Thank you. Please be seated All right, good afternoon.
We're here on the three o 'clock docket. We have
first -day matters set in the Hooters of America
case, case number 25 -80078. I'll go ahead and
take appearances. I'm going to start in the courtroom.
This was noticed as a WebEx only hearing. Ms.
O 'Neill was here all day in another matter and
has asked for permission to... Walk over from
the conference room where she was dealing with
her other case to attend the first day. So I'll
start with Miss O 'Neill Thank you honor Holly
O 'Neill with the law firm of Foley and Lardner
on behalf of the debtors and with me today Your
honor is my colleague. Mr. Jones who's also probably
worn out our welcome with the court today And
also on Webex is our colleague Zach's on with
Foley and Lardner Additionally, Your Honor, I'd
like to introduce the court to our co -counsel
with Ropes and Gray. There are quite a few folks
today, and hopefully most will have an opportunity
to present some motions for the court today.
We've got Mr. Chris Dickerson, Mr. Ryan Dahl,
Ramon Brown, Michael Wheat, Hiso Park, Alexis
Ogurek, Maggie Toms, Regina Castilla, Lauren
Knight, and Ben Wagner, all with the law firm
of Robes and Gray. Additionally, Your Honor,
with Accordion Partners, LLC, we have our proposed
Chief Restructuring Officer, Mr. Keith Mabe,
who is the Senior Managing Director with Accordion.
We also have our proposed investment banker with
Solic Capital Advisors, LLC, Mr. George Coutts
and Nicholas. Pardon me, let me say that again.
Kutsan Nicholas, who's a managing director with
Solig. We also have various members of the management
team of the debtors that are also joining us
today. We appreciate the court's time. Thank
you. All right. Welcome. All right. And for the
rest of the appearances, I'm going to start by
going down the electronic appearances that have
been made. other than those that have already
been announced, and I'll either go by party or
firm. So why don't I start with the U .S. Trustee.
Good afternoon, Your Honor. Asher Bulbic for
the United States Trustee. All right. Province.
Mr. Rosen, are you with us? All right, I'll go
to drivetrain agency services, folks from Seward
and Kissel. Yes, good afternoon, Your Honor.
John Ashby of Seward and Kissel on behalf of
the control party, drivetrain agency services.
Good afternoon. All right, how about the folks
at Cramer 11? You might be on mute. I don't hear
anything yet from the Cramer 11 folks. All right,
we'll come back to them. Hoot Al Restaurants.
Good afternoon. Good afternoon. I'm Ken Butterfield.
Ken Butterfield. Thank you. All right. Sorry.
Somebody was talking over each other. So let
me try again for Hoot Al Restaurants. Good afternoon,
your honor Marcus help their Ben Butterfield
for food owl restaurants All right, good afternoon
And let me try again with somebody just speaking
from the Kramer 11 firm I Know your honor this
this is Ben Butterfield of Morrison and Worcester
Representing good owl and pooters, Inc. They
are the two members of the buyer All right, thank
you. BPH Investments. Mr. Bednaz from BPH Investments
All right, we'll go on Stanley Schwartz, Alabama
LLC Yes, this is Lee Schwartz of Schwartz Ettinger.
All right. MGDL properties. Ms. Prendergast,
are you with us? Apologies, Your Honor. I think
we were muted. All right. Thank you. Apologies,
Your Honor. I think we were muted. Leigh Ann
Prendergast on behalf of NGVL Properties with
me is my colleague Dan McGuire of Pearson Ferdinand.
Thank you. All right. Welcome. Bank of America.
Good afternoon, your honor Kyle Hirsch the law
firm of Ryan Cave Laten -Pasner representing
Bank of America as depository institution Good
afternoon. All right. How about the folks at
Sidley? Good afternoon, your honor. Can you hear
me your honor? Yes Juliana Hoffman from Sidley
Austin on behalf of Salt Lake Master Fund LP
as pre -petition lender and proposed dip lender
today Also, on behalf of XYQ Cayman LTD or limited
in its capacity as pre -petition or loan lender,
and FFI Fund Limited, FYI Limited, and Oliphant
Fund Limited as consenting level holders. And
with me, Your Honor, is my colleague, Genevieve
Weiner, and she is on video but was having some
audio issues. She's also... dialed in by phone.
All right, good afternoon. Good afternoon. All
right, how about the White and Case folks? Good
afternoon, Your Honor. Brian Pfeiffer from White
and Case, joined with by my partner, Amanda Paracrist,
and we are representing the ad hoc group of secured
note holders in the case. All right, good afternoon.
Good afternoon. Gray Reed. Good afternoon, Your
Honor Lydia Webb of Gray Reed, also on behalf
of the ad hoc group. All right, welcome. All
right, I'm going down the list, the folks at
Ballard Spar. Good afternoon, your honor Joel.
Oh, sorry. Good afternoon, your honor Joel Newell
with Valorant Spar appearing on behalf of Landlords
Beltline and Grande LP Realty Income Corporation
and Store Capital As Miss Highland just noted,
she's also appearing telephonically All right,
good afternoon All right, I'm going to go ahead
and open it up. Have I missed any appearances
on Webex? Good afternoon, Your Honor. Michael
Reardon from Battelier Ramps on behalf of Bags
of Living LLC. Good afternoon. Good afternoon,
Your Honor. This is Duane Bresch of Clark Hill,
representing Westchester Fire Insurance Company,
Federal Insurance Company, the surety bond providers
in this case. Good afternoon, Your Honor. Michelle
Schryerow, and I'm here with my colleague, Will
Doerward, and we represent Kimco Realty Corporation.
Good afternoon, Your Honor. Good afternoon, Your
Honor. Jeffrey Guttman here with Douglas Dinella,
representing Palmer South Boulevard LLC. Good
afternoon, Your Honor. Bruce Akerly of Akerly
Law on behalf of Predator and PACA Trust Beneficiary,
Benny Key's Pumping. Appearing with my colleague.
To you, Your Honor. This is Nathan Coco from
the law firm of Minslevin joined by my colleague,
Keith Kohlmeier, and we represent Citibank N
.A. as trustee and securities intermediary with
respect to the pre petition secured notes in
the aggregate amount of $350 million. Good afternoon,
Your Honor. Vicki Driver here on behalf of a
group of landlords, Four Corners Limited, Four
Corners Limited Four, Four Corners Limited Nine,
Four Corners Limited Fifteen, Four Corners Limited
Sixteen, Wing Lord Limited, Drum Lord Limited,
and the Audelia Group Partnership Limited. Good
afternoon. Good afternoon, Your Honor. Go ahead.
This is Sharon Knighton with the law firm of
Linebarter, Gog and Blair and Sampson. I'm here
representing several Avalor and property taxing
entities in Texas. We are still researching our
clients in this case, but so far I'm appearing
on behalf of Bear County, Cameron County, Dallas
County, Ector Tad, Fort Bend County, City of
Frisco, Harris County Emergency Services District
Number 11, Harris County Emergency Services District
Number 28, City of Houston, Houston Community
College System, Houston ISD. City of Humboldt,
Irving ISD, Katy ISD, Lewisville ISD, Lone Star
College System, Nueces County, City of Pasadena,
San Marcos Consolidated Independent School District,
City of Seabrook, and Tarrant County. Welcome.
Good afternoon, Your Honor. This is Mark Stout
with the Alphabet and I'm here representing Regents
Facility Services. Afternoon. Good afternoon,
Your Honor. This is Ashlyn Bernard, appearing
on behalf of FTI Consulting. I am with Kramer
Levin of Tallis and Frankel. I understand that
you called us earlier. I apologize. I was having
some technical difficulties. No worries. Thank
you. Thank you. Good afternoon, Your Honor. Catherine
Dunn from Chase -Brunberg and Friedman, representing
MCL Properties LLC. Alright, welcome. Alright,
last call for appearances. All right. Before
I turn it over to the debtors, I'll just let
everybody know I've signed a lot of Prohok Vichy
orders. If you have filed an application on motion
and I haven't signed the order yet, not to worry.
Everybody's welcome. The orders will be signed
either today or tomorrow. So with that, I'll
turn it over to the debtors. Thank you, Your
Honor. Again, Holly O 'Neill on behalf of the
debtors. Your Honor, as the Court is aware, on
March 31st, Hooters of America LLC filed, along
with 15 of its affiliated entities, have filed
bankruptcy. And we've got approximately, I'm
sorry, we have 30 affiliated entities and we've
got 15 first day pleadings to go through today.
For the sake of simplicity, we'll go through
the motions effectively one at a time. and all
of the first day motions will be handled by our
colleagues at Ropes and Gray. The donors have
worked with our noticing agent, Kroll, to do
our level best to get as much notice out as possible,
recognizing this is a shortened notice period,
but it is for first day motions, which are obviously
critical to the operation of the business. In
conjunction with QRL, the debtors served the
voluntary petition, the first day motions, agendas
and notice of hearing were served out yesterday
on April 1st to the obviously United States trustee,
the top 30 unsecured creditors, the secure creditors,
as well as ad hoc group of note holders, et cetera,
a myriad of folks in that the certificate of
service for that for that notice is at docket
number 72. Since filing the motions, the debtors
have been in open and ongoing discussions with
the DIP lender, the United States trustee's office,
and other parties regarding the first day matters.
The debtors believe that with the extensive service
provided by the claims agent, the limited interim
relief requested today is warranted and that
the notice was adequate. and with all rights
reserved for final relief, of course, and we
believe that good and sufficient cause has been
established to proceed today with the relief
requested. Additionally, Your Honor, just for
the record, we want to, Crowell, our noticing
agent, has set up a website and that, so that
parties can retrieve pleadings and other information
related to the case. That website is at cases
.ra .krull .com, backslash pooters, H -O -O -T
-E -R -S. Obviously, pleadings can be downloaded
from that site free of charge. Before moving
to the agenda, and by the way, Your Honor, in
fact, as we started the hearing, an updated amended
agenda was filed at docket number 84. Before
we start moving through the agenda and the first
day motions, we'd like to get a little housekeeping
out of the way in terms of presenting some of
the declarations in support of the various motions
that are set for today. We did file a witness
and exhibit list. That's at docket number 45.
Your Honor, exhibit one is the declaration of
Keith Mabe, our chief restructuring officer of
the debtors. in support of the debtors chapter
11 petitions and first day motions. That is at
docket number 19. Exhibit number 2 is another
declaration of Mr. Mabe in support of the debtors
emergency motion for interim and final orders
authorizing the debtors to obtain post -petition
financing and use cash collateral, granting liens,
and providing claims in super priority administrative
expense status, modifying the automatic stay,
scheduling a final hearing and granting related
relief. That declaration was at docket number
17. The next declaration that was filed is the
declaration of George Koutsan Nicholas in support
of the debtor's emergency motion for interim
and final orders authorizing the debtors to obtain
post -petition financing. and use cash collateral,
granting liens and providing claims with super
priority administrative expense status, modifying
the automatic stay, scheduling a final hearing,
and granting related relief. And that declaration
is at docket number 18. Additionally, we have
the declaration of Mr. Benjamin Steele in support
of the debtor's application for appointment of
Kroll Restructuring Administration, LLC. as the
debtor's claims noticing and solicitation agent.
