Good afternoon, this is Josh Lopez today is November
5th I'm gonna call the first day hearings in
25 906 for to Clip a trafico I will take Appearances
virtually this is a virtual hearing. There's
no one in the courtroom everyone is on the line
Wish everyone a good day Please hit five star
and I will unmute your line I would also ask
if you just jump on the Southern District of
Texas web page You'll find a place to make an
electronic appearance. Just go to my home page
You'll find a place for complex cases and where
to make electronic appearances I'm just going
to go in the order in which I see them is a 3
1 2 number Good morning your honor Chad who snick
with Kirkland and Ellis appearing on behalf of
the Cleopatra debtors Okay, good afternoon. Here's
a 9 1 7 number Good afternoon, your honor Scott
Greenberg kitchen dining structure on behalf
of the ad hoc first thing group and proposed
it blenders. Good afternoon a 3 1 2 number Good
afternoon, your honor Jack lose of Kirkman and
Alice on behalf of the Dutters you a 7 1 3 number
Good afternoon, your honor. John Higgins and
Shane Johnson from Porter and Hedges appearing
as co -counsel for the debtors with the Carpenter
team. Okay. Good afternoon. A 646 number? Good
afternoon, your honor. Bob Britton and Paul Weiss
on behalf of the FPP parties. Good afternoon,
Mr. Britton. And a 202 number. Let's see. Mr.
Jimenez, that must be you. Good afternoon your
honor Andrew Jimenez for the United States 15.
Good to see you. Mr. Jimenez 3 1 2 number Good
afternoon your honor Sean scouted mayor Brown
on behalf of co -foss finance gmbh one of the
factors Good afternoon Anyone else wish to make
an appearance, please hit five star and I will
unmute your line One more check. Okay, who should
I turn this over to? And we dumped a fair amount
of paper on you late last night. So thank you
for that. I also want to thank Mr. Jimenez and
his office for working with us. I believe we
are, for the most part, resolved on issues. We
may have one or two issues here and there to
work through, with your honor. But I think with
the office of the state's trustees' help, we've
been able to streamline those issues. Your Honor,
I also, and lastly, want to thank – or not last,
but I want to thank the parties in interest around
the room. Your Honor, this has been a huge push
to get to where we are today. And without them,
we wouldn't have been able to reach the agreement
that's going to facilitate. But I think we'll
be a very smooth process overall. And last and
very important to this effort was the debtors'
management team. Your Honor, and – As most management
teams do in these Chapter 11 cases, they need
to do two jobs. One is running the business and
keeping the trains running on time. The two is
dealing with all the people around this room
and getting ready for a lengthy Chapter 11 process
to the extent we're unable to reach a deal. Unfortunately,
we were able to pull it together, but the management
team here did a fantastic job of working with
us and getting everybody in the right spot. Your
Honor, the second piece that I want to chat about
is the notice of the first day hearing. So we
filed an affidavit of service at docket number
7 -9. It is an affidavit of Ms. Leticia Sanchez
of Stratto. I noticed, Your Honor, before the
hearing and entered the order authorizing Stratto
to service the debtor's notice and claims agent
as well as the joint administration motion. Ms.
Sanchez and the Stretto firm took care of serving
the notice of the first day hearing via electronic
mail on as many parties as we possibly could,
overnight delivery on others where we didn't
have email addresses. That includes, in terms
of email service, it includes the lenders who
are party to the RSA, the agent lenders, the
indenture trustees who are applicable. cash management
banks, the attorneys general for the various
states around the union that we do business in,
as well as the internal revenue service, utility
providers, and ultimately the insurance folks
as well. And last but not least, the factors
that we've already heard from today. With that
notice, Your Honor, we believe notice of the
first day hearing and the emergency relief we're
requesting today. is appropriate. Your Honor,
unless you have any questions, I'd like to publish
a short presentation. Okay. I think I've given
the presenter role. It was a Kirkland presenter.
There's someone who says they can't hear me.
I just would remind folks to please dial in as
well. I was going to do the presentation myself.
I don't... There's... There was someone... You
want to give it to you? Sure. I have it ready,
so... Uh, sure. Oh, it's sharing the whole thing.
Sorry, thank you. There we go. I think you can
see the presentation now. Your Honor, we're here
today for the first day hearing in the cases
for Cleopatra, Finkel, Sorrow, and 24 of his
debtors updated. Your Honor, I'm gonna refer
to them as clock here throughout the presentation,
which is the common business for the debtors.
Your Honor, as a result of the hard work and
efforts of the folks around the room can please
to present a fully consensual prepackaged Chapter
11 case that eliminates 1 .3 billion euro of
debt, provides a full recovery to general and
secure trade creditors, and positions the company
to emerge from Chapter 11 as quickly as possible.
Your Honor, as I already indicated and as you're
probably well aware, Your Honor, this is a packaging
company. And we are one of the largest manufacturers
of packaging materials around the globe. And,
Your Honor, if I lay out here on the slide the
different areas that we participate in in terms
of how we break down our business between pharma,
nutraceutical, medical devices, consumer packaging,
et cetera. Now your honor my last attempt at
courtroom humor was in response to judge Perez's
invitation to get my ear pierced And you know
my answer to that question was met with clear
derision from a variety of publications That
shall go unnamed, but I got even more derision
from here at Kirkland So I'm resisting the urge
your honor to make a joke about the nature of
a packaging case in a prepackaged case. In fact,
the associates at Kirkland who are working on
this case threw it up on a wheel of chance, and
the wheel said, no, Chad, don't make that joke.
So I'm not going to make that joke today. Instead,
I'm going to tell you that as with Mr. Sussberg,
I think I have significant experience with the
types of products that Klockner uses and I frankly
think everybody on this phone call does. Whether
it's the occasionally allergy pill or cold medication
that you're popping out of the child -proof blisters,
the daily use of credit cards, purchasing fresh
meat and seafood that are wrapped in packaging
produced by Klockner. I suspect we've all had
a daily interaction with these types of products.
But not to be outdone by Mr. Susberg, I did do
something about a month ago. I went and had surgery
just so I could say on this presentation that
I was familiar with why they store the scalpels
in sterilized packaging and trays along the lines
of what clock their manufacturers. But joking
aside, Your Honor, I think What makes Klockner
unique is its investment in research and development.
And we invest over 15 million euro every year
on research and development to continue to be
a leading provider of sustainable specialized
packaging. That includes, for example, Your Honor,
some of our more recent packages like Tray to
Tray and KP Elite. which use recyclable materials,
produce the packaging, and minimize the amount
of packaging necessary, which is an attractive
trait to our customers who are attempting to
reduce costs and reduce the overall packaging
volume. KP Infinity is another more recent example
of the research and development that our R &D
group has done. KP Infinity is a product that
is recyclable. in that it also retains heat.
And so you're familiar by food service providers
packaging your meal in one of these. What makes
it super unique is it's a multi -use type material
moving away from the polyurethane or expanded
polyurethane, which is being rejected by regulatory
regimes around the world. It's that type of innovation
that has made Klockner what it is. It was founded
in 1965 and it grew into the United States and
Canada in the 70s and ultimately is celebrating
its 60th anniversary this year in 2025. Over
that time, it has grown, Your Honor, to employ
approximately 5 ,000 employees around the world,
27 manufacturing plants in 16 countries. Each
year, Your Honor, we produce approximately 500
,000 tons of high -performance film and packaging
solutions. Your Honor, the debtor's efforts are
led by the management team that you see here
on your screen. I want to highlight two of the
management team who are on the call today. First,
the debtor's declarant, Mr. Mark Rotella. He
is the first day declarant. I can see him on
my screen, hopefully you can see on his. Second
is Ms. Shanae Mitchell. She is the general counsel
for the debtors and has worked closely with us
as we have prepared for today's cases. Your Honor,
the debtors are managed by a board of managers.
