Thursday, October 22, 2015

Colt Defense - Unions Appeal Auction Bid Procedures to Protect Rights Under Collective Bargaining Agreement and, Meanwhile, No Qualified Bid Has Been Received for Colt's Assets.

Every so often a legal dispute arises in an international bankruptcy case that the press decides not to cover at all.  One can speculate as to what is driving the choice by the press of what to cover, how to cover it and what not to cover at all.  Rather than speculate, I maintain this blog for the sake of transparency.

One such dispute is currently in the United States District Court for the District of Delaware.

The iconic American gunmaker, Colt, is in bankruptcy proceedings in Delaware, and has put its assets on the auction block.  Surprisingly, a willing buyer has yet to come forward, though perhaps this is merely a function of limited efforts to date to market the assets.

Make no mistake.  There is value in the company and its assets.  While Colt has experienced financial difficulties - apparently due to over-leveraging its balance sheet, it also reportedly recently obtained a share in a $212 million contract from the U.S. Department of Defense.

See article, Financially Stricken Colt Defense Wins $212M Contract with DOD

It is against this backdrop that the International Automobile, Aerospace and Agricultural Workers of America and its Local Union No. 376 filed an appeal of the Order of the United States Bankruptcy Court for the District of Delaware approving bid procedures in connection with the sale of substantially all of the assets of Colt.

The question raised on appeal is whether the Order violates section 1113(f) of the Bankruptcy Code when neither the Order nor the bid procedures required "Qualified Bids" provide that a potential purchaser assume the Collective Bargaining Agreement with the UAW, which includes the requirement that for the duration of the agreement, Colt will require a potential purchaser of the company or a substantial portion of its assets or operations to assume the Collective Bargaining Agreement.

The progress of the appeal can be tracked for free online on Justia.  The latest post indicates that, on October 13, 2015, a Recommendation was made that the appeal be withdrawn from mandatory mediation. So, it is likely the appeal will proceed in court absent a settlement.

Will a purchaser for the Colt assets come forward willing to assume the union obligations of Colt?

According to a filing made by Colt in its bankruptcy proceedings yesterday, the proposed auction of Colt's assets, which had been scheduled to take place on October 20, 2015 was cancelled because no Qualified Bid was received by October 16, 2015 (the deadline set in the Order that is presently on appeal, discussed above).  However, Colt "reserves all of its rights with respect to the continuation of the Sale Motion, including, without limitation, its right to seek amendment of the Bidding Procedures Order and to reschedule the Sale Hearing for a future date to be determined."

No comments:

Post a Comment