by Colt Defense, LLC is teetering on the brink of bankrupcy. Yesterday, the rating agency Standard & Poors reduced their credit rating from CC to D. This is the lowest level possible.
Standard & Poor’s reduced Colt’s rating two grades to D from CC, according to a statement Tuesday from the credit grader. The new rating means S&P considers the company “in default or in breach of an imputed promise” and that it has ruled out the possibility the manufacturer will make good on a missed interest payment during a 30-day grace period.
The weapons maker didn’t pay the $10.9 million due May 15 to holders of its $249.4 million of 8.75 percent unsecured notes due November 2017, according to S&P. Colt had warned in November it was “probable” it wouldn’t have the cash to make the payment if it didn’t meet internal sales forecasts.
On Monday, Colt issued a press release saying it had extended their tender offer to bondholders. This tender offer is asking bondholders to swap existing bonds for new bonds at a very substantial cut in their face value. If 98% of bondholders don’t accept this swap by May 26th, then Colt Defense is prepared to go into bankruptcy. They say they have a “prepackaged plan of reorganization.” This is the third time Colt has extended their deadline for the tender of bonds for exchange. If they do go into bankruptcy, unsecured creditors will get just pennies on the dollar.
On Friday, Colt announced a new stocking dealer program. What concerns me the most about it is the pricing of their models involved in the program.
Colt has recently refocused its core model lineup to ensure ample opportunity for consumers to acquire the most sought-after models. These same models have been repositioned in the market with more attractive suggested retail price points: the standard 1991 Government Model now has an MSRP of $799, the Combat Commander carries an MSRP of $849, the Defender is now positioned at an MSRP of $899 just to name a few.
This gives the Colt 1991 Government Model a MSRP less than that of Springfield’s Mil-Spec 1911 and Ruger’s SR1911. This reeks of desperation to me.
What is the Gov't Model and the Peacemaker going for? For a long time Colt neglected the civilian market. They had their military contracts so the they didn't need the civilians. Now with no more military contracts they are hurting.
A Bond Rating of "D" should cause desperation. I don't think Detroit's bond rating fell that low. Chicago's isn't that low, and it is on its way to being the next Detroit.
So if they shouldn't show desperation now, when should they panic? After the doors are paddle-locked it is too late.
The company has been raped by holding companies and held hostage by unions for decades. A group of friends put together a buyout offer back in the mid-'80s when the company was in trouble, but because they were based in Virginia, the union blocked the deal, fearing the new owners would move production to Virginia – a "right to work" state. Of course that was the plan because the unions were choking the life out of the company, forcing unreasonably high prices for retail products and creating extensive long-term liability for pensions, etc. The plan was to buy-out the workers with ownership shares to get out from under the unions and give the workers a vested interest in the success of the company.
Between unions and anti-gun politics, I don't see how – or why – gun companies can continue in the traditional industrial centers of the Northeast. If Colt rises from the ashes, they might maintain a headquarters and museum in Hartford, but if they don't move manufacturing to a more politically and labor friendly climate, they'll just go right back down the tubes.
The worst part of their position is that they don't make anything that isn't being made by nearly a dozen other manufacturers.
And they don't make it any better than any of the others.
That IS a desperation move… IMHO…
That IS a desperation move… IMHO…
Colt brought a lot of this on it's self. I went to their web site to see just what they offer. Single action revolvers in original and New Frontier. Semi-auto pistols that are hard for the average person to afford. I checked my distributor, I'm a dealer) and the wholesale prices were enough to pucker the old sphincter. Wit a couple of exceptions, there semi-autos started in the 800+ range. Their least expensive revolver is $1246.30 wholesale. I can buy the exact same thing in a Ruger, for $428.00. If I was into cowboy shooting, it would be a no brainer. And there are no double action revolvers at all. I like their Trooper model, it was the same size frame as my Ruger Security Six. Between the unions and depending on military contract, they did it to their selves. Long ago they should have moved to friendlier territory. We could have been looking at $700.00 Pythons.