And I believe that is filed at docket number
5 -2. The first day declaration as our first
exhibit today contains a detailed description
of the debtors, their operations, the nature
of the current financial distress that the debtors
find themselves in. the need to file these cases
in the specific support for each of the first
day motions. I will mention, Your Honor, Mr.
Chris Dickerson of Ropes and Gray does have a
presentation. I'll hand off to him shortly, but
to give the Court a better overview of the cases,
of the debtors in the cases. Your Honor, at this
time we would ask, just as a... precursor in
support of the various motions that those declarations
be admitted into the record. All right, so my
practice is to swear the declarants in. It won't
take long. If Mr. Mabe is handy, I'll just start
with him. Mr. Mabe, can you hear the court? I
can, Your Honor. All right. All right, I see
you. If you'll raise your right hand. You swear
or affirm that the testimony you're about to
give through your declaration or otherwise is
the truth the whole truth and Nothing but the
truth so help you God if so, please say I do
I Do all right, and I've seen your declarations.
Do you have anything to add or change about them?
All right, and then any objections to the admission
of exhibits one and two the declarations of mr.
Mabe All right, those are admitted. And I'll
switch to Mr. Koutse Nicholas. I hope I haven't
butchered your name. You can hear me? Yes, I
can, Your Honor. All right. If you can raise
your right hand, I'll swear you in. Do you swear
or affirm that the testimony that you're about
to give through your declaration or otherwise
is the truth, the whole truth, and nothing but
the truth? So help you God. If so, please say
I do. All right any changes or additions to your
declaration All right, thank you all right any
objections to admission of exhibit number three
All right, so three is also admitted together
with one and two and then mr. Steele are you
with us? Yes, all right if you'll raise your
right hand Do you swear or affirm that the testimony
that you're about to give through your declaration
or otherwise is the truth, the whole truth, and
nothing but the truth, so help you God. If so,
please say I do. I do. All right. Any changes
or additions to your declaration? No, Your Honor.
All right. Thank you. Anybody object to admitting
exhibit number five? All right. Five is admitted.
Thank you, Your Honor. The debtors otherwise
filed a witness and exhibit list at docket number
45. And those have a myriad of exhibits. Mr.
Jones just showed me that an additional revised
proposed interim dip order has been filed at
docket number 83 -1 as well. We would move to
have those exhibits admitted. for purposes of
proceeding with the motions. They also are supported
by the declarations. So that's exhibits 4 and
then 6 through 18. We'll start with those. Any
objections to 4 or 6 through 18? Those are admitted
and the the red line Miss O 'Neill at 8 docket
85. It appears to be docket 83 -1. I'm sorry
And that is the revised proposed interim dip
order and then 85 okay 85 is the red line That's
correct. Okay. So we can just admit 83? You're
offering the document of docket 83? Within docket
number 83, Your Honor, is the, just so all parties,
it's a lengthy document. So at docket number
83, the revised proposed dip order, you can find
the dip budget at page number 267 of 427. So
there's a placeholder on the witness and exhibit
list for the dead budget, and that's where it's
located. All right. Any objections to admission
of that document? All right. That's admitted
as well. Thank you, Your Honor. And with that,
I see Mr. Dickerson, and I will hand off to my
co -counsel at Ropes and Rick Gray, Mr. Chris
Dickerson. Thank you. All right. Thank you. Thank
you, Your Honor. Chris Dickerson from Ropes and
Gray on behalf of the debtors. Can you hear me
okay? Yes, I can. Thank you. I'm getting a little
bit of an echo. I think someone may not be muted,
but I'll proceed if you can hear me okay. Yeah,
I can hear you, and there's no... I don't hear
any echoes on my end. Great. Thank you. As Ms.
O 'Neill described... Your honor, I have a very
short PowerPoint that will hopefully provide
you and other interested parties some information
about the company, how it got here, and where
we hope that it will be going. We have filed
this presentation as a demonstrative on the docket.
It's docket number 74. All right. Thank you.
If we could go to the next page. Is that me?
If I can do this. Your honor as indicated we
are here on behalf of Hooters who's been in business
since 1983 and operates a number of restaurants
that provide world -class chicken wings beer
and sports entertainment among other things As
I said, founded in 1983, there are 151 company
-owned stores, 154 franchises outside of the
company, and then they have three franchises,
or what are known as hoots, which are primarily
to -go chicken wing restaurants that compete
with Wing Stop and other similar ideas. Their
headquarters is in Atlanta, Georgia, although
we do have, amongst the debtors, there are three
Texas entities. They have approximately 5 ,957
employees, 101 ,945 of which are full -time,
and then the remainder are part -time. As you
can see there, the performance revenue for the
debtors is $381 .5 million, with an EBITDA last
year of $15 .3 million. Your Honor, the Primary
reason we're here is the need to reconfigure
the company to balance its to address its balance
sheet and address the increased costs and As
compared to its revenue so that it can continue
to operate on a go -forward basis You can see
the breakdown here on the slide of the revenue
from each side. And as you will see that while
it makes significant franchise and license agreement
revenue, approximately 23 million, the majority
of its revenue is through the operation of those
154 company owned restaurants. Just a quick overview
in the United States. You can see the red. I'm
not sure what to call that symbol, but the red
dots are where company -owned stores are located,
and the orange ones are where the franchise -owned
stores are located. So it really is a coast -to
-coast operation. It's also a global operation.
These are the locations of franchisees. They
all are franchisees outside of the United States.
Quickly, Your Honor, as I mentioned previously,
these are the debtor entities, those 30 of them.
The ones that are colored in orange are non -securitization
entities, and which you'll find will be called
the manager entities throughout these proceedings.
And then the ones in blue are the securitization
entities. This is an important aspect of the
cases, Your Honor. Securitization is a whole
company securitization and it pledges all of
the debtor's assets essentially to the securitization.
The manager entities simply provide management
services to the restaurants and to the securitization
itself while those restaurants are being operated.
So the only collateral assets that are owned
by the non -securitization entities, those manager
entities, would be the right to payments from
the services that they provide. Governor, this
is a quick overview, which will be discussed
in a little more detail as we go through some
of the motions, specifically the DIP, that shows
what the debt structure of the debtors are. You'll
see there's a manager advance loan, another amendment
loan, term loans. and then those indentures that
have been described before, that number of 306
does not include interest, so it's likely a little
bit larger. As to how we got here, Your Honor,
I described that briefly before, but here's a
little more detail. Obviously, COVID was a very
difficult event for all kinds of retail operations,
especially dining. operations, and Hooters is
no exception. In addition to that, given the
current economic situation in the United States
and abroad, the debtors were faced with rising
labor costs, costs of food and other items. consumer
demand for casual dining in general, because
as the economy had softened, there was less free
liquidity for families or others to go out to
casual dining restaurants. In addition, I think
as everyone is aware, and Your Honor is undoubtedly
aware, the lease obligations that were entered
into pre -COVID have now become a little bit
out of market and difficult to maintain. In addition,
The cost associated with the debt that was described
on the previous slide has become a significant
drain on the ability of the company, the company's
liquidity position. As I said, approximately
$376 million in funded debt. They have $19 million
in debt service obligations coming due in 2025,
including interest payments that were coming
due here in May of $3 .9 million. In addition,
there is another obligation that undoubtedly
will be described in more detail as these cases
proceed, which is a lags royalty obligation.
As the company began to... recognize that it
needed to restructure its balance sheet and if
it wanted to be able to continue to operate on
a go -forward basis it did take a number of steps
to try to deal with that situation both outside
of court and then ultimately will lead to the
decision to restructure inside of a chapter 11
proceeding. Highlighted on this slide are some
improvements or excuse me operational improvements
that were undertaken in the last year in 2024.
primarily the closing of 48 underperforming stores.
And then they entered into a new line of business
in which they manufactured, supplied, and distributed
Hooters branded frozen meals to grocery stores
around the country. As the debtors realized that
those... steps alone weren't going to be sufficient
to address its balance sheet issues. It did engage
other advisors, including my firm, Rips and Gray.
Accordion, who you've heard is the proposed chief
restructuring officer and financial advisor to
the company. And then the proposed investment
banker, Solik, was retained, engaged by the company
in 2024. In addition to that, the board appointed
an independent experienced fiduciary to the Board
of Managers, Mr. Adam Paul. Mr. Paul is on the
WebEx today. And they formed a special committee
at the parent company on the Board of Managers
in order to facilitate an independent review
of the strategic alternatives that the companies
were. and they delegated all authority regarding
those transactions to that special committee.
That special committee is a committee of one
Mr. Paul. In conjunction with Mr. Paul and the
advisors, the company then entered into discussions
regarding its liquidity position and in an attempt
to try to deal that on an out -of -court basis
arranged to have Certain funds which are described
here at the at the bottom released and provided
to the company for liquidity purposes that totals
approximately 15 million dollars that did provide
some runway and allow the company to negotiate
with other stakeholders to try to reach an out
-of -court resolution, but as described previously
that was only a Band -aid with respect to being
able to get the issues addressed in a more holistic
manner. As I said, the company and its advisors
entered into discussions with various stakeholders
and potential transaction parties. Solik leading
that charge and they engaged with more than 95
parties. 38 NDAs were executed. They had extensive
diligence calls and explored the market in a
very fulsome manner. In March of this year, they
successfully drove a consensus among the pre
-petition lenders, those term loan lenders, the
ad hoc group of note holders, and a potential
buyer. That buyer, as mentioned before, is two
current franchisees, including a group that is
made up of the original owners and founders of
Hooters who have been involved in the business
since 1983. The process led to what I would say
is a somewhat remarkable success. The company
is entering into Chapter 11 with a restructuring
support agreement that has 100 % of the term
loan lender's support. 100 % of the manager advance
loan party's support, and holders of approximately
94 % of the securitization note holders. The
RSA has been filed. It's an exhibit to the DIP
credit agreement, which was filed as part of
the DIP order. So that is available for parties
to review as well. That's how we got here your
honor where we're trying to go is that we are
we would like to emerge on a fairly rapid timeline
And currently that's expected to be about three
months as I said, we have the support of all
of the debtors major constituencies and what
that process will entail will be a plan process
that will transition the company from company
owned stores to purely franchise model they will
in fact through the plan selling those 154 stores,
well, hopefully all 154 stores, but a significant
portion in excess of 100 of them are already
contemplated to be transitioned and operated
by franchisees as part of the new company. In
order to allow that, the term loan, the pre -petition
term loan lenders have agreed to provide a dip
in the amount of $35 million of new money. A
small portion of the previous expended or provided
term loan, the amount of 5 million, is being
rolled up under that facility. But that will
be described in more detail when we present the
dip motion. The RSA also includes customary planned
support covenants and also a customary fiduciary
out. To the extent that there are other parties
there that we hadn't identified previously who
would like to come participate in a process that's
more value -maximizing for the debtors, we are
more than willing to entertain that interest,
and the other parties in interest here recognize
that that fiduciary out is a very important part
of this process. With more specificity, Your
Honor, the RSA does include milestones. Here's
a quick overview of them, but as you'll see that
we're looking to try to have the plan effective
by the end of June. That obviously puts a lot
of pressure on us to make sure that we get our
work done, and also it's obviously subject to
the requirements of the bankruptcy code and the
availability of the court in order to allow us
to meet all these milestones. aspirational but
we do intend to keep to them as much as we possibly
can and we hope to not be in bankruptcy any longer
than we have to because that's as everyone knows
is a very expensive proposition and we would
like to get the balance sheet fixed and get the
Hooters restaurants back on into out of bankruptcy
and operating as a successful enterprise. A little
more detail on the dip financing, which again
will be described in even more detail with the
presentation of the dip motion. As I said, the
pre -petition, the lender is a pre -petition
manager advance lender. And I think I'll stop
for just a second because I've been using a word
and then a phrase that is very important to these
cases, but I think sometimes needs a little bit
of explanation. The first is manager. As I said,
the... Non -securitization entities are in effect
the manager of all the company -owned stores.
