WEBVTT 00:00:08.919 --> 00:00:11.279 Good afternoon, Your Honor. You've had a long 00:00:11.279 --> 00:00:14.759 day already. It's been a day. It's been a day. 00:00:15.539 --> 00:00:17.179 Well, obviously, Your Honor, thank the Court 00:00:17.179 --> 00:00:21.519 for scheduling us today on a very busy day. We'd 00:00:21.519 --> 00:00:23.820 also like to thank Mr. Hackman from the Office 00:00:23.820 --> 00:00:26.699 of the United States Trustee. We're pleased to 00:00:26.699 --> 00:00:29.460 report we've been working with him and we have 00:00:29.460 --> 00:00:32.000 largely resolved all of the U .S. Trustee's comments. 00:00:32.640 --> 00:00:35.020 I think we're down to just one outstanding issue. 00:00:35.530 --> 00:00:39.509 with respect to what we're calling the 542e motion. 00:00:41.210 --> 00:00:43.649 Other than that, Your Honor, I move forward with 00:00:43.649 --> 00:00:47.130 some introductions. In the courtroom is Stephen 00:00:47.130 --> 00:00:51.950 Strom. He's the debtor's independent director 00:00:51.950 --> 00:00:55.869 and the declarant today. As you no doubt saw 00:00:55.869 --> 00:00:58.250 from Mr. Strom's declaration, he has substantial 00:00:58.250 --> 00:01:01.490 experience in restructuring generally and in 00:01:01.490 --> 00:01:03.950 particular dealing with very challenging situations 00:01:03.950 --> 00:01:09.590 and this may be one. On Zoom today, Your Honor, 00:01:09.769 --> 00:01:12.670 is Robert Wagstaff. He's the debtor's proposed 00:01:12.670 --> 00:01:17.750 CRO from Riveron. Mr. Wagstaff is on the ground 00:01:17.750 --> 00:01:21.129 in Cancun, which is where the debtors are headquartered. 00:01:21.129 --> 00:01:23.849 So he is appearing by Zoom today, as a result. 00:01:25.349 --> 00:01:27.409 From Yonkanoa, Your Honor, I'm joined by a number 00:01:27.409 --> 00:01:31.829 of our colleagues, but I anticipate presenting 00:01:31.829 --> 00:01:35.189 today will be Sean Greacher, Alison Milkey, and 00:01:35.189 --> 00:01:38.489 Jared Koshinosh. And the first thing lenders 00:01:38.489 --> 00:01:41.409 are here your honor and there are also our proposed 00:01:41.409 --> 00:01:44.329 dip lender Prudential and Cigna and they're represented 00:01:44.329 --> 00:01:53.530 by Baker and Mackenzie and Mr. Cousins So your 00:01:53.530 --> 00:01:56.469 honor the circumstances we find ourselves in 00:01:56.469 --> 00:02:01.909 here very recent governance change lack of current 00:02:01.909 --> 00:02:06.180 financial information reports of severe operational 00:02:06.180 --> 00:02:09.900 distress, serious concerns over animal health 00:02:09.900 --> 00:02:13.759 and welfare aren't necessarily the standard set 00:02:13.759 --> 00:02:17.139 of circumstances that this court typically sees. 00:02:18.400 --> 00:02:21.659 That said, we think with Your Honor's help as 00:02:21.659 --> 00:02:24.599 we get out of the gate here and the use of the 00:02:24.599 --> 00:02:28.020 tools that are available under Chapter 11, we 00:02:28.020 --> 00:02:30.680 expect and hope that in a relatively short period 00:02:30.680 --> 00:02:33.419 of time, We will have this case on a more typical 00:02:33.419 --> 00:02:36.360 path, consistent with other restructurings before 00:02:36.360 --> 00:02:40.939 this Court. Your Honor, the background, there's 00:02:40.939 --> 00:02:43.659 a significant amount of detail in Mr. Strom's 00:02:43.659 --> 00:02:46.219 declaration. I want to address just a few key 00:02:46.219 --> 00:02:49.639 points for the Court's consideration. But obviously, 00:02:49.840 --> 00:02:52.460 if Your Honor has any questions or needs more 00:02:52.460 --> 00:02:55.219 detail on any specific point, we'd be happy to 00:02:55.219 --> 00:03:00.180 cover that. I do want to reiterate that as Mr. 00:03:00.400 --> 00:03:03.759 Strom's declaration makes clear. Some of the 00:03:03.759 --> 00:03:06.379 information in that declaration is dated because 00:03:06.379 --> 00:03:09.020 the company has not generated audited financial 00:03:09.020 --> 00:03:14.500 reports since 2022 and has not timely provided 00:03:14.500 --> 00:03:18.000 reporting to the first thing note holders. The 00:03:18.000 --> 00:03:20.500 most recent financial information that we've 00:03:20.500 --> 00:03:23.460 had access to is from the third quarter of 2023. 00:03:29.039 --> 00:03:32.319 The company is an international operation operating 00:03:32.319 --> 00:03:36.419 more than 30 attractions in eight countries, 00:03:37.060 --> 00:03:40.340 primarily US, Mexico, the Caribbean, and Italy. 00:03:41.800 --> 00:03:44.599 These are recreational attractions focused on 00:03:44.599 --> 00:03:47.120 dolphins or other live animal encounters under 00:03:47.120 --> 00:03:51.419 the trade name The Dolphin Company. Overall, 00:03:51.539 --> 00:03:55.150 the company has roughly 2 ,400 animals. about 00:03:55.150 --> 00:04:00.110 295 dolphins residing at these facilities. The 00:04:00.110 --> 00:04:03.870 company employs more than 2 ,600 people, and 00:04:03.870 --> 00:04:08.870 in 2023 had 3 .5 million visitors to their dolphin 00:04:08.870 --> 00:04:13.949 habitats, marinas, and water parks. The company 00:04:13.949 --> 00:04:17.069 has in excess of $200 million of funded debt, 00:04:17.350 --> 00:04:21.329 that's in two tranches of first and second. The 00:04:21.329 --> 00:04:23.649 first lien has been in payment default since 00:04:23.649 --> 00:04:28.730 January of 2024, so over one year. And the second 00:04:28.730 --> 00:04:30.970 lien has been in payment default since September 00:04:30.970 --> 00:04:37.110 of 2023. Additionally, Your Honor, there are 00:04:37.110 --> 00:04:39.829 credible reports indicating that the company 00:04:39.829 --> 00:04:43.689 has been without access to essential liquidity, 00:04:44.350 --> 00:04:48.029 liquidity necessary to pay vendors, taxing authorities. 00:04:48.560 --> 00:04:51.240 There's reports that they've delayed or not paid 00:04:51.240 --> 00:04:54.920 certain wages and have not adequately provided 00:04:54.920 --> 00:04:58.180 for the health, safety, and welfare of the animals 00:04:58.180 --> 00:05:04.040 in their care. Again, as Mr. Strom's declaration 00:05:04.040 --> 00:05:08.180 indicates, the facts of all of these issues will 00:05:08.180 --> 00:05:11.360 be clarified as Mr. Strom and the management 00:05:11.360 --> 00:05:14.220 team gains control over the company's books and 00:05:14.220 --> 00:05:19.089 records. Given these... serious defaults and 00:05:19.089 --> 00:05:23.189 concerns for the health of the business and the 00:05:23.189 --> 00:05:26.569 health of the animals. I'm really in the absence 00:05:26.569 --> 00:05:30.250 of prior management having any plan on how to 00:05:30.250 --> 00:05:34.269 address these matters. The first lean note holders, 00:05:34.370 --> 00:05:37.250 after exhibiting what appears to be significant 00:05:37.250 --> 00:05:41.250 patients, took steps to exercise their control 00:05:41.250 --> 00:05:44.750 rights and remove the existing members of LIH's 00:05:44.750 --> 00:05:48.519 board. and they did so and then appointed Mr. 00:05:48.899 --> 00:05:53.519 Strom as the sole independent director. At that 00:05:53.519 --> 00:05:57.699 point, Mr. Strom caused LIH to retain Mr. Wagstaff 00:05:57.699 --> 00:06:01.300 as the CRO and Riveron as restructuring advisor. 00:06:04.300 --> 00:06:06.720 After that, the firstly note holders exercised 00:06:06.720 --> 00:06:08.779 their control rights in the equity interests 00:06:08.779 --> 00:06:12.360 of the Mexican affiliates to remove those entities 00:06:12.360 --> 00:06:15.660 boards and appoint Mr. Strom there as the sole 00:06:15.660 --> 00:06:16.959 independent director. independent director for 00:06:16.959 --> 00:06:20.819 those entities. Once that was completed, Mr. 00:06:21.000 --> 00:06:25.120 Sram removed the remaining debtors, boards and 00:06:25.120 --> 00:06:27.379 appointed himself as the independent director 00:06:27.379 --> 00:06:31.259 there. This process is ongoing. I know your honor 00:06:31.259 --> 00:06:35.060 has the org chart. Right now there's a total 00:06:35.060 --> 00:06:39.220 of 15 debtors, the lead debtor and 14 affiliates. 00:06:39.560 --> 00:06:42.860 We're taking steps now to replace the boards 00:06:42.860 --> 00:06:46.730 with Mr. Sram at the other entities. but we're 00:06:46.730 --> 00:06:49.970 following the proper procedures for the jurisdiction 00:06:49.970 --> 00:06:52.550 where those entities are incorporated. And some 00:06:52.550 --> 00:06:55.310 of that is taking more time to go through the 00:06:55.310 --> 00:06:57.709 process of replacing the board and installing 00:06:57.709 --> 00:07:01.490 Mr. Strom. But it is underway and we do expect 00:07:01.490 --> 00:07:04.529 several more debtors to file as we affect that 00:07:04.529 --> 00:07:09.689 change. Now the court may be wondering, you know, 00:07:09.709 --> 00:07:14.029 why did the independent director and the CRO 00:07:14.029 --> 00:07:16.329 determined the file chapter 11 now before they 00:07:16.329 --> 00:07:18.829 really had an opportunity to get their arms around 00:07:18.829 --> 00:07:23.550 the business operations of these debtors There's 00:07:23.550 --> 00:07:26.389 really four reasons your honor by all accounts 00:07:26.389 --> 00:07:31.230 the company's in dire financial position They've 00:07:31.230 --> 00:07:32.970 been in payment default as they indicated on 00:07:32.970 --> 00:07:36.990 the first things for over a year In discussions 00:07:36.990 --> 00:07:39.009 with the firstly no holders they made it clear 00:07:39.009 --> 00:07:40.949 that they were prepared to lend to this company, 00:07:40.970 --> 00:07:45.040 but only with a management change and inside 00:07:45.040 --> 00:07:48.199 of a Chapter 11 where there could be appropriate 00:07:48.199 --> 00:07:51.720 transparency, they were also clear they would 00:07:51.720 --> 00:07:56.779 not be primed on their first -ling death. There 00:07:56.779 --> 00:07:58.939 are animal safety concerns around reports of 00:07:58.939 --> 00:08:02.019 dolphin deaths, particularly in the last six 00:08:02.019 --> 00:08:05.459 months, and government action to investigate 00:08:05.459 --> 00:08:10.259 alleged animal abuse concerns have caused a very 00:08:10.259 --> 00:08:12.670 difficult situation that we want to... to try 00:08:12.670 --> 00:08:17.529 to address immediately. Legal actions, judgment 00:08:17.529 --> 00:08:21.689 liens, are all starting to pile up, whether it's 00:08:21.689 --> 00:08:24.329 eviction proceedings, efforts to collect past 00:08:24.329 --> 00:08:28.529 due amounts, or attachments. There are significant 00:08:28.529 --> 00:08:33.070 legal actions going on. And Your Honor may have 00:08:33.070 --> 00:08:35.549 noticed that the prior management commenced the 00:08:35.549 --> 00:08:39.769 concurso mercantile, similar to a bankruptcy. 