Colt Ready To Exit Bankruptcy; Union Agrees To Retiree Benefit Cuts
Sergio Pereira adds a completed Colt rifle to a rack of newly assembled guns at the company headquarters in West Hartford. Each is then test fired, packaged, and sent to retailers. (MICHAEL McANDREWS / Hartford Courant)
Gunmaker Colt Defense received confirmation of its reorganization plan in bankruptcy court in Delaware Wednesday, paving the way for an exit from bankruptcy this month, the company said in a statement issued Wednesday evening.
Colt Holding Co. filed for bankruptcy protection in June, citing $269 million in unsecured debt to its 30 largest creditors. The largest creditor by far is a group of bondholders that loaned the company $250 million in 2009.
Some of those bondholders will be partial owners of the company once it's out of bankruptcy, as they are contributing $30 million of the $50 million of recapitalization Colt will have at that point, according to The Wall Street Journal.
Critical to the reorganization was the United Auto Workers' agreement to cut retiree medical benefits for 372 former Colt workers and spouses. The contract had the company paying nearly all the retirees' expenses that Medicare didn't cover; the company's exposure will now be limited to $1,500 per person.
The union succeeded in negotiating a more generous offer, as the company had proposed changing its retiree medical benefits to $1,350 per person.
The majority of retirees spend less than that, but 55 of the retirees have much higher health care costs.
The union also said it will cooperate with management in asking the state to lend the company $10 million, which it would use for working capital, product development and to buy the Colt factory in West Hartford. The factory is owned by a consortium of investors, including the Sciens Capital Management private equity firm that was the sole owner of Colt before it entered bankruptcy in June.
The state has repeatedly given money to Colt over the decades, including $10 million as Colt exited bankruptcy the last time, in 1994.
The union's memorandum of understanding, filed Tuesday, also touches on many issues for current workers. Of the 610 Colt workers in West Hartford, 462 are represented by the union. The company also has about 100 employees in Canada.
In the memorandum, the union said it would consider moving to a 10-hour, four-day-a-week schedule. It agreed to productivity improvement efforts, and said it would work with management to develop new compensation programs linked to productivity improvements.
The union agreed to losing its two seats on the board of the company, but will have access to information the board has. Post bankruptcy, Colt will no longer have to share its financial information with the public through Securities and Exchange Commission filings.
Colt declined to comment.
In the press release, CEO Dennis Veilleux said: "Today we achieved the last important milestone on Colt's path to emerging from Chapter 11 as a stronger and more competitive company. We greatly appreciate the dedication and support of our extraordinary employees during this process, as well as the support we received from our financial stakeholders, Sciens Capital and our customers and vendors."
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