You see them here. I want to call special attention
to two of those boards of managers. Moe Mangy
and Gary Beggeman, they have served as the debtor's
special committee throughout these restructurings.
The debtor does have other additional independent
directors on board that assisted along the way,
but the special committee was comprised of Mr.
Mangy and Mr. Beggeman. Your Honor, the capital
structure here, while complex with many entities,
ultimately is really pretty simple. We have approximately
2 .3 billion euro of funded debt that's broken
down, as you can see on the chart here. All of
the shaded boxes on the screen are the 25 debtors
that have convinced these Chapter 11 cases. The
starred entities, Your Honor, are those that
are party to the factoring arrangements that
you'll hear about later in the hearing. We have
about 1 .8 billion dollars of first lien secured
debt. We have another 134 million dollars of
first lien bridge loan debt. And then we have
some local debt in country. Each of these tranches
of secured debt are first lien debt secured by
different collateral. That's an important thing
to highlight. And then lastly is the second lien
notes, which approximately 317 million euro.
Those notes are secured by the same collateral
as the 1L debt that's highlighted here. Our 1Ls
are represented by an ad hoc group that has retained
Gibson Dunn and Mr. Greenberg, who you see on
the phone, as their counsel. They've also retained
Houlihan Loki. as their investment banker. The
second debt – the second lien debt highlighted
here in the pink boxes is represented – one of
the large holders of that second lien debt is
Castle Knight. They hold, I believe, approximately
80 million – or $90 million of that debt. They
are represented by Mr. James Savin at Aitken
Gump. And last but not least, our Strategic Value
Partners, or SVP, that is the debtor, they own
substantially all of the equity – not all, but
substantially all of the equity in the debtors.
They also hold significant chunk of the 1L debt.
It's approximately 100 million – I'm sorry, approximately
50 million. And then they hold approximately
100 million of the second lien debt alongside
of CASEL. And here's just a summary of that.
Your Honor, I've already talked about Kirkland.
Of course, Mr. Higgins at Porter Hedges. You'll
hear in our declaration in support of the DIP
facility the declaration from Mr. Brent Herlihy
and then our financial advisors at Alvarez and
Marcell, Mr. John Hickman. And finally, we've
already talked about Stretto. I'll summarize
that as well. Your Honor, the debtors refinanced
substantially all their debt in early 2021 because
they had debt coming due in 2022. At that time,
they were riding a bit of the high coming out
of COVID because a lot of the customers around
the world increased. their purchasing of the
goods in order to create back inventory should
things go sideways during COVID. The lenders
underwrote those numbers and ultimately believed
that the company's business would grow into the
capital structure over time. Unfortunately, the
industry faced headwinds. There was a drop in
demand that was caused as the customers realized
that inventory was too much relative to demand,
and therefore demand dropped. Meanwhile, the
prices of raw materials that go into the production
of the packaging materials increased significantly.
Those industry headwinds obviously had a very
negative effect on liquidity, and beginning in
mid -2023, There was a strain on the debtor's
business, and there was a series of attempts
to get additional liquidity, some of which you
see in the first lien debt. But ultimately, it
became clear as we headed into the end of 2024
through April 2025, as the debtors were attempting
to try and refinance their first lien debt, there
was a maturity coming up in the early part of
2026. it became clear that we were going to be
unable to refinance that debt. So in February
2025, we obtained some additional financing that
I just mentioned. And we used that financing
to negotiate with our first lien lenders on a
potential amendment -extend transaction. And
that really took place during the kind of the
second half of 2025 as we headed into the summer.
But in early August 2025, Your Honor, it became
clear that an amendment extend was not going
to happen. It's at this point, Your Honor, that
we face a critical moment with waning liquidity,
contrasting with the debtor's obligations to
comply with law in all of the jurisdictions around
the world, including in Germany, where we know
the financial operational restrictions are quite
strict. We had faced a conundrum. We could file
a freefall Chapter 11 case, which would have
likely been an unmitigated disaster because the
company was not prepared for a freefall Chapter
11. Or we could work with our stakeholders to
try and find another solution. And it's here
where the ad hoc group of personally lenders
stepped up in a major way. Your Honor, in about
the end of August, we reached resolution on a
forbearance agreement and a bridge financing
agreement, which was in effect in advance on
what would be dip financing. They provided us
with 135 million euro additional liquidity that
allowed us to satisfy the liquidity, minimum
liquidity standards that we needed to maintain
to continue operating the business. and to give
us sufficient time to actually negotiate with
all of the stakeholders what was going to happen
here today. And it's as a result of those efforts
– and I'd be remiss not to mention the efforts
of the factors who also played along with us
as we were navigating these liquidity issues
– that we were able to reach agreement on the
terms of the prepackaged case that we filed last
– that we launched last night for solicitation.
and filed today. Your Honor, with that, I'm going
to turn the podium over to my partner, Mr. Jack
Lewis, to walk through what the deal looks like
and what the timeline that we're proposing for
these Chapter 11 cases. Okay. Thank you. Can
Your Honor hear me okay? Just fine. Good afternoon.
Good afternoon, your honor. Looking ahead in
our presentation, we have a couple more slides
that just set the table as it relates to the
overall restructuring transaction that we've
negotiated, as well as the financing that's tied
to that transaction. And finally, what we view
as the path ahead in these Chapter 11 cases,
subject to your honor's approval of our proposed
scheduling motion. As it relates to the overall
restructuring transaction, Your Honor, it's a
relatively straightforward restructuring transaction
at the end of the day. We executed – the company
executed an RSA immediately preceding launch
of their prepackaged cases and the filing of
these Chapter 11 cases. That includes the debtors
in these Chapter 11 cases, the first lien lenders
– represented by Gibson Dunn and Houlihan, plus
certain additional consenting first -ling lenders.
It gets us in the neighborhood of 90 percent
of all outstanding first -ling claims. Plus the
Castle Knight funds and SVP, which as Mr. Husek
highlighted, holds the significant majority of
the 2L claims. Between Castle Knight, SVP, and
certain cross holdings held by first -ling members
that are funds that are part of the firstly ad
hoc group, we have well in excess of two -thirds
of all two -hour claims party to the RSA. The
RSA contemplates a prepackaged Chapter 11 process.
In accordance with the terms of the RSA, we launched
solicitation of a prepackaged plan immediately
before the filing. And we anticipate, as I'll
come on to, that the solicitation process will
continue through early December. In terms of
treatment of claims in these Chapter 11 cases,
the DIP claims, which I'll describe in a little
more detail on the following slide, will convert
in their entirety into a new exit facility. The
company is not required to raise new financing
to repay and cash the DIP claims at emergence.
First lien claims. will receive a hundred percent
of the new equity in reorganized Klockner. There
are some structuring considerations in the RSA
as it relates to what type of equity instrument
certain funds can hold, but effectively the first
lien lenders will own a hundred percent on a
per capita basis of the equity in Klockner on
the other side of the Chapter 11 process. The
second lien lenders have negotiated a resolution
with the first lien lenders in the company, under
which the headline term is that those second
lien lenders will receive $17 .5 million of incremental
first lien loans under the first lien exit facility.
So these will be peripasue with the first lien
loans that the DIP is converting into. It will
be an incremental 17 .5 million euro. And those
loans will be distributed on a pro rata basis
to all 2L holders. And as I said, we have an
excess of two -thirds of those holders already
supporting the plan. Under the terms of this
plan, and in light of the fact that it is a prepackaged
restructuring, holders of unsecured claims and
holders of other claims that aren't the first
lien claims or second lien claims will be unimpaired
existing equity interests. predominantly held
by the SVP funds will be canceled as part of
this process. The plan also contains customary
release, exculpation, and injunction provisions,
which are for more detailed consideration when
we get the confirmation. Flipping ahead a slide,
a brief summary, and we'll get into a little
more detail in connection with the financing
motion, Your Honor. but to sort of set the table
for your honor as to the overall structure of
the DIP financing. The overall quantum of DIP
financing is €984 million. That includes a $349
million new money component and a $635 million
roll -up of existing first lien obligations.
