As more and more retailers are deciding to liquidate instead of reorganize while in bankruptcy protection, a number of debtors are looking to sell their leases to get more cash for their creditors. So far, there aren't too many takers for them.
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In fact, bankrupt electronics retailer Circuit City Inc. had to cancel its auction scheduled for Dec. 18 because it didn't receive bids for its 154 leases. It's likely that the debtor will now seek to reject the leases.
Circuit City's not alone, either. Even bankrupt retailers that have sold leases are selling only a fraction of them. Whitehall Jewelers Holdings Inc. has sold only about five of its 335 leases. Linens Holding Co., the parent of Linens n' Things, was only able to sell nine of 120 leases.
Mervyn's Holdings LLC has been luckier than most retailers. It was able to sell 58 of its 153 leases, for $15.4 million, with the largest package being sold to joint bidders Kohl's Corp. and Forever 21 Inc. The remaining leases will be rejected.
Only more leases are likely to come onto the market, too. KB Toys Inc. is planning to close its 461 stores, and Steve & Barry's LLC is shuttering all 173 stores. B. Moss Clothing Co. (70 stores) and National Wholesale Liquidators (35) are turning the lights off, too.
With so much empty space out there, sales have declined from a few years ago, and interested nonbankrupt retailers are bypassing the bankruptcy court altogether and negotiating directly with landlords for the space, a phenomenon we documented in September in our sister publication, Bankruptcy Insider. - Jamie Mason
