Okay. Good afternoon, everyone. This is Judge
Kaplan. And the court will be hearing the Del
Monte Foods Corporation's two matters, first
aid matters. Allow everybody an opportunity to
adjust their screens. As the hearing is fully
remote, I will lead off with my usual admonishment
to make sure if you wish to be heard, You please
use the raise hand function and I will do my
best to spot you and call upon you. I will take
appearances as we go along rather since I know
there's a time crunch. There are orders that
need to be entered and everyone has some place
to go. So we'll get these moving forward. Let
me turn. to Debtors' Council and have appearances.
Thank you, Your Honor. Good afternoon. Felice
Yudkin, Mike Saroda, David Bass, Cole Schatz,
PC, proposed co -counsel to the Debtors. I wanted
to start off and thank Your Honor for scheduling
this hearing on such an expedited basis. The
Debtors truly appreciate your courtesy in doing
so. I wanted to also quickly make a few introductions
to the court before turning over the podium to
our co -counsel. The first introduction, Your
Honor, is our proposed co -counsel, HSF Kramer.
Additional debtor professionals, Your Honor,
are Jonathan Goulding, the Chief Restructuring
Officer from Alvarez and Marcell. Alvarez and
Marcell is also serving as financial advisor
in the case, and PJT Partners, Your Honor, is
the debtor's proposed investment banker. With
those introductions, Your Honor, I'm gonna turn
the podium over to Adam Rogoff from HSF Kramer,
who's gonna provide the court with some background
regarding today's filings. Sounds good, thank
you, and welcome all. I am aware... that because
of the short time, we have pro -hoc VJ applications
that have been filed and pending for purposes
of today's hearing. We'll take a very liberal
approach and I'll just say welcome to New Jersey
and we'll move on. All right, let's continue.
Good afternoon, Mr. Rogoff. Good afternoon, Your
Honor. First of all, can you hear me okay? I
can, thank you. Excellent. Adam Rogoff. H .S
.F. Kramer. Formerly, you would know us as Kramer
11. And I'm here today with a variety of my colleagues,
and I'll have them introduce themselves as they
address the various motions before your honor.
First off, thank you very much to your honor
and the court for accommodating us for this hearing
this afternoon. In my overview, I'm not going
to get into all the details that are laid out
in the first day declaration of John Goulding
as chief restructuring officer. We come into
this case with a dip facility in excess of $900
million, inclusive of $165 million of additional
liquidity. As you will hear from Ms. Ringer,
we have a pressing need to have the order approving
our dip facilities entered this afternoon, assuming
your honor is inclined to approve that. So I'm
going to focus my presentation on key areas before
turning to the rest of the agenda over to my
colleagues. Fair enough. Headquartered in Walnut
Creek, California, Del Monte has been a cornerstone
of American grocery stores for more than 130
years. It's an internationally renowned producer,
distributor, and marketer of plant -based packaged
food products with a powerful portfolio of brands
that people enjoy daily, including Del Monte,
Cantadena, Collagen, and Joiba. Dalmonte enjoys
market -leading brand recognition and trust due
in large part to its long legacy of its flagship
brand. It's driven by its mission, nourishing
families, enriching lives every day. Partnering
with hundreds of family farmers in the United
States and Mexico, the majority of Dalmonte's
products are locally sourced and travel less
than a hundred miles to the company's production
facilities. Del Monte distributes its products
through a wide variety of channels. The debtors'
operations are divided into three segments, the
well -recognized branded products, a U .S. private
label business, and sales through other outlets
like food service industry. The debtors also
license various of their brands that they own
to third parties for use in certain parts of
the world. Del Monte has over 2 ,700 employees
and operates Four plants, two in the United States,
two in Mexico. And a large number of the employees
are seasonal. I'll come back to that concept.
Some business operations are undertaken by certain
non -debted subsidiaries, specifically in Mexico
and South America. Del Monte has a pack season
production cycle that generally runs between
the months of June and October, depending upon
the specific product. This concept of a pack
season is key to what you're going to hear about
today. The 2025 pack season is underway and is
a driver of our imminent need for liquidity.
We have 18 debtors and starting with Del Monte
Foods Holdings Limited or DMFHL that is the direct
or indirect parent of the other 17 debtors. DMFHL
in turn is a private company whose majority shareholder
is ultimately Del Monte Pacific Limited or DMPL.
DMPL is a public company listed on the Singapore
Stock Exchange. DMFHL maintains a 10 -member
board of directors and 80 % of the board members
are unaffiliated with DMPL. Looking at our capital
structure, the company has substantial debt leverage.
As of the petition date, the debtor's long -term
secured funded debt obligations alone totaled
approximately $1 .23 billion outstanding. And
Your Honor can see the chart identifying the
breakdown between the AVL facility and our different
term loan facilities. I'm not going to go through
the details of the various secured facilities.
It's laid out in the Goulding Declaration. The
debtors also have material unsecured obligations
owing to vendors, suppliers, service providers,
as well as inter -company claims owing to DMPL
for inventory like pineapples and for services.
Let's talk about the events leading up to the
filing. As I previewed, Del Monte has a peak
liquidity need tied to its pack season, which
is when the company purchases its inventory and
packs its products. The pack season runs June
through October for many products. The resulting
inventory is typically sold over the next 12
to 18 months. The company is currently in its
2025 pack season. Del Monte has faced substantial
market constraints in recent years, including
excess inventory in the wake of the COVID -19
pandemic and anticipated increases in demand.
However, this increased demand was not ultimately
met as consumers changed their buying habits.
Left with substantial excess inventory, Del Monte
was forced to store, write off, or sell this
inventory at substantial losses. This also affected
the company's borrowing base under its pre -petition
ABL facility, which further reduced liquidity.
Following the 2023 pack season, the company scaled
back production in response to changing consumer
demand. To manage liquidity, Del Monte relied
on favorable trade terms from its vendors, and
has stretched vendor payments resulting in substantial
accounts payable. Vendors began to contract trade
terms, which in turn further reduced the company's
liquidity. Despite challenging conditions, the
company took actions to reduce overhead and improve
cost margins as a broader part of an operational
transformation and pivot towards an asset light
operational structure. The debtor's liquidity
need for the 2024 PAC season last year resulted
in entering into a liability management transaction
last summer. Again, this is laid out in the Goulding
Declaration, so I won't spend much time on it
here. But the funds provided necessary liquidity
for the 2024 PAC season last year. Since I'd
like to move forward to the main meal, I'll bring
us to the 2025 PAC season. The debtors require
material new liquidity, which fortunately they
have obtained in the form of the dip facilities.
This includes $165 million of additional liquidity
to fund the necessary working capital payroll
and vendor payments. We come into this case with
a production unable to move forward and tens
of millions of dollars owed to vendors and suppliers
to meet the needs of this current tax season.
Without the new liquidity from the dip facilities,
the debtors cannot operate. The alternative is
simple, but stark. It's an immediate liquidation
of the debtors. Instead, we have a path forward
that provides for immediate funds for operations
and supports a value maximizing sale as a going
concern. A sale that will allow for employees,
trade, contract, counterparties to have a going
forward business and preserve brands that consumers
have loved for over 130 years. The debtors believe
that a drawn out bankruptcy process is value
destructive. Instead, To provide for a value
maximizing marketing process, the debtors have
entered into a restructuring support agreement
with the ad hoc term lender group. The debtors,
with the assistance of their investment banker,
PJ Partners, will run a post -petition sale process
to identify potential third -party bidders for
some or all of their assets. And subject to reaching
agreement on mutually acceptable bidding procedures,
the ad hoc term lender group agrees to credit
bid their claims and serve as a stocking horse.
for all the substantial, all the debtor's assets.
The debtors plan to file their bidding procedures
motion within 10 days. And a timeline is laid
out on the next slide. My goal, Your Honor, was
to set the table for today, recognizing that
larger portions of the story will now be served
up by today's motions. Hopefully all of this
will be easy to digest. Having exhausted my pun
limit, I'm gonna turn the podium over to Ms.
Mandel, unless Your Honor, of course, has any
questions for me. No, I do not. I appreciate
the overview. For the record, the court did have
an opportunity to read through the declaration
of Mr. Goulding, as well as the supporting declaration
of Mr. Mates from BJT. So I have a broader understanding
of how we got here. Let me hear from counsel.
Thank you. Ms. Mandel, good afternoon. Good afternoon,
Your Honor. For the record, I'm Leigh Mandel,
HSF brain for the debtors. I'm going to be covering
the joint administration motion for designation
as a complex chapter 11 case. We're getting an
echo feedback. I'll ask everybody to make sure
their mics are off. Continue, let's see how we
do. Are you still getting the feedback? I think
we're okay. Okay. There we go. So I'm going to
be covering joint administration and the debtor's
motion for application as a complex chapter 11
case, starting with the application for designation
as a complex chapter 11 case. which is agenda
item one and filed at docket number four. We
believe the relief requested is customary and
applicable with court rules, and unless the court
has questions, we respectfully request entry
of the proposed order. All right. Let me turn.
Thank you. Let me just, so we understand how
we'll go forward with all of these first aid
matters. Ms. Bilsky, good afternoon. I see you
for the U .S. trustee. I'm going to... As usual,
just depend on you to interject if there are
issues relative to the debtor's first day application.
Does that work for you? Yes, Your Honor. And
if it's helpful, I could also thank you. Laura
Gilske with the Office of the United States Trustee.
I can also represent that we provided comments
to the debtors based on drafts prior to the filing
last night. The debtors have agreed to accept
the vast majority of our comments, and we have
signed off on revised red line orders that we
were provided with this morning and last night.
Except for the dip motion and the wages motion,
I do not believe I'm going to raise any objections
to the balance of the orders, Your Honor. All
right, then. So I'll assume I have the support.
the US trustee and that your comments have been
incorporated apart from the dip motion and the
wages motion and we'll return to those we'll
address those as they come forward. Thank you.
Then let me ask on the first motion is there
anyone who wishes to be heard? I don't see any
raised hands so that will be granted and Ms.
Vandel and I guess I'll address this to all your
colleagues. I assume following this afternoon's
hearing, you'll put together the final versions
of the proposed orders and get them down. Have
them emailed directly to my chambers rather than
the clerk's office so we can see to it that they're
handled. All right? Okay, great. Thank you, Your
Honor. Thank you. I believe next is joint administration,
which is agenda item two and file that docket
number three. The motion requests the administration
of the chapter 11 cases of the 18 affiliated
debtors. Again, we believe this is customary
relief and we would respectfully request entry
of the proposed order. All right. Anyone wish
to be heard? Hearing and seeing no one. Motion
granted. And thank you. And with that, I'm going
to turn it over to my colleague, Rachel Ringer,
who will be presenting the dip motion. All right.
