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Many attorneys feel Section 365(d)(4) has crippled retailers' ability to reorganize and has led to a proliferation of liquidations and quick going-concern sales. The provision gives companies a hard cap of seven months to figure out what to do with their leases, something that can be particularly troubling to retailers with just 20 stores, let alone several hundred. While Harvey Miller of Weil Gotshal & Manges LLP testified in front of a House subcommittee a few weeks ago concerning what, exactly, led to Circuit City Stores Inc.'s liquidation (and mentioned, in part, the provision), attorney Jay Indyke of Cooley Godward Kronish LLP made an interesting point as to how it has affected a smaller retailer, Ritz Camera Centers Inc. Indyke, who represents Ritz's unsecured creditors committee, notes that the company filed for bankruptcy claiming it had a strategy to close its Boaters World Marine Centers stores as well as half of its 800 Ritz Camera photo shops, with the goal of reorganizing around the 400 remaining stores. However, even though that may be the goal and may still happen, the 210-day period could wreak havoc on it. Tied into Ritz's $85 million debtor-in-possession loan from Wachovia Bank NA is a a stipulation that it must close no less than 400 stores. Where this becomes complicated is that Ritz must put itself up for sale by the beginning of June -- a deadline that is directly tied to the 210-day lease period, Indyke says. "Even if [Ritz] has the ability to reorganize, if it doesn't have an equity player in place or a strategic buyer or funding by early June -- a period of time that's [basically] 100 days before the expiration of the [lease rejection] period -- it's set up for a liquidator to come in for a 90-day [going-out-of-business] sale," he says. "These types of provisions are having dramatic impact on the ability [of a retailer] to reorganize." - Ben Fidler
CategoriesComments
From: Bob,
Hey Mickey. Learn how to spell and take a grammar class and everyone will actually listen seriously to your opinion. That post makes you look like an illiterate trailer park ditch digger.
Posted on:
March 31, 2009 1:14 AM
From: Mickey,
Hey Bob, Leave it to a lost soul to overreact on a couple of typos. You must be taking an English class, congratulations. In middle school they will show you how to stay on task and deal with the subject at hand, i.e. the above article. Then later on, they will show you how to have an opinion on important stuff. Right now, this financial stuff must be over your head. Howse that Bob? Did me typed better?
Posted on:
March 31, 2009 1:45 AM
From: Frank,
Posted on:
April 3, 2009 6:58 AM
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Section 365(d)(4) of the U.S. bankruptcy code seems arcane, but it's rapidly gaining prominence as attorneys blame it for a rash of retailer liquidations.
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Everybody is trying to make excuses for poor management. The bankruptcy code was tightened for everyone a couple of years ago. Now its being used as an excuse for horrible management. They have blame something else so they can get another job. Leases wouldn't be an issue of the people who run the company knew what they were doing. Rapid expansion that fails is the fault of the people who run the company. If they end up with to many leases it means they were too greedy to manage correctly. Quit making excuses for Circuit City. They screwed up royally and deserve all the blame.