Hartford, Connecticut gunmaker Colt has won confirmation of its Chapter 11 bankruptcy exit plan. The plan, which includes a new lease on the company’s Hartford plant as well as negotiated terms for retiree medical benefits with the United Auto Worker’s union, was approved by all of the company’s stakeholders. ABLAdvisor reports:
Colt Defense LLC announced that the United States Bankruptcy Court for the District of Delaware (the “Court”) has confirmed the Company’s Second Amended Joint Plan of Reorganization (“the Plan”). The Plan received full support from all of the Company’s stakeholders. Upon completion of the restructuring process, which is expected to occur in the coming weeks, the Plan will significantly restructure and reduce the Company’s debt, improve its capital structure and enhance its liquidity profile. The Company will also have a new lease for its West Hartford Facility and the Plan reaffirms the Company’s strong relationship with the UAW.
The Plan finalizes a global settlement of all outstanding issues in the cases, achieved through a consensus reached among Colt’s key stakeholders, including a consortium of Colt’s secured lenders, Morgan Stanley as the lender under Colt’s pre-petition and post-petition secured term loan facilities, the official committee of unsecured creditors appointed in Colt’s bankruptcy cases, Sciens Capital Management and the landlord at Colt’s West Hartford facility.
In conjunction with the confirmation, Colt also announced that it has reached an agreement with the United Auto Workers Union that resolves issues relating to retiree medical benefits.
“Today we achieved the last important milestone on Colt’s path to emerging from Chapter 11 as a stronger and more competitive company,” said Dennis Veilleux, President and Chief Executive Officer of Colt Defense LLC. Mr. Veilleux added, “We greatly appreciate the dedication and support of our extraordinary employees during this process, as well as the support we received from our financial stakeholders, Sciens Capital and our customers and vendors.”
Perella Weinberg Partners L.P. is acting as financial advisor of the Company, Mackinac Partners LLC is acting as restructuring advisor of the Company and O’Melveny & Myers LLP is the Company’s legal counsel.
Although Colt Defense has been in bankruptcy, it is still producing firearms. According to a recent report, the deal retains all of Colt’s 700 employees, which is welcome news in a time of uncertainty for them. Colt’s financial woes have been the result of parent company Sciens Capital’s mismanagement. Back in May, Hognose of WeaponsMan.com walked his readers through the company’s financial woes:
Colt’s hedgies (several generations of them, currently Sciens Capital) have taken it through multiple unnecessary reorganizations, each time stripping as much cash out of the company as possible, pocketing as much as they can get away with, and leaving it saddled with unsustainable debt. The company has hundreds of millions in debt that it has no reasonable chance of repaying. Now, faced with inability to pay a $10.9 million interest payment owed this month, the company’s managers seek to stave off default with hedge-fund chutzpah: offering investors the “opportunity” to take a 70% haircut on $250M of their bonds, or, alternatively, the company will bang out bankrupt — in a prepackaged bankruptcy modeled on that of the Government Motors rip-off and using the same obscure section of the bankruptcy code. Like the Chrysler and GM bankruptcies, this plan will preserve the equity of favored creditors — the hedge fund managers — while ruining, or at least haircutting, disfavored creditors — like the bond holders.
We have been covering Colt’s financial struggle since November of last year, beginning with initial signs of Colt’s default, and continuing with the withdrawal of Blackstone Funds’ equity, the Cortland Capital loan, debt restructuring, the news that Colt had mortgaged some of its patents, Colt filing Chapter 11, the possibility of a Native American tribe coming to Colt’s rescue, and Colt’s new joint contract with FN, which Remington subsequently sued them both, and the Army, over.
Though Colt may be emerging from bankruptcy, it’s likely that their problems are not over. We will continue to cover events with the company as they unfold.