Tough times for many retailers is prompting their landlords to consider new solutions to the risk of failing firms.
Mall owners are considering becoming lenders to struggling retailers to help them stay in business while providing the landlords with a greater say in any restructuring plan that may be necessary.
Boutique bank PJ Solomon has been talking to several mall owners in the US regarding retailer Forever 21, Inc. according to Bloomberg sources.
The plan would be to convert rent and other liabilities into secured debt to give them time to turn things around and avoid court. If they subsequently go bust, landlords’ position as lenders would give them higher priority in bankruptcy proceedings including a stronger say in restructuring.
Other options that landlords have pursued previously include buying the failing retailer outright.
“Unless the landlords are going to repurpose their properties altogether, they still have to capture the greatest value they can from retail tenants,” said Scott Stuart, chief executive officer of industry group Turnaround Management Association told Bloomberg. “If they can get creative about keeping the stores open, it may be a win-win situation.”