Ms. Ringer, pleasure to see you again. Pleasure
to see you too, Your Honor. Great to see you.
Just for the record, Rachel Ringer from HSF Kramer
on behalf of the company. So first, I do want
to echo Mr. Rogoff's thanks to your chambers,
to the US trustee. And to all of the other case
parties, as you heard from Mr. Rogoff, we're
under a bit of time pressure today. And I certainly
wanted to recognize that we've all been working
very hard under the time constraints that we've
got. But we appreciate everyone's cooperation
so that we can do what we need to do today to
avoid any interruption in operations. On that
note, I'm actually gonna take my presentation
a little bit out of order because we do have
a deadline today for funding. So we need to make
sure that we get the orders to your honor, assuming
you're otherwise inclined to grant the relief.
So I wanna start actually with. talking to you
about scheduling a final hearing if at all possible.
And then I can jump into a more substantive presentation.
But given that we have to actually fill in the
order with those dates, I'd love for my team
to be able to do that while we're having a discussion
of the actual relief requested if at all possible.
That makes sense. So we have a 40 day milestone
under our RSA. I think that we were hoping your
honor might have time available the week of August
4th. I believe August 4th itself would work for
the parties if that works for your honor. That's
a Monday that certainly works for the court.
I would schedule it at 10 o 'clock. I guess my
question will be, and you all have to decide,
it'll depend upon whether the nature and the
scope of the objections, whether it will be remote,
hybrid, or in court. For now, let's just... Understood,
Your Honor. We're aware of your preference with
respect to live testimony. So to the extent that
that final hearing requires it, we understand
we need to be in person for that. Great. We'll
leave that date, August 4th, at 10 a .m. And
that would be for a return date for the bidding
procedures? That would be for the final DIP hearing.
I'm sorry. Your Honor, the bid procedures themselves
have not yet been filed. Right. I'm just trying
to get a sense. So that would be the final hearing
on the DIP. All right. And presumably on the
other first day relief to the extent it needs.
Correct. Thank you, Your Honor. You're welcome.
So unless there were any other scheduling matters
at the outset, I'm happy to jump into the more
substantive presentation of the relief requester.
The only question I had was, is it likely you're
going to need a date in advance of August 4th
for any of the second day it matters, or does
August 4th work for them all? It is possible
we need a date between now and then. Maybe I
will defer to some of my colleagues who are going
to be addressing some of the other First day
relief to maybe talk through dates then but it
is possible. You may want a date Let's call it
keep a week or two prior. I was going to say
keep in the back of your mind then July 28th
That's the prior Monday again at 10 o 'clock.
The court has time that day Okay. Thank you Okay,
so before your honor, the company is seeking
approval of really two DIP facilities. We filed
a motion at docket number 17 with a proposed
interim order attached. We also filed two declarations
in support, the declaration of our CRO John Goulding,
that's docket number 19, and the declaration
of Scott Maitz from PJT at docket 18. Before
I go any further, I'll be remiss if I did not
seek to move the two declarations we filed into
evidence. Both Mr. Goulding and Mr. Mates are
on the line and in the virtual courtroom today.
All right. Let's start with Mr. Goulding's declaration.
We'll mark it for identification as D1. Mr. Goulding,
good afternoon. Good afternoon. All right. The
court has read your declaration and it's being
proffered in lieu of your direct testimony. If
you were to testify before the court at this
hearing, would the content of your testimony
be the same as reflected in your declaration?
Yes, it would. You had the opportunity to review
your declaration prior to being filed with the
court? I did. And everything is truthful and
accurate to the best of your knowledge? Yes.
All right, thank you. Let me ask any other counsel
who are on the line for any parties in interest.
Is there any objection to Mr. Goulding's declaration
coming in in lieu of direct testimony? I see
no raised hand. That's always a good sign. Does
anyone wish the opportunity to cross -examine?
Again, I see no raised hands, so you're off the
hook, Mr. Golden. We'll mark the, again, it's
D1. It's admitted, the declaration's admitted
into evidence. Let me turn to Mr. Mates. Good
afternoon, Mr. Mates. Good afternoon, Your Honor.
Am I pronouncing it right or correctly? You are
indeed. All right, thank you. Gonna run through
the same inquiry. I had an opportunity to read
your declaration. We'll mark it as D2. Did you
have an opportunity to review this document before
it was filed with the court? Sorry, the audio
just cut out. Could you repeat that? Sure. Did
you have an opportunity to review your declaration
before it was filed with the court? Yes, sir.
Okay, and you were understanding the declarations
being offered in lieu of giving direct testimony
this afternoon? I do. All right. And if you were
going to give direct testimony, would the content
of your declaration be the same as your direct
testimony? Yes, it would. And everything was
truthful and accurate to the best of your knowledge?
Yes, it is. All right, thank you. Any counsel
for any party in interest wish to object to the
entry? Your Honor, can Your Honor hear me? Yes,
I can. And I apologize for speaking over you,
Your Honor, nature of the medium. Your Honor,
I would object to certain provisions in the declaration
that I believe are hearsay. You know, Your Honor,
we represent an ad hoc group of minority you
know, lenders, which includes some of the, you
know, the first out, you know, term loans. We
object to, we don't object to the ABL, you know,
facility. We don't object to the use of cash
collateral. And we're okay with the dip other
than, you know, the roll up of the $150 million
on the, you know, on the first day. You know,
so that's where we're coming from, Your Honor.
There are a couple things in the... declaration
that we believe are hearsay or potentially hearsay.
I was retained just a few hours ago this morning.
Our clients were surprised by the filing. The
proposed dip was embedded with them. They weren't
aware of it. So we've been drinking out of a
fire hose all morning trying to get up to speed.
Obviously, you know, given it's just the first
day, the case was filed less than 24 hours ago,
you know, we'd have an opportunity to cross -examine,
you know, to depose the witness. But we do have
some concerns about, you know, some of the language
in the affidavit in particular on paragraph 14,
where he says, based on my participation in the
process and my experience, these efforts were
unsuccessful because, and then he lists why they
weren't able to find any other but doesn't necessarily
say what the basis that is other than his experience.
So, you know, we don't believe that, you know,
that's appropriate, you know, for the document.
So at least with respect to that provision, you
know, we would ask that Your Honor not, you know,
admit the declaration until after we have cross
-examined him in connection with the alternative,
potential alternative DIPs. Are you, let me have
your appearance just formally. It's Alan Brilliant
from Deckard LLP. I was joined here with my colleague
who is admitted in New Jersey, Gary Bennett,
but he stepped out moments ago. We represent
an ad hoc group of minority lenders. All right.
Are you intending or seeking to cross -examine
Mr. Mates? This afternoon on the content of his
declaration or are you looking towards the final
hearing? Our issue is judged that we don't want
the roll -up to occur on the interim basis So
I guess we would you know well, we would you
know would would want to cross him You know this
this afternoon All right, and obviously we would
reserve our rights with respect to the final
hearing so You're taking issue with the latter
portion of paragraph 14. Paragraph 14, and then
also, you know, I would cross him on it. I don't
object to the admission of it, but, you know,
some of the provisions where he says that the
terms are reasonable. All right. Just to clarify,
if I may, the bottom part of that, this is direct
feedback that we got from the 12 parties at work.
that were contacted as part of this process.
I'll give you an opportunity to expand on your
declaration. Ms. Ringer, do you wish to be heard?
Yes, Your Honor, thank you. I was going to maybe
suggest that I finish out my presentation before
we actually do a... any sort of cross of Mr.
Mates. I tend to believe that the issues that
Mr. Brilliant is raising are frankly legal ones
that could be done just on argument. But if he
would like to cross Mr. Mates on these provisions
of his declaration, certainly within his right
to do so. So I would submit that. I should get
through the presentation. I can address some
of the issues that he's now previewed as I'm
walking through it. And then to the extent he
still needs or wants to cross Mr. Mates at that
point, I think it would make sense to wait for
that cross examination until after I've finished
the argument portion, if that makes sense to
your honor. It does. We'll hold off on the admission
of D2 pending further inquiry. Mr. Brilliant,
I'll come back to you. Thank you, Your Honor.
At a later point in time. Ms. Rangel, please
continue. Thank you, Your Honor. As you now kind
of started to understand, the DIP facilities
that we're seeking approval of are facilities
that are being provided by our current lenders.
And I know that Mr. Rogoff, just by virtue of
trying to truncate his presentation, didn't go
into a lot of detail on the current capital structure
of the company. I thought it might make sense
to just quickly hit on that for purposes of the
record. The company has two secure facilities.
They have a pre -petitioned ABL facility and
then what is called the super senior credit facility
that has three loans within that facility. It's
a first out term loan, a second out term loan
and a third out term loan. First out, second
out and third out being referring to the relative
order of priority. With respect to the pre -petition
ADL, there's a maximum availability of $550 million.
It's subject to certain borrowing -based limitations.
It is secured by substantially all the assets
of the obligores under that facility. There are
certain exceptions there, but it has a first
priority lien on accounts receivable and inventory,
and it has a second lien on term loan priority
collateral. As of the petition date, there was
about $211 million outstanding and about $26
million in pre -petition letters of credit. With
respect to the super senior credit agreement,
it provides for three tranches of term loans,
as I mentioned. As of the petition date, there
was approximately 395 million in first -out term
loans, which includes 122 million of incremental
first -out loans that were issued in April of
this year. There was 468 million in second -out
and 135 million in third -out term loans. It's
important, though, to note that the liens and
the security interests granted on each of the
first out, second out and third out are actually
separate and distinct for each of these tranches.
Your honor, in May of this year, the debtors,
as they were heading into the PAC season, as
you heard from Mr. Rogat, the debtors concluded
that they did need additional financing and liquidity
and they needed this liquidity. quickly in order
to continue operations in the ordinary course
throughout the pack season. As Mr. Mates testified
in his declaration, the debtors did do a market
test of the dip financing, but there were no
third parties that were willing to provide financing
on a junior basis, on a non -consensually priming
basis, or against what are otherwise very limited
to the extent they exist at all, unencumbered
assets here. Nor would they be able to achieve
a refinancing of the ABL on the timeline that
was ultimately required by the company. So the
debtors negotiated DIP financing with their existing
lenders. Those negotiations were very hard fought
and they were done at arm's length and they resulted
in the DIP facilities that we're proposing today.
I wanna hit on a couple of the key terms of those
facilities, although you did get a little bit
of a preview of them from Mr. Brilliant. So first
is the DIP term loan facility. and that is a
priming super priority senior secured facility.
