Is legendary firearms manufacture Colt facing bankruptcy? Sources say this might be so… In an article by TMF they wrote:
That manufacturer is Colt, one of the most famous and storied names in the gun industry and one which has seemingly been troubled just as long. The company is reportedly pursuing a two-pronged strategy to remain in business.
Plan A is to restructure its debt with bondholders, asking them to take a 70% loss on the face value of the debt they hold with longer maturities and higher interest rates. On the other hand, Plan B is to undertake what is called a prepackaged bankruptcy that would allow Colt to move quickly through the proceedings and emerge a healthier company on the other end.
While such dual tracks are common, Colt is being unconventional as it seeks a restructuring that requires near unanimous consent from its bondholders, a difficult proposition under the best of circumstances, and a “prepack” without consultation with its largest debt owners.
Restructuring the balance sheet begins with $250 million worth of unsecured 8.75% interest rate bonds due in 2017. Colt is asking bondholders to accept just $300 in new junior secured bonds that bear a 10% interest rate and mature in 2023 for every $1,000 they hold. In addition, Colt will offer them $50 of new bonds for every $1,000, if they also vote in favor of its prepackaged bankruptcy plan.
The Times calls the move to do a prepackaged bankruptcy without the benefit of input from creditors a risky move and speculates the gun maker may be attempting to bluff bondholders into agreement, because the alternative — its demise — would be worse.
Be sure to check out the entire article, and stay tuned for more on this issue.