Category Archives: Industry

Glock Training Pistols

We’ve covered the SIRT training pistol before, but such a successful market was probably not going to be neglected by Glock forever. In fact, Glock has introduced several versions of training pistol, most of which are available only to LE/military customers, so far. They can all take rail-mounted accessories or aftermarket sights without trouble.

Cutaway Pistols

Cutaways are used for teaching how a firearm works and are useful for training both users and armorers. Sure, an experienced armorer has no problem visualizing what’s going on inside a simple machine like a Glock 17, but seeing it in front of his face brings him to that threshold of knowledge sooner.


Here’s what Glock says about these:

GLOCK cutaway models are produced for technical and firearms training. These models are always a main attraction at training classes, presentations, and tradeshows because they clearly illustrate the ingeniously simple internal mechanisms of the GLOCK pistol. They are sold exclusively to law enforcement agencies.
Cutaway pistols in are available in the following models:
Gen3 – G17, G19, G20, G21, G22, G23
Gen4 – G17

Glock T FX Training Pistol

This is a special pistol for use with nonlethal Simunitions® FX 9mm marking ammunition for training, including kinetic training and force-on-force. It is available to LE and military customers only. As the Sims come in essentially a single caliber, there is only one standard catalog Glock T FX, the Glock 17 T FX.


As is customary with Simunitions guns, the 17 T FX Training Pistol functions on direct blowback. The blue parts of the slide are polymer inserts to reduce the slide weight and permit the pistol to cycle with the low-powered, light-weight training rounds.

Here’s the Glock factory description:

Over the years, Police, Special Units, SWAT, and Military units around the world have proven that static shooting training, combined with simulated shooting training, produces the greatest benefits. The GLOCK Training Pistols were developed with the purpose of enabling reality-based tactical operations training using color marking or plastic projectile ammunition.

Simunitions, Inc., now a division of General Dynamics Canada, has also long furnished conversion kits and dedicated training weapons on Glock as well as other platforms.

Glock P Practice Pistol

The Practice Pistol, here a G22P, fires neither Simunitions nor live ammunition. It’s simply a trainer, designed to impart mechanical skills to those new to handling Glock pistols.  It can be loaded, unloaded, disassembled and assembled, holstered and dry-fired like a regular Glock, but it can’t chamber or fire live ammunition.


Here’s the Glock rundown:

Loading magazines, sight alignment, trigger squeeze, and disassembling are all part of a shooter’s training routine. The GLOCK Practice Pistol was developed to eliminate dangerous scenarios during training exercises. Identical to a GLOCK pistol in handling, weight, size, and balance, it puts the real thing in your hand, without any firing capability.

Glock R Reset Pistol

The Glock Reset Pistol is their answer to the Next Level Training SIRT trainer. It’s not as complete, requiring the trainer or organization to source a separate laser module, but it is from Glock, meaning organizations can (and do) bundle it into their pistol bid.


Glock says this about that:

The GLOCK Reset Pistols automatically reset the trigger without having to manually manipulate the slide. They enable safe, practical training when used with a shooting simulator. An aftermarket, laser impulse generator can be integrated in the barrel, and when pulling the trigger, the firing pin will activate and register a virtual hit on a simulator screen.

The “aftermarket lasers” they’re talking about are things like the Laserlyte cartridge laser.

Hat tip: a friend who sent us to the anti-gun gun magazine, Recoil, which had a story on the Glock trainers that got us interested in looking them up.


Can’t Billions Buy Better Bullshit?

Kyle Stock (l) and Michael Bloomberg (r).

Kyle Stock (l) and Michael Bloomberg (r).

Back last summer, Bloomberg propagandist Kyle Stock crowed that “Gun Sales are Down.” And it’s true that they were — relative to 2013. A year further on they’re still higher, than 2012.

Stock’s deliberate misrepresentation of the data is worth a little study, because it’s how propagandists work. In this case, he uses NSSF data and a redrawn NSSF graph, but mislabels the NSSF adjustment (whatever force is strong in this one, it’s not the force of integrity).

Coming off a year of record sales, the gun market is cooling off. And overeager gunmakers are still struggling to dial down their expectations.

In the recent quarter, Smith & Wesson (SWHC) sales dropped 23 percent, to $131.9 million, and profit plunged 45 percent, to $14.6 million, according to a report late yesterday. Long guns and “modern sporting rifles,” in particular, lost favor among shooters, but handguns cooled off as well. Smith & Wesson shares slumped almost 15 percent on the news.

Stock, in his ignorance of the industry and determination to score propaganda points for his wealthy lord, is jumbling several different kinds of data. NSSF adjusted background checks are a proxy, albeit an imperfect one, for unit volume. The imperfection is not just in the things that NSSF takes out of the data, like one state’s weird habit of running NICS checks monthly on every concealed carry license holder, and other non-sales-related checks, but also in that you can buy many guns on one NICS check. Our own last five NICS checks were for (1) four collector pistols bought at once at auction; (2)  four AR-15 prototype receiver sets, (3) two AK receivers with parts kits, (4) six assorted lower receivers, and (5) three WWII weapons, including an NFA weapon. Here’s the equation: 5 NICS = 19 Firearms transferred. So we don’t know what the average multiplier on a NICS check is, but we know that, shorn of the non-sales transactions NSSF tries to adjust out, it is some value greater than 1. (Probably 1 decimal something small, because most transactions are still a single gun, but we don’t know, do we?). We also don’t know if that multiplier itself displays a secular trend, and if so, in what direction. So all NICS can be is a loose, longitudinal proxy for sales. Not much use as an absolute number, but useful for year-over-year comparisons.

To violate what we just said about the inutility of the absolute numbers, we note that the 2015 pace, if it is sustained all year, will still produce a near-record of over 20,000,000 NICS checks (our loose, longitudinal proxy for sales). NICS checks have nearly doubled in the last five years. However, over many years (NICS data back to 1998 is available) the sales in the second half-year always exceed the first half. There are doldrums in the summer and in February, and the peak is invariably December, with November a close second. Something happens in December in America, wherein guns are common gifts: it’s probably not fair to expect a Bloomberg hireling in New York City to understand this source of seasonality in the data.

The next data point he uses, which is not connected to unit sales, particularly, is stock price. Stock prices rise and fall based on firm performance, relative to market expectations. Journalists, who tend to be both narrowly and shallowly educated in storytelling alone, and to suffer from innumeracy, never seem to grasp this. So the market (somewhat unreasonably)  expected that the feverish 2013 sales pace would continue, while everyone in the industry knew that the years of every-month-up-over-the-previous-year had to end sometime.

Sturm Ruger (RGR), another force in the industry, had similarly weak numbers at the end of July. Sales for Sturm dropped 13.4 percent, to $153 million, in the latest quarter, while profit slid by almost one-third, to $22.3 million.