It's in the amount of 412 .5 million dollars
and that includes 165 million dollars of new
money commitments. 100 million of that new money
is going to be available upon entry of the interim
order. And then 247 .5 million of rolled up loans,
150 million of which would be rolled up upon
entry of the interim order. So we're talking
about a 1 .5 to one roll up here, which is in
line with precedent. Then we've got the DIP ADL
facility, which is a $500 million super priority
secured revolving ADL facility. This is a roll
-up of amounts under the pre -petition ADL and
this is important because it will allow the debtors
access to their working capital facility absent
which The debtors would actually have to go out
and obtain even more new money financing. We're
talking about potentially $100 million based
on current projections for the case. So the roll
up of the ABL was necessary for getting access
to that working capital and to fund the operations
during the course of the case. I would note though,
they're not actually rolling up all $500 million,
much less is outstanding and drawn at this point,
but $500 million is the availability. Just quickly
on the fees and the interests, because they are
structured in a way here that is actually very
favorable to the company. First, on the term
loan dip, a portion of the interest on the new
money dip is really the only component of fees
and interest here that are payable in cash, not
at exit. Interest on the rolled up loans is payable
in kind. The fees on the dip term loan facility
are twofold. First, there's a backstop premium.
10 % and that's 10 % of the new money commitments.
This is payable in kind and it's payable on a
parada basis to the backstop parties. This is
important because the backstop parties, which
is the ad hoc group represented by Gibson Dunn,
they are agreeing to backstop and earmark funds
now for the full amount of the dip new money
commitment. And they're agreeing to do that now.
So getting approval of the backstop premium has
to happen because the actual backstop happens
between the interim and the final hearing. I
will say though that the way that this DIP has
been structured. Any holder of a first out loan
that agrees to sign the RSA will be offered the
ability to participate in the new money loans
and therefore have their first out rolled up
on a pro rata basis between the first out initial
loans and the incremental loans through a syndication
process. And I can tell you that that syndication
process is going to commence. I think starting
Monday, the debtors professionals are going to
hold a lender call. Obviously, for folks listening
that are interested in that, just be aware that
that is going to kick off next week following
the holiday. The other fee is a commitment fee.
It's 4 % of the new money commitments. It's also
payable in kind. And the fees are only payable
on the new money component of the term loan dip.
and the commitment fee is on the amount being
funded. So it goes pro rata to the full thing.
So it's not like the commitment fee will ultimately
go to that whole group rather than, it's essentially
like you're only agreeing to approve a fee now
that is commensurate with the amount of money
that's being provided. And then with respect
to the fees on the DIP AVL facility, those are
actually payable at exit, again, which is important
from the company's standpoint, given its current
liquidity position. A couple other points just
worth flagging on the DIP. It does provide for
a lien on all unencumbered property. This is
fairly standard. Notably though, the lien on
proceeds of avoidance actions is only upon entry
of a final order. The DIP does provide for adequate
protection packages for pre -petition secured
lenders in the form of replacement liens and
super priority adequate protection claims. And
it does include waivers of certain statutory
and other protections. Although I would flag
that the waivers with respect to 506C, 552B and
marshalling, these all only kick in upon entry
of the final order. which I think is important
to note. There is a carve out here, just again
for the record to explain a little bit of how
the carve out works is slightly unusual. The
carve out here consists of $3 million plus all
accrued and unpaid professional fees as of the
date of a carve out trigger notice. And the $3
million plus those accrued and unpaid become
the carve out reserve. the Carbet Reserve has
a first out with respect to the term loan dip
collateral, not the ADL collateral. So as the
term loan collateral is liquidated, the Carbet
Reserve gets funded and paid. Just on process.
We did send a copy of the dip order to the US
trustee, albeit only very recently. And we did
try to work to resolve as many of the open issues
as we could with the US trustee. We did get a
markup of the order from them earlier this afternoon.
We went through with the lenders. We were able
to incorporate many of their comments. Many of
them were previewing issues that we would expect
to be raised by a committee or identifying that
the committee will and should negotiate those
issues in the order, all of which we were okay
with incorporating. There were some requests
to make certain relief subject to entry of the
final order, but those were ultimately just not
acceptable to the lenders, as Your Honor can
imagine, given that the lenders are agreeing
to fund the DIP on the first day, the protections
that were built into the DIP, for their benefit,
for the vast majority of them, other than the
ones that I've mentioned, those need to kick
in now in order to make sure that they're protected
on what they're funding and what they're otherwise
committing to. So with that, maybe I will pause.
I don't know if Your Honor has any questions,
but I obviously would like the opportunity to
respond to anything that's raised by Mr. Brilliant
or by the U .S. Trustee. Well, all right. Thank
you, Ms. Ringer. Let me turn first to the U .S.
Trustee, Ms. Bielski, and hear her concerns.
Thank you, Your Honor, and Lauren Bielski with
the Office of the United States Trustee. As counsel
said, we were given a copy of the dip motion
in advance of the filing, but it was only yesterday
afternoon, and we tried to turn around comments
as soon as possible and work with debtor's counsel
right up until two o 'clock today to go over
some of the I guess, requests that were not accepted
and I am working off of the red line that we
provided them and I did not confirm with council
whether this is the same draft that ended up
being filed since the timing of when we started
doing our red lines and when it was submitted
to the court was a few hours later. So I apologize
in advance that some of the things I go over
don't quite match up but I think it'll still
work that I can point to certain particular provisions.
And as Your Honor knows, for the first day matters,
our objective is to ensure that the interim relief
granted is narrowly tailored to what is needed
during the interim period and to preserve as
much as possible for the final hearing so that
a committee can be appointed and have time to
meaningfully contribute to the process and to
make their own comments. And we did get our solicitation
out already today to the top 30, and we ask that
those... packages be returned next week and we
are also trying to get the package onto our website
hopefully by tomorrow at the latest. I'm saying
that so that those who are viewing today can
start looking for that. We also try to ensure
that there is an appropriate challenge period
and that any future trustees not inappropriately
hindered by any language in the interim order.
And of course we also try to make sure that the
relief request does not run afoul of the bankruptcy
code. So just making sure the adequate protection
claims are limited to what's allowed by Section
507B. And so to that end, Your Honor, some of
the remaining open issues that I want to bring
before the court have to do with our request
for language predominantly in the first couple
pages of the order in which we ask that the debtors
insert the language subject to an effective upon
entry of the final order granting such relief.
And the one other spot where this language appears
that we have asked that it be included as well
is, I believe it's page 85. At paragraph 14,
the section that has to do with releases and
indemnification. Again, we had asked for additional
language that says subject to an effective upon
entry of a final order. Council explained their
position as to why they find this language objectionable.
And I guess the only thing I would ask is if...
if our comments aren't accepted by the court
either, just to confirm my understanding of the
court's position in prior cases in which I believe
Your Honor stated that if information comes to
light, that would have changed your ruling on
these early hearings, that you have the ability
to revisit your own orders, to at least make
sure that my understanding of that is correct.
I could say at the outset, I've always maintained
the court has an inherent authority to revisit
any order that's on an interim basis should the
circumstances warrant it. But we'll go through
your specific concerns. Thank you, Your Honor.
The other concerns, again it appears multiple
times throughout the order, but I think the first
place it appears is on page beginning with paragraph
six, which is the dip super parity claims and
the language that has to do with, I guess, the
code sections and section 507B. And what our
concern here, especially with the inclusion of
section 326, 726, and anything beyond 707B is
that This is trying to change the, I guess, what
would happen in the events that the case is converted
to Chapter 7, and that the Chapter 7 administrative
claims would have or should have priority over
all other administrative claims. And the language
as written removes that. And also, I guess, keeping
in Section 726, as it appears, the way the language
is here, also changes what is really the priority.
for distribution of property of the estate, again,
if the case would ever convert to Chapter 7.
And so we find that provision as written objectionable
and ask that certain revisions were made to that.
But again, it was not agreed to. And I guess
the last point that remains outstanding, Your
Honor, has to do with the challenge period. And
it's rather lengthy provision, but I believe
it begins on page... I apologize. It begins on
page 70 of paragraph 15, and the language we
requested be at the end of the section. And again,
Your Honor doesn't have the benefit of our red
line, but I will just read the language that
we request be included. And again, it goes to
possibility of there being a trustee appointed
at some point. And the language we're requesting
states, further, for the avoidance of doubt,
any trustee appointed or elected shall, until
expiration of the period provided herein, for
asserting challenges, and thereafter for the
duration of any adversary proceeding or contested
matter, and I'm just going to skip over some
of the language, but be deemed a party, other
than the debtors, and shall not, for purposes
of such adversary proceeding or contested matter,
be bound by the acknowledgments, admissions,
confirmations, and stipulations of the death
that are in this interim order. And again, this
is just to make sure that a chapter, a trustee,
a chapter seven or chapter 11 trustee is not
bound by the debtor's stipulations. And that
is why we requested that inclusion in the order.
And I believe that is the balance of our objections
to the order. All right, thank you, Ms. Bielski.
Before I turn to Mr. Brilliant and hear from
him, Ms. Ringer, do you want to address, I think
there are basically three areas of concern that
Ms. Bielski outlined. Certainly, Your Honor.
I think I may have already addressed the request
of the U .S. Trustee to punt much of the relief
to... a final order or make it subject to entry
of the final order. I think that the couple of
places that were identified on the record, again,
I mean, these are fundamental components of the
relief being requested today and fundamental
to the lenders agreement to fund and agree to
consensual use of cash collateral. So those are
unfortunately changes that we are not, that the
lenders and therefore the company are not willing
to accept. With respect to some of the references
to making adequate protection claims subject
to, you know, not subject to section 726 of the
bankruptcy code. I mean, again, these are...
fairly standard protections for DIP lenders in
interim orders, as well as in final orders. And
so again, our DIP lenders here are not willing
to break the mold, particularly in a case where
neither is the debtors, particularly in a case
where this funding is so necessary and so urgent.
So again, we tried to adhere to fairly standard
language on those provisions, but we're unfortunately
not able to accommodate the requests of the...
of the U .S. trustee. Finally, the changes that
were referenced in paragraph 15 about the trustee
in a chapter 7 or 11 not being bound by the debtor
stipulations, I would submit that the language
that the U .S. trustee is requesting actually
changes the playing field a little bit. If a
chapter 11 trustee is appointed or if the case
it's ever converted into a seven. I think the
parties would have whatever rights they would
have to argue about what the implications are
of the appointment of that trustee at that time.
But it's not something that the company or the
lenders are willing to. embed into the dip order
at this point. So I think I could on each of
the issues. If your honor has any other questions,
please let me know. But I, you know, we appreciate
the U .S. trustees comments. We did try to accommodate
many of the many of the other comments. And unfortunately,
these were ones that we just we just could not
do. All right. Thank you. Let me turn your honor.
