Case 16-10527-MFW Doc 1167 Filed 04/14/16 Page 1 of 5 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: SPORTS AUTHORITY HOLDINGS, INC., et al. 1 Debtors. Chapter 11 Case No. 16-10527 (MFW) (Jointly Administered) Requested Hearing Date: 4/26/16 at 11:30 a.m. Requested Objection Deadline: 4/21/16 at 12:00 p.m. MOTION OF SHOPS AT BELLA TERRA OWNER, LP FOR ENTRY OF AN ORDER COMPELLING THE DEBTORS TO PAY STUB RENT FOR CLOSING STORE PURSUANT TO 11 U.S.C. 363(e) AND GRANTING RELATED RELIEF Shops at Bella Terra Owner, LP, successor in interest to MRPL Retail Partners, Ltd. ( Landlord ), landlord of the Sports Authority location at the Shops at Bella Terra Shopping Center in Fort Bend County, Texas, by its undersigned counsel, hereby submits this motion (the Motion ) to compel the above-captioned Debtors to pay the Stub Rent (as defined below) in an amount of not less than $37,906.01, for the Leased Premises (as defined below) pursuant to 11 U.S.C. 363(e). 2 In support of this Motion, Landlord respectfully states: BACKGROUND 1. On March 2, 2016 (the Petition Date ), the above-captioned debtors (the Debtors ) filed voluntary petitions for relief under chapter 11 of title 11 of the United States Code (the Bankruptcy Code ) in the United States Bankruptcy Court for the District of Delaware (this Court ). 1 The Debtors and the last four digits of their respective taxpayer identification numbers are as follows: Sports Authority Holdings, Inc. (9008); Slap Shot Holdings, Corp. (8209); The Sports Authority, Inc. (2802); TSA Stores, Inc. (1120); TSA Gift Card, Inc. (1918); TSA Ponce, Inc. (4817); and TSA Caribe, Inc. (5664). The headquarters for the above-captioned Debtors is located at 1050 West Hampden Avenue, Englewood, Colorado 80110. 2 The Debtors have also failed to pay rent to Landlord for the month of February 2016. Nothing herein shall act as a waiver of amounts due and owing for such unpaid rent.
Case 16-10527-MFW Doc 1167 Filed 04/14/16 Page 2 of 5 2. Upon information and belief, the Debtors are operating their businesses and managing their properties as debtors-in-possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. 3. Landlord is the owner of certain real property in which the Debtors lease retail space (the Leased Premises ) pursuant to that certain Shopping Center Lease Between MRPL Retail Partners, Ltd. and TSA Stores, Inc. for Premises Located in the Shops at Bella Terra Shopping Center, Fort Bend County, Texas dated April 14, 2011, as the same may have been amended from time to time (the Lease ). 3 4. The Leased Premises are located in a shopping center as that term is used in section 365(b)(3) of the Bankruptcy Code. See In re Joshua Slocum, Ltd., 922 F.2d 1081, 1086-87 (3d Cir. 1990). 5. On March 2, 2016, the Debtors filed their Motion Pursuant to Sections 105, 363 and 365 of the Bankruptcy Code, Fed. R. Bankr. P. 2002, 6003, 6004, 6006, 9007, 9008 and 9014 and Del. Bankr. L.R. 2002-1, 6004-1 And 9006-1, for Entry of (A) an Order (I) Approving Bid Procedures in Connection with the Sale of Substantially All of the Debtors Assets, (II) Scheduling an Auction for and Hearing to Approve Sale of Assets, (III) Approving Notice of Respective Date, Time and Place for Auction and for Hearing on Approval of Sale, (IV) Approving Procedures for the Assumption and Assignment of Certain Executory Contracts and Unexpired Leases, (V) Approving Form and Manner of Notice Thereof, and (VI) Granting Related Relief; and (B) an Order Authorizing and Approving (I) the Sale of Substantially All of the Debtors Assets Free and Clear of Liens, Claims, Rights, Encumbrances, and Other Interests, 3 A copy of the Lease is attached hereto as Exhibit A. DAL:937437.2 2
