Aerospace & Defense Update
Colt Defense, a West Hartford, Connecticut based firearm manufacturer, appears to be headed into a showdown with its bondholders after missing a $10.9 million payment last month. Colt’s modern sports rifles and handguns sales fell 30.0% in 2014 and its cash on hand diminished to a balance of $11.9 million as of May 22nd. The company appears to be headed towards bankruptcy potentially prompting a transfer of ownership to its creditors. However, given a projected sales growth of 24.0% in FY2015 and FY2016, the company’s private equity owners, Sciens Management, plan to retain ownership. In an effort to raise sufficient capital to avoid bankruptcy, the owners have proposed issuing $450.0 of new securities for every $1,000.0 of outstanding bonds. As of June 1st, only 5.9% of bondholders have expressed approval for this plan. This plan will falter without unanimous consent.
Last Friday, the U.S. Navy announced the award of $4.3 billion in contracts to construct the new nuclear-powered aircraft carrier, John F. Kennedy. After months of negotiations, Huntington Ingalls Inc., a parent corporation of Newport News Shipbuilding, received a $3.4 billion contract for the detail, design, and construction (“DD&C”) work on the carrier. The shipbuilder also obtained a $941.0 million contract for labor to complete the carrier’s component and steel fabrication, selected construction unit assemblies, and all remaining direct material. Newport News Shipbuilding has already constructed 450 of the ship’s 1,100 structural units dating back to December 2010.
Government Technology Solutions Update
On Monday, the Federal CIO Tony Scott issued a directive mandating the use of more robust Internet protocols (“IPs”) for federal websites, following the recent Office of Personnel Management (“OPM”) hack. The directive states that all federal websites switch from using the HTTP to HTTPS standard, which means a middleman is less likely to intercept and modify internet traffic between a website and its end user. While it is not clear how the hackers got into the OPM database, the need for more advanced cybersecurity at the federal level is apparent. The deadline set for adopting the new standard is the end of 2016.
Government Agencies are starting to set up infrastructure to comply with the DATA Act, which requires federal spending to be standardized, traceable, understandable, and available online. Federal Agencies are currently spending large amounts of time and money in order to comply with this act. The program’s efforts will make auditing each agency easier, and it will allow the government to run large scale analytics to improve government spending. Additionally, the online standardized formatting will make it easier for private citizens to access and analyze the data. The system set up is anticipated to provide significant contracting opportunities for the private sector.
Elbit Systems (Up 4.0%) – Shares were up this week in response to the company’s announcement of two new technologies, its new BrightNite helicopter visual technology and its Kollsman Enhanced Vision System-Superior Performance product for the COMAC C919 aircraft.
SAIC (Down 5.3%) – Shares were down this week following the company’s release of its 1Q15 earnings. The company reported earnings per share (“EPS”) of $0.73, missing analysts’ expectations of $0.75 per share.
RF Industries, Ltd. has acquired Rel-Tech Electronics, Inc., a manufacturer of cable assemblies and wiring harnesses for blue chip industrial, oilfield, instrumentation, and military customers. The deal was valued at an estimated $3.1 million.
CoorsTek, Inc. acquired BLS Textiles, Inc., a developer and producer of hard armor systems for defense and police. Terms of the deal were not disclosed.
Novaria Group, Inc. acquired substantially all of the assets of Sky Manufacturing, Inc., a manufacturer of fasteners, bolts, and spline heads for the aerospace industry. Terms of the deal were not disclosed.
StoneCalibre, LLC acquired Cohu Inc.’s Broadcast Microwave Services, Inc., a manufacturer of mobile microwave communications equipment including transmitters, receivers, antennas, and accessories that enable the transmission of real-time video, audio, telemetry, and sensor data from manned aircrafts, unmanned aerial vehicles and ground platforms. The deal is worth an estimated $8 million.
Global Defense & National Security Systems, Inc. to acquire STG Incorporated, a provider of enterprise network operations, cybersecurity, financial services, systems engineering and integration, software engineering, and linguistics and intelligence solutions. The deal is worth $165.5 million to be paid in both cash and stock.
World Wide Technology, Inc. acquired Asynchrony, a provider of technology consulting, to include in application development, mobile computing, systems and sensor integration, enterprise architecture, and tactical collaboration. The terms of the deal were not disclosed.