When Sears Holdings Corp. filed for chapter 11 bankruptcy on Monday, it said that it would close another 142 unprofitable Sears and Kmart locations and seek to reorganize around financially healthier stores. It also triggered a “time bomb” that retailers have had a tough time surviving, according to a Reuters commentary. Over the last dozen or so years, bankrupt retailers have had less time to make major strategic decisions for their survival and landlords and lenders have had more leverage in the process. The change stems from a provision in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 that forces companies to find an agreement within seven months on its real-estate leases, or allow landlords to walk away from the agreement. Prior to 2005, companies would spend a year or two working out a viable survival plan. The law intensifies the pressure on Sears and Chairman Eddie Lampert to restructure the company and turn it into a relevant, viable business. “They have less money and a shorter period of time to make decisions,” said ABI President Ted Gavin of the Gavin/Solmonese restructuring advisory firm. “There’s more transactional risk.” Read the full commentary*.
*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.
Occupancy issues are at the heart of many significant retail cases, as detailed in the ABI publication Retail and Office Bankruptcy: Landlord/Tenant Rights, available at the ABI Store.
