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?
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.