Case 16-10527-MFW Doc 1887 Filed 05/13/16 Page 1 of 5 IN THE UNITED 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 Related D.I. No. 1210, 1464 & 1752 SUPPLEMENTAL OBJECTION OF KMART CORPORATION TO (I) DEBTORS NOTICE OF POSSIBLE ASSUMPTION AND ASSIGNMENT OF CERTAIN EXECUTORY CONTRACTS AND UNEXPIRED LEASES IN CONNECTION WITH SALES AND (II) TO ENTRY OF PROPOSED MAIN SALE ORDER; AND JOINDER TO SIMILAR LANDLORD OBJECTIONS Kmart Corporation ( Kmart ), by and through its undersigned counsel, files this Supplemental Objection ( Supplemental Objection ) to (i) the Debtors Notice Of Possible Assumption And Assignment Of Certain Executory Contracts And Unexpired Leases In Connection With Sales (the Cure Notice ) and (ii) entry of the Debtor s proposed Order, Pursuant to Sections 105, 363, and 365 of the Bankruptcy Code, (1) Approving Sale of All Acquired Assets; (ii) Authorizing the Assumption, Assignment, and Transfer of the Debtors Interest in Executory Contracts and Unexpired Leases; and (iii) Granting Related Relief [D.I. 1752] ( Proposed Main Sale Order ), and Joinder to Similar Landlord Objections, and in support thereof respectfully states as follows: 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. 1
Case 16-10527-MFW Doc 1887 Filed 05/13/16 Page 2 of 5 BACKGROUND 1. On March 2, 2016 ( Petition Date ), the above-captioned debtors and debtors-inpossession (collectively, the Debtors ) filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code ( Bankruptcy Code ). 2. Kmart is the landlord of certain properties that are subject to subleases with debtor TSA Stores, Inc. ( TSA ) and debtor The Sports Authority, Inc. 3. More particularly, Kmart and TSA entered into a sublease, as may have been thereafter amended from time to time, for premises located in the Royal Eagle Plaza Shopping Center, Coral Springs, Florida dated March 21, 2012 (Store No. 31982) (the Coral Springs Lease ). 4. In addition, Kmart and The Sports Authority, Inc. entered into a Sublease Agreement dated September 18, 1992 in connection with property located in Suffolk County, New York (Store No. 03862), which Sublease Agreement was amended from time to time, including but not limited to that certain First Amendment to Sublease between Kmart and TSA as successor to The Sports Authority, Inc. (the Bohemia Lease and, collectively with the Coral Springs Lease, the Kmart Leases ). 5. On or about April 14, 2016, the Court entered the Order (A) Approving Bidding Procedures in Connection with (I) The Sale of Substantially All of the Debtors Assets and (II) the Transfer, Assumption and Assignment of Certain Unexpired Leases of Nonresidential Real Property; (B) Scheduling Separate Auctions For and Hearings to Approve the Sale of Assets and Unexpired Leases of Nonresidential Real Property Subject to the Debtors Store Closing Plan; (C) Approving Notice of Respective Date, Time and Place for Auctions and for Hearings on Approval of Respective Sales; (D) Approving Procedures for the Assumption and 2
Case 16-10527-MFW Doc 1887 Filed 05/13/16 Page 3 of 5 Assignment of Certain Executory Contracts and Unexpired Leases in Connection With the Sales; (E) Approving Form and Manner of Notice Thereof; and (F) Granting Related Relief, [D.I. No. 1186] in connection with certain of the Debtors leases that the Debtors are attempting to assume and assign to the highest bidder. 6. On April 28, 2016 Kmart filed its objection to the Debtors proposed cure amounts [D.I. 1464] (the Cure Objection ) 2. To date, no order has been entered by the Court fixing the proposed cure amounts with respect to the Kmart Leases. 7. On May 6, 2016, the Debtors filed the Proposed Main Sale Order as directed by the Bid Procedures Order. 8. The Proposed Main Sale Order does not require the payment of cure amounts upon any assumption and assignment of the Kmart Leases. Instead, it provides that the Buyers shall promptly pay the Cure Amounts (Proposed Main Sale Order, 24). Kmart submits, however, that all undisputed cure amounts should be paid upon assumption and assignment of the Kmart Leases pursuant to Section 365(b)(1) of the Bankruptcy Code, while any disputed cure amounts should be escrowed and paid to Kmart upon agreement of the Debtors and Kmart, or upon further Court order. 9. Paragraph 25 of the Proposed Main Sale Order provides: The Cure Amounts with respect to the Assigned Agreements set forth on Exhibit B attached hereto are hereby approved in the amounts specified in the column identified as Cure Amount in the row for each such Assigned Agreement in such exhibit, which supersede any Cure Amounts listed in any Potential Assumption and Assignment Notice with respect to such Assigned Agreements. Notably, however, Exhibit B to the Proposed Main Sale Order as filed is blank. 2 Capitalized terms not defined herein shall have the meanings ascribed to them in the Objection. 3
