Stub Rent in Bankruptcy: Optimizing Cash Flow; Enforcing Payment; Navigating the Administrative Claims Process

This CLE webinar will discuss the continuing circuit court split over the payment of stub rent under a commercial lease of real property and how the way a jurisdiction treats stub rent affects bankruptcy strategy and pressure points for debtors and landlords. The panel will also discuss the importance of monitoring trends and changes in how courts interpret and apply the rules for stub rent.

"Stub rent" refers to the rent owed to a landlord between the petition date and the next date rent is due. Courts remain split on whether stub rent is a post-petition obligation that must be paid in a timely manner under Bankruptcy Code Section 365(d)(3) or whether stub rent is a pre-petition obligation that can be treated as a priority administrative claim under Section 503(b)(1) and not paid, if at all, until plan consummation. For debtors with a lot of leases—franchises, retail and restaurant business, data centers—stub rent may significantly affect cash flow. Whether to file in a "billing date" or "proration" jurisdiction is often an important consideration in venue selection. 

Landlords left to assert administrative claim status for stub rent are not guaranteed payment. They still have to navigate the administrative claims process, compete with other administrative claimants, stay vigilant against the granting of administrative expense priority in sale, DIP, and other orders, and be prepared for reduced or subordinated claims under other Bankruptcy Code provisions. Landlords may owe significant obligations and covenants to their own secured lenders and other third parties that need protecting from aggressive DIP lenders.

Listen as our expert panel discusses the ongoing split about stub rent, including recent decisions, such as In re Rite Aid and the order in In re TRP Brands L.L.C., as well as recent maneuvers in In re SAKS Global Enterprises L.L.C.,  and offers practical guidance for managing stub rent in bankruptcy.