Case MFW Doc 1818 Filed 05/12/16 Page 1 of 5 UNITED STATES BANKRUPCTY COURT DISTRICT OF DELAWARE. Chapter 11

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1 Case MFW Doc 1818 Filed 05/12/16 Page 1 of 5 UNITED STATES BANKRUPCTY COURT DISTRICT OF DELAWARE In re: Sports Authority Holdings, Inc., et al., Debtors. Chapter 11 Case No (MFW) (Jointly Administered) Related to Docket No. 106 PB IL OREO, LLC S LIMITED OBJECTION TO DEBTORS 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 , AND , 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, (II) THE ASSUMPTION AND ASSIGNMENT OF CERTAIN EXECUTORY CONTRACTS AND UNEXPIRED LEASES, AND (III) RELATED RELIEF PB IL OREO, LLC ( PB IL ) hereby files its limited objection (the Objection ) to the Debtors 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 , and , 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,

2 Case MFW Doc 1818 Filed 05/12/16 Page 2 of 5 Encumbrances, and Other Interests, (II) the Assumption and Assignment of Certain Executory Contracts and Unexpired Leases, and (III) Related Relief [Docket No. 106] (the Sale Motion ), filed by the above-captioned debtors and debtors in possession (the Debtors ). In support of the Objection, PB IL respectfully states as follows: OBJECTION 1. On March 2, 2016 (the Petition Date ), 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 (the Court ). 2. 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. PB IL is the owner of real property located at the northeast corner of 48th Street and Ray Road in the City of Phoenix, County of Maricopa, and State of Arizona, commonly known as 4820 East Ray Road (the Premises ). One of the Debtors, TSA Stores, Inc. ( TSA ), leases retail space at the Premises pursuant to that certain Shopping Center Lease (the Lease ) dated December 17, 2007 by and between ABS SW Investors, LLC and TSA. PB IL is currently the holder of all rights under the Lease. 4. On March 2, 2016, the Debtors filed the Sale Motion. On April 14, 2016, the Court granted certain procedures related to the Sale Motion, which noted that the Lease associated with the Premises would be sold pursuant to the Bid Procedures Closing Store Leases [Docket No. 1186, pg ] (the Bid Procedures ). On May 3, 2016, the Debtors filed their Notice of Bidding Results, Adjourned Closing Store Lease Auction, and Status of Closing Store Leases [Docket no.1691] (the Bidding Results ). The Premises is listed on Exhibit B of , v. 1 2

3 Case MFW Doc 1818 Filed 05/12/16 Page 3 of 5 the Bidding Results, indicating that the Lease would be subject to competitive bidding in connection with the Main Auction on May 16, As of the date hereof, the Debtors have not notified PB IL of the identity of any purchaser of the Lease and have not provided adequate assurance of such purchaser s future performance under the Lease. 6. Section 365(f)(2)(B) of the Bankruptcy Code permits the assignment of a lease only if, among other things, adequate assurance of future performance by the assignee of such contact or lease is provided. The Debtors bear the burden of proving adequate assurance of future performance in connection with the potential assumption and assignment of the Lease. In re F.W. Restaurant Assoc., Inc., 190 B.R. 143 (Bankr. D. Conn. 1995). While the Bankruptcy Code does not define adequate assurance, it is typically determined by considering factors of future performance under 365(b), including sufficient economic backing, economic conditions, certificates, credit reports, escrow deposits, or other similar forms of security or guarantee. In re Lafayette Radio Electronics Corp., 9 B.R. 993, 998 (Bankr. E.D.N.Y. 1981); In re Belize Airways, 5 B.R. 152 (Bankr. S.D. Fla. 1980). 7. Furthermore, because the Lease is a shopping center lease, the Bankruptcy Code requires more than the basic adequate assurance of future performance. In re Arden and Howe Associates, Ltd., 152 B.R. 971, 976 (Bankr. E.D. Cal. 1993); 11 U.S.C. 365(b)(1)(C). Such heightened adequate assurance requirements include adequate assurance-- (A) of the source of rent and other consideration due under such lease, and in the case of an assignment, 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; (B) that any percentage rent due under such lease will not decline substantially; , v. 1 3

