NY Times On the Colt Bankrupcy

M4A1_ACOG

The NY Times reports that Colt is close to finalizing a bankruptcy plan which will give bond holders a severe “haircut” ie. Colt will owe them a lot less than they currently do. I have to admit that the specifics of this plan are to complex for me to understand. Maybe a financial guru can explain how this all works in the comments below. From NY Times

Actually, it has announced that its first plan is to restructure its outstanding bond debt with an exchange offer. Existing bonds would be exchanged for new bonds with longer maturities and higher interest rates. Bondholders would also enjoy a rather severe haircut – the new bonds would have a face amount that was 70 percent lower. Ouch.

But because Colt has also announced that the exchange offer is conditional on receiving nearly full bondholder participation, I’m going to assume that won’t happen and move along to Plan B.

Plan B is a “prepack,” or a prepackaged bankruptcy case. An American prepack – the term has a different meaning in Britain – involves solicitation of votes on a bankruptcy plan before the bankruptcy is actually filed. Once the case is filed, the debtor can move quickly to court approval of the plan.

An exchange offer must comply with the Trust Indenture Act of 1939, which requires unanimous consent to change the core terms of a bond, but a bankruptcy plan can achieve the same result simply by compliance with the voting rules of the bankruptcy code. Fifty percent of the creditors and two-thirds of the amount owned work here.

I was hounded by investment bankers some years back. They were all trying to figure out if buying Colt junk bonds would be profitable. Ever since the early 1990s Colt has been going from one disaster to another. First it was union strife, then very poor strategic decisions leading to consumers boycotting them and now it looks to me like they were to overly reliant on military contracts. I don’t like gun industry consolidation, but maybe Remington should buy Colt? A Remington owned Colt can’t be worse than the current situation, a Colt that is almost always inches away from bankruptcy.

Thanks to Mike for the tip.



Steve Johnson

Founder and Dictator-In-Chief of TFB. A passionate gun owner, a shooting enthusiast and totally tacti-uncool. Favorite first date location: any gun range. Steve can be contacted here.


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  • jrt 82

    poop.
    And here I was looking forward to a couple of those Colt OEM rifles.

    • Shawn Thompson

      they are already out on the market. go buy one

      • MR

        If they’re still around in a few months, I might pick up a 1911. Just not in the budget right now, plus I don’t want to fight the vultures and collectors trying to get the last products of “the real Colt” before they go under.

        • All the Raindrops

          There’s no real collectability in current production colt products. I could name 10 guns that are better investments.

  • Yohei556

    There is probably a bunch of Belgians walking around the Colt plant, pointing at things, whispering in Belgian, taking notes, measuring for new curtains….

    • Vitsaus

      Glorious. Best comment all day.

    • Joe

      Would they even need Colt’s production capacity for government contracts?
      That said, FN is extremely friendly toward private individuals.
      FS2000, PS90, SCAR, M16A4’s and M4’s, and even a semi M249.
      What other defense contractor does that?
      GD needs to step it’s game up, I want a MK19 in 37mm.

    • Walloons whispering in French 🙂

      • Kivaari

        Or Flemish.

        • FN has always been a company filled with Francophones, so probably not.

    • MPWS

      I would not bet on it. They once, after many tries to get it going, discarded one of icons of American gunmaking – USRAC formerly Winchester Repeating Arms. They are probably not in mood of bothering with downer. The only way out is governments (U.S. and Canadian) buyout.

    • I welcome our new Belgian overlords.

      • Cannoneer No. 4

        Hell, they bought out Budweiser, why not Colt?

        • PavePusher

          Not like Budweiser’s product could suffer in any way by that….

    • John

      Probably. The SCAR is by all accounts a nifty and reliable weapon… but it’s so expensive, only special force units order it in any quantity.

      They’re probably watching HK very closely. Maybe they’re making a bid on Colt and ensure they’ll both get future U.S. contracts and that they can make their own version of the 416 for future sales.

    • Frank Aking

      As they should be. Colts failed on its own. Stop blaming others.

      • DonDrapersAcidTrip

        who said otherwise? stop talking just to hear yourself

      • Yohei556

        who did i blame?

    • Andrew Hobby

      Ugh, and you just KNOW those curtains are going to be Belgian Curtains. The Nerve!

    • john huscio

      “whispering in belgian”

      Walloon or Flemish?

  • MountainKelly

    It can be way worse. Remington is becoming just… Awful

  • Actually, Colt is attempting to strong arm their bond holders into accepting the note exchange with the threat of Chapter 11 as the alternative. An extremely high percentage of bond holders have to agree to the exchange to stave off the bankruptcy. The current senior notes are unsecured, so the bond holders would risk losing their investment in a bankruptcy. However, the exchange deal would trade the unsecured notes for secured notes. While initially providing a lower face value, the new notes would pay a higher interest rate and be a higher priority for repayment in any potential bankruptcy in the future.

