On November 13 The Wall Street Journal reported that Colt Defense LLC “could default by the end of the year.”
Colt Rifle and pistol sales are sluggish and the company “is likely to miss a [$10.9 million] payment to bondholders” on November 17.
According to WSJ, Colt is controlled by Sciens Capital Management LLC and has “$248.8 outstanding on the bonds as of June 29.” On November 13 the bonds were trading at about 30 cents on the dollar. WSJ claims that even if Colt is somehow able to pay bondholders on time, it quickly faces another hurdle via a “$48.1 million term-loan agreement by Dec. 31.”
On top of this, Colt expects to report a “50 percent to 60 percent decline in operating income for the quarter [that] ended September 28.”
With income down but expenses remaining up, it should be noted that Colt workers are unionized–members of the United Auto Workers (UAW). So there are certain costs associated with the presence of unionization that are eating away at Colt’s bottom-line as well.
The automobile manufacturing implosion in Detroit and subsequent bailouts highlighted how the added union costs crippled makers like Chevrolet, Dodge, and Chrysler.
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