Colt Defense’s credit rating dropped to “B”
Things are not looking good for Colt Defense LLC. From the S&P press release ...
Nov 16 - Standard & Poor's Rating Services said today that it has lowered its corporate credit rating on Colt Defense LLC [CDEFHC.UL] (Colt) to 'B' from 'B+'. At the same time, we lowered the issue-level rating on the company's unsecured notes to 'B' from 'B+', although the '4' recovery rating remains unchanged. We have placed both the corporate credit and issue ratings on CreditWatch Negative.
"West Hartford, Conn.-based Colt, a manufacturer of small arms for the military and law enforcement, has been experiencing lower revenues and earnings over the past year due to decreased demand for its M4 carbine from its main customer, the U.S. military, as well as law enforcement customers, ," said Standard & Poor's credit analyst Christopher DeNicolo. "The company had planned to replace this demand with orders from international customers and new products, but has had only limited success, since a large order it had expected this year has been delayed. The lower volumes have also resulted in deteriorating margins, mitigated somewhat by cost-reduction efforts."
The reduced earnings and higher debt levels following a refinancing in 2009, have resulted in total debt to EBITDA increasing to almost 7x for the 12 months ended Oct. 3, 2010, from 3x in the same period in 2009, and funds from operations to debt of around 0%, down from 16%. Although we expect some modest improvement in revenues and earnings in fourth-quarter 2010, Colt's results will likely be much lower than the same period in 2009--which we believe will probably result in further deterioration in its credit protection measures.
I guess the Pentagon only needs so many M4 Carbines.
Note, Colt Defense should not be confused with Colt's Manufacturing Company, the civilian manufacturer, that was split off from Colt Defense in 2002.
[ Many thanks to Carl for emailing me the info. ]
Yeah, 25k new M4A1s next year ought to bounce Colt back abit, plus they’re building the M240B now. Wonder what the “large order that has been delayed” is about.
Steve…
Stocks dont matter whaen it comes to DOD or Army adoption. Colt is still making M-4A1s for the Army now that they selected the M-4A1 to replace the M-4. The army isnt going to buy any largre number of M-4A1s till next year so this dosnt matter much.
guess their credit rating wasnt HP/MPI tested
The real problem is that the Army has the M-4 technical data and now Sabre or H&K can get contracts for carbines now. And since the Army is upgrading rather than replacing Colt is mostly left out the the loop.
It seems Colt already has a whole line of products that can respond to the HK416 and other new designs eating up the market share.
- Advanced Piston Carbine (APC)
- Advanced Hybrid Carbine (AHC)
- Advanced Colt Carbine Monolithic (ACC-M)
And now the CM901 which besides allowing the use of different calibers can also use the upper receivers of the above carbines.
Plus they are working on that Sub-Compact Weapon (SCW) and managed to sell a few new IARs.
Yes they are all AR-15 based designs, but so are many of Colt’s competitors.
It’s evolve or die and unfortunately, Colt have been incredibly slow to change over the years. The CM901 is an innovative move in the right direction, but will be years before it’s adopted in any meaningful numbers.
HK, FN, LMT, etc. are stealing market share from Colt at a rapid rate on both the military and civilian fronts. ‘If’, and it’s a mighty big ‘If’, the US Army chooses a new rifle that isn’t from Colt, then things are going to look mighty grim for it’s future.
I don’t know if you noticed, but Colt Defense has recently replaced the President/CEO and Senior Vice President.
That’s junk bond status. Are they offering any new bonds?
Oh boo hoo. You want more money, try selling more to civilians.
I can’t wait till I start hearing about HKs finanicial hardships!!!