".......
Colt’s most valuable properties, its intellectual property (designs, trademarks and patents) are essentially mortgaged, greatly reducing the cash value of the business, which the managers propose selling at auction.
After Colt defaulted on an interest payment last month, its managers, hedge fund Sciens Capital, initially tried to press bondholders into accepting a 95% haircut and a six-year stretch in bond terms. Only 5.1% of the bondholders were willing to take a chance at getting 5% six years later ($50 per $1000 of bonds’ face value), even with the firm threatening to go bankrupt and zero them out. Colt managed to negotiate some breathing space with the bondholders, and managed to raise the participation to a still-anemic 5.9%, even after offering them a less sour 45% of old bond face value in the new bonds.
The managers’ second choice, a prepackaged bankruptcy like the one used in the notorious Government Motors bankruptcies, also did not attract enough creditor support. ......"(Not a good sign)
Best Wishes,
Bruce