Doesnt sound cool. Sounds like colt is going to do a tripple sommersault with a double twist into a pool of poop. Since colt has negligible cashflow, i would surmise the value to be like .75x sales in a bankruptcy sale, or about $150 million. That might be rich, but not undoable for a good iconic brand. Total debt of colt is about $306 million,,, the working capital and term debt are secured, and the seniour notes are not. Morgan stanley probably has bought all the senior notes for a song, and will get paid well when the judge yells SOLD!
During the third quarter of 2014, the Company faced increasing liquidity challenges as a result of several recent business trends impacting the Company’s current and forecasted revenues and cash flows. These trends included the continued decline in market demand for the Company’s commercial modern sporting rifle (“MSR”), recent declines in demand for the Company’s commercial handguns and delays in anticipated timing of U.S. Government and certain international sales. As a result, the Company expects to report lower revenues and Adjusted EBITDA (see Note 18 “Segment Information”) for the year-ended December 31, 2014 than it had previously forecasted. These trends are expected to continue to put pressure on the Company’s liquidity for the foreseeable future.
Management’s plan to mitigate the business risk associated with the Company’s increased liquidity challenges include: (i) seeking revenue growth across all sales channels, (ii) executing initiatives designed to optimize the Company’s performance and reduce costs, (iii) managing inventory levels for positive cash flow by focusing the production schedule on the Company’s backlog of firm commitments, (iv) working closely with U.S. Government regulators to obtain timely approval of international sales and (v) seeking ways to restructure the Company’s unsecured debt to reduce overall debt service costs.
As announced in the Company’s Form 12b-25 filed on November 12, 2014, there was uncertainty about whether the Company would have the cash necessary to pay its November 17, 2014 senior notes interest payment under the Company’s senior notes issued on November 10, 2009 by Colt Defense LLC and Colt Finance Corp. (“Senior Notes”). On November 17, 2014, the Company entered into a $70,000 senior secured term loan facility with Wilmington Savings Fund Society, FSB, as agent and Morgan Stanley Senior Funding Inc., as lender, (the “MS Term Loan”) (see Note 22 “Subsequent Events”) which replaced the Company’s existing Term Loan agreement (see Note 10 “Notes Payable and Long-Term Debt – Term Loan”) and provided the Company a net amount of $4,101 of additional liquidity. The MS Term Loan also enabled the Company to make its November 17, 2014 Senior Notes interest payment of $10,938. In addition, the lenders, under the Company’s existing Credit Agreement (see Note 10 “Notes Payable and Long-Term Debt – Credit Agreement”), also agreed to amendments to the Credit Agreement which allowed the Company to enter into the MS Term Loan and provided for additional liquidity through a modification of excess availability thresholds.
After giving effect to the aforementioned market and business challenges as well as the sales opportunities that the Company believes exist, the Company has forecasted revenue and Adjusted EBITDA growth in 2015. There can be no assurance that the actual demand for the Company’s commercial MSRs or commercial handguns will meet the Company’s internal forecast. In addition, there can be no assurance that U.S. Government or international sales will occur as the Company has forecasted primarily due to a U.S. Government regulatory approval process which is difficult to predict. As a result of these factors, and notwithstanding the additional cash the Company obtained from the MS Term Loan, risk exists with respect to the Company achieving its internally forecasted results and projected cash flows for the remainder of 2014 and 2015. Absent the Company achieving its internal forecast for the remainder of 2014 and 2015 and the successful execution of Management’s strategy, including addressing other long-term debt such as the Senior Notes, it is probable that the Company may not have sufficient cash and cash equivalents on-hand along with availability under its Credit Agreement, as amended, to be able to meet its obligations as they come due over the next 12 months, including the Company’s May 15, 2015 Senior Notes interest payment of $10,938.