They provide the contracts for the food. They
make sure that the stores are stocked correctly.
They make sure that employee wages and insurance
and all the things that an overall manager of
a restaurant operation would provide. And so
that is... they receive a management fee for
those services. As I said, as well, it does not,
those entities do not have any other assets other
than goodwill and their overall expertise. The
other important phrase that I've been using is
the manager advance. The pre -petition loans
were conducted as manager advances. And a manager
advance is a creature or a function of most securitizations
that are dealing with businesses of this type.
In short, a manager advancement as a safety measure,
which is put in place in the securitization indenture
to address any liquidity shortfalls that the
securitization entities might have. The expectation
originally is always that the amount of the management
fee and other liquidity that the manager has
has been provided by the securitization entities
is sufficient to pay for those costs incurred
by the securitization entities, but that is not
always the case. In order to cover that shortfall,
the manager will undertake what is called the
manager advance and use its own funds to pay
for the outstanding securitization expenses.
The indenture then allows for repayment of those
advances to be placed at the top of the payment
waterfall, the use of the funds that are received
by the manager on behalf of both the company
-owned stores and the franchise fees. and in
effect primes all other amounts until those advances
are repaid. This structure in the waterfall that
existed pre -petition will continue during the
bankruptcy proceedings, and as you will hear
shortly when the dip motion is presented, is
the basis upon which the dip credit agreement
is founded. In other words, the dip is being
treated as a manager advance and will move to
the top of the waterfall per the indenture as
a permitted current. pre -petition by the indenture,
and we'll keep that structure in place. Back
to the dip financing, Your Honor. I'll leave
most of this to my colleague, Mr. Brown, who
will be presenting the dip later, but I just
want to emphasize the last note there is that
without the dip facility, the company will not
possess sufficient liquidity to administer these
Chapter 11 cases and would be forced to likely
convert to Chapter 7 without that relief. Lastly,
Your Honor, I know we spent a fair amount of
time at the beginning of the case to identify
the various parties. I thought I would do that
quickly just so that you can understand who's
talking at what time and who they represent,
as there are a number of parties, as you already
saw when we went through appearances. The company
management team, the CEO is Mr. Sal Melli, the
CFO is Mr. Ms. campaign, and as mentioned previously,
the CRO and our first data client is Mr. Mabe,
Mr. Keith Mabe. Debtors, professionals, my firm,
Ropes and Gray, our co -counsel, Folane Lardner.
Accordion is the financial advisor. Kroll is
the proposed claims and noticing agent. Solik
is the investment banker, proposed investment
banker, and C Street Advisory is our PR firm.
The independent manager is the securitization
debtors. Those entities that were not part of
the manager is the law firm of Goldberg Cone.
The pre -petition term lender, the manager advance
lender, and the dip lender is represented by
Sidley and Hula Hanloki as their financial advisor.
The 94 % of the security certification note holders
is represented by White and Case and M3 Partners
as their financial advisor. The securitization
control party is Seward and Kissel, and the buyer
group is represented by Morrison and Forster.
Omitted here inadvertently was the trustee under
the notes, and that's Citibank, and they are
represented by Minsleven. With that, Your Honor,
I'll stop talking for a bit and see if there
are any questions that I can answer, and then
if not, we will move to the agenda and start
going through the motions. All right, no questions
at this time. PowerPoint was very helpful, and
I also appreciate that you filed it on the docket
so Everybody else can see it. So thank you You're
welcome matter with that. I think I will see
the podium to my colleague. Mr. Wagner I'll note
that as mentioned previously we do have a number
of different and gray lawyers presenting today.
And I would just like to let the court know that
some of them are presenting for the first time
in court. So it's a momentous day for them, and
I look forward to their presentations. Thank
you, Your Honor. And I will now turn it over
to Mr. Wagner. Just a quick note. I was in court
most of the day, but I did see the red lines
that were filed. It's very helpful. I got through
all of the red lines. Except the dip red line.
I think I refreshed and saw it when I was sitting
up on the bench So I will go through that of
course when we get to the dip motion, but otherwise
I've seen I Think I'm up to speed on everything
on the docket other than the dip dipwater red
line I think Can you hear your now I can hear
I think you had actually only been muted so I
can hear you know Okay, I'm sorry. I was simply
thanking you and your chambers for working with
us to to have the hearing today and also the
office of the US trustee Who we've been working
with to try to resolve any issues that they might
have that I think we've made very productive
steps with them, and I don't think we have too
many open items, if any. And then lastly, I would
like to thank all the other parties. We've been
working very hard over the last few months, especially
over the last week, to try to get these cases
to a place where we could file, and so I deeply
appreciate all of the hard work from all the
parties. So thank you, Your Honor, and I hope
that our, that congeniality continues with us
as we work through the cases. So thank you. All
right, now over to Mr. Wagner. All right, thank
you. Good afternoon, Your Honor. For the record,
Ben Waggoner from Ropes and Gray on behalf of
the debtors. Your Honor, if it's all right with
you, we would like to present the motions in
a slightly different order than what is on the
revised agenda. That's fine. Thank you, Your
Honor. Your Honor, the first item that I'll be
covering is agenda item number one. This is the
debtor's motion for joint administration. File
the docket number two. As the court is aware,
Bankruptcy Rule 1015B provides that if a joint
petition of two or more or two or more petitions
are pending in the same court by or against a
debtor and an affiliate, the court may order
a joint administration of the estates. Your Honor,
that is what we have here. All 30 of the debtors
in these cases are affiliates, and joint administration
will provide a significant administrative convenience
without harming the substantive rights of any
parties in interest. We've provided a copy of
the motion and the proposed order to the United
States Trustee. and received no comments. Accordingly,
we respectfully request that the proposed form
of order at docket number two be entered by the
court. All right. Any comments, questions, or
concerns about the joint administration motion?
Mr. Bublick? Thank you, Your Honor. Nothing to
add to the newest trustee. All right, the proposed,
by the way, my normal practice for first days,
since I've reviewed all the proposed orders,
is to just adopt the findings and conclusions
that are in the orders rather than do my own
mini -ruling for each matter. So if I approve
it, I'm adopting the findings and conclusions.
The only, I guess, potential ask on this one,
because I did share this with the clerk's office
as well, Paragraph 9 asks that the court put
a docket entry that refers to the joint administration.
The only request on that one potentially is to
just shorten it up rather than list them all
out individually. Maybe just refer to the first
debtor at all. It would just shorten up that
docket entry, but that's not a huge issue. Otherwise,
I didn't have any comments or concerns about...
the joint administration motion. So Mr. Bublick.
Your Honor, we will submit a revised form of
order incorporating that change. All right. I
think Mr. Bublick is good to go. Is that right?
Yes, Your Honor. Oh, sorry. Can you hear me,
Your Honor? Yes, I can now. Yes, U .S. Trustee
is fine with that. Thank you, Your Honor. All
right, so that motion is granted. Thank you,
Your Honor. The next item on the agenda that
I'll be covering is agenda item number five.
This is the debtor's creditor matrix motion filed
at docket number six, and the revised order is
filed at docket number 76. By this motion, the
debtors are seeking entry of an order authorizing
the debtors to file a consolidated creditor matrix
in lieu of submitting a separate mailing matrix
for each debtor, file the consolidated top 30
creditors list in lieu of submitting a separate
list for each debtor, serve certain parties an
interest by email except when a party to be served
by both has a mailing address, the debtor's books
and records and files or has designated a mailing
address. and is requested hard copy U .S. First
Class mail service, redact certain personally
identifiable information including the home addresses
and email addresses of the debtors current former
employees and creditors who are individual persons
from the consolidated creditor matrix, the consolidated
top 30 list, the debtor schedules and statements,
and affidavits of service filed with the court
in these Chapter 11 cases. The debtors are also
requesting the court approve the form and manner
of notifying creditors in these Chapter 11 cases.
and also approve the bar date for filing proofs
of claim. The debtors proposed bar dates include
the general claims bar date for filing proofs
of claim for pre -petition claims at June 15,
2025, which should be 76 days after the petition
date, the governmental bar date at September
29, 2025, 182 days after the petition date, and
the rejection bar date. by which proofs of claim
arising from the rejection of executive contracts
or unexpired leases must be filed at the later
of the general claims bar date, at the governmental
bar date as applicable, any date this court may
fix in a rejection order, or if no date is set
in such order, 35 days after the date of entry
of such order. Your Honor, the motion and proposed
form of order have been shared with the United
States Trustee. At the request of the United
States trustee, the unredacted version of the
matrix will include a header with language putting
the party in interest on notice of this court's
order and the redacted nature of the publicly
filed order. We've also made minor changes with
respect to the noticing procedures after conferring
with our proposed claims agent. We submitted
revised form of order at docket number 76. But
we further submitting a revised form of order
reflecting the change that the general claims
are date from May 15th, 2025 to June 15th, 2025.
Unless your honor has questions, respectfully
request that the revised form of order will be
submitting reflecting these changes entered by
the court. So June 15th falls on a Sunday. Do
you want to? Your Honor, may I confer with counsel
real quick? Yeah. Your honor we proposed June
16 2025. All right, I think June 16th makes sense
Thank you your honor, we will make that change
in the revised proposed order And then for the
governmental bar date, I didn't I didn't check
that one just make sure it doesn't fall on a
weekend Anybody else have any comments questions
or concerns about this motion? Mr. Bublick, are
you good? Yes, thank you, Your Honor. The USRC
appreciates that Dentor's Council worked with
us to reach an agreeable bar dates. All right.
