WEBVTT

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Okay. Good afternoon, everyone. This is Judge

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Kaplan. And the court will be hearing the Del

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Monte Foods Corporation's two matters, first

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aid matters. Allow everybody an opportunity to

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adjust their screens. As the hearing is fully

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remote, I will lead off with my usual admonishment

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to make sure if you wish to be heard, You please

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use the raise hand function and I will do my

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best to spot you and call upon you. I will take

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appearances as we go along rather since I know

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there's a time crunch. There are orders that

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need to be entered and everyone has some place

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to go. So we'll get these moving forward. Let

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me turn. to Debtors' Council and have appearances.

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Thank you, Your Honor. Good afternoon. Felice

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Yudkin, Mike Saroda, David Bass, Cole Schatz,

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PC, proposed co -counsel to the Debtors. I wanted

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to start off and thank Your Honor for scheduling

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this hearing on such an expedited basis. The

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Debtors truly appreciate your courtesy in doing

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so. I wanted to also quickly make a few introductions

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to the court before turning over the podium to

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our co -counsel. The first introduction, Your

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Honor, is our proposed co -counsel, HSF Kramer.

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Additional debtor professionals, Your Honor,

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are Jonathan Goulding, the Chief Restructuring

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Officer from Alvarez and Marcell. Alvarez and

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Marcell is also serving as financial advisor

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in the case, and PJT Partners, Your Honor, is

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the debtor's proposed investment banker. With

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those introductions, Your Honor, I'm gonna turn

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the podium over to Adam Rogoff from HSF Kramer,

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who's gonna provide the court with some background

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regarding today's filings. Sounds good, thank

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you, and welcome all. I am aware... that because

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of the short time, we have pro -hoc VJ applications

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that have been filed and pending for purposes

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of today's hearing. We'll take a very liberal

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approach and I'll just say welcome to New Jersey

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and we'll move on. All right, let's continue.

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Good afternoon, Mr. Rogoff. Good afternoon, Your

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Honor. First of all, can you hear me okay? I

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can, thank you. Excellent. Adam Rogoff. H .S

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.F. Kramer. Formerly, you would know us as Kramer

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11. And I'm here today with a variety of my colleagues,

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and I'll have them introduce themselves as they

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address the various motions before your honor.

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First off, thank you very much to your honor

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and the court for accommodating us for this hearing

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this afternoon. In my overview, I'm not going

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to get into all the details that are laid out

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in the first day declaration of John Goulding

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as chief restructuring officer. We come into

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this case with a dip facility in excess of $900

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million, inclusive of $165 million of additional

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liquidity. As you will hear from Ms. Ringer,

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we have a pressing need to have the order approving

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our dip facilities entered this afternoon, assuming

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your honor is inclined to approve that. So I'm

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going to focus my presentation on key areas before

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turning to the rest of the agenda over to my

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colleagues. Fair enough. Headquartered in Walnut

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Creek, California, Del Monte has been a cornerstone

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of American grocery stores for more than 130

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years. It's an internationally renowned producer,

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distributor, and marketer of plant -based packaged

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food products with a powerful portfolio of brands

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that people enjoy daily, including Del Monte,

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Cantadena, Collagen, and Joiba. Dalmonte enjoys

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market -leading brand recognition and trust due

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in large part to its long legacy of its flagship

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brand. It's driven by its mission, nourishing

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families, enriching lives every day. Partnering

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with hundreds of family farmers in the United

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States and Mexico, the majority of Dalmonte's

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products are locally sourced and travel less

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than a hundred miles to the company's production

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facilities. Del Monte distributes its products

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through a wide variety of channels. The debtors'

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operations are divided into three segments, the

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well -recognized branded products, a U .S. private

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label business, and sales through other outlets

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like food service industry. The debtors also

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license various of their brands that they own

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to third parties for use in certain parts of

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the world. Del Monte has over 2 ,700 employees

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and operates Four plants, two in the United States,

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two in Mexico. And a large number of the employees

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are seasonal. I'll come back to that concept.

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Some business operations are undertaken by certain

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non -debted subsidiaries, specifically in Mexico

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and South America. Del Monte has a pack season

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production cycle that generally runs between

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the months of June and October, depending upon

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the specific product. This concept of a pack

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season is key to what you're going to hear about

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today. The 2025 pack season is underway and is

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a driver of our imminent need for liquidity.

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We have 18 debtors and starting with Del Monte

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Foods Holdings Limited or DMFHL that is the direct

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or indirect parent of the other 17 debtors. DMFHL

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in turn is a private company whose majority shareholder

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is ultimately Del Monte Pacific Limited or DMPL.

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DMPL is a public company listed on the Singapore

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Stock Exchange. DMFHL maintains a 10 -member

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board of directors and 80 % of the board members

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are unaffiliated with DMPL. Looking at our capital

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structure, the company has substantial debt leverage.

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As of the petition date, the debtor's long -term

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secured funded debt obligations alone totaled

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approximately $1 .23 billion outstanding. And

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Your Honor can see the chart identifying the

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breakdown between the AVL facility and our different

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term loan facilities. I'm not going to go through

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the details of the various secured facilities.

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It's laid out in the Goulding Declaration. The

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debtors also have material unsecured obligations

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owing to vendors, suppliers, service providers,

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as well as inter -company claims owing to DMPL

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for inventory like pineapples and for services.

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Let's talk about the events leading up to the

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filing. As I previewed, Del Monte has a peak

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liquidity need tied to its pack season, which

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is when the company purchases its inventory and

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packs its products. The pack season runs June

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through October for many products. The resulting

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inventory is typically sold over the next 12

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to 18 months. The company is currently in its

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2025 pack season. Del Monte has faced substantial

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market constraints in recent years, including

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excess inventory in the wake of the COVID -19

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pandemic and anticipated increases in demand.

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However, this increased demand was not ultimately

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met as consumers changed their buying habits.

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Left with substantial excess inventory, Del Monte

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was forced to store, write off, or sell this

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inventory at substantial losses. This also affected

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the company's borrowing base under its pre -petition

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ABL facility, which further reduced liquidity.

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Following the 2023 pack season, the company scaled

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back production in response to changing consumer

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demand. To manage liquidity, Del Monte relied

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on favorable trade terms from its vendors, and

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has stretched vendor payments resulting in substantial

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accounts payable. Vendors began to contract trade

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terms, which in turn further reduced the company's

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liquidity. Despite challenging conditions, the

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company took actions to reduce overhead and improve

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cost margins as a broader part of an operational

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transformation and pivot towards an asset light

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operational structure. The debtor's liquidity

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need for the 2024 PAC season last year resulted

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in entering into a liability management transaction

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last summer. Again, this is laid out in the Goulding

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Declaration, so I won't spend much time on it

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here. But the funds provided necessary liquidity

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for the 2024 PAC season last year. Since I'd

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like to move forward to the main meal, I'll bring

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us to the 2025 PAC season. The debtors require

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material new liquidity, which fortunately they

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have obtained in the form of the dip facilities.

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This includes $165 million of additional liquidity

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to fund the necessary working capital payroll

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and vendor payments. We come into this case with

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a production unable to move forward and tens

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of millions of dollars owed to vendors and suppliers

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to meet the needs of this current tax season.

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Without the new liquidity from the dip facilities,

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the debtors cannot operate. The alternative is

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simple, but stark. It's an immediate liquidation

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of the debtors. Instead, we have a path forward

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that provides for immediate funds for operations

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and supports a value maximizing sale as a going

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concern. A sale that will allow for employees,

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trade, contract, counterparties to have a going

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forward business and preserve brands that consumers

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have loved for over 130 years. The debtors believe

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that a drawn out bankruptcy process is value

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destructive. Instead, To provide for a value

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maximizing marketing process, the debtors have

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entered into a restructuring support agreement

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with the ad hoc term lender group. The debtors,

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with the assistance of their investment banker,

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PJ Partners, will run a post -petition sale process

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to identify potential third -party bidders for

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some or all of their assets. And subject to reaching

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agreement on mutually acceptable bidding procedures,

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the ad hoc term lender group agrees to credit

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bid their claims and serve as a stocking horse.

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for all the substantial, all the debtor's assets.

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The debtors plan to file their bidding procedures

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motion within 10 days. And a timeline is laid

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out on the next slide. My goal, Your Honor, was

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to set the table for today, recognizing that

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larger portions of the story will now be served

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up by today's motions. Hopefully all of this

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will be easy to digest. Having exhausted my pun

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limit, I'm gonna turn the podium over to Ms.

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Mandel, unless Your Honor, of course, has any

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questions for me. No, I do not. I appreciate

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the overview. For the record, the court did have

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an opportunity to read through the declaration

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of Mr. Goulding, as well as the supporting declaration

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of Mr. Mates from BJT. So I have a broader understanding

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of how we got here. Let me hear from counsel.

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Thank you. Ms. Mandel, good afternoon. Good afternoon,

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Your Honor. For the record, I'm Leigh Mandel,

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HSF brain for the debtors. I'm going to be covering

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the joint administration motion for designation

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as a complex chapter 11 case. We're getting an

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echo feedback. I'll ask everybody to make sure

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their mics are off. Continue, let's see how we

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do. Are you still getting the feedback? I think

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we're okay. Okay. There we go. So I'm going to

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be covering joint administration and the debtor's

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motion for application as a complex chapter 11

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case, starting with the application for designation

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as a complex chapter 11 case. which is agenda

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item one and filed at docket number four. We

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believe the relief requested is customary and

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applicable with court rules, and unless the court

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has questions, we respectfully request entry

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of the proposed order. All right. Let me turn.

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Thank you. Let me just, so we understand how

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we'll go forward with all of these first aid

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matters. Ms. Bilsky, good afternoon. I see you

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for the U .S. trustee. I'm going to... As usual,

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just depend on you to interject if there are

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issues relative to the debtor's first day application.

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Does that work for you? Yes, Your Honor. And

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if it's helpful, I could also thank you. Laura

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Gilske with the Office of the United States Trustee.

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I can also represent that we provided comments

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to the debtors based on drafts prior to the filing

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last night. The debtors have agreed to accept

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the vast majority of our comments, and we have

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signed off on revised red line orders that we

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were provided with this morning and last night.

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Except for the dip motion and the wages motion,

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I do not believe I'm going to raise any objections

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to the balance of the orders, Your Honor. All

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right, then. So I'll assume I have the support.

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the US trustee and that your comments have been

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incorporated apart from the dip motion and the

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wages motion and we'll return to those we'll

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address those as they come forward. Thank you.

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Then let me ask on the first motion is there

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anyone who wishes to be heard? I don't see any

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raised hands so that will be granted and Ms.

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Vandel and I guess I'll address this to all your

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colleagues. I assume following this afternoon's

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hearing, you'll put together the final versions

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of the proposed orders and get them down. Have

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them emailed directly to my chambers rather than

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the clerk's office so we can see to it that they're

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handled. All right? Okay, great. Thank you, Your

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Honor. Thank you. I believe next is joint administration,

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which is agenda item two and file that docket

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number three. The motion requests the administration

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of the chapter 11 cases of the 18 affiliated

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debtors. Again, we believe this is customary

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relief and we would respectfully request entry

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of the proposed order. All right. Anyone wish

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to be heard? Hearing and seeing no one. Motion

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granted. And thank you. And with that, I'm going

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to turn it over to my colleague, Rachel Ringer,

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who will be presenting the dip motion. All right.

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Ms. Ringer, pleasure to see you again. Pleasure

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to see you too, Your Honor. Great to see you.

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Just for the record, Rachel Ringer from HSF Kramer

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on behalf of the company. So first, I do want

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to echo Mr. Rogoff's thanks to your chambers,

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to the US trustee. And to all of the other case

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parties, as you heard from Mr. Rogoff, we're

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under a bit of time pressure today. And I certainly

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wanted to recognize that we've all been working

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very hard under the time constraints that we've

00:15:44.929 --> 00:15:48.889
got. But we appreciate everyone's cooperation

00:15:48.889 --> 00:15:51.330
so that we can do what we need to do today to

00:15:51.330 --> 00:15:55.529
avoid any interruption in operations. On that

00:15:55.529 --> 00:15:57.669
note, I'm actually gonna take my presentation

00:15:57.669 --> 00:16:00.809
a little bit out of order because we do have

00:16:00.809 --> 00:16:04.169
a deadline today for funding. So we need to make

00:16:04.169 --> 00:16:06.289
sure that we get the orders to your honor, assuming

00:16:06.289 --> 00:16:09.710
you're otherwise inclined to grant the relief.

00:16:11.169 --> 00:16:13.889
So I wanna start actually with. talking to you

00:16:13.889 --> 00:16:17.110
about scheduling a final hearing if at all possible.

00:16:18.029 --> 00:16:21.269
And then I can jump into a more substantive presentation.

00:16:21.789 --> 00:16:23.450
But given that we have to actually fill in the

00:16:23.450 --> 00:16:26.049
order with those dates, I'd love for my team

00:16:26.049 --> 00:16:28.809
to be able to do that while we're having a discussion

00:16:28.809 --> 00:16:31.230
of the actual relief requested if at all possible.

00:16:31.529 --> 00:16:35.669
That makes sense. So we have a 40 day milestone

00:16:35.669 --> 00:16:39.570
under our RSA. I think that we were hoping your

00:16:39.570 --> 00:16:43.350
honor might have time available the week of August

00:16:43.350 --> 00:16:51.029
4th. I believe August 4th itself would work for

00:16:51.029 --> 00:16:53.889
the parties if that works for your honor. That's

00:16:53.889 --> 00:16:56.590
a Monday that certainly works for the court.

00:16:57.129 --> 00:17:06.490
I would schedule it at 10 o 'clock. I guess my

00:17:06.490 --> 00:17:09.430
question will be, and you all have to decide,

00:17:10.529 --> 00:17:14.309
it'll depend upon whether the nature and the

00:17:14.309 --> 00:17:17.170
scope of the objections, whether it will be remote,

00:17:17.490 --> 00:17:22.210
hybrid, or in court. For now, let's just... Understood,

00:17:22.230 --> 00:17:25.930
Your Honor. We're aware of your preference with

00:17:25.930 --> 00:17:28.809
respect to live testimony. So to the extent that

00:17:28.809 --> 00:17:31.150
that final hearing requires it, we understand

00:17:31.150 --> 00:17:34.400
we need to be in person for that. Great. We'll

00:17:34.400 --> 00:17:39.180
leave that date, August 4th, at 10 a .m. And

00:17:39.180 --> 00:17:41.400
that would be for a return date for the bidding

00:17:41.400 --> 00:17:46.680
procedures? That would be for the final DIP hearing.

00:17:46.900 --> 00:17:48.440
I'm sorry. Your Honor, the bid procedures themselves

00:17:48.440 --> 00:17:50.640
have not yet been filed. Right. I'm just trying

00:17:50.640 --> 00:17:53.779
to get a sense. So that would be the final hearing

00:17:53.779 --> 00:17:59.680
on the DIP. All right. And presumably on the

00:17:59.680 --> 00:18:02.500
other first day relief to the extent it needs.

00:18:02.730 --> 00:18:06.869
Correct. Thank you, Your Honor. You're welcome.

00:18:07.750 --> 00:18:10.289
So unless there were any other scheduling matters

00:18:10.289 --> 00:18:12.470
at the outset, I'm happy to jump into the more

00:18:12.470 --> 00:18:14.369
substantive presentation of the relief requester.

00:18:15.609 --> 00:18:18.390
The only question I had was, is it likely you're

00:18:18.390 --> 00:18:21.130
going to need a date in advance of August 4th

00:18:21.130 --> 00:18:24.170
for any of the second day it matters, or does

00:18:24.170 --> 00:18:27.109
August 4th work for them all? It is possible

00:18:27.109 --> 00:18:31.650
we need a date between now and then. Maybe I

00:18:31.650 --> 00:18:34.970
will defer to some of my colleagues who are going

00:18:34.970 --> 00:18:37.089
to be addressing some of the other First day

00:18:37.089 --> 00:18:39.890
relief to maybe talk through dates then but it

00:18:39.890 --> 00:18:42.950
is possible. You may want a date Let's call it

00:18:42.950 --> 00:18:45.329
keep a week or two prior. I was going to say

00:18:45.329 --> 00:18:48.109
keep in the back of your mind then July 28th

00:18:48.109 --> 00:18:51.049
That's the prior Monday again at 10 o 'clock.

00:18:51.250 --> 00:18:56.940
The court has time that day Okay. Thank you Okay,

00:18:57.200 --> 00:18:59.480
so before your honor, the company is seeking

00:18:59.480 --> 00:19:02.400
approval of really two DIP facilities. We filed

00:19:02.400 --> 00:19:05.619
a motion at docket number 17 with a proposed

00:19:05.619 --> 00:19:09.640
interim order attached. We also filed two declarations

00:19:09.640 --> 00:19:12.480
in support, the declaration of our CRO John Goulding,

00:19:12.599 --> 00:19:16.339
that's docket number 19, and the declaration

00:19:16.339 --> 00:19:22.430
of Scott Maitz from PJT at docket 18. Before

00:19:22.430 --> 00:19:25.910
I go any further, I'll be remiss if I did not

00:19:25.910 --> 00:19:29.150
seek to move the two declarations we filed into

00:19:29.150 --> 00:19:31.809
evidence. Both Mr. Goulding and Mr. Mates are

00:19:31.809 --> 00:19:33.990
on the line and in the virtual courtroom today.

00:19:35.170 --> 00:19:40.970
All right. Let's start with Mr. Goulding's declaration.

00:19:41.329 --> 00:19:45.789
We'll mark it for identification as D1. Mr. Goulding,

00:19:46.490 --> 00:19:51.319
good afternoon. Good afternoon. All right. The

00:19:51.319 --> 00:19:55.059
court has read your declaration and it's being

00:19:55.059 --> 00:19:57.619
proffered in lieu of your direct testimony. If

00:19:57.619 --> 00:20:01.759
you were to testify before the court at this

00:20:01.759 --> 00:20:05.720
hearing, would the content of your testimony

00:20:05.720 --> 00:20:07.940
be the same as reflected in your declaration?

00:20:08.640 --> 00:20:11.619
Yes, it would. You had the opportunity to review

00:20:11.619 --> 00:20:14.920
your declaration prior to being filed with the

00:20:14.920 --> 00:20:17.579
court? I did. And everything is truthful and

00:20:17.579 --> 00:20:19.680
accurate to the best of your knowledge? Yes.

00:20:19.829 --> 00:20:26.690
All right, thank you. Let me ask any other counsel

00:20:26.690 --> 00:20:29.390
who are on the line for any parties in interest.

00:20:30.069 --> 00:20:33.509
Is there any objection to Mr. Goulding's declaration

00:20:33.509 --> 00:20:39.990
coming in in lieu of direct testimony? I see

00:20:39.990 --> 00:20:43.289
no raised hand. That's always a good sign. Does

00:20:43.289 --> 00:20:46.750
anyone wish the opportunity to cross -examine?

00:20:49.990 --> 00:20:53.210
Again, I see no raised hands, so you're off the

00:20:53.210 --> 00:20:58.329
hook, Mr. Golden. We'll mark the, again, it's

00:20:58.329 --> 00:21:00.890
D1. It's admitted, the declaration's admitted

00:21:00.890 --> 00:21:04.809
into evidence. Let me turn to Mr. Mates. Good

00:21:04.809 --> 00:21:08.509
afternoon, Mr. Mates. Good afternoon, Your Honor.

00:21:08.670 --> 00:21:11.890
Am I pronouncing it right or correctly? You are

00:21:11.890 --> 00:21:15.609
indeed. All right, thank you. Gonna run through

00:21:15.609 --> 00:21:18.880
the same inquiry. I had an opportunity to read

00:21:18.880 --> 00:21:24.559
your declaration. We'll mark it as D2. Did you

00:21:24.559 --> 00:21:27.059
have an opportunity to review this document before

00:21:27.059 --> 00:21:36.960
it was filed with the court? Sorry, the audio

00:21:36.960 --> 00:21:39.240
just cut out. Could you repeat that? Sure. Did

00:21:39.240 --> 00:21:42.519
you have an opportunity to review your declaration

00:21:42.519 --> 00:21:45.599
before it was filed with the court? Yes, sir.

00:21:45.710 --> 00:21:48.849
Okay, and you were understanding the declarations

00:21:48.849 --> 00:21:51.329
being offered in lieu of giving direct testimony

00:21:51.329 --> 00:21:55.529
this afternoon? I do. All right. And if you were

00:21:55.529 --> 00:22:00.069
going to give direct testimony, would the content

00:22:00.069 --> 00:22:01.930
of your declaration be the same as your direct

00:22:01.930 --> 00:22:04.910
testimony? Yes, it would. And everything was

00:22:04.910 --> 00:22:06.690
truthful and accurate to the best of your knowledge?

00:22:07.049 --> 00:22:11.069
Yes, it is. All right, thank you. Any counsel

00:22:11.069 --> 00:22:14.269
for any party in interest wish to object to the

00:22:14.269 --> 00:22:20.250
entry? Your Honor, can Your Honor hear me? Yes,

00:22:20.250 --> 00:22:23.869
I can. And I apologize for speaking over you,

00:22:23.990 --> 00:22:27.930
Your Honor, nature of the medium. Your Honor,

00:22:28.950 --> 00:22:32.809
I would object to certain provisions in the declaration

00:22:32.809 --> 00:22:39.029
that I believe are hearsay. You know, Your Honor,

00:22:39.230 --> 00:22:44.200
we represent an ad hoc group of minority you

00:22:44.200 --> 00:22:46.279
know, lenders, which includes some of the, you

00:22:46.279 --> 00:22:49.559
know, the first out, you know, term loans. We

00:22:49.559 --> 00:22:54.220
object to, we don't object to the ABL, you know,

00:22:54.319 --> 00:22:55.740
facility. We don't object to the use of cash

00:22:55.740 --> 00:22:58.579
collateral. And we're okay with the dip other

00:22:58.579 --> 00:23:02.000
than, you know, the roll up of the $150 million

00:23:02.000 --> 00:23:06.799
on the, you know, on the first day. You know,

00:23:06.799 --> 00:23:09.480
so that's where we're coming from, Your Honor.

