Case 17-12906-CSS Doc 399 Filed 02/05/18 Page 1 of 19
IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
------x : In re : Chapter 11 : CHARMING CHARLIE HOLDINGS, : Case No. 17-12906 (CSS) INC, et al.,1 : Debtors. : (Jointly Administered) : : Objection Deadline: February 5, 2018 at 12:00 p.m. (ET)2 : Hearing Date: February 13, 2018 at 12:00 p m. (ET) : Related to Docket Nos. 185 & 367 ------x
LIMITED OBJECTION OF ARC SWWMPA001, LLC, ARC WEMPSMN001, LLC, BRIXMOR PROPERTY GROUP, CENTENNIAL REAL ESTATE COMPANY, LLC, CENTERCAL PROPERTIES, LLC, DEUTSCHE ASSET & WEALTH MANAGEMENT, FEDERAL REALTY INVESTMENT TRUST, G&I VII RETAIL CARRIAGE LLC, KRE COLONIE OWNER, LLC, TSW 2015, LLC, PGIM REAL ESTATE, STARWOOD RETAIL PARTNERS LLC, THE MACERICH COMPANY, TRADEMARK PROPERTY COMPANY, NOVI TOWN CENTER INVESTORS LLC, UBS REALTY INVESTORS LLC, WAYSIDE COMMONS INVESTORS LLC, AND YTC MALL OWNER, LLC TO (1) DISCLOSURE STATEMENT FOR THE AMENDED JOINT CHAPTER 11 PLAN OF REORGANIZATION OF CHARMING CHARLIE HOLDINGS INC. AND ITS DEBTOR AFFILIATES PURSUANT TO CHAPTER 11 OF THE BANKRUPTCY CODE; AND (2) MOTION OF THE DEBTORS FOR THE ENTRY OF AN ORDER (A) APPROVING THE DISCLOSURE STATEMENT; (B) ESTABLISHING THE VOTING RECORD DATE, VOTING DEADLINE, AND OTHER DATES, (C) APPROVING PROCEDURES FOR SOLICITING, RECEIVING, AND TABULATING VOTES ON THE PLAN, AND (D) APPROVING THE MANNER AND FORMS OF NOTICE AND OTHER RELATED DOCUMENTS
ARC SWWMPA001, LLC, ARC WEMPSMN001, LLC, Brixmor Property Group, Inc.,
Centennial Real Estate Company, LLC, Centercal Properties, LLC, Deutsche Asset & Wealth
Management, Federal Realty Investment Trust, G&I VII Retail Carriage LLC, KRE Colonie
1 The debtors in these chapter 11 cases, along with the last four digits of each debtor’s federal tax identification number, include: Charming Charlie Canada LLC (0693); Charming Charlie Holdings Inc. (6139); Charming Charlie International LLC (5887); Charming Charlie LLC (0263); Charming Charlie Manhattan LLC (7408); Charming Charlie USA, Inc. (3973); and Poseidon Partners CMS, Inc. (3302). The location of the Debtors’ service address is: 5999 Savoy Drive, Houston, Texas 77036.
2 Extended by agreement of the Debtors.
Case 17-12906-CSS Doc 399 Filed 02/05/18 Page 2 of 19
Owner, LLC, Novi Town Center Investors, LLC, PGIM Real Estate, Starwood Retail Partners
LLC, The Macerich Company, Trademark Property Company, TSW 2015, LLC, UBS Realty
Investors LLC, Wayside Commons Investors LLC, and YTC Mall Owner, LLC (collectively, the
“Landlords”), by their undersigned attorneys, hereby file this Limited Objection (the
“Objection”) to (1) Disclosure Statement for the Amended Joint Chapter 11 Plan of
Reorganization of Charming Charlie Holdings Inc. and its Debtors Affiliates Pursuant to
Chapter 11 of the Bankruptcy Code [D.I. 367] (the “Disclosure Statement”); and (2) Motion of the Debtors for the Entry of an Order Approving (A) Approving the Disclosure Statement; (B)
Establishing the Voting Record Date, Voting Deadline, and Other Dates, (C) Approving
Procedures for Soliciting, Receiving, and Tabulating Votes on the Plan, and (D) Approving the
Manner and Forms of Notice and Other Related Documents [D.I. 185] (the “Solicitation
Procedures Motion”)3 and respectfully represent as follows:
I. BACKGROUND FACTS
1. Each of the above-captioned debtors and debtors in possession (the “Debtors”) filed voluntary chapter 11 bankruptcy petitions on December 11, 2017 (the “Petition Date”) in the United States Bankruptcy Court for the District of Delaware (the “Court”). Upon information and belief, the Debtors have continued to operate their businesses and manage their properties as debtors-in-possession pursuant to 11 U.S.C. §§ 1107(a) and 1108.4
2. The Landlords are the owners or operators of the shopping centers (the “Centers”) listed on scheduled, attached hereto as Exhibit A, in which the Debtors lease retail space (the
“Premises”) pursuant to certain written leases (the “Leases”).
3 Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Disclosure Statement or Solicitation Procedures Motion, as applicable.
4 Unless otherwise specified, all statutory references to “Section” are to 11 U.S.C. §§ 101 et seq. (the “Bankruptcy Code”).