As it relates to the new money portion of the
DIP, $264 million of that will be available on
the first day following Your Honor's entry of
the interim order and finalization of the DIP
credit agreement. At the final hearing, an incremental
$85 million will be made available. As we've
noted here, Your Honor, under the initial draw
of the DIP, The pre -petition bridge financing,
which with accrued fees equates to approximately
134 million euro, will be fully refinanced in
cash. There is a distinction and it is a distinction
with the difference between the refinancing of
the bridge facility and the roll -up of the existing
first link claims. That will be a cash refinancing,
the existing, the DIP lenders are advancing cash
to refinance that loan. There is not one -to
-one overlap between the DIP lenders given the
growth in the group and the participants in the
DIP facility as between the DIP and the bridge.
And it was a negotiated part of both the bridge
financing and the ultimate DIP financing that
that financing would be refinanced in full as
part of the bridge. That bridge was put in in
late August with the specific intention of providing
a runway for the debtors and their lenders to
negotiate a consensual restructuring. Obviously,
the initial goal was to negotiate a restructuring
supported by the company and its personally lenders.
Ultimately, we were able to achieve much more
consensus than that, bringing on board the 2L
lenders and SVP as equity sponsor. That bridge
was always contemplated to be part of a broader
facility that not only funded the negotiation
period, but also the debtor's broader restructuring.
And the sizing, even contemplated in late August,
has always contemplated that there would be a
larger facility sized to fund the liquidity need
of the debtors during the implementation of the
restructuring that was negotiated and fill the
liquidity need that the debtors have to satisfy
trade claims and other operational obligations.
Under the interim draw, $130 million of cash
stays on the debtor's balance sheet and will
be available to satisfy operational need for
the debtors over the first portion of the case.
The remaining $85 million will enable the debtors
to satisfy the balance of the operational obligations
and capitalize the debtors sufficiently for emergence.
The plan does not contemplate that the debtors
will be required to raise additional capital
to exit. Unless Your Honor has any questions
on the div structure, I was going to touch briefly
on timeline and then pause before we go into
the agenda. Okay. Your Honor, we're here on the
first day hearing, November 5th. We contemplate
a full solicitation process in compliance with
the bankruptcy rules and applicable non -bankruptcy
law and have noticed a voting and opt -out and
objection deadline of December 11th. And subject
to Your Honor's availability, we would request
a confirmation hearing on or about December 16th.
The RSA contemplates a 45 -day milestone for
the confirmation. December 16th is around about
day 42. When we get there, Your Honor, we would
also request – we're going to need a second -day
hearing inside of that day, given the company's
cash needs and the interim and final relief contemplated
by the system. What dates did you Around what
dates like around that December 3rd 4th area
somewhere on there? somewhere around 25 days
obviously we have Thanksgiving at the end of
the month so I think that puts us in the first
week of December your honor, okay Okay, okay
Your honor ask any questions from your honor
that concludes our initial presentation. We would
pause there if any other parties in interest
have opening statements to make. Otherwise, we
would jump into the agenda starting with the
scheduling motion. Your Honor, and I will be
brief, Mr. Hussnick warned me to be very brief,
or he threatened me with more jokes for the court.
But in all seriousness, Your Honor, there's a
lot of history here, and look, we're at a really
good place, obviously, coming before Your Honor
with a prepackaged case, so I'm not going to
go all the way down memory lane, but I do want
to just hit on a couple points. Your honor the
members of our ad hoc group are part of a broader
group That are the existing bridge lenders and
the 1l creditors and obviously the proposed dip
lenders in these pre -packaged cases We are also
parties to the RSA which the Vedders have mentioned
that supported I think the the numbers shook
out right around 92 percent of the existing first
-ling creditors And if it's ultimately approved
the transaction contemplated by the RSA embodied
in the plan results in a deleveraging of approximately
$1 .3 billion of these debtors' balance sheet.
Your Honor, just quickly, in terms of a little
bit of background, because we've actually been
involved in this case for quite some time, dating
all the way back to April of 2024, when this
ad hoc group first came together, the ad hoc
group, I know we've thrown around a couple different
numbers, but the ad hoc group is approximately
82%. of the company is approximately $2 billion
of first lien debt. We filed a 2019, that's at
ECF statement 75 that has the detail. But it's
a combination effectively of first lien term
loans, US and Euro denominated given what the
business is, first lien bonds, and I think the
group owns actually about 46, 47 % of the RCF
as well. I agree with Mr. Hussnick, it's not
the world's most... complicated capital structure
per se, but just given the global footprint of
the company, it is challenging. And that issue
came up in connection with the bridge facility
we put in over the summer, which was referenced.
Just by way of background, we've probably been
in active discussions on again, off again with
the company since the end of 24. The company
did effectively an exchange offer in April of
last year, where they converted some of the unsecured
notes into 2Ls. After they finished that exchange
offer in the spring, they really turned to our
group, which was more 1L -oriented, because as
you heard from the debtors, you had maturities
approaching, and they were having some issues
recognizing they probably couldn't tap the capital
markets to refinance this out. They also had
some issues with liquidity. I will say, without
going too far down memory lane, we spent a significant
portion of time in the spring of last year leading
into the summer negotiating an A &E transaction,
which is where this originally started. That
transaction literally got to a point where all
documentation was done. I think I actually had
started to restrict other lenders in the syndicate
to get support for the A &E before we launched.
And unfortunately, at the end, for reasons obviously
in their own business determination, the company
and the sponsors decided not to move forward.
with the A &E transaction. And that transaction,
just to provide a little context of how we got
to the bridge, since it's part of the refinancing
today, that transaction was effectively $275
million of fresh capital coming in to support
the A &E. Some of that for balance sheet cash,
some of that to pay down our lenders in connection
with rolling their maturities. And that fell
apart in late July. And then in mid -August,
as Mr. Hysnick said, shortly after the A &E failed,
which I think all of our folks were probably
still licking their chops a little bit, having
gotten to the finish line, we did get a call
from the debtors' advisors letting us know that
not only was the A &E dead and the equity injection
dead, but they needed approximately $100 million
of liquidity and relief on our first -line debt
payments that were coming due that month. Obviously,
that was a bit of a 180 for us. Given we were
going from a par exchange in A &E and, you know,
the sponsor staying in place to preparing to
write a check to prevent the company from, as
Mr. Husnik outlined and I agree with, what would
have been a pretty catastrophic collapse into
Chapter 11, particularly if you think about some
of the foreign jurisdictions, Germany and the
like, which would have been implicated and are
obviously a lot less forgiving than our processes
here in the U .S. So against that backdrop, Our
lenders stepped up. They provided the incremental
bridge. That was about 112 million euro at the
time. Obviously, some fees have been created
on that since. All I would say, and this just
goes to the capital structure point, it was actually
a pretty complicated bridge to put in place just
because of where the assets are located and trying
to take liens in foreign jurisdictions. It was
a little bit of a hodgepodge of our Kirkland
and Gibson finance lawyers to really get comfortable.
that we came up with a collateral package that
worked for the bridge. But I agree with the debtor's
commentary, the thought process was always that
we would get to this point in time where the
bridge would be taken out by a dip facility.
And just by way of background, that bridge was
put in place, fantastic timing for all of us
on the phone, it was late August. We put it in
place, we batched, stopped it, and then Houlihan
and company went out and did a post -closed syndication.
And eventually we got, I think, about 84, 85
percent of folks into that bridge over the summer.
