Hudson Trail Outfitters Ltd, the Maryland outdoor specialty retailer that announced plans to close after 45 years in business earlier this week, told its vendors last week that it only has enough assets to pay about 35 percent  of its $11 million in outstanding debt, according to a letter obtained by The B.O.SS. Report.

In the Aug. 28 letter, the Maryland-based retailer revealed that it was conducting a going-out-of-business sale and planned to close its four remaining stores in Washington D.C.; Rockville, MD; Arlington, VA and Fairfax, VA. by Dec. 1.

“The demise of the business can be traced to declining sales due to increased competition from larger retailers and from online retailers,” reads the letter, which is signed by Sandy Cohan, CEO; Susan Strain, CFO; and Stacey Cohan, GMM. “As a result, the Company anticipates that it will be unable to continue to pay its debts and operating expenses, forcing the Company to make the decision to close.”

While the letter instructs creditors to send inquiries to a Rockville, MY law firm and notes the company has engaged Winter Harbor LLC and Gordon Brothers to help run the going-out-of-business ale, it makes no mention of plans to file a Chapter 7 bankruptcy petition, which would provide it protection from creditors while it liquidates its assets.

The letter lists the company’s creditors as:

  • HTO’s senior lending partner, Salus Capital Partners, which is owed approximately $3.2 million, which is secured by a perfected UCC lien on all of the Company’s assets;
  • payroll and sales tax liability of approximately $85,000;
  • vendor and other unsecured debts of approximately $3 million; and
  • accrued rent and contingent lease liability to landlords in excess of $4 million.

Hudson Trail Outfitters estimates the cost value of its inventory to be $3.8 million, and the liquidation value of its other assets, such as furniture and store fixtures, to be $50,000.  
 
“The Company will continue to work closely with its secured lender during this process. HTO will pay unsecured creditors, pro rata, the proceeds, if any, from such liquidation after payment of all administrative expenses; the satisfaction of the Salus secured debt, and any outstanding tax liabilities. While the Company has no way of knowing whether there will be funds available to pay unsecured creditors, HTO is committed to conducting the closing of the business and the liquidation of the assets in the most efficient manner possible in order to maximize recovery to creditors.”