00:23:10.200 --> 00:23:13.009
There are a couple things in the... declaration

00:23:13.009 --> 00:23:17.210
that we believe are hearsay or potentially hearsay.

00:23:18.369 --> 00:23:21.390
I was retained just a few hours ago this morning.

00:23:21.490 --> 00:23:24.609
Our clients were surprised by the filing. The

00:23:24.609 --> 00:23:27.349
proposed dip was embedded with them. They weren't

00:23:27.349 --> 00:23:29.650
aware of it. So we've been drinking out of a

00:23:29.650 --> 00:23:37.930
fire hose all morning trying to get up to speed.

00:23:38.190 --> 00:23:40.160
Obviously, you know, given it's just the first

00:23:40.160 --> 00:23:43.059
day, the case was filed less than 24 hours ago,

00:23:43.339 --> 00:23:45.460
you know, we'd have an opportunity to cross -examine,

00:23:45.460 --> 00:23:48.079
you know, to depose the witness. But we do have

00:23:48.079 --> 00:23:51.859
some concerns about, you know, some of the language

00:23:51.859 --> 00:23:56.039
in the affidavit in particular on paragraph 14,

00:23:57.220 --> 00:24:00.759
where he says, based on my participation in the

00:24:00.759 --> 00:24:04.000
process and my experience, these efforts were

00:24:04.000 --> 00:24:07.160
unsuccessful because, and then he lists why they

00:24:07.160 --> 00:24:11.559
weren't able to find any other but doesn't necessarily

00:24:11.559 --> 00:24:14.640
say what the basis that is other than his experience.

00:24:15.299 --> 00:24:17.960
So, you know, we don't believe that, you know,

00:24:18.019 --> 00:24:21.240
that's appropriate, you know, for the document.

00:24:21.420 --> 00:24:23.460
So at least with respect to that provision, you

00:24:23.460 --> 00:24:27.339
know, we would ask that Your Honor not, you know,

00:24:27.519 --> 00:24:29.319
admit the declaration until after we have cross

00:24:29.319 --> 00:24:33.880
-examined him in connection with the alternative,

00:24:35.799 --> 00:24:39.059
potential alternative DIPs. Are you, let me have

00:24:39.059 --> 00:24:43.900
your appearance just formally. It's Alan Brilliant

00:24:43.900 --> 00:24:47.420
from Deckard LLP. I was joined here with my colleague

00:24:47.420 --> 00:24:50.519
who is admitted in New Jersey, Gary Bennett,

00:24:50.619 --> 00:24:54.700
but he stepped out moments ago. We represent

00:24:54.700 --> 00:24:59.099
an ad hoc group of minority lenders. All right.

00:24:59.299 --> 00:25:03.920
Are you intending or seeking to cross -examine

00:25:03.920 --> 00:25:07.319
Mr. Mates? This afternoon on the content of his

00:25:07.319 --> 00:25:10.940
declaration or are you looking towards the final

00:25:10.940 --> 00:25:16.259
hearing? Our issue is judged that we don't want

00:25:16.259 --> 00:25:18.880
the roll -up to occur on the interim basis So

00:25:18.880 --> 00:25:21.440
I guess we would you know well, we would you

00:25:21.440 --> 00:25:24.079
know would would want to cross him You know this

00:25:24.079 --> 00:25:27.640
this afternoon All right, and obviously we would

00:25:27.640 --> 00:25:29.660
reserve our rights with respect to the final

00:25:29.660 --> 00:25:34.750
hearing so You're taking issue with the latter

00:25:34.750 --> 00:25:37.730
portion of paragraph 14. Paragraph 14, and then

00:25:37.730 --> 00:25:40.089
also, you know, I would cross him on it. I don't

00:25:40.089 --> 00:25:42.069
object to the admission of it, but, you know,

00:25:42.170 --> 00:25:44.589
some of the provisions where he says that the

00:25:44.589 --> 00:25:48.730
terms are reasonable. All right. Just to clarify,

00:25:48.829 --> 00:25:52.029
if I may, the bottom part of that, this is direct

00:25:52.029 --> 00:25:54.430
feedback that we got from the 12 parties at work.

00:25:54.800 --> 00:25:56.799
that were contacted as part of this process.

00:25:56.799 --> 00:25:59.859
I'll give you an opportunity to expand on your

00:25:59.859 --> 00:26:02.880
declaration. Ms. Ringer, do you wish to be heard?

00:26:03.299 --> 00:26:05.420
Yes, Your Honor, thank you. I was going to maybe

00:26:05.420 --> 00:26:09.279
suggest that I finish out my presentation before

00:26:09.279 --> 00:26:12.569
we actually do a... any sort of cross of Mr.

00:26:12.690 --> 00:26:15.230
Mates. I tend to believe that the issues that

00:26:15.230 --> 00:26:18.309
Mr. Brilliant is raising are frankly legal ones

00:26:18.309 --> 00:26:22.569
that could be done just on argument. But if he

00:26:22.569 --> 00:26:25.369
would like to cross Mr. Mates on these provisions

00:26:25.369 --> 00:26:27.069
of his declaration, certainly within his right

00:26:27.069 --> 00:26:31.019
to do so. So I would submit that. I should get

00:26:31.019 --> 00:26:32.720
through the presentation. I can address some

00:26:32.720 --> 00:26:35.700
of the issues that he's now previewed as I'm

00:26:35.700 --> 00:26:38.180
walking through it. And then to the extent he

00:26:38.180 --> 00:26:40.259
still needs or wants to cross Mr. Mates at that

00:26:40.259 --> 00:26:42.339
point, I think it would make sense to wait for

00:26:42.339 --> 00:26:44.819
that cross examination until after I've finished

00:26:44.819 --> 00:26:46.440
the argument portion, if that makes sense to

00:26:46.440 --> 00:26:49.640
your honor. It does. We'll hold off on the admission

00:26:49.640 --> 00:26:55.579
of D2 pending further inquiry. Mr. Brilliant,

00:26:55.660 --> 00:26:58.140
I'll come back to you. Thank you, Your Honor.

00:26:58.140 --> 00:27:00.420
At a later point in time. Ms. Rangel, please

00:27:00.420 --> 00:27:04.079
continue. Thank you, Your Honor. As you now kind

00:27:04.079 --> 00:27:07.740
of started to understand, the DIP facilities

00:27:07.740 --> 00:27:10.059
that we're seeking approval of are facilities

00:27:10.059 --> 00:27:13.819
that are being provided by our current lenders.

00:27:14.539 --> 00:27:17.400
And I know that Mr. Rogoff, just by virtue of

00:27:17.400 --> 00:27:19.660
trying to truncate his presentation, didn't go

00:27:19.660 --> 00:27:22.440
into a lot of detail on the current capital structure

00:27:22.440 --> 00:27:25.119
of the company. I thought it might make sense

00:27:25.119 --> 00:27:27.859
to just quickly hit on that for purposes of the

00:27:27.859 --> 00:27:35.059
record. The company has two secure facilities.

00:27:35.099 --> 00:27:37.220
They have a pre -petitioned ABL facility and

00:27:37.220 --> 00:27:39.619
then what is called the super senior credit facility

00:27:39.619 --> 00:27:43.940
that has three loans within that facility. It's

00:27:43.940 --> 00:27:46.279
a first out term loan, a second out term loan

00:27:46.279 --> 00:27:49.039
and a third out term loan. First out, second

00:27:49.039 --> 00:27:51.619
out and third out being referring to the relative

00:27:51.619 --> 00:27:54.940
order of priority. With respect to the pre -petition

00:27:54.940 --> 00:28:00.220
ADL, there's a maximum availability of $550 million.

00:28:00.799 --> 00:28:03.200
It's subject to certain borrowing -based limitations.

00:28:03.779 --> 00:28:06.319
It is secured by substantially all the assets

00:28:06.319 --> 00:28:09.859
of the obligores under that facility. There are

00:28:09.859 --> 00:28:12.599
certain exceptions there, but it has a first

00:28:12.599 --> 00:28:15.559
priority lien on accounts receivable and inventory,

00:28:15.940 --> 00:28:18.480
and it has a second lien on term loan priority

00:28:18.480 --> 00:28:21.859
collateral. As of the petition date, there was

00:28:21.859 --> 00:28:27.140
about $211 million outstanding and about $26

00:28:27.140 --> 00:28:30.839
million in pre -petition letters of credit. With

00:28:30.839 --> 00:28:34.180
respect to the super senior credit agreement,

00:28:34.440 --> 00:28:36.299
it provides for three tranches of term loans,

00:28:36.359 --> 00:28:40.210
as I mentioned. As of the petition date, there

00:28:40.210 --> 00:28:44.250
was approximately 395 million in first -out term

00:28:44.250 --> 00:28:47.710
loans, which includes 122 million of incremental

00:28:47.710 --> 00:28:49.950
first -out loans that were issued in April of

00:28:49.950 --> 00:28:55.630
this year. There was 468 million in second -out

00:28:55.630 --> 00:29:00.990
and 135 million in third -out term loans. It's

00:29:00.990 --> 00:29:03.369
important, though, to note that the liens and

00:29:03.369 --> 00:29:06.009
the security interests granted on each of the

00:29:06.009 --> 00:29:08.529
first out, second out and third out are actually

00:29:08.529 --> 00:29:11.390
separate and distinct for each of these tranches.

00:29:13.349 --> 00:29:17.250
Your honor, in May of this year, the debtors,

00:29:17.309 --> 00:29:19.829
as they were heading into the PAC season, as

00:29:19.829 --> 00:29:22.089
you heard from Mr. Rogat, the debtors concluded

00:29:22.089 --> 00:29:24.690
that they did need additional financing and liquidity

00:29:24.690 --> 00:29:29.700
and they needed this liquidity. quickly in order

00:29:29.700 --> 00:29:31.980
to continue operations in the ordinary course

00:29:31.980 --> 00:29:38.039
throughout the pack season. As Mr. Mates testified

00:29:38.039 --> 00:29:40.740
in his declaration, the debtors did do a market

00:29:40.740 --> 00:29:44.480
test of the dip financing, but there were no

00:29:44.480 --> 00:29:46.380
third parties that were willing to provide financing

00:29:46.380 --> 00:29:49.160
on a junior basis, on a non -consensually priming

00:29:49.160 --> 00:29:52.640
basis, or against what are otherwise very limited

00:29:52.640 --> 00:29:55.180
to the extent they exist at all, unencumbered

00:29:55.180 --> 00:29:58.720
assets here. Nor would they be able to achieve

00:29:58.720 --> 00:30:01.119
a refinancing of the ABL on the timeline that

00:30:01.119 --> 00:30:03.880
was ultimately required by the company. So the

00:30:03.880 --> 00:30:06.660
debtors negotiated DIP financing with their existing

00:30:06.660 --> 00:30:10.799
lenders. Those negotiations were very hard fought

00:30:10.799 --> 00:30:14.180
and they were done at arm's length and they resulted

00:30:14.180 --> 00:30:16.279
in the DIP facilities that we're proposing today.

00:30:17.420 --> 00:30:20.660
I wanna hit on a couple of the key terms of those

00:30:20.660 --> 00:30:23.680
facilities, although you did get a little bit

00:30:23.680 --> 00:30:26.799
of a preview of them from Mr. Brilliant. So first

00:30:26.799 --> 00:30:31.359
is the DIP term loan facility. and that is a

00:30:31.359 --> 00:30:34.720
priming super priority senior secured facility.

00:30:34.839 --> 00:30:38.000
It's in the amount of 412 .5 million dollars

00:30:38.000 --> 00:30:41.700
and that includes 165 million dollars of new

00:30:41.700 --> 00:30:44.819
money commitments. 100 million of that new money

00:30:44.819 --> 00:30:46.960
is going to be available upon entry of the interim

00:30:46.960 --> 00:30:53.779
order. And then 247 .5 million of rolled up loans,

00:30:54.279 --> 00:30:56.819
150 million of which would be rolled up upon

00:30:56.819 --> 00:30:59.359
entry of the interim order. So we're talking

00:30:59.359 --> 00:31:03.880
about a 1 .5 to one roll up here, which is in

00:31:03.880 --> 00:31:09.400
line with precedent. Then we've got the DIP ADL

00:31:09.400 --> 00:31:13.059
facility, which is a $500 million super priority

00:31:13.059 --> 00:31:17.619
secured revolving ADL facility. This is a roll

00:31:17.619 --> 00:31:20.740
-up of amounts under the pre -petition ADL and

00:31:20.740 --> 00:31:23.579
this is important because it will allow the debtors

00:31:23.579 --> 00:31:25.960
access to their working capital facility absent

00:31:25.960 --> 00:31:28.130
which The debtors would actually have to go out

00:31:28.130 --> 00:31:32.490
and obtain even more new money financing. We're

00:31:32.490 --> 00:31:35.450
talking about potentially $100 million based

00:31:35.450 --> 00:31:38.930
on current projections for the case. So the roll

00:31:38.930 --> 00:31:42.450
up of the ABL was necessary for getting access

00:31:42.450 --> 00:31:46.210
to that working capital and to fund the operations

00:31:46.210 --> 00:31:49.319
during the course of the case. I would note though,

00:31:49.359 --> 00:31:51.859
they're not actually rolling up all $500 million,

00:31:52.259 --> 00:31:55.680
much less is outstanding and drawn at this point,

00:31:56.240 --> 00:32:01.480
but $500 million is the availability. Just quickly

00:32:01.480 --> 00:32:04.599
on the fees and the interests, because they are

00:32:04.599 --> 00:32:06.440
structured in a way here that is actually very

00:32:06.440 --> 00:32:10.019
favorable to the company. First, on the term

00:32:10.019 --> 00:32:13.019
loan dip, a portion of the interest on the new

00:32:13.019 --> 00:32:16.240
money dip is really the only component of fees

00:32:16.240 --> 00:32:18.660
and interest here that are payable in cash, not

00:32:18.660 --> 00:32:24.200
at exit. Interest on the rolled up loans is payable

00:32:24.200 --> 00:32:29.400
in kind. The fees on the dip term loan facility

00:32:29.400 --> 00:32:33.619
are twofold. First, there's a backstop premium.

00:32:34.269 --> 00:32:37.170
10 % and that's 10 % of the new money commitments.

00:32:37.349 --> 00:32:39.809
This is payable in kind and it's payable on a

00:32:39.809 --> 00:32:43.210
parada basis to the backstop parties. This is

00:32:43.210 --> 00:32:47.089
important because the backstop parties, which

00:32:47.089 --> 00:32:51.670
is the ad hoc group represented by Gibson Dunn,

00:32:52.430 --> 00:32:56.269
they are agreeing to backstop and earmark funds

00:32:56.269 --> 00:32:59.809
now for the full amount of the dip new money

00:32:59.809 --> 00:33:03.220
commitment. And they're agreeing to do that now.

00:33:03.680 --> 00:33:06.880
So getting approval of the backstop premium has

00:33:06.880 --> 00:33:10.220
to happen because the actual backstop happens

00:33:10.220 --> 00:33:14.740
between the interim and the final hearing. I

00:33:14.740 --> 00:33:17.180
will say though that the way that this DIP has

00:33:17.180 --> 00:33:20.130
been structured. Any holder of a first out loan

00:33:20.130 --> 00:33:22.609
that agrees to sign the RSA will be offered the

00:33:22.609 --> 00:33:24.950
ability to participate in the new money loans

00:33:24.950 --> 00:33:27.750
and therefore have their first out rolled up

00:33:27.750 --> 00:33:30.269
on a pro rata basis between the first out initial

00:33:30.269 --> 00:33:33.650
loans and the incremental loans through a syndication

00:33:33.650 --> 00:33:36.750
process. And I can tell you that that syndication

00:33:36.750 --> 00:33:39.470
process is going to commence. I think starting

00:33:39.470 --> 00:33:42.009
Monday, the debtors professionals are going to

00:33:42.009 --> 00:33:45.170
hold a lender call. Obviously, for folks listening

00:33:45.170 --> 00:33:48.029
that are interested in that, just be aware that

00:33:48.029 --> 00:33:51.789
that is going to kick off next week following

00:33:51.789 --> 00:33:56.329
the holiday. The other fee is a commitment fee.

00:33:57.049 --> 00:33:59.869
It's 4 % of the new money commitments. It's also

00:33:59.869 --> 00:34:03.250
payable in kind. And the fees are only payable

00:34:03.250 --> 00:34:06.609
on the new money component of the term loan dip.

00:34:06.859 --> 00:34:09.659
and the commitment fee is on the amount being

00:34:09.659 --> 00:34:11.940
funded. So it goes pro rata to the full thing.

00:34:12.059 --> 00:34:16.179
So it's not like the commitment fee will ultimately

00:34:16.179 --> 00:34:21.059
go to that whole group rather than, it's essentially

00:34:21.059 --> 00:34:26.699
like you're only agreeing to approve a fee now

00:34:26.699 --> 00:34:28.760
that is commensurate with the amount of money

00:34:28.760 --> 00:34:32.980
that's being provided. And then with respect

00:34:32.980 --> 00:34:36.360
to the fees on the DIP AVL facility, those are

00:34:36.360 --> 00:34:39.800
actually payable at exit, again, which is important

00:34:39.800 --> 00:34:42.219
from the company's standpoint, given its current

00:34:42.219 --> 00:34:46.460
liquidity position. A couple other points just

00:34:46.460 --> 00:34:49.739
worth flagging on the DIP. It does provide for

00:34:49.739 --> 00:34:52.239
a lien on all unencumbered property. This is

00:34:52.239 --> 00:34:55.860
fairly standard. Notably though, the lien on

00:34:55.860 --> 00:34:58.940
proceeds of avoidance actions is only upon entry

00:34:58.940 --> 00:35:02.809
of a final order. The DIP does provide for adequate

00:35:02.809 --> 00:35:05.170
protection packages for pre -petition secured

00:35:05.170 --> 00:35:07.949
lenders in the form of replacement liens and

00:35:07.949 --> 00:35:12.670
super priority adequate protection claims. And

00:35:12.670 --> 00:35:16.030
it does include waivers of certain statutory

00:35:16.030 --> 00:35:18.829
and other protections. Although I would flag

00:35:18.829 --> 00:35:22.969
that the waivers with respect to 506C, 552B and

00:35:22.969 --> 00:35:26.429
marshalling, these all only kick in upon entry

00:35:26.429 --> 00:35:30.010
of the final order. which I think is important

00:35:30.010 --> 00:35:35.289
to note. There is a carve out here, just again

00:35:35.289 --> 00:35:37.929
for the record to explain a little bit of how

00:35:37.929 --> 00:35:40.989
the carve out works is slightly unusual. The

00:35:40.989 --> 00:35:44.050
carve out here consists of $3 million plus all

00:35:44.050 --> 00:35:46.050
accrued and unpaid professional fees as of the

00:35:46.050 --> 00:35:51.210
date of a carve out trigger notice. And the $3

00:35:51.210 --> 00:35:53.530
million plus those accrued and unpaid become

00:35:53.530 --> 00:35:56.260
the carve out reserve. the Carbet Reserve has

00:35:56.260 --> 00:35:58.920
a first out with respect to the term loan dip

00:35:58.920 --> 00:36:02.519
collateral, not the ADL collateral. So as the

00:36:02.519 --> 00:36:04.099
term loan collateral is liquidated, the Carbet

00:36:04.099 --> 00:36:09.400
Reserve gets funded and paid. Just on process.

00:36:10.579 --> 00:36:13.760
We did send a copy of the dip order to the US

00:36:13.760 --> 00:36:17.179
trustee, albeit only very recently. And we did

00:36:17.179 --> 00:36:19.539
try to work to resolve as many of the open issues

00:36:19.539 --> 00:36:23.099
as we could with the US trustee. We did get a

00:36:23.099 --> 00:36:25.320
markup of the order from them earlier this afternoon.

00:36:25.480 --> 00:36:27.340
We went through with the lenders. We were able

00:36:27.340 --> 00:36:31.400
to incorporate many of their comments. Many of

00:36:31.400 --> 00:36:33.679
them were previewing issues that we would expect

00:36:33.679 --> 00:36:37.679
to be raised by a committee or identifying that

00:36:37.679 --> 00:36:40.969
the committee will and should negotiate those

00:36:40.969 --> 00:36:43.949
issues in the order, all of which we were okay

00:36:43.949 --> 00:36:47.070
with incorporating. There were some requests

00:36:47.070 --> 00:36:52.090
to make certain relief subject to entry of the

00:36:52.090 --> 00:36:55.769
final order, but those were ultimately just not

00:36:55.769 --> 00:36:57.710
acceptable to the lenders, as Your Honor can

00:36:57.710 --> 00:37:00.949
imagine, given that the lenders are agreeing

00:37:00.949 --> 00:37:05.250
to fund the DIP on the first day, the protections

00:37:05.250 --> 00:37:07.980
that were built into the DIP, for their benefit,

00:37:09.000 --> 00:37:11.440
for the vast majority of them, other than the

00:37:11.440 --> 00:37:13.039
ones that I've mentioned, those need to kick

00:37:13.039 --> 00:37:15.500
in now in order to make sure that they're protected

00:37:15.500 --> 00:37:17.599
on what they're funding and what they're otherwise

00:37:17.599 --> 00:37:22.280
committing to. So with that, maybe I will pause.

