With diminishing sales and unlikeliness of paying bondholders, Colt Defense, LLC warns of a bleak financial future.
The privately held company announced yesterday in a filing with the Securities and Exchange Commission possible default as it’s likely to miss a $10.9 million payment to bondholders on Nov. 17. If skipped, Colt has a 30-day grace period, but if it does not pay by Dec. 15 the company will be in default.
If a company defaults without first declaring bankruptcy, creditors will likely force it into bankruptcy and liquidate the assets or the company will operate under the shield of a bank, limiting major operational decisions.
Colt blames its financial woes on a continued decline in demand for rifles and handguns in the commercial market, and delays in government sales. The company reported in June a $20.5 million loss so far in 2014, down from a $9.5 million profit for the same time in 2013.
Like the iconic West Hartford, Connecticut, company, other gun makers have also seen a decline in demand. Smith & Wesson reported a net income of $14.6 million, down from $26.5 million for the quarter last year. Profits for the industry giant, Sturm, Ruger and Company, plunged 76.3 percent, from $28.6 million this time last year to $6.8 million for the past three months.