Colt Defense LLC altered and extended Tuesday an offer to bondholders after lining up financing for a potential Chapter 11 bankruptcy organization from secured lenders and some landlords and equity investors.
The company's bondholders now have until midnight June 12 to swap their unsecured bonds, or “Old Debt,” for new bonds, or risk Colt filing a Chapter 11 bankruptcy petition, where they could ultimately receive less. Only 5.9 percent of the holders of the old debt had tendered their bonds under Colt's previous exchange offer as of 5 p.m. Monday, June 1.
The firearms manufacturer disclosed Tuesday that it had entered into a restructuring support agreement with secured lenders under its $35.0 million senior secured term loan facility and $72.6 million senior secured term loan. The agreement calls for secured lenders to provide the funds needed to implement a prepackaged plan of reorganization in federal bankruptcy court if Colt decides to pursue that option. Colt had laid out the Chapter 11 option in its offer last month to exchange new, more secured debt for its outstanding 8.75% Senior Notes due 2017 as part of a broader initiative to reduce its debt payments and attract new financing over the next five years.
The restructuring support agreement sets terms for debtor-in-possession (DIP) credit facilities totaling $15 million as well as exit financing that would kick in upon completion of the prepackaged bankruptcy. Colt would use the plan to restructure all amounts outstanding under the existing secured term loan facility and senior secured term loan and the DIP Facilities.
Landlord, equity holders pledge support
Colt disclosed that it has also obtained an indication that the landlord of its West Hartford, CT facility will, subject to certain conditions, extend Colt’s existing lease for up to five and a half years from the lease’s existing expiration date upon the Prepackaged Plan becoming effective. In addition, Colt has received an indication from certain of its equity holders that they will consider providing an additional equity investment in Colt upon the effectiveness of the prepackaged plan.
As a result of entering into the restructuring support agreement with the secured lenders, Colt said it had amended the terms of its exchange offer and Consent Solicitation for the Old Notes and the Prepackaged Plan Solicitation. Holders of the notes who validly tender their those securities will now receive 10.0% Junior Priority Senior Secured Notes due 2021 in the amount set forth in the table below. If the Prepackaged Plan becomes effective, holders of Old Notes will receive the New Notes on substantially similar terms as the Exchange Offer.
Colt said trade creditors, vendors, and customers will be unaffected by the prepackaged bankruptcy fililng and will continue to be paid in the ordinary course of business. Union related agreements will also be unaffected and employees will be paid all wages, salaries and benefits on a timely basis.
Colt continues to negotiate with certain holders of its old notes but said there can be no assurances they will accept its prepackaged bankruptcy plan. Nor has Colt yet decided whether to file for bankruptcy.