00:08:40.759 --> 00:08:43.840 in Mexico. That was, again, filed by the prior 00:08:43.840 --> 00:08:47.100 management. In our review, Your Honor, we can't 00:08:47.100 --> 00:08:52.539 see that the company that filed had the requisite 00:08:52.539 --> 00:08:55.460 corporate authority to commence a concursive 00:08:55.460 --> 00:08:59.299 mercantile. But really more importantly, Mr. 00:08:59.460 --> 00:09:02.159 Schramm has determined that such a proceeding 00:09:02.159 --> 00:09:05.840 can't really create the platform for the global 00:09:05.840 --> 00:09:08.580 restructuring that's required here. It deals 00:09:08.580 --> 00:09:13.700 with only one entity. in Mexico. I can give you 00:09:13.700 --> 00:09:16.740 an update on that proceeding, Your Honor. On 00:09:16.740 --> 00:09:21.279 March 31, new management did move to withdraw 00:09:21.279 --> 00:09:24.899 the Concurso mercantile. There was a hearing 00:09:24.899 --> 00:09:28.159 yesterday and continued to today, and it recently 00:09:28.159 --> 00:09:31.500 ended. And we expect a ruling very soon. But 00:09:31.500 --> 00:09:34.179 the current management has asked to withdraw 00:09:34.179 --> 00:09:38.059 from that. If withdrawal is successful, we do 00:09:38.059 --> 00:09:41.500 intend to file that entity. as a sister company 00:09:41.500 --> 00:09:46.039 with the current debtors. So really in sum, Your 00:09:46.039 --> 00:09:49.240 Honor, given the substantial financial uncertainty, 00:09:50.440 --> 00:09:53.700 the ongoing lack of transparency and responsiveness 00:09:53.700 --> 00:09:58.019 to animal safety, the legal proceedings, the 00:09:58.019 --> 00:10:01.039 filing of a Chapter 11 proceeding to invoke the 00:10:01.039 --> 00:10:04.799 automatic stay and to allow the new debtor, I'm 00:10:04.799 --> 00:10:08.470 sorry, the new director and CRO the breathing 00:10:08.470 --> 00:10:11.429 spell to do the work necessary to get their arms 00:10:11.429 --> 00:10:14.269 around this company and put it on a path to maximize 00:10:14.269 --> 00:10:19.889 value. So what does success look like in this 00:10:19.889 --> 00:10:23.970 case? We see it playing out in three phases. 00:10:25.690 --> 00:10:28.769 First, stabilizing proper management and oversight 00:10:28.769 --> 00:10:32.730 of the business. That means what seems like some 00:10:32.730 --> 00:10:35.909 basic stuff, Your Honor, getting eyes on the 00:10:35.909 --> 00:10:39.980 parks. access to bank accounts, access to email 00:10:39.980 --> 00:10:44.600 and the servers. Really basic but critical stuff. 00:10:45.940 --> 00:10:48.779 Top of mind, animal safety, Your Honor. We can't 00:10:48.779 --> 00:10:51.519 say it enough. We're very concerned that the 00:10:51.519 --> 00:10:54.480 lack of liquidity has caused the situation where 00:10:54.480 --> 00:10:56.659 the animals are not being properly cared for. 00:10:56.919 --> 00:10:59.039 So we want to get in there and find out and do 00:10:59.039 --> 00:11:03.779 what we can to make sure that's fixed. So success 00:11:03.779 --> 00:11:06.379 in phase one, Your Honor, is that the animals 00:11:06.379 --> 00:11:10.659 are safe, they're properly cared for, employees 00:11:10.659 --> 00:11:14.100 are paid on time, vendors are paid for their 00:11:14.100 --> 00:11:18.000 post -petition services, and the company operates 00:11:18.000 --> 00:11:20.279 in accordance with the obligations of Chapter 00:11:20.279 --> 00:11:25.059 11. We're already actively looking for allies 00:11:25.059 --> 00:11:27.919 in what we call a must -succeed project of animal 00:11:27.919 --> 00:11:30.769 safety. Hopefully, we'll find those people within 00:11:30.769 --> 00:11:33.289 the company. We're also looking at consultants 00:11:33.289 --> 00:11:36.690 outside the company. We've begun to reach out 00:11:36.690 --> 00:11:40.330 to those individuals. We're looking for people 00:11:40.330 --> 00:11:42.409 who will share the goal and help us do what's 00:11:42.409 --> 00:11:47.690 necessary to keep these animals safe. Must succeed 00:11:47.690 --> 00:11:52.090 Project 1B is getting our arms around the financial 00:11:52.090 --> 00:11:55.490 operations of the business. Again, this means 00:11:55.490 --> 00:11:58.639 fully understanding cash management. where the 00:11:58.639 --> 00:12:03.179 bank accounts, emails, server, employee payroll, 00:12:03.500 --> 00:12:06.799 vendor services, and really other goods and services 00:12:06.799 --> 00:12:09.600 necessary to avoid a shutdown scenario that would 00:12:09.600 --> 00:12:13.679 both hurt the value of the business and put the 00:12:13.679 --> 00:12:17.360 animals in further danger. So we're hopeful that 00:12:17.360 --> 00:12:20.220 we're going to be able to take the steps necessary 00:12:20.220 --> 00:12:23.679 to make this happen as quickly as possible. Mr. 00:12:23.860 --> 00:12:26.620 Wagstaff, as I indicated, is in Cancun with his 00:12:26.620 --> 00:12:29.159 team from Riveron. doing what they can to push 00:12:29.159 --> 00:12:32.379 this process forward. But the relief that we're 00:12:32.379 --> 00:12:34.779 seeking today will be very helpful and a first 00:12:34.779 --> 00:12:37.399 step in sort of implementing phase one of this 00:12:37.399 --> 00:12:41.500 plan. We want to do everything necessary to comply 00:12:41.500 --> 00:12:44.019 with the bankruptcy code, obviously, and really 00:12:44.019 --> 00:12:47.500 in turn determine the best path forward from 00:12:47.500 --> 00:12:51.879 an operational standpoint for this company. So 00:12:51.879 --> 00:12:54.059 as you're here in connection with the DIP financing 00:12:54.059 --> 00:12:57.809 motion, The firstly note holders have stepped 00:12:57.809 --> 00:13:02.149 up with an emergency funding opportunity that 00:13:02.149 --> 00:13:04.929 the company can use to address the dire needs 00:13:04.929 --> 00:13:08.929 as they are discovered. We have some buckets 00:13:08.929 --> 00:13:11.710 we call them of where that funding can be used, 00:13:12.269 --> 00:13:15.049 but we are working on a more comprehensive dip 00:13:15.049 --> 00:13:18.850 budget and we have 15 days to do that. We're 00:13:18.850 --> 00:13:20.490 hopeful that we're going to get access to the 00:13:20.490 --> 00:13:25.539 information to provide the court creditors. everyone 00:13:25.539 --> 00:13:28.000 else involved, all the other stakeholders with 00:13:28.000 --> 00:13:32.980 a budget that we can use the DIP for. That's 00:13:32.980 --> 00:13:34.799 phase one, Your Honor. We then move to phase 00:13:34.799 --> 00:13:38.799 two, and that's a state value maximization. The 00:13:38.799 --> 00:13:41.000 debtors have already contacted investment bankers 00:13:41.000 --> 00:13:43.899 with appropriate experience for a company of 00:13:43.899 --> 00:13:47.299 this type, and interviews are scheduled shortly. 00:13:49.100 --> 00:13:51.240 After we've ensured that the animals are safe 00:13:51.240 --> 00:13:55.059 and being cared for and we have... are arms around 00:13:55.059 --> 00:13:58.799 what assets the debtors have. Mr. Strom, his 00:13:58.799 --> 00:14:01.679 advisors, will determine how best to maximize 00:14:01.679 --> 00:14:05.179 the value of the business for the stakeholders. 00:14:06.840 --> 00:14:09.419 Success here means generating as much value as 00:14:09.419 --> 00:14:13.899 possible from these company assets. Phase three, 00:14:13.980 --> 00:14:16.460 Your Honor, is sort of down the road. It may 00:14:16.460 --> 00:14:20.490 even be part of a Chapter 11 plan process. That's 00:14:20.490 --> 00:14:23.889 a full investigation, accounting, and reckoning 00:14:23.889 --> 00:14:27.929 of the historical issues related to these debtors, 00:14:28.289 --> 00:14:31.590 looking at potential state causes of action against 00:14:31.590 --> 00:14:35.009 third parties. Success there will be to identify 00:14:35.009 --> 00:14:37.970 those causes of action, Your Honor, and to allow 00:14:37.970 --> 00:14:40.110 stakeholders to understand what happened here 00:14:40.110 --> 00:14:42.990 and to seek recovery for the estate for those 00:14:42.990 --> 00:14:48.940 stakeholders. So in sum, Mr. Strom and his team 00:14:48.940 --> 00:14:52.460 are beginning to form a strategic plan for the 00:14:52.460 --> 00:14:55.259 debtors that will not only stabilize but hopefully 00:14:55.259 --> 00:15:00.320 improve animal welfare and operations, optimize 00:15:00.320 --> 00:15:03.399 the performance of the core assets, identify 00:15:03.399 --> 00:15:07.139 non -core assets for disposition, and restructure 00:15:07.139 --> 00:15:11.759 the debtor's liabilities. Now we expect those 00:15:11.759 --> 00:15:13.519 who are in a position to cooperate with this 00:15:13.519 --> 00:15:18.029 process will fully and promptly do so. If they 00:15:18.029 --> 00:15:21.429 do not, if their actions or inaction jeopardize 00:15:21.429 --> 00:15:24.649 animal welfare or the safety of employees, we'll 00:15:24.649 --> 00:15:27.509 be back in front of this court. Again, the relief 00:15:27.509 --> 00:15:30.750 we seek today is the first step in that process. 00:15:32.009 --> 00:15:34.409 As we get better information on her, Your Honor, 00:15:34.610 --> 00:15:36.629 we promise we will provide the court updates 00:15:36.629 --> 00:15:40.409 and other parties so people understand how things 00:15:40.409 --> 00:15:43.980 are progressing. Again, depending on the urgency 00:15:43.980 --> 00:15:47.200 of situations, we may be bothering Your Honor 00:15:47.200 --> 00:15:50.759 for some emergency relief. We apologize in advance 00:15:50.759 --> 00:15:55.259 for that imposition. We're going to try to organize 00:15:55.259 --> 00:15:59.360 this as best as possible and try to resolve as 00:15:59.360 --> 00:16:01.480 many issues as we can out of court. But if we 00:16:01.480 --> 00:16:04.700 need to come to the court, we'll be in contact. 00:16:05.600 --> 00:16:09.519 So hopefully this context helps the court's consideration 00:16:09.519 --> 00:16:14.620 of the first day's we have today. I'm happy to 00:16:14.620 --> 00:16:18.519 answer any questions your honor has. This was 00:16:18.519 --> 00:16:20.980 this is helpful and I did read the filings. I 00:16:20.980 --> 00:16:24.080 noticed the situation in which the debtor found 00:16:24.080 --> 00:16:30.919 itself and how the lack of institutional knowledge 00:16:30.919 --> 00:16:37.679 that the current director and the CRO have understandably 00:16:37.679 --> 00:16:43.070 because they weren't involved. And I hear that 00:16:43.070 --> 00:16:48.769 the CRO, what is his name? Mr. Wagstaff. Thank 00:16:48.769 --> 00:16:54.049 you. Mr. Wagstaff is in Cancun, which is the 00:16:54.049 --> 00:16:57.649 headquarters. Correct. And so is that where all 00:16:57.649 --> 00:17:00.750 of the books and records such as they are or 00:17:00.750 --> 00:17:06.059 the access to computer records is? We expect 00:17:06.059 --> 00:17:08.619 that your honor there may be you know there there 00:17:08.619 --> 00:17:12.700 are US facilities in Miami and other places in 00:17:12.700 --> 00:17:14.920 Florida So there may be books and records in 00:17:14.920 --> 00:17:16.779 more than one location, but certainly the corporate 00:17:16.779 --> 00:17:19.440 headquarters is in Cancun And that's where the 00:17:19.440 --> 00:17:21.480 river on team and mr. Wags that for focusing 00:17:21.480 --> 00:17:32.500 their efforts now Yeah, the Miami Seaquarium 00:17:32.500 --> 00:17:36.160 is still open, as is the facility in Panama. 00:17:36.359 --> 00:17:40.940 There may be a few others. The Panama facility 00:17:40.940 --> 00:17:44.160 has been the subject of some action by the state 00:17:44.160 --> 00:17:47.880 attorney general for concerns over animal welfare, 00:17:48.000 --> 00:17:51.880 but I believe it's still operating. And we've 00:17:51.880 --> 00:17:54.200 been in touch already with the attorney general's 00:17:54.200 --> 00:17:56.519 office in Florida, and I believe we have a call 00:17:56.519 --> 00:18:00.920 tomorrow morning with them to explain. has access 00:18:00.920 --> 00:18:04.559 to more liquidity. We're going to get in there 00:18:04.559 --> 00:18:06.619 and make sure that we make the changes to that 00:18:06.619 --> 00:18:08.660 property that are necessary. Well, obviously, 00:18:08.839 --> 00:18:12.539 you've identified the paramount importance of 00:18:12.539 --> 00:18:19.099 the animal welfare, as well as paying employees, 00:18:19.279 --> 00:18:23.539 et cetera. But I assume that there are regulations. 