Colt Defense Warns It May Miss $10.9 Million Payment to Bondholders in 2015
OutdoorHub Reporters 12.07.14
Colt Defense indicated in a recent regulatory filing that the company may not have the funds to meet a $10.9 million interest payment for May of 2015. According to Forbes, this announcement came after the gun maker reported a net loss of $28.4 million in the first nine months of 2014 due to low market demand. Earlier last month, Colt managed to narrowly avoid defaulting on its loan payments after securing a $70 million loan with a Morgan Stanley affiliate. If a default did occur, creditors could demand immediate payment, forcing the company to liquidate its assets and file for bankruptcy. Colt is not out of hot water just yet, however, and the gun maker expressed its “substantial doubt about the company’s ability to continue as a going concern” in the filing due to its financial troubles.
Bloomberg reported that the credit rating agency Standard & Poor’s raised Colt’s rating to CCC in November after the company secured the loan from Morgan Stanley, but still viewed Colt’s liquidity position as weak. Colt itself reported a net loss of $7.8 million in the third quarter, which financial experts attributed to the loss of US government contracts due to a tighter defense budget and declining demand in the civilian market. Gun makers, including producers of the ever-popular AR-15 style sporting rifles, saw demand rise astronomically in 2012 and 2013 due to fears of government regulation. Demand has since slackened. In the first nine months of last year, Colt reported a profit of $20.4 million, as opposed to the $28.4 million loss in the same period for 2014.
According to Guns.com, Colt said that it will be moving forward by fulfilling backlogged orders, reducing costs, and working closely with government regulators for approval of international sales.
“We know we’re in the trough right now,” Colt CEO Dennis Veilleux said in a conference call.
MarketWatch estimates the company, which has been in operation since 1836, holds around $300 million in debt.
