Some of the most fascinating topics covered this week are Corporate (How America's oldest gun maker went bankrupt), Technology (Is superintelligence possible?), Book Review (Mueller report is a racy thriller), Lifestyle (Global meat-eating is on the rise, bringing surprising benefits), Sports (Ellyse Perry: 'There has never been more interest in women's cricket'), and Climate Change (A million species are at risk of extinction).
At Ambit, we spend a lot of time reading articles that cover a wide gamut of topics, ranging from zeitgeist to futuristic, and encapsulate them in our weekly ‘Ten Interesting Things’ product. Some of the most fascinating topics covered this week are Corporate (How America’s oldest gun maker went bankrupt), Technology (Is superintelligence possible?), Book Review (Mueller report is a racy thriller), Lifestyle (Global meat-eating is on the rise, bringing surprising benefits), Sports (Ellyse Perry: ‘There has never been more interest in women’s cricket’), and Climate Change (A million species are at risk of extinction).
Here are the ten most interesting pieces that we read this week, ended May 10, 2019.
1) How America’s oldest gun maker went bankrupt: A financial engineering mystery [Source: The New York Times]
Cerberus Capital Management, a private-equity firm, bought Remington before it opened office in Huntsville. It was purchased at a relative bargain. When Cerberus bought Remington in 2007, the world was hurtling through the greatest rush of private-equity acquisitions in history. There were never fewer than 1,700 private-equity transactions annually; in 2007 the figure peaked at 7,400. In exchange for tens of millions in incentives, Remington had only to commit to a few terms, laid out in a fat document called a development agreement. First, it had to hire enough employees every year so that, in 2021, it would have a local work force of 1,868. Second, starting immediately, it had to pay those employees a minimum average hourly wage of $19.50, rising to $20.19 in 2017. All parties signed.
But, there was a hidden, vaguely mysterious quirk of the company’s finances. In 2012, more or less in the middle of the best climate for gun makers in a generation, America’s oldest continually operating manufacturer abruptly, and for no easily discernible reason, borrowed hundreds of millions of dollars. Cerberus had somehow made a great deal of money on Remington even before opening the Huntsville factory. In order to buy Remington, Cerberus, as most private-equity firms would, created a new entity, a holding company. Instead of Cerberus buying a gun company, Cerberus put money into the holding company, and the holding company bought Remington. In 2010, Cerberus had the holding company borrow $225 million from an undisclosed group of lenders, most likely hedge funds.
The holding company spent most of the $225 million buying back its own stock, effectively transferring all the borrowed cash to Cerberus. In April 2012, Cerberus did something fateful, which probably seemed smart at the time. It had Remington borrow hundreds of millions of dollars and use it to buy the holding company’s debt. America’s oldest gun company now owed the money that Cerberus had used to pay itself back for having bought the company in the first place. Suddenly Remington was carrying hundreds of millions of dollars in debt that, if it could not be paid, would cause the business to go bankrupt. Remington executives arranged a meeting with their creditors. After listening politely, the banks made a proposal: They would exchange the money they were owed for an ownership stake in Remington, a so-called Chapter 11 bankruptcy or “debt-for-equity swap.” This arrangement would allow Remington to stay running, albeit under distant ownership, until a plan could be drawn up for its future, such as a sale or a liquidation of assets.
2) The terrifying potential of the 5G network [Source: The New Yorker]
We all are aware of the hype that’s surrounding the 5G. It’s said that with 5G, you can download a full-length movie in just 4 seconds. While there are many benefits of 5G, one also needs to consider cyberattacks and surveillance. Even before the introduction of 5G networks, hackers have breached the control center of a municipal dam system, stopped an Internet-connected car as it travelled down an interstate, and sabotaged home appliances. Ransomware, malware, crypto-jacking, identity theft, and data breaches have become so common that more Americans are afraid of cybercrime than they are of becoming a victim of violent crime.