Well, thank you. Other than that date change,
I didn't have any other harpoon items, so that
motion is approved. Thank you, Your Honor. The
final item on the agenda that I will be covering
is agenda item number eight. This is the debtor's
taxes motion filed at docket number 9, and the
revised order is filed at docket number 79. By
this motion, the debtors are seeking entry of
an order authorizing the debtors to remit and
pay certain taxes and fees accrued prior to the
petition date that are payable or will become
payable during the pendency of these Chapter
11 cases. including any penalties and interest
thereon to various federal, state, county, and
city taxing and licensing authorities, and to
remit and pay any audit amounts that may become
payable in the ordinary course of business. Your
Honor, the debtors proposed order submitted as
an exhibit to the taxes motion emitted language
requesting authority to pay taxes and fees accrued
prior to the petition date that quote are payable
as of the petition date. The debtors have submitted
a revised form of order including language requesting
the authority. to pay taxes and fees that are
payable as of the petition date, in addition
to the authority to pay those pre -petition taxes
and fees that will become payable during the
pendency of these cases. As of the petition date,
the debtors had a portion of their property taxes
due, which they'd been unable to pay due to liquidity
issues. This is the reason for the proposed language
addition. Your Honor, the motion and the proposed
form of order have been shared with United States
Trustee, and we receive no comments. As of the
petition date, the debtors are in the process
of disputing a completed audit with respect to
their sales and use taxes with the state of Florida.
The debtors maintain an audit reserve in the
current amount of that audit, but it is subject
to possible reduction. The debtors have also
received notice of a potential audit with respect
to their sales and use taxes with the state of
Texas from the period of April 1st, 2021 to December
31st, 2024, but no date for the audit's initiation
has been declared. The debtors seek to pay any
audit amounts on a final basis as they may arise
in the ordinary course Unless your honor has
any questions we respectfully request that the
revised form of order at docket number 79 be
entered by the court All right, let me start
with no, I'll start with us. Let me start with
mr. Bublick. Mr. Bublick any concerns about this
one? No concerns from the interest to your honor.
Thank you. All right Any other party have any
comments or concerns about this motion? Yes,
Judge. Jeffrey Gutman on behalf of Palmer South.
We're a landlord of one facility that's being
operated by the Hooters better. I have not seen
this disorder and we are owed real estate taxes
and it's not clear to us whether our debt is
covered by this order or not. They didn't share
this order with us, and I think it should be
shared with us so we can review and comment.
So it was filed on the dock. It admittedly was
filed today, but there's a proposed form of order
that was attached to the original motion that
was filed. Do you have ECF access by chance?
Not handy, Judge. Okay. Maybe counsel could address
how he's dealing with landlord property tax issues.
Mr. Janell, Your Honor, we are... Your Honor,
may I confer with the Council for a second? Sure.
Your Honor, this motion is not seeking to reimburse
landlords for property tax obligations or other
tax obligations. This motion is simply seeking
authority to pay taxing authorities directly.
We'll be working with landlords with respect
to any assumption, an assignment, and or rejection
of real property leases to handle contractual
issues with respect to reimbursement of property
taxes. All right, that makes sense to me, Mr.
Dinella. I don't think your client's prejudiced
by the entry of this order. I agree, Judge. And
then... We'll deal with it at a later time on
our issue. All right, very good. Anybody else
have any concerns about this motion? All right.
Well, that one's granted as well. Thank you,
Your Honor. I will now see the podium to my colleague,
Ms. Knight. All right. Thank you. Good afternoon,
Your Honor. Lauren Knight of Robson Garrett on
behalf of the debtors. The first matter I will
be presenting is agenda item number four, that
is at docket number five, the debtor's application
to retain Kroll as claims and noticing agent.
I'll note that we filed a revised form of order
at docket number 77. Additional support for the
application is set forth in the declaration of
Benjamin Steele, a managing director at Kroll,
which is attached as exhibit B to the application.
Mr. Steele is on the Webex and available to testify
if you or any of their party has any questions.
Your Honor, pursuant to 28 U .S .C. Section 156C,
the debtors seek authority to retain and employ
Kroll Restructuring Administration, LLC, as claims
noticing and solicitation agent in these Chapter
11 cases. Your Honor, the debtors chose Kroll
as their proposed claims and noticing agent based
on Kroll's capabilities, experience handling
cases of this size and complexity, its acceptable
pricing terms, and its disinterestedness. Thousands
of likely claimants and entities to be noticed
in these cases. It would be administratively
burdensome to perform the services that Kohl
has proposed to provide absent Kohl's retention.
Your Honor, we are also seeking authorization
to replenish Kohl's $75 ,000 retainer, which
was applied to all pre -petition invoices to
hold the retainer under the engagement agreement
as a security for the payment of fees and expenses.
Your honor, we previewed the application with
the US trustee and resolved all of their open
issues Unless your honor has any other questions.
We respectfully request that you enter the revised
form of order at docket number 77 All right,
thank you I did not have any questions for mr.
Steele after reading his declaration and I don't
have any concerns about the application The red
line looks good to me. So let me ask mr. Public
U .S. Trustees, good to go on this one? Yes,
Your Honor. No concerns with this any longer.
Thank you, Your Honor. All right. Anybody else
have any comments or concerns about the Kroll
retention application? All right. That one's
approved. Thank you, Your Honor. The next and
final matter that I will be presenting on is
agenda number, item number seven, that is at
docket number eight, the debtor's insurance motion.
By this motion, the debtor seek authority but
not direction to maintain their existing insurance
policies and pay all obligations arising there
under or in connection therewith, to renew, supplement,
modify, or purchase insurance coverage, and to
continue to honor their obligations under the
surety bond program. The coverage provided for
under the insurance policies is essential to
preserving the value of the debtor's assets,
and in many instances, required by various regulations,
laws, and the United States' trustees' operating
guidelines. Your Honor, as an overview, the debtors
maintain 26 insurance policies that provide coverage
for, among other things, property, general liability,
workers' compensation, excess liability, directors
and officers' liability, and crime protection.
And Your Honor, Exhibit B to the order includes
a summary of all of the policies. In sum, the
total amount of annual premiums on account of
those policies is approximately $6 .2 million.
Most of these premiums are financed pursuant
to premium financing agreements. The aggregate
amount of remaining monthly payments under the
premium financing agreements is approximately
2 .1 million. Finally, Your Honor, the debtors
maintain 114 surety bonds with an average base
amount of $9 ,000. Pursuant to the surety bond
program, the debtors remit payments when the
bonds are issued or renewed on an annual basis.
The surety premiums total approximately $18 ,000
per year. Currently, the debtors are not aware
of any outstanding amounts owed on account of
the surety bonds, but seek relief to pay any
should they arise. To continue their business
operations post -petition, the debtors must maintain
their surety bonds to provide financial assurance
to the various agencies that regulate the debtors'
operations. As such, the debtors seek authority
to pay surety bond premiums as they come due
and renew as needed in the ordinary course. Pending
any questions from Your Honor, the U .S. Trustee,
or any other parties in interest, I would request
entry of the order. All right. Thank you. Why
don't I start with Mr. Bublick again. Any concerns
about this one? No concerns from you, Your Honor.
Thank you. All right. Any other party? Good afternoon,
Your Honor. This is Dwayne Brescia for the surety
companies, Westchester Fire Insurance Company
and Federal Insurance Company. Easier just to
call them the chub surety group. No objections
to the entry of the order. I just have been retained
this morning on this matter. I'm not able to
confirm or deny many of the allegations in the
motion are stated today. I have no reason to
oppose them. I just reserve our rights to clarify
the record if needed at a later date. Otherwise,
no objections to the order. All right, thank
you. All right, any other party? All right, that
motion is also granted. Thank you, Your Honor.
I will now see the podium to my colleague, Maggie
Toms. All right, thank you. Good afternoon, Your
Honor. Maggie Toms of Ropes and Gray on behalf
of the debtors. I'll be presenting three motions.
The first will be the sofa extension motion,
filed at docket number seven, listed on the agenda
as number six. By this motion, the debtors are
seeking entry of an order extending the time
to file sofas by 30 days for a total of 44 days.
These are complex cases, Your Honor, comprising
of 30 debtors. And as explained in the motion,
the debtors operate a global chain of restaurants.
Due to the nature of the debtor's businesses,
they routinely engage with a considerable number
of suppliers across the country. As such, the
debtors anticipate that it may require 44 days
to complete the sofas. For the reasons set forth
in the motion and in the absence of any questions
from the court, we respectfully ask entry of
the order at docket number seven. All right.
I'll start with Mr. Bublick. Any concerns about
this one? No concerns, Your Honor. Thank you.
All right. Any other party? All right. I don't
have any heartburn with this one either. I've
looked at the order and that one's also granted.
Thank you, Your Honor. Next, I'll be presenting
the utility motion filed at Docket Number 10
listed on the agenda as Number 9. and authorizing
but not directing payment of undisputed invoices
for utility services, including the debtor's
utility consolidator in accordance with pre -petition
practice. The debtors obtain electric natural
gas sewage among other similar utility services
from a number of utility providers. Without these
services, the debtor's operations will be severely
disrupted. and it would undermine these reorganization
efforts. The debtors intend to satisfy post -petition
obligations owed to utility providers with cash
on hand, cash generated from the ordinary course
of business, and cash available to the debtors
under the DIP facility. But in addition, the
debtors are proposing additional adequate assurance
of payment and the debtors propose to deposit
approximately $419 ,000 into a segregated account
for the benefit of the utility providers. In
addition, the debtors seek approval of the adequate
assurance procedures. If a utility provider believes
additional adequate assurance is required, they
must serve a written request on the notice parties.
If this request is not served, the utility provider
shall be deemed to have received satisfactory
adequate assurance and are forbidden from altering
or discontinuing the utility services. Unless
Your Honor has any questions, we respectfully
request that the proposed form of order at Dock
Number 10 be entered by the court. All right.
I don't have any questions on this one. Any party
have any comments, questions, or concerns? All
right that motion is granted. Thank you your
honor. The final motion that I'll be presenting
is the wages motion filed at docket number 11
listed on the agenda as number 10. By this motion
the debtors are requesting the authority but
not direction to pay pre -petition workforce
obligations and to continue to honor their compensation
and benefits programs and to pay related expenses.
The debtor's workforce consists of about 6 ,000
employees, about 2 ,000 of which are full time.
Of those employees, 559 are salaried and the
rest are paid hourly. In addition, the debtors
utilize eight independent contractors to provide
marketing, IT, and learning and development functions
for various projects. The debtors are requesting
approximately $4 .04 million of relief on account
of the debtor's compensation and benefits programs
and prepetition workforce obligations. Although
the debtors believe all compensation and benefits
programs are vital to the debtor's businesses,
pursuant to the order, the debtors are only seeking
authority to the extent that they believe it
necessary to prevent immediate and irreparable
harm. Importantly, the debtors are not requesting
relief to pay any amounts on account of compensation
and obligations that are in excess of the statutory
cap set forth as Section 507A4 of the Bankruptcy
Code, except for amounts paid pursuant to the
EEOC proceedings. Your Honor, the employees provide
the debtors with services necessary to conduct
the debtor's businesses. And the debtors believe
that absent the payment of pre -petition compensation
obligations, the debtors may experience employee
turnover and instability at this critical time.