As it is probable that the Company may not have sufficient liquidity to be able to make its May 15, 2015 Senior Notes interest payment without meeting the Company’s internal projections (including addressing the Company’s Senior Notes), the Company’s long-term debt has been classified as current on the consolidated balance sheet. Currently the Company does not have sufficient funds to repay the Senior Notes upon an actual acceleration of maturity. In the event of an accelerated maturity, the Company’s lenders may take actions to secure their position as creditors and mitigate their potential risks. These events would adversely impact the Company’s liquidity (see Note 9 “Liquidity”). These factors raise substantial doubt about the Company’s ability to continue as a going concern.
They need some diversity, but still taking advantage of the current channels. There are other companies that have had great success with this approach, such as atk sporting, freedom group, etc..
I don't think that GD wants anything to do with the retail or sporting side of swhc. Much like ATK dropping the sporting side of their business. They can be useful partners, and each of their contributions makes a project very special.
There may be future partnership opportunities for these companies. General Dynamics might want to partner on an AR project for military organizations, as Colt is swirling still, and is a relatively weak competitor. I will add further that morgan stanley didnt get into the colt deal for nothin. I think it was a bridge financing and i think they were accumulating colt debt for dimes on the dollar before the refinance took place. Expect some news from colt soon, as their business fundamentals are in the toilet and certainly werent improved with a refi.
They must have been reading the illustrious posts on this here message board.
Thanks. Good info. So if we extended the declining trend then factored in the seasonal effect in the 'hunting' quarter, it will be interesting for swhcs quarter ended october...
How does it look compared to 2012. 2013 is really an outlier as the gunmakers were shipping everything they made, shipping as fast as they could. One thing to think about is the marketshare was distributed to second and third tier brands that wouldnt be considered today. My goodness, people were paying big bucks for a taurus, stoeger, highpoint, you name it...
Even the guy with the nutty messages is gone. I wonder if the shorts covered more. Short interst down to 11 mil shares, down from about 21 mil in march 2014
I think that both rgr and swhc got a boost from colt not going into the toilet. Perhaps the market was discounting for the potential takeover of colt by rgr or swhc? WTFDIK!
#$%$, $10 million, not $100 million. And no equity kicker...but they likely boight up all the debt for 25%, now making an instant 75% profit....plus they are probably pushing the company to sell. Verkauf.
Morgan stanley took out the old debentures.... Funny thing is morgan stanley probably bought all the old debt first for pennies on the dollar. They probably put an equity kicker on the debt .....or maybe this is going to be a DIP loan....
Part of their strategy is to 'right price' their pistols and ultimately control what happens at the retail level. So, they offer top end and well respected pistols at prices that beat glock, beretta, springfield (same class in my estimation) ...the market has no choice but to assign share to smith and wesson....ruger got spiked because their long gun line is startng to resemble a firearms museum. The ruger american is an exception, but good god, that mini-14 is for marching down sentimental street, snd the 10/22 is being overtaken by the likes of the AR22 from swhc...
Every once in a while you need to clean the bilge and bring in new talent. Swhc brought in debney who knew virtually nothing about guns....fifer better watch his step. His board should bring him down for being such a #$%$ to the analysts ...
Just remember, they amended their credit agreement very recently...the lenders have to be quite cross at this JUNCTURE. THe lenders probably told colt to go find a buyer at the last amendment. They likely did; the buyer said only in a 363, so here we are. Its not unusual for a debtor to avoid filing a 10q just before chapter filing,,,it avoids a potentially messy situation.
Good strategy... Debney isnt discounting the gun. They are already "right priced" for the product...their prices are competitive and the product is number #1. The maggs probably cost about $4 each...
Takes a few minutes and look at colts last 10q. They will most likely file a chapter 11 in a matter of days.
Yes, they would be selling the brand, the retail exposure, sales, intellecual rights, etc.. The buyer would likely put the volume in the buyers existing plants, change around the supply chain, etc... Ruger and swhc both have excess capacity.... Ruger might want to bring its product line more out of the shadows and actually have a line that is the top of a product class rather than competing with everyone els in the next tier. To elaborate, ruger polymers are second to glock and swhc...most rifles are the same. Ruger wheelguns might occupy space in the first tier, but i dont know. Ruger has always seemed to emphsize value (a function of quality and price) the approach is quite stable , but it will never be interruptive, like swhcs m&p as an example.