Sale/Leaseback Transaction in Bankruptcy

• Client: Owner participant in sale/leaseback
• Date: Nov 20, 2009
• Location:

Summary:

Schiff Hardin represented the owner participant in the sale/leaseback of 18 stores located in 15 states having as the tenant a national retailer whose bankruptcy filing resulted in the rejection by the tenant of 10 of the leases. Each of the loans on the 10 properties whose leases were rejected went into default without the rental income from the tenant.

The owner participant and trustee for the benefit of the certificate holders negotiated a workout of the defaulted loans. The owner participant purchased three of the loans from the trustee at a discount in exchange for the transfer of the equity interests in the remaining seven properties to the trustee. With respect to the three properties purchased by the owner participant, we then represented the owner participant in connection with the lease of one property to a national retailer and the sale of the other two properties.

Complicating the initial workout of the loans was that in the original sale/leaseback transaction structure, the owner participant owned a 30-year estate for years (with an option to purchase the remainder) and a third party owned the remainder interest.