Samsonite Corporation, one of the world’s largest luggage manufacturers, filed for bankruptcy in the United States Bankruptcy Court for the District of Delaware on September 2, 2009. According to Samsonite’s Declaration in Support of First Day Motions, the company “does not anticipate that any of its customers or suppliers will be materially affected by this [bankruptcy] filing.” While this is good news for Samsonite’s customers, the outcome for the company’s landlords is less certain.
As stated in its Declaration, Samsonite leases 173 retail stores in 38 states. Due to a sudden drop in consumer demand for travel products, Samsonite experienced a significant reduction in its cash flow. As a result, the company engaged in a restructuring process that culminated in the filing of its bankruptcy petition in Delaware. Through bankruptcy, Samsonite intends to reject up to 84 leases for those stores the company deems unprofitable.
Landlords dealing with commercial tenants in bankruptcy face a host of issues, including administrative rent, rejection damages and adequate assurance. A previous post on this blog titled “Ten Things Every Commercial Landlord Should Know About a Tenant in Bankruptcy” provides a good introduction to the issues that confront a landlord when a commercial tenant files for bankruptcy. Judge Peter J. Walsh, a former Chief Judge of the Delaware Bankruptcy Court, recently issued an opinion in the Sportsman’s Warehouse bankruptcy that provides a very helpful understanding of how bankruptcy courts approach claims for administrative rent and taxes that arise under a lease. Landlords in Samsonite may find Judge Walsh’s decision particularly relevant as Judge Walsh is also the judge presiding over the Samsonite bankruptcy.