Ruger and Smith are not the only “forces in the industry” — but they are the only publicly held companies, at least pending ATK’s spinoff of its sporting wing. So, as we all do, Kyle Stock is arguing from a very limited data set — privately held firms file no 10-Ks. The returns of Smith and Ruger are, necessarily, a second set of loose, longitudinal proxies for a complex and variegated industry. But note that he didn’t mention Ruger’s stock price’s doings. That’s because, unlike Smith, it has a long secular upward trend. If you’ve followed the stocks for years and understand the market a little (rather than, say, being a shallow journalist who skims until he fastens on a point he can slot into The Narrative®), you know that Smith is a much more volatile stock than Ruger (the standard deviation over a period is a measure of volatility, and Smith’s is much higher). So when Smith soars, it soars high; when it takes on on the chin, it goes all the way to the mat before getting back up.

The problem, according to both companies, is too many guns. Executives are grousing about “high inventory,” stubborn retail partners, and a glut of guns in such stores as Cabela’s. They are less eager to acknowledge that high inventory in any business comes from only two places: low demand and/or too much supply.

There have been many new entrants in some segments of the gun market. This is a common thing to see in a market segment where barriers to entry are moderate (meaning, it’s easier to go into business making guns than making cars, or airplanes, or pharmaceuticals): high profitability induces new entrants.

This week, Smith & Wesson’s chief executive, James Debney, went so far as to suggest that stores were just clogged up with the wrong guns—an “unfavorable mix” of “lesser brands and hard to sell products.” Sturm Ruger, meanwhile, took a similar tact, blaming itself for not producing enough cool new firearms.

Again, Stock is a paid propagandist for a billionaire. His mind, his soul, and most of all, his pen are for sale. His education and training are entirely in the use of words: to express ideas, to suppress ideas, to sway emotions. He is, if anyone is, supposed to be able to use the sailing-derived noun tack in a figurative sense for a change of direction without the amateurish error of using the mistaken noun tact in place of tack — if his education hadn’t been shallow and full of holes.

What the industry really needs is a few lawmakers advocating a gun-control bill. That’s what pushed the gun business to record highs last year in the wake of the Sandy Hook school shootings.

Whistling past the graveyard of his master’s gun control dreams, that last bit. Do gun-ban attempts drive sales? To some extent, yes, in three ways.

  1. Ban attempts pull sales forward, by providing an impetus for sales now that would have happened sooner or later anyway. A lot of these sales go to people already into guns who wanted another one, or always wanted an AR-15, and that kind of thing. You probably have friends in this category.
  2. Ban attempts bring fence-sitters off the fence. This includes both Fudds who were eyeing the modern sporting and defense gun market with curiosity, and people who were entirely outside the gun culture, looking in.
  3. By bringing new people into armed self-defense, or into gun sports or hobbies, ban attempts permanently raise sales levels. Some percentage of these people who weren’t engaged before become repeat customers.

So yes, there’s a spike, and the part that has Stock mumbling around his mouthful of Bloomberg reproductive tackle, is that a spike by definition subsides. But it subsides to a new, higher, level. This same thing will happen every time the Boston-Manhattan-DC-Chicago-LA anti-gun Axis pushes citizen disarmament.

Those fears, however, have largely abated, and gun sales have gone with them. Even reports of ammunition shortages are dying off.

via Gun Sales Are Down – Bloomberg Businessweek. (This has also appeared under the headline “People aren’t buying guns,” but it’s the same article, repop’d to double the propaganda value).

That’s what Stock was told to write, and that’s what he wrote, but what we’re seeing in 2015 and saw in 2014 is not some regression to the mean over the last 20 years, but a regression from the record year of 2013 to a level about equal with (and so far, ahead of) the previous record year, 2012. You’ll never see that under Stock’s byline, because it’s not what his sugar daddy hired him to say.

Stock floated this same concept before, in November, 2013, by misrepresenting NICS data then.  Now there’s a bigger push to get the story out in Bloomberg’s media empire.

Bloomberg has his hirelings hot on this meme. For example, just in the last week, he has them grinding out:

Note well these bylines (and the editors, who are named at some of the links), and add Bloomberg chief anti-gun writer flunky Paul Barrett to the list. This is the propaganda team.

The appearance of all these variations of the same propaganda theme on Bloomberg-controlled media is no accident. But this concerted and centrally-directed propaganda campaign has a credibility problem: propaganda is only effective if it is wrapped around a truthful or at least plausible armature, and this one isn’t. Gun sales have subsided only to a new, higher level than the status quo ante. Will it be a hard time to be in the market with an undifferentiated, me-too product? Sure, but the last couple years, when even such a product would sell out, were anomalous. But a solid percentage of all those new shooters who bought a new gun over the two years of Bloomberg’s latest anti-gun jihad are just about due for another gun. The record of 2013 may not fall this year, but it will fall, and it will fall whether or not Bloomberg redoubles his paid, astroturf attacks. He can leave it alone and lose, or he can push harder and lose faster.

Now, there are network effects to consider. More people, who know more people, now own, carry, and shoot guns. As many as half the 20 million guns sold since Bloomberg renewed his ban efforts went to new shooters or gun owners. Each person’s social network expands the pool of people who know normal, sane people who rely on guns for defense or enjoy them for sport. Legitimate gun use for self-defense is even creeping in to the popular culture. The fastest-growing segments of the market are women and minorities, who are realizing that their belief in government authority’s duty to protect them was misplaced.

This is the best bullshit billions can buy, and really, it’s not that good. So, Bloomberg can keep squandering his money on these quasi-literate hacks from The Best Schools®, at any rate he desires. Attack us desultorily, our victory draws closer. Attack us furiously, our victory draws closer, faster.

In Any Colt Bankruptcy, its Patents are Already Gone.

In the long-running serial of financial peril that is the Colt Defense story, a midnight discovery by commenter Daniel E. Watters:

I just happened to take a look at one of Colt’s patents and noticed that it has been assigned to Cortland Capital, the folks who bailed them out in February. Further research shows that this is true across the board for the active patents and patent applications.

Daniel is best known for his indispensable 5.56 timeline at the Gun Zone, but he has been a persistent researcher of the Colt financial drama. In this case, he is right on. Colt’s patents are gone, they technically are no longer property of Colt Defense LLC; and they won’t be, unless Colt repays the loan. And this is nothing new: since 2006 Colt has been mortgaging

We’re not referring, of course, to Colt’s historic patents, like this 1836 revolver patent, which have long since lapsed.

Screenshot 2015-05-23 14.00.51


We’re talking about its current patents, like this frequently-cited 2005 modular firearm patent. As that link shows, it, and its brethren, have at one time or another been the property of a who’s who of New York banking interests: Bank of America, Wells Fargo, JP Morgan Chase. And in recent years, less-established banks, the sort that make riskier loans, culminating a couple of years ago with Cortland Capital, whose latest loan of $33M came with a 10% interest tab.

