In the United States Bankruptcy Court for the District of Delaware
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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.