2 Case 17-12906-CSS Doc 399 Filed 02/05/18 Page 3 of 19
3. All of the Objecting Landlords’ premises (the “Premises”) are premises located in shopping centers, as that term is used in 11 U.S.C. § 365(b)(3). See In re Joshua Slocum, Ltd.,
922 F.2d 1081 (3d Cir. 1990).
4. On December 22, 2017, the Debtors filed the Joint Chapter 11 Plan of
Reorganization of Charming Charlie Holdings Inc. and its Debtor Affiliates Pursuant to Chapter
11 of the Bankruptcy Code [D.I. 183] (the “Plan”), the Disclosure Statement, and the Solicitation
Procedures Motion, seeking an order (i) approving the Disclosure Statement; (ii) approving the solicitation and notice procedures; (iii) approving the form and manner of ballots and notices; and (iv) scheduling certain dates related thereto, a form of which was filed on January 17, 2018
(the “Proposed Order”) [D.I. 336]. On January 23, 2018, the Debtors filed amended versions of the Plan and Disclosure Statement [D.I. 365 & 367].
5. The Landlords do not object to the Debtors’ efforts to confirm a plan of reorganization, but as drafted, the Disclosure Statement, Plan and Proposed Order fail to provide adequate information for the Landlords or other creditors to make an informed decision with respect to the Plan and the treatment of the Leases under the Plan, and the Plan itself improperly seeks to modify the Landlords’ rights under their Leases and the Bankruptcy Code.
II. ARGUMENT
A. The Disclosure Statement fails to provide adequate information upon which creditors can rely to make an informed judgment regarding the Plan.
6. Section 1125 requires that a disclosure statement contain “adequate information.”
11 U.S.C. § 1125(a). Disclosure is the “pivotal” concept in a chapter 11 reorganization.
Westland Oil Development Corp. v. MCorp Management, 157 B.R. 100, 102 (Bankr. S.D. Tex.
1993) (citing 5 Collier on Bankruptcy, ¶ 1125.03 (15th ed. 1992)); see also Oneida Motor
Freight, Inc. v. United Jersey Bank, 848 F.2d 414, 417 (3d Cir. 1988) (“The importance of full
3 Case 17-12906-CSS Doc 399 Filed 02/05/18 Page 4 of 19
disclosure is underlaid by the reliance upon the disclosure statement by creditors and the court.
Given this reliance, we cannot overemphasize the debtor’s obligation to provide sufficient data to
satisfy the Code standard of ‘adequate information.’”). The purpose behind the disclosure
requirement is to prevent a debtor from seeking acceptance of its reorganization plan until it provides its creditors and other parties-in-interest with a disclosure statement that contains
“adequate information” about the details of the debtor’s plan and its prospects of success. 11
U.S.C. § 1125(b).
7. Section 1125(a)(1) defines adequate information as “[i]nformation of a kind, and
in sufficient detail, as far as is reasonably practicable in light of the nature and history of the
debtor and the condition of the debtor’s books and records, that would enable a hypothetical
reasonable investor typical of holders of claims or interests of the relevant class to make an informed judgment about the plan . . . .” 11 U.S.C. § 1125(a)(1). Congress intended that the disclosure statement serve as the primary source of information upon which creditors and shareholders could rely in making an informed judgment about a plan of reorganization. In re
Scioto Valley Mortgage Co., 88 B.R. 168 (Bankr. S.D. Ohio 1988).
8. The Disclosure Statement does not satisfy the disclosure standards set forth in
section 1125 of the Bankruptcy Code. The Disclosure Statement and Plan also rely, in part, on a
Plan Supplement including schedules of assumed and rejected Leases that need not be filed until
March 16, 2018—in the midst of the holidays and only one week before the Voting and
Objection Deadline. Moreover, the Plan improperly provides the Debtors with the ability to
reject executory contracts and leases beyond confirmation of a Plan. This is contrary to the
Bankruptcy Code and makes it impossible for creditors to make an informed decision on the
Plan. “If, on the face of the plan, the plan could not be confirmed, then the Court [should] not
4 Case 17-12906-CSS Doc 399 Filed 02/05/18 Page 5 of 19
subject the estate to the expense of soliciting votes and seeking confirmation. Not only would
allowing an unconfirmable plan to accompany a disclosure statement, and be summarized
therein, constitute inadequate information, it would be misleading and be a needless expense to
the estate.” In re Pecht, 57 B R. 137, 139 (Bankr. E.D. Va. 1986); In re Copy Crafters
Quickprint, Inc., 92 B.R. 973, 980 (Bankr. N.D.N.Y. 1988) (“approval should be withheld if, . . . it is apparent that the plan will not comply with Code § 1129(a)”); In re Dakota Rail, Inc.,
104 B.R. 138, 143 (Bankr. D. Minn. 1989) (allowing a facially nonconfirmable plan to
accompany a disclosure statement is both inadequate disclosure and a misrepresentation); see
also In re Beyond.com Corp., 289 B.R. 138, 140 (Bankr. N.D. Cal. 2003) (“Because the
underlying plan is patently unconfirmable, the disclosure statement may not be approved.”). As
a result, the Court should require the Debtors to amend the Disclosure Statement and Plan to provide creditors with adequate information (which cannot be modified post-confirmation) before allowing the Debtors to proceed to plan confirmation.