For the reason set, excuse me, additionally the
debtors have worked with the USP and have agreed
to kick the expense reimbursement for senior
level management to the second day. For the reason
set forth in the motion, And in the absence of
any additional questions, Your Honor, we respectfully
ask entry of the revised form of order, which
we will be filing, which will include the expense
reimbursement language. All right. Mr. Bublick,
anything else on that one? Well, the associate
appreciates that are working with us to resolve
our concerns. We also had some concerns regarding
the independent contractors. So to the extent
that better is able to, we would like to hear
evidence that the independent contractors they
do seek to be paid do qualify under 507A4B. Thank
you, Your Honor. Is this evidence to be supplied?
After the hearing, are you looking for that now,
Mr. Bubley? Your Honor, we were awaiting a list
of the independent contractors, and they did
seem to get paid, and we have not received that
yet. So to the extent that we're able to put
on that evidence now or commit to providing that
later, the U .S. trustee would appreciate that
to resolve its concern as to these independent
contractors that are sought to be paid. I'm fine
either way if the debtors want to commit to providing
that information to the U .S. trustee after the
hearing. I don't have any problems with that.
Yes, we'll do that, Your Honor. All right. So
I guess that one will be granted with the first
modification, which I understand is coming in
a red line. I'll let you work on Mr. Bulwick
after the hearing. I'll just assume that if the
order's uploaded, all remaining issues have been
resolved. But with those caveats, that motion's
approved. Thank you, Your Honor. I'll now cede
the podium to Mr. Park. All right, thank you.
Good afternoon, Your Honor. For the record, He's
a part from Robson Gray on behalf of the debtors.
The motion that I'll be presenting today is the
debtors cash management motion. This is audit
document number 12. It's agenda item number 11
on today's agenda list. All right, thank you.
Your Honor, through this motion, the debtors
are seeking to one, continue the debtors cash
management system, to honor any pre and post
obligations on account of bank fees. three to
maintain existing business forms, and four to
continue the debtors cash management system in
the ordinary course. The debtors maintain a total
of 27 bank accounts. Those are maintained at
US Bank and Bank of America. Both of those institutions
are approved by the US trustee as depositories,
and all of the debtors' bank accounts are FDIC
insured. In order to assist the court's understanding
of the debtor's cash management system, I think
that's to view the cash management system in
two different categories. The first category
is what we call the non -securitization entities,
and as Mr. Dickerson alluded to earlier, these
are the manager entities that are involved or
associated with the corporate activities of the
company. The main... The operating account at
this entity is the main corporate account. This
is maintained at Hooters of America LLC, bank
account number ending in 0215 at US Bank. And
this account is the main operating account where
it makes any disbursements on account of corporate
activities and collections to the extent that
there are any. Importantly, in the ordinary course
of business, Your Honor, The tutors of America
LLC as the manager of the securitization entities
make certain advancements to the securitization
entities in cases where there are insufficient
funds to operate the securitization entities.
And once the funds are made, the right to reimbursement
of these entities sit at the top of the waterfall
for repayment of the securitization entities
under the indenture. The other half of the debtor's
cash management system are the securitization
entities. These entities are involved with the
debtor's operations of the restaurants and also
the franchise activities. With regards to the
franchise activities, the debtors collect certain
fees in the form of franchise fees and royalty
fees under the franchise agreements that debtors
have with certain franchisees. Once the proceeds
come in on account of these restaurant activities
and the franchise activities, they are funneled
into what we would call the main collection account
in the motion. And this is where all the proceeds
from the restaurant activities and the franchise
activities are gathered after accounting for
any of the disbursements that need to be made.
Once it hits that account, it's then transferred
to a bank account maintained by the US Inventor
Trustee. and the trustee for the purpose of making
the payments under the waterfall that we described.
Your honor, the debtors believe that the ability
to continue the debtors' cash management system
is imperative for purposes of operating in the
ordinary course of business. The failure to do
so will tremendously impair the debtors' business
in the ordinary course. The debtors believe that
we have circulated copies of the motion beforehand
with the U .S. trustee. I believe that we have
resolved all of the comments, but we have not
have had the chance to upload a revised order.
So subject to your review, Your Honor, that there
is a respectfully request that the order be entered
by this court. All right, thank you. We're gonna
mute that person first. And then we'll go to
Mr. Public. Mr. Public, any other? Thoughts or
comments on this one? No, Your Honor. The U .S.
Trustee, again, appreciates that are working
with us on a form of order that would be accepted
to the U .S. Trustee and appreciates the resolution
that we reached on that. Thank you, Your Honor.
All right. Any other party? Good afternoon, Your
Honor. Kyle Hirsch for Brian Cave, Leighton Pasner,
representing Bank of America. We have not had
a chance to confer with debtors council. There
is a modest revision that we would be requesting
of debtors council. So to the extent there is
a proposed order that is being amended for uploading,
I think we can get that addressed. I don't expect
it to be controversial. It relates to authorization
for the bank to charge back to accounts for returned
items. That's an important provision for the
bank to include in its cash management provisions.
But I do expect that to be a non -controversial
discussion with Betters Council. And with that
additional revision, we don't have objections
to the proposed order. All right. That sounds
like something that should be able to get worked
out in fairly short order after the hearing,
before the order's uploaded. Yep, you're right.
I will agree, Warren. Thank you. We'll come forward
with Mr. Hirsch and make sure it's addressed
in the order. All right. All right. Thank you.
Any other parties? All right. Well, that motion's
granted with the understanding that that little
tweak will be made before the order's uploaded.
Otherwise, everything else looks good to go.
So that motion's granted. Thank you. Now I yield
the floor to my colleague, Ms. Regina Casillo.
All right, thank you. Good afternoon, Your Honor.
For the record, Regina Castillo from Ropes and
Gray on behalf of the debtors. I will be presenting
the next two matters. The first matter I'll be
presenting is agenda number 12. This is the debtors
critical vendor motion filed at docket number
13. By this motion, the debtors are seeking entry
of an order authorizing the debtors to pay certain
pre -petition claims of vendors whose goods and
services are essential to the debtors continued
operations, claimants whose claims are entitled
to administrative expense priority under section
503 B9 of the bankruptcy code, and claims that
give rise to statutory constructive trust under
PACA and PASA. In this order, the debtors are
seeking this relief on an interim basis up to
an amount of approximately $4 .7 million. Your
Honor, the debtors, along with their advisors,
have engaged in a thorough review of the books
and records and reviewed diligently to identify
the vendors out of the debtor's entire vendor
population that are truly critical to their operations
and without whose goods and services the debtor's
estates would be significantly and irreparably
harmed. We worked with the United States trustee
in advance of filing to address any questions
and concerns and believe that the proposed interim
order attached to the motion and submitted in
advance of the hearing is acceptable to United
States trustee. Unless your honor has any questions,
we respectfully request that the proposed form
of order at docket number 13 be entered by the
court. All right. I'll start again with Mr. Bubly.
No concerns, Your Honor. Thank you. All right.
Thank you. Any other party? Your Honor, this
is. We're secretly on behalf of, as I stated
earlier, Benny Keith Company, a significant creditor
in this action out of Fort Worth, Texas. My client
is a food service provider to Hooters restaurants.
in the Texas and outlying areas. My only concern,
I don't necessarily object to the critical vendor,
but I wanted to comment that we are working with
the debtors to try to resolve our status as a
critical vendor. We are owed over $2 million
for pre -petition debts from the restaurants
that we service or supply. In addition to that,
we are a preferred creditor under the Parish
Bliger Cultural Commodities Act, trust provisions,
which give us priority over all creditors, secured,
unsecured, or otherwise, in connection with the
debtor's bankruptcy case. Again, I emphasize
that we are working very closely with the debtors
to resolve our status in the bankruptcy case.
But I wanted to make at least some statement
that we reserve our rights with respect to the
treatment of our claim. under the critical vendor
motion and also more particularly under the debtor
in possession motion, which is going to be heard
in a minute. We are, like I said, we are owed
quite a significant amount of money. The motion
currently before the court does not identify
any creditors per se. We have been advised that
we are deemed by the debtor to be a critical
creditor. However, we have not had a resolution
and I'm concerned only that with our claim at
$2 .2 million on pre -petition debt and other
creditors that they may consider critical vendors,
that the amount that is being set aside for treatment
of critical vendors is adequately sufficient
to maintain the goal that the debtors seek to
achieve by this motion. That's all I would have
at this time. Thank you. Entry of the order won't
prejudice your client's rights to continue to
work with the debtor to try to convince them
that they're critical. So I understand the comment.
So thank you for that. Any other parties? Your
Honor, Mark Stout here on behalf of Regents Facility
Services, Inc. Your Honor. Shortly before the
hearing today, I had an opportunity to call debtors
council and to their credit, I sent them an email
just a couple hours before the hearing and they
immediately responded. My understanding is that
my client will be listed and a revised order
that they are submitting to the court listening
to counselors presentation. It's unclear to me
if the order that is previously been presented
to the court is the one that they intend to upload
or if there's going to be a revised one. But
my understanding is that my client is in the
revised order for $321 ,206 on a claim amount
of $726 ,000. I reserve all rights to object
to the treatment, I have not had an adequate
time to dig through it with my client, but I
did want to make sure that my understanding that
we were going to be listed as a critical vendor
is correct and that the court was aware of that.
Thank you. All right. Well, I guess I'll hear
from the debtors on whether the agreement was
to list you or whether they just consider you
critical. It doesn't really matter to me, however.
However, the debtors would like to confirm that
Mr. Stout's clients are critical vendors. However,
we will not be submitting a revised order. All
right, very good. Your Honor, will the debtor
confirm that my client Betty Keith's company
is a critical vendor and will be treated respectfully
under the court's order? Your honor the debtors
confirm Thank you All right Well that motion
Is also granted no matter what standard applies
whether it's co -server or some other standard
I think the debtors have satisfied it with with
the evidence and the Declaration so that motion
is granted Thank you your honor the next item
on the agenda that I'll be covering is agenda
number 13 This is the debtor's customer program's
motion filed to docket number 14. By this motion,
the debtors are seeking entry of an order authorizing
the debtors to maintain and administer their
existing customer programs and to honor their
pre -petition obligations related thereto. Your
Honor, the continuance of these customer programs
is critical to the debtor's business. In particular,
it's essential that the debtors maintain their
valuable customer relationships, goodwill, and
continue maximizing the debtor's reputation and
customer satisfaction. The debtors run a variety
of customer programs and rewards that are designed
to drive brand excitement, attract customers,
and maintain positive customer relationships
at each of its restaurants. This includes certain
promotions and a loyalty program maintained by
the debtors. The loyalty program is structured
as a tiered membership system where guests accrue
points with each visit for amounts spent at the
debtor's restaurants. Additionally, the debtors
provide rewards for non -purchasing activities
such as birthdays, holidays, or other qualifying
events for participants of the loyalty program.