And just to fast forward, that's kind of Labor
Day. From Labor Day to today or the last couple
of weeks, we've effectively been spending a lot
of time with the debtors. They redid their business
plan. As you saw at the outset, they brought
in independent directors who got deeply involved
and came up to speed. And the goal was to get
to a soft landing into bankruptcy and then The
good news, obviously, is just in the last weekend,
we were able to cut a deal with the second liens,
mainly Castle Knight, represented by Aiken, with
Mr. Britton's clients, SVP, and the sponsor,
both in their sponsor capacity and lender capacity,
where we, I think, since Friday to today, pivoted
from what was going to be a prearranged in front
of your honor to a prepack. So a good result.
So just to say it, I mean, it's been a long road.
It's gone from a consensual A &E to no deal,
to a liquidity crisis, to a freefall, to a prearrange,
to a pre -pack. I would say the back – the last
ending has been very good. And I won't get into
the depth. We'll hit that as Mr. Lewis hits it
in the opening presentation. But I think from
our perspective, it's been a long ride. We've
gotten to a good place. I think our hope – probably
our clients' hope is that they never have to
talk to any of us again, make a focus on the
business, and get this company in and out of
bankruptcy as quickly as possible. So I appreciate
the time, Your Honor, and with that, Mr. Luiz,
I'm sorry to steal your thunder. I'll hand it
back to you. Perfect. Thank you very much. Anyone
else? Just check. Okay. Who do I turn it over
to? All right. Jack Lewis again from Kirkland
Alice on behalf of the debtors I will be taking
us through the first two motions that are up
on the agenda Before we jump into those your
honor We'd like to move into the record the support
for the first day motions and Get financing those
are the declarations of mr. Mark Rotella the
CFO of clockner docket number four And then,
in support of the did financing and use of cash
collateral, the declaration of Brent Herlihy
of PJT at Dock Number 25, and declaration of
Jonathan Hickman from A &M at Dock Number 26.
All witnesses are available in the virtual courtroom
for cross. Okay. They're admitted. Subject to
cross. Thank you, Your Honor. Moving on to the
first motion on the agenda, at docket number
seven is the debtor scheduling motion. Your Honor,
I hit the high points of scheduling. In the intro,
we are seeking to advance these cases to confirmation
by mid -December. Subject to Your Honor's availability,
we have requested a hearing date of December
16th. which we would expect to be a fairly streamlined
confirmation hearing. We have noticed an objection
deadline and voting deadline of December 11th.
I wasn't planning to go into much more detail,
Your Honor, unless Your Honor has any questions
about the orders or forms of exhibit. It's all
relatively standard, straightforward solicitation
procedures, ballots, et cetera. We launched,
as I said, immediately before the filing yesterday
afternoon. Okay, let me just see if anyone wishes
to be heard in connection with this motion Your
honor and energy minutes for the u .s. Trustee
no issues with this motion. I just want to Just
expand a little bit for for the quarter for everyone
Listening in that this this this this order also
includes deals with the 341 meeting and schedules
If the debtors are able to confirm a plan within
62 days, then the 341 meeting will be waived
and the filing of schedules. However, if the
debtors do not meet that deadline of confirming
by day 62, the U .S. Treasury will schedule a
341 meeting and the debtors will be required
to file schedules. That makes perfect sense to
me. Thank you very much. Anyone else? Okay. Here
what we have is just a scheduling motion. I've
reviewed the proposed timeline. It's appropriate.
It's already started. I'm going to give you a
combined hearing date on December 16th at 1 p
.m. And I will review the, again, everybody's
rights are preserved in connection with Plan
confirmation related issues. This is literally
just a Scheduling motion, but I'm also approving
the forms of notices so I do Note and everybody's
rights are reserved with respect to have what
I would call more substantive matters related
to plan confirmation But the forms are appropriate
I've had an opportunity to review those they're
customary in our district and quite frankly around
the country everybody's We're really just establishing
dates the dates are satisfy the bankruptcy rules
and provisions of the bankruptcy code So I will
just looks like mr.. Luz I'm just going to fill
in December 16th at 1 your objection deadline
works And then we'll we'll take those up the
forms of publication are obviously appropriate
And again everybody's rights are are preserved,
and I'll get that signed in on the docket Yep,
I put it in the in the kind of the mini box to
where it kind of just talked about December 16
or just at any time Just I just added the at
1 p .m. Prevailing central In the introduction,
we went through the overall structure of the
DIP, Your Honor, but just to hit on the numbers,
what we're seeking relief for today is for $264
million of refinancing. $134 million of that
new financing will be used to refinance the bridge
facility in full. In addition, we are seeking
on an interim basis $480 million approvals roll
up $480 million of existing first lien claims.
With the remaining $85 million of new money and
$155 million of roll -up being on the final order,
those ratios of roll -up remain consistent from
interim to final. It's just that the company
is in more need of liquidity up front. Your Honor.
Speaking to the overall liquidity need, the company
was running very low on cash in late August,
which is why we required a new bridge financing
facility. That bridge financing facility was
sized for basically a six -week negotiation process.
And we would get to the terms of an RSA and launch
implementation from there. We are now on week
10. The company has been required for several
weeks now to manage liquidity very closely and
has had to bear the additional burden of the
costs of the various professionals that are in
the virtual courtroom today that it takes to
get to a prepackaged plan. The company is in
dire need of an additional liquidity infusion,
the liquidity that's contemplated by the RSA
to begin to normalize terms with its vendors.
ensure that it's sort of hitting its operational
targets as usual, which is what this facility
is sized for and what the company is intending
to do after the funding comes in the door. As
we sit here today, the company has less than
$50 million global cash, a portion of which is
restricted in an aggregate amount. That's well
below the company's normal minimum operating
cash requirement. set forth in more detail and
especially the declarations of Mr. Rotella and
Mr. Hickman. An interim draw is sized to allow
the debtors to sort of normalize terms over the
interim period and in some ways catch up from
the stretch that's occurred over the past several
years. I touched on it before, Your Honor, the
refi at the bridge. It just takes from the roll
-up. That bridge facility was a very specific
facility, as Mr. Greenberg mentioned, with very
specific position collateral that differs from
the broader collateral base of the 1L being refinanced.
That sort of one -to -one basis lenders collateral
being refinanced into the overall dip facility.
Lenders really – or the debtors really think
of this as one financing facility. Money that
was extended in late August and the money that's
being extended pursuant to the DIP facility.
Size to accomplish one restructuring. And we're
fortunate that the second phase of restructuring
will be more truncated. Now that we've had an
opportunity to negotiate the terms of the RSA.
And so we submit that that is an appropriate
use of funds. on an interim basis. And it's the
protection that the lenders bargain for when
they advance the funds initially. And the company
believes that they're entitled to now, given
the extraordinary results that the provision
of the provision of the ultimately in these cases.
The remaining roll -up is a typical roll -up
of It's 1L obligations. The dip obligations will
be against all of debtors, honor which substantially
overlaps with the petition obligores. And the
dip obligations, as your honor might expect,
are all assets of the debtors subject to various
sort of local law perfection requirements. That's
just reference to the intro. The company has
entities all over the world and so intend to
comply with the various. The order otherwise
contains a fairly standard suite of protections
for the lenders with certain commissions being
subject to the final order of your honor we have
challenge period the challenge period runs 60
days from the later I should say of 60 days from
entry of the interim order or for a commitment
appointment not of course the anticipating appointment
Yeah, that is the one that takes out the marshaling
the equitable it's the one with the Martian language,
right? Preserving the right Preserving the right
right right that nothing in the interim preserving
the right in connection with the final to come
in and still requested and Wiping them out. I
did get a chance to see that makes sense to me.
Yeah Language in there is there's some cleanup.
I would call it language Related to our factoring
arrangements. There's some very specifically
negotiated language in here as it relates to
about the collateral and relative priority of
our factors and our dip lenders. And we appreciate
both sides engaging in that. Oh, I did see that,
yeah. Reaching a resolution. But that is a resolution
that all parties are happy with, including the
company. So just the last point, Your Honor,
on season costs. As set forth in more detail
in Mr. Hurley Heath's declaration, So it's an
expensive, arm's length negotiation between the
company and its lenders, led by the special committee
of the board. Ultimately, we landed at a suite
of fees that we believe is reasonable under those
circumstances and when taken in context of the
broader transaction, where ultimately it's the
lenders who will be owning the company. We believe
that the overall leverage levels as a result
of the size of the dip financing are sustainable.