Case 16-10527-MFW Doc 1167 Filed 04/14/16 Page 3 of 5 (II) the Assumption and Assignment of Certain Executory Contracts and Unexpired Leases, and (III) Related Relief (Docket No. 106) (the Bid Procedures Motion ). 6. Landlord asserts that the Debtors are responsible for payment of rent for the period of March 2 - March 31, 2016 (the Stub Rent ) for the use and occupancy of the Leased Premises, specifically Stub Rent for the Bella Terra location where the Debtors are conducting store closing sales (the Closing Sales ) pursuant to the Bid Procedures Motion. 7. The Debtors have failed to pay Stub Rent to Landlord for the use and occupancy of the Leased Premises, and have not made any provisions in their proposed postpetition financing budget for the payment of such Stub Rent. For the following reasons, the Debtors should be immediately compelled to pay the Stub Rent due and owing to Landlord under the Lease. RELIEF REQUESTED 8. Section 363(e) of the Bankruptcy Code guarantees adequate protection to any party with an interest in property used by a debtor during the debtor s bankruptcy proceedings who makes a request for adequate protection: 11 U.S.C. 363(e). Notwithstanding any other provision of this section, at any time, on request of an entity that has an interest in property used, sold or leased, or proposed to be used, sold, or leased, by the trustee, the court, with or without a hearing, shall prohibit or condition such use sale, or lease as is necessary to provide adequate protection of such interest. 9. Section 363(e) is straightforward and non-discretionary. If a creditor with an interest in property used by the debtor makes a request for adequate protection, then the court shall prohibit or condition the use of such property on the provision of adequate protection. 11 U.S.C. 363(e); see In re WorldCom, Inc., 304 B.R. 611 (Bankr. S.D.N.Y. 2004); DAL:937437.2 3
Case 16-10527-MFW Doc 1167 Filed 04/14/16 Page 4 of 5 see also In re Metromedia Fiber Network, Inc., 290 B.R. 487, 491 (Bankr. S.D.N.Y. 2003) ( Section 363(e) is not permissive or discretionary ). 10. The Supreme Court has held that the term interest is the most general term that can be employed to denote a right, claim, title, or legal share in something. Russello v. U.S., 464 U.S. 16, 21 (1983). 11. A landlord undeniably holds an interest in the property that it owns and leases to a debtor, as well as an interest in the lease itself, the rents due under that lease, and the proceeds of the lease. See In re Ames Department Stores, Inc., 136 B.R. 357, 359 (Bankr. S.D.N.Y. 1992) ( Section 363(e) of the Bankruptcy Code reserves for bankruptcy courts the discretion to condition the time, place and manner of Store Closing Sales, thereby providing adequate safeguards to protect shopping center landlords and their other tenants, while allowing the Trustee to fulfill its fiduciary obligations ). 12. Where an estate may be administratively insolvent, as may be the case here, the court may provide landlords with adequate protection under Section 363(e). See In re Goody s Family Clothing, Inc., 610 F.3d 812, 819 (3d Cir. 2010). Section 361(3) is clear that adequate protection may not take the form of a deferred administrative claim. See 11 U.S.C. 361(3). Under section 361 of the Bankruptcy Code, only a contemporaneous transfer of value satisfies the requirements of adequate protection. Id. Such adequate protection should take the form of immediate cash payments for post-petition use of the Leased Premises. See id.; In re Kellstrom Indus., Inc., 282 B.R. 787, 794 (Bankr. D. Del. 2002). 13. The Debtors have already announced their intention to sell substantially all of their assets, and deliver essentially all of the sale proceeds to their secured lenders. Facing the complete depletion of the Debtors estates by their secured lenders, adequate protection for the DAL:937437.2 4
