Colt, the 179-year-old company whose pistol “won the West,” has lost a 21st century battle over the American gun industry.
After years of struggles, the iconic company filed for bankruptcy protection Sunday, leaving creditors to sort out $500 million in debt.
The filing underscores the vicissitudes of the gun industry, as well as the company’s production missteps.
Colt Defense LLC said a sales bubble in 2013 contributed to its troubles today. Several high-profile shootings, including the massacre at Sandy Hook Elementary School in Connecticut, fueled gun sales as enthusiasts feared a regulatory backlash. The threat has since subsided and consumers have slowed their purchases.
Problems with military contracts at home and abroad added to its woes.
The maker of handguns and M16 rifles is now fighting to survive. Its bankruptcy protection filing comes more than six months after it took out a $70 million rescue loan from Morgan Stanley to make an interest payment. The company wants to keep management in place and sell almost all of its assets to its private equity backer.
While Colt isn’t even within the Top 10 largest U.S. gun makers, its legend is outsized. The gun was promoted as a symbol of American individualism and popularized by owners, including President Theodore Roosevelt and mythologized Western outlaw Billy the Kid. Founder Samuel Colt patented an innovative revolver design in 1836 that made it easier to fire multiple shots before reloading.
Colt, based in West Hartford, Connecticut, is used to near-death experiences. The company last filed for bankruptcy protection in 1992. Almost 150 years before that, within its first decade of existence, the gun maker almost failed after its products didn’t catch on.
The founder dug himself out by landing a defense contract with the U.S. government for the Mexican War, according to History.com. Samuel Colt also reinvented gun manufacturing using interchangeable parts, cranking out 150 weapons per day and creating an advantage against other firearms companies.
Colt died in 1862 at 47. Armsmear, his home, still stands in Hartford and is a national historic landmark.
Once again, solving production delays will be critical to restoring liquidity, the company said. U.S. government sales slowed after production issues arose with its M240 machine gun and there was no new contract for its M4 carbine, according to the company’s filing.
Colt’s “ability to meet current customer demands for finished rifles and handguns is fragile,” Chief Restructuring Officer Keith Maib said in a court filing.
Flagging sales to a Malaysian customer and the Canadian government also hurt, the company said. Colt gets 40 percent of sales from the U.S. and foreign governments, according to the filing. The company needs to deliver products at “ramped-up” rates to the U.S. government the end of this year, Maib said.
Colt’s reorganization may allow it to ride out what market research firm IBISWorld estimates will be a 4.1 percent revenue decline for U.S. gun and ammunition manufacturers next year. The industry generates about $14 billion a year in revenue. After that, the firm expects industry sales to reverse, helped by a shift in attention to the global export market and increasing diplomatic tensions.
Colt, which has 800 employees, listed assets and debt of as much as $500 million each in bankruptcy court in Wilmington, Delaware. Sciens Capital Management LLC, which sponsored Colt after its 1992 bankruptcy, has agreed to make the first bid for the company’s assets as a so-called stalking horse, to set a starting price, according to a statement from the gun maker.