Landlords Without Borders: Challenges In Canadian/U.S. Cross-Border Retail Restructurings

• Published date: 07 February 2022
• Law Firm: Kelley Drye & Warren LLP
• Author: Mr James S. Carr and Eloy Peral

By James S. Carr and Eloy A. Peral¹

As with its neighbor to the south, Canada faced an influx of retail insolvencies during the midst of the COVID-19 pandemic. For example, in 2020, Canadian-based clothing retailers such as the Aldo Group and Groupe Dynamite filed applications under the Canadian Companies' Creditors Arrangement Act (CCAA), Canada's equivalent to a chapter 11 case, and commenced chapter 15 proceedings in the U.S.² In 2021, the real estate segment of Sarku Japan, a Japanese quick-service restaurant chain, commenced a CCAA case and a chapter 15 proceeding, even though none of the debtors' 226 restaurants are located in Canada.³

A CCAA cross-border restructuring presents unique challenges for landlords in both the plenary CCAA case and the ancillary chapter 15 case. When a retailer chooses to restructure under the CCAA rather than chapter 11, a glaring problem for landlords is the lack of many of the unique rights and protections afforded to landlords, and in particular shopping center landlords, under ' 365 of the Bankruptcy Code. However, the CCAA is...