00:18:26.330 --> 00:18:29.549 states or in various countries with respect to 00:18:29.549 --> 00:18:33.150 animal welfare. Yes, Your Honor, and the company 00:18:33.150 --> 00:18:36.410 has a staff that can handle this. We need to 00:18:36.410 --> 00:18:39.230 get access to them and find out who's going to 00:18:39.230 --> 00:18:42.930 stay with the new management team to help implement 00:18:42.930 --> 00:18:47.150 changes and use this new liquidity to make sure 00:18:47.150 --> 00:18:49.410 that we're properly caring for the animals. Yeah, 00:18:49.410 --> 00:18:52.650 I would hope that there would be internal and 00:18:52.650 --> 00:18:54.930 on -site records with respect to the animals. 00:19:04.200 --> 00:19:06.880 bankruptcy in their residents, and there are 00:19:06.880 --> 00:19:10.599 patients that need to be taken care of. And there 00:19:10.599 --> 00:19:13.440 are often state regulators who are quite interested 00:19:13.440 --> 00:19:19.240 in what is happening with those debtors. Yes, 00:19:19.259 --> 00:19:21.539 Your Honor. There's plenty of news reports to 00:19:21.539 --> 00:19:24.539 look at to indicate there's reason for concern 00:19:24.539 --> 00:19:27.319 here. And then again, that's a reason that we 00:19:27.319 --> 00:19:30.440 filed so quickly to get access to liquidity to 00:19:30.440 --> 00:19:34.559 be able to make some changes. Thank you. So with 00:19:34.559 --> 00:19:36.380 that your honor unless you have any other questions, 00:19:36.380 --> 00:19:38.680 I move the admission of the strong declaration 00:19:38.680 --> 00:19:46.119 for purpose of this first day hearing All right, 00:19:46.200 --> 00:19:47.819 thank you your honor, I think mr. Koshan eyes 00:19:47.819 --> 00:20:02.799 will start off the agenda Good to see you again 00:20:12.549 --> 00:20:15.430 I sympathize with your honor we'll get through 00:20:15.430 --> 00:20:19.089 it together hopefully the few motions that I'm 00:20:19.089 --> 00:20:20.829 presenting are a little bit more straightforward 00:20:20.829 --> 00:20:23.049 than what we discussed at the previous hearing 00:20:23.049 --> 00:20:26.990 but if obviously if you have any questions ask 00:20:26.990 --> 00:20:35.309 Mr. Brady because he owes me But anyway, thank 00:20:35.309 --> 00:20:37.609 you, Your Honor. And I'd like to reiterate Mr. 00:20:37.750 --> 00:20:41.250 Brady's thanks to Mr. Hackman. He's been very 00:20:41.250 --> 00:20:44.730 responsive in getting us his comments. And as 00:20:44.730 --> 00:20:47.809 always, so I'd like to kick it off with, as usual, 00:20:47.950 --> 00:20:51.430 the Joint Administration Motion. As Your Honor 00:20:51.430 --> 00:20:54.569 saw, we have 15 debtors that are affiliates within 00:20:54.569 --> 00:20:56.569 the meaning of Section 101 of the Bankruptcy 00:20:56.569 --> 00:20:59.609 Code. For the reasons set forth in the motion, 00:21:00.089 --> 00:21:03.470 Joint Administration is warranted under local 00:21:03.470 --> 00:21:08.259 rule. And importantly, we are seeking this relief 00:21:08.259 --> 00:21:11.180 for procedural purposes only, and procedural 00:21:11.180 --> 00:21:14.359 consolidation would promote the efficiency of 00:21:14.359 --> 00:21:16.920 these cases. And so unless you have any questions, 00:21:17.019 --> 00:21:19.440 we would request that the court enter the order. 00:21:19.720 --> 00:21:22.119 I do not. Does anyone wish to be heard with respect 00:21:22.119 --> 00:21:25.960 to the joint administration motion? I hear no 00:21:25.960 --> 00:21:28.059 one. I reviewed it. It's appropriate. I will 00:21:28.059 --> 00:21:31.609 grant it. Thank you, Your Honor. Next item is 00:21:31.609 --> 00:21:33.849 number four on the agenda and that is the debtors 00:21:33.849 --> 00:21:36.650 application to retain Kurtzman Carson Consultants 00:21:36.650 --> 00:21:39.170 doing business as Verita Global as a claims and 00:21:39.170 --> 00:21:42.150 noticing agent for these cases The debtors have 00:21:42.150 --> 00:21:45.349 over 200 creditors and in excess of a thousand 00:21:45.349 --> 00:21:49.869 notice parties in these cases. I believe We are 00:21:49.869 --> 00:21:52.170 still running down the notice parties, but it 00:21:52.170 --> 00:21:55.849 could be potentially over a thousand But under 00:21:55.849 --> 00:21:58.390 and under these facts and our local rules The 00:21:58.390 --> 00:22:00.490 debtors are required to retain a claims agent. 00:22:01.210 --> 00:22:03.029 Also consistent with the court's claims agent 00:22:03.029 --> 00:22:05.450 retention protocol, the debtors solicited three 00:22:05.450 --> 00:22:08.049 proposals to serve as claims agent in these cases. 00:22:08.430 --> 00:22:10.329 After reviewing these proposals, the debtors 00:22:10.329 --> 00:22:13.109 selected Verita based on its competitive pricing 00:22:13.109 --> 00:22:16.250 structure and expertise. And I should note that 00:22:16.250 --> 00:22:18.670 there was a notice of revised order that was 00:22:18.670 --> 00:22:21.390 filed. I believe we have the red lines that I 00:22:21.390 --> 00:23:04.569 can hand up to your honor. So with respect to 00:23:04.569 --> 00:23:08.869 the KCC retention, there was just two changes. 00:23:09.250 --> 00:23:12.289 One was to attach the engagement agreement as 00:23:12.289 --> 00:23:15.430 exhibit A to the order and to change the term 00:23:15.430 --> 00:23:18.609 verita to indemnified parties throughout the 00:23:18.609 --> 00:23:22.109 order in connection with the indemnification 00:23:22.109 --> 00:23:25.529 provisions. It's a broader term, I take it? I 00:23:25.529 --> 00:23:30.150 believe so. Unless Your Honor has any questions, 00:23:30.549 --> 00:23:33.359 we would respectfully ask you. enter the order 00:23:33.359 --> 00:23:38.900 approving KCC as claims agent. I do not have 00:23:38.900 --> 00:23:41.099 any questions. Does anyone wish to be heard? 00:23:42.839 --> 00:23:46.680 Thank you, no one. I reviewed the application 00:23:46.680 --> 00:23:51.559 and I see the revised form of order. It all looks 00:23:51.559 --> 00:24:01.619 in order. The next item for your consideration 00:24:01.619 --> 00:24:04.299 is the motion confirming the worldwide automatic 00:24:04.299 --> 00:24:07.299 stay. I believe your honor is familiar with these 00:24:07.299 --> 00:24:11.059 sorts of orders. They're typical in cases with 00:24:11.059 --> 00:24:13.740 foreign vendors where we obviously have a lot 00:24:13.740 --> 00:24:17.359 here who are not necessarily familiar with Chapter 00:24:17.359 --> 00:24:21.480 11 proceedings and so a comfort order is typical 00:24:21.480 --> 00:24:24.539 and we believe necessary and appropriate in these 00:24:24.539 --> 00:24:28.579 cases. That was also subject to some US trustee 00:24:28.579 --> 00:24:33.349 comments. That I see your honors reviewing. Happy 00:24:33.349 --> 00:24:37.210 to answer any questions. There were not too many 00:24:37.210 --> 00:24:42.509 changes. One was to strike one paragraph of one 00:24:42.509 --> 00:24:45.009 subparagraph of part of paragraph two of the 00:24:45.009 --> 00:24:50.109 order. And Mr Hackman requested the addition 00:24:50.109 --> 00:25:06.990 of what is now paragraph 11. I see these changes, 00:25:07.349 --> 00:25:13.049 which were also items I have flagged. And because 00:25:13.049 --> 00:25:18.170 I view these motions as really just a repetition, 00:25:18.170 --> 00:25:25.210 if you will, of the code, but not enlarging provisions 00:25:25.210 --> 00:25:28.150 of the code, but simply just restating. Or is 00:25:28.150 --> 00:25:31.589 this paragraph 11? It says it's declarative and 00:25:31.589 --> 00:25:34.009 intended to be coterminous. That's a good way 00:25:34.009 --> 00:25:46.849 to say it. Paragraph three. Courts of competent 00:25:46.849 --> 00:25:50.130 jurisdiction shall take all appropriate measures 00:25:50.130 --> 00:25:52.970 required to enforce and recognize the Chapter 00:25:52.970 --> 00:25:57.150 11 cases. Sounds like I'm mandatorily ordering 00:25:57.150 --> 00:26:01.059 some other court. to take some action. And I 00:26:01.059 --> 00:26:04.819 don't know that I have seen this type of provision 00:26:04.819 --> 00:26:11.660 in one of these orders. So I have a concern there. 00:26:12.099 --> 00:26:17.660 Maybe it's with the shall nature of that sentence. 00:26:21.799 --> 00:26:29.759 It's a fair question. We can change it tonight. 00:27:09.640 --> 00:27:15.859 I guess it's qualified by 525. So with that qualification, 00:27:16.819 --> 00:27:21.200 I'm okay with that language. Understood. Thank 00:27:21.200 --> 00:27:26.980 you, Your Honor. Did I ask if anyone wished to 00:27:26.980 --> 00:27:29.779 be heard? I don't believe you did. Does anyone 00:27:29.779 --> 00:27:36.220 wish to be heard? I don't hear anyone. As you 00:27:36.220 --> 00:27:39.140 can tell, I did review this. Motion I do as I 00:27:39.140 --> 00:27:42.220 said before consider it to be a comfort order 00:27:42.220 --> 00:27:46.299 and co -extensive with what's in the code recognizing 00:27:46.299 --> 00:27:52.859 as counsel has stated that Foreign parties in 00:27:52.859 --> 00:27:58.279 interest Do not necessarily understand How the 00:27:58.279 --> 00:28:03.180 code works with the change that I've requested 00:28:03.180 --> 00:28:16.119 and that's going to be made Yes, that was my 00:28:16.119 --> 00:28:21.220 only concern. And with that change, I will approve 00:28:21.220 --> 00:28:24.500 it as revised to reflect the comments from the 00:28:24.500 --> 00:28:27.200 Office of the United States trustee and my request 00:28:27.200 --> 00:28:30.279 to change. Thank you very much, Your Honor. The 00:28:30.279 --> 00:28:32.380 last item that I will be presenting today is 00:28:32.380 --> 00:28:35.700 the motion to authorize Robert Wagstaff as foreign 00:28:35.700 --> 00:28:39.359 representative. Section 1505 of the bankruptcy 00:28:39.359 --> 00:28:42.180 code. allows a debtor in possession to obtain 00:28:42.180 --> 00:28:45.200 a court order authorizing a trustee or an entity 00:28:45.200 --> 00:28:49.619 to act in a foreign country on behalf of an estate 00:28:49.619 --> 00:28:53.960 created under Section 541. As a CRO in these 00:28:53.960 --> 00:28:57.420 cases, Mr. Wagstaff is well positioned to represent 00:28:57.420 --> 00:29:00.240 the debtors in a foreign proceeding and to serve 00:29:00.240 --> 00:29:02.940 as a foreign representative to ensure that any 00:29:02.940 --> 00:29:05.460 such proceedings are well coordinated with these 00:29:05.460 --> 00:29:09.160 Chapter 11 cases. Also, authorizing Mr. Wagstaff 00:29:09.160 --> 00:29:11.720 as a foreign representative will avoid the added 00:29:11.720 --> 00:29:14.099 expense of retaining a third party to act as 00:29:14.099 --> 00:29:17.339 such. I'd also note, as Mr. Brady laid out in 00:29:17.339 --> 00:29:20.160 his presentation, there are a lot of unknowns 00:29:20.160 --> 00:29:24.660 in foreign jurisdictions, so there is a chance 00:29:24.660 --> 00:29:28.480 of immediate and irreparable harm if Mr. Wagstaff 00:29:28.480 --> 00:29:31.359 is not appointed and is able to act quickly, 00:29:31.460 --> 00:29:37.259 especially with respect to the concorso. So with 00:29:37.259 --> 00:29:41.440 that, we believe it is appropriate to enter this 00:29:41.440 --> 00:29:45.140 order because there is a substantial risk of 00:29:45.140 --> 00:29:48.240 immediate and irreparable harm to these states. 