US based Firearms manufacturer Colt has filed for bankruptcy after it failed to garner support of bondholders for a debt reshaping agreement, the company said in a statement last Sunday.
"Colt plans to try to reduce its $355 million debt burden via a court-supervised auction of its business, to generate proceeds to repay some of its lenders," Wall Street Journal reported Monday, 15, June 2015.
Colt said that Sciens Capital Management has proposed to buy "all of Colt's assets and assume secured liabilities and all liabilities related to existing agreements with employees, customers, vendors, and trade creditors."
The process is expected to be completed in 60 to 90 days. Colt says its existing secured lenders have agreed to provide $20 million to allow for continuation of operations.
Colt’s downturn started after they lost a multi-million dollar M4 carbine rifles bid to arm the US military to Remington in 2013. The $77 million contract later went to Beligian Herstal after Colt’s fallout with Remington.
The decline is also attributed to missteps with gun owners, a misreading of the police firearms market and a fall in gun sales to the public after an initial spike several years ago.
The major blow however is the losing of the government contract which Moody's Investor Service said has dropped to less than 10 percent of sales from 60 percent in 2009.
"The loss of the U.S. government contract made it far worse," Alan Rice, a member of the board of the New Hampshire Firearms Coalition was quoted as saying by Associated Press.
In an official statement, restructuring Officer Keith Maib said, “Colt remains open for business.” That’s thanks to a pending $20 million loan to keep its Connecticut-based manufacturing operations going. Colt’s future will depend on what happens next now that it’s up for sale.