There are no pre -petition amounts due under
the debtor's loyalty program beyond the non -purchasing
rewards, but the debtors request authority to
continue honoring these promotions. Additionally,
the debtors seek authority to continue its gift
card programs, which is administered by a third
party, Stored Value Solutions. The third party
administrator is paid a monthly processing fee
of $3 ,200. As of the petition day, there are
approximately $10 .6 million in gift cards outstanding.
However, in the three months prior to the petition
date, approximately $670 ,000 were redeemed pursuant
to the program. The debtors seek authorization
to honor any accrued obligations, including obligations
incurred on account of the processing fee, and
to continue to honor all customer obligations
on a post -petition basis consistent with past
practices. Finally, the debtors seek authority
to continue its partnership with its third -party
delivery services and first -party delivery providers
who facilitate direct ordering and delivery services.
The third party delivery partnerships collect
payments from customers and remit payments to
debtors net of commissions and fees, where the
first party delivery providers collect monthly
fees as well as a transaction fee of approximately
$49 ,000 a month. As of the petition date, the
debtors do not owe any outstanding obligations
under the delivery partnerships, but seek authority
to continue the partnerships and the ordinary
course on a post -petition basis. Your Honor,
maintaining these critical relationships will
benefit all the debtors, creditors, and stakeholders.
And the debtors believe that the damages from
disregarding these obligations under the customer
programs would far exceed the costs associated
with honoring them, as canceling any of these
programs would result in brand damage, loss of
goodwill, as well as loss of returning customers.
Unless Your Honor has any questions, we respectfully
request that the proposed form of order at docket
number 14 be entered by the court. All right.
Mr. Public, any concerns on this one? No concerns
with this motion. Thank you, Your Honor. All
right. Any other party? All right. The order
on this one looked fine to me, so just as with
the others, I'll adopt it, and that motion is
granted. Thank you, Your Honor. With that, I'll
say the podium to my colleague, Ms. O 'Court.
All right. Thank you. Good morning, Your Honor.
For the record, Alexis Ogorek from Ropes and
Gray. I'll be presenting two motions, the first
of which is the debtors lease rejection motion,
which is found at docket number 15 and agenda
number 14 on the proposed revised agenda. We
have spoken with certain council to the landlords
and we are continuing to work with those landlords
on a revised form of revised proposed form of
order, pardon me, and we will upload that order
after this hearing when it's agreed to. In terms
of the relief, the debtors are requesting authorization
to reject certain non -residential real property
leases and abandon certain personal property
at such lease locations. The debtors have ceased
operations at 36 of its restaurant locations
prior to the petition date. The debtors have
either surrendered possession of the premises
and provided notice to the landlords, or the
debtors have been locked out by the landlords.
The debtors are requesting the rejection of leases
as of the petition date, as well as abandoning
personal property assets therein. The debtors
do not believe there is valuable property remaining
at the locations that they have surrendered to
the landlords. And the debtors are requesting
relief effective as of the petition date to minimize
post -petition administrative expenses. We've
provided a copy of the motion to counsel to the
U .S. trustee. And accordingly, if there are
no questions, we respectfully request that this
court enter the lease rejection order, which,
again, there will be a revised proposed form
of after. All right. So when I read this one,
I think last night, the original certificate
of service just said that it was served on the
court's pacer system, but at some point, I think
over lunch I saw there's a revised affidavit
of service and it looks, I didn't have time to
go through and look at the details, but it looked
I think towards the end, was it I and J, you
were able to get service on the affected counterparties
either by email or overnight service, is that
right? Your Honor, I believe that's correct.
Were there any counterparties that you didn't
have good that you didn't have addresses for
for overnight service whether it was like a post
office for a post office box or nothing stuck
out so Your Honor, I do not believe so but I
can confirm all right, so Well, I'll just trust
that the service is good. If there was a problem
serving anybody, you can follow up after the
hearing. So let me start and ask, are there any
parties have any questions or concerns about
this motion? This is Joel Newell with Ballard's
Bar. There were a couple of questions related
to this, and I will echo Council's comment. that
we have had some dialogue with council as to
some perspective language to be included in the
order. The first being, since this is a first
day motion, one of the concerns is why this needs
to be done on such an expedited basis, given
the non -protonc relief as to these properties
that it wouldn't incur any additional administrative
costs. The second being, as council noted, these
36 properties one of particular interest to our
client has left the essentially the restaurant
equipment and everything there and getting clarifying
language in the proposed order that the landlord
can dispose of that property once the orders
entered similar to what we may see in a later
motion on the rejection procedure that is not
necessarily compounded, but expanded upon from
the standpoint of some of that property on site
on these closed businesses, maybe third party,
and the difficulty of then the landlord being
in the position of having to determine whose
property that is. We did get a list of the third
party holders of that property and trying to
work with the debtor on. coordinating that, but
some of those concerns are still outstanding
in relation to the respective motion and the
immediate relief asked by the debtors today.
So tell me you've floated some proposed language
or not. Have you had a chance to do that? Yes,
I apologize, Your Honor. Yes, to clarify or reaffirm,
yes, we have sent some proposed language to Debtors
Council. to be considered. The comment that I
believe we received in response was that they
needed to confer with the secured lender or lender
in general on those proposed changes. And we
at this point don't have affirmation whether
that's been accepted or not. But we'll continue
to work with debtors council and whomever on
continue to discuss that proposed order itself.
All right, so from the debtor's perspective,
I don't know if you can give me an update if
you've had a chance to confer with the, I guess
the lenders that would, the concern I guess would
be the lenders that have a lien in the stuff
that the landlords are proposing to go dispose
of. Apologies for that. I'm not sure if I was
on mute there or not. We are continuing to work
with the landlord's council to continue working
on a revised form of order. In terms of the specific
comments by council that was just raised, actually,
I'm sorry. May I have a moment to confer with
my colleagues? Sure. Thank you. Your honor, can
you hear me? Yes, I can. Sorry. Thank you so
much for that. So we have notified the third
parties who have interest in the property that
is left behind at the locations, and we are not
directing one way or the other what the landlords
should or should not do with that. We have provided
the contact information, and we will continue
to provide it if any more is needed so that the
landlords and those third parties can continue
working that out amongst themselves. As for the
specific comments by this landlord that were
raised and to which we responded that we were
working with our secure lenders, we are still
working with our secure lenders on that. Obviously,
there are multiple parties of interest in this
case. So I cannot confirm those specific comments
at this time, but we will continue dialogue with
the landlord council and with the other parties
in interest. All right. So just as a heads up,
because this has come up in other cases, giving
a little bit of a preview for the next motion
with the abandonment procedures. I've never quite
gotten comfortable with the concept that the
language, and again, we're not calling that motion
yet, but that the abandonment would be free and
clear of liens, claims, and encumbrances, abandon
to the landlord, free and clear of liens, claims,
and encumbrances. I haven't quite gotten comfortable
with language like that. Is that what? the proposed
language that's being discussed for the current
rejection motion? Is that the type of language
that you're looking for for your landlord client?
Right, Your Honor. Are you referring to the rejection
motion that we're discussing now or the rejection
procedures motion? Well, I'm asking if the type
of language that this particular landlord is
asking for to resolve his concerns about this
motion Is he asking for that type of language,
the type of language that's in the procedures
for abandonment? Because I'm, is that what you're
asking for, to be able to go get it free and
clear of liens, claims, and encumbrances? Or
is it just that the stays lifted free to exercise
whatever rights and remedies you might have?
I think from my perspective, that's the type
of language that I would be comfortable with.
Thank you, counsel. Yes, to answer the court's
question, the language that we would be proposing
or have proposed would include that the property
that is abandoned by the debtor is free and clear
of those interests of the creditors to otherwise
dispose of as provided and the abandonment of
the property in those rejected leases. So you'll
have to help, you'll have to convince me that
that's appropriate because I've In prior cases,
I haven't approved language like that because
the Why would the abandonment be free and clear
of liens claims and encumbrances I know that
that would be helpful to the landlord but Wouldn't
it be sufficient if the landlord is just free
to exercise whatever rights and remedies it may
have under applicable law to dispose of Whatever's
left Well in similar cases this language has
been utilized in part of the issue is the cost
of the storage of trying to Then determine whose
property it is or the lien holder rights And
The the language provides that and maybe it's
a clarification to my private comment I apologize
your honor that There's no free and clear language,
but the language that the property will be abandoned
in consultation with the lenders. So the landlords
need further clarity that the lenders have been
consulted and are waiving their liens. And I
think that addresses the court's issue because
it wouldn't be so much as the court's determining
that the landlord can dispose of it free and
clear is that they're waiving their liens as
to that. So I think it would be at that point
a mutual. per se release of the lien for that
once the order is entered for then the landlord
to dispose of the property that's abandoned by
the debtor. So that's why I believe the secondary
comment that council raised that they're still
conferring with lenders comes into play with
regards to language in the proposed order. So
I wouldn't have any problem if the lenders who
are represented here agree to language that say
once it's abandoned they're or releasing their
liens so that you can do with it what you want
without having to worry about those lenders that
are expressly releasing their whatever interest
they might have in the equipment. If that's what
you're talking about, I don't have a problem
with that. I guess I'll just have to rely on
the debtors to let me know if the order's uploaded,
who all has blessed that language in the order.
I apologize for any confusion I may have created
with my prior comments, but I believe at the
end of the day, with conference with the lenders,
it will be a waiver and inclusive in the order
itself. So we'll work with debtors council post
hearing to address that. All right. Does that
work for the debtors to try and wrap up that
particular concern with language that's agreed
to by the debtors? this this landlord and whichever
lenders want to expressly release their liens?
Yes your honor that works for us. All right any
other any other parties? Yes your honor Cheryl
Knighton on behalf of several uh ad valorem property
taxing entities in Texas. Going back to the comments
that were just discussed about abandonment free
and clear of liens, under pursuant to Texas law,
the liens held by the Avalon taxing entities
are the senior liens on any tangible personal
property. So they would object to any abandonment
free and clear of liens at this juncture. All
right. So it sounds like for this particular
motion, I don't think anybody's trying to get
that language in there. But so I understand your
concern so if the debtors want to try to resolve
the issues for these landlords After the hearing
I don't have any problem with that I will grant
the motion and allow the debtors the opportunity
to tweak the order to resolve the concerns of
particular lenders about particular liens, but
I'm not anticipating that this order will be
uploaded with just general language that says
that the abandonments Free and clear. I think
that would address miss Knighton's concerns,
correct? Yes, your honor that would address the
teching up or ease concerns. All right. All right.
