Colt: The Continued Soap Opera.

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Old Fuff

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Following a piece authored by Jim Shepherd at the Shooting Wire, the Old Fuff learns that the soap opera that is Colt is continuing - but may come to a head in 5 days (June 15th, 2015).

Jim in turn got his information from Reuters Financial, where the following was posted yesterday.

Gun maker Colt heads toward bankruptcy showdown with bondholders

WILMINGTON, Del. | By Tom Hals

Famed U.S. gun maker Colt appears to be headed into a bankruptcy duel in the coming week if its private equity backers and bondholders cannot overcome widely differing views on the best way to heal the company's financial wounds.
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Obviously the situation does not look good. Well to start with:

Colt Defense LLC [CDEFHC.UL], whose M1911 was the primary sidearm for the U.S. military for most of last century, missed a $10.9 million payment last month to holders of $250 million in its senior bonds.
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But the company is still optimistic.

Colt is forecasting sales growth of 24 percent in 2015 and 2016, the company's private equity owners, Sciens Management, intend to retain ownership, even if bondholders get stuck with big losses.
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But the bondholders that have an investment stake in Colt see things differently.

"Their (Colt's) message to creditors is to take the 45 cents or get flushed," said Leonard Klingbaum, a partner with Willkie Farr & Gallagher, who is advising lenders in the talks.
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So the bondholders are not jumping on the bandwagon to take this offer:

The West Hartford, Connecticut-based company has proposed issuing $450 of new securities for every $1,000 of outstanding bonds - a 55 percent discount. Colt has said that as of June 1, it has the consent of just 5.9 percent of bondholders, represented by the law firm Brown Rudnick.
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So what will probably happen if the bondholders stand firm - as they appear to be doing?

If bondholders reject the debt-cutting plan, Colt has said in regulatory filings it will sell its assets in bankruptcy, with the possibility that no bid will be enough to cover the company's $105 million in secured debt, leaving nothing for bondholders.
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Supposedly June 15, 2015 is the absolute deadline - be we've heard that before. Maybe by next Monday, give-or-take we may finely know what's going to happen, but don't bet on it. :banghead:

http://www.reuters.com/article/2015/06/09/us-coltdefense-bankruptcy-idUSKBN0OP1YN20150609
 
Sciens Management seems intent on staying in the game. The secured debt holders appear to be working to keep things from flying apart any more than they are already. The bond holders are between a rock and a hard place.

Pure speculation, but a likely strategy here is to force the bankruptcy question, wipe out the bondholders, and reconstitute the company with renegotiated secured debt covenants. As I noted a few weeks ago in the other now-closed Colt thread, the bond holders were being told to accept a huge reduction in their bond amounts, or risk getting nothing in a bankruptcy. That may be where this is headed. Colt's sales are way down, but they are forecasting growth. That may be enough to motivate the secured debt holders to work with current management. Eliminating that bondholder debt would be a key to re-booting Colt, and the bondholders may be getting lined up for a fall.

However, I've venture that Colt could face the complication of litigation by aggrieved bondholders - and that could slow down things for Colt.

I'm glad the Reuters piece made mention of the Hostess Twinkie example. That's exactly what I've been using as a benchmark for what Colt's strategy could be.
 
I'm a big Colt fan so I hope that they somehow get this sorted out to whatever extent so that Colt remains in business, continuing to make quality 1911s, ARs, and anything else they can think of to turn a profit.
 
with the possibility that no bid will be enough to cover the company's $105 million in secured debt, leaving nothing for bondholders.
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Doesn't sound to me like that $105,000,000 in debt is very secure then.
Time to put the dead horse down.........
 
[Sarcasm]Connecticut should un-ban Colt brand AR-15s, the residents here alone will save the company.[/Sarcasm]
 
oneounceload said:
Doesn't sound to me like that $105,000,000 in debt is very secure then.
Time to put the dead horse down.........
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That's a misunderstanding of what secured debt means.

The debt owed to two creditors are secured by the assets (tangible and intangible) of the company, and it also means they stand first in line to get paid back.

The debt owed to bondholders is not secured - which means that bond holders have rather limited recourse, and would only get paid back after the secured creditors. They're farther to the back of the line, meaning there may be nothing left for them after the two guys in front.

So, if a refinancing or sell off of the company earns $100 million (just hypothetically), then the secured creditors can be made whole on the bulk of their debt.

The unsecured creditors (bond holders) would get nothing.

Also there could be various other arrangements where the secured creditors continue a role after a sell off, being paid back the balance over time. So, their position is much more "secured" than the bondholders, and they may actually have a vested financial interest in seeing the pony continue - or reborn.
 
Most companies go away eventually. maybe the best thing is to just put it out of its misery.

They are not doing anything especially well anyway.

Nor are they selling any innovative products that customers cannot get enough of.
 
management and shareholders get taken out before bondholders so that is fine that sciens is playing chicken. But they get cut first
 
That's a misunderstanding of what secured debt means.