B. The Plan and Disclosure Statement seek to improperly extend the time to assume or reject leases.
9. As set forth above, the Disclosure Statement and Plan improperly provide the
Debtors with the right to assume or reject leases after confirmation, and they specifically provide
for the possibility of motions to assume leases after the Effective Date, as well as for providing that the Debtors may reject leases post-confirmation if an allowed cure claim is unsatisfactory to the Debtors. See Disclosure Statement, Article VII(E)(1) & VII(E)(2); Plan, Article V(A) &
V(B). This violates Section 365(d)(4), and as a result, the Plan is not confirmable under Section
1129(a)(1).
10. Section 1129(a)(1) provides that “a plan may not be confirmed unless the plan complies with the applicable provisions of Title 11 . . . .” Mabey v. S.W. Elec. Power Co. (In the
5 Case 17-12906-CSS Doc 399 Filed 02/05/18 Page 6 of 19
Matter of Cajun Elec. Power Cooperative, Inc.), 150 F. 3d 503, 513, n.3 (5th Cir. 1998) (citing
Mickey’s Enters., Inc. v. Saturday Sales, Inc. (In re Mickey’s Enters., Inc.), 165 B.R. 188, 193
(Bankr. W.D. Tex. 1994) (“In order to confirm a plan the court must find that the plan and its proponent have complied with the applicable provisions of Title 11.”)). Moreover, a plan cannot be confirmed if it violates the provisions of Title 11. See Resorts Int’l., Inc. v. Lowenschuss (In re Lowenschuss), 67 F.3d 1394 (9th Cir. 1995).
11. The Debtors cannot pick and choose which Bankruptcy Code provisions to follow and which to ignore. Section 365(d)(4) requires the assumption or rejection of leases no later than the entry of the order confirming a plan of reorganization, providing in relevant part that “an unexpired lease of nonresidential real property under which the debtor is the lessee shall be deemed rejected . . . if the trustee does not assume or reject the unexpired lease by the earlier of
(i) the date that is 120 days after the date of the order for relief [or within such additional time as set by the Court and authorized by Section 365(d)(4)]; or (ii) the date of the entry of an order confirming a plan.” The Debtors must abide by this provision to confirm their Plan.
12. As noted above, the Disclosure Statement and Plan propose to give the Debtors the ability to reject leases after entry of the confirmation order on various grounds, including if they are dissatisfied with a cure resolution, or with the resolution of any landlord’s objection to the Plan. This potentially disenfranchises Landlords by permitting the Debtors to reject leases after the voting deadline, thereby depriving Landlords with potentially significant rejection claims from voting to accept or reject the Plan. In addition, this may be used as an attempt to force Landlords to reduce their legitimate cure claims, even though there may be no legal basis to do so. This is unsupported by either statutory authority or case law, and the Bankruptcy Code requires that all leases of non-residential real estate will be assumed or rejected no later than the
6 Case 17-12906-CSS Doc 399 Filed 02/05/18 Page 7 of 19
date of entry of the confirmation order. The Debtors must either finalize its list of assumed and rejected leases such that landlords with rejected leases have time to vote on the Plan, or they must provide some mechanism to make sure that these landlords are not improperly disenfranchised by the plan process.
13. Prior to the 1984 amendments to the Bankruptcy Code, the final date when a chapter 11 debtor could assume or reject an unexpired lease was the date of confirmation of its plan of reorganization. Specifically, section 365(d)(2) provided that in chapter 11, the trustee could assume or reject an executory contract or unexpired lease of the debtor at any time before the confirmation of a plan, but the court, on request of any party to the agreement, could shorten the time to assume or reject. See 11 U.S.C. § 365(d)(2) (1978). Soon after the enactment of the
1978 Bankruptcy Code, Congress realized that major deficiencies existed in section 365. The delay built into section 365(d)(2), without a mechanism for earlier assumption or rejection, worked a hardship on lessors, particularly shopping center lessors. This ultimately culminated in the 1984 enactment of section 365(d)(4), which made the 60-day time limit imposed by section
365(d)(1) in liquidation proceedings applicable to nonresidential leases of real property in reorganization cases.
14. Section 365(d)(4) was created as part of the statutory provisions known as the
Shopping Center Amendments of 1984. Initially, it provided that a nonresidential real property lease is deemed rejected if the trustee does not assume or reject it within 60 days after the order for relief, or within such additional time as the court fixes, for cause, within such 60 day period.
The legislation’s purpose was to compel debtors to make prompt and effective assumptions and rejections of nonresidential real property leases, and it was not to extend this time. That notwithstanding, debtors made various attempts to extend the time to assume or reject leases
7 Case 17-12906-CSS Doc 399 Filed 02/05/18 Page 8 of 19
multiple times during bankruptcy cases, including requests to extend the time to assume or reject leases after confirmation. While these requests were generally denied as contrary to legislative intent, further changes were necessary to clarify the law in this area.
15. In 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer
Protection Act, which included explicit language regarding the outside date for assumption or rejection of nonresidential real property leases. This is the current version of section 365(d)(4), and it provides that the deadline to assume or reject leases is the earlier of the time set by the statute (as may have been extended by the Court) or the date of entry of the confirmation order.
