Struggling Retailers Use Bankruptcy to Break Leases by the Thousands
Struggling Retailers Use Bankruptcy to Break Leases by the Thousands, reports the American Bankruptcy Institute, on 8/620:
With the pandemic intensifying the plight of U.S. retailers, companies ranging from J. Crew Group Inc. to the owner of Ann Taylor are using chapter 11 bankruptcy filings to quickly get out of costly, long-term leases and shutter thousands of stores, Bloomberg News reported. By seeking court protection, firms like Neiman Marcus Group Inc. and the parent company of Men’s Wearhouse avoid the headache of protracted negotiations with individual landlords. But the moves threaten to upend huge swaths of the real estate market and the half-trillion-dollar market for commercial mortgage-backed securities. “This is now black-letter law — a debtor can cram down a landlord,” said Melanie Cyganowski, a former bankruptcy judge who’s now a partner at law firm Otterbourg PC. “If this becomes a tsunami of retailers rejecting their leases, it’s going to trigger another part of the sea change — the mortgages held by the landlords.” As bankrupt firms like JCPenney Co. and Brooks Brothers Group Inc. look to jettison leases, landlords are already feeling the consequences. CBL & Associates Properties Inc., owner of more than 100 shopping centers in the U.S., is preparing its own bankruptcy filing after rent collections cratered. And 16 percent of retail property loans bundled into CMBSs were delinquent in July, according to research firm Trepp. At least 25 major retailers have filed for bankruptcy this year, according to data compiled by Bloomberg. The most recent additions include Tailored Brands Inc., owner of Men’s Wearhouse and Jos. A. Bank, which is seeking to close about a third of its more than 1,200 stores, and Lord & Taylor parent company Le Tote, which said it could shut down all of the department store’s remaining locations.