Posted on Jun 15, 2015
Behind Colt's bankruptcy: Financial engineering that backfired. Your thoughts?
8.3K
65
49
4
4
0
The gun company founded by Samuel Colt has flirted with financial disaster for much of its 179- year history. Now the storied West Hartford (Conn.) maker of rifles and pistols is heading into Chapter 11, in large part because of more than a decade of dubious financial engineering and accumulating debt.
Colt Defense, as the main part of the company is now known, filed for bankruptcy protection on Sunday while listing as much as $500 million in debt. Cooling demand for its civilian semiautomatic rifles and handguns, as well as delays in certain large U.S. government and foreign military orders, have exacerbated the company's finances. But the main reason the company hasn't weathered rocky market conditions since the winding down of the wars in Iraq and Afghanistan is that the New York financiers who control the company borrowed too much and paid themselves lavishly.
As I reported in a feature story last year, the private equity firm Sciens Capital and its affiliates loaded Colt with debt since the mid-2000s while taking cash out in the form of "distributions" and "advisory fees." Sciens remains the controlling owner of Colt Defense, according to a regulatory filing. An executive with Sciens did not immediately return a message seeking comment.
In 2009 and 2010, meanwhile, Colt somehow missed out on the "Obama surge," a run of strong civilian gun sales prompted by fears whipped up by the National Rifle Association that the Democratic president would stiffen federal gun control. The panic-based buying that lifted the small arms industry has now eased, making it even more difficult for Colt to move the military-style semiautomatic rifles it had hoped would be its salvation. "The industry's recent rapid growth is expected to slow over the next five years, increasing at a more modest average annual rate of 4.1 percent," according to the research firm.
Ibihttp://http://www.msn.com/en-us/money/companies/behind-colts-bankruptcy-financial-
engineering-that-backfired/ar-BBlb4My?li=BBgzzfcsworld.
Colt Defense, as the main part of the company is now known, filed for bankruptcy protection on Sunday while listing as much as $500 million in debt. Cooling demand for its civilian semiautomatic rifles and handguns, as well as delays in certain large U.S. government and foreign military orders, have exacerbated the company's finances. But the main reason the company hasn't weathered rocky market conditions since the winding down of the wars in Iraq and Afghanistan is that the New York financiers who control the company borrowed too much and paid themselves lavishly.
As I reported in a feature story last year, the private equity firm Sciens Capital and its affiliates loaded Colt with debt since the mid-2000s while taking cash out in the form of "distributions" and "advisory fees." Sciens remains the controlling owner of Colt Defense, according to a regulatory filing. An executive with Sciens did not immediately return a message seeking comment.
In 2009 and 2010, meanwhile, Colt somehow missed out on the "Obama surge," a run of strong civilian gun sales prompted by fears whipped up by the National Rifle Association that the Democratic president would stiffen federal gun control. The panic-based buying that lifted the small arms industry has now eased, making it even more difficult for Colt to move the military-style semiautomatic rifles it had hoped would be its salvation. "The industry's recent rapid growth is expected to slow over the next five years, increasing at a more modest average annual rate of 4.1 percent," according to the research firm.
Ibihttp://http://www.msn.com/en-us/money/companies/behind-colts-bankruptcy-financial-
engineering-that-backfired/ar-BBlb4My?li=BBgzzfcsworld.
Weapons
Bankruptcy
Firearms and Guns
Posted >1 y ago
Responses: 21
0
0
0
I wonder if this is a way for them to escape high regulations on firearms production on the east coast. There had been rumor a few years back that they were looking to relocate somewhere in the midwest, like Missouri.
(0)
(0)
SSG Roger Ayscue
They will likely relocate, if they move, to Alabama, Georgia, or South Carolina, joining FN, REMINGTON, MARLIN, HK, AAC, and a plethora of others leaving the HIGHLY UNIONIZED north for right to work states in the South.
(1)
(0)
SSgt (Join to see)
I see them selling to one of those companies, most likely Remington - one American company folding into another.
(0)
(0)
SSG Roger Ayscue
I do not see them selling to Remington (Freedom Group) We had better hope not. Freedom Group has a reputation of totally rat fracking every company that it buys...Just look at Bushmaster
(1)
(0)
(0)
(0)
Read This Next
Continue with Facebook 
Continue with Google