Investment group downgrades Heckler & Koch's performance rating

Moody’s Investment Services reduced the globally known gun maker Heckler & Koch’s performance rating in a recent review due to its weak operational performance, pending legal troubles and minimal amount of cash on hand.

The lack of free cash is just the lead into the explanation. In the next few months Moody’s believes HK will be unable to pay the semi-annual interest in respect of its EUR 295 million bond due Nov. 15. Concerns for the next year include whether or not HK will be granted export licenses for various countries and in turn earn enough money to make interest payments in the next year.

Currently, HK awaits export license approval by the German government, a decision that was scheduled for May, but was postponed to the end of September because of evolving events in the Middle East.

However, HK is also being investigated for violating export license agreements after HK rifles were found in Mexico. Although the investigation has not had a direct negative impact on the company, if found at fault it could impair HK’s ability to obtain export licenses to non-NATO-countries in the future.

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