00:29:49.000 --> 00:29:50.920 Thank you. Does anyone wish to be heard with 00:29:50.920 --> 00:29:57.119 respect to the foreign rep motion? I hear no 00:29:57.119 --> 00:30:00.559 one. I reviewed it. Given the international nature 00:30:00.559 --> 00:30:04.480 of this debtor, there certainly may be need and 00:30:04.480 --> 00:30:09.099 already is a need to have a foreign representative 00:30:09.099 --> 00:30:17.220 who can represent these debtors in other courts 00:30:17.220 --> 00:30:21.160 as necessary, and I will find it is necessary 00:30:21.160 --> 00:30:23.460 to avoid immediate and irreparable harm in the 00:30:23.460 --> 00:30:26.059 context of these cases, and I will approve this. 00:30:26.220 --> 00:30:29.519 Was there any change to this order? I don't believe 00:30:29.519 --> 00:30:32.500 so. I believe Mr. Hackman just had a question 00:30:32.500 --> 00:30:34.900 that we answered offline, but I believe that 00:30:34.900 --> 00:30:39.039 this was. Thank you, and it will be signed as 00:30:39.039 --> 00:30:41.240 submitted. Thank you very much, Your Honor. That 00:30:41.240 --> 00:30:46.460 is it for me for today. I'll see the podium to 00:30:46.460 --> 00:31:05.559 Ms. Milke. I'm Margaret Allison Milkey for the 00:31:05.559 --> 00:31:08.839 debtors. As you've heard this afternoon, the 00:31:08.839 --> 00:31:12.480 debtors are in a period of transition. By all 00:31:12.480 --> 00:31:15.839 accounts, they have been running on fumes, desperately 00:31:15.839 --> 00:31:19.779 in need of financing and leadership. As part 00:31:19.779 --> 00:31:22.779 of the recent management transition, the debtor 00:31:22.779 --> 00:31:25.519 CRO has begun to address those issues as Mr. 00:31:25.599 --> 00:31:28.240 Brady has identified. They first did that by 00:31:28.240 --> 00:31:30.440 securing DIP financing, which my colleague Mr. 00:31:30.559 --> 00:31:34.640 Breacher will speak to shortly. Second, they 00:31:34.640 --> 00:31:37.140 address these issues by immediately flying to 00:31:37.140 --> 00:31:40.440 Mexico to assess the conditions of the debtor's 00:31:40.440 --> 00:31:43.200 facilities, including the debtor's most sensitive 00:31:43.200 --> 00:31:47.059 assets, their dolphins, sea lions, manatees, 00:31:47.359 --> 00:31:50.279 seals, and other animals, to help to transition 00:31:50.279 --> 00:31:52.880 the operational leadership through meetings with 00:31:52.880 --> 00:31:56.180 the debtor's workforce, with banks, with accountants, 00:31:56.380 --> 00:31:58.640 with lawyers, with vendors, and with customers. 00:32:00.039 --> 00:32:03.319 Mr. Wagstaff is a highly experienced individual. 00:32:03.539 --> 00:32:06.500 He has a unique set of skills for this assignment. 00:32:07.480 --> 00:32:10.539 He is bilingual. He has previously lived and 00:32:10.539 --> 00:32:13.900 worked in Mexico, and he has contacts in the 00:32:13.900 --> 00:32:18.900 region. However, notwithstanding these exceptional 00:32:18.900 --> 00:32:21.920 characteristics and circumstances, Mr. Wagstaff 00:32:21.920 --> 00:32:24.680 will most certainly face and already has faced 00:32:24.890 --> 00:32:27.529 significant challenges in taking control of an 00:32:27.529 --> 00:32:29.970 operation that has been run by the debtor's former 00:32:29.970 --> 00:32:33.690 CEO since its inception, and has by all accounts 00:32:33.690 --> 00:32:38.109 a very small, closely held organization with 00:32:38.109 --> 00:32:41.930 a small leadership team. While the debtors and 00:32:41.930 --> 00:32:44.730 Mr. Wagstaff will be commercial and respectful 00:32:44.730 --> 00:32:47.690 in their efforts, employees may not welcome this 00:32:47.690 --> 00:32:49.650 transition, and they may not be cooperative. 00:32:50.769 --> 00:32:53.029 Former management may attempt to thwart the process. 00:32:53.610 --> 00:32:56.210 and employees may not want to speak with the 00:32:56.210 --> 00:33:01.910 new management for whatever reason. It is critical 00:33:01.910 --> 00:33:04.809 that Mr. Wagstaff and his team have access to 00:33:04.809 --> 00:33:07.650 the books and records of the company, to information 00:33:07.650 --> 00:33:10.109 related to the debtor's properties and facilities, 00:33:10.509 --> 00:33:13.190 and to the debtor's financing. As you've heard, 00:33:13.210 --> 00:33:15.470 we are at a deficit in terms of information, 00:33:15.670 --> 00:33:18.650 and the lenders in this case have not received 00:33:18.650 --> 00:33:23.450 financing information for a long time. and it's 00:33:23.450 --> 00:33:26.230 imperative that Mr. Wagstaff and his team have 00:33:26.230 --> 00:33:29.690 full access to the debtor's books and records 00:33:29.690 --> 00:33:32.430 and any other information, whether that's maybe 00:33:32.430 --> 00:33:34.029 not the debtor's books and records, but still 00:33:34.029 --> 00:33:35.970 related to the debtor's books and records, like 00:33:35.970 --> 00:33:39.549 credential information or other types of access. 00:33:41.390 --> 00:33:44.789 This will provide Mr. Wagstaff with an additional 00:33:44.789 --> 00:33:48.390 tool in his arsenal to help him importantly feed 00:33:48.390 --> 00:33:51.390 and manage the animals. to maintain the facilities, 00:33:52.309 --> 00:33:55.849 to construct a budget, and ultimately to run 00:33:55.849 --> 00:33:58.529 these Chapter 11 processes, which, as we all 00:33:58.529 --> 00:34:01.009 know, requires a substantial amount of diligence 00:34:01.009 --> 00:34:03.549 and reporting, which is onerous even in the best 00:34:03.549 --> 00:34:07.309 of cases. And that is why the debtors filed their 00:34:07.309 --> 00:34:10.769 motion, Docket Number 7, for an order requiring 00:34:10.769 --> 00:34:12.710 that the debtor's former and current management 00:34:12.710 --> 00:34:16.090 and workforce provide records and information 00:34:16.090 --> 00:34:18.250 relating to the debtor's property and finances. 00:34:18.829 --> 00:34:21.610 to specifically Mr. Wagstaff and the debtors. 00:34:22.050 --> 00:34:25.369 And particularly for use in discharging Mr. Wagstaff 00:34:25.369 --> 00:34:27.570 and the debtors' responsibilities in these cases. 00:34:28.909 --> 00:34:31.329 Now, I will acknowledge this is not routine relief. 00:34:32.170 --> 00:34:36.670 Certainly not on a first day. And 542E is a lesser 00:34:36.670 --> 00:34:42.170 known code provision. And, you know, this is 00:34:42.170 --> 00:34:44.489 not something you've probably seen before, particularly 00:34:44.489 --> 00:34:50.010 in a first day setting. The function of 542E 00:34:50.010 --> 00:34:52.650 is befitting of the current circumstances. And 00:34:52.650 --> 00:34:55.309 I would say, Your Honor, that these are exceptional 00:34:55.309 --> 00:34:57.510 circumstances, and it's not really relief that 00:34:57.510 --> 00:35:01.210 you'll see us come back to you trying to achieve 00:35:01.210 --> 00:35:05.550 in a run -of -the -mill case. As we know, 542E 00:35:05.550 --> 00:35:08.030 is directed to persons that hold record information, 00:35:08.289 --> 00:35:11.550 specifically books, records, papers, and documents 00:35:11.550 --> 00:35:13.809 relating to the debtor's property or financial 00:35:13.809 --> 00:35:17.280 information. It requires that a person disclose 00:35:17.280 --> 00:35:19.860 or turn over such information to a debtor in 00:35:19.860 --> 00:35:24.519 possession. It's unlike Rule 2004 in that it's 00:35:24.519 --> 00:35:28.380 significantly more narrow. The records that are 00:35:28.380 --> 00:35:30.440 disclosed relates only to the debtor's property 00:35:30.440 --> 00:35:33.519 or financial affairs. And the debtors here, as 00:35:33.519 --> 00:35:35.539 I mentioned, are not seeking information as a 00:35:35.539 --> 00:35:38.780 phishing expedition to garner documents in support 00:35:38.780 --> 00:35:41.659 of claims or causes of action or other matters 00:35:41.659 --> 00:35:44.489 which might impact Third -party economic rights 00:35:44.489 --> 00:35:48.349 or claims or defenses Rather this is to obtain 00:35:48.349 --> 00:35:51.909 information to run the cases to operate the business 00:35:51.909 --> 00:35:55.590 It's to administer the cases which is the standard 00:35:55.590 --> 00:36:02.230 under 542 And in this case, it's a matter of 00:36:02.230 --> 00:36:05.090 imminent importance there are approximately 2 00:36:05.090 --> 00:36:13.480 ,400 animals and the debtors The debtors need 00:36:13.480 --> 00:36:15.659 this information in order to be able to ascertain 00:36:15.659 --> 00:36:18.219 what food requirements are necessary, what care 00:36:18.219 --> 00:36:21.159 requirements are necessary to put in place the 00:36:21.159 --> 00:36:23.880 individuals that will be necessary to continue 00:36:23.880 --> 00:36:26.719 to manage them and to respond to things like 00:36:26.719 --> 00:36:30.000 the Attorney General's investigation or, you 00:36:30.000 --> 00:36:34.639 know, frankly, just to run the business. Because 00:36:34.639 --> 00:36:37.219 it's a critical matter of importance for those 00:36:37.219 --> 00:36:39.400 animals, but not just the animals, also the payroll. 00:36:42.440 --> 00:36:45.980 information that they need to come to work every 00:36:45.980 --> 00:36:49.579 day and to continue to create in an atmosphere 00:36:49.579 --> 00:36:51.460 that the debtors can continue to run their businesses 00:36:51.460 --> 00:36:54.179 and preserve value. All of these things are critical. 00:36:54.780 --> 00:36:57.760 And it's not a matter for two weeks from now. 00:36:58.079 --> 00:37:00.460 It's a matter for yesterday and for today and 00:37:00.460 --> 00:37:03.940 for tomorrow. Mr. Weichstaff is on site currently 00:37:03.940 --> 00:37:06.800 trying to get access to the company's email systems, 00:37:06.980 --> 00:37:08.920 to their books and records, to the passcode, 00:37:08.960 --> 00:37:11.449 to the front door. All of these things are critical 00:37:11.449 --> 00:37:15.469 information that needs to happen right now. And 00:37:15.469 --> 00:37:20.289 we require any tool that is available to us, 00:37:20.429 --> 00:37:23.130 understanding that this is a really important 00:37:23.130 --> 00:37:25.329 endeavor for preservation of the estates and 00:37:25.329 --> 00:37:28.969 administration of the estates. So while we would 00:37:28.969 --> 00:37:31.369 note that this is not typical relief, and certainly 00:37:31.369 --> 00:37:35.510 542 does require notice and a hearing, we would 00:37:35.510 --> 00:37:39.380 submit that the standard for irreparable harm 00:37:39.380 --> 00:37:41.980 has been satisfied here, and then it's appropriate 00:37:41.980 --> 00:37:45.860 to enter relief on an interim basis now. Parties 00:37:45.860 --> 00:37:47.940 will have an opportunity to come back and object, 00:37:48.420 --> 00:37:51.280 and we are happy to set this for a final hearing, 00:37:51.380 --> 00:37:55.280 and parties will have plenty of time to determine 00:37:55.280 --> 00:37:56.699 whether there's an issue with the relief that 00:37:56.699 --> 00:37:58.840 we're seeking. But again, because the information 00:37:58.840 --> 00:38:01.000 that we're seeking is limited, it's directed 00:38:01.000 --> 00:38:04.920 towards former officers, insiders, employees. 