the opportunity to score big with civilians sales in the US. That has dried up, people do not have the disposable cash these days. H&K missed the boat, it sailed on a one way trip.

    • Schlomo

      The French won’t give them the order unless they start looking less desperate. Does France have much incentive to buy from a failing company?

  • Sulaco

    Dear HK, you suck and we hate you. Love German Banks.

    • DaveP.

      That noise you hear is Larry Correia laughing himself silly.

  • Marui

    Why doesn’t HK make more of their guns in the US to bypass the impor restrictions? They did it with the MR series of rifles, why can’t they do it with their sub guns and other desirable guns?

    • Like what? The GMG, MG4, and 121? Most of their cool stuff isn’t purchasable by civilians dude.

      • Zachary marrs

        Make it semi auto, how would that not be civilian legal?

        • barry

          Haha, no one is going to pay big bucks for a semi auto MG4. It’s pretty pointless to have a light machine gun that isn’t full auto, unless your first name is Jerry and last name is Miculek. He had to register his trigger finger with the BATFE.

          • Zachary marrs

            What about those semi auto rpd’s? Those semi auto m240’s? People will buy it, and you have no evidence they won’t

          • barry

            Semi m240 by Ohio Ordinance Works costs $13,900 and weighs 24.2 pounds empty. I’m sure the MG4 will be expensive, too. If you think they are flying off the shelves, why don’t you open a business and sell them, genius. I’ll make sure to be around to bid on your belongings when the bank repossesses them.

          • Zachary marrs

            They sale, even though they may not fly off the shelves. H&k doesn’t just make lmg’s Einstein, people will go bonkers over semi auto mp5’s and 7’s and g36’s

          • ssfdsf

            I’d buy the hell out of a semi-auto MP7 and 416. I could care less about MP5s(history just doesn’t do it for me, same with AKs), and the G36 is just terribly unimpressive to me, but I’m sure there are people who grew up playing video games who are about 20 right now and would love one.

          • Bruce Brunken

            Buying the gun you used in a video game is not a very positive statement about American culture or gun enthusiasts, generally speaking. What sort of a child mind does this?

          • Scott P

            Because I didn’t have the luxury of growing up in the country or having family/friends who shot guns. I didn’t even know my grandpa had guns until after he died even then he never shot them when he was alive they just stayed hidden in his house.

            Growing up in suburbia/urban environment which the vast majority of Americans now live under means zero exposure to positive firearm experiences since the only time we saw guns was either in the hands of criminals or the police with the media reinforcing that paradigm.

            Why hunt? You have the grocery store. Why target shoot? You can go to a bar, museum, or do a host of other things for fun.

            Therefore my only positive exposure to firearms on my own terms was video games coupled with a love of history growing up in the 90’s and 2000’s, the Golden Years of gun control. My mother is an anti and my dad doesn’t care (he bought a shotgun years (but I’ve shot it more than he has). If it wasn’t for video games I’d be another progtard stuck in the urban bubble parroting their soundbytes.

            So I am sorry that I don’t live up to your ideal way of how someone should be introduced to firearms. Sorry I didn’t grow up in the country or conservative state. Sorry I didn’t have family or friends who gave a damn about guns or gun rights. I had to make due with what I had and that was video games. You too will find out with the ever increasing urbanization of this country video games are going to be your only hope in getting future generations on the Pro 2nd Amendment side like myself.

          • Scott P

            Sorry that was early 2000’s. I would also like to add that now I own almost 30 guns all from “gasp” video games I played as a child and still do now in my late 20’s. Yet those same games have not inspired me to go on a rampage.

          • Zachary marrs

            Even then, you are the one who brought up sale’s. The original discussion was over whether they could be made semi auto.

            And besides, at h&k prices, they aren’t flying off the shelf either

          • Schlomo

            People will pay for it. Just look at the companies making the belt fed AR-15 uppers.

      • Marui

        If made available by HK, I’d definitely pick up a true semi-auto UMP, as well as an MP5. Maybe even a semi auto MP7. Sure the MP7 might not be practical for civilians, but I want one 🙂

        • Schlomo

          How is MP7 not practical for civilians? Civilians need short range weapons more than they need long range weapons.

          What do I need a long range weapon to shoot a butt burglar from across my living room? MP7 also has less penetration than an MP5 through normal barriers, so it’s safer for civilians who have to worry about what’s behind their targets, and it also has less recoil than MP5, so it would be easier to shoot for family members who may not be used to shooting much, or for you if you simply cannot afford time/money to train too much.

          • Marui

            The lack of ammunition would be a big problem for practicality. And then if HK decides to ship the civi version with a 16″ barrel instead of making it a pistol… It’s a weird thought but maybe they would do that. Expect the unexpected when HK makes their civi guns. Eg: making the USC have 10 round mags, Making SL8s grey to appear less “evil” etc.

          • Mikecl

            Marui nailed it!

            HK wont import many of their firearms, do you think they are going to send over the specs for someone in the US to make the ammo? not likely.