That's more of an issue for six weeks from now,
but the interest rate of ES plus three percent
cash, two percent thick, five percent commitment
fee, seven percent backstop fee, three and a
half percent steer co -work fee, all specifically
negotiated for this facility and supported by
the vast majority of secured lenders in this
case. And for the reason that for this declaration,
we believe are reasonable under the circumstances.
I'll pause there, Your Honor. I'm happy to answer
any questions Your Honor has about the order.
We've uploaded a full clean of the order that
also attaches the dip credit agreement. We will
have a bit of work to finalize and tick and tie
the terms of the dip credit agreement, but in
economic terms, match what has been disclosed
in the papers. uh... it did as your honor might
expect there's some complexities around collateral
aligning competence and things of that nature
uh... they're not a particular economic impact
but we would expect to finalize that shortly
after the hearing and get closed in so there's
one at eighty one one at eighty two I know someone
didn't filed Which one should I'm assuming 82
is more recent than 80? Maybe just such a red
line, but how does it what which one should I
be looking at and which one attaches the credit
agreement? So the document filed at number 82
include the red line and clean of the order that
was to ensure that your honor saw the changes
that were made Single compiled order that includes
the credit agreement, which is that docket number?
Okay, let me just ask does anyone wish to be
heard in connection with the financing motion
I Appreciate the clarification mister Mr.. Cohen
if you could hit five star I will unmute your
line and there you are Go for it Yes, your honor
you hear me. Yes, just fine. Good afternoon.
Perfect Good afternoon, your honor Michael Cohen
Gibson Dunn and Crutcher on behalf of the ad
hoc group the first thing creditors and proposed
dip lenders I believe mr. Luz covered the landscape
pretty extensively on the dip We naturally support
entry of the interim dip order, but I'd like
to take a moment and echo How critical it is
to the lenders to see this business continue
to get stabilized? and find the right landing
here and continue to flourish as we hopefully
get through these cases, especially given the
extensive footprint in Europe and in other countries
where maintaining the relationships of vendors
in those jurisdictions is absolutely critical.
To that end, I'll just highlight that DIP will
fund over 170 million of vendor payments pursuant
to first day orders here, given that a vast majority
of those vendors are in non -U .S. locations.
as well, nearly 80 million of payroll over the
budget period. These are the types of – this
is the main focus for the lenders, just to get
this business in the right place and move through
these cases. And with that, those are my remarks.
If you have any questions, Your Honor, on the
order, I'm happy to take any of those. No. I
did get a chance to review the changes while
we were here. I just see the comments from That
you tell me it would with respect to the marshaling.
I think that makes perfect sense I did see kind
of the preservation of rights language for the
factors I think all that makes sense to me It's
clear based upon the declarations that the debtor
it needs money. It's clear that There's been
a year of negotiation. It was a bridge loan and
now you got another loan You know, first aid
dips are always coming in different shapes and
forms, but when you have a prepack that's proposed
to un -impair the trade and on the first aid
you're seeking authority and a lot of the money
that is going to be used is to really take care
of trade creditors in connection with motions,
I think things get a lot easier on my end because
it's really... One of the things you look out
for in dip motions at the beginning is to make
sure that there's some protection for unsecured
creditors in this process and so especially in
an international case if the goal is to take
care of creditors around the world who may not
have had access and to some information and then
certainly due process went out but just I feel
a lot more comfortable today doing what we're
doing knowing that we're gonna that the company
is intending on taking care of its trade, keeping
the business going, that there's a business there
and there's agreement here. So 364 is satisfied.
The proposed financing, the terms of the financings
are appropriate and reasonable under the circumstances.
And I'm comfortable granting the relief requested.
And I also note that there's large agreement
from a really large creditor up here. And so
I will get this. Signed and on the docket mr.
Lewis. I need to give you a final hearing date
on this and I thought December 3rd at 9 a .m.
Is when I can do it To just make that one work
I know there's a bullet in here that I've got
to add for just a blank on the to identify the
factoring motion itself It's like Somewhere in
there and I'm just gonna I'll add that in as
well. I think it's your footnote for the interim
factoring order But maybe I just what I'm gonna
do for to make my life a little easier is I'm
just gonna delete the docket number reference
if there's an interim order, it'll be clear what
it is, but it'll just make me In other words,
I'm gonna forget to go back and do this, and
so this will make your life a little easier that
we can get this done. So I'll get this signed
and on the docket. Where do we go next? With
that, Your Honor, I would hand it over to Mr.
Gremley from the Kirkland team, and we'll take
the next couple of agenda items. All righty.
Mr. Gremley. I appreciate it. Mr. Gremley, if
there's any thunder on the motion to seal, I'm
going to sign that order. So no. No, no grand
presentation on the motion to seal the factoring.
I'll take care of that one, but I'll let you
proceed how you wish mr. Grimley good afternoon.
Oh, I need to unmute your line so you can speak
good afternoon Good afternoon your honor Dave
Bremling and Brooklyn Alice on behalf of the
betters. Can you hear me? Okay? Just fine good
afternoon Okay, well, I didn't prepare expensive
marks on the ceiling motion, so that's great
news, and I'll just jump right into the factoring
motion itself at a docket number 27. Yeah. All
righty. And, uh... See that? And he used to think
it would have tried to make a joke on the ceiling
and the factoring, and I'm just... We're just
going to keep it moving. on these jokes, I guess.
We'll keep it moving. Okay. I think some of the
packaging probably has a sealing component to
that. I knew it, I knew it. That's why I had
to take that one off the docket. I signed that
one and it'll get on the docket. Okay, where
do we go next? So the facturing motion is at
docket number 27. Yep. You've heard a little
bit about the cooperation that we've received
from the factors today. They're represented.
There are two that we work primarily with, one
named COFAS. They're represented by Mayor Brown.
Another called Facto Fromps, I believe is how
they pronounce their name. They're represented
by Dentons. They worked with us on the dip motion
and order, and they've also worked with us on
the factoring motion and order, and we really,
really appreciate their cooperation to this date.
And in addition to the financing that Mr. Luzloff
keyed through, The debtors will support their
liquidity during these Chapter 11 cases by continuing
their pre -petition factoring arrangements. Now,
the factoring arrangements are a significant
part of the debtor's liquidity. They take in
on average more than $5 million a day through
the sale of receivables. in the debtors' forecast
that if they weren't able to continue the facility,
they would need an incremental $280 million to
fund the Chapter 11 cases. And simply put, Your
Honor, the debtors sometimes have lengthy trade
terms, and the factoring facilities allow them
to bring them essentially down to zero, bringing
cash in instantly and allowing them a liquidity
pick -up. We think that they are ordinary course
transactions. The others do them every day, and
they've done them for years. But to the extent
that Your Honor disagrees, we also believe that
for the purpose of helping mitigate... the liquidity
flow. They also represent a good use of the debtor's
business judgment, and they should be approved
for that reason. I understand that Mr. Jimenez
has an issue with our requested release. He and
I have been on the phone several times today.
I'm sure he's tired of hearing me, but I do appreciate
that he's willing to have a constructive dialogue
on these points with me. But I do want to address
the issue that he has, if that's okay with you.
So Mr. Jimenez reached out to us and said that
the main issue that he has is with an interim
order, paragraph eight, we provide a conditional
grant of super priority claims to the factors.
