As Altrec Heads to Auction, Dealers Ask Why It Got So Much Trade Credit

“We are in the process of contacting vendors and so far none have turned us down,” Altrec’s CRO Clyde Hamstreet told The B.O.S.S. Report in an exclusive interview.

 

Using the cash available from its new financing to prepay for products, Hamstreet said Altrec expects fresh inventory to begin flowing again in coming weeks even though Altrec’s trade creditors will only get pennies on the dollar for debts owed them prior to December, when Altrec was placed in receivership.

 

Unless new investor bid more than $3.25 million for the Altrec assets in coming weeks, a limited partnership formed by Remington Outdoor Co. will acquire the business. Remington agreed in mid-January to a “stalking horse” bid of $3.25 million for the assets and has since agreed to lend up to $1 million to the retailer to keep it running through the auction process. On Friday, a bankruptcy judge set 11 am Feb. 17 as the deadline for competing bids. If no better bids emerge before the Feb. 17 deadline, Remington will acquire the business as a going concern. If a higher bid surfaces, Remington is entitled to recover up to $250,000 in expenses from the buyer.

 

Remington, which is one of the world’s largest manufacturers of firearms, has not disclosed why it is interested in Altrec. The company has been telling investors for several years that it is committed to growing its sales of higher margin apparel and firearms accessories. It acquired 75 percent of Mountain Khakis in 2010. Remington has been under pressure to find new investors since December, 2012, when a lone gunman used one of its semi-automatic Bushmaster rifles to gun down 20 school children and six adults at Sandy Hook Elementary School.

 

Hamstreet was appointed as a state court receiver of Altrec in early December, 2013, about two months after the retailer defaulted on $3.5 million in promissory notes. By then, many outdoor product vendors had stopped shipping to the company, he said. Altrec’s list of 20 largest unsecured creditors, and the amounts owed them, includes: Burton Corp., $520,585.60; The North Face, $508,505.50; Arc’teryx, $507,969.19; Patagonia, $410,705.77 and Keen $318.456.36, according to Altrec’s Chapter 11 petition. The Timberland Company, Canada Goose and Sorel are all owed more than $250,000.

 

Hamstreet has helped restructure or liquidate dozens of distressed businesses during his career, including a failed online retailer and an apparel brand that sold direct online.

 

He said he quickly concluded Altrec’s secured creditors could get more money selling the company as a going concern than by liquidating it. Altrec listed assets of $5.7 million and debts of $24.2 million in its Chapter 11 petition, but Hamstreet estimated its liquidation value at just $1.2 million in December, well short of the $8 million owed secured creditors.

“I did some shopping incognito and I liked their presentation of the products, their marketing and the customer service, particularly their follow up with emails,” Hamstreet told The B.O.S.S. Report. “It was very good, very tasteful and not in your face. There are bright young people with some creativity there. There is something there worth more than you could get through liquidating.”

 

Hamstreet said Altrec continues to employ about 26 people, including former CEO Mike Morford. While that’s down sharply from the peak of 104 employees in 2011, Hamstreet said he hopes to bring back more employees in coming weeks.

 

Altrec competitors regard the company with both admiration and disdain. On the one hand, the company was forward  often the first to feature new products and excelled at SEO. On the other hand, they were viewed as a chronic violator of minimum advertised pricing, or MAP, policies. 

 

David Polivy, a co-owner of Tahoe Mountain Sports said Altrec’s discounting became particularly disruptive last year.

 

“I didn't know the distress they were in but now knowing about the bankruptcy, it makes a lot of sense,” said Polivy, who sells through a bricks-and-mortar store, TahoeMountainSports.com and on Amazon.com. “They had tons of stuff on sale early season and tons of new stuff that shouldn't have been on sale. While they were always MAP violators, this fall they seemed to not care and just had everything on sale. I guess in hindsight now, they were simply trying to liquidate. It caused a lot of problems for us.”

 

Another retailer questioned why vendors would extend Altrec so much credit.

 

 

“When companies are willing to go six- and seven-figures in debt to support an always-struggling retailer, I don’t think they’ll ever learn,” said one online specialty retailer who requested anonymity. “But I’m a cynic right now.  Maybe the lesson is to pick your partners with care and support those with history.”

 

 

Polivy noted Altrec’s biggest trade creditors never offered Tahoe Mountain Sports leniency when it was having trouble paying bills over the past two winters.

 

 

 

“It’s really sad to see over half a million dollars owed to some of those companies who clearly drank the Kool-Aid and lost,” said Polivy. “I wish these companies would put trust in their core specialty shops more than these gigantic, overly financed, pure play sales channels. It is the specialty shop telling the stories, encouraging safety in the outdoors and backcountry, promoting education and then selling.”