The lenders may wish to be heard. I see Mr. Goldstein.
raising his hand manually. All right, okay. Mr.
Goldstein, well, do you wish to wait before we
hear from Mr. Brilliant or do you want to address
these issues that were raised? And let me have
your appearance, Mr. Goldstein. Thank you, Your
Honor, and apologies. I did want to interrupt.
So I tried to raise my hand visually so people
could see. I appreciate being recognized. That's
Jason Goldstein from Gibson Dunn on behalf of
the Ad Hoc Super Senior Term Lender Group. We
filed our 2019 statement at docket number 47
this morning. We represent 73 .2 percent of the
first outlenders and 58 .2 percent of the second
outlenders. I think that's really important just
so that the court understands that that's the
required lender's threshold within the document.
It also represents the majority of two different
tranches secured by separate liens in the term
facility. The reason I raised my hand was just
I thought it could be helpful to give the court
some context before we hear other arguments about
what we're asking for today. And I think the
situation of these cases has been very challenging.
It's been a short run for my clients to understand
the funding need of the company. The company
is very unique in its funding need in that it's
really a working capital issue consistently.
You've heard a little bit from the company about
the PAC and the PAC season. Basically, what it
means is the company needs a lot of funding upfront
to be able to operate in order to pay its employees,
in order to pay suppliers and vendors, in order
to service customers. So it is paramount that
they have more funding than they might need on
a day -to -day basis coming into the season.
And then on the back end of this ramp up, the
company is able to collect on what it's actually
doing from an operational standpoint after the
fact. but it creates a sort of continuous working
capital need. And this is something that my clients
are agreeing to fund in this context on a sort
of short timeframe in that we did not understand
that the company was going to need this. This
is not something where we've been working at
this for six months. We're agreeing to really
bridge this entire case for the benefit of the
companies in order to maximize value for everyone
here. This isn't a case where we're looking at
non -pro -rata DIP funding. This isn't a case
where we're excluding anyone. As Ms. Ringer said,
this is something that's open on a pro -rata
basis to all of the senior lenders to participate
in. They get the benefit of commitment fees for
that. They get the benefit of any roll -up for
that. It's really about being able to bridge
to what the company needs to do here. And we're
providing extensive material new value here in
order to allow the company to run a helpful process.
That process is... a sale process. So we are
looking for a market test of value. No one's
trying to predetermine value here. It's really
a waterfall type case. Hope is that there is
tremendous value in the market. This is a brand
name company that everyone recognizes. We think
there will be robust bidding here and we are
looking to maximize value for everyone's benefit.
And in that context, someone really needed to
step up to provide this funding. It was a relatively
complex situation from the company's working
capital standpoint. And that's really what my
clients are doing here. So I thought it might
be helpful if I just gave that background in
advance of any objections, because we are putting
in real value on an interim basis. It's $100
million in new cash today that's going to fund
all of this operating of the company. The company
doesn't have it. Not only do I understand they'll
miss the payroll today, but it will really severely
impact the value of the company going forward.
The PAC is the most critical operational time,
and we're agreeing to fund that on this interim
basis in order to make sure that we're preserving
the going concern value of the business. And
that is what is going to benefit all of the lenders
in this case. So I have much more that I could
say, but I'll stop there for the court. If you
have any questions, Your Honor, I'm happy to
answer them. All right. Now at this juncture,
I thank you for... your position. All right,
let me turn to Mr. Brilliant at this juncture.
Thank you, Your Honor. Can you hear me, Your
Honor? I can. Thank you, Your Honor. So as I
said earlier, you know, we were very surprised
at the timing of the filing. You know, we had
no expectation that this was going to happen.
You know, the minority lenders who aren't part
of the ad hoc group. you know, got together this
morning and they contacted me. As I said, we're
kind of drinking out of a fire hose here and
trying to get up to speed as best we can in such
a short period of time. But the filing came as
a surprise to the other lenders and consequently
we weren't as prepared. as we would like to be.
There's a bunch of things in the order, like
the U .S. trustee, we have the same view, which
is that on an interim basis, Your Honor should
only approve what is necessary. you know, to
get to a final hearing and shouldn't approve
anything that improves other parties' positions
inappropriately under the bankruptcy code or
otherwise prejudice the case. When they file
the case today, Your Honor, they tell us that
they're going to do a very quick sale process.
The dip loan itself is only a nine month term
loan. On the first day of the hearing, They want
to roll up the entire amount of the ABL, and
my clients don't object to that. And they want
to roll up $150 million of the term loans, including,
on a peri -passu basis, a portion of the incremental
term loans, which were just issued in April and
used to pay out a stub portion of the loans that
were... you know, had filed a lawsuit in connection
with a, they were holdouts in connection with
an LME transaction. You know, we think that there's
a possibility here that there could be, you know,
preference claims against the parties who receive
the money, and there may be, you know, issues
as to whether or not, you know, those, you know,
loans are, you know, are valid. But the bottom
line is, Your Honor, a... a roll -up of a large
amount of debt like this on a contested basis
on the first day of the case with virtually no
notice. The debtors filed less than 24 hours
ago. The dip motion wasn't filed at that point.
So we're at 3 o 'clock in the afternoon here
with pretty much no notice to anybody we think
is not appropriate, violated due process, and
just... not inappropriate thing. The Lenders
Council makes it seem like they're stepping up,
you know, they're providing, you know, financing
to benefit everyone. But the reality is, Your
Honor, what they're doing is they're providing
the financing and trying to improve their position
here dramatically in connection with that, you
know, through the roll -up, a portion of which
they're asking. your honor, $150 million, which
is a huge amount here that they're asking your
honor to approve today. So they're not doing
this for the other term lenders. They're not
doing this for the unsecured. They're doing this
for themselves because it benefits them. Now,
they tell you that everybody has the opportunity
to participate in this, but that's right. You
have the opportunity to participate in it if
you sign an RSA. and you give up all the other
rights you have, you know, in connection with
the case and just go along with the rest of the
ad hoc group. And that may very well be something
that some of the members of my group would want
to do, but they can't decide that on five days,
you know, notice as to whether that's appropriate.
But the fact that they're requiring that, Your
Honor, in a first day hearing is, you know, is
inappropriate. The other thing, Your Honor, is
the dip, if approved, will be the first out dollars.
It's going to be it's going to be at the top
of the waterfall, excluding the collateral for
the AVL lenders. It's not going to be risk collateral.
So they're basically putting in money that will
be repaid because it's the first dollars out.
But they're asking for huge fees that they're
asking your honor to approve today, a 4 % commitment
fee, a 10 % backstop fee, interest of SOFR plus
9 .5%. So, I mean, I don't know what the, you
know, the rate of return for the lenders are
on the loan itself before you take into account
the roll -up of the loan. I guess we'll ask,
you know, Mr. Mates about that, the cross -examination.
But we know it's going to be a huge number, because
it's not as if you're going to be amortizing
the 14 percent fees, you know, over our two -
or three -year period. You're amortizing them
at most, at most nine months, which is the you
know, the term of the diplome, but under the
milestones that are required here, this case,
you know, will be over, if the debtors and the,
and the ad hoc lender group get their way, will
be over, you know, much, you know, earlier than
that. So Your Honor, you know, like the U .S.
trustee, we just want to make sure that Your
Honor enters an order today that doesn't allow
people to inappropriately, you know, improve,
you know, their position. You know, a roll -up,
as Your Honor knows, it's even better than a
cross -collateralization, which is frowned out
from the standpoint. It makes pre -petition debt.
Post -petition debt means that it can't be dealt
with under a plan of reorganization and can't
be challenged. In particular, it shouldn't be
done on the first day with no notice, especially
the limited notice that's been given here. But
more importantly, given all the LME transactions,
the fact that a portion of the money they want
to roll over is less than 90 days old. And within
the preference period, there's no sense here
evaluation whether or not these loans are even
over secured at this point. So they're basically,
they say they're doing this for everybody else,
but they're getting a huge fee. providing the
dip and getting something which improves their
position dramatically on the first day of the
case without anybody having an opportunity to
investigate it and determine whether or not it's
appropriate. So we don't have a problem with
the ABL loans being rolled up given the nature
of those loans, but we do have a problem with
the ad hoc. the term loans being rolled up, and
we do have an issue with the total amount of
fees that they're asking your honor to approve
on the interim basis. Everything else, your honor,
we would reserve to the final hearing. All right.
Ms. Ringer? Thank you, your honor. I'm wondering
if now, to the extent Mr. Brilliant is actually
going to cross Mr. Mates, I'm wondering if now
is the appropriate time. I certainly have responses
to every single thing he just said, but I think
maybe we should do any cross of Mr. Mates first,
and then I can maybe conclude. Perhaps Mr. Mates'
testimony will actually assist in that regard.
I think it would be appropriate. Mr. Brilliant,
I read through Mr. Mates' declaration. and I
looked at the paragraph 14 that you highlighted.
I don't see hearsay issue because I take his
testimony in the declaration as being his view
based on the information that he assembled. I'm
not accepting the statements as being for the
truth of what they're asserted. They may have
helped form his view. But you're subject, you
have the ability to cross -examine him on his
views and on the merits of formulating those
views based on his information. So I'm going
to allow D2 into evidence, subject to cross -examination,
and we can proceed on that basis. Let me see
if I'm looking for Mr. Mates. I'm here. Oh, there
you are. Mr. Mates, I'm going to ask you to raise
your hand. This is virtually. Do you swear or
affirm to tell the truth, the whole truth, and
nothing but the truth under penalty of perjury?
I do. All right. Do you have anybody in the room
there with you? Yes, I do. Who is there? I've
got numbers of the Kramer 11 team, HSF Kramer
11 team. All right. Do you have any counsel with
you in that room? Yes. Mr. Mates is in Kramer's
office. All right. I'm going to give you an instruction.
You are not to take any instructions from anyone
else in that room as part of your testimony.
You're not to look to them, not to seek guidance
from them. If there is an objection to your testimony,
it will be raised by counsel and I will address
it. If you're going to view any notes or any
written information apart from your declaration,
you must advise us that you are reviewing independently
any written documents in assisting your testimony.
Do you understand? I do. All right. Mr. Brilliant,
will you be conducting the cross -examination?
I will, Your Honor. All right. You may proceed.
Has he been sworn in? Yes, he has. Your Honor?
Yes, I did. Thank you, Your Honor. You're welcome.
Mr. Mates, the interest on the dip loans is SOFR
plus 9 .5%. Is that correct? Yes. And there's
a 10 % backstop fee for the backstop lenders?
