Colt Defense’s credit rating dropped to “B”

    Things are not looking good for Colt Defense LLC. From the S&P press release

    Nov 16 – Standard & Poor’s Rating Services said today that it has lowered its corporate credit rating on Colt Defense LLC [CDEFHC.UL] (Colt) to ‘B’ from ‘B+’. At the same time, we lowered the issue-level rating on the company’s unsecured notes to ‘B’ from ‘B+’, although the ’4′ recovery rating remains unchanged. We have placed both the corporate credit and issue ratings on CreditWatch Negative.

    “West Hartford, Conn.-based Colt, a manufacturer of small arms for the
    military and law enforcement, has been experiencing lower revenues and
    earnings over the past year due to decreased demand for its M4 carbine from
    its main customer, the U.S. military, as well as law enforcement customers, ,”
    said Standard & Poor’s credit analyst Christopher DeNicolo. “The company had
    planned to replace this demand with orders from international customers and
    new products, but has had only limited success, since a large order it had
    expected this year has been delayed. The lower volumes have also resulted in
    deteriorating margins, mitigated somewhat by cost-reduction efforts.”

    The reduced earnings and higher debt levels following a refinancing in
    2009, have resulted in total debt to EBITDA increasing to almost 7x for the 12
    months ended Oct. 3, 2010, from 3x in the same period in 2009, and funds from
    operations to debt of around 0%, down from 16%. Although we expect some modest
    improvement in revenues and earnings in fourth-quarter 2010, Colt’s results
    will likely be much lower than the same period in 2009–which we believe will
    probably result in further deterioration in its credit protection measures.

    I guess the Pentagon only needs so many M4 Carbines.

    Note, Colt Defense should not be confused with Colt’s Manufacturing Company, the civilian manufacturer, that was split off from Colt Defense in 2002.

    [ Many thanks to Carl for emailing me the info. ]

    Steve Johnson

    I founded TFB in 2007 and over 10 years worked tirelessly, with the help of my team, to build it up into the largest gun blog online. I retired as Editor in Chief in 2017. During my decade at TFB I was fortunate to work with the most amazing talented writers and genuinely good people!