Bondholders of the gun maker Remington Outdoor Company, formerly The Freedom Group, want a better deal if investors are going to cash out.
Remington Outdoor makes the Bushmaster AR-15 assault rifle that was used in last year's murder of 20 children and six adults at the Sandy Hook Elementary School in Newtown, Conn. Four days after the massacre, which took place on Dec. 14, 2012, private equity giant Cerberus said it would seek a buyer for Freedom Group, but in the last year attempts to secure a deal have failed.
Cerberus, which owns Remington Outdoor, is seeking to raise money to repay investors, as a number of them have said they want to cash out of Remington Outdoor.
With the one-year anniversary of the massacre approaching, people familiar with the situation tell CNBC institutional investors are getting anxious about getting out of the investment.
Debt holders have come back with their own proposal on how to raise the needed funds.
(Read more: Maker of guns used in Sandy Hook sees sales growth)
Cerberus proposed raising the money through a $200 million dollar debt offering to a single investor that would pay a hefty 13.1 percent rate of interest. The investor would have also received a minority stake in the company.
To comply with its investors wishes, Cerberus wants to raise money so it can cash out while continuing to look for a buyer for the gun maker.
Cerberus officials declined comment on this report.
Bondholders have asked that Cerberus issue $175 million of add on debt under its existing structure. Offered to institutional investors, interest on the loan would be the London Interbank Offered Rate, or LIBOR, plus 425 basis points, with a 1.25 percent LIBOR floor or minimum. That would put the interest paid at roughly 6.5 percent, far less than Cerberus' original proposal.
(Read more: Cerberus seeks equity investment for gun unit)
A person familiar with the situation said there appears to be strong interest in the new proposal and it could close within 10 days.
The source declined to say how Cerberus would distribute the money raised from the offering to investors, should investors want to pull more money out than Remington raises through the debt offering.
—By CNBC's Mary Thompson. Follow her on Twitter @MThompsonCNBC.