Case 16-10527-MFW Doc 1167 Filed 04/14/16 Page 5 of 5 Debtors use of the Landlord s property outside of the ordinary course of business to liquidate their secured lenders collateral necessitates the immediate payment of the Stub Rent for the Leased Premises before any sale proceeds are distributed to the Debtors secured lenders. 14. Accordingly, Landlord requests that the Court compel the Debtors to pay the Stub Rent due and owing under the Lease to Landlord immediately. WHEREFORE, Landlord requests that this Court enter an order: (a) granting this Motion; (b) granting Landlord adequate protection and compelling the Debtor to immediately pay to Landlord the amount of not less than $37,906.01 for Stub Rent due under the Lease; and (c) granting Landlord such other and further relief as this Court deems just and appropriate under the circumstances. Dated: April 14, 2016 Wilmington, Delaware Respectfully submitted, /s/ Katherine Good L. Katherine Good (No. 5101) Chantelle D. McClamb (No. 5978) WHITEFORD, TAYLOR & PRESTON LLC The Renaissance Centre 405 N. King Street, Suite 500 Wilmington, DE 19801 Telephone:(302) 353-4144 Facsimile: (302) 661-7950 Email: kgood@wtplaw.com cmcclamb@wtplaw.com - and - Michelle V. Larson ANDREWS KURTH LLP 1717 Main Street, Suite 3700 Dallas, Texas 75201 Tel: (214) 659-4400 Fax: (214) 659-4401 Email: michellelarson@andrewskurth.com Counsel for Shops at Bella Terra Owner, LP DAL:937437.2 5
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Case 16-10527-MFW Doc 1167-2 Filed 04/14/16 Page 1 of 2 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: SPORTS AUTHORITY HOLDINGS, INC., et al. 1 Debtors. Chapter 11 Case No. 16-10527 (MFW) (Jointly Administered) NOTICE OF MOTIONS AND HEARING THEREON Requested Hearing Date: 4/26/16 at 11:30 a.m. Requested Objection Deadline: 4/21/16 at 12:00 p.m. PLEASE TAKE NOTICE that, on April 14, 2016, Shops at Bella Terra Owner, LP, successor in interest to MRPL Retail Partners, Ltd. (the Movant ) filed the Motion of Shops at Bella Terra Owner, LP for Entry of an Order Compelling the Debtors to Pay Stub Rent for Closing Store Pursuant to 11 U.S.C. 363(e) and Granting Related Relief (the Motion ) with the United States Bankruptcy Court for the District of Delaware (the Court ). PLEASE TAKE FURTHER NOTICE that, contemporaneously therewith, the Movant filed the Motion to Shorten Notice for Hearing and Objection Deadlines for the Motion of Shops at Bella Terra Owner, LP for Entry of an Order Compelling the Debtors to Pay Stub Rent for Closing Store Pursuant to 11 U.S.C. 363(e) and Granting Related Relief (the Motion to Shorten ). PLEASE TAKE FURTHER NOTICE that, pursuant to the Motion to Shorten, the Movant has requested that any responses or objections to the Motion be filed with the Court and served upon the undersigned counsel to the Movant no later than 12:00 p.m. (ET) on April 21, 2016 (the Objection Deadline ). 1 The Debtors and the last four digits of their respective taxpayer identification numbers are as follows: Sports Authority Holdings, Inc. (9008); Slap Shot Holdings, Corp. (8209); The Sports Authority, Inc. (2802); TSA Stores, Inc. (1120); TSA Gift Card, Inc. (1918); TSA Ponce, Inc. (4817); and TSA Caribe, Inc. (5664). The headquarters for the above-captioned Debtors is located at 1050 West Hampden Avenue, Englewood, Colorado 80110.
Case 16-10527-MFW Doc 1167-2 Filed 04/14/16 Page 2 of 2 PLEASE TAKE FURTHER NOTICE that, in the Motion to Shorten, the Movant has requested that the Motion be heard at the hearing scheduled for April 26, 2016 at 11:30 a.m. (ET) (the Hearing Date ) before the Honorable Mary F. Walrath, United States Bankruptcy Judge for the District of Delaware, 824 Market Street, 5 th Floor, Courtroom 4, Wilmington, Delaware 19801. PLEASE TAKE FURTHER NOTICE that, if the Court denies the relief requested in the Motion to Shorten, you shall receive a further notice regarding the hearing date and objection deadline. Dated: April 14, 2016 Wilmington, Delaware Respectfully submitted, /s/ Katherine Good L. Katherine Good (No. 5101) Chantelle D. McClamb (No. 5978) WHITEFORD, TAYLOR & PRESTON LLC The Renaissance Centre 405 N. King Street, Suite 500 Wilmington, DE 19801 Telephone:(302) 353-4144 Facsimile: (302) 661-7950 Email: kgood@wtplaw.com cmcclamb@wtplaw.com - and - Michelle V. Larson ANDREWS KURTH LLP 1717 Main Street, Suite 3700 Dallas, Texas 75201 Tel: (214) 659-4400 Fax: (214) 659-4401 Email: michellelarson@andrewskurth.com Counsel for Shops at Bella Terra Owner, LP.