As a result, Congress has specifically stated that debtors cannot extend the time to assume or reject there nonresidential real property leases beyond the date of confirmation. The Court should direct the Debtors to modify the Disclosure Statement and Plan to provide that the
Debtors will assume or reject all leases no later than the entry of an order confirming the Plan.
C. The Debtors should pay all undisputed cure amounts not later than the Effective Date.
16. Consistent with the above, the Debtors should pay all undisputed cure amounts for assumed Leases on the Effective Date of the Plan along with other administrative claims.
Section 365(b)(1)(A) requires that the Debtors promptly cure outstanding balances due under the
Leases upon assumption. To the extent there is a dispute over the total cure obligation for any
Lease, all undisputed cure amounts should be paid immediately. Debtors should escrow disputed amounts, and the Court should set a status conference within thirty (30) days of the assumption or assumption and assignment of the Leases to deal with any disputes that remain unresolved after such period.
8 Case 17-12906-CSS Doc 399 Filed 02/05/18 Page 9 of 19
D. The Debtors Must Provide the Landlords With Adequate Assurance Information and Cure Amounts with Sufficient Time to Object.
17. The Debtors may not assume or assume and assign leases unless they demonstrate adequate assurance of future performance. 11 U.S.C. § 365(b)(1)(C); see also 11 U.S.C.
§ 365(f)(2). Providing adequate assurance of future performance is an affirmative duty of the
Debtors, and the Debtors bear the ultimate burden of persuasion as to issues under Section 365.
See In re Rachels Indus., Inc., 109 B.R. 797, 802 (Bankr. W.D. Tenn. 1990); see also Richmond
Leasing Co. v. Capital Bank, N.A., 762 F.2d 1303, 1309 (5th Cir. 1985). The obligation to comply with section 365(b) and section 365(f) is unaffected by maneuvering the assumption and assignment process through a Plan. Courts require a specific factual showing through competent evidence to determine whether a debtor demonstrates adequate assurance of future performance.
See, e.g., Matter of Haute Cuisine, Inc., 58 B.R. 390 (Bankr. M.D. Fla. 1986) (even though experts presented cash flow projections, the court found that insufficient documentary evidence had been presented). To determine whether a party provides adequate assurance of future performance under section 365(b), courts have looked to sufficient economic backing, economic conditions, certificates, credit reports, escrow deposits or other similar forms of security or guarantee. In re Lafayette Radio Elecs. Corp., 9 B.R. 993 (Bankr. E.D.N.Y. 1981); In re Belize
Airways, 5 B.R. 152 (Bankr. S.D. Fla. 1980).
18. The Disclosure Statement and Plan do not provide any discussion of the adequate assurance of future performance information (the “Adequate Assurance Information”) the
Debtors intend to provide to the Landlords in connection with the assumption, or assumption and assignment, of the Leases. Moreover, the documents specify no deadline whatsoever by which such Adequate Assurance Information will be provided. Absent the provision of sufficient
Adequate Assurance Information and a reasonable period of time to review such information,
9 Case 17-12906-CSS Doc 399 Filed 02/05/18 Page 10 of 19
Landlords that have leases that are being assumed by the Plan cannot properly assess the tenant that will take over the those leases post-confirmation.
19. In order to consider the fairness and feasibility of a Plan, it is crucial that a disclosure statement contain sufficient financial information, data, valuations or projections relevant to the decision to accept or reject a plan, including information relevant to the risks posed to creditors under such plan. In re U.S. Brass Corp., 194 B.R. 420, 425 (Bankr. E.D. Tex.
1996) (citing In re Metrocraft Pub. Servs., Inc., 39 B.R. 567, 568 (Bankr. N.D. Ga. 1984)). Most reported decisions discussing the standards of a disclosure statement include the requirement that the disclosure statement reveal the present financial condition of the debtor. Metrocraft Pub.
Services, Inc., 39 B.R. at 568; Microwave Products of America, Inc., 100 B.R. 376, 378 (Bankr.
W.D. Tenn. 1989); In re Scioto Valley Mortg. Co., 88 B.R. at 170. Equally important are the projections for the reorganized debtor. In re Ferretti, 128 B.R. 16, 21 (Bankr. D.N.H. 1991).
20. The Disclosure Statement inadequately discusses the current financial status of the Debtors, as well as its anticipated post-petition financial position and prospects. The
Disclosure Statement does not provide sufficient current or future financial information upon which creditors may rely to evaluate the likelihood that the payments promised under the Plan will be made, and whether the Debtors will survive as an economically viable business. The
Disclosure Statement should better describe the Debtors’ financial condition and future projections.
21. The Debtor’s failure to provide creditors with an opportunity to review sufficient critical financial data is a failure to supply “adequate information” within the meaning of Section
1125(a). Metrocraft, 39 B.R, at 570; In re A.C. Williams, 25 B.R. 173, 176 (Bankr. N.D. Ohio
1982); In re William F. Gable Co., 10 B.R. 248, 250 (Bankr. N.D. W.Va. 1981). The plan
10 Case 17-12906-CSS Doc 399 Filed 02/05/18 Page 11 of 19
proponent must show “concrete evidence of a sufficient cash flow to fund and maintain both its
operations and obligations under the Plan.” In re SM 104 Ltd., 160 B.R. 202 (Bankr. S.D. Fla.
