Gun Manufacturer Colt Warns of Possible Default

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Colt Defense LLC warned that it could default by the end of the year, as the privately owned company, which has suffered from declining demand for rifles and handguns, is likely to miss a payment to bondholders.

The gun maker faces a $10.9 million payment to bondholders Nov. 17, according to a filing on Wednesday with the U.S. Securities and Exchange Commission. If Colt skips the payment, it will enter a 30-day grace period, but without payment by Dec. 15 it will be in default and bondholders can demand immediate, full payment.

Colt, which is controlled by investment firm Sciens Capital Management LLC, had $248.8 million outstanding on the bonds as of June 29. The bonds were trading in the mid-30 cents on the dollar—deep in distressed territory—on Thursday.

Sciens declined to comment.

Colt, which has been manufacturing firearms and supplying the U.S. military since the mid-1800s, isn’t alone in grappling with weak demand, especially for sporting rifles. Smith & Wesson Holding Corp. reported a 46% drop in operating income for its latest quarter. And Cerberus Capital Management LP-owned Freedom Group, which owns the Remington Arms and Bushmaster brands, was recently downgraded by Moody’s , which cited pressure on earnings and revenue amid demand volatility.

Even if Colt is able to pay bondholders in time, it is “probable” that Colt will violate a $48.1 million term-loan agreement by Dec. 31 without an amendment or alternate financing, the company said. It added that it is in discussions with existing and potential lenders over the situation.

Lenders amended the agreement earlier this year, allowing Colt to skip three $1.9 million payments through March 2015.

Colt, which is based in West Hartford, Conn., and Kitchener, Ontario, declined to provide any additional information Thursday.

The company revealed its financial woes in Wednesday’s SEC filing to explain why it couldn’t file a quarterly financial report on time. Colt said it is down to $1 million in availability on its revolving credit facility and is still “working through accounting considerations and liquidity concerns.”

The gun maker said it expects to report a 50% to 60% decline in operating income for the quarter ended Sept. 28, compared with the year-earlier period. It also expects to swing to an operating loss for the first nine months of the year. Colt blamed its financial troubles on market trends including declining consumer sales of rifles and handguns and delays in sales to the U.S. government.

Colt was cut deep into junk territory by both Moody’s and Standard & Poor’s in recent months. Each rating firm maintains a negative outlook on the company. In the event of a default, S&P said in September that it expects bondholders to recover no more than 10% on the debt.

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[farook]

While the global economic depression, defence budget cuts and Obama scare would be a part of the reason, Colt really should take a lesson from HK, Sig and Walther on how to move with times. While their 1911 and revolvers are great there is no innovation in the company when it comes to making new designs. Sigs new P320 multi frame and calibre, Walther new CCP, Hk VP9, companies are in competition with each other. The price of tag of G2s ammo is one proof that the market is open to any manufacturer who has innovation in his inventory list. Unless the company comes out with innovative designs there might be a merger, my guess is its going to be with Smith and Wesson.

[xl_target]

While their 1911 and revolvers are great there is no innovation in the company when it comes to making new designs.

You do have a point.
Colt has not been really innovative lately.

I should mention that on further study of this issue, this division is Colt's Military and Law Enforcement division. It is a separate entity from the part of Colt that sells to civilians.
From what I gather, that division is doing OK.

[farook]

If there is one arms manufacturer that demands respect its FN. Right from the MInimi to these..one example of how innovation can make you a leader...

[dr.jayakumar]

Best bet will be to enter civilian market in india.
regards
dr.jk

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Colt Avoids Default After Securing $70M Loan

Colt Defense LLC, hit with weakening sales of sporting rifles and handguns in the past year, will not default on a major loan payment now that it has secured a new $70 million loan, a filing Tuesday with regulators shows.

Last week, West Hartford-based Colt said it needed a loan or an amendment to its existing financing agreements or the gunmaker would be at risk of default.

A $10.9 million loan payment was due Monday, but the company said it had a grace period through Dec. 15.


Filing: Colt At Risk Of Defaulting On Loan
STEPHEN BUSEMEYER
In addition to weakened sales in the past year, delays in sales to the U.S. government, as well as "timing of certain international sales," also have hurt the company's revenues, Colt said last week.

Colt said the new funding through Morgan Stanley will provide the company "with the time and flexibility necessary to support its medium- and long-term objectives"

Colt Defense LLC reunited its military and civilian handgun businesses in July 2013 with a $60.5 million acquisition of Colt Manufacturing Co., a decade after they were split apart. At the time of the merger, it was carrying $250 million in debt.

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So this is the whole of Colt. I was incorrect when I said that this was only their law enforcement and military sales division.
It is sad to see a respected name like "Colt" have to struggle like this.

[farook]

If Colt skips the payment, it will enter a 30-day grace period, but without payment by Dec. 15 it will be in default and bondholders can demand immediate, full payment.

A $10.9 million loan payment was due Monday, but the company said it had a grace period through Dec. 15.

If anyone from Colt is reading this here is what you do. DO-NOT pay any money for the time being to any of the share holders instead assure them a bonus if they wait for another six months. Use all the money you borrowed to make state of the art handguns, rifles and shotguns for both civilian and military. Be ready by shot-show 2015. Bag huge orders and pay back the shareholders and the banks.

On the other hand if you pay the money next month. Then you have to deal with the deteriorating sales, interest payback along capital payback out of an unproductive sick unit called Colt, wherein the founder was once compared to the almighty. God made man and a woman but Samuel Colt made them Even.

The figures that the company has defaulted in is Nothing pea nut money if one were to take into account the total defence budget of the country. Colt try to make a comeback do not think of winding up.

[farook]

Now that is what I call innovation

[xl_target]

You want more innovation.
Check out the SIG MPX.
I think they are going to sell a ton of them.

[youtube][/youtube]

[farook]

Think Sig is going to set new standard when it comes to multiple barrel lengths and multi calibre weapons. HK is really falling behind here. Hope they have a successor to the 416 and 417 in shot-show 2015