Bed Bath & Beyond Inc. could face tough negotiations with landlords and pay a high price to close out leases on hundreds of stores as the retailer attempts to downsize without the protection of bankruptcy, WSJ Pro Bankruptcy reported. A last-minute equity financing of up to $1 billion provided the company enough capital to pay down bank loans, which Bed Bath defaulted last month. But staying out of chapter 11 also means it loses negotiating leverage it would otherwise have in bankruptcy. One of the biggest drains on its limited resources may be landlords who may not let it off the hook without demanding much more money in rent than they would get if the retailer had filed for bankruptcy, according to some landlords and bankruptcy lawyers. “Rightsizing the footprint can be done outside bankruptcy, but it’s a lot more expensive,” said Bradford Sandler, a bankruptcy attorney at Pachulski, Stang, Ziehl & Jones LLP. The chapter 11 code gives companies certain tools to cap financial liabilities for breaking leases. Landlords owed money on leases are treated like other low-ranking creditors: they get what is left after the debtors pay top lenders and essential expenses. Read more.
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.