Does that work for the debtors also then? Yes,
your honor. That works for us All right. Very
good. Well that that motion is granted then and
I'll Keep an eye out for some some form of agreed
order Thank you, your honor The next motion I'd
like to present, as you previewed, is the rejection
procedures motion. And similarly, we continue
to speak and work with landlords to address their
concerns. And we'll upload a revised proposed
form of order after this hearing. Apologies,
I keep having trouble saying that. As in the
previous discussion, the debtors seek entry of
an order authorizing and approving procedures
to reject certain executory contracts and non
-residential real property leases. And while
the debtors have also requested authority to
reject certain leases effective as a petition
date, this one creates procedures for future
rejections of contracts and leases. The proposed
procedure is required that the debtors file a
rejection notice, which sets requirements regarding
abandonment of personal property, objection procedures,
deadlines for filing claims, unresolved objections,
and treatment of security deposits. We have provided
a copy of this motion with counsel to the U .S.
trustee. And if there are no questions, we respectfully
request that this court enter the rejection procedures
order, which we will upload after this hearing.
All right, so what my concern about the abandonment
language what do the debtors propose to do with
that? So that's the it's the it's the language
in the order that says after the debtors specify
That they're going to abandon it absent a timely
objection. It's abandoned free and clear to the
landlord Your honor we are comfortable removing
that language All right, so I'm fine with the
abandonment and to the extent that the if any
particular lender wants to agree to procedures
where they're releasing their particular liens,
that's great, but With that change, I don't have
any other concerns about that motion Does any
party have any comments or concerns about the
motion of docket 16? Judge if I may be maybe
heard just on this one Council has said she's
going to be submitting a revised order. I don't
know what the changes are anticipated in the
revised order. I'd like her to address that.
Sorry, I don't know if I'm off mute yet. Alright,
now I can hear you. Go ahead. Thank you, Your
Honor. We can share the revised the revised proposed
form of order with such counsel We have not decided
on all the changes yet, so I can't walk through
them at the moment, but Happy to share it. I
mean, how could we approve an order without even
knowing it's not even been shared with anyone
So I understand she's gonna propose any proposed
order will be sent to you I guess from my perspective,
as long as the abandonment language is tweaked,
I don't have a problem with the order. Tell me
what your particular concern is with this order.
Well, just as an example, if she changes the
amount of time, I mean, on behalf of Mr. Donella,
the sooner we know whether or not this scooter's
location is going to be sold or taken over or
operated, it's important to us to know where
we stand. If, for example, they're changing the
time of their rejection, that affects us dramatically.
When you say the time of the objection, do you
mean the time you have to respond to a proposed
notice? Either way. The time that they're going
to give the notice or the time for us to respond
to it. So I don't think this sets a deadline
for them to give you a notice. I don't recall
seeing that. Is that in the order somewhere that
I missed? It just generally provides that the
debtors and they have a lot on their plate at
the appropriate time They decide which proposed
leases they want to reject After and there's
no deadline for that after that decision is made
They would then serve the the proposed rejection
notice on the affected counterparty which would
include your client at that time your client
would then have the opportunity to There's an
objection period. The objection period is 14
days, Your Honor. 14, all right, thank you. So
14 days. So I don't think you're prejudiced by
the entry of this order and the types of changes
that I think that the debtors are talking about
making are non -material changes, not something
that would wildly change the proposed procedure.
And that would give your client the opportunity
to look at the proposed rejection. And if you
have an objection, you'll have 14 days to file
it. So I think the proposed order fully preserves
your client's rights. It's not doing anything
now other than setting a process in motion for
the debtors to then file notices as and when
they see fit. All right. Thank you, Judge. Your
Honor, Vicki Driver on behalf of a litany of
landlords, I won't repeat. I just would like
to see a copy of the order before it's uploaded.
I don't think we'll have any issues with it at
all, but would just like to see the final copy.
All right. I think that's a fair request. I don't
think the debtors will have any problems with
that. And I don't have my official entry of appearance
on file. I just spoke with the clients this afternoon.
But I will get my contact information over to
counsel for the debtor today so that they know
who they're talking to and who they're talking
on behalf of. All right. Thank you. Thank you,
Ms. Strieber. All right. Any other parties have
any concerns about this motion? All right. Well,
it's granted other than with the one tweak on
the abandonment language that I raised. Otherwise,
I think you're good to go. So thank you. Thank
you, Your Honor. I will now be seating the podium
to my colleague, Mr. Brown. All right. Thank
you. Good afternoon, Your Honor. Ramon Brown,
ropes and gray on behalf of the debtors. Good
afternoon. I'll be presenting, I'll be presenting
the debtor's dip motion filed at docket number
four, agenda item number three. As noted previously,
the revised form of order was recently filed
just before the hearing at docket number 83 with
the red line filed at docket number 85. Also,
as previously noted, in support of the dip motion,
the debtors filed the declaration of Mr. Keith
Maeve at docket number 17, the debtor CRO, and
the declaration of George Coutson Nicholas of
Solic, the debtor's investment banker. That's
filed at docket number 18. Your honor by this
motion the debtors are seeking approval of what
is a 40 million dollar dip facility provided
by the debtors pre -petition lender This facility
includes 35 million dollars of new money in a
roll -up of five million dollars with the pre
-petition manager advance credit agreement claims
As noted by my colleague. Mr. Dickerson These
funds these the funds will be provided to the
debtors for the purpose of funding manager advances,
solely for the purpose of benefiting the securitization
claims, which are the securitization entities,
which are the restaurant and franchise operations.
Of the $35 million of new money requested, $5
million will be made available in the interim
period with the ability to request an additional
up to $1 million each week through entry of the
final order. As Your Honor would expect, the
DIP is requesting super priority priming liens
subject to generally the carve out and any permitted
liens. During the first four weeks of these cases,
the debtors expect and as referenced in the or
as noted in the budget. filed with the interim
order. The debtors anticipate spending just under
$10 million in the first four weeks with a significant
portion of these amounts going on account of
vendor claims. Much of which, with respect to
certain of the critical vendors mentioned just
earlier. Your Honor, without access to these
funds under the debt facility, the debtors would
not have sufficient liquidity to pay their ordinary
course operating expenses, nor would they be
able to fund the administrative costs of these
estates. Obtaining dip financing at the outset
of these cases is critical and necessary to maintaining
the debtor's operations as a growing concern.
As described in Mr. Koutanikoulis' declaration,
The debtors undertook a pre -petition marketing
process seeking to obtain proposals for, among
other things, post -petition financing. At the
conclusion of that marketing process, the debtors,
the proposed DIP facility was the only viable
post -petition financing option available to
the debtors. I would also note, Your Honor, one
clarification and with respect to the declaration.
and is reflected in the revised papers that with
respect to the dip facility, there are no fees
contemplated as negotiated between the parties.
I would like to emphasize, Your Honor, that the
dip facility is a key aspect of the overall restructuring
contemplated in the RSA that was recently filed
this morning in connection with the... Interim
order, I do not have the doctorate number, but
it should be just after the revised form of order
filed at Dr. 85. All right. The debtors, Your
Honor, require access to the facility immediately
to avoid irreparable harm and to continue operating
in the ordinary course, as contemplated in these
cases. For these reasons, Your Honor, the debtors
submit that Approval of the dip facility is in
the best interest of the estates. Finally, Your
Honor, we worked with a number of parties, including
the USD, to try to resolve a number of issues
leading up to the hearing. We were able to resolve
a significant amount of the issues as reflected
in the revised form of order, though we continue
to discuss with parties additional comments.
So we expect that at the conclusion of this hearing,
we'll still... be resolved in issues and will
file a refund of order post hearing. Your Honor,
with that, Your Honor, I'm happy to address any
questions or if helpful, walk through the revised
form of order. Why don't we go through the revised
order and then I'll open it up for any comments
after that. All right, Your Honor, thank you.
This is the one red line that I didn't quite
have time to get through, so I'll... start looking
at it in real time here? Your Honor, I'll note
that most of these changes here I would describe
as non -substantive. If helpful, and just given
the size of this dipwater, I can flag what I
think are the highlights or more substantive
changes here. Yeah, that'd be perfect. Thank
you, Your Honor. First, I would note on page
10 of the red line, and this is paragraph F,
Romanate IB. Your Honor, I just want to note
the change here is just correcting the pre -petition
terminal amount. All right, I see it. Your Honor,
the next change I would flag is on page 14 of
the red line, subparagraph C. I just want to
note that the parties agreed to move this language
regarding certain pre -petition reporting that
was included. All right, I got it. The next one
I would notice on page 32 of the red line, it's
paragraph 2... 2B, Romanet 4. Your Honor, this
is just authorization for the debtors to make
certain payments to secure parties on account
of any fees, indemnification, or expense reimbursements
to the... No voter parties. All right, I got
it. Your Honor, the next one I would flag is
page 47 of the red line. It's paragraph 11A.
At the top of the page, Your Honor, I'll just
flag that the... Professional fee carve out is
no longer subject to the budget All right Your
honor the next change is on page 74 of the red
line That will be paragraph 26 A, at the bottom
of that paragraph. Your honor, this change is
just authorization for relevant third parties
to enter into account control agreements. And
I'm sure other parties can speak in more detail
about this, but generally, your honor, this is
providing for a city bank and I believe the pre
-petition or the dip agent to enter into account
agreements, account control agreements with each
other. For the record, you're on the city bank
would be the securitization, Trustee. All right,
thank you. Then the final, I would say material
change I would like to note is paragraph 58 of
the interim order. This is our reservation of
rights for LAGS equipment LLC that we received
early this morning with respect to any rights
they would have with respect to the LAGS royalty
obligations. I'd say the balance of the changes
are I'd say mostly related to DIP lender and
note holder, the ad hoc group consent rights
and other clarifying changes. And with that,
I'd open it up to any questions from your honor
or comments from other council. All right. Well,
thanks for walking through the order, the material
provisions for changes. So let me open it up.
Why don't I start with, I did see the reservation
of rights was filed by. City banks, why don't
I start with city bank? Thank you, your honor.
This is Nathan Coco from Mince Levin on behalf
of city bank, which is the trustee for the pre
petition secured notes. Um, as we noted in our
reservation of rights, your honor, um, the pre
petition, those trustee has not been involved
in negotiations among the debtors, the dip lenders
and other stakeholders. regarding the terms and
conditions of this dip financing and cash collateral
arrangement. Nor have we had discussions over
the last couple days with the debtors regarding
their proposed use of the trustee's cash collateral.
And I understand that this case, as is often
the case, was filed perhaps under exigent circumstances.
But we have undertaken to quickly analyze the
dip motion and the proposed form of order, including
some of the revisions and red lines that have
come across the transom. There are other materials
in connection with the dip that we haven't yet
had an opportunity to review, including the credit
agreement. And although the trustee is not objecting
to the interim relief that's being sought by
the debtors today, we filed our reservation rights
to make clear to the court and to other parties
in interest that the trustee is not in a position
at this stage to consent to final relief being
sought under the dip motion. particularly with
respect to the priming of the trustee's liens.
And because of that, the trustee expressly reserves
its rights, claims and objections for purposes
of the final hearing to the extent that it has
objections. All this having been said, we hope
to continue to engage with other stakeholders
in the case, most particularly the debtors on
any issues we may have as we continue our review.
