bankruptcy – Blog Archive

11 Retailers to Watch for Possible Bankruptcy Filings in 2017

tonder on January 11, 2017

Category: Bankruptcy & Creditor's Rights, Uncategorized
Tag: bankruptcy, retail closing

2016 ended on a high note with higher than expected holiday sales and overall a better real estate market. However, there were a number of retailers that sought bankruptcy protection. Some of the retailers, like Fairway and EMS, emerged as new entities in Chapter 11 bankruptcy proceedings while their operations continued. Yet others, like Sports Authority and PacSun, closed their doors, leaving open spaces for landlords.

Sports Authority Looks to be the Next Big Tenant Chapter 11 Bankruptcy Filing

tonder on February 5, 2016

Category: Bankruptcy & Creditor's Rights, Business & Corporate, Uncategorized
Tag: bankruptcy, Sports Authority

Sports Authority, Inc. (“Sports Authority”) appears to likely be the next big tenant Chapter 11 bankruptcy filing. Recent reports are indicating that the sporting and apparel chain is preparing to file for Chapter 11 bankruptcy protection, as debt payments are due in 10 days, according news reports from Bloomberg Business and other outlets. Of its 450 stores,Bloomberg reports that Sports Authority plans to close as many as 200 locations within a bankruptcy proceeding.

Sports Authority was once the biggest sporting-goods chain in the U.S, but over the past few years has had difficulty competing with Dick’s Sporting Goods Inc., Lululemon Athletica Inc., Gap Inc.’s Athleta, and Amazon.com Inc.

Landlord’s Questions

If you are a landlord, it’s a good idea to review your accounting and call any defaults that may exist. Furthermore and operationally, you may want your property manager to speak with the store manager to obtain important security code, HVAC, and utility information, if you don’t already have it on hand. If a store is rejected or abandoned in a bankruptcy proceeding you don’t want to be scrabbling for that information after the fact.

If Sports Authority does file for file bankruptcy protection, some vital questions are: (1) Will they remain a tenant?; (2) When will rent be paid?; (3) Are there pre-petition claims that are owed?; (4) Is there Debtor in default of pre petition non-monetary obligations?; and (5) What other damages are owed (both pre- and post-petition)?

Trade Creditor Questions

Trade creditors, including suppliers, should also be asking important questions such as: (1) Have you been paid on time and does a reclamation claim (right to take back goods shipped, unpaid within 45 days) exist?; (2) Can an administrative claim be asserted?; and (3) Should a proof of claim be filed, and if so, how?

It’s a good idea for commercial landlords and trade creditors to speak with bankruptcy counsel now to formulate and execute a plan in the event of the likely bankruptcy filing. Stark & Stark’s Creditor’s Rights Group can help. Our bankruptcy attorneys regularly represent landlords throughout the country, including recently in the District of New Jersey, Southern District of New York, District of Delaware and Eastern District of Pennsylvania on a variety of issues. For more information the Sports Authority filing, and how Stark & Stark can assist you, please contact Thomas Onder, Shareholder at (609) 219-7458 or tonder@Stark-Stark.com. Mr. Onder writes regularly on commercial real estate issue and is a member of ICSC and Chair of the 2016 ICSC PA/NJ/DE Next Generation Committee.

Mobile Home Valuations – For Once Location Doesn’t Matter

sstark on November 12, 2015

It is common knowledge that in the real estate market, the selling price for a mobile home is almost always dependent upon where is located. Yet, in a recent Chapter 11 case in the district of Delaware, Boomerang Tube LLC, the debtors relied upon a decision by Bankruptcy Judge Shannon, In re George Welch Sr. (Bankr. D. Del. October 19, 2015).

In that Chapter 13 setting, the debtor suggested that the replacement value of the equipment was the proper valuation for purposes of the cramdown sought in their Plan. In this Plan, the chapter 13 debtors’ sought to assume the ground lease, retain the mobile home, and cramdown the secured creditor’s claim to value the of the mobile home as determined in the NADA Retail Value Guidebook for Manufactured and Mobile Homes.

The creditor objected based upon an appraisal it had obtained, which valued the mobile home at $80,000 “in place.” The creditor reasoned that since the debtor decided to assume the underlying ground lease and use the mobile home as a residence, the creditor was entitled to a higher figure – the true value of the living accommodation if sold as it stood. Comps in the creditor’s appraisal had relied upon the location of comparable mobile homes in order to establish value.

