Iconic gunmaker Colt is on the brink of bankruptcy

[davepc]

http://money.cnn.com/2015/06/10/news/companies/colt-bankruptcy/index.html

Colt, the iconic American gunmaker, could be bankrupt within days.

The company, that has been making guns for 160 years, has been struggling financially and missed a $10.9 million interest payment on its debt in mid-May.

Colt admitted, in a regulatory filing, that its failure to make that interest payment raises "substantial doubt about the company's ability to continue as a going concern." Colt also said it "may seek relief under the bankruptcy code."

The company has a 30-day grace period until June 14 to make the interest payment after which it has to find a way to restructure the debt with its bondholders.

Kevin Starke, gun industry analyst for CRT, said that Colt had already signed a debt restructuring agreement with its bank, but a group of bondholders rejected it that would have dropped the bonds to 45% of their face value.

[Cooley Hurd]

1. No more forties at the convenience store?

[Duckhunter935]

2. I would expect that brand to be purchased

just like Indian motorcycles, too much legacy to let it go.

[davepc]

3. The problem is most of their revenue is wrapped up in their military contracts

Somebody will buy them for the name and the M4/M16 contract alone.

[Lurks Often]

5. FN has the current M4A1 contract, not Colt

I think FN is making them in South Carolina

[Lurks Often]

4. Purchased and moved to another state

Whoever buys Colt won't stay in CT and they'll need to start coming up with some new designs as well, since other companies are selling the same current designs of equal quality at a lower price.

[benEzra]

6. Colt lost their way a few times...

when they let their line of civilian revolvers and pistols wither while wasting resources on politically favored but unreliable "smart guns", mostly abandoning the civilian AR market to other companies just as the AR became the top selling civilian rifle in the United States, and setting themselves up for gun-owner boycotts once or twice in the '90s. The disaster with the promising All-American 2000 9mm pistol (interesting design, lousy quality assurance) hurt them badly and sent them into Chapter 11 for a while. And when they finally re-entered the AR market, their quality was excellent (a Colt 6920 is still of the more highly regarded AR's) but they lagged in adapting to civilian innovation on that platform; to this day, you can't buy a Colt AR with a midlength gas system, for example.

What is really hurting them right now is debt from their prior poor decisions, though; their revenues are decent, but given their debt load they would have to have stellar revenues to survive.

I do think they will emerge from bankruptcy a much healthier company; we'll see.

Good writeup at Wikipedia: https://en.wikipedia.org/wiki/Colt%27s_Manufacturing_Company

[ileus]

7. A few plastic guns and revive the snakes.

Hopefully if Colt is bought an American company will do it. Ruger where are you???

[DonP]

8. Poor business strategies but survives with a classic brand name

Their business strategy, of focusing on a few large customers and very limited high priced offerings to a broader customer base with little dealer support is a bad premise.

All it takes is one major customer to go elsewhere and they're in trouble.

Now they'll scramble to try and rebuild their civilian customer base by re-issuing older designs and repeat the whole cycle again.

Maybe the next owners will spend some money on R&D and a decent "go to market" strategy and stop trying to milk the brand to death.

[Duckhunter935]

9. I have to admit the Colt name was part of my

decision process for two of my weapons

Colt 1911 government model
Colt LE6920

[DonP]

10. Nothing wrong with keeping classic designs going

But some investment in new technology and new designs is what builds their stability and a future market.

Everybody loved the 55 to 57 Ford T-Birds. But somebody at Ford was smart enough to design the Mustang for the next few generations.

Colt hasn't been doing that.

[Duckhunter935]

11. Very true

[Eleanors38]

12. No surprise. Winchester folded, then went under FN ownership. Colt should consider Savage...

as a means of recovering. At the end of the 1990s, they were facing bankruptcy. But they went about improving a good, cheap rifle they had been making for years, and expanded their offerings, all well made. The company is doing well today.