Colt Bites the Bullet, Files for Chapter 11 Protection

NEW YORK (The Deal) -- Privately held firearms maker Colt Defense has filed for bankruptcy after failing to reach an out-of-court restructuring deal with its senior noteholders.

The West Hartford, Conn., company and nine affiliates on Sunday submitted Chapter 11 petitions in the U.S. Bankruptcy Court for the District of Delaware in Wilmington. The companies have requested joint administration of the cases, with Colt Holding Co. to serve as lead debtor.

Colt, which is majority-owned by New York private equity firm Sciens Capital Management Group, looks to support a sale process through $20 million in new-money debtor-in-possession financing from its existing secured lenders.

According to a Monday DIP motion, the financing would consist of a $6.67 million term loan from pre-petition senior lenders and a $13.33 million term loan from pre-petition term lenders. Cortland Capital Market Services and Wilmington Savings Fund Society would serve as DIP agents on the respective loans, court papers show.

Both loans would be priced at 12.5% and would mature on the earliest of 120 days after the loan closing dates, the completion of a sale of all the company's assets or confirmation of a Chapter 11 plan. Judge Laurie Selber Silverstein is set to consider joint administration and interim DIP approval at a Tuesday first-day hearing.

Sciens, meanwhile, has agreed to serve as stalking-horse bidder for Colt's assets. The PE firm has agreed to assume a $35 million senior loan, a $72.6 million term loan, the DIP facilities, executory contracts and unexpired leases.

Under proposed bidding procedures, interested parties would have until July 20 to make offers that topped the value of Sciens' bid by at least $1 million. If Colt received a rival bid, an auction would take place on Aug. 3, at which bids would have to increase in increments of at least $1 million. A sale hearing would follow on Aug. 7.

There was no mention of a breakup fee in the bidding procedures motion.

Colt's bankruptcy filing comes after the company failed to reach a consensual out-of-court restructuring agreement with its noteholders, owed $250 million.

In a Sunday statement, Colt's chief restructuring officer, Keith Maib of Mackinac Partners, said: "The plan we are announcing and have filed [Sunday] will allow Colt to restructure its balance sheet while meeting all of its obligations to customers, vendors, suppliers and employees and providing for maximum continuity in the company's current and future business operations.

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