    • MIke

      Appreciate this insight, its a smart play

  • Mystick

    Wouldn’t that be like GM buying Ford?

  • Hsein Chen

    Hope that four star is out of a job!

  • Alex Nicolin

    I wonder how they ended up in the hole, right after an AR boom market.

    • They’ve been there for many years.

    • spotr

      Colt mostly missed the AR boom market because of their “decision” to minimize sales to civilians.

  • Dogthecynic

    It reads like a first salvo. There’s almost no chance that the bondholders accept this offer, I mean if they do, it’ll be very beneficial for Colt. So you throw out an offer, then when you go down the more contentious route, you can say “Hey, we made a good faith offer based on what we can pay, you didn’t take it”. Seniors are unsecured, though, so Colt maybe making the bet that holders are going to bite the bullet then roll the dice in bankruptcy.

  • Bill Wallace

    I’d be leery of anything the New York Times publishes, they don’t really care about FACTS. Especially when the NRA and NRA Conventions are the subject.

    • uncle fester

      In Bankruptcy, everyone has to take a haircut (or worse) as the company restructures.

      Typically, the equity holders are wiped out. Unsecured creditors often get completely wiped out. Next, the bond holders and/or secured creditors take a haircut and/or swap the debt for equity.

      Because bankruptcy fights are expensive, creditors and debtors have a strong incentive to work out an agreed settlement.

      When Detroit went bankrupt, it’s bond holders got something like 74 cents on the dollar.

    • Colt Defense has announced the terms of the proposed bond exchange on their own website, as well in filings with the SEC.

      http://www.colt.com/ColtintheMedia/PressReleases/tabid/252/articleType/ArticleView/articleId/125/Colt-Defense-LLC-Launches-Restructuring-Transaction.aspx

    • TJbrena

      I’m gonna be the devil’s advocate here.

      NYT is a pretty good source of news that provides a wide variety of information, so long as you stay away from a heavily politicized issue like guns.

      I avoid the “National” section like the plague with few exceptions because of exactly that sort of bias, but I read the NYT’s “International” section almost every day.

      The series NYT did a few months back on wealthy foreigners buying American real estate was interesting, especially the one about the Russkie oligarch responsible for an extremely shady MiG deal that bought a high rise in Manhattan, and the feud he had with a Russian expat.

  • Riot

    The king of corruption, the small arms industry’s baron of bribery is going bankrupt?

    Fantastic.

  • floppyscience

    “A Remington owned Colt can’t be worse than the current situation”

    I’m sure a lot of people would rather see Colt simply cease to exist than live on as another one of Remington’s bastardized brand names, myself included.

    • Heretical Politik

      OMG yes. Death before dishonor.

    • Kivaari

      It wouldn’t be so bad if Remington started making better guns than are made today.

      • floppyscience

        No, not at all, but I don’t see that happening anytime soon. It’s been 8 years since Cerberus took them over and they haven’t tried to turn themselves around yet. On the contrary, they just shut down the Para factory (who WAS finally getting their stuff together) and killed the Para name so they could make their designs under the Rem banner.

        So long as people keep buying their stuff, they will never improve. They have no reason to.

        • Kivaari

          I know they would sell more if the boosted quality. I know dealers that are no longer buying Remington’s near what they did 10 years ago. Inspecting them, shows they are not even close to the old days. It’s too bad. Ruger makes functional guns with lower quality finishing, and that has caused me to stop buying them as well. Although I bought a nice used KP95DC last year for $175 with a pile of accessories.

    • MclarenF1Forever

      I feel the same way when the Armalite name got picked up by Eagle. Sometimes brands/names ought to go into the history books. Pan-Am is another name that should’ve just stayed in the books rather than being bought and traded.

    • FightFireJay

      Thank you for jumping on that. The only good thing Remington has done recently is 1911s. The R1 is a good value and they fixed Para’s QC issue… then what do they do with a name they bought and quality they actually improved? Announced they are absorbing the models to be made under Remington name. Wow.

      Anyone can do better than that with Colt. And we won’t even mention the Marlin issue… oops, just did.

    • MR

      But it won’t cease to exist for long, someone will buy the rights to the name. Maybe the company that bought the Armalite name. Get some new “Pony” rollstamps and make Colts and Armalites on the same line.

      • floppyscience

        Though it would be ironic, I think FN would do a good job. They’re very good at managing the brands they already have and are in tune with the civilian market. Vista Outdoor (used to be ATK) would be another solid choice.

