Sciens Misses Funding Deadline, Colt Bank’cy. Exit Continuing

Colt-Logo

Sciens Capital Management, the hedge fund managers that own Colt Defense, LLC, have failed to meet the January 8 deadline for funding the famous gunmaker’s exit from bakruptcy. The Wall Street Journal reports:

Gun maker Colt Defense LLC is poised to exit bankruptcy after tweaking its chapter 11 exit plan to account for a reduced equity commitment from private-equity owner Sciens Capital Management.

Sciens missed a December deadline to fund $15 million of the cost of bailing its longtime portfolio company out of bankruptcy. Friday, Sciens came up with $5 million, and other creditors agreed to give the private-equity firm until early February to find the rest of the money.

Meanwhile, however, Colt wanted $50 million to implement its restructuring plan, money to pay lawyers and advisers and to get the troubled firearms manufacturer on its feet financially. Bondholders came through with an additional $10 million to make sure the company emerges on time.

At a hearing Monday in the U.S. Bankruptcy Court in Wilmington, Del., Judge Laurie Selber Silverstein approved changes to the chapter 11 plan she confirmed last month. Approval came after the judge hesitated over endorsing provisions of the plan that shield Sciens from litigation over how it has handled Colt.

Creditors had criticized the private-equity firm for draining cash out of the company, leaving it without research and development funding to stay competitive. Sciens denied the allegations.

Immunity from lawsuits is an important attraction for lenders and others that pitch in to a turnaround effort, earned by putting in cash or some other form of value. Sciens is seeking to hold on to the lawsuit shield that was justified by a $15 million funding pledge even though it has so far only come up with one-third of the amount.

Sciens contributed $5 million to the reorganization, but its lawyers stand to collect $2.6 million in fees, the judge noted at Monday’s hearing. Additionally, Sciens’s December failure to fund forced Colt to pay additional money to extend the maturity of its bankruptcy loan, the judge pointed out.

“I’ve got $3.1 (million) going out the door and $5 (million) coming in,” the judge calculated, questioning whether the gain for Colt justified letting Sciens off the hook for threatened lawsuits.

Ultimately, she bowed to the arguments of Colt creditors, who said they backed the tweaked plan for “pragmatic reasons.” Steven Levine, lawyer for the consortium of bondholders that are funding Colt’s bankruptcy emergence, said the group decided “they could either have a viable company without litigation or have litigation without a viable company.”

Bondholders decided to preserve Colt and grant the releases to Sciens despite its delay in providing funding for the bankruptcy exit, Mr. Levine said. Judge Silverstein cited the need to preserve Colt and the jobs of its workers in approving the changed chapter 11 plan.

Approval came after Sciens’s lawyers reduced the fees they are charging to Colt’s bankruptcy, and Sciens agreed to beef up financing support for Colt’s West Hartford, Conn., manufacturing facility. The private-equity firm still has almost a month to contribute the full amount of its commitment.

Despite being the force that – in the eyes of some who’ve been watching closely – has been responsible for the bulk of Colt’s recent troubles, and despite failing to provide the funding Colt needs to exit bankruptcy as agreed via the exit strategy, Sciens Capital Management still has its reins on a complicit Colt Defense, with the company’s executives arguing to allow Sciens not only more time to fund the company, but immunity from any potential lawsuits in the process.

Sciens has until the end of January to come up with another $10 million dollars to fund Colt’s exit.

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.

 

Thanks to Daniel for the tip.



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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  • Jim

    Colt, Just die already.

    • Comrade

      Communist

      • MR

        Because he wants the free market to do its job?

      • MR

        Capitalist pig-dog

    • MR

      Somebody would buy the rights to the name. RIA? Freedom Group?

      • Jwedel1231

        Freedom Group buying the colt name is the only way it could get worse for Colt.

  • Bob

    This is getting ridiculous, but not exactly surprising to me from my experience with corporations…

  • Jon

    Why cant we be so lucky as to have Sciens removed from ownership and someone competent take over? For the love of Pete, why must Colt be run by nincompoops?