This interesting 2010 patent for a mechanically-selectable, electrically-adjustable rate of fire for an AR-15 type weapon was first assigned to Cortland in 2013. (The logic chart below seems to be missing something, to wit, a FIRE step, but that’s what’s in the patent).

Colt electric rate of fire patent US08336438

Other patents show similar assignments. In the next set of loans after their granting, they’ve been used as collateral.

It’s unknown if the current patents are producing any royalty income for Colt. If so, it doesn’t show up on their SEC forms.

Of course, the finance companies do not want to exploit the patents; they just want security for their loans, and winding up holding the patents in lieu of principal and interest is not their preferred outcome. They’re in the money racket, not the gun racket.

But if Colt defaults on its Cortland loan, Cortland winds up holding a bag of patents (and any other security Colt pledged) rather than its money. In such as case, they might be able to charge Colt royalties for using these inventions of its employees and former employees. If Colt production continues. Or resumes. Most likely, they would try to sell the patents.

The patents are one of the true stores of value in Colt Defense LLC, but they have been mortgaged as part of the financial looting monetization of the company that the last several rounds of owners have undertaken. The company’s trademarks are also a highly valuable asset. One wonders if they, too, have been mortgaged.

When the $33M loan was announced in February, Colt only described it as “secured,” not indicating that it was secured with Colt’s patents, but the evidence was always there in the financial section of the US Patent and Trademark Office records, just waiting for Daniel to find it.

We still consider a resolution of the financial crisis on either of the terms preferred by the Colt managers extremely unlikely. (Those terms are a refinancing of defaulted bonds, or a prepackaged bankruptcy that accrues primarily to the benefit of the hedge-fund owners and managers). That means that what is likely is probably a non-prepack bankruptcy.

It seems unlikely that the firm could make a credible proposal for continuing in Chapter 11 reorganization, but it is possible. A more likely outcome is a Chapter 7 liquidation, which may result in a court-ordered sale of the entire assets, or a cannibalization of the company.

The clock is ticking on this 150-year-old company, and on firearms manufacture in Hartford (any new owner will have small reason to retain the overpriced workforce, expensive and underproductive facility, and hostile political/economic business climate that come with the present location).

VPO-208: Russian Gunsmiths Respond to Russian Law

We’re familiar, here in the USA, with weapons that are shaped by US gun laws. We have a variety of weird and wonderful arms that exist only because of the Gun Control Act of 1968, the National Firearms Act of 1934, and the patchwork of implementing regulations and executive orders that have shaped the US market. In addition, state assault-weapon band have resulted in oddities like California’s “Bullet Buttons.” A wide range of legislatively-midwifed Frankenguns, from the Walther PPK/S, to short barreled rifles, to pistols with SIG braces, reflect the degree to which designers are constrained by the gun-designing impulses of American politicians and bureaucrats.

It should come as no surprise that the same thing happens in other countries with large gun markets. This case in point comes to us from Russia, where gun laws are generally stricter than in the United States. There, no one can own a pistol. Most citizens can own a shotgun; but to own a rifle you have to have owned the shotgun without incident for five years.

So here comes the VPO-208: an SKS shotgun.

SKS in .366Produced by Techcrim, an Izhevsk manufacturer, the .366 by Russian measure, across the lands (.375 by ours, across the grooves), is a smoothbore or near-smoothbore gun that gets the would-be gun owner into a semi-automatic, service rifle platform, while staying within the letters of Russian law.

The ammunition appears to be made from fireformed 7.62 x 39mm casings, and is available in a range of sporting projectiles, plus a shotshell variant.

It is reminiscent of such American wildcats (some of them since turned production) as the small-head .300 Whisper, .300 AAC Blackout, .338 Spectre, and the Mauser-head-sized .375 Reaper, all of which run in the AR-15 platform. It just goes to show that this kind of innovation is hardly an American monopoly.

The first table in the advert below has three columns: “Type of projectile”; “Speed, meters per second;” and “Energy, Joules”. Here’s our conversion of this table.

Projectile Type Velocity, m/s Energy, J Velocity, fps Energy, ft-lb
LSWC poly coat 13.5 grams 640 2765 2099 2039
FMJ 11 grams 700 2618 2296 1931
FMJ 15 grams 620 2883 2034 2126
JSP 15 grams 620 2883 2034 2126



As the shot of the fired JSP shows, and these velocity and energy tables suggest, it would actually be a good short-range hunting round.

The second table, with the bullet-drop diagram, is, “Velocity and Energy of Projectile, .366 TKM with 15-gram FMJ bullet”. Here’s our translation and unit conversion.

Metric (SI) Values Muzzle 50 meters 100 meters
Bullet Drop mm 0 35 125
Velocity m/s 625 570 520
Energy J 2837 2437 2028
English Values Muzzle 50m 100m
Bullet Drop in. 0 1.38 4.92
Velocity f/s 2050 1870 1706
Energy ft/lb. 2092 1797 1495

The problem with the gun is its accuracy, as it’s basically a smoothbore. Hyperprapor suggests that it might be minute-of-E-silhouette at 100m.

But hey, it will let some Russian guys own the rifle their nation’s color guards parade with, and even let them shoot it, all with the reduced paperwork and hassle of a shotgun; perhaps a big win for them.

There are no ballistics for the shotshell, which exists, we suspect, primarily to navigate the channels of Russian weapons law. (This law does seem somewhat liberalized since Soviet days). Techcrim’s website shows that they are very active in small-caliber (.410) shotguns and shells, which seem to have more of a following in Russia than they do here. We wonder if that’s an artifact of Russian law, too.

We saw this on r/guns, posted by our old friend hyperprapor, who notes that under Russian law “paradox rifling”  is legal if it’s under 150mm long (About 5.9″).  Paradox rifling is rifling that was just engraved in the last few inches of the bore of what was otherwise a shotgun, to give it some capability with a single ball or bullet. It was named by English bespoke gunmaker Holland and Holland, who adopted the patent from GV Fosbery of Webley-Fosbery fame. Westley Richards called it “Explora” but other makers seem to have stuck with the paradox name.

And this is definitely one for the “how weird does it get” file — a smoothbore SKS that is one short hop removed from the Webley-Fosbery Automatic Revolver!

Hunting with AR-type Rifles?

One of the coolest things that you get with membership in the National Shooting Sports Foundation is access to the NSSF’s research. We’re looking over a survey that they conducted about hunting with AR-type Modern Sporting Rifles. While we can’t share the proprietary survey in its entirety, we can comment on a couple of the things that really struck us.

AR-15 Model 601

The Survey

question markWe’re not experts in surveys, but the firm NSSF contracted to do this one appears to have great pains to reduce sources of bias and error. For example, they called both landline and cell phones. In addition, they called up to five times, on multiple lines if necessary, to eliminate the bias that results if you only sample those easy to reach by phone.  The questions were what a layman might call fill-in-the-blank, multiple choice, and scaled questions using the Likert scale or a variation, something you’ve used even if the name comes up blank: “On a scale of one to five, with one being not at all interested and five being very interested…”

If we were working for a major shooting-sports manufacturer or retailer, we’d read this survey and give some weight to its findings.

