Colt Defense LLC filed a plan of reorganization after reaching an agreement on with a promise of $50 million in new financing.

The 179-year-old supplier of M4 carbines and M16 rifles for the U.S. and foreign militaries, which filed for bankruptcy in June, expects to emerge from Chapter 11 before year-end. A confirmation hearing to approve the plan is scheduled for Dec. 16.

Under a new deal, lenders would agree to eliminate $250 million of unsecured bond debt in exchange for taking a piece of ownership in the company.

Colt said holders of more than 60 percent of $250 million in outstanding 8.75 percent senior notes due 2017 and majority owner Sciens Capital Management Group have agreed to provide the debtor with $50 million in new capital to support the plan.. Colt had originally tried to wipe out the value of its bonds, totaling $250 million.

Sciens would avert a bankruptcy sale under the plan. The plan secures options for the company to continue operations at its plant in West Hartford, CT on a long-term basis. The plan and disclosure statement also include the terms on which the Company’s secured lenders, including Morgan Stanley Senior Funding, Inc., have agreed to refinance their prepetition and post-petition loans through new secured exit facilities.

“We are encouraged by the progress we have made toward a successful exit from bankruptcy and are confident that our filed plan of reorganization strengthens the company's balance sheet, provides adequate capital and liquidity to execute our strategic plan and preserves continuity in Colt's business operations,” CEO Dennis Veilleux said in the statement.

The company filed for bankruptcy on June 14 after struggling with supply-chain issues, a slowdown in gun sales and its loss of a key contract to supply M4 rifle to the U.S. Army. Under an alternate path, Colt officials are still looking for purchase offers from buyers who would participate in an Oct. 20 auction.