One of the nation’s most recognized firearms brands may go under today after it asked investors to take a 70 percent pay cut or accept a so-called “pre-packaged” bankruptcy.
In April, Colt Defense told holders of nearly $300 million in bond debt that it could not make payments on its loan and asked its debtors to accept an new deal that would stretch the loan out over a longer term and give investors 30 cents on the dollar when the company pays it off. If bankers didn’t accept that deal, Colt would execute a “prepack” bankruptcy that a near majority of investors must accept in order to avoid a lengthy (and costly) Chapter 11 filing.
The bond holders are supposed to accept either deal by midnight May 11.
We’ve all known this potential collapse was coming. SSR readers will remember last fall when news emerged that Colt Defense might not be able to make a nearly $11 million interest payment on its $250 million bond loan this month. And there have been several stories coming out about the Kissimmee, Florida, manufacturing plant Colt agreed to open that still hasn’t gotten off the ground.
Many industry analysts (and Colt as well) point to the lagging military, law enforcement and agency sales as the key link in Colt’s demise chain of events. But others point to poor consumer product innovation and financial managers who just want to suck the company dry.
Whatever the reason might be, Colt is on life support and tonight’s deadline could mean the end of the storied company as we know it.