Retail

Sonnenschein's Corporate Reorganization & Bankruptcy, Real Estate, Corporate, Taxation, Labor & Employment and other practice groups have extensive experience in all aspects of retail bankruptcies across the nation.  Areas in which Sonnenschein has significant expertise include:

• Trade creditor remedies, including setoff, reclamation and vendor priority claims
• Assumption and rejection of real property leases, including shopping center leases and tenant mix and balance issues
• Other landlord-tenant issues
• Assumption and rejection of vendor contracts and other contracts and leases
• Insurance matters
• Workers' compensation and surety bond matters
• Preference and avoidance actions

Sonnenschein attorneys have represented a number of parties, including: 

• Debtors-in-possession
• Official committees of unsecured creditors and equity security holders
• Involuntary bankruptcy petitioners
• Lenders, indenture trustees and stockholders
• Debtors' executives and directors
• Section 363 asset purchasers

Representative Engagements

The following is a summary of certain of the matters in which we have been actively involved for the party or parties noted in the descriptive text and that are of a public nature.  There are also representations in non-public matters that are not discussed by name herein. 

Key Debtor and Debtor-In-Possession Engagements:

Grossmans, Inc. (Del.): 
Sonnenschein represented this hardware retailer in its Chapter 11 reorganization.  We helped the company to preserve its tax assets for use in the reorganized business.  With our assistance, the company was able to structure a transaction in which a large vendor obtained a minority equity interest in the reorganized entity.  As a result of this transaction, the remaining creditors received a higher value than would have been available from an asset sale transaction because valuable tax attributes had been retained.  Sonnenschein also successfully defended the debtor in connection with investigations into an equity committee's insider transactions. 

Central Hardware and Witte Hardware (E.D. Mo.): 
Sonnenschein represented this chain of Midwest retail hardware stores and related distribution companies in their Chapter 11 cases.  Sonnenschein's representation resulted in a successful going concern sale of the debtor's business.   

Handy Andy Home Improvement Centers, Inc. (N.D. Ill.): 
After failing to find a business model to successfully compete with "big box" retailers, such as Home Depot, retail hardware chain Handy Andy engaged Sonnenschein to represent it in a liquidation of its assets through an orderly Chapter 11 proceeding.  This case included an auction of undermarket leaseholds that had value assignable to third parties.

Custom Shop Corp. (Del.): 
Sonnenschein represented Custom Shop, a chain of specialty clothing stores, in its Chapter 11 cases.  During the first month of the case, Custom Shop was successfully sold as a going concern, under Section 363.  Sonnenschein also structured a transaction in which the stalking horse bidder purchased the secured lenders' position pre-petition and provided DIP financing through the sale of assets.

Representation of Creditors, Landlords, Insurers and Other Parties to Large Retail Bankruptcies

Wickes Lumber (N.D. III):
Sonnenschein represents the Official Committee of Unsecured Creditors in Wickes Lumber’s Chapter 11 case.  Under Sonnenschein’s guidance, the committee opposed the company’s proposed DIP financing arrangement.  This allowed other potential lenders to submit competing DIP proposals.  Ultimately, Wickes received a much more favorable DIP financing package.  Sonnenschein also played a leading role in the marketing efforts and going concern sale of the debtor’s lumberyard assets, resulting in very favorable purchase prices for the debtor’s assets.  The Committee recently settled four pending suits relating to directors and officers of Wickes for in excess of $4.1 million, and is the co-proponent of a joint plan with the Debtor, which has been confirmed.

Kmart Corporation (N.D. Ill.): 
Sonnenschein represented numerous vendors, landlords and other creditors in connection with Kmart's Chapter 11 bankruptcy.  On behalf of its clients, Sonnenschein successfully negotiated numerous real property lease assumptions and rejections.  Upon confirmation of the Kmart plan of reorganization, we were able to successfully preserve important protections for our landlord clients.  In addition to landlords and creditors, Sonnenschein represented a surety bond issuer in connection with over $100 million in claims arising from Kmart's default on workers' compensation obligations.

Prior to joining the firm, a member of our practice served as counsel to a vendor in connection with post-petition credit terms and the resolution of a multi-million dollar disputed prepetition claim.

Bradlee's Stores, Inc. (S.D.N.Y.)
Federated Department Stores, Inc. (N.D. Ohio)
Filene's Basement, Inc. (Mass.): 
In each of these large retail Chapter 11 bankruptcies, Sonnenschein represented certain of the debtor's officers in connection with their employment contracts, claims and other matters.  There was significant litigation regarding severance and other claims in these cases.

Zale Corporation (N.D. Tex.)
Bedmart, Inc. (N.D. Ill.): 
Sonnenschein represented petitioning creditors in these bankruptcy cases.  The Zale case was filed under Chapter 11. The Bedmart petition was filed under Chapter 7 and was heavily contested.  After an order for relief was entered in the Bedmart case, recoveries of certain transfers for the benefit of insiders were obtained by the trustee, which provided recovery for unsecured creditors.

In re Fortunoff (SDNY): 
We represent the primary second lien debtholder in these Chapter 11 cases of this jewelry and general merchandise chain.  A sale was noticed for the first month of the cases and permits both going concern bidders and liquidators to submit bids.

In re Hancock Fabrics, Inc. (Del.): 
We represent the official committee of equity security holders in these Chapter 11 cases.  The debtors are among the leading national retailers in the fabric, decorating and home design business, and operated more than 400 stores in 48 states as of the filing date.

Carter Hawley Hale (C.D. Cal.):
We represented Prudential Insurance Company of America in connection with several million dollars of mortgage debt on many of the retail stores in this chain. 

Federated Department Stores, Inc. (N.D. Ohio): 
We represented Montgomery Ward in its acquisition of a leasehold from the Federated Department Stores bankruptcy estate.  In these cases there was extensive litigation regarding use clauses and regarding the tenant mix and balance.

Montgomery Ward (Del.): 
We represented acquirers of leasehold interests under a designation rights agreement in the second Chapter 11 case of Montgomery Ward.

Rufus, Inc. (Del.): 
We represented equity holders of this retailer.  The Chapter 11 plan ultimately adopted in this case provided the equity holders with an interest in the debtor's acquirer. 

Musicland Holding Corp. (New York, NY):
Prior to joining the firm, a member of our practice served as counsel to a major motion picture studio.  The studio had a multi-million dollar secured second lien claim and also required defense of a preference and fraudulent transfer adversary proceeding, which sought recovery of over $5 million.  This adversary proceeding was ultimately settled for a few hundred thousand dollars.

Tower Records (Three A Holdings LLC) (Wilmington, Delaware)
Valley Media, Inc. (Wilmington, Delaware)
In both of these cases, a member of our firm served as counsel to a second lien holder with respect to enforcement of the lien and related issues.