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.