Gun maker Colt Defense and its creditors are close to a deal on a plan to bring the company out of bankruptcy, but if it fails, the business will go on the auction block next month, Reuters reported yesterday. Colt filed for bankruptcy earlier this year due to falling sales of its sport rifles and the loss of military contracts. The company's private equity owner has been battling its bondholders for control of the West Hartford, Connecticut-based business, and the parties are pressured by Colt's dwindling cash. "It's fair to say the parties are very close to a deal," Colt lawyer John Rapisardi told the U.S. Bankruptcy Court in Wilmington, Delaware. "The parties are working to finalize a term sheet and an agreement can be reached in a couple days." Colt wanted more time for talks but was forced to court by Morgan Stanley, which is using its bankruptcy loan to demand the start of a court-supervised auction process. Bankruptcy Judge <b>Laurie Silverstein</b> paused the hearing and sent the parties into a conference room to work out an agreement. The parties agreed to auction procedures, but postponed by three weeks the deadline for bids and a sale. An auction would be held on Oct. 20.
