(The Daily Beast) – After decades arming American soldiers, first with the Vietnam era M16 and later the modern M4 rifles carried in Iraq and Afghanistan, famed gun manufacturer Colt lost its contract with the military in 2013. It never recovered. Last Sunday Colt Defense LLC filed for bankruptcy after 179 years in business.
Colt’s chapter 11 filing comes after earlier, failed attempts to restructure its $350 million debt were rejected by the company’s bondholders. Last November, the Wall Street Journal reports, borrowed $70 million from Morgan Stanley in a bail-out loan to allow the company to pay down interest on its debts. Under an article of the bankruptcy code, Colt is now headed to auction where it’s hoping for a quick sale. The company lists its sponsor Capital Management LLC, as its “stalking horse bidder,” meaning that Sciens, which which owns close to 90% of the company, has agreed to buy out Colt’s assets and secured liabilities.
The downturn for Colt seems to have started after the company, which had relied on sales to the government, lost a multimillion dollar bid for to arm the military.
Following a drawn-out and contentious bidding war, Colt lost its contract to provide the Pentagon with M4 rifles in 2013. The $77 million contract went instead to a Belgian company, F.N. Herstal.