Representation: Crown American Corporation
Bankruptcy – Western District of Pennsylvania
Situation: Glosser Bros., Inc. operated more than 70 discount department stores in Pennsylvania and four surrounding states. Because of debts incurred from a leveraged buy-out and a retailing downturn, Glosser Bros., Inc. filed a Chapter 11 petition.
Crown American Corporation, holding nine of Glosser Bros., Inc.’s mall store leases, hired Bernstein and Bernstein, P.C. to protect its interests as landlord and major creditor.
Just before and after filing, the debtor closed almost 40 stores but kept open eight of the Crown American Corp. stores which were among the most profitable and possibly the most valuable leases in the chain. Crown American Corp. became concerned that a potential Glosser Bros., Inc. buyer would change the character of the stores and interfere with Crown American Corp. mall tenant mixes.
Action: Bernstein and Bernstein, P.C. assisted Crown American Corp. in developing a strategy for the company to buy Glosser Bros., Inc. by paying creditors more than they were originally offered, allowing Crown American Corp. to continue existing operations and protect its shopping centers. Substantial litigation and maneuvers followed, including litigation over the assumption of leases, as well as Crown’s requests for permission to file its plan.
While Glosser Bros., Inc. still maintained the exclusive right to propose a plan of reorganization, Bernstein and Bernstein, P.C. and its client utilized an aggressive approach. Filing a motion to have the court terminate the debtor’s exclusive right would have allowed Crown American Corp. to submit its own plan. Second, writing to all 2700 creditors, outlining reasons for opposing the debtor’s plan and urging them to vote it down, which would have allowed Crown to file its plan.
Crown American Corp. posted a $28 million letter of credit with the creditors’ committee as proof of intent to pursue its plan. The strategy developed by Bernstein and Bernstein, P.C. and Crown American Corp. resulted in: the third party buyer agreeing to certain conditions required by Crown American Corp. controlling the manner in which Glosser Bros., Inc. would continue operations in the Crown American Corp. malls; creditors receiving more than the buyer’s original offer; and Glosser Bros., Inc. assuming major Crown American Corp. leases, curing all defaults and delinquencies.
