Good afternoon, Your Honor. You've had a long
day already. It's been a day. It's been a day.
Well, obviously, Your Honor, thank the Court
for scheduling us today on a very busy day. We'd
also like to thank Mr. Hackman from the Office
of the United States Trustee. We're pleased to
report we've been working with him and we have
largely resolved all of the U .S. Trustee's comments.
I think we're down to just one outstanding issue.
with respect to what we're calling the 542e motion.
Other than that, Your Honor, I move forward with
some introductions. In the courtroom is Stephen
Strom. He's the debtor's independent director
and the declarant today. As you no doubt saw
from Mr. Strom's declaration, he has substantial
experience in restructuring generally and in
particular dealing with very challenging situations
and this may be one. On Zoom today, Your Honor,
is Robert Wagstaff. He's the debtor's proposed
CRO from Riveron. Mr. Wagstaff is on the ground
in Cancun, which is where the debtors are headquartered.
So he is appearing by Zoom today, as a result.
From Yonkanoa, Your Honor, I'm joined by a number
of our colleagues, but I anticipate presenting
today will be Sean Greacher, Alison Milkey, and
Jared Koshinosh. And the first thing lenders
are here your honor and there are also our proposed
dip lender Prudential and Cigna and they're represented
by Baker and Mackenzie and Mr. Cousins So your
honor the circumstances we find ourselves in
here very recent governance change lack of current
financial information reports of severe operational
distress, serious concerns over animal health
and welfare aren't necessarily the standard set
of circumstances that this court typically sees.
That said, we think with Your Honor's help as
we get out of the gate here and the use of the
tools that are available under Chapter 11, we
expect and hope that in a relatively short period
of time, We will have this case on a more typical
path, consistent with other restructurings before
this Court. Your Honor, the background, there's
a significant amount of detail in Mr. Strom's
declaration. I want to address just a few key
points for the Court's consideration. But obviously,
if Your Honor has any questions or needs more
detail on any specific point, we'd be happy to
cover that. I do want to reiterate that as Mr.
Strom's declaration makes clear. Some of the
information in that declaration is dated because
the company has not generated audited financial
reports since 2022 and has not timely provided
reporting to the first thing note holders. The
most recent financial information that we've
had access to is from the third quarter of 2023.
The company is an international operation operating
more than 30 attractions in eight countries,
primarily US, Mexico, the Caribbean, and Italy.
These are recreational attractions focused on
dolphins or other live animal encounters under
the trade name The Dolphin Company. Overall,
the company has roughly 2 ,400 animals. about
295 dolphins residing at these facilities. The
company employs more than 2 ,600 people, and
in 2023 had 3 .5 million visitors to their dolphin
habitats, marinas, and water parks. The company
has in excess of $200 million of funded debt,
that's in two tranches of first and second. The
first lien has been in payment default since
January of 2024, so over one year. And the second
lien has been in payment default since September
of 2023. Additionally, Your Honor, there are
credible reports indicating that the company
has been without access to essential liquidity,
liquidity necessary to pay vendors, taxing authorities.
There's reports that they've delayed or not paid
certain wages and have not adequately provided
for the health, safety, and welfare of the animals
in their care. Again, as Mr. Strom's declaration
indicates, the facts of all of these issues will
be clarified as Mr. Strom and the management
team gains control over the company's books and
records. Given these... serious defaults and
concerns for the health of the business and the
health of the animals. I'm really in the absence
of prior management having any plan on how to
address these matters. The first lean note holders,
after exhibiting what appears to be significant
patients, took steps to exercise their control
rights and remove the existing members of LIH's
board. and they did so and then appointed Mr.
Strom as the sole independent director. At that
point, Mr. Strom caused LIH to retain Mr. Wagstaff
as the CRO and Riveron as restructuring advisor.
After that, the firstly note holders exercised
their control rights in the equity interests
of the Mexican affiliates to remove those entities
boards and appoint Mr. Strom there as the sole
independent director. independent director for
those entities. Once that was completed, Mr.
Sram removed the remaining debtors, boards and
appointed himself as the independent director
there. This process is ongoing. I know your honor
has the org chart. Right now there's a total
of 15 debtors, the lead debtor and 14 affiliates.
We're taking steps now to replace the boards
with Mr. Sram at the other entities. but we're
following the proper procedures for the jurisdiction
where those entities are incorporated. And some
of that is taking more time to go through the
process of replacing the board and installing
Mr. Strom. But it is underway and we do expect
several more debtors to file as we affect that
change. Now the court may be wondering, you know,
why did the independent director and the CRO
determined the file chapter 11 now before they
really had an opportunity to get their arms around
the business operations of these debtors There's
really four reasons your honor by all accounts
the company's in dire financial position They've
been in payment default as they indicated on
the first things for over a year In discussions
with the firstly no holders they made it clear
that they were prepared to lend to this company,
but only with a management change and inside
of a Chapter 11 where there could be appropriate
transparency, they were also clear they would
not be primed on their first -ling death. There
are animal safety concerns around reports of
dolphin deaths, particularly in the last six
months, and government action to investigate
alleged animal abuse concerns have caused a very
difficult situation that we want to... to try
to address immediately. Legal actions, judgment
liens, are all starting to pile up, whether it's
eviction proceedings, efforts to collect past
due amounts, or attachments. There are significant
legal actions going on. And Your Honor may have
noticed that the prior management commenced the
concurso mercantile, similar to a bankruptcy.
in Mexico. That was, again, filed by the prior
management. In our review, Your Honor, we can't
see that the company that filed had the requisite
corporate authority to commence a concursive
mercantile. But really more importantly, Mr.
