(Repeats without change)By Davide ScigliuzzoNEW YORK, March 2 (IFR) - Banks that helped the firearmsindustry to raise billions of dollars have been hesitant to stepinto the public debate on gun violence following the latestschool shooting in Florida.Their silence stands in contrast to the US names - including retailers, airlines and car rental companies - thathave either sought to distance themselves from the industry orimplement their own gun restrictions.More than a dozen banks have arranged loans and bond salestotalling at least US$2bn for gun makers over the past fiveyears, according to an IFR analysis.That figure grows to over US$7bn if Olin - a large chemicalcompany that owns ammunition maker Winchester - is included inthe calculation.The deals range from a US$655m debt package for Remingtonput together by Bank of America Merrill Lynch in early 2012 to abond sale that Citigroup led only this past January for Olin.BAML was involved in seven out of nine debt deals examinedby IFR and had leading roles in five of them - includingRemington, Olin and Vista Outdoor.In a statement, the bank said it was joining other companiesin the financial services industry "to examine what we can do tohelp end the tragedy of mass shootings"."An immediate step we're taking is to engage the limitednumber of clients we have that manufacture assault weapons fornon-military use to understand what they can contribute to thisshared responsibility," it said.Other major US banks with roles in some of the financings,including Citigroup, Goldman Sachs, JP Morgan and MorganStanley, declined to comment.
So did a number of foreign institutions that have alsoworked on deals for the industry: Barclays, Deutsche Bank,Mitsubishi UFJ Financial Group and Sumitomo Mitsui BankingCorporation.Pittsburgh-based PNC, which lent money to Olin and VistaOutdoor, said in a statement that it was "very concerned" aboutgun violence."PNC has had guidance in place since 2013 that discouragesnew loans to gun manufacturers and has very limited exposure toclients that manufacture AR-15-style rifles," it said. "We arecontinuing to consider these issues."Wells Fargo, also involved in deals for the same twocompanies, said that while it encouraged debate regardingfirearms and public safety, it saw the political and legislativeprocess as the best way to resolve the issue.
CHANGING SENTIMENTDebt issued by gun and ammunition makers is only a drop inthe ocean in the US$2.8trn market for leveraged loans and junkbonds in the United States. And few market participants believethe companies in question will be shut out of the debt market.But the public backlash, combined with some of thecompanies' poor sales performances recently, could result inhigher cost of capital for at least some of them."They will get impacted operationally and that willtranslate into downgrades and borrowing costs going up," onehigh-yield portfolio manager said.Last month, Remington reached a deal with creditors thatwill see it file for bankruptcy to cut its debt load afterstruggling with disappointing sales.One investor told IFR his firm had contemplated buying theRemington loans that will be exchanged into equity, which atsome point were being offered as low as 25 cents on the dollar.But he eventually decided to pass on the purchase.Public outrage in the wake of the Parkland shooting thatleft 17 dead, which took place two days after Remington'srestructuring deal was announced, was one of the main reasons,he said."We bowed out because we were uncomfortable, and theresidual equity was going to be very small," he said.Asset managers say they have long faced restrictions fromsome institutional clients when it comes to buying debt of gunmakers and other industries such as casinos and tobacco. Thatsentiment has intensified in recent years."There is more emphasis in finding companies that are goodstewards," said a second portfolio manager, who argued thatstricter mandates have so far come from European investors aswell as some high-net-worth individuals.One European investor summed up his views even more bluntly:"If a board asks you why you should invest in guns, there isjust no right answer." (Reporting by Davide Scigliuzzo; Editing by Marc Carnegie)
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