00:37:22.440 --> 00:37:24.260
I don't know if Your Honor has any questions,

00:37:24.440 --> 00:37:27.679
but I obviously would like the opportunity to

00:37:27.679 --> 00:37:29.900
respond to anything that's raised by Mr. Brilliant

00:37:29.900 --> 00:37:32.630
or by the U .S. Trustee. Well, all right. Thank

00:37:32.630 --> 00:37:35.730
you, Ms. Ringer. Let me turn first to the U .S.

00:37:36.170 --> 00:37:39.889
Trustee, Ms. Bielski, and hear her concerns.

00:37:41.690 --> 00:37:43.469
Thank you, Your Honor, and Lauren Bielski with

00:37:43.469 --> 00:37:45.869
the Office of the United States Trustee. As counsel

00:37:45.869 --> 00:37:48.889
said, we were given a copy of the dip motion

00:37:48.889 --> 00:37:51.710
in advance of the filing, but it was only yesterday

00:37:51.710 --> 00:37:53.809
afternoon, and we tried to turn around comments

00:37:53.809 --> 00:37:57.190
as soon as possible and work with debtor's counsel

00:37:57.190 --> 00:37:59.429
right up until two o 'clock today to go over

00:37:59.429 --> 00:38:03.730
some of the I guess, requests that were not accepted

00:38:03.730 --> 00:38:06.469
and I am working off of the red line that we

00:38:06.469 --> 00:38:08.190
provided them and I did not confirm with council

00:38:08.190 --> 00:38:10.889
whether this is the same draft that ended up

00:38:10.889 --> 00:38:14.590
being filed since the timing of when we started

00:38:14.590 --> 00:38:16.210
doing our red lines and when it was submitted

00:38:16.210 --> 00:38:19.050
to the court was a few hours later. So I apologize

00:38:19.050 --> 00:38:20.409
in advance that some of the things I go over

00:38:20.409 --> 00:38:24.389
don't quite match up but I think it'll still

00:38:24.389 --> 00:38:28.449
work that I can point to certain particular provisions.

00:38:29.309 --> 00:38:31.710
And as Your Honor knows, for the first day matters,

00:38:31.829 --> 00:38:33.690
our objective is to ensure that the interim relief

00:38:33.690 --> 00:38:36.170
granted is narrowly tailored to what is needed

00:38:36.170 --> 00:38:38.050
during the interim period and to preserve as

00:38:38.050 --> 00:38:40.510
much as possible for the final hearing so that

00:38:40.510 --> 00:38:42.829
a committee can be appointed and have time to

00:38:42.829 --> 00:38:46.849
meaningfully contribute to the process and to

00:38:46.849 --> 00:38:50.349
make their own comments. And we did get our solicitation

00:38:50.349 --> 00:38:53.909
out already today to the top 30, and we ask that

00:38:53.909 --> 00:38:58.039
those... packages be returned next week and we

00:38:58.039 --> 00:39:01.239
are also trying to get the package onto our website

00:39:01.239 --> 00:39:03.800
hopefully by tomorrow at the latest. I'm saying

00:39:03.800 --> 00:39:07.639
that so that those who are viewing today can

00:39:07.639 --> 00:39:11.280
start looking for that. We also try to ensure

00:39:11.280 --> 00:39:13.719
that there is an appropriate challenge period

00:39:13.719 --> 00:39:16.340
and that any future trustees not inappropriately

00:39:16.340 --> 00:39:18.739
hindered by any language in the interim order.

00:39:19.539 --> 00:39:21.199
And of course we also try to make sure that the

00:39:21.199 --> 00:39:22.980
relief request does not run afoul of the bankruptcy

00:39:22.980 --> 00:39:25.449
code. So just making sure the adequate protection

00:39:25.449 --> 00:39:27.150
claims are limited to what's allowed by Section

00:39:27.150 --> 00:39:31.110
507B. And so to that end, Your Honor, some of

00:39:31.110 --> 00:39:33.750
the remaining open issues that I want to bring

00:39:33.750 --> 00:39:37.469
before the court have to do with our request

00:39:37.469 --> 00:39:42.530
for language predominantly in the first couple

00:39:42.530 --> 00:39:46.769
pages of the order in which we ask that the debtors

00:39:46.769 --> 00:39:49.449
insert the language subject to an effective upon

00:39:49.449 --> 00:39:51.730
entry of the final order granting such relief.

00:39:52.360 --> 00:39:55.380
And the one other spot where this language appears

00:39:55.380 --> 00:39:58.019
that we have asked that it be included as well

00:39:58.019 --> 00:40:05.340
is, I believe it's page 85. At paragraph 14,

00:40:06.139 --> 00:40:08.079
the section that has to do with releases and

00:40:08.079 --> 00:40:10.739
indemnification. Again, we had asked for additional

00:40:10.739 --> 00:40:12.739
language that says subject to an effective upon

00:40:12.739 --> 00:40:15.920
entry of a final order. Council explained their

00:40:15.920 --> 00:40:19.019
position as to why they find this language objectionable.

00:40:19.199 --> 00:40:21.659
And I guess the only thing I would ask is if...

00:40:21.710 --> 00:40:24.449
if our comments aren't accepted by the court

00:40:24.449 --> 00:40:28.030
either, just to confirm my understanding of the

00:40:28.030 --> 00:40:30.849
court's position in prior cases in which I believe

00:40:30.849 --> 00:40:34.849
Your Honor stated that if information comes to

00:40:34.849 --> 00:40:37.170
light, that would have changed your ruling on

00:40:37.170 --> 00:40:39.030
these early hearings, that you have the ability

00:40:39.030 --> 00:40:42.110
to revisit your own orders, to at least make

00:40:42.110 --> 00:40:43.690
sure that my understanding of that is correct.

00:40:46.989 --> 00:40:51.289
I could say at the outset, I've always maintained

00:40:51.289 --> 00:40:53.150
the court has an inherent authority to revisit

00:40:53.150 --> 00:40:58.670
any order that's on an interim basis should the

00:40:58.670 --> 00:41:02.730
circumstances warrant it. But we'll go through

00:41:02.730 --> 00:41:05.469
your specific concerns. Thank you, Your Honor.

00:41:06.409 --> 00:41:10.309
The other concerns, again it appears multiple

00:41:10.309 --> 00:41:12.329
times throughout the order, but I think the first

00:41:12.329 --> 00:41:17.829
place it appears is on page beginning with paragraph

00:41:17.829 --> 00:41:21.489
six, which is the dip super parity claims and

00:41:21.489 --> 00:41:25.570
the language that has to do with, I guess, the

00:41:25.570 --> 00:41:30.150
code sections and section 507B. And what our

00:41:30.150 --> 00:41:33.030
concern here, especially with the inclusion of

00:41:33.030 --> 00:41:44.389
section 326, 726, and anything beyond 707B is

00:41:44.389 --> 00:41:48.800
that This is trying to change the, I guess, what

00:41:48.800 --> 00:41:51.019
would happen in the events that the case is converted

00:41:51.019 --> 00:41:53.360
to Chapter 7, and that the Chapter 7 administrative

00:41:53.360 --> 00:41:56.739
claims would have or should have priority over

00:41:56.739 --> 00:41:58.780
all other administrative claims. And the language

00:41:58.780 --> 00:42:03.280
as written removes that. And also, I guess, keeping

00:42:03.280 --> 00:42:09.800
in Section 726, as it appears, the way the language

00:42:09.800 --> 00:42:13.920
is here, also changes what is really the priority.

00:42:15.440 --> 00:42:17.900
for distribution of property of the estate, again,

00:42:17.920 --> 00:42:20.000
if the case would ever convert to Chapter 7.

00:42:20.360 --> 00:42:23.800
And so we find that provision as written objectionable

00:42:23.800 --> 00:42:26.199
and ask that certain revisions were made to that.

00:42:26.219 --> 00:42:30.760
But again, it was not agreed to. And I guess

00:42:30.760 --> 00:42:33.340
the last point that remains outstanding, Your

00:42:33.340 --> 00:42:36.780
Honor, has to do with the challenge period. And

00:42:36.780 --> 00:42:40.440
it's rather lengthy provision, but I believe

00:42:40.440 --> 00:42:48.510
it begins on page... I apologize. It begins on

00:42:48.510 --> 00:42:53.469
page 70 of paragraph 15, and the language we

00:42:53.469 --> 00:42:56.269
requested be at the end of the section. And again,

00:42:56.309 --> 00:42:57.929
Your Honor doesn't have the benefit of our red

00:42:57.929 --> 00:43:01.590
line, but I will just read the language that

00:43:01.590 --> 00:43:07.670
we request be included. And again, it goes to

00:43:07.670 --> 00:43:10.130
possibility of there being a trustee appointed

00:43:10.130 --> 00:43:12.699
at some point. And the language we're requesting

00:43:12.699 --> 00:43:14.960
states, further, for the avoidance of doubt,

00:43:15.099 --> 00:43:17.500
any trustee appointed or elected shall, until

00:43:17.500 --> 00:43:20.579
expiration of the period provided herein, for

00:43:20.579 --> 00:43:22.980
asserting challenges, and thereafter for the

00:43:22.980 --> 00:43:25.019
duration of any adversary proceeding or contested

00:43:25.019 --> 00:43:29.039
matter, and I'm just going to skip over some

00:43:29.039 --> 00:43:31.679
of the language, but be deemed a party, other

00:43:31.679 --> 00:43:34.079
than the debtors, and shall not, for purposes

00:43:34.079 --> 00:43:36.460
of such adversary proceeding or contested matter,

00:43:36.679 --> 00:43:38.679
be bound by the acknowledgments, admissions,

00:43:39.440 --> 00:43:41.820
confirmations, and stipulations of the death

00:43:41.820 --> 00:43:43.780
that are in this interim order. And again, this

00:43:43.780 --> 00:43:46.840
is just to make sure that a chapter, a trustee,

00:43:46.980 --> 00:43:49.260
a chapter seven or chapter 11 trustee is not

00:43:49.260 --> 00:43:51.760
bound by the debtor's stipulations. And that

00:43:51.760 --> 00:43:55.000
is why we requested that inclusion in the order.

00:43:55.679 --> 00:44:00.519
And I believe that is the balance of our objections

00:44:00.519 --> 00:44:04.719
to the order. All right, thank you, Ms. Bielski.

00:44:05.119 --> 00:44:07.340
Before I turn to Mr. Brilliant and hear from

00:44:07.340 --> 00:44:09.780
him, Ms. Ringer, do you want to address, I think

00:44:09.780 --> 00:44:14.139
there are basically three areas of concern that

00:44:14.139 --> 00:44:16.719
Ms. Bielski outlined. Certainly, Your Honor.

00:44:17.139 --> 00:44:20.380
I think I may have already addressed the request

00:44:20.380 --> 00:44:24.400
of the U .S. Trustee to punt much of the relief

00:44:24.400 --> 00:44:27.710
to... a final order or make it subject to entry

00:44:27.710 --> 00:44:29.869
of the final order. I think that the couple of

00:44:29.869 --> 00:44:34.190
places that were identified on the record, again,

00:44:34.190 --> 00:44:36.289
I mean, these are fundamental components of the

00:44:36.289 --> 00:44:39.590
relief being requested today and fundamental

00:44:39.590 --> 00:44:44.510
to the lenders agreement to fund and agree to

00:44:44.510 --> 00:44:47.349
consensual use of cash collateral. So those are

00:44:47.349 --> 00:44:50.349
unfortunately changes that we are not, that the

00:44:50.349 --> 00:44:53.130
lenders and therefore the company are not willing

00:44:53.130 --> 00:44:59.440
to accept. With respect to some of the references

00:44:59.440 --> 00:45:01.960
to making adequate protection claims subject

00:45:01.960 --> 00:45:06.480
to, you know, not subject to section 726 of the

00:45:06.480 --> 00:45:08.719
bankruptcy code. I mean, again, these are...

00:45:08.619 --> 00:45:13.440
fairly standard protections for DIP lenders in

00:45:13.440 --> 00:45:16.480
interim orders, as well as in final orders. And

00:45:16.480 --> 00:45:19.119
so again, our DIP lenders here are not willing

00:45:19.119 --> 00:45:23.159
to break the mold, particularly in a case where

00:45:23.159 --> 00:45:25.639
neither is the debtors, particularly in a case

00:45:25.639 --> 00:45:28.699
where this funding is so necessary and so urgent.

00:45:29.699 --> 00:45:32.480
So again, we tried to adhere to fairly standard

00:45:32.480 --> 00:45:34.900
language on those provisions, but we're unfortunately

00:45:34.900 --> 00:45:37.260
not able to accommodate the requests of the...

00:45:37.309 --> 00:45:40.829
of the U .S. trustee. Finally, the changes that

00:45:40.829 --> 00:45:44.789
were referenced in paragraph 15 about the trustee

00:45:44.789 --> 00:45:47.550
in a chapter 7 or 11 not being bound by the debtor

00:45:47.550 --> 00:45:49.809
stipulations, I would submit that the language

00:45:49.809 --> 00:45:51.849
that the U .S. trustee is requesting actually

00:45:51.849 --> 00:45:56.150
changes the playing field a little bit. If a

00:45:56.150 --> 00:45:58.670
chapter 11 trustee is appointed or if the case

00:45:59.240 --> 00:46:01.639
it's ever converted into a seven. I think the

00:46:01.639 --> 00:46:03.340
parties would have whatever rights they would

00:46:03.340 --> 00:46:06.420
have to argue about what the implications are

00:46:06.420 --> 00:46:09.440
of the appointment of that trustee at that time.

00:46:09.539 --> 00:46:12.800
But it's not something that the company or the

00:46:12.800 --> 00:46:15.980
lenders are willing to. embed into the dip order

00:46:15.980 --> 00:46:18.840
at this point. So I think I could on each of

00:46:18.840 --> 00:46:20.820
the issues. If your honor has any other questions,

00:46:20.980 --> 00:46:24.260
please let me know. But I, you know, we appreciate

00:46:24.260 --> 00:46:26.860
the U .S. trustees comments. We did try to accommodate

00:46:26.860 --> 00:46:30.800
many of the many of the other comments. And unfortunately,

00:46:30.820 --> 00:46:32.679
these were ones that we just we just could not

00:46:32.679 --> 00:46:37.280
do. All right. Thank you. Let me turn your honor.

00:46:37.539 --> 00:46:41.000
The lenders may wish to be heard. I see Mr. Goldstein.

00:46:41.309 --> 00:46:46.389
raising his hand manually. All right, okay. Mr.

00:46:46.590 --> 00:46:49.610
Goldstein, well, do you wish to wait before we

00:46:49.610 --> 00:46:51.889
hear from Mr. Brilliant or do you want to address

00:46:51.889 --> 00:46:54.210
these issues that were raised? And let me have

00:46:54.210 --> 00:46:56.829
your appearance, Mr. Goldstein. Thank you, Your

00:46:56.829 --> 00:46:58.389
Honor, and apologies. I did want to interrupt.

00:46:58.429 --> 00:47:01.170
So I tried to raise my hand visually so people

00:47:01.170 --> 00:47:03.909
could see. I appreciate being recognized. That's

00:47:03.909 --> 00:47:06.849
Jason Goldstein from Gibson Dunn on behalf of

00:47:06.849 --> 00:47:10.260
the Ad Hoc Super Senior Term Lender Group. We

00:47:10.260 --> 00:47:13.039
filed our 2019 statement at docket number 47

00:47:13.039 --> 00:47:16.800
this morning. We represent 73 .2 percent of the

00:47:16.800 --> 00:47:19.840
first outlenders and 58 .2 percent of the second

00:47:19.840 --> 00:47:23.460
outlenders. I think that's really important just

00:47:23.460 --> 00:47:25.619
so that the court understands that that's the

00:47:25.619 --> 00:47:27.739
required lender's threshold within the document.

00:47:28.219 --> 00:47:31.059
It also represents the majority of two different

00:47:31.059 --> 00:47:34.059
tranches secured by separate liens in the term

00:47:34.059 --> 00:47:37.360
facility. The reason I raised my hand was just

00:47:37.360 --> 00:47:39.420
I thought it could be helpful to give the court

00:47:39.420 --> 00:47:42.340
some context before we hear other arguments about

00:47:42.340 --> 00:47:45.360
what we're asking for today. And I think the

00:47:45.360 --> 00:47:48.219
situation of these cases has been very challenging.

00:47:48.659 --> 00:47:51.539
It's been a short run for my clients to understand

00:47:51.539 --> 00:47:53.860
the funding need of the company. The company

00:47:53.860 --> 00:47:57.099
is very unique in its funding need in that it's

00:47:57.099 --> 00:47:59.880
really a working capital issue consistently.

00:48:00.400 --> 00:48:02.400
You've heard a little bit from the company about

00:48:02.400 --> 00:48:05.469
the PAC and the PAC season. Basically, what it

00:48:05.469 --> 00:48:08.130
means is the company needs a lot of funding upfront

00:48:08.130 --> 00:48:11.610
to be able to operate in order to pay its employees,

00:48:11.829 --> 00:48:14.389
in order to pay suppliers and vendors, in order

00:48:14.389 --> 00:48:17.769
to service customers. So it is paramount that

00:48:17.769 --> 00:48:20.369
they have more funding than they might need on

00:48:20.369 --> 00:48:22.670
a day -to -day basis coming into the season.

00:48:23.070 --> 00:48:26.110
And then on the back end of this ramp up, the

00:48:26.110 --> 00:48:28.530
company is able to collect on what it's actually

00:48:28.530 --> 00:48:31.429
doing from an operational standpoint after the

00:48:31.429 --> 00:48:34.869
fact. but it creates a sort of continuous working

00:48:34.869 --> 00:48:38.389
capital need. And this is something that my clients

00:48:38.389 --> 00:48:42.309
are agreeing to fund in this context on a sort

00:48:42.309 --> 00:48:45.329
of short timeframe in that we did not understand

00:48:45.329 --> 00:48:48.449
that the company was going to need this. This

00:48:48.449 --> 00:48:50.130
is not something where we've been working at

00:48:50.130 --> 00:48:53.050
this for six months. We're agreeing to really

00:48:53.050 --> 00:48:56.969
bridge this entire case for the benefit of the

00:48:56.969 --> 00:48:59.369
companies in order to maximize value for everyone

00:48:59.369 --> 00:49:01.909
here. This isn't a case where we're looking at

00:49:01.929 --> 00:49:04.750
non -pro -rata DIP funding. This isn't a case

00:49:04.750 --> 00:49:07.510
where we're excluding anyone. As Ms. Ringer said,

00:49:07.610 --> 00:49:09.750
this is something that's open on a pro -rata

00:49:09.750 --> 00:49:12.150
basis to all of the senior lenders to participate

00:49:12.150 --> 00:49:14.610
in. They get the benefit of commitment fees for

00:49:14.610 --> 00:49:16.789
that. They get the benefit of any roll -up for

00:49:16.789 --> 00:49:19.889
that. It's really about being able to bridge

00:49:19.889 --> 00:49:22.570
to what the company needs to do here. And we're

00:49:22.570 --> 00:49:26.050
providing extensive material new value here in

00:49:26.050 --> 00:49:29.150
order to allow the company to run a helpful process.

00:49:29.489 --> 00:49:33.809
That process is... a sale process. So we are

00:49:33.809 --> 00:49:36.550
looking for a market test of value. No one's

00:49:36.550 --> 00:49:39.030
trying to predetermine value here. It's really

00:49:39.030 --> 00:49:42.610
a waterfall type case. Hope is that there is

00:49:42.610 --> 00:49:45.889
tremendous value in the market. This is a brand

00:49:45.889 --> 00:49:48.690
name company that everyone recognizes. We think

00:49:48.690 --> 00:49:51.769
there will be robust bidding here and we are

00:49:51.769 --> 00:49:54.130
looking to maximize value for everyone's benefit.

00:49:54.530 --> 00:49:57.269
And in that context, someone really needed to

00:49:57.269 --> 00:50:00.380
step up to provide this funding. It was a relatively

00:50:00.380 --> 00:50:03.500
complex situation from the company's working

00:50:03.500 --> 00:50:05.880
capital standpoint. And that's really what my

00:50:05.880 --> 00:50:08.380
clients are doing here. So I thought it might

00:50:08.380 --> 00:50:11.179
be helpful if I just gave that background in

00:50:11.179 --> 00:50:14.400
advance of any objections, because we are putting

00:50:14.400 --> 00:50:17.420
in real value on an interim basis. It's $100

00:50:17.420 --> 00:50:21.280
million in new cash today that's going to fund

00:50:21.280 --> 00:50:24.380
all of this operating of the company. The company

00:50:24.380 --> 00:50:26.619
doesn't have it. Not only do I understand they'll

00:50:26.619 --> 00:50:29.579
miss the payroll today, but it will really severely

00:50:29.579 --> 00:50:32.000
impact the value of the company going forward.

00:50:32.400 --> 00:50:34.960
The PAC is the most critical operational time,

00:50:35.320 --> 00:50:37.960
and we're agreeing to fund that on this interim

00:50:37.960 --> 00:50:40.599
basis in order to make sure that we're preserving

00:50:40.599 --> 00:50:43.219
the going concern value of the business. And

00:50:43.219 --> 00:50:46.099
that is what is going to benefit all of the lenders

00:50:46.099 --> 00:50:48.900
in this case. So I have much more that I could

00:50:48.900 --> 00:50:51.019
say, but I'll stop there for the court. If you

00:50:51.019 --> 00:50:52.699
have any questions, Your Honor, I'm happy to

00:50:52.699 --> 00:50:54.960
answer them. All right. Now at this juncture,

00:50:55.019 --> 00:51:00.980
I thank you for... your position. All right,

00:51:01.000 --> 00:51:03.719
let me turn to Mr. Brilliant at this juncture.