    • Spencerhut

      Colt is run by “nincompoops” because they earned it.

  • RICH

    TRUMP SHOULD BUY COLT. HE WOULD MAKE IT FLUID AGAIN OR CLOSE IT UP !

    • DW

      1st thing Trump says to Colt execs?

      “You are fired.”

      • RICH

        It’s the mess made by Colt’s Execs that have brought them into this mess.

    • Giolli Joker

      Tell him on twitter…

    • John

      Yes, as someone who’s had four businesses that went bankrupt, that babbling buffoon is surely the one to manage this.

      • RICH

        The ‘buffoon’ as you refer to him, John, is a multi billionaire ! He put some businesses in bankruptcy because that’s where they were heading regardless. I would assume he would do the same with Colt. Colt screwed themselves several years ago by putting all of their strength in military contracts.

  • Burst

    The fact that the executives are arguing for Sciens control does not exactly lend much trust towards their leadership.

  • Yimmy

    That’s ok, I’ll continue to buy them as it is.

    • MR

      I’m planning on special ordering one, before the current company folds like a cheap suit, as nobody around here keeps them in stock. When I asked about Colt, the counter staff at the local gun stores all bemoaned the derth of available stock, blaming it on Colt’s reliance on military contracts. That may just be gun shop talk, but it seems consistent with what I’ve read here and elsewhere.

      • sean

        Colt changed their buying program with all the supplier and gun stores. Most businesses in the gun industry do not want to deal with them.

  • ostiariusalpha

    Well, CEO pay hasn’t exactly been asymptotic there, Mr. Whittle. I can’t muster a ton of sympathy for the drum-happy neo-hippies that infested the Occupy Wallstreet movement, but Bunghole Bill’s pud pulling for corporate cockroaches doesn’t fly with me either.

    • LV-426

      I’d love to take that “Test” right next to him. Hella cute talk from a little man from NY educated in LA…

  • Esh325

    The last successful gun they made was the M4, and now that doesn’t matter because of the plethora of AR15/M4s that equal or exceed Colt in quality, and are more innovated to boot. Colt is a dead pony.

    • LV-426

      Didn’t they just get another contract ??????

      • Jwedel1231

        Yes, a contract they share with FNH.

        • It looks like Colt actually managed to underbid FN for that contract. Of course, it is all in limbo with the Remington GAO award protest and the US Court of Claims lawsuit.

          The first delivery order to FN America under their contract W15QKN-15-D-0072 was valued at $2,675,160 for 4,220 M4A1 carbines.

          The first delivery order to Colt Defense under their contract W15QKN-15-D-0102 was valued at $2,666,000 for 4,300 M4A1 carbines.

    • Cymond

      … and yet here we are, still discussing them. I think this applies:

  • LV-426

    Even tho what he says is something true. Is this guy from Canada??

  • RICH

    One thing he’s right about is this generations feelings of ‘entitlement’ ! The schools are no longer teaching the youth any ‘life lessons’ ! You have 30 year adults today that can’t cook, count change or take care of ‘themselves’.

    • JK

      Ya’know, I bet your the first person ever to complain about how the next generation seems to be turning out.

  • Bob

    Corporations do some good works so no criticism? FYI I am a manager who works in a corporation. I see the good and the bad. A lot of bad. The lip service to the customer, the relentless drive to get more money from people who don’t need what we are pushing them to buy, etc. I’m not protesting because I’ve never spent days dragging around wood in a forest, because I have actually done so since I come from a poor family. Mr. Whittle is an upper management type, who probably has a nice car and oversized house and keeps on telling his minimum wage employees who are on food stamps and struggling to just be grateful for what they are being given and they should work harder. I wonder if Whittle has any issues with the government? Probably not, since he should be grateful for all they do…

  • John

    Look. Go back to the Morongo Band and ask if they have $15 million in cash to buy in and on what terms. Sciens can leave without penalty–as clearly they’re trying to do–and people who actually care about Colt can take over.