Score One for Shopping Center Landlords: Adequate Assurance of Future Performance Means Just What the Bankruptcy Code Says!
In a recent decision, the Chief Judge of the District Court for the Southern District of New York reversed a decision of the bankruptcy court in the Sears bankruptcy case that was prejudicial to the interests of shopping center landlords whose tenants become chapter 11 debtors.
The district court’s decision in MOAC Mall Holdings, LLC v. Transform Holdco LLC (In re Sears Holding Corporation, et al.), Case 7:19-cv-09140-CM (S.D.N.Y. Feb. 27, 2020) (Doc. 26), held that section 365(b)(3)(A) of the Bankruptcy Code—which provides that “adequate performance of future performance” of a shopping center lease includes proof that “the financial condition and operating performance of the proposed assignee and its guarantors, if any, shall be similar to the financial condition and operating performance of the debtor and its guarantors, if any, as of the time the debtor became the lessee under the lease”—means exactly what it says. Thus, “only an assignee with a financial condition and operating performance that resembled the debtor’s ab initio would provide a shopping center landlord with ‘adequate assurance’ that the bargain originally struck would be performed by the lease’s assignee.”
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The National Law Review Published Tuesday, March 10th, 2020.