Razzoo's, Inc., the Texas-based restaurant chain, is facing pushback from one of its key landlords over a proposed bankruptcy financing arrangement that the landlord says unfairly shifts the burden of unpaid rent to property owners while the company seeks to reorganize.
Simon Property Group, L.P. and related entities filed an objection on October 27, 2025, in the U.S. Bankruptcy Court for the Southern District of Texas challenging the restaurant company's debtor-in-possession financing motion. The landlords argue that Razzoo's 13-week DIP budget, which runs through January 2, 2026, fails to include payments for "Stub Rent" covering the period from the company's October 1, 2025 bankruptcy filing through October 31, 2025.
The objection highlights a common tension in retail bankruptcies where landlords find themselves providing essential services to struggling tenants while facing uncertainty about rent payments. Razzoo's operates locations at Simon's Firewheel Town Center in Garland, Texas, and Concord Mills in Concord, North Carolina—both classified as shopping centers under federal bankruptcy law.
Timeline of Financial Distress
Razzoo's, Inc. and its parent company Razzoo's Holdings, Inc. filed for Chapter 11 bankruptcy protection on October 1, 2025, the same day they sought court approval for post-petition financing. After resolving an initial objection from First Horizon Bank, the court entered an interim order on October 7, 2025, authorizing First Horizon as the DIP lender.
However, the landlords' concerns intensified when Razzoo's filed an extension motion on October 16, 2025, seeking to delay payment of lease obligations through November 30, 2025. According to the objection, "by the Debtor's own admission under the Extension Motion, they have not paid, nor budgeted, to timely pay rent for the month of October."
Legal Arguments and Landlord Rights
The Simon Property entities, represented by Michelle E. Shriro of Singer & Levick, P.C., raised several sophisticated legal objections to the proposed financing arrangement:
Section 365(d)(3) Violations: The landlords argue that federal bankruptcy law requires debtors to pay post-petition rent timely from the filing date. They cite court precedents establishing that "Stub Rent" for post-petition periods is entitled to administrative priority under Section 503(b) of the Bankruptcy Code.
Objection to DIP Liens: The landlords oppose granting liens on leases where the lease agreements prohibit or restrict such liens, arguing that "the DIP Lender should not be granted a benefit that is greater than what the Debtor has under the terms of the leases."
Section 506(c) Waiver Concerns: The objection challenges proposed waivers that would prevent the estate from charging costs of preserving collateral to the DIP lender, noting that the Fifth Circuit has held courts may surcharge lenders for post-petition rents "as necessary and beneficial to the lender."
Business Impact and Adequate Protection
The landlords acknowledge that Razzoo's continued use of the leased premises is "critical to the Debtors' business and going-concern value," but argue they should receive adequate protection for providing this benefit. The objection states: "The continued use and occupancy of the Premises is critical to the Debtors' business and going-value concern. This use and occupancy provides an actual, necessary, and continuing benefit to the Debtors and to the DIP Lender."
The landlords express concern about potential administrative insolvency, noting it's "unclear whether Debtors' cases will end in administrative insolvency, notwithstanding the DIP Financing." They argue that without proper budgeting for rent payments, they risk becoming "involuntary, unsecured, post-petition, interest-free lender[s] to the Debtors."
Relief Sought
While the Simon Property entities don't oppose the DIP financing generally, they seek several modifications to protect their interests:
- Requiring the DIP budget to include sufficient funds for stub rent and post-petition rent payments
- Denying waivers of Sections 506(c) and 552 of the Bankruptcy Code
- Prohibiting new DIP liens on leases where lease terms restrict such liens
- Providing adequate protection under Section 363(e) of the Bankruptcy Code
This article was prepared using Stretto Conductor, our new AI-powered assistant that's here to help. Stretto Conductor was able to create this summary of a 13 page court filing in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Stretto Conductor may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.