In The Bankruptcy Strategist case study “Lease Rejection in Shiekh Shoes,” David Kupetz and Asa Hami discuss the Shiekh Shoes Chapter 11 case and its successful use of power available under the Bankruptcy Code to reject leases for irreversibly unprofitable locations, negotiate favorable modification of leases to turn other stores profitable, and conduct store closing sales regardless of limitations imposed on such sales by non-bankruptcy law or leases.
“Key factors precipitating Shiekh’s Chapter 11 case were the need to close irreversibly unprofitable stores and reject the associated leases, and the need to modify terms of numerous store leases to allow the Shiekh the opportunity to become profitable,” wrote Kupetz and Hami. “Shiekh was not able to accomplish these needed lease modifications outside of Chapter 11. Throughout the Chapter 11 case, the company negotiated and obtained agreements with numerous landlords to beneficially modify lease terms, including rent reductions. The debtor also closed stores and rejected numerous leases and, at many of those locations, conducted store closing sales that were authorized by the court. Additionally, Shiekh assumed certain already profitable leases without modification.”
As of the effective date of its plan of reorganization (June 29, 2018), Shiekh continued to operate approximately 85 stores. Shiekh Shoes successfully exited from Chapter 11 bankruptcy in June 2018, and was represented by SulmeyerKupetz. The primary attorneys working on the case were David Kupetz, Asa Hami, Claire Wu, Jeff Pomerance and Steve Werth.
Read the full article here.