Colt May Default - Bloomberg - Today

[Don Ro]

Colt, whose credit rating was cut by Standard & Poor’s today to CCC-, has been struggling to service its $308 million of debt after losing U.S. contracts due to defense budget pressures and amid dissipating concern that the government will limit the ownership of firearms. Consumers rushed to buy weapons after shootings in Newtown, Connecticut, and Aurora, Colorado, fueled speculation that federal restrictions would increase.

S&P’s rating reduction reflects “the increased likelihood of Colt defaulting in the coming months, perhaps as early as next week, as a result of the deterioration in its liquidity position due to poor earnings and cash flow in recent months,” analysts led by Chris Mooney wrote in a report today. The rating indicates that Colt is vulnerable to nonpayment.
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Colt Defense Searches for Financing as Default Looms - Bloomberg

[unclebilly]

Amazing, I would have thought they were sitting pretty after the gun rush of 2013... I thought everyone needed an AR or three.

[Tobra]

I don't like it one bit.

[jyl]

This seems weird to me too, so I did some reading. Colt has a monster load of debt ($300MM). As a result, it makes money only in boom years like 2009, 2013. It loses money in slow years like 2010, 2012. In the last five years Colt has, in total, made close to no money.

They lost the M4 contract in 2013. Civilian AR sales have plunged. International sales are still doing okay for them.

They are overwhelmingly dependent on the M4/AR15 rifle. Everything else, including handguns and machine guns, is a small part of sales.

Looks like a very bad business, financially speaking. I imagine bankruptcy will put them out of the running for US govt contracts, for some years. Maybe they figure since they just lost the M4 five year contract and there is no real momentum toward a new US military rifle (AFAIK), this is a good time to go BK and cut the debt. If Colt had no debt, it would be profitable even in the slow years.

[Brando]

Sounds like bad financial management - not bad products.

Maybe they are pricing themselves out of competition, too?

[jyl]

Sales in 2013 went up about [correction] +13% excluding the increase from buying the Colt handgun business mid year. I don't know if that means they lost share in the AR market. Also not sure why they lost the military M4 contract, I assume to FN? Basically it looks to me like they've failed to innovate, still selling the same products they've sold for decades. No polymer guns. No CCW guns. Living on the past.

[red-beard]

I wonder if this is also because many financial institutions are divesting themselves of connections to the firearm industry.

[red-beard]

BTW: Who has the M4 contract now?

[Porsche-O-Phile]

The administration would love to see them shut their doors. I hope it doesn't happen.

[gr8fl4porsche]

BTW: Who has the M4 contract now?

FN has had it since 2013

[onewhippedpuppy]

Walk into the local gun store, what says Colt on it? It's a legendary name, one that I think could sell well if applied to the right products. They make a 1911, but I rarely see it in stores. They make an AR-15 and M4, but I rarely see it in stores. Their revolvers like the Python are legendary and EXPENSIVE on the used market, yet they only produce novelty cowboy action revolvers. Seems like a combination of status quo thinking and piss poor market penetration.

[Jrboulder]

They seem to be missing a lot of business in the AR parts market by chasing the pipe dream of profitably selling budget premium-brand rifles. The markup they could get out of selling Colt brand parts (most of which are made by outside mfgs) could put some good cash in their pocket.

[Jeff Higgins]

Originally Posted by onewhippedpuppy

...yet they only produce novelty cowboy action revolvers.

[regency]

Love my older Colts. Agree, never hardly see a new Colt 1911 in a Gun store.

1973 911 T MFI Coupe, Aubergine

Steve

[Don Ro]

[Don Ro]

So why don't we see Colt 1911s in stores?
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And why did they stop making the Python?

[Rick Lee]

So why don't we see Colt 1911s in stores?

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And why did they stop making the Python?

We have plenty around here, but they aren't cheap and, for what they cost, I think Dan Wesson, STI, Ed Brown and Les Baer make better 1911s. Have you see the smoking deals on Colt ARs on CDNN? How much cheaper can they get?

[jyl]

The Colt we are talking about here is "Colt Defense". They were the M16/AR15 maker. The handguns were made by a different company, "New Colt". The two companies separated in 2002, then were reunited in mid 2013. I don't know how much cooperation there was between Colt Defense and New Colt, but I assume some since they apparently shared some facilities.

Now that I think about it, when was the last significant new gun design that Colt developed? They didn't even develop the M16.

[jyl]

I wonder if this is also because many financial institutions are divesting themselves of connections to the firearm industry.

Demonstrate an inability to make money in the best five years that your industry has had in our lifetime, and financial institutions will sure enough walk away from you . . .

[Jrboulder]

Colt's Curse: Gunmaker's Owners Have Led It to Crisis After Crisis - Businessweek