Case MFW Doc 780 Filed 05/29/18 Page 1 of 5 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE : :

Transcription

1 Case MFW Doc 780 Filed 05/29/18 Page 1 of 5 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE x In re THE BON-TON STORES, INC., et al., 1 Debtors x Chapter 11 Case No (MFW) (Jointly Administered) Re Docket No. 18, 348, 372, 490 LIMITED OBJECTIONS OF BT (MULTI) LLC, BT-YORK (PA), AND BT (PA) QRS 12-25, INC. TO THE DEBTORS PROPOSED AMOUNTS FOR STUB RENT CLAIMS AND 503(B)(9) CLAIMS BT (Multi) LLC, BT-York (PA), and BT (PA) QRS 12-25, Inc. (individually, a Landlord and collectively, the Landlords ), by and through their undersigned attorneys, each files these limited objections to the Debtors Notice of Proposed Amounts for Stub Rent Claims and 503(b)(9) Claims [Docket No. 662] (the Stub Rent Notice ). In support of these objections, each Landlord respectfully represents as follows The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, are The Bon-Ton Stores, Inc. (5229); The Bon-Ton Department Stores, Inc. (9309); The Bon-Ton Giftco, LLC (2805); Carson Pirie Scott II, Inc. (2140); Bon-Ton Distribution, LLC (5855); McRIL, LLC (5548); Bonstores Holdings One, LLC (8574); Bonstores Realty One, LLC (8931); Bonstores Holdings Two, LLC (8775); and Bonstores Realty Two, LLC (9075). The headquarters for the abovecaptioned Debtors is 2801 East Market Street, Bldg. E, York, Pennsylvania The portion of these objections concerning lease severability is solely on behalf of BT (PA) QRS 12-25, Inc.

2 Case MFW Doc 780 Filed 05/29/18 Page 2 of 5 BACKGROUND 1. The Landlords are three distinct landlords that own nine non-residential shopping center real properties leased to certain of the Debtors pursuant to the following three separate lease agreements (each, a Lease and collectively, the Leases ) (a) the Lease Agreement, dated as of April 10, 1997, as amended (the BT (PA) QRS Lease ), between BT (PA) QRS 12-25, Inc., as landlord, and Debtor The Bon-Ton Department Stores, Inc., as tenant, respecting real property and improvements located in Johnstown, Pennsylvania and Allentown, Pennsylvania; 3 (b) the Lease Agreement, dated as of June 19, 2006, as amended (the BT-York (PA) Lease ), between BT-York (PA), as landlord, and Debtor The Bon-Ton Department Stores, Inc., as tenant, respecting real property and improvements located in York, Pennsylvania; and (c) the Lease Agreement, dated as of June 26, 2015 (the BT (Multi) Lease ), between BT (Multi) LLC, as landlord, and Debtor McRIL, LLC, as tenant, respecting real property and improvements located in (i) Joliet, Illinois; (ii) Fargo, North Dakota; (iii) Ashwaubenon, Wisconsin; (iv) Brookfield, Wisconsin; (v) Greendale, Wisconsin; and (vi) Wauwatosa, Wisconsin The street address for the Allentown Premises (as defined in the BT (PA) QRS Lease) is 3585 S. Church St., Whitehall, PA The street address for the Johnstown Premises (as defined in the BT (PA) QRS Lease) is 550 Galleria Drive, Johnstown, PA The Johnstown Premises is not listed on the Stub Rent Notice. On April 27, 2018, the Debtors filed the Debtors Second (2nd) Omnibus Motion for Entry of an Order, Pursuant to Sections 105(a), 365(a), and 554(a) of the Bankruptcy Code, Authorizing the Debtors to Reject (I) Certain Unexpired Leases of Nonresidential Real Property, and (II) Certain Related Agreements in Connection Therewith, Nunc Pro Tunc to April 30, 2018 [Docket No. 656], seeking to reject the BT (PA) QRS Lease solely respecting the Johnstown Premises. BT (PA) QRS Inc. objects to any attempt to sever that Lease. The Debtors and BT (PA) QRS Inc. have stipulated to a briefing schedule regarding that dispute. [Docket No. 715] Correspondingly, BT (PA) QRS 12-25, Inc. objects to the Stub Rent Notice to the extent it is based on the Debtors request for severance of the BT (PA) QRS Lease. Each of the Leases is guaranteed by certain of the Debtors. The BT (PA) QRS Lease is guaranteed by Debtor The Bon-Ton Stores, Inc. pursuant to a Guaranty and Suretyship Agreement, dated April 10, 1997, - 2 -

