On the heels of the Joyce Leslie and Sports Authority Chapter 11 bankruptcy filings, another retailer just filed for Chapter 11 bankruptcy protection, and it appears that two (2) more retailers are preparing to file to reorganize.
PacSun, more formally known as Pacific Sunwear of California, Inc., just filed for Chapter 11 bankruptcy protection this morning in the United States Bankruptcy Court for Delaware, docket # 16-10882. High debt forced the teen retailer of surf/beachwear to file. PacSun operates 600 stores and is expected to close a number of stores either after the big back to school or holiday season. It lists total assets of $298,853,000 and liabilities of $305,056,000 in its petition.
In addition to PacSun, two more retailers are expected to file shortly. Bloomberg recently reported that Vestis Retail Group, owner of Eastern Mountain Sports (68 stores), Bob’s Stores (35 stores), and Sport Chalet (51 stores), appears to be preparing for a Chapter 11 bankruptcy filing. Bob’s Stores previously filed for bankruptcy in 2003 and was subsequently purchased by Vestis. This would be the second recent entrant into bankruptcy for a sporting goods retailer following Sports Authority, which filed on March 2, 2016.
Additionally, the New York Post recently reported that Fairway Market may also be filing shortly. The company hired Weil, Gotshal & Manges, the law firm which most recently handled the A&P bankruptcy.
Landlords – if one of these companies is a tenant of yours, the first thing you should do is ensure they are current on rent. If rent payments are not current, it is probably a good idea to call any defaults that may exist, now. Aside from staying current with rent, it is important to ensure that your operations personnel are fully-apprised. For instance, when was the last time your property manager spoke with the store manager to obtain important security codes, HVAC, and utility information? If a store is rejected or abandoned in a bankruptcy proceeding, you don’t want to be scrambling for that information after the fact.
If and when these companies file for bankruptcy protection, some important things landlords need to know are:
- Will they remain a tenant?
- When will rent be cured?
- Are there pre-petition claims that are owed?
- When will “Stub Rent” be paid?
- Is their 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, such as:
- Have you been paid on time and does a reclamation claim (right to take back goods shipped, unpaid within 45 days) exist?
- Can an administrative claim be asserted?
- Should a proof of claim be filed, and if so, how?
- If you are a consignor of goods, when can you get paid or take your goods back?
It’s a good idea for commercial Landlords and trade creditors to speak with bankruptcy counsel immediately to formulate and execute a plan in the event of the likely bankruptcy filing.
Stark & Stark’s Bankruptcy & Creditors’ 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 Pennsylvanian on a variety of issues. Most recently, our Group represented landlords and trade creditors in the RadioShack, A&P, Joyce Leslie, and Sports Authority Chapter 11 bankruptcy cases.
For more information the PacSun 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.