High-Capacity Gun Magazine Maker Plans Junk Bond Debut

Magpul Industries Corp., a maker of high-capacity magazines and other military-style rifle equipment, plans to sell its first-ever junk bond offering, a deal likely to attract investors hungry for yield and repel those following ESG criteria.

The closely held company, whose products make semiautomatic rifles faster and easier to reload, is looking to raise $300 million through the sale of seven-year bonds, it said in a statement. Proceeds will be used to refinance debt and pay a special dividend to its owners.

Magpul, owned by private investment firm Albion River, was founded in 1999 by Richard M. Fitzpatrick, a former U.S. Marine sergeant. Demand for its products has been particularly strong over the past year with the pandemic, social unrest in several U.S. cities and expectations that gun policy may become more restrictive under the Biden administration all contributing to higher sales, according to Moody’s Investors Service.

The bond sale will test the relative strength of two forces that have shaped credit markets over the past several months: investors’ hunt for yield and their increasing focus on environmental, social and governance risks. Moody’s rates the bonds B1, four levels below investment grade.

ESG Concerns

Borrowing costs for speculative-grade companies have never been cheaper as debt investors pile into riskier assets. The average yield on junk-rated bonds reached an all-time low of 3.84% on Monday and companies have been taking advantage to load up on debt.

Yet as one of the largest makers of gun accessories, Magpul is unlikely to find support from money managers who screen their investments based on ESG criteria. High-capacity magazines -- enabling shooters to fire dozens of rounds without reloading -- have been a common feature of mass shootings across the country and have attracted scrutiny in Washington.

B. Riley Securities is arranging calls with potential investors over the coming days to discuss the terms of the offering, according to people with knowledge of the matter who requested anonymity. It is sounding out investor appetite for the bond sale at a yield of around 5.5%, one of the people said.

A representative for B. Riley declined to comment. Magpul and Albion didn’t respond to requests for comment.

(Everytown for Gun Safety, which advocates for universal background checks and gun-safety measures, is backed by Michael Bloomberg, founder and majority owner of Bloomberg News parent company Bloomberg LP.)

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