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.

Gun prices climbed into the stratosphere last month during the 2015 April Premiere Firearms Auction conducted by the Rock Island Auction Company (RIA). The most expensive gun at auction was an historic Colt Paterson, the first-ever factory-engraved Colt handgun. Complete with the original fitted factory case with various accessories, this Paterson inspired a bidding war that saw the price rise to a stunning $414,000. That is an amazingly high price for a gun that was not owned by a well-known historic personage. Generally, to command a price in the multiple hundreds of thousands of dollars, a gun must have a significant historic provenance — such as having been owned by a legendary figure such as Billy the Kid or Wyatt Earp.

It seems like prices continue to rise every year at auctions of historic and collectible firearms. At RIA’s April Premier Auction, the total sale value of the auctioned guns topped $11.6 million. Remarkably, a first-year production Colt Python (serial #170) sold for $17,250! That makes this Editor regret not having acquired an early model Snake decades ago.

Today is the 179th birthday of the revolver, as invented by Samuel Colt of Hartford, Connecticut. On February 25, 1836, Samuel Colt was granted a United States patent for an “Improvement in Fire-Arms”, specifically the “Revolving Gun”. The rest is history. Colt’s original patent drawings, along with the text of his application, are available online.