1993); In re Nelson, 84 B.R. 90, 93 (Bankr. W.D. Tex. 1988). The Court should not approve the
Disclosure Statement until the Debtors have provided this crucial information.
22. Moreover, the Disclosure Statement and Plan also contemplate that the Debtors
may seek to assign an Executory Contract or Unexpired Lease to an entity other than the
Debtors, but the Debtors provide no information on an assignment process, or a framework for providing Landlords and other affected parties with notice of any potential assignment, much less any mechanism for providing Adequate Assurance Information for the proposed assignee. If the filing of the Plan Supplement is intended to serve as the notice of assignment, the Debtors propose that it need not be filed until March 16, 2018—only one week before the Voting and
Objection Deadline. This time period is insufficient to provide adequate notice of any proposed assignment of the Leases, and neither does the Disclosure Statement or Plan set forth what
Adequate Assurance Information the Debtors intend to provide to the Landlords on any such third party assignee, or a timeframe to provide such information. Absent sufficient Adequate
Assurance Information and a reasonable period of time to review such information, landlords cannot properly assess any potential assignee of their Leases.
23. To the extent the Debtors seek to assume and assign leases, a mechanism for providing notice and Adequate Assurance Information5 must be included in the Disclosure
5 In order to satisfy the adequate assurance of future performance burden, and especially for any potential assignee of the Leases, Landlords must receive, at a minimum, the following information: (i) the specific name of the proposed tenant that will act as the assignee, and the proposed name under which the assignee intends to operate the store; (ii) the potential assignee’s intended use for the space; (iii) audited financial statements and annual reports for the past three (3) years, including all supplements or amendments thereto; (iv) cash flow projections for the proposed assignee, the proposed assignee’s most recent business plan, all cash flow projection for the Lease subject to the assignment request, and any financial projections, calculations and/or pro-formas prepared in contemplation of purchasing the Leases; (v) all documents and other evidence of the potential assignee’s retail experience and experience operating in-line stores in a shopping center; and (vi) a contact person for the proposed
11 Case 17-12906-CSS Doc 399 Filed 02/05/18 Page 12 of 19
Statement, or, in the alternative, the Disclosure Statement should specify that any such request will be by separate motion.
24. The Debtors should provide Landlords with Adequate Assurance Information and the Cure Notice for any Leases that they intend to assume, or assume and assign, not less than
fourteen days (14) before any objection deadline. There is more than enough time for the
Debtors to provide the Landlords with this meaningful opportunity to review this crucial information and prepare objections.
E. The Plan improperly seeks to modify rights under the Leases.
25. The Plan and Disclosure Statement provide that the assumption of leases shall serve as a full release of any monetary and non-monetary defaults. See Disclosure Statement,
Article (IV)(M)(3) & VII(E)(2), Plan, Article V(B) & IX(C). A debtor assumes its leases cum
onere, or subject to existing burdens. In re Wash. Capital Aviation & Leasing, 156 B.R. 167,172
(Bankr. E.D. Va. 1993). While the Debtors must pay all outstanding monetary balances due under the Leases as cure at the time of assumption, the Debtors assume, and must honor, other obligations under the Leases, including nonmonetary defaults, regardless of when they arise.
The Debtors cannot avoid these obligations through releases or waivers in their Plan.
26. Further, in addition to rent and related monthly charges, the Debtors also bear responsibility for other charges under the Leases that may not yet be known or which may not
assignee that Landlord may directly contact in connection with the adequate assurance of future performance. Moreover, since the Leases are shopping center leases, the Debtors must also provide the following information pursuant to Section 365(b)(3) with respect to any proposed assignee: the source of rent and that the financial condition and operating performance of the proposed assignee and its guarantors, if any, must be similar to the financial condition and operating performance of the debtor and its guarantor(s), if any, as of the time the debtor became the lessee; that any percentage rent due under the lease will not decline substantially; that assumption and assignment of the lease is subject to all provisions thereof, including (but not limited to) provisions such as a radius, location, use, or exclusivity provision, and will not breach of any such provision in any other lease, financing agreement, or master agreement relating to such shopping center; and that assumption and assignment of the lease will not disrupt the tenant mix or balance in the shopping center.
12 Case 17-12906-CSS Doc 399 Filed 02/05/18 Page 13 of 19
yet have been reconciled and/or adjusted from the pre-assumption periods. For instance, the
Debtors occupy retail space at the Centers pursuant to triple-net leases, where they typically pay rent and related lease charges in advance for each month. In addition to a base minimum rent,
the Debtors pay a pro-rata share of other charges and expenses, such as real property taxes,
insurance, common area maintenance (“CAM”) fees, and percentage rent. Certain charges, such
as CAM and property taxes are estimated prospectively, billed to and paid by the tenant during
the year based upon such estimate, and then reconciled after year-end. Year-end reconciliations
and adjustments for previous years may not yet be complete (i.e. – year-end reconciliations and
adjustments that accrued through 2017 may have not been billed for many locations, and such
charges for 2017 will not be billed until sometime in 2018). Moreover, certain charges may be
paid in arrears, and cannot be calculated (in some cases) until a year or more after year-end.