That's correct. And there's a 4 % commitment
fee that would be given to the members of the
ad hoc group as well, correct? along with anybody
else who participates in the new money financing,
that's correct. Okay, and with respect to the
10 % backstop fee, the only people, parties who
get that are the members of the IDOT committee,
is that correct? That's correct. And the term
loan itself, that matures in nine months, is
that right? That's right. And what is the, you
know, the total internal rate of return that's
expected for the lenders on the loan. I believe
it's somewhere between 35 and 38 percent. It's
not too dissimilar from other internal rates
of return that we see for loans like this. Your
Honor, I'd ask that you direct the witness just
to answer my questions, not editorialize afterwards.
Mr. Mates, you heard a request. Please continue.
Thank you, Your Honor. I just moved to strike
everything after 35 to 38%. So stricken. Thank
you, Your Honor. Now, in determining it's 35
to 38%, what assumption did you make with respect
to the 4 % commitment? What assumption did you
make there? The assumption is that the 4 % is...
earned on the new money, but payable at exit.
Okay, but did you assume that members of the
ad hoc group just received a pro rata portion
of it based on the amount of the loans? Did you
assume that no one else participated and they
got a higher percentage? What assumption did
you make with respect to that? It's for the entire
facility. So we, the math is four percent of
the new money is the dollar amount that we used.
when calculating the IRR. So it's irrespective
of who comes in. Okay, but if other people don't
come in, members of the committee would get a
larger... I'll strike that. And the outside of
the term date is nine months, right? That's correct.
And when you set that, the expectation is that
the company would have its assets sold or emerged
from bankruptcy prior to that. Isn't that right?
That's right. And that, in fact, may be two or
three months shorter than that. Isn't that right?
I don't know. OK. And the 35 % to 38 % that you
gave us, that assumes that it's a full nine -month
loan. Isn't that right? That's correct. So if
it's shorter, the internal rate of return would
be even higher. Isn't that right? That's right.
And you know, here there's a large portion of
the the first out term loan that's asking to
be rolled up on on day one. Isn't that right?
Yes, it depends on your definition of large.
Do you not think $150 million is large? I think
about it relative to other similar Dips in these
situations. All right. What's the total? What's
the total amount of the the first lien? for the
first out term of It's about 400 million dollars
the 150 million is more than a third of that,
right? That's correct and a third of the loan
is a large portion wouldn't you say Okay And
a portion of the loans that are being rolled
up on a peri -passive basis are the incremental
term loans, is that correct? That's correct.
And the incremental term loans have been outstanding
for less than 90 days, isn't that right? That's
my understanding. And the use of those proceeds
was used to pay out what I'm going to refer to
as the stub lenders, is that right? Can you clarify,
please? Do you not understand what I mean by
stub lenders? Yeah, I'm not sure. The court understands
the purpose of the payments and the history.
That'll assist the process. I understand the
derivation of the $122 million. But there were
parties who didn't participate in the LME transaction.
Is that right? That's right. And they filed a
lawsuit against the company in Delaware courts.
Correct. And then in April, they were paid off.
Is that correct? I believe it was April. And
April 9th sound right to you? I'm not sure of
the exact date. You agree with me that was less
than 90 days ago, right? That's my understanding.
The dip loan is going to be secured by all of
the non -ABL assets on a first priority basis,
is that correct? That's my understanding, yes.
And that's going to be senior to the first out
term loans? That's my understanding. And senior
to the second out term loans? That's my understanding.
And senior to the third out term loans, right?
That's my understanding, yes. Okay. And there's
$165 million of new loans that are being made
under the DIP. Is that correct? That's correct.
And do you believe that the DIP collateral is
worth more than $165 million? Objection. Your
Honor, this is premature for today to talk about
valuation. Mr. Mates is talking about the DIP
process, not about a valuation dispute. I'll
overrule the objection. He can ask the question.
Mr. Mates, you can answer. We haven't done evaluation
of the collateral. You think there's a possibility
here that the collateral could be worth less
than $165 million? We haven't done evaluation
of the collateral. Okay, so if the collateral
was worth less than $165... million dollars and
a hundred and fifty million dollars was uh...
you know was rolled up here then a hundred and
fifty million which is peri -paso with i think
it testified earlier over four hundred million
that would be dramatically under secured that
right i'm not following the question okay there's
the i think it testified earlier that there's
approximately four hundred million dollars and
first out term loans correct that's correct About
three hundred and nine. If I have it right, it's
about three hundred ninety five million, correct?
My recollection is this is approximately four
hundred million dollars. Okay. And if those loans,
if the collateral that secures them is worth
less than one hundred and sixty five million
dollars, then those loans are under secured.
Is that right? You've been doing bankruptcy advisory
work for over 20 years, correct? No. How long
have you been doing bankruptcy advisory work?
About 14 years. 14 years. And you're familiar
with the term under -secured, right? Yes. So
if a loan is worth the face amount of a loan,
$165 million, and it's collateral, were worth
less than $165 million, you'd agree with me it's
under -secured, right? Okay. So I guess what
I'm asking you is if the collateral is worth
less than $165 million and you have $400 million
of first -down term loans, then it's possible
that the loans that are being rolled up are under
-secured. Is that right? I'm kind of objecting
again on a... hypothetical, speculation, et cetera.
But I think Mr. Brilliant has made his point.
At this point, I'm going to sustain the objection.
I understand the argument. Mr. Brilliant, let's
move on. OK, thank you. Do you have your declaration
in front of you? I do. Can you turn to paragraph
29 for me? Okay, before we get to the language,
let me just ask you a few questions. You're familiar
with roll -ups, right? Yes. And the effect of
a roll -up is to make pre -petition debt post
-petition debt, right? That's right. And then
it can't be, without the lender's consent, under
the bankruptcy code, it can't be compromised
through a plan, is that right? That's my understanding.
And then it would be senior administrative claims
are senior to... Pre -prepetition claims, is
that right? That's right the and You know you
Have you been involved in situations where there
was a roll -up? of collateral on an interim basis
on the first day over objection of creditors
in the other than this case I don't recall over
objection of credit, of creditors. Okay. And,
uh, uh, uh, ordinarily, wouldn't you agree with
me that roll -ups occur on the final hearing
date, not an interim date? Isn't that right?
I don't think that's necessarily the case, no.
Okay, so tell me in what situations you've been
involved in where roll -ups occurred on the,
on the first day. Most recently was at home group,
which was two weeks ago, the lenders advised
by your firm rolled up two times the ratio of
the money funded. And there was no objection
there at the interim hearing, isn't that right?
I don't recall there being an objection. How
do you know that that occurred? Who told you
that? How do you know? Were you involved in the
matter? Yes. Okay. All right. But there was no...
As far as... Are you aware of any objections
that occurred at that hearing? I don't recall
there being objections. Were you at the DIP hearing?
I participated in the first part. Okay. And you
don't recall there being any objection there?
Yeah, I don't recall there being any objection.
Okay. And then what other... Matters are you
aware of where there was a roll -up on the on
the first day? Okay, so you'd agree with me that
roll -ups are not common right I Would say they're
not uncommon Okay, but there's a difference and
that's the language you use in paragraph 29 But
there's a difference between something that's
common and something that's not uncommon. Isn't
that right? Okay. Okay. I mean, is that a yes,
sir? The question, can you repeat the question,
please? In paragraph 29, use the word that roll
-ups are not uncommon features required by DIP
lenders under the DIP financings of this type.
Did I read your language properly? That's right.
That's right. Yeah, and you know, although you
say they're not uncommon, you don't say that
they're common because there's a difference between
common and uncommon, right? Yeah, that's right.
I said they're yeah, they're not uncommon. That's
correct. Okay, that's right, because they're
right and there's a difference between common
and uncommon, right? In your mind, this is your
language, right? In your mind, there's a difference,
isn't that correct? Objection, this is getting
a little argumentative and unclear. Sustained,
I understand the difference between the words.
Let's move forward. All right, so just a few
more questions, Mr. Mates. You say that you did
a search for other diplomas, is that correct?
That's correct. And you say that... No other
proposal was actionable. Did you receive any
proposals? We did not. So when you say there
were no actionable proposals, what you really
meant in your declaration is there were no proposals
at all? I meant that there are no no actionable
proposals. If that's what I wrote, that's what
I meant. Well, is there? OK, but is there whether
it? So when you say there are no actionable proposals,
what you really mean is there were just no proposals
at all? I meant that there were no actionable
proposals. If you're asking me if we received
any proposals, we did not receive any proposals,
if that helps move things along here. It does.
All right, thank you. And so the only proposal
you received was from the ad hoc group, is that
correct? That's correct. And the ad hoc group?
required the roll -up feature? Yes, they did.
And the debtors, you know, agreed to that, is
that right? Yes, we did. And you agreed to that
because there were no other proposals? There
were no other proposals and again, you know,
roll -ups are not uncommon features of debt facilities.
I have nothing else, Your Honor. Thank you, Mr.
Brilliant. Any redirect, Mr. Hammerman? Yes,
very briefly, Judge. And first of all, can you
hear me okay? Because we're in the same room,
we're using Mr. Mates' microphone, and I'm just
trying to avoid echo. I can hear you. Thank you.
Great. Mr. Mates, Mr. Brilliant asked you about
the backstop. The backstop premium going only
to the ad hoc group. Can you explain why that's
going to the ad hoc group? Yes, the backstop
fee is going to the ad hoc group because the
ad hoc group is the one that's agreed to backstop
the financing. Are they the group that's taking
the risk and earmarking capital? That's correct.
Mr. Brilliant asked me all sorts of questions
about the size of the roll -up. Can you tell
the court a little bit more about why you think
the size of the roll -up here, 1 .5 to 1, is
acceptable? Yeah, again, I think it's supported
by other dip roll -ups that we've seen. We've
seen certainly, as I mentioned, At Home Group
was 2 to 1. We've seen other ones that are 2
to 1. So this one being one and a half to one
was, again, within the range of what we tend
to say. Mr. Brilliant asked you about whether
the roll -up was a requirement of the lenders,
and you said yes. Can you describe for the court
again what happens if the lenders do not fund
the dip because there is no roll -up? What are
the consequences to the company? needs capital
today, right, given where they are in their working
capital cycle and their lack of liquidity. So
without raising this capital today, it's a mess.
They will be able to make certain payments that
they need to, you know, withstand the ongoing
operations of the enterprise. Are you aware,
sir, that about a week ago, there was a press
leak about Del Monte looking for a dip facility?
Yes, I am. Did anyone other than the group you
had contacted contact you in an effort to make
a competing dip proposal? No. So the dip proposal
that we have today is the only one available
to the company, correct? That's correct. I have
nothing further to add. All right, thank you.