Schramm has determined that such a proceeding
can't really create the platform for the global
restructuring that's required here. It deals
with only one entity. in Mexico. I can give you
an update on that proceeding, Your Honor. On
March 31, new management did move to withdraw
the Concurso mercantile. There was a hearing
yesterday and continued to today, and it recently
ended. And we expect a ruling very soon. But
the current management has asked to withdraw
from that. If withdrawal is successful, we do
intend to file that entity. as a sister company
with the current debtors. So really in sum, Your
Honor, given the substantial financial uncertainty,
the ongoing lack of transparency and responsiveness
to animal safety, the legal proceedings, the
filing of a Chapter 11 proceeding to invoke the
automatic stay and to allow the new debtor, I'm
sorry, the new director and CRO the breathing
spell to do the work necessary to get their arms
around this company and put it on a path to maximize
value. So what does success look like in this
case? We see it playing out in three phases.
First, stabilizing proper management and oversight
of the business. That means what seems like some
basic stuff, Your Honor, getting eyes on the
parks. access to bank accounts, access to email
and the servers. Really basic but critical stuff.
Top of mind, animal safety, Your Honor. We can't
say it enough. We're very concerned that the
lack of liquidity has caused the situation where
the animals are not being properly cared for.
So we want to get in there and find out and do
what we can to make sure that's fixed. So success
in phase one, Your Honor, is that the animals
are safe, they're properly cared for, employees
are paid on time, vendors are paid for their
post -petition services, and the company operates
in accordance with the obligations of Chapter
11. We're already actively looking for allies
in what we call a must -succeed project of animal
safety. Hopefully, we'll find those people within
the company. We're also looking at consultants
outside the company. We've begun to reach out
to those individuals. We're looking for people
who will share the goal and help us do what's
necessary to keep these animals safe. Must succeed
Project 1B is getting our arms around the financial
operations of the business. Again, this means
fully understanding cash management. where the
bank accounts, emails, server, employee payroll,
vendor services, and really other goods and services
necessary to avoid a shutdown scenario that would
both hurt the value of the business and put the
animals in further danger. So we're hopeful that
we're going to be able to take the steps necessary
to make this happen as quickly as possible. Mr.
Wagstaff, as I indicated, is in Cancun with his
team from Riveron. doing what they can to push
this process forward. But the relief that we're
seeking today will be very helpful and a first
step in sort of implementing phase one of this
plan. We want to do everything necessary to comply
with the bankruptcy code, obviously, and really
in turn determine the best path forward from
an operational standpoint for this company. So
as you're here in connection with the DIP financing
motion, The firstly note holders have stepped
up with an emergency funding opportunity that
the company can use to address the dire needs
as they are discovered. We have some buckets
we call them of where that funding can be used,
but we are working on a more comprehensive dip
budget and we have 15 days to do that. We're
hopeful that we're going to get access to the
information to provide the court creditors. everyone
else involved, all the other stakeholders with
a budget that we can use the DIP for. That's
phase one, Your Honor. We then move to phase
two, and that's a state value maximization. The
debtors have already contacted investment bankers
with appropriate experience for a company of
this type, and interviews are scheduled shortly.
After we've ensured that the animals are safe
and being cared for and we have... are arms around
what assets the debtors have. Mr. Strom, his
advisors, will determine how best to maximize
the value of the business for the stakeholders.
Success here means generating as much value as
possible from these company assets. Phase three,
Your Honor, is sort of down the road. It may
even be part of a Chapter 11 plan process. That's
a full investigation, accounting, and reckoning
of the historical issues related to these debtors,
looking at potential state causes of action against
third parties. Success there will be to identify
those causes of action, Your Honor, and to allow
stakeholders to understand what happened here
and to seek recovery for the estate for those
stakeholders. So in sum, Mr. Strom and his team
are beginning to form a strategic plan for the
debtors that will not only stabilize but hopefully
improve animal welfare and operations, optimize
the performance of the core assets, identify
non -core assets for disposition, and restructure
the debtor's liabilities. Now we expect those
who are in a position to cooperate with this
process will fully and promptly do so. If they
do not, if their actions or inaction jeopardize
animal welfare or the safety of employees, we'll
be back in front of this court. Again, the relief
we seek today is the first step in that process.
As we get better information on her, Your Honor,
we promise we will provide the court updates
and other parties so people understand how things
are progressing. Again, depending on the urgency
of situations, we may be bothering Your Honor
for some emergency relief. We apologize in advance
for that imposition. We're going to try to organize
this as best as possible and try to resolve as
many issues as we can out of court. But if we
need to come to the court, we'll be in contact.
So hopefully this context helps the court's consideration
of the first day's we have today. I'm happy to
answer any questions your honor has. This was
this is helpful and I did read the filings. I
noticed the situation in which the debtor found
itself and how the lack of institutional knowledge
that the current director and the CRO have understandably
because they weren't involved. And I hear that
the CRO, what is his name? Mr. Wagstaff. Thank
you. Mr. Wagstaff is in Cancun, which is the
headquarters. Correct. And so is that where all
of the books and records such as they are or
the access to computer records is? We expect
that your honor there may be you know there there
are US facilities in Miami and other places in
Florida So there may be books and records in
more than one location, but certainly the corporate
headquarters is in Cancun And that's where the
river on team and mr. Wags that for focusing
their efforts now Yeah, the Miami Seaquarium
is still open, as is the facility in Panama.