00:51:04.239 --> 00:51:06.039
Thank you, Your Honor. Can you hear me, Your

00:51:06.039 --> 00:51:09.980
Honor? I can. Thank you, Your Honor. So as I

00:51:09.980 --> 00:51:12.860
said earlier, you know, we were very surprised

00:51:12.860 --> 00:51:16.440
at the timing of the filing. You know, we had

00:51:16.440 --> 00:51:18.920
no expectation that this was going to happen.

00:51:19.139 --> 00:51:21.940
You know, the minority lenders who aren't part

00:51:21.940 --> 00:51:25.139
of the ad hoc group. you know, got together this

00:51:25.139 --> 00:51:27.340
morning and they contacted me. As I said, we're

00:51:27.340 --> 00:51:30.659
kind of drinking out of a fire hose here and

00:51:30.659 --> 00:51:34.199
trying to get up to speed as best we can in such

00:51:34.199 --> 00:51:37.760
a short period of time. But the filing came as

00:51:37.760 --> 00:51:40.300
a surprise to the other lenders and consequently

00:51:40.300 --> 00:51:43.500
we weren't as prepared. as we would like to be.

00:51:43.960 --> 00:51:46.380
There's a bunch of things in the order, like

00:51:46.380 --> 00:51:48.500
the U .S. trustee, we have the same view, which

00:51:48.500 --> 00:51:51.260
is that on an interim basis, Your Honor should

00:51:51.260 --> 00:51:55.179
only approve what is necessary. you know, to

00:51:55.179 --> 00:51:57.780
get to a final hearing and shouldn't approve

00:51:57.780 --> 00:52:00.659
anything that improves other parties' positions

00:52:00.659 --> 00:52:03.219
inappropriately under the bankruptcy code or

00:52:03.219 --> 00:52:06.820
otherwise prejudice the case. When they file

00:52:06.820 --> 00:52:08.860
the case today, Your Honor, they tell us that

00:52:08.860 --> 00:52:11.000
they're going to do a very quick sale process.

00:52:11.380 --> 00:52:15.900
The dip loan itself is only a nine month term

00:52:15.900 --> 00:52:20.280
loan. On the first day of the hearing, They want

00:52:20.280 --> 00:52:24.019
to roll up the entire amount of the ABL, and

00:52:24.019 --> 00:52:27.679
my clients don't object to that. And they want

00:52:27.679 --> 00:52:32.360
to roll up $150 million of the term loans, including,

00:52:32.619 --> 00:52:35.860
on a peri -passu basis, a portion of the incremental

00:52:35.860 --> 00:52:39.099
term loans, which were just issued in April and

00:52:39.099 --> 00:52:44.539
used to pay out a stub portion of the loans that

00:52:44.539 --> 00:52:48.889
were... you know, had filed a lawsuit in connection

00:52:48.889 --> 00:52:52.170
with a, they were holdouts in connection with

00:52:52.170 --> 00:52:55.409
an LME transaction. You know, we think that there's

00:52:55.409 --> 00:52:57.909
a possibility here that there could be, you know,

00:52:58.150 --> 00:53:00.250
preference claims against the parties who receive

00:53:00.250 --> 00:53:02.449
the money, and there may be, you know, issues

00:53:02.449 --> 00:53:06.349
as to whether or not, you know, those, you know,

00:53:06.550 --> 00:53:10.269
loans are, you know, are valid. But the bottom

00:53:10.269 --> 00:53:14.639
line is, Your Honor, a... a roll -up of a large

00:53:14.639 --> 00:53:17.300
amount of debt like this on a contested basis

00:53:17.300 --> 00:53:19.880
on the first day of the case with virtually no

00:53:19.880 --> 00:53:24.320
notice. The debtors filed less than 24 hours

00:53:24.320 --> 00:53:27.739
ago. The dip motion wasn't filed at that point.

00:53:28.320 --> 00:53:31.099
So we're at 3 o 'clock in the afternoon here

00:53:31.099 --> 00:53:34.239
with pretty much no notice to anybody we think

00:53:34.239 --> 00:53:39.219
is not appropriate, violated due process, and

00:53:39.219 --> 00:53:43.510
just... not inappropriate thing. The Lenders

00:53:43.510 --> 00:53:46.590
Council makes it seem like they're stepping up,

00:53:46.730 --> 00:53:49.369
you know, they're providing, you know, financing

00:53:49.369 --> 00:53:51.809
to benefit everyone. But the reality is, Your

00:53:51.809 --> 00:53:53.929
Honor, what they're doing is they're providing

00:53:53.929 --> 00:53:56.929
the financing and trying to improve their position

00:53:56.929 --> 00:53:59.989
here dramatically in connection with that, you

00:53:59.989 --> 00:54:02.750
know, through the roll -up, a portion of which

00:54:02.750 --> 00:54:05.500
they're asking. your honor, $150 million, which

00:54:05.500 --> 00:54:10.039
is a huge amount here that they're asking your

00:54:10.039 --> 00:54:11.860
honor to approve today. So they're not doing

00:54:11.860 --> 00:54:14.579
this for the other term lenders. They're not

00:54:14.579 --> 00:54:16.219
doing this for the unsecured. They're doing this

00:54:16.219 --> 00:54:20.079
for themselves because it benefits them. Now,

00:54:20.099 --> 00:54:22.699
they tell you that everybody has the opportunity

00:54:22.699 --> 00:54:25.719
to participate in this, but that's right. You

00:54:25.719 --> 00:54:27.780
have the opportunity to participate in it if

00:54:27.780 --> 00:54:30.360
you sign an RSA. and you give up all the other

00:54:30.360 --> 00:54:32.760
rights you have, you know, in connection with

00:54:32.760 --> 00:54:35.320
the case and just go along with the rest of the

00:54:35.320 --> 00:54:37.760
ad hoc group. And that may very well be something

00:54:37.760 --> 00:54:40.300
that some of the members of my group would want

00:54:40.300 --> 00:54:43.380
to do, but they can't decide that on five days,

00:54:43.380 --> 00:54:45.519
you know, notice as to whether that's appropriate.

00:54:45.860 --> 00:54:48.360
But the fact that they're requiring that, Your

00:54:48.360 --> 00:54:52.139
Honor, in a first day hearing is, you know, is

00:54:52.139 --> 00:54:54.400
inappropriate. The other thing, Your Honor, is

00:54:54.400 --> 00:54:57.119
the dip, if approved, will be the first out dollars.

00:54:57.280 --> 00:55:00.949
It's going to be it's going to be at the top

00:55:00.949 --> 00:55:03.789
of the waterfall, excluding the collateral for

00:55:03.789 --> 00:55:07.190
the AVL lenders. It's not going to be risk collateral.

00:55:07.429 --> 00:55:09.889
So they're basically putting in money that will

00:55:09.889 --> 00:55:12.650
be repaid because it's the first dollars out.

00:55:12.909 --> 00:55:16.130
But they're asking for huge fees that they're

00:55:16.130 --> 00:55:19.690
asking your honor to approve today, a 4 % commitment

00:55:19.690 --> 00:55:25.150
fee, a 10 % backstop fee, interest of SOFR plus

00:55:25.150 --> 00:55:30.199
9 .5%. So, I mean, I don't know what the, you

00:55:30.199 --> 00:55:32.219
know, the rate of return for the lenders are

00:55:32.219 --> 00:55:34.719
on the loan itself before you take into account

00:55:34.719 --> 00:55:38.300
the roll -up of the loan. I guess we'll ask,

00:55:38.300 --> 00:55:41.900
you know, Mr. Mates about that, the cross -examination.

00:55:41.980 --> 00:55:43.980
But we know it's going to be a huge number, because

00:55:43.980 --> 00:55:45.860
it's not as if you're going to be amortizing

00:55:45.860 --> 00:55:48.820
the 14 percent fees, you know, over our two -

00:55:48.820 --> 00:55:50.960
or three -year period. You're amortizing them

00:55:50.960 --> 00:55:55.280
at most, at most nine months, which is the you

00:55:55.280 --> 00:55:57.400
know, the term of the diplome, but under the

00:55:57.400 --> 00:55:59.760
milestones that are required here, this case,

00:56:00.039 --> 00:56:04.880
you know, will be over, if the debtors and the,

00:56:04.880 --> 00:56:06.579
and the ad hoc lender group get their way, will

00:56:06.579 --> 00:56:09.179
be over, you know, much, you know, earlier than

00:56:09.179 --> 00:56:11.519
that. So Your Honor, you know, like the U .S.

00:56:11.699 --> 00:56:13.599
trustee, we just want to make sure that Your

00:56:13.599 --> 00:56:16.579
Honor enters an order today that doesn't allow

00:56:16.579 --> 00:56:19.880
people to inappropriately, you know, improve,

00:56:19.880 --> 00:56:22.340
you know, their position. You know, a roll -up,

00:56:22.420 --> 00:56:24.599
as Your Honor knows, it's even better than a

00:56:24.599 --> 00:56:28.719
cross -collateralization, which is frowned out

00:56:28.719 --> 00:56:30.599
from the standpoint. It makes pre -petition debt.

00:56:32.199 --> 00:56:35.320
Post -petition debt means that it can't be dealt

00:56:35.320 --> 00:56:39.679
with under a plan of reorganization and can't

00:56:39.679 --> 00:56:44.079
be challenged. In particular, it shouldn't be

00:56:44.079 --> 00:56:46.440
done on the first day with no notice, especially

00:56:46.440 --> 00:56:48.500
the limited notice that's been given here. But

00:56:48.500 --> 00:56:51.980
more importantly, given all the LME transactions,

00:56:52.139 --> 00:56:54.099
the fact that a portion of the money they want

00:56:54.099 --> 00:56:58.900
to roll over is less than 90 days old. And within

00:56:58.900 --> 00:57:02.780
the preference period, there's no sense here

00:57:02.780 --> 00:57:05.519
evaluation whether or not these loans are even

00:57:05.519 --> 00:57:09.960
over secured at this point. So they're basically,

00:57:10.880 --> 00:57:14.480
they say they're doing this for everybody else,

00:57:14.539 --> 00:57:16.820
but they're getting a huge fee. providing the

00:57:16.820 --> 00:57:19.280
dip and getting something which improves their

00:57:19.280 --> 00:57:21.380
position dramatically on the first day of the

00:57:21.380 --> 00:57:26.320
case without anybody having an opportunity to

00:57:26.320 --> 00:57:30.320
investigate it and determine whether or not it's

00:57:30.320 --> 00:57:34.079
appropriate. So we don't have a problem with

00:57:34.079 --> 00:57:37.340
the ABL loans being rolled up given the nature

00:57:37.340 --> 00:57:40.420
of those loans, but we do have a problem with

00:57:40.420 --> 00:57:43.389
the ad hoc. the term loans being rolled up, and

00:57:43.389 --> 00:57:46.190
we do have an issue with the total amount of

00:57:46.190 --> 00:57:47.750
fees that they're asking your honor to approve

00:57:47.750 --> 00:57:50.369
on the interim basis. Everything else, your honor,

00:57:50.489 --> 00:57:55.269
we would reserve to the final hearing. All right.

00:57:55.829 --> 00:58:00.480
Ms. Ringer? Thank you, your honor. I'm wondering

00:58:00.480 --> 00:58:02.940
if now, to the extent Mr. Brilliant is actually

00:58:02.940 --> 00:58:05.039
going to cross Mr. Mates, I'm wondering if now

00:58:05.039 --> 00:58:07.380
is the appropriate time. I certainly have responses

00:58:07.380 --> 00:58:12.179
to every single thing he just said, but I think

00:58:12.179 --> 00:58:15.179
maybe we should do any cross of Mr. Mates first,

00:58:15.219 --> 00:58:18.179
and then I can maybe conclude. Perhaps Mr. Mates'

00:58:18.400 --> 00:58:20.219
testimony will actually assist in that regard.

00:58:21.039 --> 00:58:23.639
I think it would be appropriate. Mr. Brilliant,

00:58:23.980 --> 00:58:29.119
I read through Mr. Mates' declaration. and I

00:58:29.119 --> 00:58:32.360
looked at the paragraph 14 that you highlighted.

00:58:33.420 --> 00:58:37.280
I don't see hearsay issue because I take his

00:58:37.280 --> 00:58:40.079
testimony in the declaration as being his view

00:58:40.079 --> 00:58:45.659
based on the information that he assembled. I'm

00:58:45.659 --> 00:58:49.579
not accepting the statements as being for the

00:58:49.579 --> 00:58:53.000
truth of what they're asserted. They may have

00:58:53.000 --> 00:58:56.539
helped form his view. But you're subject, you

00:58:56.539 --> 00:59:00.599
have the ability to cross -examine him on his

00:59:00.599 --> 00:59:03.599
views and on the merits of formulating those

00:59:03.599 --> 00:59:06.760
views based on his information. So I'm going

00:59:06.760 --> 00:59:10.579
to allow D2 into evidence, subject to cross -examination,

00:59:10.920 --> 00:59:14.559
and we can proceed on that basis. Let me see

00:59:14.559 --> 00:59:19.179
if I'm looking for Mr. Mates. I'm here. Oh, there

00:59:19.179 --> 00:59:22.719
you are. Mr. Mates, I'm going to ask you to raise

00:59:22.719 --> 00:59:25.900
your hand. This is virtually. Do you swear or

00:59:25.900 --> 00:59:27.199
affirm to tell the truth, the whole truth, and

00:59:27.199 --> 00:59:29.000
nothing but the truth under penalty of perjury?

00:59:29.460 --> 00:59:31.820
I do. All right. Do you have anybody in the room

00:59:31.820 --> 00:59:37.420
there with you? Yes, I do. Who is there? I've

00:59:37.420 --> 00:59:40.480
got numbers of the Kramer 11 team, HSF Kramer

00:59:40.480 --> 00:59:43.179
11 team. All right. Do you have any counsel with

00:59:43.179 --> 00:59:50.619
you in that room? Yes. Mr. Mates is in Kramer's

00:59:50.619 --> 00:59:55.690
office. All right. I'm going to give you an instruction.

00:59:56.090 --> 01:00:00.710
You are not to take any instructions from anyone

01:00:00.710 --> 01:00:03.710
else in that room as part of your testimony.

01:00:03.789 --> 01:00:07.510
You're not to look to them, not to seek guidance

01:00:07.510 --> 01:00:10.710
from them. If there is an objection to your testimony,

01:00:10.730 --> 01:00:15.210
it will be raised by counsel and I will address

01:00:15.210 --> 01:00:20.869
it. If you're going to view any notes or any

01:00:20.869 --> 01:00:24.980
written information apart from your declaration,

01:00:25.559 --> 01:00:31.320
you must advise us that you are reviewing independently

01:00:31.320 --> 01:00:35.900
any written documents in assisting your testimony.

01:00:35.960 --> 01:00:40.739
Do you understand? I do. All right. Mr. Brilliant,

01:00:40.880 --> 01:00:43.079
will you be conducting the cross -examination?

01:00:44.360 --> 01:00:47.340
I will, Your Honor. All right. You may proceed.

01:00:48.619 --> 01:00:50.559
Has he been sworn in? Yes, he has. Your Honor?

01:00:50.679 --> 01:00:54.210
Yes, I did. Thank you, Your Honor. You're welcome.

01:00:55.929 --> 01:01:01.929
Mr. Mates, the interest on the dip loans is SOFR

01:01:01.929 --> 01:01:07.510
plus 9 .5%. Is that correct? Yes. And there's

01:01:07.510 --> 01:01:10.210
a 10 % backstop fee for the backstop lenders?

01:01:11.849 --> 01:01:15.289
That's correct. And there's a 4 % commitment

01:01:15.289 --> 01:01:17.269
fee that would be given to the members of the

01:01:17.269 --> 01:01:20.980
ad hoc group as well, correct? along with anybody

01:01:20.980 --> 01:01:22.860
else who participates in the new money financing,

01:01:22.860 --> 01:01:26.559
that's correct. Okay, and with respect to the

01:01:26.559 --> 01:01:29.599
10 % backstop fee, the only people, parties who

01:01:29.599 --> 01:01:32.239
get that are the members of the IDOT committee,

01:01:32.280 --> 01:01:36.159
is that correct? That's correct. And the term

01:01:36.159 --> 01:01:39.960
loan itself, that matures in nine months, is

01:01:39.960 --> 01:01:45.719
that right? That's right. And what is the, you

01:01:45.719 --> 01:01:49.059
know, the total internal rate of return that's

01:01:49.059 --> 01:01:53.199
expected for the lenders on the loan. I believe

01:01:53.199 --> 01:02:00.119
it's somewhere between 35 and 38 percent. It's

01:02:00.119 --> 01:02:04.320
not too dissimilar from other internal rates

01:02:04.320 --> 01:02:07.860
of return that we see for loans like this. Your

01:02:07.860 --> 01:02:09.780
Honor, I'd ask that you direct the witness just

01:02:09.780 --> 01:02:12.719
to answer my questions, not editorialize afterwards.

01:02:13.980 --> 01:02:18.150
Mr. Mates, you heard a request. Please continue.

01:02:19.389 --> 01:02:21.510
Thank you, Your Honor. I just moved to strike

01:02:21.510 --> 01:02:28.150
everything after 35 to 38%. So stricken. Thank

01:02:28.150 --> 01:02:32.090
you, Your Honor. Now, in determining it's 35

01:02:32.090 --> 01:02:35.269
to 38%, what assumption did you make with respect

01:02:35.269 --> 01:02:39.630
to the 4 % commitment? What assumption did you

01:02:39.630 --> 01:02:45.869
make there? The assumption is that the 4 % is...

01:02:46.039 --> 01:02:49.739
earned on the new money, but payable at exit.

01:02:52.820 --> 01:02:54.599
Okay, but did you assume that members of the

01:02:54.599 --> 01:02:57.219
ad hoc group just received a pro rata portion

01:02:57.219 --> 01:02:59.900
of it based on the amount of the loans? Did you

01:02:59.900 --> 01:03:02.280
assume that no one else participated and they

01:03:02.280 --> 01:03:04.260
got a higher percentage? What assumption did

01:03:04.260 --> 01:03:07.519
you make with respect to that? It's for the entire

01:03:07.519 --> 01:03:11.179
facility. So we, the math is four percent of

01:03:11.179 --> 01:03:15.139
the new money is the dollar amount that we used.

01:03:15.320 --> 01:03:17.739
when calculating the IRR. So it's irrespective

01:03:17.739 --> 01:03:23.139
of who comes in. Okay, but if other people don't

01:03:23.139 --> 01:03:27.239
come in, members of the committee would get a

01:03:27.239 --> 01:03:37.880
larger... I'll strike that. And the outside of

01:03:37.880 --> 01:03:40.980
the term date is nine months, right? That's correct.

01:03:41.659 --> 01:03:44.260
And when you set that, the expectation is that

01:03:44.260 --> 01:03:46.900
the company would have its assets sold or emerged

01:03:46.900 --> 01:03:49.539
from bankruptcy prior to that. Isn't that right?

01:03:49.940 --> 01:03:53.340
That's right. And that, in fact, may be two or

01:03:53.340 --> 01:03:56.260
three months shorter than that. Isn't that right?

01:03:59.280 --> 01:04:04.059
I don't know. OK. And the 35 % to 38 % that you

01:04:04.059 --> 01:04:07.239
gave us, that assumes that it's a full nine -month

01:04:07.239 --> 01:04:10.539
loan. Isn't that right? That's correct. So if

01:04:10.539 --> 01:04:12.619
it's shorter, the internal rate of return would

01:04:12.619 --> 01:04:15.380
be even higher. Isn't that right? That's right.

01:04:16.719 --> 01:04:21.360
And you know, here there's a large portion of

01:04:21.360 --> 01:04:25.900
the the first out term loan that's asking to

01:04:25.900 --> 01:04:28.820
be rolled up on on day one. Isn't that right?

01:04:31.980 --> 01:04:34.019
Yes, it depends on your definition of large.

01:04:34.619 --> 01:04:39.599
Do you not think $150 million is large? I think

01:04:39.599 --> 01:04:44.179
about it relative to other similar Dips in these

01:04:44.179 --> 01:04:46.559
situations. All right. What's the total? What's

01:04:46.559 --> 01:04:50.780
the total amount of the the first lien? for the

01:04:50.780 --> 01:04:55.360
first out term of It's about 400 million dollars

01:04:55.360 --> 01:04:58.980
the 150 million is more than a third of that,

01:05:00.199 --> 01:05:05.179
right? That's correct and a third of the loan

01:05:05.179 --> 01:05:15.679
is a large portion wouldn't you say Okay And

01:05:15.679 --> 01:05:20.059
a portion of the loans that are being rolled

01:05:20.059 --> 01:05:23.539
up on a peri -passive basis are the incremental

01:05:23.539 --> 01:05:26.300
term loans, is that correct? That's correct.

01:05:27.079 --> 01:05:29.960
And the incremental term loans have been outstanding

01:05:29.960 --> 01:05:33.239
for less than 90 days, isn't that right? That's

01:05:33.239 --> 01:05:36.199
my understanding. And the use of those proceeds

01:05:36.199 --> 01:05:40.320
was used to pay out what I'm going to refer to

01:05:40.320 --> 01:05:45.989
as the stub lenders, is that right? Can you clarify,

01:05:46.869 --> 01:05:49.449
please? Do you not understand what I mean by

01:05:49.449 --> 01:05:55.909
stub lenders? Yeah, I'm not sure. The court understands

01:05:55.909 --> 01:05:58.570
the purpose of the payments and the history.