General Opinions and Demographics

None of these really seems to overthrow conventional wisdom; instead, they reinforce it.

Hunting is something that is taken up by the young, primarily. They start a little younger in, say, the West than in the Northeast, but most hunters start off as minors — the center of the distribution seems to be in late childhood, in the tweens and early teens — and those who start after Age 21 number in the mere single digits . That strikes us as a hint that there might be an untapped market for introducing adults who may be hunting-curious to the sport. I wonder if there are guides who ease first-timers into it?

Yet, one of the reasons people do it the most, may explain the youth bias of beginners: 26% do it “to be with family and friends.” (Of course, another large number, 25%, hunt for meat. This is one where a respondent might have given multiple answers, but the survey made them pick one).  The largest group do it for the sport, or recreation Some do it to be close to nature (14%), and trophy hunting is described as a motivation by very few.

Hunting with MSRs

Elmer FuddMany more hunters haven’t used this kind of rifle, than have (72 to 27 percent). An awful lot of hunters are not interested in it:  the principal reasons are emotional ones. It strikes some as nontraditional, even nonsporting. Others have practical reasons not to use them, one of the most common being that hunters already have the right firearms for the hunting they do. It’s not cost that holds hunters back; it’s lack of a perceived application for the AR in their form of hunting.

Those that do hunt with ARs primarily hunt varmints and predators.

Looking into the Future

One glimmer of hope in the data, for MSR manufacturers, is that those who have used an AR or MSR for hunting have taken it up very recently, within the last five years. As we’ve seen in the past, 50 years ago, such rifles weren’t even mentioned in gun magazines aimed at the shooting public, except as military curiosities. Twenty-five years ago, they were much more popular, but not in a hunting context. It is in the last few years that we’ve seen the emergence of a hunting culture that uses modern sporting rifles.

Right in line with that survey data, the hunting culture has emerged first in varmint and predator hunting. The shooting of feral hogs and coyotes is not constrained by the sporting traditions of deer and elk hunting.  No one is shooting hogs to “feel at one with Nature,” he’s doing it because Nature is uprooting his cash crops! But with the emergence of ARs in large-game calibers like .308 and .300 Win Mag, we can expect to see more hunters whose first rifle, perhaps, was a black one, moving on to larger game.

The trend is certainly for wider penetration and acceptance of the MSR and certain accessories (including suppressors, which are now in the camel’s-nose position MSRs were in hunting three decades ago), into the hunting market.

Savvy manufacturers and retailers are, even now, studying this report and trying to figure out how to reach that half or more of hunters who have an emotionally negative reaction to the idea of hunting with an AR.

Well, it took a good 50 years for the bolt action to catch on with hunters, and here in the East (we should mention, one of the interesting features of the report is its regional crosstabs)  there are still many holdouts with lever-action carbines. That means there’s a lot of upside for MSRs as hunting rifles — if they can overcome the resistance of the traditionalists, a very open question as the majority of hunters are hunters because they are observing traditions.

S&P Drops Colt Defense Below Junk to “D for Default.”

colt_logo_mAccording to a notably focused and clear analysis by Laura J. Keller of Bloomberg, Colt’s bonds’ rating has been dropped from an abysmal CC to D, as low as ratings go, sometimes called in the finance world “D for Default.”

Standard & Poor’s reduced Colt’s rating two grades to D from CC, according to a statement Tuesday from the credit grader. The new rating means S&P considers the company “in default or in breach of an imputed promise” and that it has ruled out the possibility the manufacturer will make good on a missed interest payment during a 30-day grace period.

As we mentioned in comments to our last report on Colt’s Perils of Pauline fiscal drama, they were technically in default as soon as their interest payment came due and they did not have cash on hand to pay it.

The weapons maker didn’t pay the $10.9 million due May 15 to holders of its $249.4 million of 8.75 percent unsecured notes due November 2017, according to S&P. Colt had warned in November it was “probable” it wouldn’t have the cash to make the payment if it didn’t meet internal sales forecasts.

Colt received an unsecured loan from Morgan Stanley for $70 Million in November, just barely avoiding default at that time, by using the loan proceeds to pay the bond interest increment ($10.9M) and fund ongoing operations. Most of that cash is gone now, with only $8.4M in unencumbered cash available at the end of April (and another $10.9M payment due May 15th). (Colt has a few million more than that, but the cash was used as security for a loan, and paying that specifically earmarked “restricted” cash back takes priority over other debt, in a bankruptcy scenario).

The Sword of Damocles hanging over the bond holders is the probability that they’ll be zeroed out completely in a bankruptcy. Colt had hoped that imminent threat would get them to accept a 70% haircut to roll their bonds over into newer and even more speculative debt. When they didn’t bite by 12 May, they rolled the dice for another week, and then, on the 18th, rolled the dice again. Colt’s net assets, per Bloomberg, are over 100% collateralized, meaning in a bankruptcy, bondholders are left with an empty bag.

In a bankruptcy scenario, not much would be left for holders of the 8.75 percent junior notes, according to S&P. Since the $102 million of collateral available to Colt’s secured lenders is just shy of the $103 million they’re owed, S&P estimates holders of senior unsecured debt would recover between zero and 10 percent of their investment.

In other words, even in a liquidation, these bondholders get to the head of the line only after all the juice has been squeezed.

Naturally this has an impact on the market for the bonds:

The junior notes traded in odd-sized lots at 27.75 cents on the dollar at 4:37 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

It’s a little surprising that they’re worth that much in the market, because it’s hard to imagine any way to get a 25¢ recovery on these bonds at this point, unless Colt’s intellectual property brings a lot more at bankruptcy auction that the market values it at.

Elsewhere in the Industry

Colt is not the only firearms maker in the news. Cerberus, a hedge fund, has announced that it has failed in its attempts to sell its firearms holdings, now organized as Remington Outdoor, and instead is offering  to cash out institutional investors, including politically-managed California public employee pension funds, that have the vapors over buying guns. Cerberus managers have claimed that because of public perceptions of guns as naughty things, they couldn’t even get the underwriting to take Remington public.

This is nonsense. Look at how Morgan Stanley stepped up to make that unwise $70M loan to Colt, and consider how low and even negative interest in “safe” investments has investors taking wild, inadvisable risks. But the nonsense may serve Cerberus’s ends well. If they can get CALPERS, etc., and other “socially conscious” investors out and bring their former stakes in-house before going public, they would likely leave Cerberus investors with the best kind of financial problem: how to handle massive capital-gains taxes on a hugely successful investment. But the Remington story has already been spun as a sign of the “collapse of the gun market.”