Mr. Brilliant, anything more on your end? Just
argument, Your Honor, at the appropriate time.
All right, well, now's the appropriate time.
Let me have your argument, then, Ms. Ringer.
I'll let you address the arguments. Thank you,
Your Honor. Your Honor, we don't think the DIP
meets the standards for being approved here.
Again, we have no objection to the ABL portion
of the DIP, and we would have no problem with
the DIP if the fees where appropriate here, and
the roll -up doesn't occur on the first day,
but would be subject to final hearing. Your Honor,
it's really unprecedented to have on the first
day of a case to... you know, here less than
24 hours, you know, notice no committee being
formed, you know, to approve 150, you know, million
-dollar roll -up. As I said, we all know about
the case law in connection with cross -collateralization.
This is, you know, significantly, you know, worse
from the standpoint that, you know, it enables,
you know, party to, you know, have debt which
can't be compromised as part of the Chapter 11
case. You know, here, Judge, there is no evidentiary
record for Your Honor to find that the lenders
aren't being dramatically advantaged, you know,
by the roll -up debtors. You know, I believe
the testimony, quite frankly, you know, from
Mr. Mates was a little disingenuous on the valuation
issues, but leaving that aside, there's no testimony
here that the first -out term loan is over -secured
and therefore, you know, that... you know, that
by being rolled up, that they're not receiving,
you know, a huge benefit. The reality is they
will be senior to the other members of the, you
know, the first out term loan group who don't
participate in the loan. And because there's
no evidence here that, you know, that they're
over secured, you know, it's clear here that,
and there's argument, you know, or they've left
open the issue that the amount of the new money.
you know, might not even, you know, be sufficiently,
you know, covered. I don't believe that to be
the case, Your Honor, but that's the, you know,
that's the evidentiary record you're dealing
with. So you're being asked basically to, you
know, allow on the first day of the case a roll
-up of a large portion of the unsecured debt
over the objection of other, you know, other
lenders in a way that, you know, may dramatically,
you know, benefit the you know, you know, those,
you know, those lenders, you know, their argument
that this is being done on a, on a parietal basis
and there's a backstop fee and that everybody
would share rateably, you know, the dip is, is
also disingenuous that you have to agree, you
know, to sign, you know, the RSA and to support.
you know, there's, you know, sale process. And
again, it's being done on 24 hours, less than
24 hours notice with no opportunity for the lenders
to really, you know, vet the whole process. The
total amount of the fees here, Your Honor, are
huge. You know, there, you know, as a testimony
from Mr. Mates, they're between 35 and 38%. Uh,
you know, on the new money again for the first
out dollars, uh, you know, in this, in this,
in this case and that, uh, in and of itself,
uh, seems too high in the amount that they're
asking your honor, you know, to approve on day
one, the full commitment fee for the full amount
of the loan, you know, plus, uh, uh, you know,
the, you know, the backstop fee is, uh, uh, you
know, inappropriate, you know, here. under the
circumstances. We think that the debtors have
an obligation to negotiate harder with their
lenders and to come up with something that was
better or at least to get the things that your
honor and the creditors need an opportunity to
vet and to review to be decided on the final
hearing. I think the U .S. trustee has it exactly
right that on the interim basis your honor should
only approve what's necessary you know, to get
the estate to the, you know, to the final hearing
and that, you know, without, you know, irreparably,
you know, changing the rights of the various
parties in the case. And unfortunately, this
dip, you know, you know, doesn't, you know, doesn't
do that. And this is all exacerbated as well
by the fact that part of the loans that they
want to, you know, roll up were, you know, were
incurred. you know, less than 90 days ago within
the preference period, you know, to pay, you
know, parties who presumably were not under,
over secured and are subject to, you know, preference
attack. And here you're trying to, you know,
insulate, you know, a portion of that, which
is. uh, also inappropriate. Effectively, what
they're saying, Your Honor, is that a secure
creditor who has a lien on substantially all
the assets can just demand whatever they want
for terms of a, of a, of a dip, and that Your
Honor doesn't have to look at whether it's reasonable,
that, you know, that reasonableness is effectively
determined, uh, by what they want, and because
they're over -secured, you know, there's no other
alternative here. If you look carefully at the
language from Mr. Mates in his affidavit, he
doesn't say that this is reasonable. He says,
you know, based on the circumstance of the case
and no other proposals you know that uh... you
know that uh... uh... you know that your honor
should approve it it's not you know it's it's
not under you know fair you know terms you know
your honor and the court has an obligation you
know to look at it and make sure that it's appropriate
under the circumstances of this of this case
and we submit your honor that it's not and that
it shouldn't be approved and that you know the
debtor should just have your honor approve the
AVL roll -up and the use of cash collateral or
ask the lenders to remove the roll -up and push
more of the fees to the final hearing. move the
roll up on an interim basis, push it through
the final hearing, and if they'll agree to that,
that could be approved as well. Does Your Honor
have any questions for me? Otherwise, I think
I'm finished with my argument. No, I don't. Thank
you, Mr. Berling. I appreciate the argument.
Ms. Renger. Thank you, Your Honor. I think maybe
it would be appropriate to start with where Mr.
Brilliant left off, which is the question to
Your Honor is, is it appropriate under the circumstances
of this case? And I would point Your Honor to
paragraph 30 of the Mates Declaration, which
actually does say that he believes it's reasonable
under the circumstances. But more fundamentally,
I think what Your Honor sees in the testimony,
including the testimony from Mr. Goulding, which
came in without opposition. And what you heard
from Mr. Meats is that we need this money today.
And I will tell you, I personally have been sitting
here watching the clock as this hearing is going
on because I am concerned about us missing deadlines
for funding. We are already in the middle of
the PAC season. with manufacturing plants running
24 -7, and the company needs the cash urgently
in order to be able to continue to operate. Without
it, the business will just shut down, which is
not good for Mr. Brilliant's clients or any of
the creditors of this case. So, you know, I'm
happy to address each of the points that he raised.
I mean, they've got an issue with The term loan
roll -up, this was required by the term loan
lenders as a condition to their commitment to
provide the new money financing. I will flag
that it is relatively unusual for this new money
dip to be syndicated in the way that they're
proposing to do it here, where folks can come
in and if they do, they can provide a portion
of the new money dip and they will get their
first out rolled up as part of that syndication
process on a pro rata basis. So that is unusual.
It is an option. Yes, there is a requirement
that they sign the RSA. It sounded like Mr. Brilliant
was suggesting maybe some of his clients will
actually decide to take that opportunity. I think
it is too early to say today whether or not they
will. They can look at the circumstances of the
case and decide whether they want to. What you
heard from Mr. Mates is that he hasn't done evaluation
of the company. That's all that his testimony
was. So, you know, I think that the insinuations
from Mr. Brilliant about what the dip or any
rolled up pieces of debt are impaired. I think
those are extrapolating far more than what Mr.
Mates actually testified to. On the fees itself,
I think that in throwing out numbers and percentages.
Mr. Brilliant is ignoring the fact that these
fees are picked. They're paid in kind. It's not
a cash outlay from the debtors at the outset
of the case. That is extremely favorable to the
company. I will take issue with the suggestion
from Mr. Brilliant that the company didn't negotiate
hard enough with its lenders. I will tell you
personally, the negotiations were very hard fought.
And the fact that these fees are payable in kind
is is very important because liquidity is a problem.
And, you know, we're telling you today that this
business will shut down without it. I think that
I mean, I think I've addressed the commitment
fee, the commitment fee, I think I did in my
original remarks. But if other folks participate
in the new money term loan, they share in that
portion of the commitment fee. So it's not It's
not like that commitment fee is just on day one
going entirely to the ad hoc group. If other
folks do decide to participate during the syndication
process, they share in that commitment fee. And
with respect to the backstop fee, that backstop
fee is going to folks who are backstopping, which
is entirely appropriate and frankly standard
as far as backstops go. They're having to earmark
funds now. And so the fee needs to be approved
now. And the other provisions of the dip that,
you know, were raised by the US trustee and that
Mr. Brilliant, I think was tagging onto. I mean,
again, I addressed that at the outset of my remarks,
but we actually tried to craft a dip that punted
a lot of issues that usually a committee will
raise to. a final hearing, right? You heard me
say that 506C, 502B, marshalling, all of those
issues are punted to a final hearing and I think
has been ignored. I mean, there is a challenge
period that is embedded into the dip that the
committee can take advantage of if and when it
is appointed. The committee will do an investigation
and that is preserved in this dip. With that,
Your Honor, unless you have specific questions
that you'd like me to address, I am actually
going to be a little bit more brief than I otherwise
might be, just given the timing today. But please,
Your Honor, if you have questions, I am certainly
happy to answer them. All right, thank you, Ms.
Ringer. Mr. Goldstein, last comment. Thanks so
much, Your Honor. I'll be brief as well, because
I have the same concerns as Ms. Ringer about
timing and ensuring we can fund today. I'll just
say a couple points that Mr. Brilliant raised.
He's talking about the dip being sort of first
out dollars at the top of the stack here. It's
actually just inaccurate. This is a harder dip
to fund because we both have an ABL dip and a
term loan dip. So it will not be first dollars
on ABL collateral. And I think that's something
that's important for the context of how this
dip was put together, what my clients are willing
to do. I'll just highlight one feature. Ms. Bringer
used the word unusual. I think she meant in a
way that my clients were offering participation
to everyone else in a helpful way, another helpful
feature my clients agreed to. So the carve -out
is actually not senior in this instance to the
ABL. It is only senior on the term collateral.
So my clients have agreed to effectively fund
the professional fee cost of the case on their
backs and not put that at the top of the stack
as you would normally see because the ABL structure
here. So if that's something that shows actions
being louder than words, we really are trying
to help bridge this through a robust sale process.
In terms of the size of the facility, Ms. Ringer
mentioned the rates. Most of the rate is picked
on the actual new money, which I think is another
unusual but helpful feature. That is how we kept
the size of the overall dip down. The dip would
have to fund itself if it was cash pay interest.
The roll -up is all PIC. I'll also note that
the AP packages here are the same across all
of the tranches in the prepetition facility.