00:38:05.309 --> 00:38:08.389 And it's specifically with respect to information 00:38:08.389 --> 00:38:10.969 related to the debtor's property and finances 00:38:10.969 --> 00:38:14.070 for purposes of administering the estate. Assuming 00:38:14.070 --> 00:38:17.750 that this relief is abundantly appropriate in 00:38:17.750 --> 00:38:20.650 these cases. I'm sure you have questions for 00:38:20.650 --> 00:38:42.610 me. I see that changes are that this is now an 00:38:42.610 --> 00:38:47.530 interim order. Yes, Sir. Does anyone wish to 00:38:47.530 --> 00:38:52.969 be heard with respect to? The request under 542 00:38:52.969 --> 00:39:03.829 E. Sir. Good afternoon, your honor. May it please 00:39:03.829 --> 00:39:07.170 the court Ben Hackman for the US trustee. As 00:39:07.170 --> 00:39:12.579 counsel noted. on this motion. I thank Council 00:39:12.579 --> 00:39:14.980 for the debtors and lenders in working with us 00:39:14.980 --> 00:39:18.800 to resolve our comments on the first date pleadings. 00:39:19.639 --> 00:39:21.760 One of our initial comments on this motion was 00:39:21.760 --> 00:39:24.440 to request that the form of order be made interim, 00:39:24.719 --> 00:39:30.239 which Council graciously accepted. The U .S. 00:39:30.320 --> 00:39:34.840 Trustee's position is that the relief requested 00:39:34.840 --> 00:39:39.679 should be served out on notice. Section 542E 00:39:42.059 --> 00:39:47.119 notice and the hearing. We're sensitive to the 00:39:47.119 --> 00:39:49.900 animal welfare concerns that are present in the 00:39:49.900 --> 00:39:54.179 case and the need to access information. We're 00:39:54.179 --> 00:39:57.860 struggling to square an order directing people 00:39:57.860 --> 00:40:00.159 to turn over information within five business 00:40:00.159 --> 00:40:04.980 days in more or less an ex parte setting when 00:40:04.980 --> 00:40:08.039 the code requires says after notice and hearing. 00:40:11.320 --> 00:40:14.900 failure to produce the information would expose 00:40:14.900 --> 00:40:23.179 employees to contempt proceedings. As I read 00:40:23.179 --> 00:40:25.440 the pleadings that have been filed, there's no 00:40:25.440 --> 00:40:28.340 top 30 list that's been filed yet. I'm not sure 00:40:28.340 --> 00:40:31.519 the extent to which the creditor body has received 00:40:31.519 --> 00:40:35.559 notice of the cases themselves. As I read the 00:40:35.559 --> 00:40:38.539 motion, I did not see previous cases cited where 00:40:38.539 --> 00:40:41.469 this type of relief was granted. The U .S. Trustee 00:40:41.469 --> 00:40:44.969 is prepared not to oppose short notice if Your 00:40:44.969 --> 00:40:49.909 Honor were amenable to this relief being served 00:40:49.909 --> 00:40:53.570 out on notice. But with that, unless Your Honor 00:40:53.570 --> 00:41:15.000 has any questions for me. standard is irreparable 00:41:15.000 --> 00:41:17.000 harm and I would submit that that's satisfied 00:41:17.000 --> 00:41:20.099 here. With respect to notice the employees, this 00:41:20.099 --> 00:41:22.360 is going to come, these requests are going to 00:41:22.360 --> 00:41:26.559 come probably in person. Of course we'll provide 00:41:26.559 --> 00:41:28.980 notice to the extent that we absolutely can. 00:41:29.699 --> 00:41:33.940 If the concern is that somebody is going to be 00:41:33.940 --> 00:41:37.019 held in contempt as a result of failure to abide 00:41:37.019 --> 00:41:38.599 by the order, first of all that's within your 00:41:38.599 --> 00:41:42.599 honor's control. And certainly, Your Honor can 00:41:42.599 --> 00:41:45.199 address that as a remedy, to the extent somebody 00:41:45.199 --> 00:41:47.000 comes in and we have a fight about whether something 00:41:47.000 --> 00:41:49.719 should or shouldn't have been turned over. Moreover, 00:41:51.960 --> 00:41:54.079 the statute requires that, obviously, privileged 00:41:54.079 --> 00:41:56.280 information is not to be turned over. So really, 00:41:56.400 --> 00:42:00.579 there's no reason here to think that information 00:42:00.579 --> 00:42:02.820 related to the debtor's property and finances 00:42:02.820 --> 00:42:05.760 shouldn't be turned over at this point. So if 00:42:05.760 --> 00:42:20.210 there's an issue with that, opportunity to deal 00:42:20.210 --> 00:42:23.710 with Section 542E recently, though we haven't 00:42:23.710 --> 00:42:29.210 issued an opinion yet on it. It isn't a statute 00:42:29.210 --> 00:42:33.090 that's often used, although I will say that I 00:42:33.090 --> 00:42:36.929 see it more in my Chapter 7 trustee cases. They 00:42:36.929 --> 00:42:43.230 seem to know that provision is here. And it is, 00:42:43.230 --> 00:42:47.110 I think, being used appropriately here with the 00:42:47.110 --> 00:42:55.940 request Because the information sought is the 00:42:55.940 --> 00:42:58.239 books, documents, records, and papers relating 00:42:58.239 --> 00:43:00.559 to the debtor's property or financial affairs, 00:43:00.639 --> 00:43:03.719 which is what this debtor needs. It does provide 00:43:03.719 --> 00:43:09.519 that this section, this application, this relief 00:43:09.519 --> 00:43:13.460 can be brought by motion. And it does say after 00:43:13.460 --> 00:43:16.860 notice in a hearing. And after notice in a hearing, 00:43:17.550 --> 00:43:21.309 is addressed in section 102, and section 102 00:43:21.309 --> 00:43:26.809 of the code says that that phrase means after 00:43:26.809 --> 00:43:29.570 such notice as is appropriate in the particular 00:43:29.570 --> 00:43:33.309 circumstances and such opportunity for a hearing 00:43:33.309 --> 00:43:37.170 as is appropriate in the particular circumstances. 00:43:37.550 --> 00:43:41.869 And there's a but. It authorizes an act without 00:43:41.869 --> 00:43:45.750 an actual hearing if such notice is given properly 00:43:45.750 --> 00:43:51.440 and if... skipping a little. There is insufficient 00:43:51.440 --> 00:43:53.559 time for a hearing to be commenced before such 00:43:53.559 --> 00:43:56.780 act must be done and the court authorizes such 00:43:56.780 --> 00:44:00.619 act. So I think it is up to the court to take 00:44:00.619 --> 00:44:04.059 a look at the particular circumstances here and 00:44:04.059 --> 00:44:07.460 I'm I would hope as much of a due process person 00:44:07.460 --> 00:44:09.760 as anyone but I think under the circumstances 00:44:09.760 --> 00:44:13.119 of this case it is appropriate to issue this 00:44:13.119 --> 00:44:16.440 order on an interim basis. I will hear anyone 00:44:16.440 --> 00:44:19.639 who has an issue on an expedited basis if they 00:44:19.639 --> 00:44:25.980 come in front of me to argue that whatever it 00:44:25.980 --> 00:44:30.539 is the debtor is trying to obtain from them somehow 00:44:30.539 --> 00:44:37.900 is not records, documents that they hold that 00:44:37.900 --> 00:44:41.039 relate to the property of this debtor are somehow 00:44:41.039 --> 00:44:44.900 personal and unrelated to the documents of this 00:44:44.900 --> 00:44:50.480 debtor. But I agree what we're really addressing 00:44:50.480 --> 00:44:56.559 here is an irreparable harm issue, in that sense 00:44:56.559 --> 00:45:00.280 almost a TRO standard. And I think under the 00:45:00.280 --> 00:45:02.900 circumstances here where the welfare of the animals 00:45:02.900 --> 00:45:06.039 in particular is at issue and where there is 00:45:06.039 --> 00:45:18.409 a concern expressed based on I'll say based on 00:45:18.409 --> 00:45:20.789 the lack of cooperation with the pre -petition 00:45:20.789 --> 00:45:26.090 lenders in terms of providing necessary and required 00:45:26.090 --> 00:45:29.909 information as well as the need to immediately 00:45:29.909 --> 00:45:34.730 access the debtors books and records under these 00:45:34.730 --> 00:45:38.280 circumstances I'm going to grant I'm going to 00:45:38.280 --> 00:45:42.739 grant this motion. And I do think it's appropriate 00:45:42.739 --> 00:45:45.900 to do it on an interim basis and we'll set up 00:45:45.900 --> 00:45:48.960 a final hearing. But again, I will also hear 00:45:48.960 --> 00:45:53.159 any concern anyone has on an expedited basis. 00:45:55.400 --> 00:46:03.719 I do also expect the debtors recognizing the 00:46:03.719 --> 00:46:07.429 unique nature of this relief. are not going to 00:46:07.429 --> 00:46:10.650 be pressing in front of me contempt motions. 00:46:12.869 --> 00:46:17.090 In the first instance, or at the first moment, 00:46:17.110 --> 00:46:19.809 they don't receive cooperation, but will, in 00:46:19.809 --> 00:46:27.869 fact, work with particularly the employees to 00:46:27.869 --> 00:46:32.590 get their cooperation. And I would hope that 00:46:32.590 --> 00:46:34.789 these employees, particularly the ones that work 00:46:34.789 --> 00:46:40.909 with animals, welfare of the animal most at heart. 00:46:41.809 --> 00:46:46.110 But this may also give those employees some cover 00:46:46.110 --> 00:46:52.610 in terms of working with the CRO and our new 00:46:52.610 --> 00:46:54.809 director. So it hopefully will give them some 00:46:54.809 --> 00:46:59.110 cover to be able to do that on a cooperative 00:46:59.110 --> 00:47:01.829 basis rather than on a compelled basis. So for 00:47:01.829 --> 00:47:04.889 all those reasons, I will enter this order as 00:47:04.889 --> 00:47:28.960 revised. Thank you, Your Honor. Good afternoon. 00:47:29.059 --> 00:47:31.960 Sean Greacher from Young Conaway for the debtors. 00:47:32.940 --> 00:47:35.440 We're now at item number eight on the agenda, 00:47:35.679 --> 00:47:38.099 which is the hearing to consider interim approval 00:47:38.099 --> 00:47:40.059 of the debtors' motion for use of cash collateral, 00:47:40.219 --> 00:47:42.400 granting adequate protection to secured note 00:47:42.400 --> 00:47:44.860 holders, and for interim approval of the debtors' 00:47:44.980 --> 00:47:46.559 post -petition debtor in possession financing. 00:47:47.519 --> 00:47:49.000 As Mr. Brady said, the motion is supported by 00:47:49.000 --> 00:47:51.739 Mr. Strong's declaration. We also heard from 00:47:51.739 --> 00:47:54.369 Mr. Brady. and read from Mr. Strom's declaration 00:47:54.369 --> 00:47:56.489 the acute challenges that debtors are facing, 00:47:56.849 --> 00:47:59.429 financial defaults, significant uncertainty around 00:47:59.429 --> 00:48:02.210 critical operational issues, particularly in 00:48:02.210 --> 00:48:05.110 the areas of animal safety and welfare. Debtors 00:48:05.110 --> 00:48:07.409 have worked hard with firstly, note holders. 00:48:07.829 --> 00:48:09.829 Unfortunately, note holders have stepped up to 00:48:09.829 --> 00:48:12.250 provide for the consensual use of cash collateral 00:48:12.250 --> 00:48:14.929 and access to emergency dip funding under these 00:48:14.929 --> 00:48:18.050 extremely challenging set of circumstances. Funding 00:48:18.050 --> 00:48:20.510 that will, in our view, be necessary to protect 00:48:20.510 --> 00:48:23.340 the animals, to preserve value. estates and help 00:48:23.340 --> 00:48:27.280 shape the next acts of these cases. There is, 00:48:27.280 --> 00:48:29.139 to put it plainly, a substantial and immediate 00:48:29.139 --> 00:48:32.039 need for use of cash collateral on debt financing. 