01:05:59.210 --> 01:06:02.690
That'll assist the process. I understand the

01:06:02.690 --> 01:06:08.349
derivation of the $122 million. But there were

01:06:08.349 --> 01:06:10.969
parties who didn't participate in the LME transaction.

01:06:11.070 --> 01:06:13.460
Is that right? That's right. And they filed a

01:06:13.460 --> 01:06:15.960
lawsuit against the company in Delaware courts.

01:06:16.519 --> 01:06:21.480
Correct. And then in April, they were paid off.

01:06:21.639 --> 01:06:26.820
Is that correct? I believe it was April. And

01:06:26.820 --> 01:06:30.300
April 9th sound right to you? I'm not sure of

01:06:30.300 --> 01:06:32.900
the exact date. You agree with me that was less

01:06:32.900 --> 01:06:35.039
than 90 days ago, right? That's my understanding.

01:06:43.250 --> 01:06:48.389
The dip loan is going to be secured by all of

01:06:48.389 --> 01:06:52.250
the non -ABL assets on a first priority basis,

01:06:52.250 --> 01:06:56.250
is that correct? That's my understanding, yes.

01:06:56.769 --> 01:06:59.329
And that's going to be senior to the first out

01:06:59.329 --> 01:07:02.889
term loans? That's my understanding. And senior

01:07:02.889 --> 01:07:05.630
to the second out term loans? That's my understanding.

01:07:06.130 --> 01:07:08.389
And senior to the third out term loans, right?

01:07:09.530 --> 01:07:13.159
That's my understanding, yes. Okay. And there's

01:07:13.159 --> 01:07:16.760
$165 million of new loans that are being made

01:07:16.760 --> 01:07:19.739
under the DIP. Is that correct? That's correct.

01:07:20.460 --> 01:07:22.179
And do you believe that the DIP collateral is

01:07:22.179 --> 01:07:27.639
worth more than $165 million? Objection. Your

01:07:27.639 --> 01:07:30.460
Honor, this is premature for today to talk about

01:07:30.460 --> 01:07:32.960
valuation. Mr. Mates is talking about the DIP

01:07:32.960 --> 01:07:36.900
process, not about a valuation dispute. I'll

01:07:36.900 --> 01:07:39.880
overrule the objection. He can ask the question.

01:07:40.239 --> 01:07:46.099
Mr. Mates, you can answer. We haven't done evaluation

01:07:46.099 --> 01:07:51.599
of the collateral. You think there's a possibility

01:07:51.599 --> 01:07:55.420
here that the collateral could be worth less

01:07:55.420 --> 01:08:00.400
than $165 million? We haven't done evaluation

01:08:00.400 --> 01:08:07.519
of the collateral. Okay, so if the collateral

01:08:07.519 --> 01:08:10.780
was worth less than $165... million dollars and

01:08:10.780 --> 01:08:14.559
a hundred and fifty million dollars was uh...

01:08:14.559 --> 01:08:17.159
you know was rolled up here then a hundred and

01:08:17.159 --> 01:08:21.020
fifty million which is peri -paso with i think

01:08:21.020 --> 01:08:23.140
it testified earlier over four hundred million

01:08:23.140 --> 01:08:24.899
that would be dramatically under secured that

01:08:24.899 --> 01:08:30.060
right i'm not following the question okay there's

01:08:30.060 --> 01:08:33.000
the i think it testified earlier that there's

01:08:33.000 --> 01:08:36.039
approximately four hundred million dollars and

01:08:36.039 --> 01:08:39.869
first out term loans correct that's correct About

01:08:39.869 --> 01:08:44.069
three hundred and nine. If I have it right, it's

01:08:44.069 --> 01:08:46.130
about three hundred ninety five million, correct?

01:08:50.289 --> 01:08:52.050
My recollection is this is approximately four

01:08:52.050 --> 01:08:55.689
hundred million dollars. Okay. And if those loans,

01:08:56.829 --> 01:08:59.449
if the collateral that secures them is worth

01:08:59.449 --> 01:09:02.350
less than one hundred and sixty five million

01:09:02.350 --> 01:09:06.630
dollars, then those loans are under secured.

01:09:06.850 --> 01:09:16.880
Is that right? You've been doing bankruptcy advisory

01:09:16.880 --> 01:09:24.399
work for over 20 years, correct? No. How long

01:09:24.399 --> 01:09:25.899
have you been doing bankruptcy advisory work?

01:09:26.380 --> 01:09:29.359
About 14 years. 14 years. And you're familiar

01:09:29.359 --> 01:09:33.680
with the term under -secured, right? Yes. So

01:09:33.680 --> 01:09:37.859
if a loan is worth the face amount of a loan,

01:09:38.300 --> 01:09:41.659
$165 million, and it's collateral, were worth

01:09:41.659 --> 01:09:45.039
less than $165 million, you'd agree with me it's

01:09:45.039 --> 01:09:49.060
under -secured, right? Okay. So I guess what

01:09:49.060 --> 01:09:52.779
I'm asking you is if the collateral is worth

01:09:52.779 --> 01:09:57.340
less than $165 million and you have $400 million

01:09:57.340 --> 01:10:01.039
of first -down term loans, then it's possible

01:10:01.039 --> 01:10:06.239
that the loans that are being rolled up are under

01:10:06.239 --> 01:10:09.619
-secured. Is that right? I'm kind of objecting

01:10:09.619 --> 01:10:12.890
again on a... hypothetical, speculation, et cetera.

01:10:13.289 --> 01:10:14.909
But I think Mr. Brilliant has made his point.

01:10:15.090 --> 01:10:16.850
At this point, I'm going to sustain the objection.

01:10:17.029 --> 01:10:20.189
I understand the argument. Mr. Brilliant, let's

01:10:20.189 --> 01:10:26.590
move on. OK, thank you. Do you have your declaration

01:10:26.590 --> 01:10:31.329
in front of you? I do. Can you turn to paragraph

01:10:31.329 --> 01:10:44.170
29 for me? Okay, before we get to the language,

01:10:44.189 --> 01:10:46.470
let me just ask you a few questions. You're familiar

01:10:46.470 --> 01:10:50.510
with roll -ups, right? Yes. And the effect of

01:10:50.510 --> 01:10:52.510
a roll -up is to make pre -petition debt post

01:10:52.510 --> 01:10:55.270
-petition debt, right? That's right. And then

01:10:55.270 --> 01:10:59.729
it can't be, without the lender's consent, under

01:10:59.729 --> 01:11:02.930
the bankruptcy code, it can't be compromised

01:11:02.930 --> 01:11:07.069
through a plan, is that right? That's my understanding.

01:11:07.649 --> 01:11:09.569
And then it would be senior administrative claims

01:11:09.569 --> 01:11:14.060
are senior to... Pre -prepetition claims, is

01:11:14.060 --> 01:11:21.760
that right? That's right the and You know you

01:11:21.760 --> 01:11:25.479
Have you been involved in situations where there

01:11:25.479 --> 01:11:30.439
was a roll -up? of collateral on an interim basis

01:11:30.439 --> 01:11:33.739
on the first day over objection of creditors

01:11:33.739 --> 01:11:41.960
in the other than this case I don't recall over

01:11:41.960 --> 01:11:46.199
objection of credit, of creditors. Okay. And,

01:11:46.199 --> 01:11:49.779
uh, uh, uh, ordinarily, wouldn't you agree with

01:11:49.779 --> 01:11:52.220
me that roll -ups occur on the final hearing

01:11:52.220 --> 01:11:54.100
date, not an interim date? Isn't that right?

01:11:55.720 --> 01:11:57.819
I don't think that's necessarily the case, no.

01:11:58.439 --> 01:12:01.560
Okay, so tell me in what situations you've been

01:12:01.560 --> 01:12:04.460
involved in where roll -ups occurred on the,

01:12:04.460 --> 01:12:09.220
on the first day. Most recently was at home group,

01:12:09.560 --> 01:12:15.479
which was two weeks ago, the lenders advised

01:12:15.479 --> 01:12:22.539
by your firm rolled up two times the ratio of

01:12:22.539 --> 01:12:26.020
the money funded. And there was no objection

01:12:26.020 --> 01:12:28.500
there at the interim hearing, isn't that right?

01:12:30.020 --> 01:12:32.800
I don't recall there being an objection. How

01:12:32.800 --> 01:12:35.479
do you know that that occurred? Who told you

01:12:35.479 --> 01:12:40.210
that? How do you know? Were you involved in the

01:12:40.210 --> 01:12:44.569
matter? Yes. Okay. All right. But there was no...

01:12:44.569 --> 01:12:46.909
As far as... Are you aware of any objections

01:12:46.909 --> 01:12:51.470
that occurred at that hearing? I don't recall

01:12:51.470 --> 01:12:54.010
there being objections. Were you at the DIP hearing?

01:12:55.510 --> 01:13:00.489
I participated in the first part. Okay. And you

01:13:00.489 --> 01:13:02.069
don't recall there being any objection there?

01:13:03.510 --> 01:13:05.109
Yeah, I don't recall there being any objection.

01:13:05.810 --> 01:13:09.020
Okay. And then what other... Matters are you

01:13:09.020 --> 01:13:12.579
aware of where there was a roll -up on the on

01:13:12.579 --> 01:13:20.720
the first day? Okay, so you'd agree with me that

01:13:20.720 --> 01:13:27.359
roll -ups are not common right I Would say they're

01:13:27.359 --> 01:13:30.039
not uncommon Okay, but there's a difference and

01:13:30.039 --> 01:13:32.439
that's the language you use in paragraph 29 But

01:13:32.439 --> 01:13:33.979
there's a difference between something that's

01:13:33.979 --> 01:13:35.859
common and something that's not uncommon. Isn't

01:13:35.859 --> 01:13:44.840
that right? Okay. Okay. I mean, is that a yes,

01:13:45.180 --> 01:13:47.859
sir? The question, can you repeat the question,

01:13:48.420 --> 01:13:53.960
please? In paragraph 29, use the word that roll

01:13:53.960 --> 01:13:58.060
-ups are not uncommon features required by DIP

01:13:58.060 --> 01:14:00.680
lenders under the DIP financings of this type.

01:14:01.760 --> 01:14:04.579
Did I read your language properly? That's right.

01:14:04.720 --> 01:14:07.270
That's right. Yeah, and you know, although you

01:14:07.270 --> 01:14:09.090
say they're not uncommon, you don't say that

01:14:09.090 --> 01:14:11.189
they're common because there's a difference between

01:14:11.189 --> 01:14:14.590
common and uncommon, right? Yeah, that's right.

01:14:14.689 --> 01:14:17.310
I said they're yeah, they're not uncommon. That's

01:14:17.310 --> 01:14:19.609
correct. Okay, that's right, because they're

01:14:19.609 --> 01:14:21.949
right and there's a difference between common

01:14:21.949 --> 01:14:25.630
and uncommon, right? In your mind, this is your

01:14:25.630 --> 01:14:27.609
language, right? In your mind, there's a difference,

01:14:27.729 --> 01:14:30.510
isn't that correct? Objection, this is getting

01:14:30.510 --> 01:14:34.060
a little argumentative and unclear. Sustained,

01:14:34.220 --> 01:14:35.739
I understand the difference between the words.

01:14:36.140 --> 01:14:40.659
Let's move forward. All right, so just a few

01:14:40.659 --> 01:14:46.199
more questions, Mr. Mates. You say that you did

01:14:46.199 --> 01:14:56.159
a search for other diplomas, is that correct?

01:14:57.159 --> 01:14:59.880
That's correct. And you say that... No other

01:14:59.880 --> 01:15:02.000
proposal was actionable. Did you receive any

01:15:02.000 --> 01:15:05.739
proposals? We did not. So when you say there

01:15:05.739 --> 01:15:07.279
were no actionable proposals, what you really

01:15:07.279 --> 01:15:10.659
meant in your declaration is there were no proposals

01:15:10.659 --> 01:15:17.840
at all? I meant that there are no no actionable

01:15:17.840 --> 01:15:19.359
proposals. If that's what I wrote, that's what

01:15:19.359 --> 01:15:25.500
I meant. Well, is there? OK, but is there whether

01:15:25.500 --> 01:15:28.250
it? So when you say there are no actionable proposals,

01:15:28.609 --> 01:15:30.529
what you really mean is there were just no proposals

01:15:30.529 --> 01:15:35.229
at all? I meant that there were no actionable

01:15:35.229 --> 01:15:37.109
proposals. If you're asking me if we received

01:15:37.109 --> 01:15:39.210
any proposals, we did not receive any proposals,

01:15:39.229 --> 01:15:41.810
if that helps move things along here. It does.

01:15:42.470 --> 01:15:45.689
All right, thank you. And so the only proposal

01:15:45.689 --> 01:15:49.590
you received was from the ad hoc group, is that

01:15:49.590 --> 01:15:54.329
correct? That's correct. And the ad hoc group?

01:15:56.340 --> 01:16:00.079
required the roll -up feature? Yes, they did.

01:16:01.100 --> 01:16:03.479
And the debtors, you know, agreed to that, is

01:16:03.479 --> 01:16:07.079
that right? Yes, we did. And you agreed to that

01:16:07.079 --> 01:16:12.600
because there were no other proposals? There

01:16:12.600 --> 01:16:14.800
were no other proposals and again, you know,

01:16:14.979 --> 01:16:17.739
roll -ups are not uncommon features of debt facilities.

01:16:28.000 --> 01:16:30.399
I have nothing else, Your Honor. Thank you, Mr.

01:16:30.579 --> 01:16:33.979
Brilliant. Any redirect, Mr. Hammerman? Yes,

01:16:34.039 --> 01:16:37.979
very briefly, Judge. And first of all, can you

01:16:37.979 --> 01:16:39.619
hear me okay? Because we're in the same room,

01:16:39.739 --> 01:16:41.899
we're using Mr. Mates' microphone, and I'm just

01:16:41.899 --> 01:16:44.939
trying to avoid echo. I can hear you. Thank you.

01:16:45.600 --> 01:16:51.300
Great. Mr. Mates, Mr. Brilliant asked you about

01:16:51.300 --> 01:16:55.720
the backstop. The backstop premium going only

01:16:55.720 --> 01:16:58.100
to the ad hoc group. Can you explain why that's

01:16:58.100 --> 01:17:03.979
going to the ad hoc group? Yes, the backstop

01:17:03.979 --> 01:17:06.039
fee is going to the ad hoc group because the

01:17:06.039 --> 01:17:09.520
ad hoc group is the one that's agreed to backstop

01:17:09.520 --> 01:17:12.760
the financing. Are they the group that's taking

01:17:12.760 --> 01:17:19.020
the risk and earmarking capital? That's correct.

01:17:24.590 --> 01:17:26.489
Mr. Brilliant asked me all sorts of questions

01:17:26.489 --> 01:17:30.550
about the size of the roll -up. Can you tell

01:17:30.550 --> 01:17:32.149
the court a little bit more about why you think

01:17:32.149 --> 01:17:36.010
the size of the roll -up here, 1 .5 to 1, is

01:17:36.010 --> 01:17:40.350
acceptable? Yeah, again, I think it's supported

01:17:40.350 --> 01:17:46.850
by other dip roll -ups that we've seen. We've

01:17:46.850 --> 01:17:49.090
seen certainly, as I mentioned, At Home Group

01:17:49.090 --> 01:17:51.510
was 2 to 1. We've seen other ones that are 2

01:17:51.510 --> 01:17:54.680
to 1. So this one being one and a half to one

01:17:54.680 --> 01:17:57.319
was, again, within the range of what we tend

01:17:57.319 --> 01:18:03.779
to say. Mr. Brilliant asked you about whether

01:18:03.779 --> 01:18:06.060
the roll -up was a requirement of the lenders,

01:18:06.220 --> 01:18:09.640
and you said yes. Can you describe for the court

01:18:09.640 --> 01:18:13.319
again what happens if the lenders do not fund

01:18:13.319 --> 01:18:17.579
the dip because there is no roll -up? What are

01:18:17.579 --> 01:18:22.180
the consequences to the company? needs capital

01:18:22.180 --> 01:18:25.140
today, right, given where they are in their working

01:18:25.140 --> 01:18:29.819
capital cycle and their lack of liquidity. So

01:18:29.819 --> 01:18:33.960
without raising this capital today, it's a mess.

01:18:33.979 --> 01:18:36.140
They will be able to make certain payments that

01:18:36.140 --> 01:18:38.579
they need to, you know, withstand the ongoing

01:18:38.579 --> 01:18:43.420
operations of the enterprise. Are you aware,

01:18:43.539 --> 01:18:46.520
sir, that about a week ago, there was a press

01:18:46.520 --> 01:18:50.779
leak about Del Monte looking for a dip facility?

01:18:52.239 --> 01:18:55.279
Yes, I am. Did anyone other than the group you

01:18:55.279 --> 01:18:59.979
had contacted contact you in an effort to make

01:18:59.979 --> 01:19:05.399
a competing dip proposal? No. So the dip proposal

01:19:05.399 --> 01:19:07.659
that we have today is the only one available

01:19:07.659 --> 01:19:12.180
to the company, correct? That's correct. I have

01:19:12.180 --> 01:19:14.640
nothing further to add. All right, thank you.

01:19:14.819 --> 01:19:18.710
Mr. Brilliant, anything more on your end? Just

01:19:18.710 --> 01:19:20.609
argument, Your Honor, at the appropriate time.

01:19:21.109 --> 01:19:23.050
All right, well, now's the appropriate time.

01:19:24.090 --> 01:19:25.710
Let me have your argument, then, Ms. Ringer.

01:19:25.810 --> 01:19:28.930
I'll let you address the arguments. Thank you,

01:19:28.930 --> 01:19:35.850
Your Honor. Your Honor, we don't think the DIP

01:19:35.850 --> 01:19:39.430
meets the standards for being approved here.

01:19:39.630 --> 01:19:42.890
Again, we have no objection to the ABL portion

01:19:42.890 --> 01:19:45.750
of the DIP, and we would have no problem with

01:19:45.750 --> 01:19:50.130
the DIP if the fees where appropriate here, and

01:19:50.130 --> 01:19:53.109
the roll -up doesn't occur on the first day,

01:19:53.130 --> 01:19:57.850
but would be subject to final hearing. Your Honor,

01:19:58.170 --> 01:20:01.529
it's really unprecedented to have on the first

01:20:01.529 --> 01:20:05.250
day of a case to... you know, here less than

01:20:05.250 --> 01:20:07.890
24 hours, you know, notice no committee being

01:20:07.890 --> 01:20:12.010
formed, you know, to approve 150, you know, million

01:20:12.010 --> 01:20:14.649
-dollar roll -up. As I said, we all know about

01:20:14.649 --> 01:20:17.670
the case law in connection with cross -collateralization.

01:20:17.750 --> 01:20:21.390
This is, you know, significantly, you know, worse

01:20:21.390 --> 01:20:25.029
from the standpoint that, you know, it enables,

01:20:25.029 --> 01:20:27.630
you know, party to, you know, have debt which

01:20:27.630 --> 01:20:32.149
can't be compromised as part of the Chapter 11

01:20:32.149 --> 01:20:36.359
case. You know, here, Judge, there is no evidentiary

01:20:36.359 --> 01:20:39.760
record for Your Honor to find that the lenders

01:20:39.760 --> 01:20:43.140
aren't being dramatically advantaged, you know,

01:20:43.140 --> 01:20:46.680
by the roll -up debtors. You know, I believe

01:20:46.680 --> 01:20:48.739
the testimony, quite frankly, you know, from

01:20:48.739 --> 01:20:50.760
Mr. Mates was a little disingenuous on the valuation

01:20:50.760 --> 01:20:53.859
issues, but leaving that aside, there's no testimony

01:20:53.859 --> 01:20:57.600
here that the first -out term loan is over -secured

01:20:57.600 --> 01:21:01.250
and therefore, you know, that... you know, that

01:21:01.250 --> 01:21:04.489
by being rolled up, that they're not receiving,

01:21:04.489 --> 01:21:07.890
you know, a huge benefit. The reality is they

01:21:07.890 --> 01:21:11.989
will be senior to the other members of the, you

01:21:11.989 --> 01:21:14.970
know, the first out term loan group who don't

01:21:14.970 --> 01:21:17.510
participate in the loan. And because there's

01:21:17.510 --> 01:21:20.189
no evidence here that, you know, that they're

01:21:20.189 --> 01:21:23.329
over secured, you know, it's clear here that,

01:21:23.489 --> 01:21:25.970
and there's argument, you know, or they've left

01:21:25.970 --> 01:21:28.909
open the issue that the amount of the new money.

01:21:29.069 --> 01:21:32.029
you know, might not even, you know, be sufficiently,

01:21:32.029 --> 01:21:34.329
you know, covered. I don't believe that to be

01:21:34.329 --> 01:21:36.270
the case, Your Honor, but that's the, you know,

01:21:36.369 --> 01:21:37.930
that's the evidentiary record you're dealing

01:21:37.930 --> 01:21:41.069
with. So you're being asked basically to, you

01:21:41.069 --> 01:21:44.289
know, allow on the first day of the case a roll

01:21:44.289 --> 01:21:48.510
-up of a large portion of the unsecured debt

01:21:48.510 --> 01:21:52.130
over the objection of other, you know, other

01:21:52.130 --> 01:21:55.770
lenders in a way that, you know, may dramatically,

01:21:55.770 --> 01:21:58.699
you know, benefit the you know, you know, those,

01:21:58.699 --> 01:22:01.060
you know, those lenders, you know, their argument

01:22:01.060 --> 01:22:03.319
that this is being done on a, on a parietal basis

01:22:03.319 --> 01:22:05.399
and there's a backstop fee and that everybody

01:22:05.399 --> 01:22:08.239
would share rateably, you know, the dip is, is

01:22:08.239 --> 01:22:10.619
also disingenuous that you have to agree, you

01:22:10.619 --> 01:22:13.460
know, to sign, you know, the RSA and to support.