It is only a matter of time before writers for the anti-gun daily media start combining these stories (and HK’s woes in Germany, which are political and don’t financially threaten the firm, yet) to crow that the gun industry is dead: only, it isn’t. For example, here’s a paragraph from New York Times anti-gun activist reporter Michael de la Merced, emphasis ours, from their report on Remington’s cash-out offer (which the Times illustrated with a photo of their close allies, professional protesters at an antigun rally):

Compounding the problem has been the reluctance of big lenders to participate in the sales process for fear of potential hits to their reputation. Banks like JPMorgan Chase and Credit Suisse have rarely advised or lent money to deals involving firearms makers, making it more difficult for potential buyers to afford Remington….

(Emphasis in the above is ours. We guarantee you that timidity about reputation is not what drives Wall Street). The more key revelation is buried in the report and apparently unnoticed by de la Merced: the cashout values Remington at 880M, about the size of S&W’s market cap, far lower than the $1B-plus Cerberus earlier estimated for the firm’s value. (Of course, valuation of a private company is one of the thorniest problems in finance; in the end, value is what you can actually sell it for, and funds like CALPERS, which would long ago have been bankrupt if they had to meet the financial requirements of private firms’ pensions, have to decide how big a bath they want to take for the sake of political purity).

While 2014 sales for the industry may have been down from the 2013 peak, they weren’t down much and indicate that panic buying has subsided into a new and higher level of ongoing sales. There are many of indicators of this. For example, in 2014, the FBI’s National Instant Check System was overwhelmed with call volume, leading to unprecedented delays in answering calls:

Many call center operations have a target goal of answering 80 percent of calls within 20 seconds. However, the NICS Section’s goal is to answer Transfer Process calls (background checks for firearm purchases transferred from the NICS Contracted Call Center to the NICS Section’s staff) within 9 seconds. Based on historical data specific to transaction and call volumes, the NICS Section is able to forecast anticipated levels of staffing needed to effectively process incoming work. In 2014, the NICS Section’s Transfer Process calls were answered on an average yearly rate of 109.27 seconds due to several months of high call volume.1

If their usual objective is 9 seconds and “several months” of high volume blew their delay out to almost two minutes, think about the mathematics of that… those peak periods had really high volume, then.

Also, when the media writes that gun sales are down… bear in mind that 12.7 unadjusted NICS checks were done in 2008, the last year before the Salesman-in-Chief amplified gun sales. 2014’s down number rounds to 21.0 million, from 2013’s 21.1 million… to two places, it’s so far down it’s 99.41% of prior years.2 (We used to call that “flat,” but we just have an MBA, not a J-School sheepskin, so what do we know?)

As readers of know, Colt’s problems stem only partially from the company’s struggle with new products and market forces. Colt’s traditional products, the 1911A1 pistol and AR-15, M16 and M4 rifles remain popular worldwide (42% of the value of sales is overseas, according to the firm’s most recent SEC filings). The real mortal wound was inflicted by the company’s own managers: the company was overburdened with a fatally toxic load of debt. They did this, not as fiduciaries for the company, but in their capacity as the individuals who personally pocketed much of the money.

When Colt goes bankrupt, an event we see as unavoidable now, expect the innumerates of the New York Times to crow that the failure results from some imagined unpopularity of guns and increasing popularity of New York style gun ban regimes. Politicians who believe them and act accordingly will likely be slaughtered at the polls in all but the six or seven states where gun bans are legitimately popular.

The Bloomberg report on Colt Defense’s financials is concise and accurate, though, so do Read The Whole Thing™. Hat tip, Daniel Watters in the comments to our last Colt report.


  1. Federal Bureau of Investigation. 2014 NICS Operations. Page 6. Retrieved from:
  2. Ibid., p. 12.

Industry News: TrackingPoint winks out; Colt, ?; ATF Raids Stag

Some days there’s a bit too much news to deal with, and it’s all bad news.

First, TrackingPoint. Bad News.

tracking_point_advanced_modeThe maker of high-tech and extremely costly integrated optics/arms systems has sent its employees home, suspended sales and orders, and closed its doors. has a good overview:

The Texas-based scope company, located north of Austin, launched almost three years ago when it introduced the precision guided firearm system that allows the user to tag a target up to 1,000 yards out and hit it once the trigger is fully compressed.

Source familiar with the company told that more than 20 people were laid off today and given a two-week severance package, but we have been unable to confirm those details with an official with the company.

Rumors of financial difficulties surfaced in February when the company hired a new chief executive officer and laid off an unspecified number of employees. At the time new CEO, Frank Bruno, told that the company was cutting its research and development branch in order to lower costs and initiate new steps in a business plan.


Reports from June put TrackingPoint’s estimated revenue at $20 million for 2014, and $10 million revenue in 2013, but the company’s new CEO, Frank Bruno, declined to say in February if these figures were in line with current growth.

It’s a good and thorough report, as thorough as it can get without an update from the horse’s mouth (which is understandably not forthcoming), so go Read The Whole Thing™.

Shooting Sports Retailer, a site that’s increasingly becoming as important to industry watchers as TFB and, noted that the company is “officially out of business,” that these layoffs were the half of the company that didn’t get whacked three months ago, and that SSR was warned some time ago that this reckoning was coming.

A source alerted SSR May 18 that TrackingPoint is “officially out of business” but a statement on the company’s website simply says TrackingPoint “is no longer accepting orders” and that it thanks its “loyal customers and followers for sharing our vision.”
Screen Shot 2015-05-18 at 1.43.47 PM
In February we reported that TrackingPoint had fired nearly 50 percent of its workforce and appointed a new CEO, Frank Bruno. At the time Bruno said his company was poised for success and had grown its orders more than 200 percent.

But inside sources were telling SSR the company would go bankrupt by year’s end. Now it looks like that prediction has come to pass.

The question becomes: what happens to TrackingPoint’s technology now? They were never able to get it over the RDT&E hump and into production, where economies of scale could bring the price down. A deal with Remington (one of the many heads of Cerberus — the mythologically-challenged founders should have called that company Hydra) produced a disappointing de-contented version.

There are several possibilities for TrackingPoint:

  1. Chapter 11 reorganization (which would erase most of the debts incurred by the company’s $45 million R&D effort), which would preserve something of the company, while zeroing out investors and haircutting (at least) unsecured creditors. Freed of the burden of debt, the new company might thrive.
  2. Chapter 7 liquidation (which would sell off the assets of the firm, its technology probably foremost, and use the proceeds to make secured creditors whole, if possible, and make partial restitution to unsecured creditors, if anything is left after the secured creditors are paid. In this case the patents and technology might vanish, into one of the large defense industry prime contractors or even overseas.
  3. Some variety of sale of the whole thing, which might have it resurface as part of a larger firm, either in the firearms industry or (more likely) the defense industry. Unlike Colt, whose moves are constrained by its nature as a publicly-held (stock exchange-listed) company, privately-held TrackingPoint can probably explore more options for survival of the company, or at least, its DNA.

Hey, That Reminds Us. What About Colt?

