Colt Files for Chapter 11 Bankruptcy
On Sunday, June 14, 2015, firearms manufacturer Colt Defense LLC and its subsidiaries (“Colt”) filed for Chapter 11 bankruptcy, with the goal of selling the enterprise. Colt had been strained by a heavy $355 million debt burden, and had previously warned that it might resort to bankruptcy if it could not reach an agreement with bond-holders. In a Sunday news release, Keith Maib, Colt’s chief restructuring officer stated: “The plan we are announcing and have filed today will allow Colt to restructure its balance sheet while meeting all of its obligations to customers, vendors, suppliers and employees and providing for maximum continuity in the company’s current and future business operations.” Read full Press Release.
According to Marketwatch, Colt hopes to have new owners by the end of the summer: “Colt is racing to get to the auction block by August 3, with an opening buyout offer from Sciens Capital Management LLC, Colt’s private-equity backer.” There are actually ten separate but related business entities under the Colt umbrella that collectively filed for backruptcy. These are listed in the Bankruptcy Filing Summary, In re Colt Holding Company LLC, Case Number: 15-11296.
Colt is one of America’s oldest arms-makers. After securing revolver patents in 1836, Samuel Colt founded the Patent Arms Manufacturing Company. In 1855 this business became Colt’s Patent Fire Arms Manufacturing Company. As an enterprise, Colt enjoyed success throughout most of its long history. However, the company has struggled in recent decades, having been through Chapter 11 bankruptcy once before, a process which ended in 1994. In 2002, Colt split into two separate companies, but these were re-united in 2013 with the acquisition of Colt Manufacturing Co. by Colt Defense LLC.
Colt will not shutter its doors immediately, having secured $20 million in operating financing from lenders. But there are still fundamental problems with the business. The Wall Street Journal states: “But Colt has struggled in recent years with supply-chain and working capital issues, a slowdown in rifle sales and its 2013 loss of a key contract to supply the U.S. Army with the M4.”
Colt’s immediate problems have been cash flow, specifically making payments on its big loans. Last year Colt had to borrow $70 million from Morgan Stanley to pay bond interest. Colt has roughly $100 million in secured debt plus $260 million in bond debt. That’s a heavy burden.
Colt Defense vs. Colt’s Manufacturing Company
In 2002, Colt Defense was split off from Colt’s Manufacturing Company though both entities remained in the same West Hartford, CT location. Colt’s Manufacturing Company serves the civilian market, while Colt Defense serves the law enforcement, military, and private security markets worldwide. The two companies were reunited in 2013 when Colt Defense acquired Colt’s Manufacturing Company. Currently, Colt’s Manufacturing Co. is a subsidiary of Colt Defense.
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Tags: Bankruptcy, Chapter 11, Colt Defense, Liquidation, Patent, Samuel Colt, Stock Market, WSJ
Bad business, Government contract and a name that could move igloos.. They priced themselves out of business
Poorly run gun company to go into bankruptcy these days. A lot of investors whipped out on this deal.
Sad, but no sympathy from me. They dug their own hole by concentrating on government work and ignoring the gun buying public. Guess they should have gotten a clue from Ruger, S&W and others.
Remember the Indian motorcycles?
Another large facto is Obama. He put all gun companies into high risk categories for investment and that raises interest costs on debt.
People are quick to criticize when great companies file for bankruptcy Colt has been in business since 1855 but the fact is the Obama administration and the rest of the bleeding heart liberal Democrats don’t want them in business! It’s kind of crazy when you think about it they bailed out the Auto Industry but the fact of the matter is cars kill more people in this country’s than guns. Hang on to what you got boys and girls were going to need everyone of them to protect ourselves from this government
The products and pricing didn’t warrant operating at a loss. As the article alludes, the company must be suffering from siphoning. Their semiautomatic pistols are the only brand commonly bought to be set aside, as were Pythons, etc. Their AR’s are deemed premium because the military trusts Colt. This is a real shame.