BREAKING: Sciens Default on Loan to Colt, Rocks Bankruptcy Exit

Colt-Logo

Colt’s exit from bankruptcy has hit a snag: The owners of the company, Sciens Capital Management have defaulted on a $15 million funding commitment to Colt Defense LLC, as part of the company’s exit from bankruptcy. The private equity company agreed to pay the money to help Colt meet its commitments to its lenders, but failed to actually provide the money within the deadline. Nasdaq.com reports:

Gun maker Colt Defense LLC’s emergence from bankruptcy has been thrown into turmoil by a default on a $15 million funding commitment by private-equity owner Sciens Capital Management.

After Sciens missed a December deadline to come up with the money bondholders scrambled to find more cash to cover most of the shortfall and ensure the deals designed to usher Colt out of bankruptcy stay in place. The Connecticut firearms manufacturer said in court papers that it is on track to emerge from chapter 11, but the role of its long-time owner remains to be seen.

A Colt spokesman and a lawyer for the official committee of unsecured creditors declined to comment on the funding miss, which surfaced after Colt’s chapter 11 emergence plan was confirmed in mid-December.

Sciens principal Daniel J. Standen, who is also chairman of the governing board of the Colt parent company, said in a court filing Wednesday that the delay in funding was due to the need to document the new Colt investment as part of Sciens’s effort to enlist its investors in the deal. The firm raises money separately for each new investment, Mr. Standen said, and in order not to hold Colt in bankruptcy, it negotiated a delayed timeline for participating in the capital raise.

“Sciens strongly believes that the debtors’ business is worth saving and has therefore agreed to help fund the Debtors’ exit from chapter 11 by participating in the offering,” Mr. Standen wrote.

Sciens was supposed to participate in the new investment along with bondholders. According to documents filed in the U.S. Bankruptcy Court in Wilmington, Del., it didn’t meet the December deadline for the funding.

Court papers say Sciens has days to cure the default and to start paying up if it wants to stay involved with the storied company, maker of the “gun that won the West.” The private-equity firm has until Friday to come up with at least $1 million to hang on to a piece of Colt. If Sciens funds $2.6 million Friday, it gets another month to find more money and perhaps make good on its full commitment.

Court papers describe a fluid situation in which lenders, creditors and Sciens remain committed to getting Colt out of bankruptcy, but Sciens’s future participation hangs on whether it meets the new deadlines for funding. For most of the bankruptcy case, bondholders and Sciens were at odds, with bondholders accusing the private-equity firm of draining Colt of cash needed for research and development to keep it competitive.

Sciens denied the allegations and said it was committed to Colt’s success.

What this means is that if Sciens does not come up with at least part of the money by tomorrow, then it could be stripped of its involvement with the famous firearms manufacturer. It may be editorializing for me to say this, but perhaps that would be in Colt’s best interests, in the long run. Sciens’ management of the company has brought very little but trouble for the company.

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, over which Remington subsequently sued them both, and the Army.



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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  • Last week, Colt Defense fired PricewaterhouseCoopers LLP as its independent registered public accounting firm. It appears that Colt’s board didn’t care for the accounting firm’s less than rosy view of Colt’s future viability as a company.

    • Joshua

      Colts a good company, but they need new owners who manage money better if they’re ever going to recover.

      • Yeah, and if Sciens failing to pony up gets the courts to rip some of their tentacles out of Colt, I’ll be a pretty happy camper.

        • I have a post coming tonight that shows new consumer Colts for 2016

        • CountryBoy

          In addition, if Sciens has stripped Colt of needed cash (as is often done in these deals) they are deliberately hurting their “investment”, which makes me wonder what their real purpose is.

  • Major Tom

    “hopefully we’ll be singing ‘ding dong the witch is dead’ soon”

    Indeed. But then it’ll ask the question “Which old witch?”

    • Sciens. Or at least their involvement in Colt.

  • Oldtrader3

    Colt has done nothing for me for many years. Despite the fact that I own a couple, in their present business strategy configuration of hating small gun owners? Who cares!!!!!

    • Yimmy

      How do they hate small gun owners? I would hardly consider walking into Walmart across the nation and being able to buy a 6920, hating the small gun owners. I hope colt continues on with success, they’re a part of American history.

      • Oldtrader3

        They let their Consumer Product Quality Control go to hell for 20 years and only started fixing it when their Military Contracts went south. It is better now when their military went south, but you can’t find or buy many of their products (i.e. Peacemakers). Maybe hate is the wrong word? Disrespect might be better?

      • Well said Yimmy. Colt has been around since around 1837 in Paterson and Hartford. Colt is probably the only major gun company left in the liberal state of Connecticut; everyone else have moved South.

  • Jim_Macklin

    Maybe I’ll win the Powerball this Saturday. I might buy Colt and even fix their crappy quality control. Maybe resume American made guns with improved materials, but offer the one-off customs that Colt would do in the past.

    • Nashvone

      As long as you bring back the snake guns…

      • Yes, please.

      • That isn’t happening.

        It isn’t like they can just pull up the CAD drawings and make then again. They would literally have to relearn how to make them. And I don’t think the market is there for what many consider to be almost reproduction guns. Besides which, what makes them extremely valuable today is their rarity.

        • Nashvone

          I know but it’s fun to dream every now and then.

        • John

          >That isn’t happening.

          With New York passing a law preventing a handgun from holding more than 7 rounds, I believe otherwise.

          • That has been struck down by the courts.

  • Gregory

    Colt is responsible for its’ own demise. They make substandard garbage.

    • That is funny because their 6920 is still considered the minimum standard for AR-15s. Sure other companies exceed the standard, but there are still a lot of companies producing crap below the standard.

