Levitz DIP request draws objection; landlord says direct lien violates leases

By Caroline Salls

Pittsburgh, Nov. 4 - Levitz Home Furnishings, Inc. landlord Developers Diversified Realty Corp. objected to the company's proposed $80 million debtor-in-possession financing from GE Capital and Prentice Capital Management, according to a Thursday filing with the U.S. Bankruptcy Court for the Southern District of New York.

According to Developers Diversified, the DIP motion, in direct violation of the terms of each of its leases with Levitz, grants the lenders a direct lien on the leases.

The objection said Levitz and the DIP lenders provide no justification as to why the direct lien is necessary, as opposed to having a lien on the proceeds from the disposition of the leases.

"More importantly, [Levitz provides] no statutory support that would authorize the court to violate an express provision in each of the leases, which provision, if violated, would put the landlord into default with its own lenders," Developers Diversified said in the objection.

A DIP approval hearing is scheduled for Tuesday.

Levitz, a Woodbury, N.Y., furniture retailer, filed for bankruptcy on Oct. 11. Its Chapter 11 case number is 05-45189.

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