And the reason that I say it's a conditional
grant is because it only kicks in if the. sale
of the receivables, which, Your Honor, we do
believe is a true sale of the receivables, is
recharacterized as a financing transaction or
some other transaction. In that case, what we
have requested is that the factors receive super
priority claims to the extent of any amounts
that they are owed. First, Your Honor, we did.
push back on this provision being included, including
after we learned that Mr. Jimenez was considering
an objection, which we flagged for the factors
through their counsel, and they insisted that
it stays in, for the integral role that the factoring
facility plays in the debtor's liquidity. Where
is the paragraph? It's paragraph eight of the
interim order. If you're looking at the PDF that
we filed, I believe it's on page six. Oh, I see
it. Yeah, yeah, yeah, yeah. No, that's not going
to happen today. It's an interim order. Nothing's
going to happen in the next 30 days. We're not
going to... There will be no... This is a ship
that will never reach its destination because
there's no way in the world I'm considering recharacterization
of anything in the next 30 days. So this is kind
of an impossibility. You're more than welcome
to ask for it in the final. Just keep it moving,
folks. Let's just let the ship sail into the
night. I don't see me granting this, but go ahead.
You can try to convince me otherwise. I appreciate
the opportunity, Your Honor. Frankly, it's not
you recharacterizing the transaction that we're
concerned about. It's the international nature
of the debtor's business. These factors are based
outside the U .S. But I'm not going to hold another
hearing until December 4th, so what are we talking
about? So what we're talking about is in the
event that another court, perhaps one outside
of the United States, that may not recognize
Chapter 11, that may not feel itself within the
purview of your own disorder. Come file an emergency
motion and you'll get a hearing within 24 hours.
I can't give you anything more than that. But
if that's the concern, I can alleviate the concern
within 24 hours. And there'll be notice as to
what's going on. You've highlighted the concern.
You can just file a two -pager. I need a hearing
on this very issue. I'm getting international
issues. Somebody comes in, you got it. But there's
got to be a little bit more notice. I can't do
it on 24 hours notice. You got to read the room,
Mr. Gremlin. It gets worse from here. That's
what I'm saying. I understood, Your Honor. I'll
feed the podium on this point. You can come in
within 24 hours if that's the concern. Just come
in within 24 hours, but I cannot without more
knowledge about what's going on and whether this
is truly going to be an issue. This all looks
like it's academic. But I get the protection
that they're seeking I can just give it to you
within 24 hours You can get a hearing on it in
24 hours, and then we can talk about What's happening
and what's going on and if the factors have provided
this protection? And if they need it like the
debtor can come I promise you you'll get a hearing
real fast 24 48 hours at the most Okay, okay
understood feedback and I'm hopeful that the
factors will take comfort in your willingness
to hear us quickly on this point in case we need
to ask for that protection at that time You got
it. Just upload a revised order and I'll get
it on the docket Okay, I Didn't actually have
anything else on my presentation If I do it,
I'm going to mess something up. You know what
I mean? If I do it, Mr. Gremlin, I'm going to
mess something up. But you can put something
in there saying to the extent of any issues,
the court will conduct an emergency hearing within
48 hours. Or within one to two business days,
the court will conduct an emergency hearing.
You can put it in there. They're going to have
to guarantee. Then I'll give them the hearing
within 24 to 48 hours to resolve it. But you
can put the language in there. I've got no issues
with it. But I think Mr. Jimenez is right on
this one. Okay. Understood, Your Honor. All right.
Where do we go next? Next up on the agenda is
the debtor's cash management motion that's at
docket number 29. Your Honor, this motion is
a pretty standard cash management motion. We're
just seeking the authority to continue operating
the debtor's cash management system, to continue
to move money between the debtors' accounts,
to continue credit card programs, to pay bank
fees. We are asking for a 60 -day extension of
the 345B waiver. Just wanted to flag that for
you, and otherwise it's a pretty down -the -middle
cash management motion in order, and if nobody
has any questions. I'd ask you to enter the interim
order attached to the motion. pertains with the
the factory in motion. Just shortly before we
started the hearing, I spotted an issue here.
It's something that we discussed before, but
it's just that on paragraph number seven, it
provides for the 60 days. I'm only authorized
by my client to agree to 45 days. And my apologies
to Dentor's Council for not bringing it earlier
when we were having conversations. It's something
that slipped. I tried to send them an email before.
I did send them an email before that to start
up the hearing, Your Honor. That's my only update
that I'm requesting that instead of 60 be 45.
Your Honor, we can do 45 days. What paragraph
are we looking at? At 29, that's one, paragraph
seven, your honor. Got it. And we're going to
set the final hearing for the same December 3rd,
right, date. So essentially, this will kind of,
yeah, without prejudice to seek further extensions
of the period. Where does it request the final
hearings at the top? I am going to grant the
cash management motion. This is just to preserve
cash flow without disruption. I just need to
set an objection deadline. I'm going to put November
26 as the objection deadline, just kind of a
week before. It is the day before Thanksgiving.
It is cruel. But I hopefully, I used to have
to draft stuff during Thanksgiving. And I'm trying
to make sure that the objection gets filed. I'm
going to put noon on December 26 so that some
poor associate, or if anyone has an objection.
I put the deadline at noon to make sure they
can get out the office at a nice time. Okay.
I have signed the cash management order. Mr.
Luz, I'm not taking a no for an answer on the
noon deadline for the objections. That's what
you're coming in to. Tell me All right, where
do we go next That's all for me your honor I'll
turn the podium over to my colleague Mr. Gremlin.
It's been a pleasure talking Thank You your honor
Your honor if I could just jump in I don't know
if mr. Scott was trying to get off mute If he
can hit five star Unless I've unmuted your line
already. Mr. Scott. Mr. Scott, can you hit five
star one more time for me? Oh, I can hear you.
Sorry, your honor, I was raising my hand during
the factoring motion. I did want to understand,
give you a little bit of the background of what
we were trying to accomplish and then make sure
that we understand what protection is available
for the factoring party. I do think this is an
unusual case and we did spend a lot of time negotiating
the super priority claim here for what I think
is a pretty nuanced situation. So. Apologies
for taking us back in time. It's okay. No, no,
it's completely fine. What's going on? So, you
know, I did want to echo what Mr. Huznik said,
and there have been robust negotiations around
the factoring arrangement. But I think one of
the nuances here, as you heard during both Mr.
Huznik's remarks and Mr. Greenberg's is The fact
that the transactions here take place in a host
of different jurisdictions. So for our clients,
we have Germany, UK, Spain and France, and I
think for one of the other factors, Italy. And
I did want to highlight that despite their multi
jurisdictional nature, we do think these are
very normal course and straightforward factoring
transactions. But the one big concern that our
clients have is that there are not going to be
ancillary proceedings in other jurisdictions.
If this were only a U .S. related proceeding,
I told Mr. Gremling and I think I would agree
with U .S. trustees that probably the protections
that we are seeking right now are not likely
to be implicated. But, and I agree that the most
significant protection for the factors is we
have recognition of the true sale nature of this.
of the sales of receivables, the grant of a fallback
lien. But what is the complexity here is that
we have other jurisdictions where, at least as
contemplated, it's not clear that local law would
recognize this court's orders as binding on them.
For example, under German law, to the extent
that one of the participants in our arrangement
has its coming or its center of main interest
in Germany, It's quite possible and actually
we think likely that a German court if there
were subsequent and solvency proceedings there
might not recognize either the end -of -order
or the final factoring order so while the primary
source of I would say coverage for our payments
is there for our clients is the receivables themselves
What we negotiated and the reason why we were
seeking this super priority claim is there are
scenarios where there could be local law insolvency
proceedings. For instance, in the UK, where we
deal with LINPAC, or in Germany, where we deal
with KP Europe, where sales of receivables or
means granted even by this court might subsequently
be deemed to be void or voidable under local
law. And at that point in time, my clients and
Mr. Robert's client, Dr. Frantz, are taking the
risk that at that point in time, they've effectively
paid the purchase price of giving consideration
to the debtors. And as you heard from Mr. Gremling
and as you saw in the first day declaration,
creates significant additional liquidity for
the debtors. And yet we are left after the fact
with a claim that that sale is void or voidable
under local law. So I understand Your Honor's
reaction that this does. You know it is an unusual
case, but I do think you know we have seen other
circumstances including You know the honesty
case in front of your honor a case number 24.