There may be a few others. The Panama facility
has been the subject of some action by the state
attorney general for concerns over animal welfare,
but I believe it's still operating. And we've
been in touch already with the attorney general's
office in Florida, and I believe we have a call
tomorrow morning with them to explain. has access
to more liquidity. We're going to get in there
and make sure that we make the changes to that
property that are necessary. Well, obviously,
you've identified the paramount importance of
the animal welfare, as well as paying employees,
et cetera. But I assume that there are regulations.
states or in various countries with respect to
animal welfare. Yes, Your Honor, and the company
has a staff that can handle this. We need to
get access to them and find out who's going to
stay with the new management team to help implement
changes and use this new liquidity to make sure
that we're properly caring for the animals. Yeah,
I would hope that there would be internal and
on -site records with respect to the animals.
bankruptcy in their residents, and there are
patients that need to be taken care of. And there
are often state regulators who are quite interested
in what is happening with those debtors. Yes,
Your Honor. There's plenty of news reports to
look at to indicate there's reason for concern
here. And then again, that's a reason that we
filed so quickly to get access to liquidity to
be able to make some changes. Thank you. So with
that your honor unless you have any other questions,
I move the admission of the strong declaration
for purpose of this first day hearing All right,
thank you your honor, I think mr. Koshan eyes
will start off the agenda Good to see you again
I sympathize with your honor we'll get through
it together hopefully the few motions that I'm
presenting are a little bit more straightforward
than what we discussed at the previous hearing
but if obviously if you have any questions ask
Mr. Brady because he owes me But anyway, thank
you, Your Honor. And I'd like to reiterate Mr.
Brady's thanks to Mr. Hackman. He's been very
responsive in getting us his comments. And as
always, so I'd like to kick it off with, as usual,
the Joint Administration Motion. As Your Honor
saw, we have 15 debtors that are affiliates within
the meaning of Section 101 of the Bankruptcy
Code. For the reasons set forth in the motion,
Joint Administration is warranted under local
rule. And importantly, we are seeking this relief
for procedural purposes only, and procedural
consolidation would promote the efficiency of
these cases. And so unless you have any questions,
we would request that the court enter the order.
I do not. Does anyone wish to be heard with respect
to the joint administration motion? I hear no
one. I reviewed it. It's appropriate. I will
grant it. Thank you, Your Honor. Next item is
number four on the agenda and that is the debtors
application to retain Kurtzman Carson Consultants
doing business as Verita Global as a claims and
noticing agent for these cases The debtors have
over 200 creditors and in excess of a thousand
notice parties in these cases. I believe We are
still running down the notice parties, but it
could be potentially over a thousand But under
and under these facts and our local rules The
debtors are required to retain a claims agent.
Also consistent with the court's claims agent
retention protocol, the debtors solicited three
proposals to serve as claims agent in these cases.
After reviewing these proposals, the debtors
selected Verita based on its competitive pricing
structure and expertise. And I should note that
there was a notice of revised order that was
filed. I believe we have the red lines that I
can hand up to your honor. So with respect to
the KCC retention, there was just two changes.
One was to attach the engagement agreement as
exhibit A to the order and to change the term
verita to indemnified parties throughout the
order in connection with the indemnification
provisions. It's a broader term, I take it? I
believe so. Unless Your Honor has any questions,
we would respectfully ask you. enter the order
approving KCC as claims agent. I do not have
any questions. Does anyone wish to be heard?
Thank you, no one. I reviewed the application
and I see the revised form of order. It all looks
in order. The next item for your consideration
is the motion confirming the worldwide automatic
stay. I believe your honor is familiar with these
sorts of orders. They're typical in cases with
foreign vendors where we obviously have a lot
here who are not necessarily familiar with Chapter
11 proceedings and so a comfort order is typical
and we believe necessary and appropriate in these
cases. That was also subject to some US trustee
comments. That I see your honors reviewing. Happy
to answer any questions. There were not too many
changes. One was to strike one paragraph of one
subparagraph of part of paragraph two of the
order. And Mr Hackman requested the addition
of what is now paragraph 11. I see these changes,
which were also items I have flagged. And because
I view these motions as really just a repetition,
if you will, of the code, but not enlarging provisions
of the code, but simply just restating. Or is
this paragraph 11? It says it's declarative and
intended to be coterminous. That's a good way
to say it. Paragraph three. Courts of competent
jurisdiction shall take all appropriate measures
required to enforce and recognize the Chapter
11 cases. Sounds like I'm mandatorily ordering
some other court. to take some action. And I
don't know that I have seen this type of provision
in one of these orders. So I have a concern there.
Maybe it's with the shall nature of that sentence.
It's a fair question. We can change it tonight.
I guess it's qualified by 525. So with that qualification,
I'm okay with that language. Understood. Thank
you, Your Honor. Did I ask if anyone wished to
be heard? I don't believe you did. Does anyone
wish to be heard? I don't hear anyone. As you
can tell, I did review this. Motion I do as I
said before consider it to be a comfort order
and co -extensive with what's in the code recognizing
as counsel has stated that Foreign parties in
interest Do not necessarily understand How the
code works with the change that I've requested
and that's going to be made Yes, that was my
only concern. And with that change, I will approve
it as revised to reflect the comments from the
Office of the United States trustee and my request
to change. Thank you very much, Your Honor. The
last item that I will be presenting today is
the motion to authorize Robert Wagstaff as foreign
representative. Section 1505 of the bankruptcy
code. allows a debtor in possession to obtain
a court order authorizing a trustee or an entity
to act in a foreign country on behalf of an estate
created under Section 541. As a CRO in these
cases, Mr. Wagstaff is well positioned to represent
the debtors in a foreign proceeding and to serve
as a foreign representative to ensure that any
such proceedings are well coordinated with these
Chapter 11 cases. Also, authorizing Mr. Wagstaff
as a foreign representative will avoid the added
expense of retaining a third party to act as
such. I'd also note, as Mr. Brady laid out in
his presentation, there are a lot of unknowns
in foreign jurisdictions, so there is a chance
of immediate and irreparable harm if Mr. Wagstaff
is not appointed and is able to act quickly,
especially with respect to the concorso. So with
that, we believe it is appropriate to enter this
order because there is a substantial risk of
immediate and irreparable harm to these states.
