High-end firearms manufacturer Dakota Arms of Sturgis, South Dakota has filed for Chapter 11 bankruptcy protection. The petition for Chapter 11 bankruptcy protection was filed July 6 with the U.S. Bankruptcy Court in the District of Minnesota.

It should be noted that a Chapter 11 bankruptcy filing is not tantamount to the closure and liquidation of the company. Rather, it is a request to the court that a company be granted what is, in effect, a breathing period from creditors so as to allow the company to reorganize itself for the intent of remaining in business. Several notable American companies including Chrysler Motors and others, have used Chapter 11 filings in order to allow the company to restructure debt and simultaneously continue operations under court supervision or detailed reorganization plans.

Dakota Arms manufactures a line of high-end, high-performance rifles, from single shot hunting rifles to the .338 Lapua Longbow tactical rifle, widely regarded as one of the world's best precision military weapons.

In a release, Dakota Arms described the filing as being "in the best long-term interests of Dakota Arms' customers, creditors and employees because it will allow the company to continue operating as it resolves its financial challenges. "

Dakota Arms' management team will remain in place to implement the plan of reorganization, and the company is negotiating debtor-in-possession (DIP) financing that would supplement existing capital. Company officials expect to emerge from bankruptcy within six to twelve months.

"We want to assure our customers, our dealers and our vendors that we are conducting business as usual. The sales team will continue to take orders and deposits. The manufacturing team will continue to produce the high-quality firearms that carry the Dakota name," says Dakota Arms president Charlie Kokesh. "We do not expect any disruption to customer service or quality control as a result of this filing."

"This is a responsible step that will ultimately strengthen Dakota Arms as we move forward," Kokesh said. "The rationale behind this filing is that Dakota Arms, one of America's leading manufacturers of quality firearms, will be able to continue to produce the world's most accurate and reliable rifles for hunters and sportsmen who appreciate the very best. In the meantime, there will be no loss of jobs in Sturgis, we will be honoring all customer deposits, and we will continue to make payments to all of our vendors, especially all of the businesses in the Black Hills."

According to Julie Anne Overton, representing the privately-held company's primary investor, difficulties with a creditor led to the filing decision.

The company's initial hearing before the District of Minnesota Banruptcy Court will be this Wednesday, July 12. At that time the Court will hear preliminary motions and take steps toward the appointment of a bankruptcy trustee.

As always, we'll keep you posted

I wonder who the difficult creditor was?

I wonder if Norma Allen still has any money in that company?

quote:

Kokesh needs an education in bankruptcy law

& how to run a small business..Doubt that he'll be there by the end of august.

Am not sure I will miss them. And I also suspect the whole industry needs a shake-out to bring things back to the point where a customer can expect to be treated with scrupulous honesty.

As it is, I see way too much "hype", far too many "fad" rifles, and far too little concentration on building simple, plain, reasonably priced, but reliable firearms in FAR fewer chamberings, on time, at quoted prices.

As that is a whole 'nother subject, will just say that I have had a Miller rifle (owned by Dakota these days) on order, with my deposit paid, since 1999. Got a letter in '05 from Dakota saying they would be scheduling my Miller for man'f in early '06. Haven't heard Zip since.

Now I no longer care if it ever arrives.

Yeah,

He waited until after that fancy African safari this year.

LD

The Outdoor Wire has learned that U.S. Bankruptcy Judge Robert J. Kressel granted several early motions in the Dakota Arms Chapter 11 bankruptcy case at a preliminary hearing held yesterday in Minneapolis, Minnesota.

Dakota Arms requested permission to honor obligations to its employees for their salaries and benefits and the treatment of deposits paid to Dakota for ordered firearms as being held "in trust" rather than being regular proceeds of business.

Judge Kressel has granted both motions.

Examining the filings also gives a basic explanation for the Dakota Arms decision to ask for Chapter 11 protections. According to documents filed in the proceeding, Dakota Arms was apparently forced to the courts after First Western Bank of Sturgis, South Dakota, accelerated a demand for payment of a temporary advance following Dakota Arms' failure to meet the repayment deadline. According to court documents, say the failure to make the payment of principal and interest was due not receiving an anticipated "large receivable" in time to make the deadline.

After that failure, First Western placed all Dakota Arm's credit lines in default and demanded payment in full of all credit facilities.

Dakota Arms says the repayment of those credit facilities would have, in effect, caused the company to fail. On July 5, 2006, the bank came to Dakota Arms facilities and demanded immediate turn-over of all its collateral.

Dakota Arms refused to comply; the legal rhetoric escalated, and Dakota filed the Chapter 11 case.

With the granting of these several motions, it would seem Judge Kressel believes Dakota Arms to still be a viable company, consequently granting the "debtor in possession" status, in effect, allowing the company to continue normal operations, although under Bankruptcy Court supervision.

Dakota Arms currently continues its operations for its Sturgis, South Dakota manufacturing plant, employing 46 people. Founded in 1972 by the late Don Allen, a controlling interest was acquired by three venture capital funds in 2003.

Well, one thing is for sure. When they come out of Chapter 11 they are going to have to find a new Bank because First Western isn't going to want to work with them anymore. And if they don't find a new bank on their own they are going to have to dilute ownership even more by bringing in new money from somewhere. It doesn't look good. And thats too bad becasue I liked getting that fancy magazine every couple of months.

I wonder what was going on here? Usually a bank doesn't foreclose unless, perhaps the had a buyer for the company. If they planned to hold an auction and sell off the machine tools, cutters, computers and office furniture they're lucky to get .20 cents on the dollar.

Maybe they figure money invested in Dakota is worth even less than .20 cents on the dollar?