Yeah, I know or Mr.. Scott here's my concern.
Here's my concern is that I'm doing it. I'm doing
it on like 10 hours. I'm doing it on short notice
What if you? That's the concern I just have a
concern, Your Honor. And I don't know why it's
going to happen in the next, what court is not
going to recognize my order in 10 days or 15
days. In other words, if what you're telling
me is, in other words, if you and Mr. Houston
are going to come together and say, Your Honor,
can we pitch this portion of it, come back in
10 days or so, I probably feel better about granting
it, even if I just stuck it. But I just I'm not
comfortable doing it today, but maybe a hearing
on short notice You know if your if your clients
are that uncomfortable with what it is and I
got it. They're running a risk But I think but
a little bit more notice I could probably get
more comfortable, but maybe seven to ten days
notice out I don't want to get too close to Thanksgiving
holidays, but something where someone Who's not
here today may have an issue with it, and I feel
more comfortable if it went out So I'm happy
to work that into an order if that's what y 'all
want to do just something to give a little bit
more notice but get the factoring order in and
Then this piece can you know can tie in at a
slightly later date with some additional notice
that gets me more comfortable I understand the
trustee's concern here on this one. I think he's
right, but but I could get a little bit more
comfortable Mr.. Jimenez Thank you honor if Mr.
Scott is it's done then I'll make a sure remark
Your honor all I was going to say is I will have
to speak to our client I as I said I think the
concern is that there could be commencement of
claims or proceedings elsewhere and At that point
in time. I think one of the things you heard
is in Germany for instance There is a risk and
the UK is another one where if there were a commencement
of proceedings at that moment we could have risk
over purchases of receivables. What I think is
our client's position is it's going to be difficult
to continue the purchase. So if I give you a
hearing within 24 to 48 hours of you even getting
a notice of a commencement, what's the risk?
What's the concern? I think as long as it's clear
that we can stop. Purchasing receivables, I'll
have to speak to my client. That may work, Your
Honor. I do think it creates concern over whether
they'll be willing to continue to purchase in
those jurisdictions without those protections.
So we are relying on, it's not only the debtor's
commencement. The concern actually is over a
local creditor potentially commencing, for instance,
a winding up proceeding in the UK or a creditor
in Germany deciding, getting wind of this proceeding.
and commencing proceedings in Germany. At that
point in time, in both those jurisdictions, as
I understand it, and I don't purport to be a
UK or German lives, but we have spent many, many
hours on the phone with Kirkland and Gibson -Dunn,
including lawyers across jurisdictions on that,
there is a risk that no matter what happens,
a purchase after that is void or voidable, regardless
of the good faith of... of our clients as a purchaser
the consideration paid to the debtors that's
what this is meant this is narrowly meant to
cover that risk off and so again part of the
reason i think the dip lenders were comfortable
on this is this is not meant to open the door
to a lot of claims we think in most scenarios
we will be well covered it is meant to cover
admittedly a corner case but my client is very
concerned about taking part of these transactions
given the multi -jurisdictional nature here.
So I'll pause there, and yeah. Mr. Jimenez, let
me hear from you, and then Mr. Houstonick, I'll
turn to you. Thank you, Your Honor. Andrew Jimenez
for the U .S. trustee. Your Honor, I just want
to take a brief moment to explain why this paragraph
8, it's just inconsistent with the order, and
it's not justified under bankruptcy law. So Your
Honor, the debtors are asking the court to authorize
the debtors continued participation in the factoring
programs. That is a legitimate request on the
first day. And the proposed order, Your Honor,
takes several steps to ensure this goal that
I think are appropriate. For example, Your Honor,
The internet order provides that the transfers
of receivables constitute non -recourse sales
under applicable non -bankercy law and are deemed
through sales. Now, these are part of the simulations.
The order also provides for better releases to
each of the factors and their affiliates. The
interim order also provides the binding effect
of the stipulations of the admissions and releases
contained in paragraphs two and three of the
order, and also provide for a challenge period.
The order provides that the interim order shall
constitute, and I'm reading specifically from
the order, this interim order shall constitute
findings of facts and conclusions of law shall
take effect. and be fully enforceable noon per
cent to the petition date immediately upon entry
thereof. These states, Your Honor, conform with
bankruptcy law and are, in my view, legitimate
concerns to us on a first -day basis. But, Your
Honor, I don't think they can have it both ways.
If this is a true transaction and this court
is entering old order with stipulations to that
effect, then this is what we have. We have a
true sale transaction of receivables. To say
that, and also, it provides for a challenge for
you, Your Honor. If someone can later, if the
effect of pursuing a challenge is that then the
factors are going to have a super priority, then
this is not a meaningful challenge, Your Honor,
because the factors will end up in a better position
than before. Now, to the concerns that a foreign
jurisdiction might not recognize this court's
order, well, Your Honor, if that is the case,
it doesn't matter if it includes paragraph eight
or not, because they're not recognizing this
court's order. So I'm not following how that
provides an additional protection. I think the
protection is embedded and it's clear in the
order by characterizing this transaction as true
sales, Your Honor. I think that's where they
get the protection. They want to continue post
-petition with the same pre -petition practices,
Your Honor, and that is okay. They should be
allowed to do that, Your Honor, but there's simply
no justification for this super priority inside
of her faith, which, Your Honor, I think it also
has the effect of nullifying any possibility
of anyone making a challenge. They provide a
challenge period, but this will render that challenge
period In effect if your honor, so I think that
the way to fix it. It's just to take out a photograph
eight and and and And any reference to a super
priority place mr. Houston Your honor may I respond
to that briefly just because I do want to make
sure that the order this is clear Again to the
record Sean shot there. There's no intent to
have this super priority claim cover pre -petition
purchases that is The challenge period applies
to that. The debtors have their stipulations,
but we are not trying to cover that. What this
is meant to cover is continuing the programs
going forward. I agree. If we were only in the
U .S., I would be very comfortable telling my
client, you have a court order. It is the law
of the land. It says these are true sales. You
can rely on that. You can be comfortable that
you have that as a binding order. The concern,
again, that we are trying to address is going
forward tomorrow, when we purchase, when my client
purchases receivables in Germany, there is a
scenario under which next week someone commences
an insolvency proceeding in Germany. There is
a whole host of laws that none of us are expert
on, Your Honor, more so probably than the rest
of us, but Germany has a very different regime
for insolvency proceedings. And there is liability
for engaging in transactions potentially with
debtors in Germany that can result in transactions
that you undertake being void or voidable, determined
to be in bad faith. I used the UK example. This
is only meant to cover the scenario under which,
and I guess one option that we had thought about,
can we have this subject of further notice. I
view this as a little bit akin to a Lending in
good faith during an interim period my client
does not want to take risk over the next call
it 10 days 14 days of And and in this case is
purchasing but it is akin to granting or sending
credit For this period of time if there is a
risk that over that time not only Can that be
voided or caught back, but then we're fighting
to say this order This is not binding on you.
I got it. I got it Yes, I understand. Okay, sorry,
Your Honor. I will see the podium. Mr. Hustnick?
Thank you, Your Honor. I think I'm a little confused
because this is a form of financing, and in most
cases... I got it, Mr. Hustnick. I'm just not
granting releases on day one. What I'm saying
is folks can wait four or five days and they
can get a hearing on this. If there's a scenario,
I can come back in 48 hours and give you one.
