Lucky’s committee raises concerns about purpose of store lease sales

By Caroline Salls

Pittsburgh, March 30 – Lucky’s Market Parent Co., LLC’s official committee of unsecured creditors objected to the proposed sale of the company’s leases, arguing that the sale only benefits the Kroger Co., Lucky’s largest shareholder and pre-bankruptcy secured creditor, according to a Saturday filing with the U.S. Bankruptcy Court for the District of Delaware.

“The committee supports any sale that will result in a demonstrated, tangible economic benefit to the debtors’ estates, even if it will also benefit the debtors’ insiders by, for example, reducing such insider’s potential exposure on its lease guarantees,” the objection said.

“What the committee cannot support, however, is the debtors seeking court approval of a sale that has no or, even worse, negative economic value to the debtors’ estates, with the principal purpose of the transaction being to benefit the insider on its guarantee to the detriment of the debtors’ estates.”

Based on recent discussions with Lucky’s professionals, the committee said the principal purpose of the sale transactions appears to be to get Kroger off of its guaranty of the lease being sold.

In addition, the creditor group said now that the auction of Lucky’s vacant store leases has occurred, there is no justification, particularly in the present Covid-19 economic environment, for the company to continue to use estate funds to pay rent for empty stores “for which no credible offers have been received since January.”

“The debtors should not hope-and-pray that someone might come along in the next few months and offer to buy a vacant store lease to release Kroger from its lease guaranty,” the objection said.

As a result, the committee said the sale order should require any vacant store lease that is not being sold as of the sale hearing or subject to an existing bona fide offer to be deemed rejected as of March 31.

Lucky’s is a Niwot, Colo.-based supermarket operator. The company filed bankruptcy on Jan. 27 under Chapter 11 case number 20-10166.

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