Spero Quoted in LIBN ArticleNovember 6, 2018 |
Matt Spero was quoted in a Long Island Business News article, “When Big Retailers Go Bankrupt.” The article discusses the impact large companies declaring bankruptcy has on Long Island vendors and others.
“When you are dealing with these mega retailers, and the landlord has an interest in obtaining an anchor tenant for a shopping center, it can make it more difficult,” said Spero.
“When a landlord gets a ‘good guy guarantee’ from the retailer’s principals, the principals agree that if the company is in default and has to vacate the premises, that they will cooperate and not force the landlord to evict them,” Spero said. “The principals guarantee, ‘we’ll be good guys in that situation; we will peacefully surrender the premises. If not, we’ll be on the hook for some money to you.’ That’s fairly common. You can also request a guarantee of payment from the principals. If the lease is in default, you have a second source that you can look to if the tenant can’t pay.”
“There are insurance policies out there that offer protection in case the vendor sells goods to a buyer and the buyer goes out of business.”
“There’s the right of reclamation under the New York Uniform Commercial Code, which allows the seller to make a demand on the buyer that the seller can reclaim goods. But the buyer might ignore the demand and perhaps the goods have been comingled with other goods and it’s impossible to put the genie back in the bottle.”
“The first thing the vendor should do if the buyer files for bankruptcy is file a proof of claim in the bankruptcy case, so it goes on record that the vendor is owed a specific amount. That’s a powerful tool to have, the seller of goods needs to be aware and go on record and assert that claim,” said Spero.
“When a retailer declares bankruptcy, a vendor may breathe easier knowing that it received payments from the retailer before the filing. But not so fast: ‘any payments received by the vendor within 90 days of the buyer filing for bankruptcy are subject to claw-back claims.’ The thinking is, the debtor is presumed by law to be insolvent during that time and paying some creditors but not others. It’s not really fair that some got paid and others didn’t. Maybe some creditors exerted undue pressure. The fairest thing to do is claw back the money to the bankrupt estate to redistribute it to all creditors,” Spero informed.