As you remember, when we left Pauline at the close of last week’s episode, she was chained to the railroad track, and the 1:30 from Tikrit was approaching, flying a black flag. Colt had just kicked the can down the road extended the deadline for the scantily subscribed exchange offer for 8.75% Senior Notes due 2017, bonds which are technically in default already, as Colt missed last week’s payment. But the one-week can-kick was how Pauline got off the scraggly branch she was hanging from over a long drop into Desperation Canyon at the end of the previous week’s episode, and onto the railroad tracks instead.

As we write this, Colt still has a technical chance of getting its bondholders to take the offer, in the same way that Chicago Cubs fans tell themselves they their team is not mathematically eliminated yet in late-summer baseball. But as we wrote this last night, Colt was just an hour short of the latest deadline (i.e. the arrival of the Tikrit Express):

The Old Notes may still be tendered, Consents may still be delivered and votes to accept or reject the Prepackaged Plan may still be casted until midnight, New York City time, on May 18, 2015 unless the Exchange Offer, the Consent Solicitation or the Prepackaged Plan Solicitation is terminated or withdrawn earlier, or unless the Exchange Offer, the Consent Solicitation or the Prepackaged Plan Solicitation is further extended.

So sometime today there will be news of one of these, from least to greatest probability:

  1. a resolution of Colt’s financial problems by some deus ex macchina (i.e., sale to a new hedge fund)
  2. bankruptcy, either as Chapter 11 reorganization or Chapter 7 liquidation;
  3. a daring escape for Colt, kicking the can yet again to a new deadline.

Something that can’t go on forever, won’t — but there are a lot of clever guys on Wall Street who can wring every minute of life out of an undead company. And something that can’t happen (like Colt paying off its debts) won’t happen. So somewhere in the other large set of Things That Can Happen is what will happen.


This part of the post was OBE. As we posted last night, after scheduling this post to go live, Colt released a new deadline of May 26 (yes, it kicked the can another week — which we thought the most probable outcome).

Finally, Stag Arms is in a Legal Jam

Once again we’ll go to for the tale of the tape, as it were.

Federal agents seized thousands of gun parts and documents from New Britain gun maker Stag Arms LLC today.

According to court documents, an investigation by the Bureau of Alcohol, Tobacco, Firearms and Explosives revealed that Stag failed to comply with the National Firearms Act when agents found 3,000 unserialized machine gun lower receivers, and that the company failed to maintain documents for 136 unserialized receivers.

Stag’s owner, Mark Malkowski, was named as the claimant in the civil suit filed in Connecticut federal court on May 6.

ATF inspectors discovered the alleged violations last July and August during a routine check of Stag’s facilities and the inspector subsequently informed the company.

Tadeusz Malkowski, the federal firearms licensee for the Stag facility where the unserialized parts were found, told ATF inspectors that the receivers had been on the premises between seven and 30 days because the employee who serialized the receivers was on vacation, according to the filing.

This sounds pretty bad, but so far there have been no criminal charges. What is really happening here is that Stag’s IOI seems to have gone wild on the firm.

The IOI reneged on a verbal OK previous IOIs had given the company about keeping spare receivers on hand to retro-serialize to replace damaged receivers for warranty or other repairs. If you do this, expect ATF to target you (not that they’re consistent at all from one office to another). If you want to keep receivers to be serialized as replacements, keep those receivers in an incomplete state, which ATF has generally interpreted to mean no milling or drilling of the fire control pocket (partially finishing the pivot and takedown pin recesses, broaching or EDM’ing the magwell, finishing the mag release and bolt release recesses, and partially finishing the buffer tower (drill and tap for receiver extension), have all been ruled OK in the past). Go beyond that without a serial number and maker name, city and state on the receiver and they will violate you.

ATF Managers and US Attorneys, including the ones involved in this case, have been given marching orders to destroy firearms companies, and especially, makers of Modern Sporting Rifles, by any means necessary.

Here’s the .pdf of one forfeiture complaint. As is customary with forefeiture proceedings, the “defendants” are the seized guns and they are guilty until Stag proves them innocent. The file is courtesy of


The forfeiture complaint makes little sense to us, as they charge that these receivers were unserialized, but they list them by serial number. There are also many fewer receivers listed in this complaint than the 3,000-plus that the ATF supposedly seized. Three thousand receivers are a staggering number but as Stag produces about 150,000 a year, it’s really only a week’s production.

The anti-gun reporters at the Hartford Business Journal breathlessly reported that, “a large cache of gun parts” was found — at the gun factory. Layers and layers of editors!

In court filings and to the Hartford Business Journal, ATF agents charged that Stag is “suspected of ongoing illegal activity” and “unauthorized trafficking of guns.” They have also called all the receivers the company had on hand “machine guns,” and have obtained an opinion from the ever-flexible Firearms Technology Branch supporting that position.

Breaking: Colt Kicks the Can One Week Forward, Again

colt_logo_mWe have been watching Colt as Monday night was a deadline for bondholders to take up Colt’s decidedly unappetizing bond swap option, or the nearly-as-bad prepack option.

As of 11 PM Colt had not posted the release to their website, so we have much of the background of this story coming out in one scheduled for 0600. But we did just find the release on a British Yahoo Finance news website, that picked it up from Business Wire.

On May 18, 2015, Colt Defense LLC (“Colt”) and Colt Finance Corp. (“Colt Finance” and together with Colt, the “Issuers”) announced that (i) the “Expiration Date”, the “Consent Expiration Time” and the “Withdrawal Deadline” have been extended to 5:00 p.m., New York City time, on May 26, 2015 for their previously announced exchange offer (the “Exchange Offer”) to exchange their 10.0% Junior Priority Senior Secured Notes due 2023 (the “New Notes”) and the related subsidiary guarantees for any and all outstanding Issuers’ 8.75% Senior Notes due 2017 (the “Old Notes”) and (ii) the “Voting Deadline” and the “Withdrawal Deadline” (only applicable if participating in the Exchange Offer) have been extended to 5:00 p.m., New York City time, on May 26, 2015 for their previously announced solicitation of votes (the “Prepackaged Plan Solicitation”) to the prepackaged plan of reorganization (the “Prepackaged Plan”).

Other related deadlines have also been dropkicked just short of a week ahead from midnight on the 18th to 1700 on the 26th. Despite that, the take-up of the Colt offer among the 10% bondholders (now two weeks into a default) remains very low:

The Issuers announced today preliminary results of the Exchange Offer. As of 5:00 p.m., New York City time, on May 18, 2015, approximately $14.1 million, or 5.65%, of the outstanding principal amount of Old Notes had been validly tendered and not validly withdrawn.

That’s pretty lousy takeup, when they needed… 98%. This is barely a half-percent of movement for the firm since their last can-kicking exercise a week ago. As we quoted their then release:

The Issuers announced today preliminary results of the Exchange Offer. As of midnight, New York City time, on May 11, 2015, which was the previously scheduled “Expiration Date” for the Exchange Offer, approximately $12.7 million, or 5.1%, of the outstanding principal amount of Old Notes had been validly tendered and not validly withdrawn.