These accrued but unbilled charges are not yet due under the Leases, and they do not create a
current default or payment obligation that is part of the cure payment required to assume the
Leases. Nevertheless, Debtors remain responsible for all accrued or accruing charges under the
Leases, and must pay such charges when they come due under the Leases. The Debtors cannot
assume the Leases pursuant to the Plan, and then try to use the Plan or confirmation order to
release their obligation to pay these accrued or accruing, but unbilled, charges that come due
under the Leases in the ordinary course.
27. The Leases also contain provisions that require the Debtors to indemnify
Landlords with respect to various claims, which claims may not become known until after the
assumption of the Leases (i.e. personal injury claims at the Premises and damage to property by
the Debtors or their agents). Any assumption of the Leases must be subject to the terms of the
Leases, including the continuation of all indemnification obligations, regardless of when they
13 Case 17-12906-CSS Doc 399 Filed 02/05/18 Page 14 of 19
arose.6 Nothing in the Plan or confirmation order should act as a waiver or release of any
indemnity or other rights that exist under the Leases.
F. The Plan improperly seeks to deprive creditors of their setoff and recoupment rights.
28. The Plan improperly seeks to deprive Landlords of their rights to setoff and
recoupment. See Disclosure Statement at Article IV.M.5, Plan at Article IX.E. To the extent any
claim objections or preference actions are prosecuted against the Landlords following Plan
confirmation, the Landlords should not be deprived of their rights to assert setoffs or exercise
recoupment, or be limited in their ability to enforce these rights. The Debtors fail to provide any authority for seeking to void Landlords’ ability to exercise their setoff and recoupment rights,
and these rights survive plan confirmation. See Carolco Television Inc. v. Nat’l Broadcasting
Co. (In re De Laurentiis Entm’t Grp. Inc.), 963 F.2d 1269 (9th Cir. 1992), cert denied 506 U.S.
918 (1992) (setoff rights survive plan confirmation); see also In re Luongo, 259 F.3d 323, 333
(5th Cir. 2001); Folger Adam Security, Inc. v. DeMatteis/MacGregor, JV, 209 F.3d 252, 257-61
(3d Cir. 2000) (recoupment defense survives free and clear sale of debtor’s assets). This is
especially true where, as here, the Plan seems to preserve all of the Debtors’ rights to such setoff
and recoupment.
G. The injunction provisions of the Plan as described in the Disclosure Statement are overbroad and ambiguous.
29. The releases, waivers and injunction provisions referenced in the Disclosure
Statement and Plan are overbroad and require revision. See Disclosure Statement at Article
IV.M.5, Plan at Article IX.E. The language does not adequately address the fact that various
claims and rights under the Leases must survive confirmation of the Plan for the continuing
6 Any ability to assume the Leases is subject to the protections provided by section 365(b) and (f). Therefore, any assumption must be in accordance with all provisions of the Leases.
14 Case 17-12906-CSS Doc 399 Filed 02/05/18 Page 15 of 19
obligations that exist under the Leases. The Debtors (or successor) assume the Leases subject to
their terms, and must assume all obligations owing under the Leases, including obligations that
have accrued but may not yet have been billed under each Lease and indemnity obligations under
the Leases.
30. As set forth above, the Landlords may have claims for year-end reconciliation payments that have accrued (or are accruing) prior to confirmation, which have not yet been billed under the Leases, and the Leases include various indemnity obligations. These legitimate lease obligations must survive plan confirmation, and the Plan and any order should specifically preserve all rights of the parties with respect to assumed Leases.
III. JOINDER IN OBJECTIONS RAISED BY OTHER LANDLORDS
31. To the extent consistent with the objections expressed herein, the Landlords also
join in the objections to the Motion of other landlords, unsecured creditors and the unsecured
creditors’ committee.
IV. CONCLUSION
Based on the foregoing, Landlords request that the Court not approve the
Disclosure Statement unless and until the Debtors provide adequate information as required by
Section 1125, amend the Disclosure Statement and Plan so that the Disclosure Statement
describes a Plan that is confirmable under Section 1129, including the modifications requested
herein, and grant such further relief as the Court deems proper.