    • MANG

      It’s not Remington or Freedom Group Pre se, it’s their owner Cerberus Capital Management that sucks.

      • MANG

        Speaking of Cerberus, as far as I know they still haven’t sold Freedom Group, although they’ve been trying to unload all their gun investments. Why would they pick up a weak brand like Colt if they’re still trying to bail on the gun business?

  • Brian Thomas

    If Remington buys Colt that company would be worse off than it ever was. I have had to send back many Remingtons because of how poor the Quality was (2 receivers werent drilled right and even Remington couldnt get them on paper, got a new 5-R in .223 and a CDL in 300WSM) Marlins quality is horrible, Para is about to be just as bad. Freedom Group buyout would be THE worst thing to EVER happen to Colt.

  • Kivaari

    Colt has gone from one self-induced screw up to an

  • Raoul O’Shaugnessy

    Seems like Colt goes through one of these bankruptcies every 20 years or so.

    • MR

      Maybe they should merge with Chrysler, and they can synchronize their cycles.

  • Frank Aking

    Colt has ZERO commercial market share. Prices are 1.5-2X comparable QUALITY competition. Pistols and rifles. There’s almost ZERO commercial distribution of their ARs. Only over priced 1911’s

    They tried to take the H Und K “were better than you” approach to sales and marketing. They focused solely on Gov/PD contracts, most of which went to lower more reasonable bids like S&W etc.

    Let them die on the vine. No one is ” Too big to fail” All those employed by Colt can be employed by S&W, H&R, KAHR/AutoOrdinance…

    • MclarenF1Forever

      I think if they had started making the Pythons and other revolvers without locks, they’d probably get a decent share of that market.

      • Frank Aking

        In a free market, open sale, not “limited edition” BS? Colt would have to SLASH prices on pythons to compete with S&W. Colts commercial has failed. They Sucked at the government teet and must now rely on that

    • guest

      It’s a shame insofar as Colt’s 1911s have quietly gotten a lot better since 2005 or so. If you believe Hilton Yam, they’re the best out-of-the-box entry-level 1911s being made today, bar none, and their QC, fit and finish, and attention to little things like proper extractor tension during assembly, are leaps and bounds above everyone else out there, including Kimber. Things have gotten a lot better at Colt’s since the dark days of the 80s and 90s.

      I shudder to imagine the Colt rollmark being stamped on cast potmetal garbage guns by Hi-Point after the bankruptcy.

  • David Sonnier

    It must be bad at Colt is they couldn’t sell enough ARs during the last epic AR buying spree.

  • migueladobe

    I would say Smith & Wesson and Ruger are the only two that have the cash, but I don’t think the “AR-15” registered trademark warrants an acquisition. Wheel guns won’t save Colt in 2015. A bankruptcy might be the best choice, they might be able to lean up, get out of Connecticut, and forge on. Colt owners your collections would be benefit most from a bankruptcy.

  • PavePusher

    So, rather than start selling guns to the Citizens at reasonable prices, Colt will just burn the place down.

    Sigh…..

    • MR

      Colt…The Anti-Gun, Gun Company.

      I should be in marketing.

  • Paul White

    Cerebrus makes anything worse.

  • J.T.

    “I don’t like gun industry consolidation, but maybe Remington should buy Colt? A Remington owned Colt can’t be worse than the current situation, a Colt that is almost always inches away from bankruptcy.”

    Hell no. How about Vista Outdoor (owners of Savage) instead.

  • Fruitbat44

    “Colt” and “bankrupt.” Two words I never thought I’d hear in the same sentence. 🙁

  • The Survival Wire

    They already have Browning and FN!

  • ONTIME

    I would worry about Soros or Bloomberg buying Colt and closing the doors for good…….

  • Chad McBain

    “Bankrupcy” “Merica”

  • Sickshooter0

    I understand the Germans are looking to replace the G36. Maybe Colt can start ignoring the general public again?

  • Mazryonh

    If Colt truly does go under, will this blog publish a retrospective of their history, including an analysis on where exactly they went wrong?

  • Anthony Rosetta

    Remington sucks! I almost bought a model 700 in .270 cal. about 30 years ago. The dealer let me look at it and when I worked the bolt and put it on safety, you could hear the firing pin go off. The dealer had to send it back to Remington to fix it. I’ve never picked up anything made by Remington since. The just recently admitted they had a safety problem and recalled almost their entire line of rifles. If they pick up Colt, you can bet the whole farm they’ll cheapen it even more. It’s really a shame, two great old American companies going down the drain, excuse me, “gone” down the drain!