In a bankruptcy court affidavit, David Barton, CEO of Mountain Sports LLC, the parent of Eastern Mountain Sports (EMS) and Bob’s Stores, said the company plans to close its primary distribution center and fulfill orders from its stores as an initial step towards reorganization.

Barton noted in the filed document that Mountain Sports’ operations principally conducts business from its corporate headquarters and distribution center at 160 Corporate Court in Meriden, CT. Barton added, “As part of the debtors’ recent restructuring process, they have determined that they can vacate the distribution center and operate from their larger stores and remotely. Therefore, the debtors are in the process of vacating the distribution center.”

The company provided few details on the company’s reorganization plans, including whether Mountain Sports would seek to reorganize around a smaller number of stores or sell the business.

Maria Sawczuk, a lawyer representing Mountain Sports at Goldstein & McClintock, told SGB Media that the go-forward plan is still being finalized, stating, “We are still formulating that plan.”

In the affidavit, Barton said the filing in Wilmington, DE, U.S. Bankruptcy Court came after PNC Bank, National Association, its primary lender and secured creditor, on March 29 declared a default under Mountain Sports’ loan agreement. Barton did not disclose the reasons for the default.

Subsequently, PNC exercised dominion over the company’s cash and receivables and funded certain expenses as Mountain Sports tried to work out a reorganization plan with PNC’s consent.

Barton wrote in the affidavit, “These discussions did not result in a consensual resolution, and on or about June 12, 2024, PNC stopped funding the debtors entirely.”

Barton said Mountain Sports determined that a Chapter 11 filing was “necessary and appropriate, in light of the ensuing liquidity crisis, to continue to operate the debtors’ business while attempting to develop a plan of reorganization. The debtors accordingly seek to use these filings to restructure their liabilities and reorganize their businesses in a comprehensive and orderly fashion.”

The June 18 filing comes after reported on June 6 that Bob’s and EMS were closing 15 stores.

A WARN notice filed on May 21 with The Connecticut Department of Labor detailed the pending layoff of 148 employees at its offices and warehouse in Meriden due to a liquidity crisis. Barton wrote, We are taking this action because of business circumstances that were not reasonably foreseeable. We would like to have given you more notice of this action but were unable to do so because the bank has informed us within the last week that it will refuse to fund the employee health insurance premiums, 401K administration, payroll, as well as other critical financial obligations which, if not paid, will likely prevent us from being able to operate the business going forward. As of this date, they remain firm on their position despite our continuing best efforts to convince them otherwise. Unfortunately, the circumstances leading to this layoff were not reasonably foreseeable at an earlier date. We are currently seeking alternative funding sources, but we cannot guarantee a favorable outcome.”

In the bankruptcy court affidavit, Barton said PNC alleges it is owed approximately $24.9 million under the revolver credit facility and approximately $4.5 million under the FILO facility, for a combined aggregate amount of approximately $29.4 million. PNC asserts a first-priority security interest in Mountain Sports’ inventory, receivables, deposit accounts, and proceeds as part of the loan agreement. Barton said Mountain Sports was current on loan payments through the petition date.

Barton noted that Mountain Sports also owes an estimated aggregate unsecured debt of $26.7 million as of the petition date.

As reported by SGB Media, the 20 largest unsecured creditors were Yell Steel Enterprise, owed $472,335;, Smartwool, $455,291, Oboz, $432,147; Marmot, $353,648; The North Face, $322,582; Hydro Flask, $206,040; Amer Sports, $195,563; Black Diamond Equipment, $193,843; Thule, $176,617; Wolverine World Wide, $158,870; Gregory, $155,014; Cotopaxi, $148,753; Outdoor Research, $128,804; Mountain Shades, $125,938; On, $125,696; Vuori, $118,188; Prana, $111,139; PFE Express Ltd., $110,049; Altra, $108,393; and Google, $108,122.

The filing by Mountain Sports follows the acquisition of EMS and Bob’s by GoDigital Media Group, a Los Angeles-based media and technology holding company, in May 2022 for $70 million. The seller was Frasers Group, the U.K.-based owner of Sports Direct that had acquired the two businesses for $101 million as the former owner faced a bankruptcy threat.

GoDigital Media Group also owns YogaWorks, Cinq Music, NGLmitu, and Sound Royalties. At the time of the acquisition, GoDigital Media Group said the acquisition of the two banners marked a “major step in our strategy to generate synergy between content, community, and commerce.”

Asked what motivated the purchase in an interview with SGB Media last fall, Jason Peterson, GoDigital’s CEO, said his company’s goal is to “unify and build an ecosystem that connects content, community, and commerce across consumer passion points,” and highlighted how Bob’s and EMS stores are” threaded through every community in which they’re located.”

Peterson added, “They are best-in-class role models, and that’s the way we operate. Not to mention EMS’s incredible heritage in adventure and outdoor gear–a passion of millions of Americans that has, for far too long, been made into an expensive, elitist approach by other brands. We’re all about inspiring happiness for everyone, and EMS is a great place to do that.”

Both stores operate in the Northeast, with EMS operating 24 stores and Bob’s 23 at the close of last year.

In the bankruptcy court affidavit, Barton said EMS “markets to the adventurer looking for reliable and functional outerwear and gear at a value price,” while Bob’s “targets moderate-income customers with a selection of footwear, workwear, teamwear and activewear.”

Barton said Mountain Sports generated sales of $131.9 million in its year ended December 31, 2023. As of the the petition date, Mountain Sports employed 771 full- and part-time employees.

 See below for additional SGB Executive coverage of this developing story:

EXEC: EMS/Bob’s Parent to Shutter Distribution Center in Bankruptcy Proceedings

Bob’s and EMS to Close Stores, Layoff Employees Amid Financial Struggles