Trade Creditors Protect Yourselves: RadioShack Filing Bankruptcy Preference Complaints

tonder on October 30, 2015

Category: Bankruptcy & Creditor's Rights, Uncategorized
Tag: bankruptcy, Preference Complaints, RadioShack

In the last few days, hundreds of bankruptcy complaints against trade creditors were filed by bankrupt Chapter 11 debtor RadioShack. The crux of the complaints concern “preferences” requesting the return of money received from bankrupt debtors prior to the bankruptcy filing for goods or services sold. However, before you or your business start writing a check to return hard earned money, you should know that you may have defenses that can be asserted.

What is Preference?

To start, a preference is a payment received from a debtor, made within 90 days of the bankruptcy filing. Bankruptcy Code section 547(b) allows a bankruptcy trustee or debtor-in-possession (in this instance, RadioShack) to avoid these payments if the transfers were to or for the benefit of a creditor on account of an antecedent debt but while the debtor was insolvent (unable to pay the debts owed).

When Congress enacted the Bankruptcy Code, the policy behind preferences was to level the playing field for all creditors by not allowing a creditor to receive more than it would have within the debtor’s bankruptcy case. Read More about Trade Creditors Protect Yourselves: RadioShack Filing Bankruptcy Preference Complaints

Shopping Center Retailers File for Chapter 11 Bankruptcy – When Will Landlords and Trade Creditors Be Paid?

tonder on February 4, 2015

Category: Bankruptcy & Creditor's Rights, Uncategorized
Tag: bankruptcy, Cache, Chapter 11, RadioShack, Wet Seal

Recently, several shopping center retail stores have filed for Chapter 11 bankruptcy protection in the District of Delaware. Wet Seal, Inc. (“Wet Seal”) filed on Friday, January 16, 2015 (docket # 15-10081), Cache, Inc. (“Cache”) filed on February, 4, 2015 (docket #15-10172), and most recently, RadioShack Corporation (“RadioShack”) filed on February 5, 2015 (docket #15-1097).

Wet Seal operates 173 stores in 42 states and Puerto Rico. Prior to filing, Wet Seal closed 338 around January 7, 2015. Cache, which hasn’t turned a profit since 2011, has closings planned for some of its remaining 200+ stores. For more detail about the Wet Seal and Cache filing, check out this Wall Street Journal article.

RadioShack, after posting losses in 11 consecutive quarters, has plans for selling off up to 2400 of its stores, as well conducting “going out of business sales,” where “buyers will be able to bid on RadioShack’s assets during bankruptcy.” (Reuters)

The question for Landlords and trade creditors of the Debtor are when and how they will be paid?

Landlord’s Questions

Landlords need to ask important questions, like:

Is the Debtor remaining a tenant?;
Is the Debtor closing the store? If so, do they plan going out of business sales in violation of the lease;
Does the Debtor plan on assigning its leases? If so, will the assignments violate existing restrictions with other tenants?;
When will “stub” rent (the rent between the petition date and the next regular monthly payment) be paid?;
Are there pre-petition claims that are owed?;
Is there Debtor in default of pre-petition non-monetary obligations?; and,
What other damages are owed (both pre- and post-petition)?

Trade Creditor Questions

Trade creditors, including suppliers should also be asking important questions:

Does a reclamation claim exist (a right to take back goods shipped, but unpaid within 45 days)?;
Can an administrative claim be asserted?; and,
Should a proof of claim be filed, and if so, how?

It is imperative that commercial Landlords and trade creditors, including suppliers of goods shipped within 45 days, but unpaid, speak with sound bankruptcy counsel immediately to formulate and execute a plan that will obtain their objectives in a quick and efficient manner.

Stark & Stark’s Bankruptcy & Creditor’s Rights Group can help. Our bankruptcy attorneys regularly represent landlords in the District of New Jersey, Southern District of New York, District of Delaware and Eastern District of Pennsylvanian on a variety of issues. For more information about the Wet Seal filing and how Stark & Stark can assist you, please contact Thomas Onder, Shareholder at (609) 219-7458 or tonder@Stark-Stark.com. Mr. Onder writes regularly on commercial real estate issue and is a member of ICSC and Chair of the 2015 ICSC PA/NJ/DE Next Generation Committee.

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