Iconic American gunmaker Colt could be bankrupt within days.
After making guns for over 160 years Colt is struggling financially and missed a $10.9 million interest payment on its debt in May.
Colt admitted though regulatory filings, that this raises "substantial doubt about the company's ability to continue as a going concern" and that it "may seek relief under the bankruptcy code."
Given its grace period with bondholders expires on June 14th it will now have to find a way to restructure the debt with its bondholders.
Bondholders are understood to be opposed to any pact that forces them to take a loss, the current proposal on the table. That's because bondholders would likely recover all or most of their money in bankruptcy, assuming that Colt gets sold for enough money to cover the $250 million worth of bonds and another $102 million in other debt.
That could well be possible if a buyer emerges from among its larger rivals such as Smith & Wesson or Sturm Ruger.
Colt's status in the gun industry and its role in American history are unparalleled.
The West Hartford manufacturer established by Sam Colt is the most famous gunmaker in America and has been since the 1840s, when the Texas Rangers adopted its iconic revolver during their Wild West wars with Native Americans.
Over the years Colt's guns have been featured in countless Hollywood war movies and action films, used by actors from John Wayne to James Bond.
"The Colt is one of the most powerful guns I've ever fired," wrote Chris Kyle of "American Sniper" fame.
In 1911, building on success of previous Colt weapons, the U.S. Army adopted the radical Colt 1911 semiautomatic .45 caliber pistol as its standard issue side arm. It went on to become one of the most famous guns ever made and was in service by the U.S. military for over 80 years.
Yet recently, sales have declined.
Weak leadership and lack of modernization
Compact and light handgun sales across the industry are up in recent years. Colt compact models like the Mustang and the Defender are not as well liked as those made by rival Glock. American police mostly carry Glocks, which are known for being lightweight yet can hold high capacity magazines.
The company still makes a wide variety of weapons for the military, including the AR-15, the M-16, the M4, and the M203 grenade launcher but the military is no longer the cash cow it once was as the wars in Iraq and Afghanistan wind down.
The result is that the fate of an American icon hangs in the balance and will be determined by bankers and creditors in the coming weeks.