4 Case MFW Doc 1818 Filed 05/12/16 Page 4 of 5 11 U.S.C. 365((b)(3). (C) that assumption or assignment of such lease is subject to all the provisions thereof, including (but not limited to) provisions such as a radius, location, use, or exclusivity provision, and will not breach any such provision contained in any other lease, financing agreement, or master agreement relating to such shopping center; and (D) that assumption or assignment of such lease will not disrupt any tenant mix or balance in such shopping center. 8. To date, the Debtors have not satisfied any of the adequate assurance requirements necessary to assume and assign Lease. PB IL has not been provided any information concerning the proposed assignee or its ability to make the payments under the Lease. 9. Because PB IL does not have any information necessary to make an informed decision as to a potential assignment and assumption of the Lease, it hereby objects to the assignment and assumption of the Lease. RESERVATION OF RIGHTS 10. PB IL reserves the right to raise additional grounds for relief requested in this Objection if the Debtors can locate a purchaser for the Lease, including, without limitation, to raise arguments as to the ability of any purchaser of the Lease to provide adequate assurance of future performance under the Lease , v. 1 4

5 Case MFW Doc 1818 Filed 05/12/16 Page 5 of 5 WHEREFORE, PB IL requests that this Court enter an order (a) denying the Sale Motion to the extent that it contemplates assumption and assignment of the Lease without first providing adequate assurance of future performance pursuant to section 365 of the Bankruptcy Code; and (b) granting PB IL such other and further relief as this Court deems just and appropriate under the circumstances. Dated: May 12, 2016 GOLDSTEIN & MCCLINTOCK, LLLP /s/ Maria Aprile Sawczuk Maria Aprile Sawczuk (No. 3320) 1201 North Orange Street, Suite 7380 Telephone: (302) Facsimile: (302) marias@restructuringshop.com Attorneys for PB IL OREO, LLC , v. 1 5

6 Case MFW Doc Filed 05/12/16 Page 1 of 2 CERTIFICATE OF SERVICE I, Maria Aprile Sawczuk, hereby certify that on this 12th day of May, 2016, in addition to the service provided under the Court s CM/ECF system, I caused true and correct copies of the foregoing PB IL OREO, LLC s Limited Objection to Debtors 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 , and , 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, (II) the Assumption and Assignment of Certain Executory Contracts and Unexpired Leases, and (III) Related Relief to be served by first class United States mail, postage prepaid and addressed to the following parties: Robert A. Klyman, Esq. Matthew J. Williams, Esq. Jeremy L. Graves, Esq. Sabina Jacobs, Esq. Gibson, Dunn & Crutcher LLP 333 South Grand Avenue Los Angeles, CA (counsel for Debtors) Robert J. Feinstein, Esq. Jeffrey N. Pomerantz, Esq. Bradford J. Sandler, Esq. Pachulski Stang Ziehl & Jones LLP 919 North Market Street, 17th Floor (counsel for Committee) Donald E. Rothman, Esq. Riemer & Braunstein LLP Three Center Plaza Boston, MA (counsel for Bank of America, N.A) Michael R. Nestor, Esq. Kenneth J. Enos, Esq. Andrew L. Magaziner, Esq. Young Conaway Stargatt & Taylor, LLP Rodney Square 1000 North King Street (counsel for Debtors) Hannah McCollum, Esq. United States Trustee s Office 844 King Street, Suite 2207 Lockbox 35 Robert J. Stark, Esq. Bennett S. Silverberg, Esq. Brown Rudnick LLP Seven Times Square New York, NY (counsel for Wilmington Savings Fund Society, FSB and certain Term Lenders) , v. 1 6

7 Case MFW Doc Filed 05/12/16 Page 2 of 2 Kevin J. Simard, Esq. Choate, Hall & Stewart LLP Two International Place Boston, MA (counsel for Wells Fargo Bank) John J. Rapisardi, Esq. O Melveny & Meyers LLP 7 Times Square Broadway New York, NY (counsel for certain Senior Subordinated Noteholders) Dated: May 12, 2016 /s/ Maria Aprile Sawczuk Maria Aprile Sawczuk (DE Bar No. 3320) , v. 1 7