Page 2 - Corporate Restructuring And Bankruptcy

S2 | MONDAY, JUNE 23, 2014 | Corporate Restructuring And Bankruptcy | NYLJ.COM

Landlords Beware:

Court Finds Debtor May Assume,

Then Assign Lease

‘Kodak’ reduces landlord-friendly beneits.

Jan. 19, 2012. Kodak was a party to a non-
BY DAVID M. BANKER residential lease (the Lease) with ITT Space
AND ELIE J. WORENKLEIN
Systems (ITT) for approximately 2,200 square
feet. The lease was in effect until September
T he Bankruptcy Court for the Southern 2050. Kodak was required to pay $100 per

District of New York recently issued an month as rent, to be adjusted every ive years
opinion that expands the authority and
based on the consumer price index. The lease
lexibility for a debtor to determine whether prohibited Kodak from assigning the Lease
(and when) to assign executory contracts without prior written consent of ITT.
and unexpired leases. In In re Eastman Kodak The original deadline set by §365(b)(4)(A)
Company, 495 B.R. 618 (Bankr. S.D.N.Y. 2013), of the Bankruptcy Code for Kodak to assume
the court found, in an apparent matter of irst or reject the Lease was May 18, 2012. On May
impression, that assumption and assignment 10, 2012, the court entered an order extending
of an unexpired lease pursuant to §365 of the Kodak’s time to assume or reject the Lease

Bankruptcy Code does not necessarily have through Aug. 16, 2012. This was the maximum
to occur at the same time. More speciically, extension permitted under §365(d)(4)(B).
while the Bankruptcy Code provides for a On July 17, 2012, Kodak filed a motion K
speciic time period for a debtor to explicitly seeking to assume several unexpired leases, OC
assume a lease or else it is deemed rejected, including the Lease (the assumption motion). GST
the court found that there is no equivalent The proposed order provided:
BI
time period or deadline for a debtor to assign Nothing included in or omitted from
an assumed lease. This opens a much larger
the motion or this order, nor as a result
window for debtors to strategically assign debtor’s estate. Kodak also reduces certain of argued that this drop-dead date to assume a of any payment made pursuant to this
contracts and leases at any time through the landlord-friendly beneits granted by Con- lease has signiicantly burdened debtors that order, shall impair, prejudice, waive or
plan conirmation, even when assumption gress in the Bankruptcy Abuse Prevention and may not have inalized their business plans or otherwise affect the rights of the debtors
may have occurred earlier in the case.
Consumer Privacy Act of 2005 (BAPCPA). Prior determined if their leases have value. Based on and their estates, subject to appropri-
Kodak expands the time for a debtor to to BAPCPA, a debtor was entitled to request an Kodak, however, a debtor who timely assumes ate notice and a hearing and this court’s
determine whether keeping or assigning an unlimited amount of extensions of the period a lease under §365 may subsequently decide approval unless otherwise agreed to by
assumed lease is in the best interest of the
to assume or reject a lease “for cause,” which to assign it for strategic reasons, for a proit or the parties, to assign any of the assumed
often were granted through plan conirmation. because it is no longer beneicial to the debtor.
leases pursuant to, and in accordance
However, the BAPCPA amendment to §365(d)
with, the requirements of §365 of the
DAVID M. BANKER is a partner, and ELIE J. WOREN- (4) provided for a hard and fast deadline1 to Factual Background
Bankruptcy Code.
KLEIN is an associate, at Lowenstein Sandler in New afirmatively assume unexpired lease that cul-
York, where they practice in the bankruptcy, inancial minated in automatic rejection if a decision Eastman Kodak Company (Kodak or the ITT did not object, or otherwise respond,
reorganization and creditors’ rights group.
was not timely made. Certain parties have
debtor) iled for bankruptcy protection on
to the assumption motion or the proposed

Inside
Corporate Restructuring

& Bankruptcy
S4 Two New Cases S6 Intercreditor Agreements
S8 Courtside Seats:
Cast a Shadow In Chapter 11: What’s a Junior Sovereign Restructurings S
S
Over Credit Bidding Lienholder to Do?
In the Supreme Court Arena
Kris Fischer, Editor-In-Chief
BY DAMIAN S. SCHAIBLE BY J. ERIC IVESTER
BY CHRISTOPHER KIPLOK
Angela Turturro, Sections Editor
AND DARREN S. KLEIN
AND RAQUELLE L. KAYE
AND DUSTIN SMITH
Monika Kozak, Design
SECURED CREDITOR
S
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