01:22:14.029 --> 01:22:16.170
you know, there's, you know, sale process. And

01:22:16.170 --> 01:22:18.729
again, it's being done on 24 hours, less than

01:22:18.729 --> 01:22:22.310
24 hours notice with no opportunity for the lenders

01:22:22.310 --> 01:22:25.729
to really, you know, vet the whole process. The

01:22:25.729 --> 01:22:28.270
total amount of the fees here, Your Honor, are

01:22:28.270 --> 01:22:31.069
huge. You know, there, you know, as a testimony

01:22:31.069 --> 01:22:35.220
from Mr. Mates, they're between 35 and 38%. Uh,

01:22:35.560 --> 01:22:37.680
you know, on the new money again for the first

01:22:37.680 --> 01:22:40.659
out dollars, uh, you know, in this, in this,

01:22:40.779 --> 01:22:43.380
in this case and that, uh, in and of itself,

01:22:43.380 --> 01:22:45.680
uh, seems too high in the amount that they're

01:22:45.680 --> 01:22:48.439
asking your honor, you know, to approve on day

01:22:48.439 --> 01:22:50.579
one, the full commitment fee for the full amount

01:22:50.579 --> 01:22:54.520
of the loan, you know, plus, uh, uh, you know,

01:22:54.560 --> 01:22:59.119
the, you know, the backstop fee is, uh, uh, you

01:22:59.119 --> 01:23:02.949
know, inappropriate, you know, here. under the

01:23:02.949 --> 01:23:06.369
circumstances. We think that the debtors have

01:23:06.369 --> 01:23:08.949
an obligation to negotiate harder with their

01:23:08.949 --> 01:23:10.909
lenders and to come up with something that was

01:23:10.909 --> 01:23:16.010
better or at least to get the things that your

01:23:16.010 --> 01:23:18.430
honor and the creditors need an opportunity to

01:23:18.430 --> 01:23:24.369
vet and to review to be decided on the final

01:23:24.369 --> 01:23:26.890
hearing. I think the U .S. trustee has it exactly

01:23:26.890 --> 01:23:30.529
right that on the interim basis your honor should

01:23:30.529 --> 01:23:32.689
only approve what's necessary you know, to get

01:23:32.689 --> 01:23:35.329
the estate to the, you know, to the final hearing

01:23:35.329 --> 01:23:41.789
and that, you know, without, you know, irreparably,

01:23:41.890 --> 01:23:43.489
you know, changing the rights of the various

01:23:43.489 --> 01:23:46.829
parties in the case. And unfortunately, this

01:23:46.829 --> 01:23:50.649
dip, you know, you know, doesn't, you know, doesn't

01:23:50.649 --> 01:23:52.810
do that. And this is all exacerbated as well

01:23:52.810 --> 01:23:54.829
by the fact that part of the loans that they

01:23:54.829 --> 01:24:00.409
want to, you know, roll up were, you know, were

01:24:00.409 --> 01:24:04.039
incurred. you know, less than 90 days ago within

01:24:04.039 --> 01:24:06.819
the preference period, you know, to pay, you

01:24:06.819 --> 01:24:09.579
know, parties who presumably were not under,

01:24:09.720 --> 01:24:13.640
over secured and are subject to, you know, preference

01:24:13.640 --> 01:24:16.420
attack. And here you're trying to, you know,

01:24:16.560 --> 01:24:19.220
insulate, you know, a portion of that, which

01:24:19.220 --> 01:24:22.510
is. uh, also inappropriate. Effectively, what

01:24:22.510 --> 01:24:24.390
they're saying, Your Honor, is that a secure

01:24:24.390 --> 01:24:26.289
creditor who has a lien on substantially all

01:24:26.289 --> 01:24:28.470
the assets can just demand whatever they want

01:24:28.470 --> 01:24:31.010
for terms of a, of a, of a dip, and that Your

01:24:31.010 --> 01:24:32.930
Honor doesn't have to look at whether it's reasonable,

01:24:33.329 --> 01:24:35.609
that, you know, that reasonableness is effectively

01:24:35.609 --> 01:24:39.109
determined, uh, by what they want, and because

01:24:39.109 --> 01:24:41.869
they're over -secured, you know, there's no other

01:24:41.869 --> 01:24:43.989
alternative here. If you look carefully at the

01:24:43.989 --> 01:24:46.430
language from Mr. Mates in his affidavit, he

01:24:46.430 --> 01:24:48.750
doesn't say that this is reasonable. He says,

01:24:48.789 --> 01:24:50.729
you know, based on the circumstance of the case

01:24:50.729 --> 01:24:53.949
and no other proposals you know that uh... you

01:24:53.949 --> 01:24:57.149
know that uh... uh... you know that your honor

01:24:57.149 --> 01:24:59.689
should approve it it's not you know it's it's

01:24:59.689 --> 01:25:03.739
not under you know fair you know terms you know

01:25:03.739 --> 01:25:06.359
your honor and the court has an obligation you

01:25:06.359 --> 01:25:08.819
know to look at it and make sure that it's appropriate

01:25:08.819 --> 01:25:12.140
under the circumstances of this of this case

01:25:12.140 --> 01:25:15.100
and we submit your honor that it's not and that

01:25:15.100 --> 01:25:18.039
it shouldn't be approved and that you know the

01:25:18.039 --> 01:25:20.100
debtor should just have your honor approve the

01:25:20.100 --> 01:25:23.079
AVL roll -up and the use of cash collateral or

01:25:23.079 --> 01:25:26.420
ask the lenders to remove the roll -up and push

01:25:26.420 --> 01:25:28.920
more of the fees to the final hearing. move the

01:25:28.920 --> 01:25:30.300
roll up on an interim basis, push it through

01:25:30.300 --> 01:25:32.020
the final hearing, and if they'll agree to that,

01:25:32.020 --> 01:25:35.739
that could be approved as well. Does Your Honor

01:25:35.739 --> 01:25:37.739
have any questions for me? Otherwise, I think

01:25:37.739 --> 01:25:40.539
I'm finished with my argument. No, I don't. Thank

01:25:40.539 --> 01:25:42.159
you, Mr. Berling. I appreciate the argument.

01:25:43.060 --> 01:25:48.289
Ms. Renger. Thank you, Your Honor. I think maybe

01:25:48.289 --> 01:25:50.989
it would be appropriate to start with where Mr.

01:25:51.250 --> 01:25:52.949
Brilliant left off, which is the question to

01:25:52.949 --> 01:25:56.510
Your Honor is, is it appropriate under the circumstances

01:25:56.510 --> 01:25:59.569
of this case? And I would point Your Honor to

01:25:59.569 --> 01:26:01.489
paragraph 30 of the Mates Declaration, which

01:26:01.489 --> 01:26:04.649
actually does say that he believes it's reasonable

01:26:04.649 --> 01:26:07.890
under the circumstances. But more fundamentally,

01:26:08.189 --> 01:26:12.010
I think what Your Honor sees in the testimony,

01:26:12.229 --> 01:26:14.050
including the testimony from Mr. Goulding, which

01:26:14.050 --> 01:26:17.310
came in without opposition. And what you heard

01:26:17.310 --> 01:26:21.850
from Mr. Meats is that we need this money today.

01:26:21.970 --> 01:26:24.510
And I will tell you, I personally have been sitting

01:26:24.510 --> 01:26:26.850
here watching the clock as this hearing is going

01:26:26.850 --> 01:26:31.289
on because I am concerned about us missing deadlines

01:26:31.289 --> 01:26:34.329
for funding. We are already in the middle of

01:26:34.329 --> 01:26:37.350
the PAC season. with manufacturing plants running

01:26:37.350 --> 01:26:40.609
24 -7, and the company needs the cash urgently

01:26:40.609 --> 01:26:44.270
in order to be able to continue to operate. Without

01:26:44.270 --> 01:26:47.550
it, the business will just shut down, which is

01:26:47.550 --> 01:26:52.069
not good for Mr. Brilliant's clients or any of

01:26:52.069 --> 01:26:56.430
the creditors of this case. So, you know, I'm

01:26:56.430 --> 01:26:58.390
happy to address each of the points that he raised.

01:26:58.510 --> 01:27:01.739
I mean, they've got an issue with The term loan

01:27:01.739 --> 01:27:04.979
roll -up, this was required by the term loan

01:27:04.979 --> 01:27:07.439
lenders as a condition to their commitment to

01:27:07.439 --> 01:27:09.840
provide the new money financing. I will flag

01:27:09.840 --> 01:27:14.819
that it is relatively unusual for this new money

01:27:14.819 --> 01:27:17.220
dip to be syndicated in the way that they're

01:27:17.220 --> 01:27:20.260
proposing to do it here, where folks can come

01:27:20.260 --> 01:27:24.020
in and if they do, they can provide a portion

01:27:24.020 --> 01:27:27.220
of the new money dip and they will get their

01:27:27.220 --> 01:27:31.090
first out rolled up as part of that syndication

01:27:31.090 --> 01:27:35.569
process on a pro rata basis. So that is unusual.

01:27:35.750 --> 01:27:38.210
It is an option. Yes, there is a requirement

01:27:38.210 --> 01:27:40.710
that they sign the RSA. It sounded like Mr. Brilliant

01:27:40.710 --> 01:27:42.670
was suggesting maybe some of his clients will

01:27:42.670 --> 01:27:45.890
actually decide to take that opportunity. I think

01:27:45.890 --> 01:27:49.949
it is too early to say today whether or not they

01:27:49.949 --> 01:27:52.109
will. They can look at the circumstances of the

01:27:52.109 --> 01:27:55.619
case and decide whether they want to. What you

01:27:55.619 --> 01:27:59.319
heard from Mr. Mates is that he hasn't done evaluation

01:27:59.319 --> 01:28:01.779
of the company. That's all that his testimony

01:28:01.779 --> 01:28:05.100
was. So, you know, I think that the insinuations

01:28:05.100 --> 01:28:08.600
from Mr. Brilliant about what the dip or any

01:28:08.600 --> 01:28:10.920
rolled up pieces of debt are impaired. I think

01:28:10.920 --> 01:28:13.659
those are extrapolating far more than what Mr.

01:28:13.739 --> 01:28:18.539
Mates actually testified to. On the fees itself,

01:28:18.800 --> 01:28:23.829
I think that in throwing out numbers and percentages.

01:28:24.229 --> 01:28:26.369
Mr. Brilliant is ignoring the fact that these

01:28:26.369 --> 01:28:29.229
fees are picked. They're paid in kind. It's not

01:28:29.229 --> 01:28:31.489
a cash outlay from the debtors at the outset

01:28:31.489 --> 01:28:34.750
of the case. That is extremely favorable to the

01:28:34.750 --> 01:28:37.489
company. I will take issue with the suggestion

01:28:37.489 --> 01:28:39.550
from Mr. Brilliant that the company didn't negotiate

01:28:39.550 --> 01:28:42.510
hard enough with its lenders. I will tell you

01:28:42.510 --> 01:28:45.010
personally, the negotiations were very hard fought.

01:28:45.890 --> 01:28:49.710
And the fact that these fees are payable in kind

01:28:49.710 --> 01:28:54.609
is is very important because liquidity is a problem.

01:28:55.750 --> 01:28:58.689
And, you know, we're telling you today that this

01:28:58.689 --> 01:29:02.670
business will shut down without it. I think that

01:29:02.670 --> 01:29:05.250
I mean, I think I've addressed the commitment

01:29:05.250 --> 01:29:07.630
fee, the commitment fee, I think I did in my

01:29:07.630 --> 01:29:11.189
original remarks. But if other folks participate

01:29:11.189 --> 01:29:14.630
in the new money term loan, they share in that

01:29:14.630 --> 01:29:17.539
portion of the commitment fee. So it's not It's

01:29:17.539 --> 01:29:19.960
not like that commitment fee is just on day one

01:29:19.960 --> 01:29:22.939
going entirely to the ad hoc group. If other

01:29:22.939 --> 01:29:25.859
folks do decide to participate during the syndication

01:29:25.859 --> 01:29:28.479
process, they share in that commitment fee. And

01:29:28.479 --> 01:29:31.819
with respect to the backstop fee, that backstop

01:29:31.819 --> 01:29:36.279
fee is going to folks who are backstopping, which

01:29:36.279 --> 01:29:39.239
is entirely appropriate and frankly standard

01:29:39.239 --> 01:29:42.659
as far as backstops go. They're having to earmark

01:29:42.659 --> 01:29:46.220
funds now. And so the fee needs to be approved

01:29:46.220 --> 01:29:50.079
now. And the other provisions of the dip that,

01:29:50.079 --> 01:29:53.720
you know, were raised by the US trustee and that

01:29:53.720 --> 01:29:56.539
Mr. Brilliant, I think was tagging onto. I mean,

01:29:56.579 --> 01:29:59.359
again, I addressed that at the outset of my remarks,

01:29:59.539 --> 01:30:05.199
but we actually tried to craft a dip that punted

01:30:05.199 --> 01:30:08.619
a lot of issues that usually a committee will

01:30:08.619 --> 01:30:11.640
raise to. a final hearing, right? You heard me

01:30:11.640 --> 01:30:15.279
say that 506C, 502B, marshalling, all of those

01:30:15.279 --> 01:30:19.220
issues are punted to a final hearing and I think

01:30:19.220 --> 01:30:22.739
has been ignored. I mean, there is a challenge

01:30:22.739 --> 01:30:27.000
period that is embedded into the dip that the

01:30:27.000 --> 01:30:28.979
committee can take advantage of if and when it

01:30:28.979 --> 01:30:30.960
is appointed. The committee will do an investigation

01:30:30.960 --> 01:30:35.050
and that is preserved in this dip. With that,

01:30:35.170 --> 01:30:36.729
Your Honor, unless you have specific questions

01:30:36.729 --> 01:30:38.869
that you'd like me to address, I am actually

01:30:38.869 --> 01:30:41.069
going to be a little bit more brief than I otherwise

01:30:41.069 --> 01:30:43.649
might be, just given the timing today. But please,

01:30:43.710 --> 01:30:45.270
Your Honor, if you have questions, I am certainly

01:30:45.270 --> 01:30:47.750
happy to answer them. All right, thank you, Ms.

01:30:47.909 --> 01:30:50.689
Ringer. Mr. Goldstein, last comment. Thanks so

01:30:50.689 --> 01:30:52.850
much, Your Honor. I'll be brief as well, because

01:30:52.850 --> 01:30:54.930
I have the same concerns as Ms. Ringer about

01:30:54.930 --> 01:30:57.909
timing and ensuring we can fund today. I'll just

01:30:57.909 --> 01:31:00.229
say a couple points that Mr. Brilliant raised.

01:31:01.080 --> 01:31:03.300
He's talking about the dip being sort of first

01:31:03.300 --> 01:31:05.840
out dollars at the top of the stack here. It's

01:31:05.840 --> 01:31:08.119
actually just inaccurate. This is a harder dip

01:31:08.119 --> 01:31:11.500
to fund because we both have an ABL dip and a

01:31:11.500 --> 01:31:14.199
term loan dip. So it will not be first dollars

01:31:14.199 --> 01:31:16.819
on ABL collateral. And I think that's something

01:31:16.819 --> 01:31:19.000
that's important for the context of how this

01:31:19.000 --> 01:31:21.279
dip was put together, what my clients are willing

01:31:21.279 --> 01:31:24.539
to do. I'll just highlight one feature. Ms. Bringer

01:31:24.539 --> 01:31:27.239
used the word unusual. I think she meant in a

01:31:27.239 --> 01:31:30.619
way that my clients were offering participation

01:31:30.619 --> 01:31:33.500
to everyone else in a helpful way, another helpful

01:31:33.500 --> 01:31:36.180
feature my clients agreed to. So the carve -out

01:31:36.180 --> 01:31:38.899
is actually not senior in this instance to the

01:31:38.899 --> 01:31:42.560
ABL. It is only senior on the term collateral.

01:31:42.960 --> 01:31:45.359
So my clients have agreed to effectively fund

01:31:45.359 --> 01:31:48.420
the professional fee cost of the case on their

01:31:48.420 --> 01:31:51.739
backs and not put that at the top of the stack

01:31:51.739 --> 01:31:56.300
as you would normally see because the ABL structure

01:31:56.300 --> 01:31:59.239
here. So if that's something that shows actions

01:31:59.239 --> 01:32:02.039
being louder than words, we really are trying

01:32:02.039 --> 01:32:05.060
to help bridge this through a robust sale process.

01:32:06.260 --> 01:32:09.239
In terms of the size of the facility, Ms. Ringer

01:32:09.239 --> 01:32:13.020
mentioned the rates. Most of the rate is picked

01:32:13.020 --> 01:32:16.340
on the actual new money, which I think is another

01:32:16.340 --> 01:32:19.359
unusual but helpful feature. That is how we kept

01:32:19.359 --> 01:32:21.560
the size of the overall dip down. The dip would

01:32:21.560 --> 01:32:24.460
have to fund itself if it was cash pay interest.

01:32:24.680 --> 01:32:27.659
The roll -up is all PIC. I'll also note that

01:32:27.659 --> 01:32:30.340
the AP packages here are the same across all

01:32:30.340 --> 01:32:33.000
of the tranches in the prepetition facility.

01:32:33.380 --> 01:32:36.140
They do not include any cash pay interest. And

01:32:36.140 --> 01:32:38.720
I'll just also note, given there was some discussion

01:32:38.720 --> 01:32:42.279
about it with Mr. Maitz, Sextera, Charismatic,

01:32:42.619 --> 01:32:47.020
Thrasio, Bed Bath and Beyond, Vier are all examples

01:32:47.020 --> 01:32:49.819
of roll -ups that are larger than one and a half

01:32:49.819 --> 01:32:52.640
to one. And most importantly, Franchise Group,

01:32:52.779 --> 01:32:55.380
a two -to -one roll -up, had an objection on

01:32:55.380 --> 01:32:58.560
day one from junior creditors. And in Phoenix

01:32:58.560 --> 01:33:00.619
Services, we had informal objections from the

01:33:00.619 --> 01:33:03.840
U .S. Trustee on the roll -up provision. So there

01:33:03.840 --> 01:33:06.640
is precedent for that. We do think, to Mr. Mates'

01:33:06.779 --> 01:33:08.960
comments, that one -and -a -half -to -one is

01:33:08.960 --> 01:33:11.699
not out of line with precedent, and honestly,

01:33:11.720 --> 01:33:14.699
on the low end. So I appreciate the court's time

01:33:14.699 --> 01:33:16.340
and consideration. Happy to answer any other

01:33:16.340 --> 01:33:19.579
questions your honor may have. I do not. Thank

01:33:19.579 --> 01:33:23.270
you. All right, is there anyone else who wishes

01:33:23.270 --> 01:33:26.189
to be heard? Your honor, can I, talent brilliant,

01:33:26.430 --> 01:33:29.289
can I be heard very quickly in rebuttal? Just

01:33:29.289 --> 01:33:32.369
very briefly, please. Yes, your honor, so just

01:33:32.369 --> 01:33:34.329
a few things. I mean, obviously we have the record,

01:33:34.510 --> 01:33:37.590
you know, that's, you know, in front of us in

01:33:37.590 --> 01:33:40.789
connection, you know, with, you know, with the,

01:33:40.789 --> 01:33:43.630
you know, the dip and the fees. You know, there

01:33:43.630 --> 01:33:46.689
was no testimony from Mr. Bates about, you know,

01:33:46.989 --> 01:33:49.420
what... you know, other comparable entities in

01:33:49.420 --> 01:33:52.460
his tip or, you know, here as to, you know, what

01:33:52.460 --> 01:33:54.880
is reasonable. And obviously, you know, we have

01:33:54.880 --> 01:33:56.960
this issue here about the collateral. But one

01:33:56.960 --> 01:33:58.939
thing I would say is, you know, this is first

01:33:58.939 --> 01:34:02.520
out dollars, 38%, you know, interest, you know,

01:34:02.659 --> 01:34:07.699
is unprecedented. With respect to, you know,

01:34:07.979 --> 01:34:10.960
Ms. Pringer said that, you know, absent your

01:34:10.960 --> 01:34:13.180
honor, approving the dip today, you know, that

01:34:13.180 --> 01:34:15.600
the, you know, the company will be forced to

01:34:15.600 --> 01:34:18.680
liquidate. There's nothing in the record that

01:34:18.680 --> 01:34:22.680
supports that other than her statement. So I

01:34:22.680 --> 01:34:27.220
don't think that's a justification here for that.