3 Case MFW Doc 780 Filed 05/29/18 Page 3 of 5 2. On April 18, 2018, the Court entered the Order, Pursuant to Sections 105, 363 and 365 of the Bankruptcy Code, Approving Sale of Certain of the Debtors Assets and Granting Related Relief [Docket No. 632] (the Sale Order ), providing, inter alia, for payment of claims against the Debtors for stub rent (the Stub Rent Claims ) up to a cap of $8,000,000 by the Agent (as defined in the Sale Order). Stub Rent is not defined in the Sale Order. The Sale Order also provides for the filing of the Stub Rent Notice and objections thereto. 5 On April 30, 2018 the Debtors filed the Stub Rent Notice, which lists a proposed payment obligation of $91,213 for Stub Rent Claims under the BT (PA) QRS Lease and no proposed Stub Rent Claim obligations for the other two Leases. OBJECTIONS 3. As applicable to the Leases, the amounts listed in the Stub Rent Notice as being due as of February 1, 2018 are incorrect. The Stub Rent Notice fails to include (a) the full unpaid basic rent payment for the BT (PA) QRS Lease, which provides for quarterly, not monthly, basic rent payments; and (b) to the extent, if any, real estate taxes payable as additional rent under each Lease are allocable to the postpetition period had a payment due date prior to the Debtors petition date or after the rejection date applicable to that Lease ( Stub Tax Claims ) are considered to be Stub Rent Claims, the Stub Tax Claims for each Lease. 4. The Stub Rent Claim relating to the BT (PA) QRS Lease must include basic rent for the period from February 5 through April 30, 2018 (not less than $341, as of May 29, 2018), not merely as the Debtors assert for the period of February 5 through as amended. The BT-York (PA) Lease is guaranteed by Debtor The Bon-Ton Stores, Inc. pursuant to a Guaranty and Suretyship Agreement, dated December 27, 2000, as amended. The BT (Multi) Lease is guaranteed by Debtors The Bon-Ton Stores, Inc., The Bon-Ton Department Stores, Inc., and Carson Pirie Scott II, Inc. pursuant to a Guaranty and Suretyship Agreement, dated June 26, Counsel for the Debtors agreed to extend the objection deadline for the Landlords to May 29,

4 Case MFW Doc 780 Filed 05/29/18 Page 4 of 5 February 28, That amount includes late fees and interest, which continue to accrue. BT (PA) QRS Inc. raised the quarterly rent payment issue relating to stub rent at both the first day hearing and the final DIP hearing in these cases. Consequently, and at the Court s direction, the Debtors included an acknowledgement in paragraph 47 of the final DIP order that Landlords stub rent claims were not limited to the month of February, but rather covered the applicable quarter for quarterly rent payments. See attached portion of Transcript of Hearing on March 12, 2018 at Correspondingly, the Debtors revised paragraph 47 of the final DIP order from referring in the prior version solely to the period from February 5, 2018 through February 28, 2018 (i.e., solely to monthly rent payments), to also cover quarterly rent payments, stating such portion of any unpaid rent under such lease that (a) came due prior to February 5, 2018 but (b) is attributable to the post-petition period ( Stub Rent ). See Docket No. 350 at Ex. B, 47 (redline showing revisions from proposed final DIP order and deleting the prior langue referencing only the month of February). 6. The Sale Order does not define Stub Rent Claims, but seems to contemplate only basic rent payments as falling within that definition. Thus, the Landlords Stub Tax Claims do not appear to constitute Stub Rent Claims as defined in the Sale Order. Instead, the Stub Tax Claims must be paid in full under section 503(b) of the Bankruptcy Code. 6 Nonetheless, out of an abundance of caution, each Landlord includes its respective Stub Tax Claims in this objection as part of its Stub Rent Claim to the extent, if any, this Court ultimately determines such claims constitute Stub Rent Claims under the Sale Order. Each 6 Similarly, all attorneys fees obligations accrued under the Leases during the postpetition, pre-rejection period must be paid in full under section 503(b)

