landlord rejection damages

Recently in the Abengoa SA bankruptcy proceeding (click here to review prior post), the United States Bankruptcy Court for the District of Delaware entered an order permitting Debtors to reject certain nonresidential real property leases (the “Rejection Order”).  Click here for a copy of the Rejection Order.

Through the order, the Debtors have received authorization from the Bankruptcy Court to reject various leases listed on Exhibit 1 to the Rejection Order.  Commercial landlords need to be on alert and pay close attention to this bankruptcy proceeding to ensure that their rights are protected in connection with the Debtors’ rejection of their leases, including being prepared to file a rejection damages claim.

Below is a link to a previous post titled “Ten Things Every Commercial Landlord Should Know About a Tenant in Bankruptcy.”  This link provides a brief summary of some of the issues landlords should consider when a commercial tenant files for bankruptcy.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  Carl is admitted in Delaware and regularly practices before the United States Bankruptcy Court for the District of Delaware. You can reach Carl at (302) 622-4272.

KB Toys filed for chapter 11 bankruptcy protection this morning in the United States Bankruptcy Court, District of Delaware (read the KB Toys Bankruptcy Petition here).  According to its affidavit in support of its bankruptcy motions,  KB operates 277 shores in shopping malls, 40 stores in strip malls and 114 outlet stores (read the KB Affidavit in Support of bankruptcy motions here).  KB lists its annual sales at $480 million.

KB previously filed for bankruptcy in 2004.  During its 2004 bankruptcy, it reduced the number of stores from 1,200 to 650.  I suspect you will see similar store-closings in this bankruptcy.  Whether KB rejects store leases, or assumes the leases,  landlords need to pay close attention to this bankruptcy.  Attached is a link to a previous post I prepared titled "Ten Things Every Commercial Landlord Should Know About a Tenant in Bankruptcy."  This link provides a brief summary of some of the issues landlords should consider when a commercial tenant such as KB files for bankruptcy.