Thank you. Does anyone wish to be heard with
respect to the foreign rep motion? I hear no
one. I reviewed it. Given the international nature
of this debtor, there certainly may be need and
already is a need to have a foreign representative
who can represent these debtors in other courts
as necessary, and I will find it is necessary
to avoid immediate and irreparable harm in the
context of these cases, and I will approve this.
Was there any change to this order? I don't believe
so. I believe Mr. Hackman just had a question
that we answered offline, but I believe that
this was. Thank you, and it will be signed as
submitted. Thank you very much, Your Honor. That
is it for me for today. I'll see the podium to
Ms. Milke. I'm Margaret Allison Milkey for the
debtors. As you've heard this afternoon, the
debtors are in a period of transition. By all
accounts, they have been running on fumes, desperately
in need of financing and leadership. As part
of the recent management transition, the debtor
CRO has begun to address those issues as Mr.
Brady has identified. They first did that by
securing DIP financing, which my colleague Mr.
Breacher will speak to shortly. Second, they
address these issues by immediately flying to
Mexico to assess the conditions of the debtor's
facilities, including the debtor's most sensitive
assets, their dolphins, sea lions, manatees,
seals, and other animals, to help to transition
the operational leadership through meetings with
the debtor's workforce, with banks, with accountants,
with lawyers, with vendors, and with customers.
Mr. Wagstaff is a highly experienced individual.
He has a unique set of skills for this assignment.
He is bilingual. He has previously lived and
worked in Mexico, and he has contacts in the
region. However, notwithstanding these exceptional
characteristics and circumstances, Mr. Wagstaff
will most certainly face and already has faced
significant challenges in taking control of an
operation that has been run by the debtor's former
CEO since its inception, and has by all accounts
a very small, closely held organization with
a small leadership team. While the debtors and
Mr. Wagstaff will be commercial and respectful
in their efforts, employees may not welcome this
transition, and they may not be cooperative.
Former management may attempt to thwart the process.
and employees may not want to speak with the
new management for whatever reason. It is critical
that Mr. Wagstaff and his team have access to
the books and records of the company, to information
related to the debtor's properties and facilities,
and to the debtor's financing. As you've heard,
we are at a deficit in terms of information,
and the lenders in this case have not received
financing information for a long time. and it's
imperative that Mr. Wagstaff and his team have
full access to the debtor's books and records
and any other information, whether that's maybe
not the debtor's books and records, but still
related to the debtor's books and records, like
credential information or other types of access.
This will provide Mr. Wagstaff with an additional
tool in his arsenal to help him importantly feed
and manage the animals. to maintain the facilities,
to construct a budget, and ultimately to run
these Chapter 11 processes, which, as we all
know, requires a substantial amount of diligence
and reporting, which is onerous even in the best
of cases. And that is why the debtors filed their
motion, Docket Number 7, for an order requiring
that the debtor's former and current management
and workforce provide records and information
relating to the debtor's property and finances.
to specifically Mr. Wagstaff and the debtors.
And particularly for use in discharging Mr. Wagstaff
and the debtors' responsibilities in these cases.
Now, I will acknowledge this is not routine relief.
Certainly not on a first day. And 542E is a lesser
known code provision. And, you know, this is
not something you've probably seen before, particularly
in a first day setting. The function of 542E
is befitting of the current circumstances. And
I would say, Your Honor, that these are exceptional
circumstances, and it's not really relief that
you'll see us come back to you trying to achieve
in a run -of -the -mill case. As we know, 542E
is directed to persons that hold record information,
specifically books, records, papers, and documents
relating to the debtor's property or financial
information. It requires that a person disclose
or turn over such information to a debtor in
possession. It's unlike Rule 2004 in that it's
significantly more narrow. The records that are
disclosed relates only to the debtor's property
or financial affairs. And the debtors here, as
I mentioned, are not seeking information as a
phishing expedition to garner documents in support
of claims or causes of action or other matters
which might impact Third -party economic rights
or claims or defenses Rather this is to obtain
information to run the cases to operate the business
It's to administer the cases which is the standard
under 542 And in this case, it's a matter of
imminent importance there are approximately 2
,400 animals and the debtors The debtors need
this information in order to be able to ascertain
what food requirements are necessary, what care
requirements are necessary to put in place the
individuals that will be necessary to continue
to manage them and to respond to things like
the Attorney General's investigation or, you
know, frankly, just to run the business. Because
it's a critical matter of importance for those
animals, but not just the animals, also the payroll.
information that they need to come to work every
day and to continue to create in an atmosphere
that the debtors can continue to run their businesses
and preserve value. All of these things are critical.
And it's not a matter for two weeks from now.
It's a matter for yesterday and for today and
for tomorrow. Mr. Weichstaff is on site currently
trying to get access to the company's email systems,
to their books and records, to the passcode,
to the front door. All of these things are critical
information that needs to happen right now. And
we require any tool that is available to us,
understanding that this is a really important
endeavor for preservation of the estates and
administration of the estates. So while we would
note that this is not typical relief, and certainly
542 does require notice and a hearing, we would
submit that the standard for irreparable harm
has been satisfied here, and then it's appropriate
to enter relief on an interim basis now. Parties
will have an opportunity to come back and object,
and we are happy to set this for a final hearing,
and parties will have plenty of time to determine
whether there's an issue with the relief that
we're seeking. But again, because the information
that we're seeking is limited, it's directed
towards former officers, insiders, employees.
