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Filing for Chapter 11 may help gun manufacturer move forward

Companies large and small in Texas can run into financial difficulties making it necessary to consider their options. For some, the idea of giving up is simply not in their makeup and they seek other solutions. Some people might think of the idea of Chapter 11 as simply a means of shirking one's duties to pay the bills. However, people who understand the process knows that it is in reality a tactic of debt reorganization by a business owner to get back on stronger ground and move the business forward.

Many Texans strongly believe in the right to bear arms, and they are probably familiar with the Colt gun manufacturer. The company was having financial trouble after losing its U.S. military contracts and decided that filing for Chapter 11 bankruptcy was the strategy it should take. The company made the filing in June. Now, the company is possibly on the verge of a settlement between a private equity owner and its bondholders. While their representatives were in court to discuss the terms of a bankruptcy auction, reports indicate that there has been progress in a turnaround plan.

The process does not include unsecured creditors and the details between the parties are still in the process of being hashed out with still unresolved issues. However, the restructuring under Chapter 11 would prevent the need for an auction. Bondholders do not want the company to be put up for sale and the private equity firm is considering what to do next.

For any company small, medium or large, the fluctuations of the economy and difficult nature of running a business make it possible that there will be times that the financial realities make the prospect of a Chapter 11 bankruptcy a necessity. Although many company debt reorganizations are not as complicated as that of the Colt gun company, they still can be difficult to navigate. Those who are having business issues and are seeking a way to get back on strong foundation should consider filing for Chapter 11 bankruptcy with help from an attorney.

Source: Wall Street Journal, "Gunmaker Colt Says Chapter 11 Turnaround Deal on the Way," Peg Brickley, Sept. 3, 2015

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