Colt Defense LLC, as expected, last week filed for Chapter 11 bankruptcy protection after failing to win the support of bondholders for a debt-restructuring agreement.

The 179-year-old firearms manufacturer famous for making “the gun that won the west,” has secured $20 million in financing from its existing senior lenders to continue operating while in bankruptcy and expects to remain in business after the restructuring.

Colt said that in making the filing in U.S. Bankruptcy Court in Delaware, it hopes the process will allow it to quickly sell its business operations in the U.S and Canada and help ease its $355 million debt load. Sciens Capital Management, a major investor in the arms maker, has agreed to purchase virtually all of Colt's assets.

“The plan we are announcing and have filed today will allow Colt to restructure its balance sheet while meeting all of its obligations to customers, vendors, suppliers and employees and providing for maximum continuity in the company's current and future business operations,” said Keith Maib, chief restructuring officer of Colt Defense, in a statement.

Colt Defense, with its headquarters and largest factory in West Hartford, CT, is the operating company formed by the 2013 merger of Colt Defense LLC and Colt Manufacturing Co., which made and marketed non-military guns.

The company prospered in the late 1990s and early 2000s as a major supplier to the U.S. military. It was the primary manufacturer of weapons such as M16 and M4 assault rifles used by front-line troops.

However, supply-chain and working capital issues, an industry-wide slowdown in rifle sales and its 2013 loss of a key contract to supply the U.S. Army with the M4 has led to struggles in recent years. Today, 30 percent of its business is for government contracts. Accounting irregularities also caused it to revise prior years’ reported financial results and miss a creditor’s initial filing deadline for an annual report, according to filings with the Securities & Exchange Commission.

Last November, Colt borrowed $70 million from Morgan Stanley to pay interest on its bonds. An affidavit in the bankruptcy case, however, indicated the company had to stretch out payments to its suppliers in order to make the November 2014 payment, and as a result, those suppliers have slowed their sales this year, “to manage their credit risk profile,” wrote Maib.

He said the suppliers’ reaction has hurt the company’s ability to produce guns and rifles on schedule.

“The company is obligated to the U.S. Government to deliver product at ‘ramped up’ rates by year end,” Maib wrote. “Any further deterioration in the company’s financial situation will put additional stress on the availability of critical raw materials and parts and count result in the loss of significant business from the U.S. Government.”

In February, it warned it might not have enough cash to make an interest payment by a June 15 deadline. In May, it missed a $10.9 million payment to holders of $250 million in its senior bonds.

In early June, Colt said it had lined up financing from secured lenders and some landlords and equity investors for a prepackaged Chapter 11 bankruptcy plan ahead of a potential default on a $10.9 million payment due bondholders June 15. Colt had proposed to pay back 45 percent of what bondholders were owed in the pre-packaged deal.

Still, unsecured bondholders have continued to overwhelmingly reject the plan although they’re expected to not receive any payback in formal Chapter 11 proceedings. As of June 1, just 5.9 percent of bondholders had registered their support for Colt’s proposal, according to the company. Ultimately, Colt wound up defaulting on the June 15 payment deadline.

Colt plans to try to reduce its $355 million debt burden via a court-supervised auction of its business, generating proceeds to repay some of its lenders over 60 to 90 days. Wilmington Trust Company was listed as the biggest unsecured creditor with a $261 million claim.

Its leading private-equity backer, Sciens Capital Management, was named the “stalking horse bidder” of the Section 363 sale, and plans to buy virtually all of Colt’s assets although competing bids will also be solicited.  Sciens Management recently owned 87 percent of the company, according to a regulatory filing. Some of Sciens’ principals own stakes in the owner of its West Hartford facility, which has a lease expiring in October.

The current management team, which has been led since October 2013 by President and CEO Dennis Veilleux, will remain in place throughout the process.

“While entering Chapter 11 protection in the absence of a consensual agreement with our note holders was not our preference and we do not take it lightly, we are confident it is the best path going forward and will enable us to continue to gain traction on a challenging but achievable turnaround in our business performance and competitive positioning in the international, U.S. government and consumer marketplaces,” said Maib. “Importantly, Colt remains open for business and our team will continue to be sharply focused on delivering for our customers and being a good commercial partner to our vendors and suppliers.”

Sales at Colt slipped in the first three months of 2015 to $50.1 million, down from $63.8 million in the first quarter of 2014. In all of 2014, the company reported  $191 million in revenue.

The list of the top-30 unsecured creditors don't appear to include any retailers. The list includes Magpul Industries Corp. a manufacturer of gun ammunition magazines and accessories, owed $981,537; Microbest Inc., $755,172; The Wilson Arms Company, $626,531; Schmid Tool & Engineering, $478,067; and Superior Plating Company, $404,201.

Colt traces its roots to New England inventor and industrialist Samuel Colt, a pioneer in the mass production of the revolver who opened his first plant in Paterson, NJ, in 183. The firm has produced many famous weapons over the years, including the Colt .45.

Its fortunes have ebbed and flowed over the years. The company previously filed for bankruptcy protection in 1992 and emerged in 1994.

Maib concluded, “We look forward to successfully executing on this plan, which provides a sound path of stewardship for an iconic American brand and the key stakeholders we serve.”