Colt Defense for a third time extended by another week, to 5:00 p.m. EDT on June 2, the deadline to participate in a deeply distressed uptier exchange offer on its $250 million issue of 8.75% unsecured notes due 2017, according to a company statement. As of last night’s deadline, just 5.7% of bondholders put in for the deal, up from 5.65% last week and 5.1% a week prior, but well beneath the closing condition for 98% participation.
Under the terms of the deal, bondholders are offered an uptier-exchange at deeply distressed levels into new 10% junior-lien notes due Nov. 15, 2023. The consideration offered under terms of the deal is at a pro rata 35% of par, inclusive of a 5% of par consent payment, for each $1,000 face-value Colt bond issue, according to the filing.
As reported, the deal is an effort to restructure the company’s balance sheet and puts the gun maker “in a better position to attract new financing in the years to come,” according to a corporate filing. Moreover, the transaction is an effort to “address key issues relating to Colt’s viability as a going concern,” the filing shows.
That said, the company is also soliciting consents from bondholders to approve a prepackaged plan of reorganization under Chapter 11 in the event that the debt swap fails, and here, too, the deadline for votes was extended a week. In that scenario, the old notes would be cancelled and bondholders would receive their pro rata share of the new notes at the prescribed ex-consent-payment level, or at 30% of par, the filing shows.
As reported, the launch of the distressed swap comes roughly a month after the company announced it reached agreements with its two loan agents to provide an extension of the deadline for the company to deliver its annual results to June 14, according to an SEC filing. The waiver came with a variety of amendments to a $33 million loan with its “rescue-loan” agent Cortland Capital Market Services and a $70 million “lifeline” term loan facility with Wilmington Savings Fund Society and Morgan Stanley (see “Colt Defense nets loan waivers to extend 10-K deadline to June 14,” LCD News, April 9, 2015).
Colt’s sole outstanding bond issue – the $250 million series of 8.75% notes – has wallowed around 30 in recent weeks and traded flat, or without accrued interest, according to sources. Market sources quoted the paper at 28.5/30.5 last week, and a small lot changed hands yesterday at 24.
As reported, the company recently hired turnaround and advisory firm Mackinac Partners as restructuring financial advisor and appointed Mackinac’s Keith Maib to serve as chief restructuring officer.
Colt Defense is rated CC/Caa3. The company was split off from 160-year-old Colt’s Manufacturing in 2002 and serves the law enforcement, military, and private security markets worldwide. The two eventually recombined. The company is controlled by Sciens Capital Management, and Blackstone Group joined with a $30 million equity stake alongside a dividend recapitalization in 2007. – Matt Fuller/Rachelle Kakouris