And it's specifically with respect to information
related to the debtor's property and finances
for purposes of administering the estate. Assuming
that this relief is abundantly appropriate in
these cases. I'm sure you have questions for
me. I see that changes are that this is now an
interim order. Yes, Sir. Does anyone wish to
be heard with respect to? The request under 542
E. Sir. Good afternoon, your honor. May it please
the court Ben Hackman for the US trustee. As
counsel noted. on this motion. I thank Council
for the debtors and lenders in working with us
to resolve our comments on the first date pleadings.
One of our initial comments on this motion was
to request that the form of order be made interim,
which Council graciously accepted. The U .S.
Trustee's position is that the relief requested
should be served out on notice. Section 542E
notice and the hearing. We're sensitive to the
animal welfare concerns that are present in the
case and the need to access information. We're
struggling to square an order directing people
to turn over information within five business
days in more or less an ex parte setting when
the code requires says after notice and hearing.
failure to produce the information would expose
employees to contempt proceedings. As I read
the pleadings that have been filed, there's no
top 30 list that's been filed yet. I'm not sure
the extent to which the creditor body has received
notice of the cases themselves. As I read the
motion, I did not see previous cases cited where
this type of relief was granted. The U .S. Trustee
is prepared not to oppose short notice if Your
Honor were amenable to this relief being served
out on notice. But with that, unless Your Honor
has any questions for me. standard is irreparable
harm and I would submit that that's satisfied
here. With respect to notice the employees, this
is going to come, these requests are going to
come probably in person. Of course we'll provide
notice to the extent that we absolutely can.
If the concern is that somebody is going to be
held in contempt as a result of failure to abide
by the order, first of all that's within your
honor's control. And certainly, Your Honor can
address that as a remedy, to the extent somebody
comes in and we have a fight about whether something
should or shouldn't have been turned over. Moreover,
the statute requires that, obviously, privileged
information is not to be turned over. So really,
there's no reason here to think that information
related to the debtor's property and finances
shouldn't be turned over at this point. So if
there's an issue with that, opportunity to deal
with Section 542E recently, though we haven't
issued an opinion yet on it. It isn't a statute
that's often used, although I will say that I
see it more in my Chapter 7 trustee cases. They
seem to know that provision is here. And it is,
I think, being used appropriately here with the
request Because the information sought is the
books, documents, records, and papers relating
to the debtor's property or financial affairs,
which is what this debtor needs. It does provide
that this section, this application, this relief
can be brought by motion. And it does say after
notice in a hearing. And after notice in a hearing,
is addressed in section 102, and section 102
of the code says that that phrase means after
such notice as is appropriate in the particular
circumstances and such opportunity for a hearing
as is appropriate in the particular circumstances.
And there's a but. It authorizes an act without
an actual hearing if such notice is given properly
and if... skipping a little. There is insufficient
time for a hearing to be commenced before such
act must be done and the court authorizes such
act. So I think it is up to the court to take
a look at the particular circumstances here and
I'm I would hope as much of a due process person
as anyone but I think under the circumstances
of this case it is appropriate to issue this
order on an interim basis. I will hear anyone
who has an issue on an expedited basis if they
come in front of me to argue that whatever it
is the debtor is trying to obtain from them somehow
is not records, documents that they hold that
relate to the property of this debtor are somehow
personal and unrelated to the documents of this
debtor. But I agree what we're really addressing
here is an irreparable harm issue, in that sense
almost a TRO standard. And I think under the
circumstances here where the welfare of the animals
in particular is at issue and where there is
a concern expressed based on I'll say based on
the lack of cooperation with the pre -petition
lenders in terms of providing necessary and required
information as well as the need to immediately
access the debtors books and records under these
circumstances I'm going to grant I'm going to
grant this motion. And I do think it's appropriate
to do it on an interim basis and we'll set up
a final hearing. But again, I will also hear
any concern anyone has on an expedited basis.
I do also expect the debtors recognizing the
unique nature of this relief. are not going to
be pressing in front of me contempt motions.
In the first instance, or at the first moment,
they don't receive cooperation, but will, in
fact, work with particularly the employees to
get their cooperation. And I would hope that
these employees, particularly the ones that work
with animals, welfare of the animal most at heart.
But this may also give those employees some cover
in terms of working with the CRO and our new
director. So it hopefully will give them some
cover to be able to do that on a cooperative
basis rather than on a compelled basis. So for
all those reasons, I will enter this order as
revised. Thank you, Your Honor. Good afternoon.
Sean Greacher from Young Conaway for the debtors.
We're now at item number eight on the agenda,
which is the hearing to consider interim approval
of the debtors' motion for use of cash collateral,
granting adequate protection to secured note
holders, and for interim approval of the debtors'
post -petition debtor in possession financing.
As Mr. Brady said, the motion is supported by
Mr. Strong's declaration. We also heard from
Mr. Brady. and read from Mr. Strom's declaration
the acute challenges that debtors are facing,
financial defaults, significant uncertainty around
critical operational issues, particularly in
the areas of animal safety and welfare. Debtors
have worked hard with firstly, note holders.
Unfortunately, note holders have stepped up to
provide for the consensual use of cash collateral
and access to emergency dip funding under these
extremely challenging set of circumstances. Funding
that will, in our view, be necessary to protect
the animals, to preserve value. estates and help
shape the next acts of these cases. There is,
to put it plainly, a substantial and immediate
need for use of cash collateral on debt financing.