00:48:33.260 --> 00:48:35.500 Mr. Assalam's declaration establishes unequivocally 00:48:35.500 --> 00:48:37.519 that the debtors have an immediate need for that 00:48:37.519 --> 00:48:41.800 money. I won't rehash the history here, but suffice 00:48:41.800 --> 00:48:44.699 it to say there's a history here. The River On 00:48:44.699 --> 00:48:47.079 team is in the process of getting access to the 00:48:47.079 --> 00:48:49.400 books, the records, the accounts. That process 00:48:49.400 --> 00:48:51.659 is ongoing this week. That process will be bolstered 00:48:51.659 --> 00:48:54.239 by the orders that Your Honor has entered, and 00:48:54.239 --> 00:48:56.800 we appreciate that. The business, as we said, 00:48:57.039 --> 00:48:59.199 involves various parks where living animals are 00:48:59.199 --> 00:49:01.599 located. While it's critical to get our arms 00:49:01.599 --> 00:49:03.139 around the business for a variety of reasons, 00:49:03.400 --> 00:49:05.539 it's absolutely essential to ensure that the 00:49:05.539 --> 00:49:08.019 health of the animals not be compromised. So 00:49:08.019 --> 00:49:10.159 without having any timely financials to rely 00:49:10.159 --> 00:49:12.519 upon, nonetheless, the note holders have stepped 00:49:12.519 --> 00:49:16.059 up to provide emergency funding. Given the urgency 00:49:16.059 --> 00:49:18.599 surrounding these challenges, the lack of available 00:49:18.599 --> 00:49:20.769 information, the unwillingness of the first lien 00:49:20.769 --> 00:49:23.670 holders to be primed, it was clear that first 00:49:23.670 --> 00:49:27.130 lien holders were the only likely source of funding 00:49:27.130 --> 00:49:30.989 today and under these circumstances. As mentioned, 00:49:31.230 --> 00:49:32.809 the debtor is in the process of interviewing 00:49:32.809 --> 00:49:35.409 potential investment banking candidates. Part 00:49:35.409 --> 00:49:38.030 of the investment banker's mandate will certainly 00:49:38.030 --> 00:49:42.449 to be a standard market analysis of the terms 00:49:42.449 --> 00:49:45.409 will present the results and the conclusions 00:49:45.409 --> 00:49:52.530 of that analysis in connection with There's one 00:49:52.530 --> 00:49:55.409 unique component of the proposed interim dip 00:49:55.409 --> 00:49:57.750 structure here in order to prepare a typical 00:49:57.750 --> 00:50:01.409 13 -week cash flow budget. One needs access to 00:50:01.409 --> 00:50:05.610 the data supporting such cash flow. So Mr. Wagstaff's 00:50:05.610 --> 00:50:07.670 team will obviously work toward that. We're working 00:50:07.670 --> 00:50:12.570 with Mexican Council, and we'll use every available 00:50:12.570 --> 00:50:16.190 avenue to obtain that. So the interim dip loan 00:50:16.190 --> 00:50:19.110 is a two -phase loan. The first phase is a borrowing 00:50:19.110 --> 00:50:23.030 of $1 million. of $500 ,000 prior to preparation 00:50:23.030 --> 00:50:26.489 of that initial approved cash flow budget. And 00:50:26.489 --> 00:50:28.769 the balance of the interim borrowing of the $4 00:50:28.769 --> 00:50:31.670 million would be available after delivery of 00:50:31.670 --> 00:50:34.789 an initial approved budget. And the dip order 00:50:34.789 --> 00:50:38.030 calls for that more traditional 13 -week cash 00:50:38.030 --> 00:50:40.469 flow budget to be delivered within 15 days or 00:50:40.469 --> 00:50:42.429 such longer time as the required lenders will 00:50:42.429 --> 00:50:45.090 agree. We will of course file that budget with 00:50:45.090 --> 00:50:48.869 the court. So the first uses of the first $1 00:50:48.869 --> 00:50:52.119 .5 million. will be to fund essential obligations 00:50:52.119 --> 00:50:55.420 as needed, including first and foremost, costs 00:50:55.420 --> 00:50:57.960 related to the caring health of animals, costs 00:50:57.960 --> 00:51:00.019 related to providing transportation services 00:51:00.019 --> 00:51:03.159 for visitors to the company's facilities, costs 00:51:03.159 --> 00:51:06.039 related to the operational planning for security 00:51:06.039 --> 00:51:09.079 and logistics of Riveron's efforts in Mexico, 00:51:10.739 --> 00:51:13.480 costs related to obtaining access to books and 00:51:13.480 --> 00:51:16.800 records, estimated fees and costs of the professionals 00:51:16.800 --> 00:51:19.780 and of the claims and noticing agents, and other 00:51:19.780 --> 00:51:22.599 operating expenses. For example, I think as Mr. 00:51:22.760 --> 00:51:25.760 Brady indicated, potential costs of an independent 00:51:25.760 --> 00:51:28.079 veterinary consultant to assist the company, 00:51:28.539 --> 00:51:31.079 to assist the independent director and the CRO 00:51:31.079 --> 00:51:34.380 on appropriate measures with respect to animal 00:51:34.380 --> 00:51:37.559 health, costs of maintenance services, or other 00:51:37.559 --> 00:51:42.599 customers facing services and the like. As for 00:51:42.599 --> 00:51:45.440 terms, the DIP calls for payment of various customary 00:51:45.440 --> 00:51:50.800 fees. $70 ,000 of fees to the agent, as well 00:51:50.800 --> 00:51:53.739 as an upfront closing fee of $200 ,000, which 00:51:53.739 --> 00:51:56.739 will be picked. DIP loan accrues interest at 00:51:56.739 --> 00:52:00.599 11%. Debtors are seeking approval of first priority 00:52:00.599 --> 00:52:02.699 liens on all property of the debtor's estates, 00:52:02.840 --> 00:52:06.000 including upon entry of a final order proceeds 00:52:06.000 --> 00:52:09.219 of avoidance actions subordinate to the carve 00:52:09.219 --> 00:52:13.420 out and permitted prior liens. The closed DIP 00:52:13.420 --> 00:52:15.599 order offers what we believe to be reasonable 00:52:15.599 --> 00:52:18.960 customary protection to the first liens and second 00:52:18.960 --> 00:52:22.679 liens, second lien lenders, adequate protection 00:52:22.679 --> 00:52:26.820 liens, and super priority claims. There are a 00:52:26.820 --> 00:52:31.380 small set of milestones related to entry of an 00:52:31.380 --> 00:52:33.659 interim order, selection of an investment banker, 00:52:34.239 --> 00:52:37.699 and ultimate entry of a final order, a standard 00:52:37.699 --> 00:52:40.619 set of covenants. The interim order provides 00:52:40.619 --> 00:52:43.039 a carve out for professional fees and disbursements 00:52:43.039 --> 00:52:44.920 for both the debtors and any committees appointed 00:52:44.920 --> 00:52:46.960 in the cases. as well as the U .S. trustee's 00:52:46.960 --> 00:52:51.239 fees. There is a request subject to a final order 00:52:51.239 --> 00:52:55.539 for Section 506C and 552B waivers and limitation 00:52:55.539 --> 00:53:01.579 of the scope of applicability of the marshland 00:53:01.579 --> 00:53:04.860 doctrine. There's a standard challenge period 00:53:04.860 --> 00:53:07.159 with respect to the pre -petition liens and claims. 00:53:08.619 --> 00:53:11.260 So Your Honor, as you were having fun at your 00:53:11.260 --> 00:53:13.639 prior hearing, we did file a black line. I don't 00:53:13.639 --> 00:53:15.860 know if Your Honor has it. If not, I believe 00:53:21.840 --> 00:53:23.840 Subject to your honor's preference. I am happy 00:53:23.840 --> 00:53:29.179 to step through that black line We did speak 00:53:29.179 --> 00:53:34.219 significantly with mr. Packman and Addressed 00:53:34.219 --> 00:53:37.420 all of the comments that he has raised So there 00:53:37.420 --> 00:53:40.260 are a number to go through and I'm happy to go 00:53:40.260 --> 00:53:54.530 line by line with you that there's a reference 00:53:54.530 --> 00:53:59.530 to 12 bilateral debt instruments. What are those? 00:54:01.889 --> 00:54:05.550 I don't know if the Council of Lenders have a 00:54:05.550 --> 00:54:07.809 view, but there are certain debt instruments 00:54:07.809 --> 00:54:13.150 with respect to a number of the foreign entities. 00:55:45.739 --> 00:55:47.780 I just wanted to make sure that we were clear. 00:55:48.780 --> 00:55:51.840 And if I bungle it, please, hopefully folks will 00:55:51.840 --> 00:55:54.800 correct me. There are, we believe, and again, 00:55:55.119 --> 00:55:59.179 given the dearth of books and records, we have 00:55:59.179 --> 00:56:01.440 reference to this in certain documents, but it 00:56:01.440 --> 00:56:04.579 appears that there are approximately a dozen 00:56:04.579 --> 00:56:09.199 agreements in various jurisdictions, foreign 00:56:09.199 --> 00:56:14.099 jurisdictions, that we would suspect relate to 00:56:14.099 --> 00:56:20.179 local payments. in and out of those entities. 00:56:20.539 --> 00:56:24.679 Again, this will be a subject of significant 00:56:24.679 --> 00:56:28.739 inquiry. We're not sure what those documents 00:56:28.739 --> 00:56:31.440 look like. We have reference to them, but we've 00:56:31.440 --> 00:56:34.119 not had the opportunity to study those documents. 00:56:34.500 --> 00:56:36.880 We don't have them yet. It will clearly be something 00:56:36.880 --> 00:56:40.739 that is on our list of materials to obtain and 00:56:40.739 --> 00:56:43.800 access so that we can understand that more thoroughly. 00:56:47.480 --> 00:56:50.420 are doing anything to those documents? Well, 00:56:50.500 --> 00:56:52.420 I believe, Your Honor, to the extent that those 00:56:52.420 --> 00:57:00.059 are prior perfected liens, no. So we're not priming 00:57:00.059 --> 00:57:01.920 to the extent that those are prior perfected. 00:57:03.119 --> 00:57:06.559 But again, certainly don't want to make any broad 00:57:06.559 --> 00:57:08.559 proclamations on documents that unfortunately 00:57:08.559 --> 00:57:22.480 we've not had the opportunity to see. It seemed 00:57:22.480 --> 00:57:28.760 to me in E Romanet 1 that we're making, that 00:57:28.760 --> 00:57:30.940 the debtor is making stipulations about a non 00:57:30.940 --> 00:57:42.679 -debtor and the lenders. So, Your Honor, I think 00:57:42.679 --> 00:57:47.079 that we are clarifying that that was one of the 00:57:48.940 --> 00:57:52.340 One of the clarifications that we've made in 00:57:52.340 --> 00:57:55.300 connection with discussions with Mr. Hackman, 00:57:55.300 --> 00:57:58.539 if you have the red line, I think what we're 00:57:58.539 --> 00:58:02.159 saying is that each pre -petition first lien 00:58:02.159 --> 00:58:05.539 grantor other than Dolphin, which is the non 00:58:05.539 --> 00:58:12.440 -debtor, joint and severally guaranteed as a 00:58:12.440 --> 00:58:14.699 primary lab obligoric with pre -petition first 00:58:14.699 --> 00:58:16.940 lien secure obligations. Again, this is consistent 00:58:16.940 --> 00:58:21.659 with... the note purchase agreement, obviously 00:58:21.659 --> 00:58:24.880 that's the stipulation subject to challenge. 00:58:25.900 --> 00:58:30.659 But again, the notion here is that this order 00:58:30.659 --> 00:58:35.519 is a stipulation of the debtors. The debtors 00:58:35.519 --> 00:58:38.300 are making this stipulation, and so the debtors 00:58:38.300 --> 00:58:41.480 are stipulating to their obligations here. There 00:58:41.480 --> 00:58:45.760 is no, from my perspective, and again, the President 00:58:45.760 --> 00:58:48.230 of Kiplander will correct me, but there's no 00:58:48.230 --> 00:58:51.269 intent to stipulate on behalf of a party who's 00:58:51.269 --> 00:59:10.889 not before you. Okay, I see some additional clarifications 00:59:10.889 --> 00:59:16.400 in Romanettes. Yes, your honor. This is of the 00:59:16.400 --> 00:59:20.039 same piece again. This is this is to clarify 00:59:20.039 --> 00:59:25.039 exactly What the debtors position the debtors 00:59:25.039 --> 00:59:28.780 who are before you believe are their joint and 00:59:28.780 --> 00:59:44.940 several primary obligations under needs to be 00:59:44.940 --> 00:59:58.719 a debtor stipulation more properly in E. I'll 00:59:58.719 --> 01:00:03.239 let the debtor, the Diblenders Council respond 01:00:03.239 --> 01:00:17.750 to that. Certainly understood. Was looking down 01:00:17.750 --> 01:00:21.030 okay, this con agreed with me as she is want 01:00:21.030 --> 01:00:49.880 to do So today, as I understand it, we're not 01:00:49.880 --> 01:00:55.119 approving any portion of the roll -up. But this 01:00:55.119 --> 01:01:02.539 provision, there are several places where it 01:01:02.539 --> 01:01:05.639 talks about including the roll -up. Is there 01:01:05.639 --> 01:01:10.099 somewhere that says, I hate these things, notwithstanding 01:01:10.099 --> 01:01:13.920 anything else, I'm not doing anything with the 01:01:13.920 --> 01:01:18.389 roll -up? I don't believe that we put such a 01:01:18.389 --> 01:01:21.710 provision in the document. I can certainly represent 01:01:21.710 --> 01:01:25.130 and would ask that the Note Holder Council, the 01:01:25.130 --> 01:01:28.570 Dippler Under Council similarly represent. It 01:01:28.570 --> 01:01:32.650 is clearly the intention to have issues of the 01:01:32.650 --> 01:01:38.409 roll -up considered at the final hearing. I think 01:01:38.409 --> 01:01:41.889 we should at least say subject to the final or 01:01:41.889 --> 01:01:46.019 something of that sort. Otherwise I would just 01:01:46.019 --> 01:01:49.739 take it out but in the lead -in to Roman at three 01:01:49.739 --> 01:01:51.940 you'd like to say subject to the final order 01:02:47.310 --> 01:02:51.050 Entry to this says, pursuant to the direction 01:02:51.050 --> 01:02:54.449 of all of the pre -petition first lien note holders, 01:02:54.889 --> 01:02:57.349 the pre -petition first lien agent has consented. 