Page 10 - NBIZ Magazine 2022 February

CBL & Associates negotiate payments and obtain rent
Properties, Inc
On November 1, 2020, CBL &
Associates Properties, Inc. (CBL), the
owner of two Triad malls with over
100 retail properties, filed for Chapter
11 bankruptcy protection. 3
Significance
CBL is a landlord filing as
opposed to a tenant filing and a
behemoth landlord of over 100
retail properties. CBL obtained
almost universal support for its
Chapter 11 Plan despite the odds.
CBL obtained 95% of the votes to
confirm its Chapter 11 Plan. It did
not file a “pre-packaged plan”, but
it had widespread approval for a
restructuring support agreement.
Nevertheless, CBL lacked the
support of its senior secured
lenders. Before the bankruptcy,
and after over 30 of its tenants
filed bankruptcies, the leading
term lenders' agents declared non-
monetary defaults that exceeded
over 1 billion dollars. The lenders’
agents attempted to wrest control of
the equity. Fortunately, the debtors
obtained a temporary restraining
order preventing the lenders’
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agents’ coup.
Neiman Marcus
Known for introducing The
Christmas Book in 1939, Neiman
Marcus filed for bankruptcy
protection on May 7, 2020. It
secured over $675 million in
financing to exit its bankruptcy in
September 2020.
Significance
Months before the filing, the
debtor contacted the landlords to
10 NBIZ ■ February 2022
Men’s Wearhouse
concessions. It eliminated over Tailored Brands, Inc. (Men’s
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$4 billion in debt and $200 million Wearhouse) filed for bankruptcy on
in annual interest. Those lease August 2, 2020. It exited bankruptcy
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negotiations saved millions in December 2020 and reduced its
of dollars for both the debtor debt by $686 million.
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and landlord.
Significance
Debtors obtained creative debtor
in possession (DIP) orders, which al-
lowed stub rent, or partial rent to be
paid in increments. Several theories
deal with partial rental payments
regarding when a tenant enters
and exits a lease, rental payment
deadlines, and/or bankruptcy filing.
A prevailing theory, known as the
proration or billing date theory,
allows the debtor-tenant to delay
rental payment for the first month
if he/she files after the first of the
month. Section 365 (d)(3) requires
that the debtor prorate the rent
as pre-bankruptcy or post-bank-
ruptcy payments. According to the
proration theory, the debtor must
Belk pay rent on a daily basis, and the
Bear Parent, Inc. (Belk) filed for landlord may collect study rent or
bankruptcy on February 23, 2021. the rent accrued post-petition and
It confirmed its plan the next day. pre-rejection.
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Both the debtors in Neiman Marcus The prevailing theory in the
and Belk contacted creditors months Southern District of Texas is the bill-
ahead of the bankruptcy filings. ing theory. That theory states that
The pre-bankruptcy communication the rent must be paid as required
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resulted in savings of millions of dol- under the lease. Consequently,
lars for the debtor and the landlords. stub rent must be paid after the
60 day following the bankruptcy
th
Significance filing. Nevertheless, many debt-
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To date, the fastest bankruptcy is ors-tenants are requesting more time
Belk, which reorganized in just 24 to pay the “stub rent” or to abate it
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hours. In preparation for its pre- all. Men’s Wearhouse took an inter-
packaged filing, the debtor negotiated esting approach. Men’s Wearhouse
with 90,000 creditors, including agreed with the landlords of the
landlords. Prior negotiation efforts assumed leases to pay future stub
protected not only the debtors but rent as follows: “20% within thirty
also the landlords. Belk shed $450 days of entry of the final financing
million in debt, allowing the company order, 20% within 60 days of entry
to retain its 17,000 employees. of the financing order, 25% upon
Another major concern of confirmation, and 35% upon the
creditors was the supposed lack effective date of the confirmed plan.”
of due process or the ability of Debtors agreed to pay the rejected
creditors to voice their concerns landlord’s stub rent within 60 days
over the pre-packaged plan. Judge of the final order. Men’s Wearhouse
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Isgur foresaw the challenge and is noteworthy because it offered to
drafted a “Due Process Preservation pay some of the “stub rent” before
Order” ensuring that creditors’ the termination of the 60 days and
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rights were protected. some well after the 60 days.