Mr. Assalam's declaration establishes unequivocally
that the debtors have an immediate need for that
money. I won't rehash the history here, but suffice
it to say there's a history here. The River On
team is in the process of getting access to the
books, the records, the accounts. That process
is ongoing this week. That process will be bolstered
by the orders that Your Honor has entered, and
we appreciate that. The business, as we said,
involves various parks where living animals are
located. While it's critical to get our arms
around the business for a variety of reasons,
it's absolutely essential to ensure that the
health of the animals not be compromised. So
without having any timely financials to rely
upon, nonetheless, the note holders have stepped
up to provide emergency funding. Given the urgency
surrounding these challenges, the lack of available
information, the unwillingness of the first lien
holders to be primed, it was clear that first
lien holders were the only likely source of funding
today and under these circumstances. As mentioned,
the debtor is in the process of interviewing
potential investment banking candidates. Part
of the investment banker's mandate will certainly
to be a standard market analysis of the terms
will present the results and the conclusions
of that analysis in connection with There's one
unique component of the proposed interim dip
structure here in order to prepare a typical
13 -week cash flow budget. One needs access to
the data supporting such cash flow. So Mr. Wagstaff's
team will obviously work toward that. We're working
with Mexican Council, and we'll use every available
avenue to obtain that. So the interim dip loan
is a two -phase loan. The first phase is a borrowing
of $1 million. of $500 ,000 prior to preparation
of that initial approved cash flow budget. And
the balance of the interim borrowing of the $4
million would be available after delivery of
an initial approved budget. And the dip order
calls for that more traditional 13 -week cash
flow budget to be delivered within 15 days or
such longer time as the required lenders will
agree. We will of course file that budget with
the court. So the first uses of the first $1
.5 million. will be to fund essential obligations
as needed, including first and foremost, costs
related to the caring health of animals, costs
related to providing transportation services
for visitors to the company's facilities, costs
related to the operational planning for security
and logistics of Riveron's efforts in Mexico,
costs related to obtaining access to books and
records, estimated fees and costs of the professionals
and of the claims and noticing agents, and other
operating expenses. For example, I think as Mr.
Brady indicated, potential costs of an independent
veterinary consultant to assist the company,
to assist the independent director and the CRO
on appropriate measures with respect to animal
health, costs of maintenance services, or other
customers facing services and the like. As for
terms, the DIP calls for payment of various customary
fees. $70 ,000 of fees to the agent, as well
as an upfront closing fee of $200 ,000, which
will be picked. DIP loan accrues interest at
11%. Debtors are seeking approval of first priority
liens on all property of the debtor's estates,
including upon entry of a final order proceeds
of avoidance actions subordinate to the carve
out and permitted prior liens. The closed DIP
order offers what we believe to be reasonable
customary protection to the first liens and second
liens, second lien lenders, adequate protection
liens, and super priority claims. There are a
small set of milestones related to entry of an
interim order, selection of an investment banker,
and ultimate entry of a final order, a standard
set of covenants. The interim order provides
a carve out for professional fees and disbursements
for both the debtors and any committees appointed
in the cases. as well as the U .S. trustee's
fees. There is a request subject to a final order
for Section 506C and 552B waivers and limitation
of the scope of applicability of the marshland
doctrine. There's a standard challenge period
with respect to the pre -petition liens and claims.
So Your Honor, as you were having fun at your
prior hearing, we did file a black line. I don't
know if Your Honor has it. If not, I believe
Subject to your honor's preference. I am happy
to step through that black line We did speak
significantly with mr. Packman and Addressed
all of the comments that he has raised So there
are a number to go through and I'm happy to go
line by line with you that there's a reference
to 12 bilateral debt instruments. What are those?
I don't know if the Council of Lenders have a
view, but there are certain debt instruments
with respect to a number of the foreign entities.
I just wanted to make sure that we were clear.
And if I bungle it, please, hopefully folks will
correct me. There are, we believe, and again,
given the dearth of books and records, we have
reference to this in certain documents, but it
appears that there are approximately a dozen
agreements in various jurisdictions, foreign
jurisdictions, that we would suspect relate to
local payments. in and out of those entities.
Again, this will be a subject of significant
inquiry. We're not sure what those documents
look like. We have reference to them, but we've
not had the opportunity to study those documents.
We don't have them yet. It will clearly be something
that is on our list of materials to obtain and
access so that we can understand that more thoroughly.
are doing anything to those documents? Well,
I believe, Your Honor, to the extent that those
are prior perfected liens, no. So we're not priming
to the extent that those are prior perfected.
But again, certainly don't want to make any broad
proclamations on documents that unfortunately
we've not had the opportunity to see. It seemed
to me in E Romanet 1 that we're making, that
the debtor is making stipulations about a non
-debtor and the lenders. So, Your Honor, I think
that we are clarifying that that was one of the
One of the clarifications that we've made in
connection with discussions with Mr. Hackman,
if you have the red line, I think what we're
saying is that each pre -petition first lien
grantor other than Dolphin, which is the non
-debtor, joint and severally guaranteed as a
primary lab obligoric with pre -petition first
lien secure obligations. Again, this is consistent
with... the note purchase agreement, obviously
that's the stipulation subject to challenge.
But again, the notion here is that this order
is a stipulation of the debtors. The debtors
are making this stipulation, and so the debtors
are stipulating to their obligations here. There
is no, from my perspective, and again, the President
of Kiplander will correct me, but there's no
intent to stipulate on behalf of a party who's
not before you. Okay, I see some additional clarifications
in Romanettes. Yes, your honor. This is of the
same piece again. This is this is to clarify
exactly What the debtors position the debtors
who are before you believe are their joint and
several primary obligations under needs to be
a debtor stipulation more properly in E. I'll
let the debtor, the Diblenders Council respond
to that. Certainly understood. Was looking down
okay, this con agreed with me as she is want
to do So today, as I understand it, we're not
approving any portion of the roll -up. But this
provision, there are several places where it
talks about including the roll -up. Is there
somewhere that says, I hate these things, notwithstanding
anything else, I'm not doing anything with the
roll -up? I don't believe that we put such a
provision in the document. I can certainly represent
and would ask that the Note Holder Council, the
Dippler Under Council similarly represent. It
is clearly the intention to have issues of the
roll -up considered at the final hearing. I think
we should at least say subject to the final or
something of that sort. Otherwise I would just
take it out but in the lead -in to Roman at three
you'd like to say subject to the final order
Entry to this says, pursuant to the direction
of all of the pre -petition first lien note holders,
the pre -petition first lien agent has consented.