At 5.65% they’re still 92.35% short of exchanging the old debt for new. As we noted at the time, and as Colt managers certainly understand, there’s not much hope of closing the gap, and the trends are all against the company. But the new release does hint that something else is up:

The Issuers believe it is in the best interests of their respective stakeholders to actively address their capital structure and have commenced discussions with an ad hoc group of holders of the Old Notes. The Issuers hope that such discussions will result in a consensual restructuring transaction.

Translated from the financial-ese, this suggests that while Colt hasn’t seen much action on its offer of junkier bonds (at a lower rate!) at a large haircut off their current, defaulted junk bonds, it has behind-the-scenes negotiations with some quantity of the holders of these bonds. A “consensual restructuring transaction” lets Colt continue to operate, without being sued into Chapter 11 or Chapter 7 by holders of the defaulted financial instruments.

There’s a little more background in tomorrow morning’s post, actually.

Past coverage:

20 Nov 14: Is Colt Going Paws Up? Why? An Analysis

20 Nov 14: No, Colt Didn’t Default

12 Dec 14: Pythons Can’t Save Colt

5 May 15: Is Colt Toast?

12 May 15: Colt Past Financial Deadline, Extends Deadline



SHOT Show Tire Kickers with Media Badges

Shot-ShowCaleb at Gun Nuts Media posts an interesting question: are too many looky-lous admitted with media credentials? The SHOT Show is months away, but it’s not too early to start thinking about it. After all, anybody who’s been on the trade show cycle knows that planning for next year’s is already underway as exhibitors wrap up this year’s.

As we intended to go with media credentials (this intention was OBE), we wonder if we’re the kind of guy he means.

[H]ave media standards gotten too lo[o]se at industry shows?

He follows up with:

I remember my first SHOT Show, in 2008. I had no business being there; my blog was small with limited readership, and really I was just some asshole who liked guns but had the right connections to get a media badge at SHOT.

You don’t need “connections,” you know. NSSF is extremely liberal with media credentialing for new media, and in general it has worked well for spreading word about the industry and the sport. Some of the other shows are rather more selective.

Now, I’m still just some asshole who likes guns, but I do this for a living now. It’s funny how that changes my perception of who should and shouldn’t be at shows.

Well, he’s showing some self-awareness here.

What further complicates this issue is that each show is a different audience.For example, SHOT and NASGW are trade shows – not technically open to the public, so I feel that they should enforce tighter standards on media than at a show like NRA, which is open to the public.

via Should the firearms industry tighten the admission standards for media at trade shows? | Gun Nuts Media.

In fact, it’s probably easier to get media credentials with NSSF (for SHOT) than with NRA. It’s not a lot of skin off our back either way — we suspect that WeaponsMan is successful enough to qualify either way; we’re pretty successful for an ad-less blog, with consistent and steady improvement in our “circulation”.

We wanted to respond to him, but by the time we saw his Tax Day post, he’d closed comments. So instead, we’re responding here.

The General Problem of Popularity and Trade Shows

Caleb puts his finger on it when he identifies the problem as being a sea of people, most of whom are absolutely no use to you. (You can take the Ed Brown approach and just be rude to them because they’re beneath you, of course… but just because it appears to work for Brown, doesn’t mean it will work for you, especially if you’re not yet established). The real problem is, you don’t know which of those people whom you don’t know will be useful to you. Maybe that kid there is a Caleb who is going to break out of the pack. Maybe that middle-aged dude over there who looks like every other middle-aged looky-lou is a retired SF trooper some of whose readers spend tens of thousands on guns… and some of them, on one gun.

Then again, maybe that recognizable YouTube face is the kind of guy who only will praise your stuff if he gets free or discounted stuff, or, worse in terms of integrity, a guy who will praise your stuff only if he gets free or discounted stuff. (The difference is subtle, but both types exist. Anybody in the industry can tell you). That’s one reason we don’t take free stuff here1, and have resisted selling ads.

Any time you have too many pursuing a good that not all can have, you have to come up with a system of rationing. The way this has been done, historically, is by price. Trade groups are loath to charge media to attend, but they probably should consider it, with discounts on the backside for “friendly” small media.

How Another Industry Does it

The largest airshow in the world is the Experimental Aviation Association annual Airventure in Oshkosh, Wisconsin. Despite the fact that shooting is much more popular than building your own plane, Airventure, which lasts a week, is substantially larger than SHOT or the NRA Annual Meeting. But EAA has a slick media operation that works very smoothly. There are very few paid staffers (who work like coolies!); most of the staff are member volunteers. (This is made possible, in part, by the fact that they hold the show in the same place every year. Harder to pull off with a show that travels around).

EAA has made it possible for successful national, local and trade media to set up their own structures on their grounds and have their own newsrooms onsite, in semi-permanent pavilions or in job-site temporary offices.

A subset of the same media that do Airventure also attend purer trade shows like that of the National Business Aviation Association (NBAA), the Aircraft Owners and Pilots Association (AOPA), and the Helicopter Association International (HAI). We’ve attended all those events in a media role, and are welcome back, so we’ve evolved an idea of best practices for the organization, the media, and businesses.

The Show Sponsor should:

  • Provide a press conference venue. This should be a room, with chairs, a lectern, a computer-projector, and a kid who knows how to use the projector on call for when the exhibitors boze out trying to run it. Note that every exhibitor will want the morning slots on the first day, trying to be the “It Girl” of the show. You can auction these slots, for the org or for charity, or simply let them go first-come-first served. The room size and schedule have to be hammered out as far in advance as you can. You will still have to have some empty slots for the pop-up exhibitor.
  • Plan for the 5% that does not get the word, accommodate them, but not at the expense of the exhibitors who follow every rule — doing it right should never be punished.
  • Provide a press-release center. EAA has a series of tables where releases and packets can be left, and a lot of cubbies and bins for releases. This needs to be someplace only the press and exhibitors can access, or exhibitors’ $50+ press packets will never get them a line of media exposure. That means you probably have to have a gorgon (but a nice one) guarding the place, in the guise of being on duty to assist.
  • Provide a press working room. If you’re on a low budget, temp tables and folding chairs, lots of electric outlets, and WiFi. Maybe lockers if you have room.  It’s OK to charge for this and important to enforce some kind of limits to keep “press” from homesteading and fighting over “their” desk. It’s not their damn desk, it’s the organizer’s desk, but press people are as prone as anybody to get jumped-up with vanity.
  • Generally be evenhanded towards the local, trade and specialty, and online press. In most cases, the national press will try to parachute in, if they have an interest, and demand special care and attention. Look, after Geraldo Rivera is gone, your organization will be in the hands of the trade press for the next nine years before Geraldo sees a squirrel in your direction, so having your media management shop tell Geraldo’s producer to pound sand and get in line like everybody else is pure media-relationship gold.
  • You will find, to your chagrin, that what starts as loose and common-sense may wind up rules-bound, as rules get written because of the sphincter muscles in the media.
  • In a worst case, feel free to exclude/expel/have arrested “media” punks who are disruptive. This is as likely to be a national media “face” or producer as it is some self-important blogger.
  • The show organizers should provide business rooms for their exhibitors and attendees to hammer out deals, and these should be one of several areas that are OFF LIMITS to the press. You will know based on sign-up sheets the first time you try this, whether you need more of these rooms. Remember, the best way to ration scarce resources fairly is price… but you may want to include some access to such a room for all your exhibitors, who have, of course, paid you for the privilege.
  • Your own media reps should keep track of several statistics of interest and issue a daily and end-of-show bulletin, to include:
    1. Daily attendance and show-long cumulative, and how this compares to past shows.
    2. Deals done / guns sold / major show events (the show is a great place to announce new products and mergers).
    3. New product intros.
    4. Whatever your organization wants to draw attention to.