01:34:27.520 --> 01:34:30.039
And with respect to this issue of the ABL collateral,

01:34:30.180 --> 01:34:32.520
I was very clear, Your Honor, in my cross -examination

01:34:32.520 --> 01:34:35.470
with Mr. mates about that. That is not something

01:34:35.470 --> 01:34:37.750
that we didn't bring out on cross -examination

01:34:37.750 --> 01:34:40.489
or understand the, you know, the nature of the

01:34:40.489 --> 01:34:42.850
collateral here, and that doesn't change our

01:34:42.850 --> 01:34:45.729
argument at all. You know, as for the fact that,

01:34:45.729 --> 01:34:49.479
you know, the roll -up itself... you know, on

01:34:49.479 --> 01:34:52.279
a final basis, maybe consistent, you know, with

01:34:52.279 --> 01:34:54.939
other transactions doesn't change the fact that

01:34:54.939 --> 01:34:58.239
roll -ups are frowned upon. You know, the, you

01:34:58.239 --> 01:35:00.500
know, Your Honor, I'm sure is familiar with Sweetland,

01:35:00.600 --> 01:35:02.739
the other, you know, cases that deal with cross

01:35:02.739 --> 01:35:05.000
-collateralization, of which this is even, you

01:35:05.000 --> 01:35:08.340
know, even worse, but just not appropriate on

01:35:08.340 --> 01:35:12.180
a first day hearing over an objection. That's

01:35:12.180 --> 01:35:14.659
all I have, Your Honor. All right. Thank you,

01:35:14.699 --> 01:35:18.420
Mr. Brilliant. And anyone else? I don't see any

01:35:18.420 --> 01:35:23.819
raised hands. All right. These issues are always

01:35:23.819 --> 01:35:28.539
difficult for a court. Countless times, both

01:35:28.539 --> 01:35:36.380
in court and cases in front of me, as part of

01:35:36.380 --> 01:35:41.220
seminars, I've heard the plea and the argument

01:35:41.220 --> 01:35:46.239
raised that courts should start calling the bluff

01:35:46.239 --> 01:35:51.819
when presented with dire consequences of failure

01:35:51.819 --> 01:35:54.920
to fund under a dip or use of cash collateral.

01:35:55.319 --> 01:36:03.180
In other words, the court should challenge and

01:36:03.180 --> 01:36:10.960
in effect what I view is to take a gamble that

01:36:10.960 --> 01:36:15.210
the bluff will not result in a forced liquidation

01:36:15.210 --> 01:36:20.369
or destructive value to an entity. This court

01:36:20.369 --> 01:36:23.449
does not wish to gamble with the interest of

01:36:23.449 --> 01:36:27.810
employees, with vendors, with investors. I understand

01:36:27.810 --> 01:36:31.850
the argument, Mr. Brilliant. I certainly understand

01:36:31.850 --> 01:36:37.609
the frustration in being presented with alternatives,

01:36:38.630 --> 01:36:43.859
with limited notice, where the argument is. Judge,

01:36:43.880 --> 01:36:50.260
you have to approve this or there will be catastrophic

01:36:50.260 --> 01:36:54.039
consequences. That's why the court does take

01:36:54.039 --> 01:36:56.960
into account all the circumstances of the case,

01:36:58.340 --> 01:37:02.380
all the elements of the proposed transaction,

01:37:03.100 --> 01:37:08.680
and tries to find and identify what is reasonable,

01:37:08.720 --> 01:37:14.210
what is not reasonable. In viewing the situation

01:37:14.210 --> 01:37:18.390
at hand, as considered the testimony of Mr. Mates

01:37:18.390 --> 01:37:21.369
through his declaration and our cross -examination,

01:37:21.630 --> 01:37:24.289
as considered the testimony of Mr. Goulding through

01:37:24.289 --> 01:37:31.109
his declaration, it's clear to the court that

01:37:31.109 --> 01:37:33.310
from the debtor's perspective and the debtor's

01:37:33.310 --> 01:37:37.010
professional's perspective, there are no competing

01:37:37.010 --> 01:37:41.640
proposals to consider. this transaction, this

01:37:41.640 --> 01:37:44.500
proposed transaction has been market tested.

01:37:45.220 --> 01:37:49.460
It may result in a costly transaction, but there's

01:37:49.460 --> 01:37:53.619
nothing to suggest that there's a better alternative.

01:37:53.819 --> 01:37:59.279
What the court must look at then is how to, does

01:37:59.279 --> 01:38:04.239
the transaction limit the ability of unsecured

01:38:04.239 --> 01:38:07.180
creditors or junior creditors to protect their

01:38:07.180 --> 01:38:10.039
interests? So the court looks at the ratio of

01:38:10.039 --> 01:38:12.920
the roll -up, one and a half to one. The court

01:38:12.920 --> 01:38:17.380
looks at the amount of the dollars in new money

01:38:17.380 --> 01:38:22.119
compared to the overall finance and how much

01:38:22.119 --> 01:38:24.859
is being requested on an interim basis and finds

01:38:24.859 --> 01:38:35.279
that there is over $250 million roughly, if not

01:38:35.279 --> 01:38:41.260
more. that is not being addressed until the final

01:38:41.260 --> 01:38:45.720
hearing. The percentage of the advance on an

01:38:45.720 --> 01:38:48.840
interim basis, the nature of the payments being

01:38:48.840 --> 01:38:54.680
picked, all are positive elements that ultimately

01:38:54.680 --> 01:39:00.680
serve to potentially give room for further negotiation

01:39:00.680 --> 01:39:04.579
or at least for further inquiry by a committee

01:39:04.579 --> 01:39:11.430
or junior creditors. The court accepts the testimony

01:39:11.430 --> 01:39:17.369
that the professionals made reasonable efforts

01:39:17.369 --> 01:39:20.729
and undertook due diligence in trying to secure

01:39:20.729 --> 01:39:25.890
the best terms that are available. The court

01:39:25.890 --> 01:39:30.029
has experience both from cases in front of it,

01:39:30.250 --> 01:39:32.510
from other cases in front of my colleagues in

01:39:32.510 --> 01:39:34.689
this district and from other cases across the

01:39:34.689 --> 01:39:43.489
country. where roll -up ratios are higher, where

01:39:43.489 --> 01:39:48.850
the fees are more draconian. The court views

01:39:48.850 --> 01:39:52.890
the proposed transaction to fall within reason.

01:39:54.989 --> 01:39:58.069
Now, with respect to the US trustee's concerns,

01:39:58.930 --> 01:40:00.869
I'm not going to dicker with the language. I'm

01:40:00.869 --> 01:40:04.399
going to put on the record right now. I'm overruling

01:40:04.399 --> 01:40:09.039
the objections. However, to the extent it turns

01:40:09.039 --> 01:40:12.060
out that facts that have not been made available

01:40:12.060 --> 01:40:15.899
to the court turn to suggest that the court was

01:40:15.899 --> 01:40:21.500
in error or that the court has injured an order

01:40:21.500 --> 01:40:24.300
which contravenes the Bankruptcy Code. The court

01:40:24.300 --> 01:40:27.560
will employ its inherent authority to revisit

01:40:27.560 --> 01:40:37.119
any prior order. language probably all of the

01:40:37.119 --> 01:40:40.760
objections can still can be addressed at the

01:40:40.760 --> 01:40:43.159
final hearing if they're relevant at that time

01:40:43.159 --> 01:40:48.140
but I'm approving on interim basis the language

01:40:48.140 --> 01:40:52.079
proposed by debtors council over the objection

01:40:52.079 --> 01:40:56.420
of the of the US trustee let me be clear if I

01:40:56.420 --> 01:40:59.520
muddled that I'm not saying they can be revisited

01:40:59.520 --> 01:41:03.300
at the final hearing absent it being demonstrated

01:41:03.300 --> 01:41:07.680
that the court relied on factual predicate that

01:41:07.680 --> 01:41:11.079
turned out to be inaccurate or that there's an

01:41:11.079 --> 01:41:14.859
inconsistency with the bankruptcy code. Again,

01:41:15.100 --> 01:41:19.079
the court focuses on the percentage that's being

01:41:19.079 --> 01:41:22.180
made available, $150 million compared to the

01:41:22.180 --> 01:41:28.439
overall transaction. The use of PIC has a significant

01:41:28.439 --> 01:41:32.250
portion of the payment obligations, elude cash,

01:41:36.109 --> 01:41:39.829
what the court views as a reasonable ratio, and

01:41:39.829 --> 01:41:43.329
the agreement by the debtor to defer most of

01:41:43.329 --> 01:41:47.930
the challenge issues to the final hearing in

01:41:47.930 --> 01:41:50.909
language, regarding many of the protections.

01:41:52.229 --> 01:41:55.829
So with that, the court will approve on an interim

01:41:55.829 --> 01:42:02.319
basis the dip finance. I'll leave it to Ms. Bilsky.

01:42:02.359 --> 01:42:05.000
I see your hand raised. I didn't mean to interrupt

01:42:05.000 --> 01:42:08.460
your honor. I was going to say I'm going to leave

01:42:08.460 --> 01:42:11.500
it to Denver's council to get down the best version

01:42:11.500 --> 01:42:15.640
of the order they can within, we're talking minutes.

01:42:16.359 --> 01:42:18.159
Minutes. Thank you. That's all I wanted to say,

01:42:18.220 --> 01:42:20.319
but your honor, it looks like orders are getting

01:42:20.319 --> 01:42:21.920
entered in real time, so I wanted to confirm

01:42:21.920 --> 01:42:27.430
that. Thank you. All right. purposes of clarity,

01:42:27.949 --> 01:42:30.029
the court is still ordering it from the bench,

01:42:31.149 --> 01:42:35.909
but will await the submission of final order.

01:42:37.029 --> 01:42:39.890
Thank you, Your Honor. Much appreciated. You've

01:42:39.890 --> 01:42:41.909
picked the question before I even had the ability

01:42:41.909 --> 01:42:44.670
to ask it, so thank you very much. All right.

01:42:45.409 --> 01:42:47.729
I will now hand, I guess, the virtual podium

01:42:47.729 --> 01:42:51.189
over to my colleague, Megan Wasson. All right.

01:42:51.670 --> 01:42:54.449
Good afternoon. Good late afternoon, Ms. Wasson.

01:42:54.900 --> 01:42:56.600
Good afternoon, Your Honor. Can you hear me all

01:42:56.600 --> 01:42:59.439
right? Yes, I can. Thank you so much. It's Megan

01:42:59.439 --> 01:43:01.720
Wasson from HSF Kramer, proposed folk council

01:43:01.720 --> 01:43:03.960
to the debtors. I will kick it off with the first

01:43:03.960 --> 01:43:05.699
few operative first -day motions and then turn

01:43:05.699 --> 01:43:08.180
it over to a few of my colleagues. But I wanted

01:43:08.180 --> 01:43:09.939
to start by thanking Ms. Gilsey at the U .S.

01:43:10.000 --> 01:43:11.880
Trustee's office for working with us on these

01:43:11.880 --> 01:43:14.680
on what I know was very tight timing. As she

01:43:14.680 --> 01:43:16.779
previewed, I think we are resolved on all but

01:43:16.779 --> 01:43:18.460
one issue in the rages motion, which I'll get

01:43:18.460 --> 01:43:22.119
to in a few minutes. So first, to start with

01:43:22.119 --> 01:43:23.979
our cash management motion, which we filed at

01:43:23.979 --> 01:43:26.840
docket number 15. As Ms. Ringer said with the

01:43:26.840 --> 01:43:28.899
DIP order, I have to note that it is critical

01:43:28.899 --> 01:43:30.960
that we do get this entered as soon as possible

01:43:30.960 --> 01:43:33.060
in order to regain access to the debtor's bank

01:43:33.060 --> 01:43:34.640
account in connection with the DIP financing

01:43:34.640 --> 01:43:37.359
being advanced. Just to give a brief overview

01:43:37.359 --> 01:43:39.479
of the cash management system, it is relatively

01:43:39.479 --> 01:43:42.600
simple. It is a few different disbursement accounts

01:43:42.600 --> 01:43:45.239
and one lockbox account controlled by JP Morgan

01:43:45.239 --> 01:43:48.420
as part of the ABL facility. Because we are under

01:43:48.420 --> 01:43:50.579
active cash dominion, all receipts get swept

01:43:50.579 --> 01:43:52.779
into that JP Morgan account, and then we draw

01:43:52.779 --> 01:43:55.340
down into a concentration account to fund distribution

01:43:55.340 --> 01:43:58.220
through disbursement accounts. We are seeking

01:43:58.220 --> 01:44:00.239
authorization to continue operating that cash

01:44:00.239 --> 01:44:02.220
management system in the ordinary course of business

01:44:02.220 --> 01:44:05.460
and to pay all related fees and expenses. We

01:44:05.460 --> 01:44:08.180
are also seeking authorization to continue ordinary

01:44:08.180 --> 01:44:10.619
post -vacation intercompany transfers, critically

01:44:10.619 --> 01:44:12.899
transfers to and from our non -better subsidiaries

01:44:12.899 --> 01:44:15.840
who are located outside of the U .S. and we are

01:44:15.840 --> 01:44:17.859
seeking to continue the company's ordinary course

01:44:17.859 --> 01:44:20.760
purchase card program with Wells Fargo. There

01:44:20.760 --> 01:44:22.760
is one issue I've been asked by Wells Fargo to

01:44:22.760 --> 01:44:24.859
flag during the hearing today. We've been informed

01:44:24.859 --> 01:44:27.000
that there may have been up to two bank accounts

01:44:27.000 --> 01:44:29.500
left off of the schedule in the motion. We will

01:44:29.500 --> 01:44:31.060
select this in the order, but I would like to

01:44:31.060 --> 01:44:32.960
supplement the record with the details of those

01:44:32.960 --> 01:44:35.800
two bank accounts. All right. Both accounts are

01:44:35.800 --> 01:44:38.520
held with Wells Fargo. One is a zero balance

01:44:38.520 --> 01:44:40.560
account in the name of Jeter Del Monte Foods

01:44:40.560 --> 01:44:42.680
Inc. And the last four digits of the account

01:44:42.680 --> 01:44:46.279
are 8224. We are still clarifying if the last

01:44:46.279 --> 01:44:48.520
account is a non -debtor or debtor controlled

01:44:48.520 --> 01:44:50.539
account, as it has two different company entities

01:44:50.539 --> 01:44:52.819
listed on it. One is a debtor, Del Monte Foods

01:44:52.819 --> 01:44:55.579
Inc. The other is a non -debtor and DINA. The

01:44:55.579 --> 01:44:59.619
last four digits of that account are 1523. We

01:44:59.619 --> 01:45:01.380
will submit a revised proposed form of order

01:45:01.380 --> 01:45:03.199
reflecting those two accounts and their balances

01:45:03.199 --> 01:45:05.260
as of the petition date, as well as an updated

01:45:05.260 --> 01:45:07.520
cash management schematic to the extent necessary.

01:45:07.920 --> 01:45:09.680
And I think we've confirmed during the course

01:45:09.680 --> 01:45:11.539
of my speaking that the language we propose is

01:45:11.539 --> 01:45:13.439
okay with Wells Fargo. So we will include that

01:45:13.439 --> 01:45:15.539
in the proposed order. But we would ask that

01:45:15.539 --> 01:45:17.319
the terms of the motion apply to those two bank

01:45:17.319 --> 01:45:20.039
accounts to the extent applicable. And I believe

01:45:20.039 --> 01:45:21.960
we addressed all comments from the US trustee

01:45:21.960 --> 01:45:23.520
prior to the hearings. We would ask that the

01:45:23.520 --> 01:45:25.399
court enter the to -be revised interim order

01:45:25.399 --> 01:45:27.539
unless there are any exceptions. All right. Does

01:45:27.539 --> 01:45:32.840
anyone else wish to be heard? Motion is granted.

01:45:33.579 --> 01:45:37.800
You'll mark an order to be submitted. I'll move

01:45:37.800 --> 01:45:39.840
on to our critical vendor motion at docket number

01:45:39.840 --> 01:45:42.500
13. The debtors are seeking to make payments

01:45:42.500 --> 01:45:44.699
on account of pre -petition amounts owed to certain

01:45:44.699 --> 01:45:46.760
vendors that are critical to the company's ongoing

01:45:46.760 --> 01:45:49.760
operations. Those include both domestic and foreign

01:45:49.760 --> 01:45:52.800
critical vendors, lien holders, 503b9 claimants,

01:45:52.920 --> 01:45:55.199
and PACA vendors, with aggregate interim requested

01:45:55.199 --> 01:45:58.720
release of approximately $100 million. In response

01:45:58.720 --> 01:46:00.739
to a concern raised by the U .S. trustee prior

01:46:00.739 --> 01:46:03.159
to the hearings, we did add some additional evidentiary

01:46:03.159 --> 01:46:05.100
support for the motion at the end of the first

01:46:05.100 --> 01:46:07.079
day declaration, as opposed to the critical nature

01:46:07.079 --> 01:46:09.630
of the relief being requested. And with that,

01:46:09.770 --> 01:46:11.329
I believe we had also addressed all comments

01:46:11.329 --> 01:46:13.229
we received on the order in advance of the hearing,

01:46:13.289 --> 01:46:15.010
so would also ask the court to enter this order

01:46:15.010 --> 01:46:19.930
if there are no objections. I see no hands raised.

01:46:21.310 --> 01:46:24.510
Granted, order to be submitted. Thank you, Your

01:46:24.510 --> 01:46:27.149
Honor. Up next is our wages motion, which was

01:46:27.149 --> 01:46:29.989
filed at docket number 10. The company has about

01:46:29.989 --> 01:46:32.789
2 ,800 employees and a somewhat complex compensation

01:46:32.789 --> 01:46:35.109
and benefit structure given historical M &A that

01:46:35.109 --> 01:46:37.739
has led to the formation of the company. We are

01:46:37.739 --> 01:46:39.699
seeking to continue all programs in the ordinary

01:46:39.699 --> 01:46:41.520
course, subject to certain limitations in the

01:46:41.520 --> 01:46:43.920
motion regarding post -petition payments to insiders.

01:46:44.619 --> 01:46:46.640
With one exception, we are not seeking to make

01:46:46.640 --> 01:46:48.640
any payments on account of pre -petition amounts

01:46:48.640 --> 01:46:51.520
that exceed the statutory cap. And that one exception

01:46:51.520 --> 01:46:53.479
is I believe the subject of the objection the

01:46:53.479 --> 01:46:54.939
U .S. trustee has raised that we've not been

01:46:54.939 --> 01:46:58.060
able to resolve, so I will turn to that. We are

01:46:58.060 --> 01:47:00.000
seeking to make pre -petition severance payments

01:47:00.000 --> 01:47:02.399
to nine individuals in excess of the statutory

01:47:02.399 --> 01:47:04.880
cap upon entry of the interim order. That is

01:47:04.880 --> 01:47:06.840
one individual more than we noted in the motion

01:47:06.840 --> 01:47:08.579
because we found out over the course of today

01:47:08.579 --> 01:47:11.140
that one additional check we had issued pre -petition

01:47:11.140 --> 01:47:13.680
was not cashed in advance of filing for pre -petition

01:47:13.680 --> 01:47:16.180
severance. You've shared the breakdown of these

01:47:16.180 --> 01:47:17.920
funds with the U .S. trustee. They range from

01:47:17.920 --> 01:47:20.920
about $80 ,000 a person to $20 ,000 a person.

01:47:21.659 --> 01:47:23.699
Seven of the relevant employees are former union

01:47:23.699 --> 01:47:26.199
employees, and the remainder are non -union employees,

01:47:26.380 --> 01:47:28.279
all of which are at the company's plant in Hanford,

01:47:28.279 --> 01:47:31.630
California. The amounts include outstanding severance

01:47:31.630 --> 01:47:33.710
payments and other benefits obligations like

01:47:33.710 --> 01:47:36.050
POCR payments. The aggregate total of the funds

01:47:36.050 --> 01:47:38.010
we're requesting is largely consistent with that

01:47:38.010 --> 01:47:41.569
in the motion. It's $317 ,000, about $160 ,000

01:47:41.569 --> 01:47:43.430
of which is in excess of the statutory capital.

01:47:44.130 --> 01:47:46.109
And as we noted in the motion, there are a few

01:47:46.109 --> 01:47:48.149
reasons that we are seeking to pay these obligations

01:47:48.149 --> 01:47:50.029
on the interim order as opposed to the final

01:47:50.029 --> 01:47:52.510
order. So the first is that we would submit these

01:47:52.510 --> 01:47:54.930
are priority claims. So the timing payment only.

01:47:55.210 --> 01:47:57.170
Payment now only goes to timing of payment, not

01:47:57.170 --> 01:47:59.810
necessarily the eventuality of payment as we

01:47:59.810 --> 01:48:01.770
have requested upon entry of the interim upon

01:48:01.770 --> 01:48:04.909
entry of the final order. Second, we submit that

01:48:04.909 --> 01:48:07.689
these payments are justified under Section 363B1

01:48:07.689 --> 01:48:10.170
and the Doctrine of Necessity. And third, and

01:48:10.170 --> 01:48:12.369
I think most critically, not making these payments

01:48:12.369 --> 01:48:14.069
would put the debtors in the position of reaching

01:48:14.069 --> 01:48:16.029
their obligations under their collective bargaining

01:48:16.029 --> 01:48:17.770
agreements with their unions who are critical

01:48:17.770 --> 01:48:20.340
partners in California. And under California

01:48:20.340 --> 01:48:22.399
law, which would apply to these employees, these

01:48:22.399 --> 01:48:24.819
payments can be considered wages, and the company's

01:48:24.819 --> 01:48:26.840
directors and officers can be subject to personal

01:48:26.840 --> 01:48:29.800
liability for unpaid wages. As a result, if these

01:48:29.800 --> 01:48:31.600
amounts are not paid now, they could simply be

01:48:31.600 --> 01:48:33.739
asserted as post -petition indemnity claims against

01:48:33.739 --> 01:48:35.619
the estate by the debtor's directors and officers.

01:48:36.380 --> 01:48:37.779
But for that reason, we would submit that the

01:48:37.779 --> 01:48:39.880
requested relief, including payment of the severance

01:48:39.880 --> 01:48:41.800
claims, is appropriate and would ask the support

01:48:41.800 --> 01:48:44.899
entity in favor. Let me turn to Ms. Bielski.