There are other provisions in this order that
talk about required lenders or majority of lenders
or whatever. I don't know, because I don't have
those documents in front of me. whether the agent
has the requisite authority or not. And I don't
get into whether the agent has a requisite authority.
I assume it does, or otherwise it wouldn't enter
into. But I've got those kinds of provisions
all over here, all over this. And even more so
in this provision toward the, I guess it's. Second
to last sentence. Oh no, that's a little different.
Oh. The language at the end of the first sentence
talking about consent is binding on all pre -petitioned
first lane secured parties. I don't get into
the inter workings of the lenders. So I would
like those references to come out. I assume,
again, I assume the agent has the authority it
needs. But I don't know that, and I can't confirm
that. So that's a sort of a global comment to
look for. OK, so just to recap, at the beginning
of paragraph I, you would have a strike pursuant
to the direction of all of the pre -preparation
firstly note holders, and then just start that
sentence with the So there's some internal inconsistency
in there too, so I don't want to get in the middle
of that. Say none of the pre -petition firstly
note holders has filed an objection This is why
I did so well in logic Very good So I believe
similarly we'll make the we'll make the I just
want to see if I'm correct, is that if there's
something in the order that's contrary to the
DIP loan documents, the DIP loan documents prevail.
And that's not usually the default provision
that we go with. I read this as saying that the
relative rights and priorities to say is if there's
a dispute between roll up dip secured parties
and other dip secured parties, Your Honor would
look to the terms of the credit agreement to
resolve that limited dispute. Okay, I guess I
would hope that what's ever in the dip documents
is not has the same priority as what I'm granting
here in this order because I'm granting right
in collateral in this order, so. Your honor.
We will strike it. Strike the final sentence.
In in paragraph C, it has the $8 million figure
in here. And we're at the I thought we were under
the interim. Borrowing of up to four. That is
correct. I think that we can modify that to just
say four million dollars for purposes of the
interim order. So perhaps we could say the aggregate
outstanding amount for all such barrings authorized
pursuant to this order shall not exceed four
million dollars. And I just also want to make
sure I'm correct that all of the current debtors
are guarantors under the Pre -Petition Facility.
sentence and the way I'm reading it is it says
that the prepetition first liens are going to
turn over to the dip agent the cash collateral
so that the cash collateral can be applied to
the dip obligations but I thought the debtor
was using cash collateral so I could be wrong.
I'll authorize the debtor to pay them but I don't
Expenses pre -petition or post -petition affirmed
and ratified. the dip liens are on the equity
interests that the debtors directly own. We wanted
to avoid any confusion with respect to 100%.
It is the equity interests as they are, as they
are held. Okay, and are those currently collateral
of the dip lenders? I assume so. They've been
exercising rights. Okay. paid in full, repaid
in full. The provided, however, is all of this
consensual? With respect to the statements that
the adequate protection claims may be impaired
pursuant to any Chapter 11 plan? Yeah. I mean,
if it's consensual, I don't have a problem. I
know that we've tried to make this consensual,
so I'm looking for a hint on that. I just received
it. Yes, it is consensual. I notice that there
are references to first day orders. We don't
obviously have operational first day orders yet.
I would just caution that the operational first
day orders should be consistent so that there
is no inconsistency between priorities given
and this. So if we need to make adjustments to
first day orders, we need to do that. Understood,
Your Honor, and we will resist the urge to state
that Consent to priming and adequate protection?
Yes. Improviso. lenders who've requested this,
my understanding is that the consent here given
the circumstances of these cases is being granted
under the totality of the circumstances here.
It's being granted to these debtors that are
subject to the possession and custody management,
if you will, of Mr. Strom and the oversight of
Mr. Wagstaff. And I don't have any issue with
that. But provided further that such consent
shall be of no force and effect if this interim
order is not entered, I guess, that this would
assume it was entered, or is entered and subsequently
reverse modified, that that means they gave their
consent now, but if this gets reversed, they
didn't give their consent? I just don't understand
what that... I mean, I get that we're not going
to consent anymore if it gets reversed on appeal.
We don't consent. And if the judge doesn't enter
the order today, whatever consent we've been
working among is ended. But I guess I don't understand
how this would work, what this means. I guess,
Your Honor, imagining a parade of horribles that,
for whatever reason, Mr. Strom, we're not here.
of a similar order. Again, I don't want to put
words in the DIP lenders mouths, but this process
was carefully orchestrated. The transition of
the board and the management was carefully orchestrated
and is an essential component to getting us here
today and the DIP lenders stepping up here today.
So I'll grant you, perhaps this is an awkward
paragraph, but I think under the circumstances
regarding the management of the company. Provided
further that such consent shall be of no further
force in effect in the event that the interim
order is an entered or it's reversed on appeal
That's fine your honor will make that change
Okay in the next paragraph sub 8 Under the circumstances
and given that the above described adequate protection
is consistent with the bankruptcy code including
506 B That seems to be an implicit ruling that
the pre -petition lenders are entitled to interest,
attorney fees, etc., that they haven't allowed
secured claim. And I'm not prepared to do that
today. So if that reference could just come out.
