Do Bankrupt Retailers Deserve More Time?

Now that all of the Circuit City’s 560 stores are dark, landlords are trying to fill the spaces left behind. Some are finding success, like one firm we recently spoke with, the Blue Bell, PA-based Goldenberg Group, which leased a former Circuit City location to furniture chain Raymour & Flanigan in a Philadelphia shopping center.We’re not sure if there are a lot of stories like that across the country, but it’s not difficult to guess that the process of filling these vacancies is tough, given that virtually every large retailer has cut back its expansion plans. But what if Circuit City had more time to try to find a buyer or restructure?The National Retail Federation would like to make that possible and scratch a 210-day limit that retailers now have to cancel a lease after filing. This 2005 amendment to the bankruptcy law was created, in part, so that landlords wouldn’t have to wait for an extended period of time while a bankrupt retailer reorganized, often leaving a large chunk of a shopping center dark.The NRF argues that retailers need more time – in some cases a year or more – to reorganize their finances and see if underperforming stores can turn around. The organization says that the current system, which holds a company to a lease or allows a landlord to terminate the agreement doesn’t give stores enough time.Obviously, most landlords are going to fundamentally disagree with allowing the retailers more time. They want control over their shopping centers. But has the recession, which will surely bring more retailer bankruptcies this year, changed the playing field?