The bankrupt Colt Holdings just accepted a loan of up to $75 million to keep the company afloat and stave off a controversial sale to its current private equity owner.
The age-old gun company is struggling to the point of barely being able to pay its employees. But U.S. Bankruptcy Judge Laurie Silverstein allowed the company to dip into the loan to make sure the staff received paychecks.
Because of Colt Holdings’ dire financial position they may end up having to sell, in which case their current owner, private equity firm Sciens Capital Management, may be in a unique position to win an auction of the company without even having to bid.
According to bondholders, that’s exactly what Sciens has been planning all along. Bondholders believe Sciens has been abusing their control over the company to starve their cash flow, thereby inducing the impending sale.
All that is speculation, of course, and Sciens made no move to oppose when Colt Holdings upped their loan from $20 million to $75 million.
(This article was submitted by freelance writer Brent Rogers)