We understand that this is important motion mission
critical to the debtors But we want to make the
court aware that we have not yet had an opportunity
to fully review all the materials and we have
not had Meaningful discussions at this point
with with the debtors and other key stakeholders.
So we are reserving our rights All right. All
right. Thank you. I understand your comments.
I appreciate the heads up Any other party right
there yes, hi your honor I'm Brian Brian Pfeiffer
from Whitencase. And we represent the ad hoc
group of securitization note holders. And I think
it just give you a little bit of background.
So Citibank is our trustee. And I'll get to it
in a moment. But we intend to work with them
between the interim and the final to address
any concerns. But just from our perspective,
from the bond holder perspective, let me start
by saying our ad hoc group. We have seven institutional
investors who own 72 % of the Class A notes and
100 % all of the Class B notes. And just for
reference, there's 266 million of Class A notes
and there's plus some interest and 40 million
plus interest of the Class B notes. Together
with some note holders that are affiliated with
the DIP lender and that are also party to the
RSA. the collective note holders that are supporting
this agreement, the RSA and the DIP are well
over 94%. I think we're about 94 % according
to Mr. Dickerson's speech earlier today. And
so, you know, there is a... a large amount of
the bonds that city represents that are covered
here. We fully appreciate their perspective and
appreciate their reservation of rights. You know,
I think as everyone, you know, the last month
or so has been a sprint for everybody. We are
happy that we're at this place with a RSA, with
the BIA group, with the DIP lender and with the
note holders. And we know that there's a lot
of work to still be, that needs to be done, but.
I think that serious progress has been made.
And I guess the point that I would make is given
this level of note holder support, we do look
forward to working with Citibank and the way
that these securitizations, they do add some
complexity. There's a control party that is represented
by Mr. Ashmead who's on the line for drivetrain.
We'll work with both Citibank and drivetrain
to make sure that any and all of their concerns.
on this score are addressed. And I'm sure the
debtor and other parties in it just will as well.
But I think given that we are their chief constituency,
I just wanted to raise that that's how we see
this unfolding. And we appreciate that the reservation
of rights and that we're really just talking
about the final. And our hope is that we'll be
able to come back to you between now and the
final and have resolved any of their concerns.
All right. Right. I appreciate that. Your Honor,
If I may, John asked me to have Seward and Kissel
counsel to drivetrain agency services, the control
party under the securitization. Given that the
holders have a strong super majority of the notes.
As stated by Mr. Dickerson earlier today, approximately
94 % of the outstanding amounts are party to
the restructuring support agreement and support
this filing and this dip motion. We believe that
this juncture, and they believe that the restructuring
transaction set out in the restructuring support
agreement will lead to the maximization of the
recovery on the notes. And for those reasons,
the control party is not objecting to the interim
relief sought today, and we look forward to working
with Mr. Pfeiffer and his constituency and Citibank
and the debtors to do whatever's necessary to
be done by the time of the final year. All right.
All right. Thank you. Good afternoon, Your Honor.
Bruce Akerly, again on behalf of Benny Keith
Company out of Fort Worth. As I mentioned earlier,
We have over $300 ,000 in perishable agricultural
commodities that trust claims. These claims prime
all claims against the debtor, including secured,
unsecured, and otherwise. And while we're working
with the debtor to make sure that our claims
are properly treated, and we're having a conference
again on Friday to discuss the matters with respect
to critical vendor status and payment of pre
-petitioned debts with will completely resolve
all the issues. I want to make sure that the
instant order is going to be interim in nature
to allow the parties to weigh in prior to a final
hearing on the cash collateral. We don't necessarily
object to the order per se, except to the extent
that we are not able to work something out, which
I think is pretty low in the scheme of things.
But I just want to make sure we preserve all
rights. Thank you, Your Honor. All right. It's
definitely an interim order, so I think that
should satisfy your concerns. Thank you. Thank
you. For the record, Your Honor, Michael Reardon
on behalf of Blacks Equipment LLC. It's the holder
of royalty interests that the debtor has been
referring to as the legacy royalty obligations
in their filings. And when I made my appearance
at the outset of the hearing, I admitted to mention
that I'm also joined on Webex by my colleagues
from Bradley, Brian Bates, and Jared Martin.
So when we first started reviewing the debtor's
first day filings, we were actually pretty surprised
to find that our client had been singled out
by the debtors in both the first day declaration
and the div motion. With reservation of rights
language, that essentially called into question
the validity of our client's royalty rights.
And I believe if I heard the debtor's counsel
correctly earlier on in the slide presentation,
he did confirm that the debtors do intend to
challenge the act's royalty interest. So it does
look like we're going to be front and center
in this case, and we look forward to appearing
before Your Honor to protect lags and legitimate
rights. As the interim death order, we did reach
out to debtors council yesterday asking if they'd
be amenable to inserting some reservation of
rights language that mirrored theirs, just to
make it abundantly clear that whatever dispute
is going to happen in the future, it's not being
dealt with now and no one's being prejudiced
at this point. And I can confirm that language
has been added to the DIP order at Paragraph
58. And I just want to express my appreciation
for the professionalism of betters attorneys
engaging with us on that. All right. All right,
thank you. I did see that language when it was
pointed out to me. So it looks like you should
be squared away for purposes of the interim order.
Yes, thank you, Your Honor. All right, any other
party? Your Honor, Juliana Hoffman from Sidley
Austin on behalf of the proposed dip lenders.
Your Honor, my colleague Genevieve Weiner is
trying to unmute her line, but I think we're
having trouble. Is there a trick to unmuting
a telephone line? For telephones, it would be
star six, I believe. Okay. Star six to unmute
if the audio is on. You're on now? Yes, I can
hear you. OK, great. Thank you. And apologies
about that. I was having issues with my computer
audio. But again, for the record, Genevieve Weiner
was still the option on behalf of the proposed
DIP lender. And thank you, Ms. Hoffman, for jumping
in. I want to reiterate the comments of Mr. Pfeiffer
and Mr. Ashmead and, you know, the First City
Council that this was the first that we had heard
from them in terms of the filing rights right
before the hearing, but they should, of course,
feel free to reach out to us. As I understand
it, though, there's nobody objecting here as
to the interval and the order as proposed with
potential changes that will be negotiated afterwards
will be entered. But again, as I understand it,
no one is objecting to the interim release here.
All right. Thank you. Your Honor, Vicki Driver,
I just had a question on the budget, but if we're
just on the order right now, I can reserve that
for if we're going through the budget separately.
I don't care. We can, if you have a question
about the budget, why don't we knock it out now,
I guess. And I'm happy for debtors council to
address this. I don't necessarily need a witness
to. attest to this, but in looking at the budget,
there is a line item referring to occupancy cost,
and I believe it's approximately $1 .891 million
for the first week. My question is, is that referring
to lease costs? And if so, has the debtor made
any decisions as to whom those payments are to
be made? Yes, I believe those are with respect
to lease obligations, particularly rent, and
in some instances, including tax and other lease
obligations. I will say that for any, and I believe
that that is for any locations that are not being
rejected as a petition date, we do expect to
honor our lease obligations. Thank you, and I'll
just I'll be in contact in a little bit more
detail with you guys as I've been brought on
board So I appreciate you addressing that on
the fly. Thank you All right, any other parties
any concerns about the dip motion Your honor,
this is Jonah well balance bar we had provided
some additional proposed language that I don't
see in the red line but we'll continue to work
with debtors council presumably to be addressed
in the final order specifically in relation to
paragraphs five and six and paragraph 28 of the
interim order but just made that note but we'll
continue to work with them and presumably be
addressed prior to the next hearing all right
all right very good that's right any other parties
Last call for comments on the dip motion All
right, well that motion is approved after the
hearing I am going to go through just quickly
and go through the rest of the red lines the
rest of the comments on the red lines, I didn't
see anything that stuck out to me and So I fully
expect I'll sign that order once it's uploaded
with all the revisions that are made So that
that motion is approved on an interim basis Mr.
Eke of least benefit your honor with that I'll
pass the podium back to my colleague Good afternoon,
Your Honor. Stephen Jones on behalf of the debtors.
I think the last item we'd like to address with
the court today is docket number three, and that
is the notice of complex case. So essentially,
Your Honor, we're asking for complex case treatment
under the complex case procedures in the district.
We'll work with Ms. Bergerine to secure omnibus
hearing dates. Otherwise, the complex case procedures
would control. No comments on these. on the proposed
order as filed with the U .S. Trustee or anyone
else. All right. Mr. Bublick, are you good with
this one? Yes, Your Honor. No concerns. All right.
Anybody else have any comments on the notice
at docket number three? All right. So I'll enter
that order. I didn't have any problems with it.
Thank you, Your Honor. I think that concludes
the Vedder's presentation for the day. We certainly
appreciate the court's time both in this matter
or earlier matter. Unless... Actually, Your Honor,
I think we have one other housekeeping matter.
I think we do need to schedule the second day
hearing. My apologies. It's Chris Dickerson for
the record for Robson Gray. All right. So I don't
know... Since I've been in court all day. I haven't
had a chance to check with my well my courtroom
deputies out But we have some stand -ins that
are helping with the scheduling. I don't have
you reached out or have you? Gotten a proposed
list of dates or have you do you have any idea?
When you might want to come back. I think the
only one that we've are I think we can work around
Primarily the the final dip hearing your honor
and which would need to be at least 28 days.
So it Anything that you would have available
a month out, I think would be helpful and acceptable,
obviously, subject to your calendar. I think
28 days out takes us to the 30th. All right,
give me just a minute. In honor, I didn't mean
to surprise you. I know you've been in court
all day. If you would like us to take this offline
with your scheduling clerk, we're happy to do
that as well. I'm happy to knock it out now.
I'm just looking. Thank you. My normal courtroom
deputy is out. And so I think it's probably just
as well to look at the calendar now. On the 30th
There's a case that's listed as set for all day,
but I'm familiar with a case and I don't I think
it's at most an hour hearing And that's at 930.
I have some preliminary lift staterings at 130
Are you do you prefer mornings or afternoons?
I Think for those that would be traveling your
honor would make it a little bit easier to do
in the afternoon. How about 2 .30 Central? Would
that work? Is that too late? That works, Your
Honor. No, I think that's acceptable. I obviously
allow others to speak up if there's an issue,
but that works for the debtors. All right. Anybody
else have any problems with the 30th at, what
did I say, 2 or 2 .30? 230 230 230 Yes, your
honor All right, why don't we go with that then
Thank you your honor and I think as mr. Jones
indicated that is all we have for you today unless
there's anything else you'd like to cover with
us I Don't think so again for the time sure I
will save the The papers were excellent. The
presentations were excellent by everybody who
presented today. So I look forward to seeing
you all in court again for the second days and
the other hearings. And I appreciate the efforts
of all the parties on reaching agreements on
the matters that are set today. So thank you
all. Unless you, unless anybody else has anything
else for this afternoon, court will be in recess.
Thank you. Alright.