Colt Defense has filed for bankruptcy protection after struggles with delays to military contracts and dropping sales. The iconic 179-year-old US gun maker has also put itself up for sale at an unusual auction with a starting bid of $0 on August 3.
“The plan will allow Colt to restructure its balance sheet while meeting all of its obligations to customers, vendors, suppliers and employees and providing for maximum continuity in the company’s current and future business operations,” said Keith Maib, chief restructuring officer at Colt.
According to Maib this was the only way to avoid a shutdown of the business which would risk the deals with the US government and 800 jobs along with their retiree benefits.
Sciens Capital Management, which currently owns 87 percent of Colt, will be the so-called “stalking horse” bidder at the auction. Sciens’ offer will shed $250 million in bonds and existing lenders will provide $20 million to keep Colt running during bankruptcy.
Colt’s most recent filings show that the company’s debt pile has reached more than $300 million. The company’s sales dropped half in first six months of 2014 compared to the previous year - a loss worth $22.1 million.
Founded by Samuel Colt in 1855, Colt lost a bidding for 120,000 M4 rifles in 2012.