They do not include any cash pay interest. And
I'll just also note, given there was some discussion
about it with Mr. Maitz, Sextera, Charismatic,
Thrasio, Bed Bath and Beyond, Vier are all examples
of roll -ups that are larger than one and a half
to one. And most importantly, Franchise Group,
a two -to -one roll -up, had an objection on
day one from junior creditors. And in Phoenix
Services, we had informal objections from the
U .S. Trustee on the roll -up provision. So there
is precedent for that. We do think, to Mr. Mates'
comments, that one -and -a -half -to -one is
not out of line with precedent, and honestly,
on the low end. So I appreciate the court's time
and consideration. Happy to answer any other
questions your honor may have. I do not. Thank
you. All right, is there anyone else who wishes
to be heard? Your honor, can I, talent brilliant,
can I be heard very quickly in rebuttal? Just
very briefly, please. Yes, your honor, so just
a few things. I mean, obviously we have the record,
you know, that's, you know, in front of us in
connection, you know, with, you know, with the,
you know, the dip and the fees. You know, there
was no testimony from Mr. Bates about, you know,
what... you know, other comparable entities in
his tip or, you know, here as to, you know, what
is reasonable. And obviously, you know, we have
this issue here about the collateral. But one
thing I would say is, you know, this is first
out dollars, 38%, you know, interest, you know,
is unprecedented. With respect to, you know,
Ms. Pringer said that, you know, absent your
honor, approving the dip today, you know, that
the, you know, the company will be forced to
liquidate. There's nothing in the record that
supports that other than her statement. So I
don't think that's a justification here for that.
And with respect to this issue of the ABL collateral,
I was very clear, Your Honor, in my cross -examination
with Mr. mates about that. That is not something
that we didn't bring out on cross -examination
or understand the, you know, the nature of the
collateral here, and that doesn't change our
argument at all. You know, as for the fact that,
you know, the roll -up itself... you know, on
a final basis, maybe consistent, you know, with
other transactions doesn't change the fact that
roll -ups are frowned upon. You know, the, you
know, Your Honor, I'm sure is familiar with Sweetland,
the other, you know, cases that deal with cross
-collateralization, of which this is even, you
know, even worse, but just not appropriate on
a first day hearing over an objection. That's
all I have, Your Honor. All right. Thank you,
Mr. Brilliant. And anyone else? I don't see any
raised hands. All right. These issues are always
difficult for a court. Countless times, both
in court and cases in front of me, as part of
seminars, I've heard the plea and the argument
raised that courts should start calling the bluff
when presented with dire consequences of failure
to fund under a dip or use of cash collateral.
In other words, the court should challenge and
in effect what I view is to take a gamble that
the bluff will not result in a forced liquidation
or destructive value to an entity. This court
does not wish to gamble with the interest of
employees, with vendors, with investors. I understand
the argument, Mr. Brilliant. I certainly understand
the frustration in being presented with alternatives,
with limited notice, where the argument is. Judge,
you have to approve this or there will be catastrophic
consequences. That's why the court does take
into account all the circumstances of the case,
all the elements of the proposed transaction,
and tries to find and identify what is reasonable,
what is not reasonable. In viewing the situation
at hand, as considered the testimony of Mr. Mates
through his declaration and our cross -examination,
as considered the testimony of Mr. Goulding through
his declaration, it's clear to the court that
from the debtor's perspective and the debtor's
professional's perspective, there are no competing
proposals to consider. this transaction, this
proposed transaction has been market tested.
It may result in a costly transaction, but there's
nothing to suggest that there's a better alternative.
What the court must look at then is how to, does
the transaction limit the ability of unsecured
creditors or junior creditors to protect their
interests? So the court looks at the ratio of
the roll -up, one and a half to one. The court
looks at the amount of the dollars in new money
compared to the overall finance and how much
is being requested on an interim basis and finds
that there is over $250 million roughly, if not
more. that is not being addressed until the final
hearing. The percentage of the advance on an
interim basis, the nature of the payments being
picked, all are positive elements that ultimately
serve to potentially give room for further negotiation
or at least for further inquiry by a committee
or junior creditors. The court accepts the testimony
that the professionals made reasonable efforts
and undertook due diligence in trying to secure
the best terms that are available. The court
has experience both from cases in front of it,
from other cases in front of my colleagues in
this district and from other cases across the
country. where roll -up ratios are higher, where
the fees are more draconian. The court views
the proposed transaction to fall within reason.
Now, with respect to the US trustee's concerns,
I'm not going to dicker with the language. I'm
going to put on the record right now. I'm overruling
the objections. However, to the extent it turns
out that facts that have not been made available
to the court turn to suggest that the court was
in error or that the court has injured an order
which contravenes the Bankruptcy Code. The court
will employ its inherent authority to revisit
any prior order. language probably all of the
objections can still can be addressed at the
final hearing if they're relevant at that time
but I'm approving on interim basis the language
proposed by debtors council over the objection
of the of the US trustee let me be clear if I
muddled that I'm not saying they can be revisited
at the final hearing absent it being demonstrated
that the court relied on factual predicate that
turned out to be inaccurate or that there's an
inconsistency with the bankruptcy code. Again,
the court focuses on the percentage that's being
made available, $150 million compared to the
overall transaction. The use of PIC has a significant
portion of the payment obligations, elude cash,
what the court views as a reasonable ratio, and
the agreement by the debtor to defer most of
the challenge issues to the final hearing in
language, regarding many of the protections.
So with that, the court will approve on an interim
basis the dip finance. I'll leave it to Ms. Bilsky.
I see your hand raised. I didn't mean to interrupt
your honor. I was going to say I'm going to leave
it to Denver's council to get down the best version
of the order they can within, we're talking minutes.
Minutes. Thank you. That's all I wanted to say,
but your honor, it looks like orders are getting
entered in real time, so I wanted to confirm
that. Thank you. All right. purposes of clarity,
the court is still ordering it from the bench,
but will await the submission of final order.
Thank you, Your Honor. Much appreciated. You've
picked the question before I even had the ability
to ask it, so thank you very much. All right.
I will now hand, I guess, the virtual podium
over to my colleague, Megan Wasson. All right.
Good afternoon. Good late afternoon, Ms. Wasson.
Good afternoon, Your Honor. Can you hear me all
right? Yes, I can. Thank you so much. It's Megan
Wasson from HSF Kramer, proposed folk council
to the debtors. I will kick it off with the first
few operative first -day motions and then turn
it over to a few of my colleagues. But I wanted
to start by thanking Ms. Gilsey at the U .S.
Trustee's office for working with us on these
on what I know was very tight timing. As she
previewed, I think we are resolved on all but
one issue in the rages motion, which I'll get
to in a few minutes. So first, to start with
our cash management motion, which we filed at
docket number 15. As Ms. Ringer said with the
DIP order, I have to note that it is critical
that we do get this entered as soon as possible
in order to regain access to the debtor's bank
account in connection with the DIP financing
being advanced. Just to give a brief overview
of the cash management system, it is relatively
simple. It is a few different disbursement accounts
and one lockbox account controlled by JP Morgan
as part of the ABL facility. Because we are under
active cash dominion, all receipts get swept
into that JP Morgan account, and then we draw
down into a concentration account to fund distribution
through disbursement accounts. We are seeking
authorization to continue operating that cash
management system in the ordinary course of business
and to pay all related fees and expenses. We
are also seeking authorization to continue ordinary
post -vacation intercompany transfers, critically
transfers to and from our non -better subsidiaries
who are located outside of the U .S. and we are
seeking to continue the company's ordinary course
purchase card program with Wells Fargo. There
is one issue I've been asked by Wells Fargo to
flag during the hearing today. We've been informed
that there may have been up to two bank accounts
left off of the schedule in the motion. We will
select this in the order, but I would like to
supplement the record with the details of those
two bank accounts. All right. Both accounts are
held with Wells Fargo. One is a zero balance
account in the name of Jeter Del Monte Foods
Inc. And the last four digits of the account
are 8224. We are still clarifying if the last
account is a non -debtor or debtor controlled
account, as it has two different company entities
listed on it. One is a debtor, Del Monte Foods
Inc. The other is a non -debtor and DINA. The
last four digits of that account are 1523. We
will submit a revised proposed form of order
reflecting those two accounts and their balances
as of the petition date, as well as an updated
cash management schematic to the extent necessary.
And I think we've confirmed during the course
of my speaking that the language we propose is
okay with Wells Fargo. So we will include that
in the proposed order. But we would ask that
the terms of the motion apply to those two bank
accounts to the extent applicable. And I believe
we addressed all comments from the US trustee
prior to the hearings. We would ask that the
court enter the to -be revised interim order
unless there are any exceptions. All right. Does
anyone else wish to be heard? Motion is granted.
You'll mark an order to be submitted. I'll move
on to our critical vendor motion at docket number
13. The debtors are seeking to make payments
on account of pre -petition amounts owed to certain
vendors that are critical to the company's ongoing
operations. Those include both domestic and foreign
critical vendors, lien holders, 503b9 claimants,
and PACA vendors, with aggregate interim requested
release of approximately $100 million. In response
to a concern raised by the U .S. trustee prior
to the hearings, we did add some additional evidentiary
support for the motion at the end of the first
day declaration, as opposed to the critical nature
of the relief being requested. And with that,
I believe we had also addressed all comments
we received on the order in advance of the hearing,
so would also ask the court to enter this order
if there are no objections. I see no hands raised.
Granted, order to be submitted. Thank you, Your
Honor. Up next is our wages motion, which was
filed at docket number 10. The company has about
2 ,800 employees and a somewhat complex compensation
and benefit structure given historical M &A that
has led to the formation of the company. We are
seeking to continue all programs in the ordinary
course, subject to certain limitations in the
motion regarding post -petition payments to insiders.
With one exception, we are not seeking to make
any payments on account of pre -petition amounts
that exceed the statutory cap. And that one exception
is I believe the subject of the objection the
U .S. trustee has raised that we've not been
able to resolve, so I will turn to that. We are
seeking to make pre -petition severance payments
to nine individuals in excess of the statutory
cap upon entry of the interim order. That is
one individual more than we noted in the motion
because we found out over the course of today
that one additional check we had issued pre -petition
was not cashed in advance of filing for pre -petition
severance. You've shared the breakdown of these
funds with the U .S. trustee. They range from
about $80 ,000 a person to $20 ,000 a person.
Seven of the relevant employees are former union
employees, and the remainder are non -union employees,
all of which are at the company's plant in Hanford,
California. The amounts include outstanding severance
payments and other benefits obligations like
POCR payments. The aggregate total of the funds
we're requesting is largely consistent with that
in the motion. It's $317 ,000, about $160 ,000
of which is in excess of the statutory capital.
And as we noted in the motion, there are a few
reasons that we are seeking to pay these obligations
on the interim order as opposed to the final
order. So the first is that we would submit these
are priority claims. So the timing payment only.