We've got a similar issue on the consent that
we just talked about. So we need to add consent
shall be of no further force in effect. There's
somewhere in here that it says that recording
officers shall be authorized and hereby is directed
to file. And I'm OK with authorized but not directing
some recording officer. I think that's consistent
with where the court's been for a long time.
Of course, and I can't see it now, but I believe
you that I missed it. I see it now. I see a change.
The change, Your Honor, is to make clear that
the additional language bestows party status
on a Chapter 7 or 11 trustee in connection with
any timely challenge that... an issue here given
the change in management that the language that
addresses the Delaware Supreme Court facts issue.
So, Your Honor, there are a number of corporations
here. So, again, in our experience, the issue,
the backs issue is where we are solely dealing
with LLCs, but we plainly have corporate entities.
suggests that the LLC backs issue is not applicable
here, given that there are, in fact, corporate
entities. That said... We're gonna respect corporate
separateness, right, as to who has what cause
of action. Perhaps, perhaps not, because I don't
know how these debtors were run pre -bankruptcy.
Understood. Just one moment on this. So your
honor, if we could include the language with
respect to the LLCs specifically, perhaps that's
a reasonable little ground here. Yes. We'll include
that language and we will say with respect to
limited liability companies. I do see that we
have a provision on cash management, I assume,
because we don't have a cash management order.
Yes, Your Honor, and the addition there was to
make it clear we're not trying to sneak one by
U .S. Trustee or anybody, not seeking a permanent
waiver or obtaining a permanent waiver, Section
345, as and when we have. with respect to what
happens on a termination event and access to
the court. Were there changes made to in the
red line? No, there's nothing on the red line.
67 is that part of 14? What is that part of?
It is. That's part of 14. And again, your honor,
I must have been sleeping at the wheel. enforced
and realize on its dip lanes, it's fine, on all
of any portion of the dip collateral, including
collecting accounts receivable, applying the
proceeds thereof, and by occupying the debtor's
premises to sell or otherwise dispose of the
dip collateral. I guess they can do that consistent
with state law, but I have no, you know, there's
some landlord out there who isn't here and may
have an issue with that. So as long as it's consistent
with state law. There's a lot of that in EIC,
but it's all subject. to the next E. It's all
subject to entry of a fine. survival of interim
order. And they all read a little differently,
but they don't seem to contemplate what happens
on a final order. Like, how does this interim
order survive if I have a final order? where
I never get to a final order and then it really
matters what the interim order says most of the
time we get to a final order and that's negotiated
and so that should supersede the interim order
but I'm not sure this says that it might but
like it governs in the interim but once I have
a final at least I think the final order should
govern I don't want there to be any inconsistencies
in any orders, and those first day orders need
to be complete. So I really don't like this language,
but I just want you to put consistent orders
in front of me. Okay? comments I have. I'm not
going to take the blame for this many comments,
because when you give me an 80 page dip order,
then you get what you get. Your Honor, I was
ready to challenge Cory Booker's time here. Did
I say that from the bench? I think I just did.
Your Honor, I was ready for far worse, but my
filibuster time is certainly short of what I
was ready for. So thank you, Your Honor, for
all the attention to this. We appreciate the
time and effort. Let me ask. Does anyone else
want to be heard? There we go, Mr. Hackman. It
was. Your Honor, let me note, there was a change
and it may not have showed up in your black line.
There's language in paragraph 20A that we are
taking out. It will appear in the black line
that you receive. your other changes. Paragraph
20A had language stating that the proposed final
order shall be substantially the same as the
interim order, except that provisions that are
interim shall be final. U .S. Trustee had concerns
with that. Oh, I noticed that. Why, it's good
to have a second set of eyes on these things.
Thank you. Your Honor, you can be assured that
Mr. Hackman did yeoman's work. I have no doubt.
In comparing this, but we are striking that language.
You'll see that stricken in the final order.
Thank you. or in the final interim order. Thank
you. Okay. I will approve borrowing on an interim
basis in the amount of four million dollars as
it's set forth a million and a half and then
a budget and the other two and a half million
based on the uncontested testimony that I received
through the declaration. Clearly, there's a need
for financing. There's a need to do it on this
unusual basis without a budget, without fully
knowing the finances of the debtor. But under
the circumstances of this case, there's no option.
And I find that it is necessary to enter this
order to avoid immediate and irreparable harm.
Thank you, Your Honor. We appreciate that. We'll
work with the DIP lenders to revise the order
and submit it under certification of counsel.
Very good. Just let chambers know when that's
done. We'll get it signed. Thank you. That's
all for today. Or do we have anything else? Oh,
we need a second day, don't we? that is not convenient
for your honor, and I understand why. And I also
understand that the next week you will get to
see lots of me. So let us know what works for
you. We can certainly work through Your Honor's
chambers. We're hopeful that we will have a set
of operational first day motions in short order.
Our hope would be to file those and seek a hearing
for the first day hearing possibly next week.
And again, facts are fluid here. Facts are incoming.
So. guidance as to when the court may be available
that we could help to sort of shoot at a date
certain we that would probably be helpful guidance
for us for an interim traditional first for a
traditional first day hearing and you're thinking
next week looks like Tuesday's the best day The
alternative is just reach out. Just reach out
when you know you have the set that you want.
And I'll find somewhere to put you in. I tell
you, in April and May, I'm going to be squeezing
people in, and some of it may be at 9 in the
morning, and some of it may be at 6 in the evening.
But we'll get people in that need to be in. Fortunately,
Your Honor, Mr. Brady's a morning riser, and
I'm a night owl. So we'll work it out. Thank
you. We appreciate your cooperation and assistance
with. Today's hearing and what's anticipated
to be future hearings that may be challenging
but we look forward to the challenge and we hope
to do right by this company and by its handles.
That's it then for today, we're adjourned.