Colt Files For Bankruptcy After Gun Sales Slump

Gun manufacturer Colt Defense has revealed it is filing for bankruptcy as it battles declining demand and the loss of a lucrative US military contract.

The firearms maker, which supplied M4 carbines and M16 rifles in the past for the US military, listed debts of as much of $500m (£323m) when it filed in bankruptcy court in Wilmington (LSE: WIL.L - news) , Delaware, on Sunday.

Existing lenders have agreed to provide $20m to allow it to continue operating while in bankruptcy, subject to court approval.

Under the scheme, the company, based in West Hartford, Connecticut, would be allowed to restructure its balance sheet.

The current management team, including chief executive Dennis Veillex, will remain in place until the process is completed in around 90 days.

Keith Maib, chief restructuring officer, said in a statement: "Colt remains open for business."

Sales in modern sports rifles and handguns fell 30% in 2014 and delays in US government sales have also hit the business.

Colt has struggled since November, when it took out a $70m rescue loan from Morgan Stanley (Xetra: 885836 - news) to make an interest payment.

The company tried to restructure out of court, announcing in April an exchange offer for loans. That expired on 12 June.

Colt supplied the US military with M4 carbines used by front-line troops in the late 1990s and early 2000s, but that deal ended in 2013.

Founder Samuel Colt - a pioneer in the mass production of the revolver - opened his first plant in Paterson, New Jersey, in 1836.

He went on to become one of the 10 wealthiest businessmen in the US, according to the company website.

One of its rifles, the Winchester Model 1873, became known as "the gun that won the West" in the 19th century, with more than 700,000 being produced.

Colt died in 1862 and the age of 47. Armsmear, his home, still stands in Hartford and is a national historic landmark.