01:02:57.550 --> 01:03:00.610 There are other provisions in this order that 01:03:00.610 --> 01:03:03.730 talk about required lenders or majority of lenders 01:03:03.730 --> 01:03:09.630 or whatever. I don't know, because I don't have 01:03:09.630 --> 01:03:12.840 those documents in front of me. whether the agent 01:03:12.840 --> 01:03:15.980 has the requisite authority or not. And I don't 01:03:15.980 --> 01:03:18.460 get into whether the agent has a requisite authority. 01:03:18.579 --> 01:03:22.239 I assume it does, or otherwise it wouldn't enter 01:03:22.239 --> 01:03:29.659 into. But I've got those kinds of provisions 01:03:29.659 --> 01:03:36.119 all over here, all over this. And even more so 01:03:36.119 --> 01:03:41.000 in this provision toward the, I guess it's. Second 01:03:41.000 --> 01:03:46.000 to last sentence. Oh no, that's a little different. 01:03:46.480 --> 01:03:51.320 Oh. The language at the end of the first sentence 01:03:51.320 --> 01:03:54.019 talking about consent is binding on all pre -petitioned 01:03:54.019 --> 01:03:56.599 first lane secured parties. I don't get into 01:03:56.599 --> 01:04:03.420 the inter workings of the lenders. So I would 01:04:03.420 --> 01:04:06.760 like those references to come out. I assume, 01:04:07.019 --> 01:04:09.239 again, I assume the agent has the authority it 01:04:09.239 --> 01:04:12.750 needs. But I don't know that, and I can't confirm 01:04:12.750 --> 01:04:19.949 that. So that's a sort of a global comment to 01:04:19.949 --> 01:04:28.690 look for. OK, so just to recap, at the beginning 01:04:28.690 --> 01:04:33.369 of paragraph I, you would have a strike pursuant 01:04:33.369 --> 01:04:35.170 to the direction of all of the pre -preparation 01:04:35.170 --> 01:04:37.909 firstly note holders, and then just start that 01:04:37.909 --> 01:05:02.090 sentence with the So there's some internal inconsistency 01:05:02.090 --> 01:05:03.630 in there too, so I don't want to get in the middle 01:05:03.630 --> 01:05:12.079 of that. Say none of the pre -petition firstly 01:05:12.079 --> 01:05:17.820 note holders has filed an objection This is why 01:05:17.820 --> 01:05:26.719 I did so well in logic Very good So I believe 01:05:41.550 --> 01:07:09.260 similarly we'll make the we'll make the I just 01:07:09.260 --> 01:07:15.980 want to see if I'm correct, is that if there's 01:07:15.980 --> 01:07:20.139 something in the order that's contrary to the 01:07:20.139 --> 01:07:22.800 DIP loan documents, the DIP loan documents prevail. 01:07:23.159 --> 01:07:25.820 And that's not usually the default provision 01:07:25.820 --> 01:07:40.139 that we go with. I read this as saying that the 01:07:40.139 --> 01:08:13.300 relative rights and priorities to say is if there's 01:08:13.300 --> 01:08:17.079 a dispute between roll up dip secured parties 01:08:17.079 --> 01:08:20.760 and other dip secured parties, Your Honor would 01:08:20.760 --> 01:08:24.439 look to the terms of the credit agreement to 01:08:24.439 --> 01:08:31.180 resolve that limited dispute. Okay, I guess I 01:08:31.180 --> 01:08:33.600 would hope that what's ever in the dip documents 01:08:33.600 --> 01:08:38.539 is not has the same priority as what I'm granting 01:08:38.539 --> 01:08:42.210 here in this order because I'm granting right 01:08:42.210 --> 01:08:47.609 in collateral in this order, so. Your honor. 01:08:48.369 --> 01:08:51.649 We will strike it. Strike the final sentence. 01:08:58.670 --> 01:09:03.810 In in paragraph C, it has the $8 million figure 01:09:03.810 --> 01:09:08.510 in here. And we're at the I thought we were under 01:09:08.510 --> 01:09:15.479 the interim. Borrowing of up to four. That is 01:09:15.479 --> 01:09:18.479 correct. I think that we can modify that to just 01:09:18.479 --> 01:09:25.460 say four million dollars for purposes of the 01:09:25.460 --> 01:09:33.779 interim order. So perhaps we could say the aggregate 01:09:33.779 --> 01:09:37.640 outstanding amount for all such barrings authorized 01:09:37.640 --> 01:09:40.399 pursuant to this order shall not exceed four 01:09:40.399 --> 01:09:47.420 million dollars. And I just also want to make 01:09:47.420 --> 01:09:50.859 sure I'm correct that all of the current debtors 01:09:50.859 --> 01:09:55.279 are guarantors under the Pre -Petition Facility. 01:10:55.570 --> 01:10:58.449 sentence and the way I'm reading it is it says 01:10:58.449 --> 01:11:04.850 that the prepetition first liens are going to 01:11:04.850 --> 01:11:07.590 turn over to the dip agent the cash collateral 01:11:07.590 --> 01:11:10.090 so that the cash collateral can be applied to 01:11:10.090 --> 01:11:12.250 the dip obligations but I thought the debtor 01:11:12.250 --> 01:11:34.649 was using cash collateral so I could be wrong. 01:13:09.029 --> 01:13:11.350 I'll authorize the debtor to pay them but I don't 01:13:13.840 --> 01:13:46.029 Expenses pre -petition or post -petition affirmed 01:13:46.029 --> 01:14:29.840 and ratified. the dip liens are on the equity 01:14:29.840 --> 01:14:34.960 interests that the debtors directly own. We wanted 01:14:34.960 --> 01:14:42.380 to avoid any confusion with respect to 100%. 01:14:42.380 --> 01:14:46.260 It is the equity interests as they are, as they 01:14:46.260 --> 01:14:49.260 are held. Okay, and are those currently collateral 01:14:49.260 --> 01:14:52.819 of the dip lenders? I assume so. They've been 01:14:52.819 --> 01:16:45.279 exercising rights. Okay. paid in full, repaid 01:16:45.279 --> 01:16:54.920 in full. The provided, however, is all of this 01:16:54.920 --> 01:17:21.579 consensual? With respect to the statements that 01:17:21.579 --> 01:17:24.600 the adequate protection claims may be impaired 01:17:24.600 --> 01:17:28.319 pursuant to any Chapter 11 plan? Yeah. I mean, 01:17:28.319 --> 01:17:31.359 if it's consensual, I don't have a problem. I 01:17:31.359 --> 01:17:34.180 know that we've tried to make this consensual, 01:17:34.199 --> 01:17:36.100 so I'm looking for a hint on that. I just received 01:17:36.100 --> 01:17:44.680 it. Yes, it is consensual. I notice that there 01:17:44.680 --> 01:17:47.100 are references to first day orders. We don't 01:17:47.100 --> 01:17:50.140 obviously have operational first day orders yet. 01:17:50.939 --> 01:17:53.920 I would just caution that the operational first 01:17:53.920 --> 01:17:56.899 day orders should be consistent so that there 01:17:56.899 --> 01:18:01.000 is no inconsistency between priorities given 01:18:01.000 --> 01:18:03.560 and this. So if we need to make adjustments to 01:18:03.560 --> 01:18:07.579 first day orders, we need to do that. Understood, 01:18:07.720 --> 01:18:10.319 Your Honor, and we will resist the urge to state 01:18:10.319 --> 01:19:18.539 that Consent to priming and adequate protection? 01:19:19.199 --> 01:19:48.220 Yes. Improviso. lenders who've requested this, 01:19:48.399 --> 01:19:53.180 my understanding is that the consent here given 01:19:53.180 --> 01:19:57.579 the circumstances of these cases is being granted 01:19:57.579 --> 01:20:00.479 under the totality of the circumstances here. 01:20:00.619 --> 01:20:04.119 It's being granted to these debtors that are 01:20:04.119 --> 01:20:09.239 subject to the possession and custody management, 01:20:09.239 --> 01:20:12.960 if you will, of Mr. Strom and the oversight of 01:20:12.960 --> 01:20:16.409 Mr. Wagstaff. And I don't have any issue with 01:20:16.409 --> 01:20:21.390 that. But provided further that such consent 01:20:21.390 --> 01:20:24.850 shall be of no force and effect if this interim 01:20:24.850 --> 01:20:28.270 order is not entered, I guess, that this would 01:20:28.270 --> 01:20:30.909 assume it was entered, or is entered and subsequently 01:20:30.909 --> 01:20:32.989 reverse modified, that that means they gave their 01:20:32.989 --> 01:20:34.670 consent now, but if this gets reversed, they 01:20:34.670 --> 01:20:38.109 didn't give their consent? I just don't understand 01:20:38.109 --> 01:20:43.680 what that... I mean, I get that we're not going 01:20:43.680 --> 01:20:48.220 to consent anymore if it gets reversed on appeal. 01:20:48.399 --> 01:20:51.140 We don't consent. And if the judge doesn't enter 01:20:51.140 --> 01:20:53.579 the order today, whatever consent we've been 01:20:53.579 --> 01:20:58.340 working among is ended. But I guess I don't understand 01:20:58.340 --> 01:21:01.579 how this would work, what this means. I guess, 01:21:01.699 --> 01:21:06.260 Your Honor, imagining a parade of horribles that, 01:21:06.680 --> 01:21:08.800 for whatever reason, Mr. Strom, we're not here. 01:21:18.319 --> 01:21:23.840 of a similar order. Again, I don't want to put 01:21:23.840 --> 01:21:28.640 words in the DIP lenders mouths, but this process 01:21:28.640 --> 01:21:32.939 was carefully orchestrated. The transition of 01:21:32.939 --> 01:21:36.899 the board and the management was carefully orchestrated 01:21:36.899 --> 01:21:41.880 and is an essential component to getting us here 01:21:41.880 --> 01:21:46.739 today and the DIP lenders stepping up here today. 01:21:47.829 --> 01:21:52.189 So I'll grant you, perhaps this is an awkward 01:21:52.189 --> 01:21:55.630 paragraph, but I think under the circumstances 01:21:55.630 --> 01:22:17.319 regarding the management of the company. Provided 01:22:17.319 --> 01:22:20.039 further that such consent shall be of no further 01:22:20.039 --> 01:22:22.560 force in effect in the event that the interim 01:22:22.560 --> 01:22:25.640 order is an entered or it's reversed on appeal 01:22:25.640 --> 01:22:28.600 That's fine your honor will make that change 01:22:28.600 --> 01:22:39.579 Okay in the next paragraph sub 8 Under the circumstances 01:22:39.579 --> 01:22:42.119 and given that the above described adequate protection 01:22:42.119 --> 01:22:45.079 is consistent with the bankruptcy code including 01:22:45.079 --> 01:22:52.520 506 B That seems to be an implicit ruling that 01:22:52.520 --> 01:22:56.800 the pre -petition lenders are entitled to interest, 01:22:57.060 --> 01:22:58.680 attorney fees, etc., that they haven't allowed 01:22:58.680 --> 01:23:02.520 secured claim. And I'm not prepared to do that 01:23:02.520 --> 01:23:05.739 today. So if that reference could just come out. 01:23:59.470 --> 01:24:03.489 We've got a similar issue on the consent that 01:24:03.489 --> 01:24:07.069 we just talked about. So we need to add consent 01:24:07.069 --> 01:25:18.369 shall be of no further force in effect. There's 01:25:18.369 --> 01:25:23.649 somewhere in here that it says that recording 01:25:23.649 --> 01:25:26.609 officers shall be authorized and hereby is directed 01:25:26.609 --> 01:25:30.550 to file. And I'm OK with authorized but not directing 01:25:30.550 --> 01:25:33.649 some recording officer. I think that's consistent 01:25:33.649 --> 01:25:36.050 with where the court's been for a long time. 01:25:36.529 --> 01:25:40.470 Of course, and I can't see it now, but I believe 01:25:40.470 --> 01:26:42.130 you that I missed it. I see it now. I see a change. 