Payment now only goes to timing of payment, not
necessarily the eventuality of payment as we
have requested upon entry of the interim upon
entry of the final order. Second, we submit that
these payments are justified under Section 363B1
and the Doctrine of Necessity. And third, and
I think most critically, not making these payments
would put the debtors in the position of reaching
their obligations under their collective bargaining
agreements with their unions who are critical
partners in California. And under California
law, which would apply to these employees, these
payments can be considered wages, and the company's
directors and officers can be subject to personal
liability for unpaid wages. As a result, if these
amounts are not paid now, they could simply be
asserted as post -petition indemnity claims against
the estate by the debtor's directors and officers.
But for that reason, we would submit that the
requested relief, including payment of the severance
claims, is appropriate and would ask the support
entity in favor. Let me turn to Ms. Bielski.
Ms. Bielski. Thank you, Your Honor. Lauren Bielski
with the Office of the United States Trustee.
I can be extremely short. We object simply to
the extent that any payments exceed the statutory
cap under Section 507A, 4 and 5. All right. I'm
going to sustain the Trustee's objection for
those payments that are beyond the statutory
cap as an interim payment. We can address it
at the final hearing. So you're authorized to
make such payments within the statutory limits.
You can make it pro rata or I'll defer to the
business judgment of the debtor on to whom and
how much the payment should be made. Any amounts
above the priority statutory priorities need
to be revisited by the final hearing. We could
wait a couple of weeks, a few weeks. Thank you,
Your Honor. Thank you. Understood, Your Honor.
You can submit a revised order. Thank you. I
will move on to our insurance motion, which was
filed at docket number 10. Just to keep it short
here, we are seeking authorization to continue
our pre -petition insurance and surety programs
in the ordinary force of business and to pay
any outstanding amounts owed on account of those
programs. I believe we also address any comments
from the U .S. trustees prior to the hearing
and not heard from anyone else, but we would
ask that the court enter the interim order absent
any objections. All right. I see no objection
and no objection granted. Thank you, Your Honor.
And for my last motion, that is our Transfer
Procedures and NOLs motion, which we filed at
Docket Number 16. While it is actually a very
long motion, it is really only seeking to do
two things. It's seeking to prevent transfers
of the common stock of the topmost debtor, Debtor
Del Monte Foods Folding Limitives, which is fully
owned by the debtor of Ultimate Parent, and to
prevent any folders of that stock from taking
a worthwhile stock deduction. As we noted in
the motion, the debtors have various substantial
tax attributes. That includes more than $400
million in federal or more than $700 million
in federal NOLs and more than $580 million in
state NOLs. Those are very valuable assets of
the state that we are seeking to preserve, and
we are seeking implementation of the procedures
laid out in the NOL's motion to prevent those
valuable assets from being in any way impaired.
We did not receive any objections to or comments
in the motion and would ask absent any objectioners
today with support and through the interim order.
All right. Court has reviewed that motion, seen
it repeatedly. I've never seen an objection.
Who knows, one day. The motion will be granted.
Thank you. Thank you, Your Honor. And with that,
I will turn the virtual podium over to my colleague,
Ashlyn Bernard, to continue with the operative
pursuit. All right. Ms. Bernard, welcome. Good
afternoon, Your Honor. Can you hear me okay?
Yes, I can, thank you. Ashlyn Bernard of HSF
Kramer for the proposed debtor council. I just
want to start by saying it's a pleasure to appear
before your honor today. We appreciate your consideration
throughout this hearing and we look forward to
working with you and all other parties throughout
the case. With that in the interest of time I'll
turn to the motions I'll be presenting today.
The first item I'll cover is the debtor's tax
motion that's filed at dock at number 12 and
item number 9 on the agenda. Your Honor, the
motion seeks customary relief in the form of
authorizing the debtors to remit and pay taxes
and fees incurred in the ordinary course, including
income taxes, use taxes, and property taxes,
as well as various other customs licensing, regulatory,
and other fees. The motion further requests to
continue engaging in tax planning activities.
in order to provide the debtors with flexibility
in pursuing a value maximizing sale transaction
as contemplated by the RSA with the ad hoc group.
Lastly, the debtors seek authority to continue
to pay pre -petition fees owed to their logistics
brokers in connection with import and export
and ultimate distribution of the debtors' products
in the ordinary course, and to continue utilizing
their services and pay any related fees and post
-petition fees. Your Honor, the debtor's timely
payment of taxes and fees as well as services
provided by the debtors' logistic brokers is
critical to the continued and uninterrupted operations
of their business. We shared the debtor's tax
motions with the U .S. trustee in advance of
filing, and as Ms. Bilski noted at the outset
of the hearing, I believe the U .S. trustee does
not have any objections to this motion. Unless
Your Honor has any further questions of me, we'd
respectfully ask that you enter the order. There
are no objections, nor does the Court object.
It is Dock at 12, I believe the motion, so it
will mark it granted. That takes us to the Utilities
Motion. Yep. So as Your Honor flagged, the next
item is the Utilities Motion, which is... The
debtors request for customary relief in the form
of prohibiting utility providers from altering,
refusing, or discontinuing utility services while
the debtors navigate through these Chapter 11
cases. The motion also seeks approval of the
proposed adequate assurance in the form of establishing
a segregated escrow account with Wells Fargo.
and by depositing approximately two weeks of
the average aggregate cost of utility services
paid on a monthly basis. In connection with that,
the debtors request to implement the related
procedures covered in the motion in connection
with resolving disputes over any adequate assurance
with utility providers. Again, I believe the
U .S. trustee does not have any objections to
this motion and we have received none from any
other parties. We would ask the honor, enter
the order. And this is an interim, the final
hearing again on August 8th? Yes, yes. I forget,
that's the date, August, August 4th rather. August
4th. Well, August 4th. Alright, motion granted.
Thank you. Thank you. The next item, it's number
11 on the agenda, is the debtors customer programs
motion filed at docket number 14. The motion
seeks to continue to honor certain customer programs
as described in the motion on a post -petition
basis and to honor any pre -petition obligations
owed to their customers as listed in the motion.
The Dutters customer programs include a range
of programs relating to volume -based and promotion
-based, as well as incentive -based, discounts,
rebates, and allowances offered to their customers
in the ordinary course. The bulk of these are
credited toward gross invoiced amounts and do
not reflect an actual cash... Sorry. do not reflect
an actual cash liability on the debtors, current
cash liability for the debtors. In addition,
the debtors maintain a military sale program
facilitated through military distributors and
a broker, which involves the purchase and sale
of the debtor's products to certain military
bases. As highlighted in the motion, the success
and viability of the debtor's business and thus
maximizing value for the debtor's assets and
for the debtor's estates are dependent upon the
loyalty of their customers. Again, I do not believe
the US trustee has an objection to this motion.
And with that, unless your honor has any questions
for me, we would respectfully request entry of
the order. I have no questions, and I see no
objections. Motion granted. The next motion I'll
cover is the creditor's matrix motion. filed
at DOC at number 8. The motion seeks authority
to file a consolidated matrix of the debtors'
creditors and a consolidated list of their largest
30 unsecured creditors, as well as to redact
certain personally identifiable information,
specifically the email addresses and home addresses
of certain individual creditors. A proposed redacted
version of the creditor matrix was filed this
morning. That's at dock at number 29. Again,
I do not believe that there are any objections
to this motion. And unless Your Honor has any
questions for me, we would respectfully request
Your Honor enter that order. No questions. Motion
granted. Thank you. The last item I will be presenting
today is agenda item number 13. That's the debtor's
motion for an extension of the deadline to file
their schedules and statements of a financial
affairs. This is found at docket number five.
Here the debtors are seeking a 31 -day extension
for a total of 45 days following the petition
date. This pushes that deadline to file the schedules
and statements to August 15th. We've reached
an agreement with the US trustee on this timeline
including based on scheduling considerations
surrounding scheduling the 341 meeting And unless
your honor has any further questions, we would
respectfully request entry of the interim proposed
order Just to confirm this bill ski the 15 -day
works for you. You've already undertaken the
solicitation. I Yes on both accounts your honor.
Thank you. Thank you motion granted Thank you
Thank you, Your Honor. And with that I'll cede
the podium to my colleague, Evan Raskin, who
will cover the balance of the motions on for
today. All right, Mr. Raskin, you're up at the
end. Thank you, Your Honor. Can you hear me?
Yes, I can. Great. Thanks again. For the record,
Evan Raskin from HSF Kramer on behalf of the
debtors. Thank you for the court's time today.
Moving to the penultimate motion, the debtors
motion to enforce the automatic stay worldwide,
which was filed at docket number eight and is
item number 14 on the agenda. The debtors operate
on a global scale and have significant operations
outside the United States, including in Mexico
and South America. The debtors foreign creditors
and contract counterparties may be unfamiliar
with the United States chapter 11 process. and
may seek to take various actions that would violate
the automatic stay, which could result in significant
harm to the debtors and their estates. The debtors
do not seek to expand or enlarge the rights afforded
to them under the bankruptcy code, rather simply
to affirm them. We have shared this motion with
the U .S. trustee and believe they are signed
off. We believe this relief is customary and
in the best interests of the debtors, their estates,
and all of their creditors. And with that, unless
Your Honor has any questions, We respectfully
request entry of the order enforcing the automatic
stay, anti -discrimination, anti -termination,
and anti -subfacto provisions of the bankruptcy
code. All right. All right. I have to chuckle
since my Article 3 colleagues have been restricting
their ability to enter nationwide injunctions,
but I can enter an order globally, worldwide.
Hey, I'll enjoy it. That's fine. Motion granted.
Thank you, Your Honor. Finally, moving to the
debtor's application to appoint Stretto as their
claims noticing agent. This was filed at docket
number seven and is item number 15 on the agenda.
In connection with Stretto's retention application,
the debtors also filed the declaration of Cheryl
Batance, which is attached to the application
as exhibit B. This time, I would like to move
that declaration into evidence. Is there any
objection? Hearing and seeing no one. admitted
into evidence. Thank you. That is D3, I believe.
Thank you, Your Honor. We have shared this application
with the U .S. Trustee and believe they are signed
off. So with that, unless Your Honor has any
questions, we would respectfully request entry
of the order related to Stretto's retention application.
All right. I see no objections. Ms. Bielski,
your office is fine with it? Yes, your honor.
All comments that we had to the drafts have been
incorporated. All right. Motion granted. Thank
you. Application granted. Thank you, your honor.
Unless you have any final questions for us, that
wraps up what we had on our agenda today. I do
not. Is there anyone who wishes to be heard on
any matters? All right. I'll urge you all, please
get the orders down to us. Reach out for chambers.
Reach out for Becca Earl, my law clerk. I know
she's happy to hear that as needed. I thank you
for your time. And I guess, unless I'm told otherwise,
we'll be seeing everybody again on August 4th.