5 Case MFW Doc 780 Filed 05/29/18 Page 5 of 5 Landlord will provide the amount of any Stub Tax Claim to the Debtors if and when the applicable Lease is rejected and the amount of said Stub Tax Claim can be calculated for the period from the Debtors petition date through the applicable lease rejection date. CONCLUSION WHEREFORE, each Landlord respectfully requests that the Court (a) allow the Landlords Stub Rent Claims in full (including, the Stub Tax Claims, if any, to the extent the Court determines Stub Tax Claims are part of Landlords Stub Rent Claims); and (b) grant each Landlord such other and further relief as the Court may deem just or proper. Dated May 29, 2018 Wilmington, Delaware Respectfully submitted, /s/ Curtis S. Miller Curtis S. Miller (No. 4583) MORRIS, NICHOLS, ARSHT & TUNNELL LLP 1201 N. Market St., 16th Flr. P.O. Box 1347 Wilmington, DE Telephone (302) cmiller@mnat.com and Alan J. Lipkin Gabriel Brunswick WILLKIE FARR & GALLAGHER LLP 787 Seventh Avenue New York, NY Telephone Fax alipkin@willkie.com gbrunswick@willkie.com Counsel for BT (Multi) LLC, BT-York (PA), and BT (PA) QRS 12-25, Inc

6 Case MFW Doc Filed 05/29/18 Page 1 of 4 EXHIBIT A

7 Case MFW Doc Filed 05/29/18 Page 2 of 4 Page 1 1 UNITED STATES BANKRUPTCY COURT 2 DISTRICT OF DELAWARE 3 4 In re Chapter 11 5 THE BON-TON STORES, INC., Case No (MFW) 6 et al., 7 Debtors. (Joint Administration 8 Requested) 9 10 United States Bankruptcy Court North Market Street 12 Wilmington, Delaware March 12, AM B E F O R E 22 HON MARY F. WALRATH 23 U.S. BANKRUPTCY JUDGE Veritext Legal Solutions

8 Case MFW Doc Filed 05/29/18 Page 3 of 4 1 and we think that's the way that the stub rent is going to 2 get covered. 3 I do want to briefly address Mr. Levinson's 4 remarks. He said he is not objecting to the DIP because he 5 can't. His other -- 6 THE COURT Yes, of course. 7 MR. FEINSTEIN -- observations are simply that. 8 We disagree with them. I think some may come up in the bid 9 procedures so I'll stop there. But there's no objection as 10 I understand it. 11 And to be clear, the collateral that the DIP 12 lenders agree to take out of their package is not available 13 to him either, so there's no discrimination or anything else 14 he can claim to argue about on the adequate protection 15 frame. Thank you. 16 MR. MILLER Thank you, Your Honor. Again for the 17 record Curtis Miller of Morris, Nichols. Just to be very 18 brief and not to reiterate things that I've already said. 19 First is there was no mention of change in the 20 language in paragraph 47 to deal with all stub rent, it's 21 still limited to February 4th to February 28th. As I said, 22 my client gets paid on a quarterly basis so that doesn't 23 help us. Page Second was I'm hearing lots of attorney testimony 25 about liquidity and the ability to pay off all the DIP, the Veritext Legal Solutions

9 Case MFW Doc Filed 05/29/18 Page 4 of 4 Page 51 1 first lien lenders DIP. Well that's, you know, that's the 2 debtors' burden to show anything that they want to get the 3 DIP approved, it's not the landlords' burden to come ahead 4 and prove affirmative evidence, you know, sort of negating 5 something that's not out there. 6 Thank you, Your Honor. 7 MR. WOOLVERTON Your Honor, Alexander Woolverton 8 for the record of Paul, Weiss. Just one point of 9 clarification. 10 The February 4th to February 28th language in the 11 DIP order, you know, that was basically our assumption that 12 rent is typically paid on a monthly basis, which is 13 obviously not true in every instance. It was not our 14 intention to not pay landlords stub rent to the extent that 15 they're entitled to payment on a quarterly basis. And so 16 we'll THE COURT Well will you change it to clarify 18 that for Mr. Miller's MR. WOOLVERTON Yes, absolutely. 20 THE COURT -- client? 21 MR. WOOLVERTON Absolutely, Your Honor. 22 THE COURT Okay. All right. Well let me do 23 this. Let me be sure I include all of the comments. 24 With respect to the landlords' objections I'm 25 going to overrule that. I am satisfied that the agreement Veritext Legal Solutions