01:48:45.159 --> 01:48:47.500
Ms. Bielski. Thank you, Your Honor. Lauren Bielski

01:48:47.500 --> 01:48:48.979
with the Office of the United States Trustee.

01:48:49.159 --> 01:48:51.720
I can be extremely short. We object simply to

01:48:51.720 --> 01:48:53.619
the extent that any payments exceed the statutory

01:48:53.619 --> 01:48:58.600
cap under Section 507A, 4 and 5. All right. I'm

01:48:58.600 --> 01:49:03.119
going to sustain the Trustee's objection for

01:49:03.119 --> 01:49:07.380
those payments that are beyond the statutory

01:49:07.380 --> 01:49:12.220
cap as an interim payment. We can address it

01:49:12.220 --> 01:49:14.800
at the final hearing. So you're authorized to

01:49:14.800 --> 01:49:17.140
make such payments within the statutory limits.

01:49:17.140 --> 01:49:20.420
You can make it pro rata or I'll defer to the

01:49:20.420 --> 01:49:23.079
business judgment of the debtor on to whom and

01:49:23.079 --> 01:49:26.239
how much the payment should be made. Any amounts

01:49:26.239 --> 01:49:29.680
above the priority statutory priorities need

01:49:29.680 --> 01:49:33.199
to be revisited by the final hearing. We could

01:49:33.199 --> 01:49:36.100
wait a couple of weeks, a few weeks. Thank you,

01:49:36.159 --> 01:49:38.560
Your Honor. Thank you. Understood, Your Honor.

01:49:38.800 --> 01:49:44.369
You can submit a revised order. Thank you. I

01:49:44.369 --> 01:49:46.649
will move on to our insurance motion, which was

01:49:46.649 --> 01:49:49.010
filed at docket number 10. Just to keep it short

01:49:49.010 --> 01:49:51.050
here, we are seeking authorization to continue

01:49:51.050 --> 01:49:53.369
our pre -petition insurance and surety programs

01:49:53.369 --> 01:49:55.430
in the ordinary force of business and to pay

01:49:55.430 --> 01:49:57.489
any outstanding amounts owed on account of those

01:49:57.489 --> 01:50:00.090
programs. I believe we also address any comments

01:50:00.090 --> 01:50:01.869
from the U .S. trustees prior to the hearing

01:50:01.869 --> 01:50:03.890
and not heard from anyone else, but we would

01:50:03.890 --> 01:50:05.710
ask that the court enter the interim order absent

01:50:05.710 --> 01:50:08.710
any objections. All right. I see no objection

01:50:08.710 --> 01:50:13.199
and no objection granted. Thank you, Your Honor.

01:50:14.460 --> 01:50:16.539
And for my last motion, that is our Transfer

01:50:16.539 --> 01:50:18.659
Procedures and NOLs motion, which we filed at

01:50:18.659 --> 01:50:21.359
Docket Number 16. While it is actually a very

01:50:21.359 --> 01:50:23.359
long motion, it is really only seeking to do

01:50:23.359 --> 01:50:25.380
two things. It's seeking to prevent transfers

01:50:25.380 --> 01:50:27.859
of the common stock of the topmost debtor, Debtor

01:50:27.859 --> 01:50:29.899
Del Monte Foods Folding Limitives, which is fully

01:50:29.899 --> 01:50:32.239
owned by the debtor of Ultimate Parent, and to

01:50:32.239 --> 01:50:33.880
prevent any folders of that stock from taking

01:50:33.880 --> 01:50:36.470
a worthwhile stock deduction. As we noted in

01:50:36.470 --> 01:50:38.149
the motion, the debtors have various substantial

01:50:38.149 --> 01:50:40.350
tax attributes. That includes more than $400

01:50:40.350 --> 01:50:42.329
million in federal or more than $700 million

01:50:42.329 --> 01:50:45.090
in federal NOLs and more than $580 million in

01:50:45.090 --> 01:50:47.729
state NOLs. Those are very valuable assets of

01:50:47.729 --> 01:50:50.130
the state that we are seeking to preserve, and

01:50:50.130 --> 01:50:52.029
we are seeking implementation of the procedures

01:50:52.029 --> 01:50:54.149
laid out in the NOL's motion to prevent those

01:50:54.149 --> 01:50:55.970
valuable assets from being in any way impaired.

01:50:56.609 --> 01:50:58.609
We did not receive any objections to or comments

01:50:58.609 --> 01:51:00.770
in the motion and would ask absent any objectioners

01:51:00.770 --> 01:51:02.470
today with support and through the interim order.

01:51:03.590 --> 01:51:07.170
All right. Court has reviewed that motion, seen

01:51:07.170 --> 01:51:09.890
it repeatedly. I've never seen an objection.

01:51:11.909 --> 01:51:15.789
Who knows, one day. The motion will be granted.

01:51:16.029 --> 01:51:19.109
Thank you. Thank you, Your Honor. And with that,

01:51:19.130 --> 01:51:21.210
I will turn the virtual podium over to my colleague,

01:51:21.390 --> 01:51:23.090
Ashlyn Bernard, to continue with the operative

01:51:23.090 --> 01:51:31.189
pursuit. All right. Ms. Bernard, welcome. Good

01:51:31.189 --> 01:51:32.729
afternoon, Your Honor. Can you hear me okay?

01:51:32.890 --> 01:51:36.340
Yes, I can, thank you. Ashlyn Bernard of HSF

01:51:36.340 --> 01:51:40.220
Kramer for the proposed debtor council. I just

01:51:40.220 --> 01:51:42.460
want to start by saying it's a pleasure to appear

01:51:42.460 --> 01:51:45.859
before your honor today. We appreciate your consideration

01:51:45.859 --> 01:51:48.020
throughout this hearing and we look forward to

01:51:48.020 --> 01:51:50.159
working with you and all other parties throughout

01:51:50.159 --> 01:51:53.100
the case. With that in the interest of time I'll

01:51:53.100 --> 01:51:54.979
turn to the motions I'll be presenting today.

01:51:57.119 --> 01:51:59.239
The first item I'll cover is the debtor's tax

01:51:59.239 --> 01:52:02.539
motion that's filed at dock at number 12 and

01:52:02.539 --> 01:52:05.810
item number 9 on the agenda. Your Honor, the

01:52:05.810 --> 01:52:09.310
motion seeks customary relief in the form of

01:52:09.310 --> 01:52:12.130
authorizing the debtors to remit and pay taxes

01:52:12.130 --> 01:52:15.229
and fees incurred in the ordinary course, including

01:52:15.229 --> 01:52:18.250
income taxes, use taxes, and property taxes,

01:52:18.630 --> 01:52:22.409
as well as various other customs licensing, regulatory,

01:52:22.689 --> 01:52:26.510
and other fees. The motion further requests to

01:52:26.510 --> 01:52:28.649
continue engaging in tax planning activities.

01:52:28.970 --> 01:52:31.470
in order to provide the debtors with flexibility

01:52:31.470 --> 01:52:34.250
in pursuing a value maximizing sale transaction

01:52:34.250 --> 01:52:37.270
as contemplated by the RSA with the ad hoc group.

01:52:38.829 --> 01:52:40.810
Lastly, the debtors seek authority to continue

01:52:40.810 --> 01:52:43.689
to pay pre -petition fees owed to their logistics

01:52:43.689 --> 01:52:46.789
brokers in connection with import and export

01:52:46.789 --> 01:52:49.430
and ultimate distribution of the debtors' products

01:52:49.430 --> 01:52:53.010
in the ordinary course, and to continue utilizing

01:52:53.010 --> 01:52:56.250
their services and pay any related fees and post

01:52:56.250 --> 01:53:01.439
-petition fees. Your Honor, the debtor's timely

01:53:01.439 --> 01:53:04.619
payment of taxes and fees as well as services

01:53:04.619 --> 01:53:07.899
provided by the debtors' logistic brokers is

01:53:07.899 --> 01:53:12.140
critical to the continued and uninterrupted operations

01:53:12.140 --> 01:53:15.760
of their business. We shared the debtor's tax

01:53:15.760 --> 01:53:18.000
motions with the U .S. trustee in advance of

01:53:18.000 --> 01:53:22.500
filing, and as Ms. Bilski noted at the outset

01:53:22.500 --> 01:53:25.000
of the hearing, I believe the U .S. trustee does

01:53:25.000 --> 01:53:29.800
not have any objections to this motion. Unless

01:53:29.800 --> 01:53:32.500
Your Honor has any further questions of me, we'd

01:53:32.500 --> 01:53:37.000
respectfully ask that you enter the order. There

01:53:37.000 --> 01:53:39.279
are no objections, nor does the Court object.

01:53:40.100 --> 01:53:42.859
It is Dock at 12, I believe the motion, so it

01:53:42.859 --> 01:53:46.520
will mark it granted. That takes us to the Utilities

01:53:46.520 --> 01:53:53.560
Motion. Yep. So as Your Honor flagged, the next

01:53:53.560 --> 01:53:58.380
item is the Utilities Motion, which is... The

01:53:58.380 --> 01:54:00.539
debtors request for customary relief in the form

01:54:00.539 --> 01:54:03.279
of prohibiting utility providers from altering,

01:54:03.300 --> 01:54:08.539
refusing, or discontinuing utility services while

01:54:08.539 --> 01:54:10.439
the debtors navigate through these Chapter 11

01:54:10.439 --> 01:54:13.600
cases. The motion also seeks approval of the

01:54:13.600 --> 01:54:16.199
proposed adequate assurance in the form of establishing

01:54:16.199 --> 01:54:19.720
a segregated escrow account with Wells Fargo.

01:54:20.239 --> 01:54:22.880
and by depositing approximately two weeks of

01:54:22.880 --> 01:54:25.779
the average aggregate cost of utility services

01:54:25.779 --> 01:54:29.720
paid on a monthly basis. In connection with that,

01:54:29.899 --> 01:54:32.939
the debtors request to implement the related

01:54:32.939 --> 01:54:36.260
procedures covered in the motion in connection

01:54:36.260 --> 01:54:39.279
with resolving disputes over any adequate assurance

01:54:39.279 --> 01:54:44.029
with utility providers. Again, I believe the

01:54:44.029 --> 01:54:46.369
U .S. trustee does not have any objections to

01:54:46.369 --> 01:54:49.270
this motion and we have received none from any

01:54:49.270 --> 01:54:52.970
other parties. We would ask the honor, enter

01:54:52.970 --> 01:54:56.310
the order. And this is an interim, the final

01:54:56.310 --> 01:55:00.390
hearing again on August 8th? Yes, yes. I forget,

01:55:00.609 --> 01:55:04.630
that's the date, August, August 4th rather. August

01:55:04.630 --> 01:55:08.109
4th. Well, August 4th. Alright, motion granted.

01:55:08.250 --> 01:55:15.100
Thank you. Thank you. The next item, it's number

01:55:15.100 --> 01:55:18.439
11 on the agenda, is the debtors customer programs

01:55:18.439 --> 01:55:23.659
motion filed at docket number 14. The motion

01:55:23.659 --> 01:55:26.840
seeks to continue to honor certain customer programs

01:55:26.840 --> 01:55:29.260
as described in the motion on a post -petition

01:55:29.260 --> 01:55:32.180
basis and to honor any pre -petition obligations

01:55:32.180 --> 01:55:35.600
owed to their customers as listed in the motion.

01:55:36.359 --> 01:55:39.359
The Dutters customer programs include a range

01:55:39.359 --> 01:55:42.380
of programs relating to volume -based and promotion

01:55:42.380 --> 01:55:45.579
-based, as well as incentive -based, discounts,

01:55:45.880 --> 01:55:48.760
rebates, and allowances offered to their customers

01:55:48.760 --> 01:55:52.359
in the ordinary course. The bulk of these are

01:55:52.359 --> 01:55:55.340
credited toward gross invoiced amounts and do

01:55:55.340 --> 01:56:02.600
not reflect an actual cash... Sorry. do not reflect

01:56:02.600 --> 01:56:07.319
an actual cash liability on the debtors, current

01:56:07.319 --> 01:56:10.180
cash liability for the debtors. In addition,

01:56:10.300 --> 01:56:12.479
the debtors maintain a military sale program

01:56:12.479 --> 01:56:15.600
facilitated through military distributors and

01:56:15.600 --> 01:56:18.479
a broker, which involves the purchase and sale

01:56:18.479 --> 01:56:20.500
of the debtor's products to certain military

01:56:20.500 --> 01:56:24.340
bases. As highlighted in the motion, the success

01:56:24.340 --> 01:56:26.859
and viability of the debtor's business and thus

01:56:26.859 --> 01:56:29.840
maximizing value for the debtor's assets and

01:56:29.840 --> 01:56:32.819
for the debtor's estates are dependent upon the

01:56:32.819 --> 01:56:36.119
loyalty of their customers. Again, I do not believe

01:56:36.119 --> 01:56:38.560
the US trustee has an objection to this motion.

01:56:39.840 --> 01:56:42.020
And with that, unless your honor has any questions

01:56:42.020 --> 01:56:44.539
for me, we would respectfully request entry of

01:56:44.539 --> 01:56:48.359
the order. I have no questions, and I see no

01:56:48.359 --> 01:56:56.039
objections. Motion granted. The next motion I'll

01:56:56.039 --> 01:57:00.380
cover is the creditor's matrix motion. filed

01:57:00.380 --> 01:57:05.079
at DOC at number 8. The motion seeks authority

01:57:05.079 --> 01:57:07.500
to file a consolidated matrix of the debtors'

01:57:07.699 --> 01:57:11.699
creditors and a consolidated list of their largest

01:57:11.699 --> 01:57:14.960
30 unsecured creditors, as well as to redact

01:57:14.960 --> 01:57:19.079
certain personally identifiable information,

01:57:19.460 --> 01:57:22.000
specifically the email addresses and home addresses

01:57:22.000 --> 01:57:26.340
of certain individual creditors. A proposed redacted

01:57:26.340 --> 01:57:28.500
version of the creditor matrix was filed this

01:57:28.500 --> 01:57:32.979
morning. That's at dock at number 29. Again,

01:57:33.020 --> 01:57:34.979
I do not believe that there are any objections

01:57:34.979 --> 01:57:37.239
to this motion. And unless Your Honor has any

01:57:37.239 --> 01:57:39.659
questions for me, we would respectfully request

01:57:39.659 --> 01:57:44.520
Your Honor enter that order. No questions. Motion

01:57:44.520 --> 01:57:49.159
granted. Thank you. The last item I will be presenting

01:57:49.159 --> 01:57:52.869
today is agenda item number 13. That's the debtor's

01:57:52.869 --> 01:57:55.090
motion for an extension of the deadline to file

01:57:55.090 --> 01:57:57.229
their schedules and statements of a financial

01:57:57.229 --> 01:58:01.109
affairs. This is found at docket number five.

01:58:02.229 --> 01:58:05.350
Here the debtors are seeking a 31 -day extension

01:58:05.350 --> 01:58:08.090
for a total of 45 days following the petition

01:58:08.090 --> 01:58:12.529
date. This pushes that deadline to file the schedules

01:58:12.529 --> 01:58:17.310
and statements to August 15th. We've reached

01:58:17.310 --> 01:58:19.649
an agreement with the US trustee on this timeline

01:58:19.649 --> 01:58:22.329
including based on scheduling considerations

01:58:22.329 --> 01:58:27.590
surrounding scheduling the 341 meeting And unless

01:58:27.590 --> 01:58:29.470
your honor has any further questions, we would

01:58:29.470 --> 01:58:32.689
respectfully request entry of the interim proposed

01:58:32.689 --> 01:58:36.170
order Just to confirm this bill ski the 15 -day

01:58:36.170 --> 01:58:38.250
works for you. You've already undertaken the

01:58:38.250 --> 01:58:41.689
solicitation. I Yes on both accounts your honor.

01:58:41.810 --> 01:58:45.890
Thank you. Thank you motion granted Thank you

01:58:46.470 --> 01:58:48.970
Thank you, Your Honor. And with that I'll cede

01:58:48.970 --> 01:58:51.890
the podium to my colleague, Evan Raskin, who

01:58:51.890 --> 01:58:53.890
will cover the balance of the motions on for

01:58:53.890 --> 01:58:57.510
today. All right, Mr. Raskin, you're up at the

01:58:57.510 --> 01:59:01.949
end. Thank you, Your Honor. Can you hear me?

01:59:02.029 --> 01:59:05.930
Yes, I can. Great. Thanks again. For the record,

01:59:06.069 --> 01:59:08.710
Evan Raskin from HSF Kramer on behalf of the

01:59:08.710 --> 01:59:11.470
debtors. Thank you for the court's time today.

01:59:11.949 --> 01:59:14.350
Moving to the penultimate motion, the debtors

01:59:14.350 --> 01:59:17.270
motion to enforce the automatic stay worldwide,

01:59:17.869 --> 01:59:20.729
which was filed at docket number eight and is

01:59:20.729 --> 01:59:24.689
item number 14 on the agenda. The debtors operate

01:59:24.689 --> 01:59:27.409
on a global scale and have significant operations

01:59:27.409 --> 01:59:30.189
outside the United States, including in Mexico

01:59:30.189 --> 01:59:33.489
and South America. The debtors foreign creditors

01:59:33.489 --> 01:59:36.090
and contract counterparties may be unfamiliar

01:59:36.090 --> 01:59:39.489
with the United States chapter 11 process. and

01:59:39.489 --> 01:59:42.010
may seek to take various actions that would violate

01:59:42.010 --> 01:59:45.149
the automatic stay, which could result in significant

01:59:45.149 --> 01:59:48.350
harm to the debtors and their estates. The debtors

01:59:48.350 --> 01:59:51.609
do not seek to expand or enlarge the rights afforded

01:59:51.609 --> 01:59:54.109
to them under the bankruptcy code, rather simply

01:59:54.109 --> 01:59:56.829
to affirm them. We have shared this motion with

01:59:56.829 --> 01:59:58.829
the U .S. trustee and believe they are signed

01:59:58.829 --> 02:00:01.369
off. We believe this relief is customary and

02:00:01.369 --> 02:00:03.609
in the best interests of the debtors, their estates,

02:00:03.649 --> 02:00:06.430
and all of their creditors. And with that, unless

02:00:06.430 --> 02:00:08.779
Your Honor has any questions, We respectfully

02:00:08.779 --> 02:00:11.159
request entry of the order enforcing the automatic

02:00:11.159 --> 02:00:14.260
stay, anti -discrimination, anti -termination,

02:00:14.479 --> 02:00:16.859
and anti -subfacto provisions of the bankruptcy

02:00:16.859 --> 02:00:19.979
code. All right. All right. I have to chuckle

02:00:19.979 --> 02:00:23.220
since my Article 3 colleagues have been restricting

02:00:23.220 --> 02:00:25.479
their ability to enter nationwide injunctions,

02:00:25.739 --> 02:00:28.579
but I can enter an order globally, worldwide.

02:00:30.159 --> 02:00:33.420
Hey, I'll enjoy it. That's fine. Motion granted.

02:00:35.380 --> 02:00:38.199
Thank you, Your Honor. Finally, moving to the

02:00:38.199 --> 02:00:40.680
debtor's application to appoint Stretto as their

02:00:40.680 --> 02:00:43.279
claims noticing agent. This was filed at docket

02:00:43.279 --> 02:00:46.420
number seven and is item number 15 on the agenda.

02:00:47.420 --> 02:00:49.619
In connection with Stretto's retention application,

02:00:49.800 --> 02:00:52.140
the debtors also filed the declaration of Cheryl

02:00:52.140 --> 02:00:54.680
Batance, which is attached to the application

02:00:54.680 --> 02:00:57.699
as exhibit B. This time, I would like to move

02:00:57.699 --> 02:01:01.220
that declaration into evidence. Is there any

02:01:01.220 --> 02:01:05.930
objection? Hearing and seeing no one. admitted

02:01:05.930 --> 02:01:09.050
into evidence. Thank you. That is D3, I believe.

02:01:10.789 --> 02:01:13.229
Thank you, Your Honor. We have shared this application

02:01:13.229 --> 02:01:15.250
with the U .S. Trustee and believe they are signed

02:01:15.250 --> 02:01:17.689
off. So with that, unless Your Honor has any

02:01:17.689 --> 02:01:20.210
questions, we would respectfully request entry

02:01:20.210 --> 02:01:22.670
of the order related to Stretto's retention application.

02:01:24.649 --> 02:01:30.569
All right. I see no objections. Ms. Bielski,

02:01:30.649 --> 02:01:34.170
your office is fine with it? Yes, your honor.

02:01:34.390 --> 02:01:35.949
All comments that we had to the drafts have been

02:01:35.949 --> 02:01:39.050
incorporated. All right. Motion granted. Thank

02:01:39.050 --> 02:01:42.729
you. Application granted. Thank you, your honor.

02:01:42.909 --> 02:01:45.369
Unless you have any final questions for us, that

02:01:45.369 --> 02:01:48.470
wraps up what we had on our agenda today. I do

02:01:48.470 --> 02:01:51.529
not. Is there anyone who wishes to be heard on

02:01:51.529 --> 02:01:56.310
any matters? All right. I'll urge you all, please

02:01:56.310 --> 02:02:00.529
get the orders down to us. Reach out for chambers.

02:02:01.029 --> 02:02:04.020
Reach out for Becca Earl, my law clerk. I know

02:02:04.020 --> 02:02:08.439
she's happy to hear that as needed. I thank you

02:02:08.439 --> 02:02:13.079
for your time. And I guess, unless I'm told otherwise,

02:02:13.300 --> 02:02:16.520
we'll be seeing everybody again on August 4th.