Case 16-10527-MFW Doc 1887 Filed 05/13/16 Page 4 of 5 10. Any order authorizing the assumption and assignment of the Coral Springs Lease and the Bohemia Lease should provide that such assumption and assignment is subject to all of the terms of those leases, including, among other relief, satisfaction, in full, of the cure amounts due and any restrictions on use of the premises and hours of operation. 11. Kmart hereby joins in similar objections filed by other landlords of the Debtors regarding the Debtors Assumption and Assignment Notice and entry of the Proposed Main Sale Order. Furthermore, because no order has been entered fixing the Coral Springs Cure Amount and the Bohemia Cure Amount, Kmart specifically reserves its rights to supplement or amend its Cure Objection. 12. Kmart also reserves its right to contest the assumption and assignment of the Coral Springs Lease and the Bohemia Lease due to the Debtors failure to timely provide adequate assurance of future performance. 13. Kmart further reserves the right to object to any other relief sought by the Debtors in connection with the proposed asset sale or the assumption and assignment of the Coral Springs Lease and the Bohemia Lease, including the ultimately successful purchaser s proposed adequate assurance. CONCLUSION WHEREFORE, Kmart respectfully requests that the Court enter an order: (i) Denying entry of the Proposed Main Sale Order and directing the Debtors to pay the Coral Springs Cure Amount and the Bohemia Cure Amount, plus any additional rent, charges and expenses that may accrue through and including the date of assumption or assumption and assignment of the Coral Springs Lease and the Bohemia Lease; 4
Case 16-10527-MFW Doc 1887 Filed 05/13/16 Page 5 of 5 (ii) Requiring the Debtors (and Buyer(s)) to provide adequate assurance of future performance under the Coral Springs Lease and the Bohemia Lease; and (iii) Such other and further relief as the Court deems just and proper. Dated: May 13, 2016 FOX ROTHSCHILD LLP By: /s/l. John Bird L. John Bird (DE No. 5310) Citizens Bank Center 919 North Market Street, Suite 300 Wilmington, DE 19801 Telephone: (302) 654-7444 Facsimile: (302) 656-8920 -and- Richard M. Meth, Esq. FOX ROTHSCHILD LLP 75 Eisenhower Parkway, Suite 200 Roseland, New Jersey 07068-1600 Telephone: 973-994-7515 Facsimile: 973-992-9125 rmeth@foxrothschild.com 5
Case 16-10527-MFW Doc 1887-1 Filed 05/13/16 Page 1 of 3 CERTIFICATE OF SERVICE I hereby certify that on the 13 th day of May, 2016, I caused copies of the foregoing Supplemental Objection Of Kmart Corporation To (I) Debtors Notice Of Possible Assumption And Assignment Of Certain Executory Contracts And Unexpired Leases In Connection With Sales And (II) To Entry Of Proposed Main Sale Order; And Joinder To Similar Landlord Objections to be served upon the parties on the annexed service list as noted thereon. /s/ L. John Bird L. John Bird (DE No. 5310) 05/13/2016
Case 16-10527-MFW Doc 1887-1 Filed 05/13/16 Page 2 of 3 Via Email & First Class Mail: Michael R. Nestor Andrew J. Magaziner YOUNG CONAWAY STARGATT & TAYLOR, LLP Rodney Square 1000 North King Street Wilmington, DE 19801 Email: mnestor@ycst.com; amagaziner@ycst.com Counsel to the Debtors Robert A. Klyman Matthew J. Williams GIBSON, DUNN & CRUTCHER LLP 333 South Grand Avenue Los Angeles, CA 90071-1512 Email: rklyman@gibsondunn.com; mjwilliams@gibsondunn.com Counsel to the Debtors SERVICE LIST Bradford J. Sandler, Esq. Robert J. Feinstein, Esq.;& Jeffery N. Pomerantz, Esq. PACHULSKI STANG ZIEHL & JONES LLP 919 N. Market Street, 17th Floor Wilmington, DE 1980 Email: bsandler@pszjlaw.com; rfeinstein@pszjlaw.com; jpomerantz@pszjlaw.com Proposed Counsel to the Committee Donald E. Rothman, Esq. RIEMER & BRAUNSTEIN LLP Three Center Plaza Boston, Massachusetts 02108 Email: drothman@riemerlaw.com Counsel to Bank of America, N.A., in its capacity as (A) DIP Agent under the proposed Debtor-in-Possession Credit Agreement, and (B) Administrative Agent and Collateral Agent under the Second Amended and Restated Credit Agreement, dated as of May 17, 2012 Robert J. Stark, Esq. and Bennett S. Silverberg, Esq. BROWN RUDNICK LLP Seven Times Square New York, NY 10036 Email: rstark@brownrudnick.com; bsilverberg@brownrudnick.com Counsel to (A) Wilmington Savings Fund Society, FSB as Administrative Agent and Collateral Agent under the May 3, 2006 Amended and Restated Credit Agreement and November 16, 2010 amended and restated and (B) certain Term Lenders under the May 3, 2006 Amended and Restated Credit Agreement and amended and restated November 16, 2010
Case 16-10527-MFW Doc 1887-1 Filed 05/13/16 Page 3 of 3 Kevin J. Simard, Esq. CHOATE, HALL & STEWART LLP Two International Place Boston, Massachusetts 02110 Email: ksimard@choate.com Counsel to Wells Fargo Bank, National Association, in its capacity as FILO Agent under the Second Amendment to Second Amended and Restated Credit Agreement, dated as of November 3, 2015 John J. Rapisardi, Esq. O MELVENY & MEYERS LLP 7 Times Square Broadway, New York, NY 10036 Email: jrapisardi@omm.com Counsel for certain holders of 11.5% Senior Subordinated Notes Due February 19, 2018 under the Securities Purchase Agreement, dated as of May 3, 2006 Via First Class Mail: Hannah J. McCollum, Esq. OFFICE OF THE UNITED STATES TRUSTEE for the District of Delaware 844 King Street, Suite 2207 Lockbox 35 Wilmington, DE 19801 U.S. Trustee