Three landlords leasing property to bankrupt women’s clothing and accessory retailer Charming Charlie Inc. objected Thursday to the company’s proposed lease rejection procedures, saying they didn’t allow enough time for the landlords to respond to a rejection notice from the debtor.
In the objection, Bayer Retail Company VI LLC, Ashley Park Property Owner LLC and G&I VII Reno Operating LLC said the lease rejection procedures provide for a seven-day window for landlords to object to a rejection or assumption notice for their leases, but that twice as much time would be needed to assess the notice.
“Seven days is not enough time for the landlords to evaluate a proposed lease rejection or assumption and draft any objections that may be necessary, especially if there are intervening weekends or holidays,” the objection said. “The landlords submitting this objection request they have 14 business days from the date the rejection or assumption notice is served to file an objection.”
The landlords lease real estate to the debtor for three retail locations: one each in Birmingham, Alabama, Reno, Nevada, and Newnan, Georgia. Charming Charlie has nearly 400 stores worldwide and began closing 97 of them in the first phase of its reorganization efforts, which seek to focus on its higher performing locations.
The landlords also object to provisions in the rejection procedures that would allow Charming Charlie to abandon its property on the leased premises as of the rejection date included in the notice. The objection cites language in the leases that prevent abandonment of the debtor’s property.
“All of the leases require debtors to remove all personal property and repair any damage caused by the removal of personal property, including signage, at the termination or expiration that lease,” the landlords said. “Debtors should be required to remove all personal property from the premises before rejection should be deemed to have occurred.”
The objection also states that the rejection should not become effective until the terms of the lease are complied with. If that compliance doesn’t occur before the rejection date included in the notice, the landlords are seeking permission to contest that date and assert any claims associated with it.
To streamline the rejection and assumption process, the landlords ask that the debtors communicate any rejection notices and adequate assurance packages to them via email, further ensuring prompt receipt of such documents.
Representatives for the landlords and Charming Charlie did not immediately respond Thursday to requests for comment.
The company filed for Chapter 11 protection in December, citing the ongoing "retail apocalypse" facing brick-and-mortar stores in the face of increasing competition from online retailers. It entered bankruptcy with about $154 million in secured debt in the form of an asset-based loan and a term loan
It came to court with a restructuring support agreement with its equity holders for a plan that involves the closing of 97 stores and the streamlining of its vendor network to reduce its size and complexity.
The company received interim approval at its first-day hearing for a post-petition financing to free up new cash so that it could restock its stores, as it came to court with just $700,000 in available cash.
The company was formed in 2004 by Charlie Chanaratsopon and grew to more than 300 locations by 2013, with another 90 since the recapitalization transactions that year, according to Sussberg.
It focuses on women's jewelry and accessories, targeting customers between the ages of 35 and 55, and organizes its stores based on a 26-color palette.
The landlords are represented by J. Cory Falgowski, Joe A. Joseph and Regan C. Loper of Burr & Forman LLP.
Charming Charlie is represented by Domenic E. Pacitti, Michael W. Yurkewicz and Morton Branzburg of Klehr Harrison Harvey Branzburg LLP and Joshua A. Sussberg, Christopher T. Greco, Aparna Yenamandra and James H.M. Sprayregen of Kirkland & Ellis LLP.
The case is In re: Charming Charlie Holdings Inc., et al., case number 1:17-bk-12906, in the U.S. Bankruptcy Court for the District of Delaware.
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