As I wrote last week, Colt Defense LLC is teetering on the verge of bankruptcy. Yesterday, they once again extended their deadline for bondholders to either accept their offer to exchange their notes or Colt goes ahead with a prepackaged bankruptcy filing. The deadline now expires on June 2nd. So far, only 5.7% of bondholders have tendered their old bonds in exchange for the new notes.
WeaponsMan reported a few days ago that Colt has mortgaged some of its patents. According to Daniel Watters, Colt has mortgaged these patents to a number of borrowers with the latest being Cortland Capital as security for a $33 million loan.
Of course, the finance companies do not want to exploit the patents; they just want security for their loans, and winding up holding the patents in lieu of principal and interest is not their preferred outcome. They’re in the money racket, not the gun racket.
But if Colt defaults on its Cortland loan, Cortland winds up holding a bag of patents (and any other security Colt pledged) rather than its money. In such as case, they might be able to charge Colt royalties for using these inventions of its employees and former employees. If Colt production continues. Or resumes. Most likely, they would try to sell the patents.
The patents are one of the true stores of value in Colt Defense LLC, but they have been mortgaged as part of the financial
lootingmonetization of the company that the last several rounds of owners have undertaken. The company’s trademarks are also a highly valuable asset. One wonders if they, too, have been mortgaged.
There is some good news for Colt. They have won a $36 million contract to deliver M4 and M4A1 carbines to a number of foreign countries including Jordan, Panama, and Colombia.
Colt Defense LLC, West Hartford, Connecticut, was awarded a $36,104,812 firm-fixed-price, indefinite-delivery/indefinite-quantity foreign military sales contract (Jordan, Antigua and Barbuda, Belize, Colombia, Hungary, Oman, Panama, Romania, Senegal, Lebanon, Romania) for M4/M4A1 carbines. Funding and work location will be determined with each order with an estimated completion date of May 21, 2018. Bids were solicited via the Internet with one received. Army Contracting Command, Warren, Michigan, is the contracting activity (W56HZV-15-D-0038).