01:26:46.590 --> 01:26:56.630 The change, Your Honor, is to make clear that 01:26:56.630 --> 01:26:58.630 the additional language bestows party status 01:26:58.630 --> 01:27:00.989 on a Chapter 7 or 11 trustee in connection with 01:27:00.989 --> 01:27:10.659 any timely challenge that... an issue here given 01:27:10.659 --> 01:27:15.760 the change in management that the language that 01:27:15.760 --> 01:27:18.680 addresses the Delaware Supreme Court facts issue. 01:27:40.170 --> 01:27:47.869 So, Your Honor, there are a number of corporations 01:27:47.869 --> 01:27:54.390 here. So, again, in our experience, the issue, 01:27:54.569 --> 01:27:57.310 the backs issue is where we are solely dealing 01:27:57.310 --> 01:28:03.670 with LLCs, but we plainly have corporate entities. 01:28:18.159 --> 01:28:23.640 suggests that the LLC backs issue is not applicable 01:28:23.640 --> 01:28:26.340 here, given that there are, in fact, corporate 01:28:26.340 --> 01:28:30.199 entities. That said... We're gonna respect corporate 01:28:30.199 --> 01:28:32.340 separateness, right, as to who has what cause 01:28:32.340 --> 01:28:36.079 of action. Perhaps, perhaps not, because I don't 01:28:36.079 --> 01:28:39.220 know how these debtors were run pre -bankruptcy. 01:28:40.560 --> 01:29:26.699 Understood. Just one moment on this. So your 01:29:26.699 --> 01:29:29.619 honor, if we could include the language with 01:29:29.619 --> 01:29:35.380 respect to the LLCs specifically, perhaps that's 01:29:35.380 --> 01:29:38.939 a reasonable little ground here. Yes. We'll include 01:29:38.939 --> 01:29:41.500 that language and we will say with respect to 01:29:41.500 --> 01:30:17.510 limited liability companies. I do see that we 01:30:17.510 --> 01:30:23.550 have a provision on cash management, I assume, 01:30:23.789 --> 01:30:25.850 because we don't have a cash management order. 01:30:27.569 --> 01:30:30.970 Yes, Your Honor, and the addition there was to 01:30:30.970 --> 01:30:33.970 make it clear we're not trying to sneak one by 01:30:33.970 --> 01:30:36.869 U .S. Trustee or anybody, not seeking a permanent 01:30:36.869 --> 01:30:40.229 waiver or obtaining a permanent waiver, Section 01:30:40.229 --> 01:31:16.779 345, as and when we have. with respect to what 01:31:16.779 --> 01:31:19.380 happens on a termination event and access to 01:31:19.380 --> 01:32:28.079 the court. Were there changes made to in the 01:32:28.079 --> 01:32:31.939 red line? No, there's nothing on the red line. 01:32:36.600 --> 01:32:41.140 67 is that part of 14? What is that part of? 01:32:41.260 --> 01:32:44.159 It is. That's part of 14. And again, your honor, 01:32:44.239 --> 01:34:51.960 I must have been sleeping at the wheel. enforced 01:34:51.960 --> 01:34:54.640 and realize on its dip lanes, it's fine, on all 01:34:54.640 --> 01:34:56.859 of any portion of the dip collateral, including 01:34:56.859 --> 01:34:58.800 collecting accounts receivable, applying the 01:34:58.800 --> 01:35:01.300 proceeds thereof, and by occupying the debtor's 01:35:01.300 --> 01:35:03.920 premises to sell or otherwise dispose of the 01:35:03.920 --> 01:35:08.399 dip collateral. I guess they can do that consistent 01:35:08.399 --> 01:35:11.600 with state law, but I have no, you know, there's 01:35:11.600 --> 01:35:16.680 some landlord out there who isn't here and may 01:35:16.680 --> 01:35:19.520 have an issue with that. So as long as it's consistent 01:35:19.520 --> 01:35:49.649 with state law. There's a lot of that in EIC, 01:35:49.729 --> 01:35:52.810 but it's all subject. to the next E. It's all 01:35:52.810 --> 01:37:15.819 subject to entry of a fine. survival of interim 01:37:15.819 --> 01:37:24.000 order. And they all read a little differently, 01:37:24.579 --> 01:37:28.819 but they don't seem to contemplate what happens 01:37:28.819 --> 01:37:32.760 on a final order. Like, how does this interim 01:37:32.760 --> 01:37:53.920 order survive if I have a final order? where 01:37:53.920 --> 01:37:56.359 I never get to a final order and then it really 01:37:56.359 --> 01:37:59.479 matters what the interim order says most of the 01:37:59.479 --> 01:38:02.479 time we get to a final order and that's negotiated 01:38:02.479 --> 01:38:05.520 and so that should supersede the interim order 01:38:05.520 --> 01:38:13.739 but I'm not sure this says that it might but 01:38:13.739 --> 01:38:18.199 like it governs in the interim but once I have 01:38:18.199 --> 01:38:21.260 a final at least I think the final order should 01:38:21.260 --> 01:40:01.699 govern I don't want there to be any inconsistencies 01:40:01.699 --> 01:40:04.899 in any orders, and those first day orders need 01:40:04.899 --> 01:40:14.260 to be complete. So I really don't like this language, 01:40:15.640 --> 01:40:18.840 but I just want you to put consistent orders 01:40:18.840 --> 01:40:31.850 in front of me. Okay? comments I have. I'm not 01:40:31.850 --> 01:40:33.670 going to take the blame for this many comments, 01:40:33.829 --> 01:40:36.270 because when you give me an 80 page dip order, 01:40:36.310 --> 01:40:38.710 then you get what you get. Your Honor, I was 01:40:38.710 --> 01:40:41.630 ready to challenge Cory Booker's time here. Did 01:40:41.630 --> 01:40:43.369 I say that from the bench? I think I just did. 01:40:46.750 --> 01:40:50.970 Your Honor, I was ready for far worse, but my 01:40:50.970 --> 01:40:54.970 filibuster time is certainly short of what I 01:40:54.970 --> 01:40:56.710 was ready for. So thank you, Your Honor, for 01:40:56.710 --> 01:40:58.810 all the attention to this. We appreciate the 01:40:58.810 --> 01:41:02.350 time and effort. Let me ask. Does anyone else 01:41:02.350 --> 01:41:10.710 want to be heard? There we go, Mr. Hackman. It 01:41:10.710 --> 01:41:14.449 was. Your Honor, let me note, there was a change 01:41:14.449 --> 01:41:19.149 and it may not have showed up in your black line. 01:41:19.789 --> 01:41:23.069 There's language in paragraph 20A that we are 01:41:23.069 --> 01:41:28.250 taking out. It will appear in the black line 01:41:28.250 --> 01:41:31.470 that you receive. your other changes. Paragraph 01:41:31.470 --> 01:41:35.390 20A had language stating that the proposed final 01:41:35.390 --> 01:41:37.789 order shall be substantially the same as the 01:41:37.789 --> 01:41:40.050 interim order, except that provisions that are 01:41:40.050 --> 01:41:43.170 interim shall be final. U .S. Trustee had concerns 01:41:43.170 --> 01:41:46.609 with that. Oh, I noticed that. Why, it's good 01:41:46.609 --> 01:41:48.789 to have a second set of eyes on these things. 01:41:48.890 --> 01:41:50.550 Thank you. Your Honor, you can be assured that 01:41:50.550 --> 01:41:53.670 Mr. Hackman did yeoman's work. I have no doubt. 01:41:54.329 --> 01:41:56.729 In comparing this, but we are striking that language. 01:41:56.770 --> 01:41:59.109 You'll see that stricken in the final order. 01:41:59.109 --> 01:42:01.390 Thank you. or in the final interim order. Thank 01:42:01.390 --> 01:42:09.909 you. Okay. I will approve borrowing on an interim 01:42:09.909 --> 01:42:12.829 basis in the amount of four million dollars as 01:42:12.829 --> 01:42:15.029 it's set forth a million and a half and then 01:42:15.029 --> 01:42:17.310 a budget and the other two and a half million 01:42:17.310 --> 01:42:22.090 based on the uncontested testimony that I received 01:42:22.090 --> 01:42:25.960 through the declaration. Clearly, there's a need 01:42:25.960 --> 01:42:28.859 for financing. There's a need to do it on this 01:42:28.859 --> 01:42:33.359 unusual basis without a budget, without fully 01:42:33.359 --> 01:42:37.539 knowing the finances of the debtor. But under 01:42:37.539 --> 01:42:39.920 the circumstances of this case, there's no option. 01:42:40.460 --> 01:42:44.779 And I find that it is necessary to enter this 01:42:44.779 --> 01:42:47.020 order to avoid immediate and irreparable harm. 01:42:48.140 --> 01:42:49.779 Thank you, Your Honor. We appreciate that. We'll 01:42:49.779 --> 01:42:52.460 work with the DIP lenders to revise the order 01:42:52.460 --> 01:42:54.239 and submit it under certification of counsel. 01:42:54.199 --> 01:42:56.380 Very good. Just let chambers know when that's 01:42:56.380 --> 01:42:59.039 done. We'll get it signed. Thank you. That's 01:42:59.039 --> 01:43:01.260 all for today. Or do we have anything else? Oh, 01:43:01.260 --> 01:43:27.060 we need a second day, don't we? that is not convenient 01:43:27.060 --> 01:43:29.699 for your honor, and I understand why. And I also 01:43:29.699 --> 01:43:32.399 understand that the next week you will get to 01:43:32.399 --> 01:43:36.739 see lots of me. So let us know what works for 01:43:36.739 --> 01:44:41.630 you. We can certainly work through Your Honor's 01:44:41.630 --> 01:44:46.529 chambers. We're hopeful that we will have a set 01:44:46.529 --> 01:44:51.109 of operational first day motions in short order. 01:44:53.210 --> 01:44:56.909 Our hope would be to file those and seek a hearing 01:44:56.909 --> 01:45:00.109 for the first day hearing possibly next week. 01:45:00.869 --> 01:45:04.489 And again, facts are fluid here. Facts are incoming. 01:45:05.550 --> 01:45:13.380 So. guidance as to when the court may be available 01:45:13.380 --> 01:45:16.000 that we could help to sort of shoot at a date 01:45:16.000 --> 01:45:20.380 certain we that would probably be helpful guidance 01:45:20.380 --> 01:45:25.359 for us for an interim traditional first for a 01:45:25.359 --> 01:45:29.979 traditional first day hearing and you're thinking 01:45:29.979 --> 01:45:44.300 next week looks like Tuesday's the best day The 01:45:44.300 --> 01:45:47.319 alternative is just reach out. Just reach out 01:45:47.319 --> 01:45:49.979 when you know you have the set that you want. 01:45:50.359 --> 01:45:53.300 And I'll find somewhere to put you in. I tell 01:45:53.300 --> 01:45:56.380 you, in April and May, I'm going to be squeezing 01:45:56.380 --> 01:45:58.739 people in, and some of it may be at 9 in the 01:45:58.739 --> 01:46:00.800 morning, and some of it may be at 6 in the evening. 01:46:00.880 --> 01:46:03.920 But we'll get people in that need to be in. Fortunately, 01:46:03.979 --> 01:46:07.000 Your Honor, Mr. Brady's a morning riser, and 01:46:07.000 --> 01:46:10.079 I'm a night owl. So we'll work it out. Thank 01:46:10.079 --> 01:46:12.939 you. We appreciate your cooperation and assistance 01:46:12.939 --> 01:46:15.680 with. Today's hearing and what's anticipated 01:46:15.680 --> 01:46:18.920 to be future hearings that may be challenging 01:46:18.920 --> 01:46:22.140 but we look forward to the challenge and we hope 01:46:22.140 --> 01:46:25.680 to do right by this company and by its handles. 01:46:27.359 --> 01:46:29.300 That's it then for today, we're adjourned.