Colt to File Chapter 11 Bankruptcy

1SHOT1KILL

Old Mossy Horns
I first heard that Colt was in deep do-do financially about 6 months ago and that bankruptcy appeared to be inevitable. Well looks like that may actually become reality any day now. Sad to see a firearm manufacture with such a storied history end up in this state. However, maybe they could use this opportunity to get out of the anti-gun region of the NE United State and come south to much greener pastures and a gun friendlier environment, that would welcome them with open arms.

The end we knew would come has finally begun. Colt Defense, LLC is set to file chapter 11 bankruptcy protection tomorrow, according to insider sources, reports marketwatch.com:

Gun maker Colt Defense LLC plans to file for chapter 11 bankruptcy protection by Monday, according to people familiar with the matter, amid business and accounting troubles.

The company has secured financing to continue operating while in bankruptcy and expects to remain in business after the restructuring, the people said.

The West Hartford, Conn.-based company, with a legacy dating to 17th century New England, developed a pistol it calls “the gun that won the West” and enjoyed a lucrative stretch in the late 1990s and early 2000s as the U.S. military’s sole supplier of the M4 line of firearms widely used by front-line troops.

But Colt has struggled in recent years with a slowdown in rifle sales and its 2013 loss of a key contract to supply the U.S. Army with the M4. The company has had accounting problems that caused it to revise prior years’ reported financial results and miss a creditor’s initial filing deadline for an annual report, according to regulatory filings.

Colt plans to try to reduce its debt burden via a court-supervised auction of its business, to generate proceeds to repay some of its lenders, the people familiar with the plans said.

Chapter 11 bankruptcy is the final admission that Colt can no longer outrun its creditors. It is the normal method by which large corporations restructure their debt, and the debtor is protected from collection efforts by its creditors. According to moranlaw.net:

Chapter 11 bankruptcy is a form of bankruptcy reorganization available to individuals, corporations and partnerships. It has no limits on the amount of debt, as Chapter 13 does. It is the usual choice for large businesses seeking to restructure their debt.

The debtor usually remains in possession of its assets, and operates the business under the supervision of the court and for the benefit of creditors. The debtor in possession is a fiduciary for the creditors. If the debtor’s management is ineffective or less than honest, a trustee may be appointed.

A creditors committee is usually appointed by the U.S.Trustee from among the 20 largest, unsecured creditors who are not insiders. The committee represents all of the creditors in providing oversight for the debtor’s operations and a body with whom the debtor can negotiate an acceptable plan of reorganization.

A Chapter 11 plan is confirmed only upon the affirmative votes of the creditors, who are divided by the plan into classes based on the characteristics of their claims, and whose votes are a function of the amount of their claim against the debtor.

If the debtor can’t get the votes to confirm a plan, the debtor can attempt to “cram down” a plan on creditors and get the plan confirmed despite creditor opposition, by meeting certain statutory tests.

Chapter 11 is probably the most flexible of all the chapters, and as such, it is the hardest to generalize about. Its flexibility makes it generally more expensive to the debtor. The rate of successful Chapter 11 reorganizations is depressingly low, sometimes estimated at 10% or less.

A more detailed look at what Chapter 11 bankruptcy means is available on the United States Courts website.

We at TFB have been covering Colt’s issues since they became apparent. Many bloggers already had called Colt’s race against debt, notably Hognose of WeaponsMan.com and Daniel Watters of The 5.56 Timeline.
- See more at: http://www.thefirearmblog.com/blog/...e-chapter-11-bankruptcy/#sthash.isxhaL5S.dpuf

http://www.thefirearmblog.com/blog/2015/06/14/breaking-news-colt-to-file-chapter-11-bankruptcy/
 

FishHunt

Old Mossy Horns
Colt has been in $$$ troubles since at least the early 1990's. Gov contracts have kept them afloat for a long time.What was once a rampant colt is now the old grey mare. Remember when Colt sold the Colt off the roof?

<>< Fish
 
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