            Like stated above, if a civi version (MP7) came to the market, the idea of that compact package fly’s right out of the window with a 16 inch barrel. Since you cannot import spare barrels, that means HK USA would have to manufacturer the spare, SBR barrels, once again not likely

            I just dont see HK doing what is needed, and in my opinion that’s giving HK USA free range to supply the US commercial market what they want.

          • Bruce Brunken

            Here’s a question–why would you want to use an MP5 or an MP7 for home defense when a Glock 19 would be so much less expensive and so much handier? Understanding, of course, that if used in a self-defense shooting, the weapon will be seized as evidence by the police and you will likely never get it back.

      • Schlomo

        Their 416 is pretty cool(their MP7 is VERY cool, as is their considerably shortened 416c model). LWRC seems to be having very good success, and that’s partially because they respect the American market. There’s none of that “military and government only” nonsense with LWRC. They work with the law, as we are all forced to, but they don’t arbitrarily make shitty guns, or choose not to release guns they “don’t think belong on the streets” or some bull.

        LWRC’s UCIW did fantastic on the open market, and they are still selling/making their UCIW stock. They had an early sale for their “PDW” shortened rifles, which sold out damn fast.

        H&K could take some notes. I’d buy a 416 if I didn’t have to pay 5 grand for a used upper sold second hand by some police department in New York to have a real version just in semi-automatic.

      • mark

        If priced around $1200 I’d buy three of their products not made here.
        G3
        MP5
        HK53

        • Lol, two of those are no longer made.

  • C.

    Guess I’ll have to get my P30L now.

    • kipy

      And hold on to it too, who knows what a super rare P30L will be worth in 50years

  • Lance

    Face it HK makes good guns but there company and there human services suck. Face it HK is responsible for HKs unofficial slogan “Were HK and you SUCK”!!!!

  • Chuang Shyue Chou

    That does not bode well.

  • Jay

    During this particular time in history where all around the globe sabres a-plenty are being rattled, H&K are on the ropes? Are these times not most ideal for the selling of small arms?

    Heaven’s I was trying to put off buying a VP-9 until next spring once I got a few choice long-guns added to the collection..looks like I might need to snatch one up pronto..and a spare parts kit or two, and a magazine or 15..

    • All_Your_Base

      I was going to wait on the vp-9 too. Guess I’m going to have to buy it now. Such a shame, Hk makes fantastic guns

  • Shayne

    I feel that H&K are only the first firearm manufactor that is going to find itself in trouble and more are to follow for very simple reasons, no more panic buying and the cost of ammo.

    H&K didn’t benefit from the panic buy and that is their own fault (not any German laws), the company is owned by a bunch of bankers and they prove that everyday.

    What is the use of buying more guns when it is too expensive to shot the ones you currently own?

  • Kenny O.

    I think HK’s main customer is the German Govt themselves. I’ve also heard that they’ve bailed them out before when the company was in dire straights because they were too important as a contractor to go under. Which kind means they’re a quasi-governmental organization. This is just general thoughts from bits and pieces I’ve read.

  • big daddy

    To make a simplistic analogy, H&K is the hot looking chick who is too shallow to find a good man and too stupid to realize her time as the hot chick is limited. H&K had people lined up with money in hand to buy so many of their products only to be told sorry we don’t sell our stuff too much we just enjoy teasing you, like the cock tease in high school. Get everybody hot & bothered and leave them all with blue balls. Now this mentality has hurt them financially as well as the overpriced non-performing military products. Think of all the potential products they could have released over the years that people would have lined up for, that’s over now. People right now are hurting for cash and the hoarding and gun confiscation scare is over, only the scare not the confiscation. Would I buy an MP5 or UMP pistol with a sig brace, oh yeah, in 45, 10mm, 9mm. .37SIG & .40 cal, all of them if they were at a reasonable price. And that goes for many other H&K products like a G36. They found a way to make them cost more not less and turned their nose up at the biggest gun buying non-military group, the US citizen. (People from NYC & California are no longer US citizens in my book) they let their government take their rights away without a fight, that’s un-American at least put up the good fight. H&K deserves what it gets, I feel bad for people who work for them and own stock, they are totally miss-managed and missed the money boat with civilian sales.

    • Bruce Brunken

      They won’t even be missed, quite frankly.

      • All_Your_Base

        That’s just simply not true.

  • Storm

    Maybe they’ll become more reasonably priced :3

  • Leo

    I own gsg522 and I could admit that quality of this rifle is pretty bad including design. I am sure HK made is better based on what I read. I changed several parts of this rifle and still not happy much, good thing it is cheap and I am not worry much about.

  • Schlomo

    H&K will set up real, balls out factory in the USA like IWI and FNH did, or H&K will fade into(“I read they made some pretty cool stuff”) obscurity like the original ArmaLite or something.

    • They have a massive factory in New Hampshire.

  • Secundius

    If BAE bought HK after Moody downgraded HK, and it affected there Stock Prices. Doesn’t technically qualify, as Insider Trading.