DFS granted more time to pay bill

By Andrew Gomes
Advertiser Staff Writer

The state is holding off on debt collection against DFS Group LP, granting the insolvent duty-free retailer an extra week to respond to a demand notice for paying $49 million in back rent and penalties.

State Attorney General Mark Bennett announced last week that his office could begin collection efforts as early as yesterday by adding breach of contract allegations to a lawsuit filed March 28.

But Bennett said he gave DFS an extra five business days through Friday to pay at least $25 million, which would at least temporarily suspend the lawsuit and state efforts to terminate the DFS contract and recover a $45 million performance bond from the retailer.

DFS Group Vice President Sharon Weiner yesterday said she had no progress to report regarding the dispute. Bennett declined to comment on the case other than to say the extension had been granted at the request of DFS.

San Francisco-based DFS operates 40 duty-free and regular retail stores at airports statewide, employing roughly 1,200 workers.

The company, citing reduced visitor travel and heightened airport security, has been paying a fraction of its rent to the state since last May, and has been trying to negotiate new rent terms for the remaining 3 1/2 years of its $60 million-a-year contract.

Early last month, DFS acknowledged it repaid $100 million in loans to majority owner LVMH Moet Hennesy Louis Vuitton last year, during which time DFS failed to pay $25 million in rent to the state.

That prompted Bennett to file the lawsuit, which alleges it is illegal under the Uniform Fraudulent Transfer Act for DFS to pay off LVMH while claiming to be unable to pay other debts.

DFS said it believes its payment to LVMH was legal, and that it has offered to pay the state $25 million owed through the end of last year if it is granted adequate rent relief for the rest of its contract.

Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.