15 Case 17-12906-CSS Doc 399 Filed 02/05/18 Page 16 of 19
Respectfully submitted, Dated: February 5, 2018 Wilmington, Delaware /s/ Laurel D. Roglen Leslie C. Heilman, Esquire (No. 4716) Laurel D. Roglen, Esquire (No. 5759) BALLARD SPAHR LLP 919 N. Market Street, 11th Floor Wilmington, DE 19801 Telephone: (302) 252-4465 Facsimile: (302) 252-4466 E-mail: [email protected] [email protected]
and
Dustin P. Branch, Esquire BALLARD SPAHR LLP 2029 Century Park East, Suite 800 Los Angeles, CA 90067-3012 Telephone: (424) 204-4354 Facsimile: (424) 204-4350 E-mail: [email protected]
and
David L. Pollack, Esquire BALLARD SPAHR LLP 51st Fl - Mellon Bank Center 1735 Market Street Philadelphia, PA 19103 Telephone: (215) 864-8325 Facsimile: (215) 864-9473 E-mail: [email protected]
Counsel to ARC SWWMPA001, LLC, ARC WEMPSMN001, LLC, Brixmor Property Group, Inc., Centennial Real Estate Company, LLC, Centercal Properties, LLC, Deutsche Asset & Wealth Management, Federal Realty Investment Trust, G&I VII Retail Carriage LLC, KRE Colonie Owner, LLC, Novi Town Center Investors, LLC, PGIM Real Estate, Starwood Retail Partners LLC, The Macerich Company, Trademark Property Company, TSW 2015, LLC, UBS Realty Investors LLC, Wayside Commons Investors LLC, and YTC Mall Owner, LLC
16 Case 17-12906-CSS Doc 399 Filed 02/05/18 Page 17 of 19
EXHIBIT A
Landlord Store No. Shopping Center City, State
ARC SWWMPA001, LLC Unknown The Shoppes at Wyomissing Reading, PA
ARC WEMPSMN001, LLC Unknown The Shops at West End West End, MN
Brixmor Property Group, Inc. Unknown Hampton Village Center Rochester Hills, MN
Brixmor Property Group, Inc. Unknown Hillcrest Market Place Spartanburg, SC
Brixmor Property Group, Inc. Unknown Oakwood Commons Hermitage, TN
Brixmor Property Group, Inc. Unknown Pointe Orlando Orlando, FL
Brixmor Property Group, Inc. Unknown Preston Park Village Plano, TX
Brixmor Property Group, Inc. Unknown The Quentin Collection Kildeer, IL
Brixmor Property Group, Inc. Unknown Trinity Commons Fort Worth, TX Centennial Real Estate Company, Unknown Fox Valley Mall Aurora, IL LLC Centennial Real Estate Company, Unknown Hawthorn Mall Vernon Hills, IL LLC Centercal Properties, LLC Unknown Blackhawk Plaza Danville, CA
Centercal Properties, LLC Unknown Bridgeport Village Tualatin, OR
Centercal Properties, LLC Unknown Station Park Farmington, UT
Centercal Properties, LLC Unknown The Collection at Riverpark Oxnard, CA
Centercal Properties, LLC Unknown The Village at Meridian Meridian, ID Deutsche Asset & Wealth Unknown City Place at the Promenade Edgewater, NJ Management Deutsche Asset & Wealth Unknown StoneCrest at Piper Glen Charlotte, NC Management Deutsche Asset & Wealth Unknown The Galleria at Mt. Lebanon Mt. Lebanon, PA Management Deutsche Asset & Wealth Unknown The Streets of Tanasbourne Hillsboro, OR Management Federal Realty Investment Trust Unknown Mercer Mall Lawrenceville, NJ The Shops at Carriage Collierville, TN G&I VII Retail Carriage LLC Unknown Crossing
KRE Colonie Owner LLC Unknown Colonie Center Albany, NY
Case 17-12906-CSS Doc 399 Filed 02/05/18 Page 18 of 19
Novi Town Center Investors Unknown Novi Town Center Novi, MI
PGIM Real Estate Unknown Hillside Village Cedar Hill, TX
PGIM Real Estate Unknown The Avenue Viera Viera, FL
PGIM Real Estate Unknown The Avenue West Cobb Marietta, GA The Promenade Shops at South Windsor, CT PGIM Real Estate Unknown Evergreen Walk The Promenade Shops at Center Valley, PA PGIM Real Estate Unknown Saucon Valley Arboretum of South South Barrington, IL Starwood Retail Partners, LLC Unknown Barrington
Starwood Retail Partners, LLC Unknown Belden Village Mall Canton, OH
Starwood Retail Partners, LLC Unknown Belmar Lakewood, CO
Starwood Retail Partners, LLC Unknown Blue Back Square West Hartford, CT
Starwood Retail Partners, LLC Unknown Promenade Bolingbrook Bolingbrook, IL
Starwood Retail Partners, LLC Unknown Capital Mall Olympia, WA
Starwood Retail Partners, LLC Unknown Collection at Forsyth Cumming, GA
Starwood Retail Partners, LLC Unknown Fairlane Town Center Dearborn, MI
Starwood Retail Partners, LLC Unknown Franklin Park Mall Toledo, OH
Starwood Retail Partners, LLC Unknown Louis Joliet Mall Joliet, IL
Starwood Retail Partners, LLC Unknown MacArthur Center Norfolk, VA
Starwood Retail Partners, LLC Unknown Northridge Mall Salinas, CA
Starwood Retail Partners, LLC Unknown Parkway Plaza El Cajon, CA
Starwood Retail Partners, LLC Unknown Southlake Mall Merrillville, IL
Starwood Retail Partners, LLC Unknown The Mall at Partridge Creek Clinton, MI