The debt owed to two creditors are secured by the assets (tangible and intangible) of the company, and it also means they stand first in line to get paid back.
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Exactly, but the way I took the article's statement was that if Colt sells everything at bankruptcy, even the secured creditors won't get their money covered by the % paid back - in short it appears (and maybe I read it wrong) that Colt is upside down owing more than what their assets would bring.
 
Iconic gunmaker Colt is on the brink of bankruptcy

I know this has been coming for awhile. Tragedy if Colt got bought out by Ruger, SW, or anyone else. We got all of our SW AR barrels swapped out for new ones from SW because they had the barrel manufacturing farmed out to Mossberg for awhile and Mossberg f'd them up. (I believe this is what happened when they bought T/C, Mossberg). Wouldn't want the quality of Colt to nosedive or anything to change.





http://money.cnn.com/2015/06/10/new...b_homepage_deskrecommended_pool&iid=obnetwork




Iconic gunmaker Colt is on the brink of bankruptcy


Colt, the iconic American gunmaker, could be bankrupt within days.

The company, that has been making guns for 160 years, has been struggling financially and missed a $10.9 million interest payment on its debt in mid-May.
Colt admitted, in a regulatory filing, that its failure to make that interest payment raises "substantial doubt about the company's ability to continue as a going concern." Colt also said it "may seek relief under the bankruptcy code.
The company has a 30-day grace period until June 14 to make the interest payment after which it has to find a way to restructure the debt with its bondholders.

Kevin Starke, gun industry analyst for CRT, said that Colt had already signed a debt restructuring agreement with its bank, but a group of bondholders rejected it that would have dropped the bonds to 45% of their face value.
Starke said that bondholders are reluctant to agree to any pact that forces them to take a loss. That's because they might have a better chance of recovering all or most of their money in bankruptcy, assuming that Colt gets sold for enough money to cover the $250 million worth of bonds and another $102 million in additional debt.

That could be possible if a buyer emerges from among its larger gunmaking rivals such as Smith & Wesson (SWHC) or Sturm Ruger (RGR).
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Another unmentioned issue:

In 1936 Colt advertised that every single component in their handguns was made "in house." Nothing was purchased except raw materials. This amounted to total independence and helped them get through the Great Depression.

Today is far different, as many of the smaller parts are ordered from specialty sub-contractors. Everything from bluing salts to pins and springs. Without question these companies are aware of Colt's situation, and have them on a payment-in-advance basis. Thus to advance production they must pay these contractors first, and unless Colt is paid up-front the money may not be available to keep production going.

Any way you cut it, a gun is equal to all of it's component parts.
 
Why would either Smith & Wesson or Ruger want to buy Colt? They are already making more 1911 platform pistols and AR-15 style rifles then Colt is.

Both have solid brand names in their own right.
 
Why wouldn't you buy Colt and the history of fine firearms that goes with the name. I just hope it doesn't wind up in the hands of some conglomerate like Remington.
 
Travis_Griffith said:
Why wouldn't you buy Colt and the history of fine firearms that goes with the name. I just hope it doesn't wind up in the hands of some conglomerate like Remington.
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$350 million plus reasons. not to mention, S&W and ruger already have great names and offerings.
 
$350 million plus reasons. not to mention, S&W and ruger already have great names and offerings.
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Exactly! In recent decades the Colt name has faded, while Smith & Wesson and Ruger have advanced. Both have full product lines while for all practical purposes Colt is limited to just 3 platforms, all of which are highly contested by they're competitors.

If either chose to spend $350 million it would be to increase their own business.
 
Don't get me wrong I love my colts and hope they turn around but I just bought another new colt 2 weeks ago in anticipation of this news.
 
Colt couldve been a commercial heavyweight, if they had made a few intelligent choices over the years.... As it stands, as a company, they deserve to fold up. They should have invested heavily into some R&D. A quality Colt piston rifle could have saved them, if they had done it a few years ago.
 
Old Fuff said:
Exactly! In recent decades the Colt name has faded, while Smith & Wesson and Ruger have advanced. Both have full product lines while for all practical purposes Colt is limited to just 3 platforms, all of which are highly contested by they're competitors.

If either chose to spend $350 million it would be to increase their own business.
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Ya know,,,, Ive been reading these threads (you're other one was well laid out, btw) and something dawned on me when I read your post here.


You're exactly right, essentially, by coming out with their own AR's and 1911's, S&W & Ruger bought the coffin (earned enough market share) and have the hammer and nails (good products at a good price) to sink Colt.

S&W and Ruger have grown their market share while Colt has grown their debt.
 
Old Fuff, as a close personal friend of founder Sam Colt, what do you think he would advise the company?
 
Old Fuff, as a close personal friend of founder Sam Colt, what do you think he would advise the company?
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Sammy was a no-nonsense sort of guy. His company didn't make a lot of different models, but he made sure he held the kind of patents that insured he'd get 100% of the market for about 20 years. :cool:

By the time that was over the company was well established, and in 1898 his successors were bright enough to hire a guy named Browning to design a line of box-magazine pistols while they're competitors were for the most part still making top-break revolvers. :uhoh:

As for the current management/owners - he'd send them to the Middle East to open a retail establishment selling long knives, and hope the ISIS tried them out on the help. :evil:
 
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