Colt Mortgaged Patents To Finance Loans; Has Won Contract For $36 Million

coltwithhorse

Disclaimer: I don’t really speak financialese, and therefore would urge readers to double-check anything I’ve written on the subject. Don’t be afraid to correct me in the comments, either!

Daniel Watters, the inimitable author of The 5.56 Timeline, has been closely following the recent Colt financial struggle, and also being an avid patent hound, discovered an interesting inconsistency in some of that company’s patents. Hognose of WeaponsMan.com has a more extensive writeup:

In the long-running serial of financial peril that is the Colt Defense story, a midnight discovery by commenter Daniel E. Watters:

I just happened to take a look at one of Colt’s patents and noticed that it has been assigned to Cortland Capital, the folks who bailed them out in February. Further research shows that this is true across the board for the active patents and patent applications.https://www.google.com/search?tbm=pts&hl=en&q=%22CORTLAND+CAPITAL%22#hl=en&tbs=sbd:1&tbm=pts&q=%22CORTLAND+CAPITAL%22+colt

Daniel is best known for his indispensable 5.56 timeline at the Gun Zone, but he has been a persistent researcher of the Colt financial drama. In this case, he is right on. Colt’s patents are gone, they technically are no longer property of Colt Defense LLC; and they won’t be, unless Colt repays the loan. And this is nothing new: since 2006 Colt has been mortgaging

We’re not referring, of course, to Colt’s historic patents, like this 1836 revolver patent, which have long since lapsed.

Screenshot 2015-05-23 14.00.51

 

We’re talking about its current patents, like this frequently-cited 2005 modular firearm patent. As that link shows, it, and its brethren, have at one time or another been the property of a who’s who of New York banking interests: Bank of America, Wells Fargo, JP Morgan Chase. And in recent years, less-established banks, the sort that make riskier loans, culminating a couple of years ago with Cortland Capital, whose latest loan of $33M came with a 10% interest tab.

That Colt has been using its inventions as collateral for loans is interesting in and of itself, but Daniel’s information doesn’t stop there. Colt has also secured a contract for foreign-military M4 Carbines worth $36 million US:

Colt Defense LLC, West Hartford, Connecticut, was awarded a $36,104,812 firm-fixed-price, indefinite-delivery/indefinite-quantity foreign military sales contract (Jordan, Antigua and Barbuda, Belize, Colombia, Hungary, Oman, Panama, Romania, Senegal, Lebanon, Romania) for M4/M4A1 carbines. Funding and work location will be determined with each order with an estimated completion date of May 21, 2018. Bids were solicited via the Internet with one received. Army Contracting Command, Warren, Michigan, is the contracting activity (W56HZV-15-D-0038).

We at TFB will keep our readers updated on the situation with Colt Defense.



Nathaniel F

Nathaniel is a history enthusiast and firearms hobbyist whose primary interest lies in military small arms technological developments beginning with the smokeless powder era. In addition to contributing to The Firearm Blog, he runs 196,800 Revolutions Per Minute, a blog devoted to modern small arms design and theory. He can be reached via email at nathaniel.f@staff.thefirearmblog.com.


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  • Anonymoose

    Interesting…very interesting.

    • ostiariusalpha

      …but stupid!

      • Evan

        This is still the same Colt that got into bed with the Clinton administration, and spent millions upon millions on “smart guns” in the early ’90s.

  • Anonymous

    Indefinite delivery/indefinite quantity doesn’t seem to make much sense in a firm fixed price contract. Under normal contract law indefinite delivery/indefinite quantity would mean that you agree to sell to the buyer as much as they demand, when they demand it, usually paying a per unit price. I’m guessing that here we are dealing with a minimum quantity guarantee which that not less than $36 million will be ordered.

    • Marcus D.

      My take as well, otherwise it makes no sense. But as someone else commented above, its not enough fast enough to finance the current debt, unless maybe that $36 mill is up front against future orders. That may buy Colt another year at most, unless the orders come flooding in that triple the minimum guarantee.

    • The contracts tend to be reported with the maximum potential value. From what I can find, the amended solicitation (W56HZV-13-R-0281) had a guaranteed minimum of 10,000 carbines and a maximum of 40,000.

  • ContrarianView

    It is not unusual for a distressed borrower – which Colt is – to assign a security interest in all of its corporate assets, including intellectual property, to its senior secured lenders. One correction to the post: Colt is still the owner of the patent and does not lose ownership unless it defaults on its loan. It works just like your home mortgage.

  • sam

    Hmmm, sounds like a hail Mary pass.

  • Lance

    Seems Romanian Spec Ops opting out of the Tavor for the M-4. Most regular troops as in Ukraine as well stick with the AK-74

    Seems Lebanon is trying to catch up most troops still use M-16A1s bought before the civil war in the 70s.

  • David

    2018 eh? That’s not a lot of time.

    Anyone think Colt could bring back some of their classic revolvers to pad their margins? I’m not a revolver type so I don’t know the market too well.

    That or they need a home run polymer wonder 9.

    Either way, they need to service that debt and 36 mill won’t cut it.

    • Anonymoose

      Not a chance.

    • DGR

      The only chance they have is to go new and better than everything else. historic guns are cool, but they dont stand a chance to save the company in this much trouble. They need a new design or idea. Another AR or 1911 isn’t going to save them this time.

    • borekfk

      Even if they did bring back the DA wheelguns and the Snakes, they’ll probably be built on CNC machines instead of being hand fitted. And you know what will happen; people will complain that they’re pieces of worthless s**t because they no longer hand fit them and they’re actually affordable.

      You’ll see a thousand forum posts of people displaying faux-outrage while posting pictures of their unfired Pythons saying they don’t make ’em like the used to. Meanwhile everyone with the new Colt revolvers will be having fun with them, like they should be.

      Personally I’d rather see Colt bring back the Woodsman or the SP-1 as a commemorative model.

  • Glock Guy

    Won’t be surprised to see them go out of business. Colt is a bygone era giving way to smaller and more lucrative companies like Daniel Defense, etc.