This data will make it into dozens if not hundreds of stories. Media people are hungry for it.

  • You should set rules for the press, and violations should have consequences, up to and including decredentialing the reporter and the reporter’s employer or outlet for the year or for longer. Otherwise the unethical reporters ruin it for the other 2% (j/k).


Caleb has another point: that the pressure of too many “press” makes it hard for the trade-show exhibitors to get business done. What you need, as an exhibitor, is a bolt-hole where you can take your customers to talk turkey readily accessible to the trade floor, but not accessible to the media scrum or the mass of attendees. This should be off limits to press, even “real” press, for the comfort of your customers. The bigger vendors have a “back room” in their booth (which has pros and cons) or run an invitation-only “hospitality suite” in the show hotel (which has pros and cons of its own). If you’re a small vendor, maybe in a small booth or even sharing a booth, who expects and hopes to sign business at the show, you can’t afford that, yet; we should probably do a whole other post for you. But for starters, make yourself a bolt hole where you can take a client. (One vendor at HAI one year hired a back room at a bar up the street. And proceeded to bring back key media types as well as business counterparties to his “secret show nerve center,” for one-at-a-time schmoozing. And ply them with booze, and swear them to secrecy — about the bar approach, not about the data he was trying to put out. Getting media one-on-one at the show tied him up, but it also tied reporters up and every minute they were with him, they weren’t in the sights of his competitors’ press people).

We should probably do a whole post on how vendors should go about getting press.


  1. In the one exception we can think of to date, to, “we don’t take free stuff,” a frequent commenter here offered us a QD supressor mount/flash hider for our Afghanistan retro M4 project, and we were grateful to take it from him. (It, also, arrived Friday). As we understand it, it was surplus to his needs after he upgraded his suppressor to a different brand. We haven’t named him because this was all discussed back-channel, and if he wants to be named he can say so himself, but we’re very grateful to him.  We owe him at least a favor or an adult beverage at some future date.

Colt Past Financial Deadline, Extends Deadline

colt_logo_mShooting Sports Retailer wrote yesterday:

Many industry analysts (and Colt as well) point to the lagging military, law enforcement and agency sales as the key link in Colt’s demise chain of events. But others point to poor consumer product innovation and financial managers who just want to suck the company dry.

Whatever the reason might be, Colt is on life support and tonight’s [Monday, 11 May 2015] deadline could mean the end of the storied company as we know it.

As one of the more financially-trained voices counted under “others” there (“others point to poor consumer product innovation and financial managers who just want to suck the company dry”), we should have been on top of this. Fortunately SSR’s Christian Lowe was on top of it, and posted a follow-up, noting that Colt has extended the deadline another week (to 18 May 15). Lowe:

Colt Defense LLC announced May 11 it would allow investors another week to decide whether to take a huge cut in returns on loans to the company or accept a bankruptcy agreement that would allow for a quicker restructuring.

Previously, Colt had told debtors they must accept a deal May 11. It is unclear why the company extended the agreement deadline….

Before checking with Colt, our guess is that the offer was extended because Colt isn’t even close to the 98-percent takeup they needed on the original exchange offer, or the 2/3 (67%) supermajority they needed on the prepackaged-bankruptcy alternative.

Colt has posted their results, and as we noted in our previous report that we suspected, Colt bondholders weren’t in a rush to convert their senior debt to new debt at 30¢ on the dollar. But even we were surprised at how unpopular the offering has been. Colt’s press release announcing the results indicates that barely 5% of the bonds have been tendered.

The Issuers announced today preliminary results of the Exchange Offer. As of midnight, New York City time, on May 11, 2015, which was the previously scheduled “Expiration Date” for the Exchange Offer, approximately $12.7 million, or 5.1%, of the outstanding principal amount of Old Notes had been validly tendered and not validly withdrawn.

The Old Notes may still be tendered, Consents may still be delivered and votes to accept or reject the Prepackaged Plan may still be casted until midnight, New York City time, on May 18, 2015 unless the Exchange Offer, the Consent Solicitation or the Prepackaged Plan Solicitation is terminated or withdrawn earlier, or unless the Exchange Offer, the Consent Solicitation or the Prepackaged Plan Solicitation is further extended.

With 5.1% gathered in just short of a month, they’re throwing a Hail Mary for picking up 61.9% more to do the prepack in one more week. This seems… improbable. (We think everyone realizes that picking up 92.9% to do the bond exchange is not going to happen by now). But they do leave the door open for another extension.

These highly discounted securities have long had a whiff of default about them, and now it’s more than a whiff. Colt’s extension of the offer hints that, “This is the last chance to save something from these bonds.” But it isn’t, of course: even liquidation, probably the worst option for preserving the value of Colt, would leave something on the table, and as senior debt Colt’s bondholders stand ahead of stockholders and ordinary in-the-line-of-business creditors, who are likely, given Colt’s staggering debt from financial operations, to be zeroed out.

Colt will survive in some form, even if it’s just another trademark slapped on generic junk by he Freedom Group. And given the firm’s perils-of-Pauline financial history, the managers may pull another rabbit out of the hat. But sometime you have to put rabbits in to the hat, or the time will come when you run out.

Their goal seems to always have been to get to the prepack, where they can take the company into Chapter 11 while retaining control and selecting what creditors to put in what order, à la Chrysler. But in Chrysler’s case, the US Government put its thumb on the scale to make sure that well-connected unsecured creditors, like the UAW pension plan, got in line in front of not-connected secured creditors, like bondholders. (1st lien bondholders got a huge haircut, and 2nd lien holders were entirely zeroed out). The managers of Colt might want to do something like this, but unless they can get the President to drag them out of the black-letter law of the bankruptcy code, as happened with the Government Motors deals, it won’t happen.

Bondholders are likely to recover something, but it probably won’t be the 30% Colt is offering — at a very high level of risk, of course.

That said, this is not a good time to send your Colt firearm in for warranty service, or for distributors to make cash orders.