Landlords Say CraftWorks Owes Rent Despite Virus Shutdowns

Landlords for the bankrupt owner of Logan’s Roadhouse and other restaurants say the company must explain how it will pay the balance of March rent after the new coronavirus forced the company to close all its restaurants and its lenders cut off financing.

In a court filing Thursday, the landlords objected to CraftWorks Parent LLC’s proposal for financing, saying the company hadn’t changed how it was budgeting for stub rent despite “the monumentally altered circumstances,” caused by the public health crisis. Stub rent is the amount due from the day a bankruptcy petition is filed through the end of that month.

The objection came just days after CraftWorks asked the U.S. Bankruptcy Court for the District of Delaware for a 60-day “breathing spell” in response to the pandemic, and proposed alternative temporary procedures for the Chapter 11 case to minimize litigation and reduce expenses and professional fees.

The restaurant operator filed for Chapter 11 protection March 3 with plans to sell itself to its lenders, affiliates of Fortress Credit Co.

At the time, Fortress also pledged to provide the company’s debtor-in-possession financing, which included $23 million of new loans and a roll-up of up to $115 million of pre-petition debt.

However, after the outbreak of Covid-19, the disease caused by the new coronavirus, Fortress served CraftWorks with a notice of default and termination of the bankruptcy financing, CraftWorks said in its March 20 filing seeking temporary procedures.

As part of those proposed temporary measures, CraftWorks suggested that creditors first try to negotiate their disputes directly with the company before filing anything with the court.

Bankruptcy Judge Brendan L. Shannon said in guidance that he was “not inclined” to approve any measure that restrained creditors from seeking relief from the court.

“The burden imposed on creditors who are simply seeking to vindicate their rights is too great,” he said.

CraftWorks had 338 restaurant locations in 39 states, Washington, D.C., and Taiwan when it filed for bankruptcy.

The court will hold a hearing on the motion for temporary procedures March 30. The motion to consider financing is set for April 3.

The case is CraftWorks Parent, LLC, Bankr. D. Del., No. 20-10475, Objection filed 3/26/20.

For additional legal resources, visit Bloomberg Law In Focus: Coronavirus.