US arms manufacturer Colt Defence has declared bankruptcy according a statement released by the company on Monday.
The 150 year-old company is one of the most well known manufacturers of guns within the United States, however had in recent years fallen on hard times.
Colt filed for Chapter 11 bankruptcy in the US District of Delaware in order to help the company deal with a crippling debt load.
“The plan we are announcing and have filed today 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,” said Keith Maib, Chief Restructuring Officer of Colt Defense LLC.
The gunmaker reportedly owed creditors around $350 million and was struggling to make repayments on this debt due to falling sales. This situation was exacerbated by the loss of a contract in 2013 to supply the US Army with Colt’s M4 assault rifle.
This week’s bankruptcy declaration also comes on the back of a failure by the company last month to pay a $10 million interest repayment on a loan owed to Morgan Stanley.
Colt hopes that the bankruptcy filling will make it easier for the company to sell to off both its assets and liabilities to a sponsor company – Sciens Capital Management LLC.
Sciens had already previously had significant control over Colt as its primary sponsor, and the bankruptcy-driven accelerated sale is seen as a natural progression of this.
During this bankruptcy period, Colt hopes to remain open for business and continue its operations as usual.
“Colt remains open for business and our team will continue to be sharply focused on delivering for our customers and being a good commercial partner to our vendors and suppliers,” said Keith Maib.
Despite this new plan, reports suggest that Colt’s bondholders are not impressed by the decision to sell the company to Sciens, who they blame for the company’s poor performance.
In a recent court hearing, the bondholders reportedly criticised Colt’s management of accelerating the company’s demise, and called for better corporate governance.