Starwood Retail Partners, LLC Unknown The Mall at Wellington Green Village of Wellington, FL
The Macerich Company Unknown Deptford Mall Deptford, NJ
The Macerich Company Unknown Freehold Raceway Mall Freehold, NJ
The Macerich Company Unknown Fashion Fair Fresno, CA
2 Case 17-12906-CSS Doc 399 Filed 02/05/18 Page 19 of 19
The Macerich Company Unknown SanTan Village Gilbert, AZ
The Macerich Company Unknown Scottsdale Fashion Square Scottsdale, AZ
The Macerich Company Unknown The Oaks Thousand Oaks, CA The Shops at North Bridge Chicago, IL The Macerich Company Unknown Block 125 The Macerich Company Unknown Twenty Ninth Street Boulder, CO
The Macerich Company Unknown Vintage Faire Mall Modesto, CA
Trademark Property Company Unknown Watters Creek Allen, TX
Trademark Property Company Unknown Perkins Rowe Baton Rouge, LA
TSW 2015 LLC Unknown Town Square Wheaton Wheaton, IL
UBS Realty Investors Unknown Bay Street Emeryville, CA
Wayside Commons Investors LLC Unknown Wayside Commons Burlington, MA
YTC Mall Owner, LLC Unknown Yorktown Center Lombard, IL
3 Case 17-12906-CSS Doc 399-1 Filed 02/05/18 Page 1 of 3
CERTIFICATE OF SERVICE
I, Laurel D. Roglen, hereby certify that on February 5, 2018, I caused a copy of the
Limited Objection of ARC SWWMPA001, LLC, ARC WEMPSMN001, LLC, Brixmor Property
Group, Inc., Centennial Real Estate Company, LLC, Centercal Properties, LLC, Deutsche Asset
& Wealth Management, Federal Realty Investment Trust, G&I VII Retail Carriage LLC, KRE
Colonie Owner, LLC, Novi Town Center Investors, LLC, PGIM Real Estate, Starwood Retail
Partners LLC, The Macerich Company, Trademark Property Company, TSW 2015, LLC, UBS
Realty Investors LLC, Wayside Commons Investors LLC, and YTC Mall Owner, LLC to
Disclosure Statement for the Amended Joint Chapter 11 Plan of Reorganization of Charming
Charlie Holdings Inc. and its Debtors Affiliates Pursuant to Chapter 11 of the Bankruptcy Code and (2) Motion of the Debtors for the Entry of an Order Approving (A) Approving the Disclosure
Statement; (B) Establishing the Voting Record Date, Voting Deadline, and Other Dates, (C)
Approving Procedures for Soliciting, Receiving, and Tabulating Votes on the Plan, and (D)
Approving the Manner and Forms of Notice and Other Related Documents to be served on the parties on the attached service list in the manner indicated thereon.
Dated: February 5, 2018 Wilmington, Delaware /s/ Laurel D. Roglen Laurel D. Roglen (No. 5759) BALLARD SPAHR LLP
Case 17-12906-CSS Doc 399-1 Filed 02/05/18 Page 2 of 3
SERVICE LIST
Via Hand Delivery
Domenic Pacitti Morton Branzburg David M. Fournier Klehr, Harrison, Harvey, Branzburg LLP Pepper Hamilton LLP 919 North Market Street, Suite 1000 Hercules Plaza, Suite 5100 Wilmington, Delaware 19801 1313 N. Market Street Co- counsel to the Debtors Wilmington, Delaware 19899-1709 Counsel to the DIP Term Loan Agent and Mark D. Collins Prepetition Term Loan Agent David T. Queroli Richards Layton & Finger Jennifer R. Hoover One Rodney Square, 920 North King Street Kevin M. Capuzzi Wilmington, Delaware 19801 Benesch, Friedlander, Coplan & Aronoff LLP Counsel to the DIP ABL Agent and the 222 Delaware Avenue, Suite 801 Wilmington, Delaware 19801 Prepetition ABL Agent Counsel to the Committee Pauline K. Morgan Richard L. Schepacarter M. Blake Cleary Office of the United States Trustee Young Conaway Stargatt & Taylor, LLP 844 N. King Street, Room 2207 1000 North King Street Lockbox 35 Wilmington, Delaware 19801 Wilmington Delaware, 19801 Counsel to the Consenting Term Loan Committee Via First Class U.S. Mail
Joshua A. Sussberg Aparna Yenamandra Kirkland & Ellis LLP Brad J. Finkelstein 601 Lexington Avenue Jeffrey Saferstein New York, New York 10022 Paul, Weiss, Rifkind, Wharton Counsel to the Debtors & Garrison LLP 1285 Avenue of the Americas Kirkland & Ellis LLP New York, New York 10019-6064 300 North LaSalle Street Counsel to the Consenting Term Loan Chicago, Illinois 60654 Committee Counsel to the Debtors Ronald A. Hewitt Julia Frost-Davies Martin E. Beeler Amelia C. Joiner Covington & Burling LLP Morgan Lewis & Bockius LLP 620 Eighth Avenue One Federal Street New York, New York 10018 Boston, Massachusetts 02110 Counsel to the DIP Term Loan Agent and Counsel to the DIP ABL Agent and the Prepetition Term Loan Agent Prepetition ABL Agent
Case 17-12906-CSS Doc 399-1 Filed 02/05/18 Page 3 of 3
Cathy Hershcopf Seth Van Aalten Michael Klein Cooley LLP 1114 Avenue of the Americas New York, New York 10036 Counsel to the Committee
2