Page 2 - Corporate Restructuring And Bankruptcy

S2 | MONDAY, DECEMBER 5, 2016 | Corporate Restructuring and Bankruptcy | NYLJ.COM
BY ERIC S. CHAFETZ
It’s impossible not to notice the vacancies when walking into a shopping mall in the United States. The New York Times recently
ERIC S. CHAFETZ is counsel at Lowenstein Sandler in New York.
reported that 15 percent of malls are 10 to 40 percent vacant—up from 5 percent with that range of vacancy a decade ago. However, in comparison, in 2006, 94 percent of malls had a vacancy rate of 10 percent or less. In addi- tion, 3.4 percent (or approximately 30 million square feet) are more than 40 percent empty. Taking all of this into account, Green Street Advisors, a rm that tracks the performance of the mall industry, told the Times that the
increased number of mall vacancies signals the onset of the “death spiral” of malls in the United States.
One of the main causes of this trend has been the bankruptcies, and subsequent liqui- dations, of many retailers that were household names (Circuit City, Linens & Things, Radio Shack, Borders, etc.) and oftentimes a mall’s anchor tenants. Some retailers have reorga- nized around a handful of stronger stores or
focused on online operations, but those are exceptions to the rule that the majority of retail bankruptcies since 2005 have resulted in complete liquidations.
Many argue that The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 sounded the death knell for the reor- ganization of retailers in bankruptcy. Com- mentators point to how retail debtors now have to decide whether to assume or reject leases within 210 days (unless the landlord consents to an extension of that deadline) and the implementation of §503(b)(9) of the Bankruptcy Code, which provides sellers of goods with an administrative claim for “the value of any goods received by the debtor within 20 days before” the bankruptcy ling.
To stem the tide, certain mall owners in Aéropostale, and several other debtor af li- ates’ high-profile bankruptcy cases, have addressed the retail bankruptcy trend in a unique and (virtually) unprecedented way. Only the early 2000s move by Kimco Realty, and a group of other lenders, to extend nanc- ing to Ames Department Stores appears to be remotely similar.
In the Aéropostale bankruptcy cases, two large mall owners, General Growth Proper- ties and Simon Property Group, teamed up with Authentic Brands Group—the owner of various global brands—and two liquida- tors—Gordon Brothers Retail Partners and Hilco Merchant Resources—to save at least 229 of Aéropostale’s 811 stores. Other reports indicate nearly 250 more stores might have also been saved as part of the group’s efforts.
Only the early 2000s move by Kimco Realty, and a group of other lenders, to extend nanc- ing to Ames Department Stores appears to be remotely similar. If the strategy works, it could provide other struggling retailers and mall owners with a much needed lifeline.
The debtors—with stores in all 50 states and Puerto Rico and Canada and approxi- mately 14,500 employees— led for Chapter 11 bankruptcy protection on May » Page S11
Will Innovative Moves Reverse the ‘Death Spiral’ of Malls?
S4 Up in Smoke: Why Marijuana Companies Can’t File Bankruptcy And How That Could Change
BY ELOY A. PERAL
S5 Uncertainty Continues
S6
Inside
Bankruptcy Wildcatting: Challenging Midstream Contracts in the Wake of ‘Sabine’ BY JOHN H. DRUCKER, MARK TSUKERMAN AND MYLES R. MACDONALD
S7
Post-Con rmation Jurisdictional Shrinkage:
What it Means
For Practitioners And Litigantsy BY KATHRYN A. COLEMAN
AND ANSON B. FRELINGHUYSEN
S8
NDAs With Compelled Disclosure
Are Critical
To Reaching a Deal BY STEPHEN D. ZIDE AND JOSEPH A. SHIFER
Over Debtor’s Right to Abandon Property
BY LORENZO MARINUZZI
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Corporate Restructuring And Bankruptcy
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