      • Joshua

        Technically they are….but not for the reason he posted. Colt is in this position due to leadership double dipping funds to pay for lavish luxuries for themselves.

        • I don’t disagree that Colt is responsible for Colt’s current situation. I was just talking about the substandard garbage.

  • Saint Vincent of Lerins

    Sciens can see the depression that’s coming.

    • Mystick

      To play on words, there’s “depression” and then there’s “full-on suicide risk”…

      It’s a point of…. scaling.

    • Patriot Gunner

      Historically that’s the time when you want to be in the gun business…nothing to spur sales like an economic depression that could lead to WROL.

  • Mystick

    Today’s Colt is a far cry from the company that “made the gun that won The West”…

    • Marcus D.

      I’m not so sure about that. The basic mechanical aspects of the 1873 are no different than the 1849 pocket pistol, or any of the guns that followed it. (This is probably also true for the Walker and the dragoons, but I am not personally familiar with their inner workings.) The only real improvements were better metallurgy and the ability to load cartridges. (Interestingly enough, it was Sam Colt’s widow who brought the gun to market and saved the company.) Talk about resting on one’s laurels! And indeed, except for Sam Colt’s widow pushing through the 1873, the business would have folded after Sam’s death, surpassed by companies with innovative products.
      Although he rest of the 19th century, and continued through the hiring of Browning, were probably the most innovative period in the company’s history, there has not been much since, and for the last 30 years Colt has done nothing but reintroduce the Mustang (a day late after Sig stole the market with a better looking gun). Yes, you can still buy an 1873–unchanged for 143 years except for finish and 1911s (changed only by addition of the Series 80). History repeats itself, innovation is not apparent, and it is small wonder that the company is foundering.

      • I have three Walkers built from Dixie Gun Works kits Marcus; one for each floor in my house. It’s like holding a cannon in my hand.

  • Mystick

    We haven’t been a capitalist society for nearly a century, much to our detriment. It’s been the intermingling and hegemony of government and business… which has nothing to do with a free market.

  • Patriot Gunner

    Colt could probably use the money it had “invested” in R&D for their “smart gun.” Just another case of businessmen and financiers who know nothing about the product, industry or its consumers and invest based on some financial model. The industry would be a lot better if Colt just disappeared, we have a plethora of AR manufacturers that will soak up the demand vacuum left behind. Heck we already have a glut of AR manufacturers so it’s not like supply will wane. The same goes for 1911’s, and we’ll do just fine without the mustang handgun. At the very least they should have gotten the hell out of CT and moved to a more gun/business friendly locale.

  • Sometimes a company just needs new leadership. But a lot of times that might only come when the company is either going into bankruptcy or is on the edge of bankruptcy, particularly with publicly held companies.

    There are numerous cases of this happening in the industry. Sometimes the leadership brought in is good, and the company thrives SIG is a good example of this. Other times they end up going fully in bankruptcy or being bought out by someone like Freedom Group.

  • Marcus D.

    In related news, it appears that for the moment the only Colt pistols on the California Roster of Approved handguns are a Colt Commander and the Python, all other 1911s (not that there were many) dropping off the roster effective January 1.

  • jc Reyes

    The problem with COLT is that it’s in Connecticut and it’s owned by a bunch of blood suckers. COLT needs to be bought out by someone who can appreciate the history of the company and the quality it is known for. Additionally, COLT needs to focus on building guns that are for the people not trying to survive on government contacts and a weapons design that designates another company’s claim to fame. For example Ruger builds guns for the people and they listen to their customers.

  • Cymond
  • Realist

    Well this explains the reason for the the new Colt M4 “Expanse”. I can see Colt Management now…”quick, cobble something together, anything I don’t care. The Colt fanbois will buy anything w/the Pony”…

  • Guido FL

    Sciens did what other ” investment companies ” do. That is bleed the company cash in every way possible then dispose of the carcass.

  • RSG

    Its Saturday. Any update on if that payment was made? I’ve owned a few Colts in my nearly 50 years. This country is better off and gun owners in particular are better served with a company like Colt still in business. The more the merrier.

    • survivor50

      “gun owners better served with a company like Colt…” maybe, but admit it, Colt got arrogant, and lazy. Therefore, OVER RUN. Witness the Sig P238. I own three. Only one Colt Govt 380 (which I like better!) Back to the future…
      It’s been said on here the problem is “They’re in Connecticut, and owned by blood suckers”. Hard to move the factory, been done though, and a branch of Colt is already here in Texas, but ‘blood suckers” abound. Wooden Stakes are the answer.
      Make a better product (they can), offer it WHEN we can actually buy it, don’t break the bank! Get new owners and management!!! Or loose it…

  • CountryBoy

    Is it a possibility that Sciens’ intent is in fact to break up Colt, whether to takeover the company at a bargain price, or to destroy it completely?

    Not to sound paranoid, but lesser evils have been done to destroy firearms companies, usually by those whose agenda isn’t clear until much later.

  • CountryBoy

    Not true; some stores have opted out of carrying black rifles, mostly because of local laws. The rest can stock them if they wish.

    It is a business decision – no gun store would carry an inventory of models that seldom sold, nor would any merchant stock slow-moving items. If Colt’s prices are above, say, CMMG or some other AR maker, Colt won’t be stocked for long.

    What you don’t seem to understand is that this has little to do with “a gun” and more to do with what is selling, and right now the AR field is overflowing with options, leaving Colt products priced too high in some cases.

    There is nothing that any normal business wouldn’t do with slow-selling products.

    But feel free to slam Wal-Mart or others without knowing the truth, as that is the sign of an internet sage.

  • Aurelian

    Colt just needs to go.

  • itsmefool

    Regardless of what happens to Colt, the world will keep spinning and the firearms industry will still offer tons of choices for today’s consumers!