And no one is like taking me up on any of these
offers But I can assure you I can't grant releases
on 10 days to a deal in which someone is telling
me is intended to cover a Scenario that we don't
that currently doesn't exist. I'm willing to
do it on short notice I'm willing to do it you
have 48 hours note hearing on it fast Just pick
the one that makes the most sense and let's give
people some notice Come back in a few days, and
I'm going to feel a lot better about it. That's
what I'm just telling folks and I get it If there's
a real risk that somehow There's a concern about
some insolvency proceeding that's going to start
that I can't handle in 24 hours I don't see how
that would exist But what I am saying is then
we have then we have a real problem, and it's
going to get a lot easier Mr.. Richard Mr. Houston
there was a point where you cut off a little
bit. I couldn't hear you Totally understand your
honor on releases and get that point What I'm
confused about is mr. Jimenez is objecting to
this provision because of the super priority
claim aspect and I just want to tease this out
because Frankly, if I walk out away from your
honor and the reason I'm doing this on the record
is if I walk away from this hearing and the factors
pull which I have no ability to stop them from
doing that because this is a financial combination,
then I have a gigantic liquidity hole overnight.
And so I want to tease it out on the record so
that Mr. Scott can go talk to his client and
get them to say yes. I can tell you, I'm okay
with it. This is a financing, and this is a financing
deal, and so I get the 364 component to it, and
I get it. I get it. This is going to continue,
and this is only covering post -petition stuff.
No one's granting releases on the pre -staff.
This is just a post -petition component, and
this is intended to cover, this is happening
in multiple jurisdictions, to the extent that
there's an issue, that there's comfort, that
there's going to be coverage, or still that they're
still going to get the benefit, the economic
benefit of the deal, even if a court doesn't
recognize My order there's still something in
this order where this court where I can enforce
something and give them the economic Benefit
of the deal I get it right I got it I'm just
saying let's just do it on a little bit of notice.
This is what I am I am really focusing on and
I'm telling you I'm I'm I get it I get it right
because there are what you would Mr.. Scott's
clients don't want is to go out there and then
Kind of have in order where I'm not enforcing
something and then another court isn't enforcing
something either there's got to be something
that where they can get the economic benefit
of the deal which is the factoring and providing
the liquidity I I Get it. I really do I just
I feel a lot more comfortable if we didn't do
it today if we did it on short notice I'd feel
a lot more comfortable, but I understand the
economics. I understand the deal. I just know
we're holding a first -day hearing really fast
I'd feel a lot more comfortable. I don't know
what's today Wednesday if we did it Monday. I
feel a lot better and it's That's that's what
I'm saying because people would know and there'd
be a notice and people could wake up and see
the docket and see what was going on and see
that we thought about this a little bit and came
back on Monday and and And got this all done,
but maybe and I suspect it could be I don't know
depending on who shows up It could be a long
hearing would be a really short hearing But I'm
willing to give you one Or hearing on 24 48 hours
notice you all tell me I'm just giving you optionality
because I don't know I'm giving you options because
I don't know what folks are gonna But their clients,
but they're gonna feel comfortable doing No,
thank you your honor Sean Scott again for the
record I think obviously we'll have to confer
with our client, and it's probably a discussion
with the debtors as well in terms of you know,
can there be a pause on purchases, at least in
those jurisdictions, you know, during that time
period? And I'm guessing Mr. Huznick is going
to tell me no. I just, I know that's the difficult
question that we're going to face, I will face
for my client tomorrow is, you know, we, this
was carefully constructed and crafted. This is
meant to be, you know, you hear the terminology
of corner case, but this was also a big part
of the protection that the initial response is.
bankruptcy, particularly U .S. bankruptcy, we
should shut down the program, for lack of a better
term, right? We shouldn't continue to purchase.
They're not a client that has done this type
of structure before in the U .S. I would say
this is very novel, and again, I credit the team
here, Kirkland, Gibson, Dunn. Everyone has worked
incredibly hard to make this happen, just given
the various jurisdictions. I just thought of
something else, Mrs. Scott, and I think I feel
more comfortable doing this, because I really,
I think a lot of this is academic. But I got
it, it's going to give your client some comfort.
Let me run something by you. Sure. Yep. Well,
I'm just thinking about this out loud. No, it's
not going to. No, I was thinking about something.
It's not going to work. Let's go back to this
one. Let me why don't why don't we all think
about this for the next couple days because essentially
what we're talking about is an academic exercise
and we're not really I Was it between now and
monday so the tense of someone starting a proceeding
where there's enforceability. It's just Really
odd to me as a risk But if you want releases
I think that's also real No, the releases are
not an issue, Your Honor. I think that is subject
to the challenge period. I'm happy to... But
who's there to... In other words, who's there
to challenge is the real question, right? But
I think that's... Isn't that true with the dip
lender? I mean, essentially, I guess the way
I look at this, Your Honor, is everyone else
rides through the one L's and the two L's are
the ones that are essentially agreeing that they
are equalizing, they are taking... some impairment
I think because they recognize as I said this
is a far cry from some other cases in front of
your honor these are these are arrangements that
I think people understand debtors have acted
properly these are well documented this is a
continuation of a program that is of immense
value to all parties here including the trade
that will run through unimpaired the one L's
and the two L's so we've worked very hard to
get to a construct that works for everyone on
the release this I mean, again, someone can challenge
them. We're not seeking that. I'm not worried
about the leases. My big concern as I come back
to is, is there a scenario under which, again,
another jurisdiction outside the U .S., someone
says the sales were void, voidable because, and
I come back to the two, these are what my clients
have raised, UK and Germany, it could be raised
by local law creditors. Yes, they shouldn't do
that, right? Trade is riding through unimpaired.
There's no reason they shouldn't commence those
proceedings. But on the flip side, I need to
be able to tell them you're not taking incremental
risk by purchasing when they, from their, again,
I would call it perhaps a Eurocentric viewpoint,
view that says we are taking those risks. We
shouldn't be doing business with an insolvent
entity. It's kind of the framework. Let me throw
one out there to you. Let me see. I think I can
get comfortable around this too. What if... Hold
on What if you got interim approval today subject
to a further hearing On the entire like we we
in other words you get protection for the next
seven days on this scenario Which I don't think
is like what happened and in seven days You kind
of get a further interim that'll take you to
the final so at least you know you're covered
for this period and then we show up in another
Seven days, and then we we everybody's rights
are preserved, but but at least you would know
if something was going to Happen over the next
few days you're covered, but then we could But
it's limited through that period. But in other
words, whatever you all were going to do in the
ordinary course, you can continue to do. Everybody's
covered. We show up on the 12th, maybe at 11
AM. On the 12th, I've got to fly out. I've got
to be somewhere on the 13th. What if we did that
so you're covered during that one week period?
Right and just whatever was there and then it's
just another hearing I feel more comfortable
that we had a further hearing and then it's good
It's almost like a kind of an interim to another
interim and that will cake us to the final and
then if But I'd feel a lot more comfortable if
we did that Your honor I certainly think that
would be acceptable to my clients obviously I'd
have to talk to them, but again you are solving
for the concern that we have is just that gap
period risk and so I agree this is I think we're
all talking most likely as lawyers do about theoretical
risk but I also you know with a client that is
running 200 well purchasing 280 million of euros
in receivables they need to know that there's
not risk there. Why don't we do that I feel more
comfortable doing that let's just kind of a kind
of an interim to another interim to another interim
and and apologies to Mr. Gremlin I tell him to
Shut him down and But he was on it man. He was
persistent. I got to give him he was on his game.
I did a fantastic job for him. I am so Now I'm
just thinking out loud I get the concern I get
the concern, but I think that way We don't have
to kind of come back on Monday. You've got the
protection that you would need and it's probably
academic protection, but but we'll then come
back and we'll have a little bit more notice
and everybody can get more comfortable. Mr. Richards,
I don't know if I've unmuted your line and maybe
you can hit five star. Mr. Richards? Bob Richards
for Pacto France. You know, we're in the same
boat as Colfax. In fact, we're a joint lender
in one of the facilities. I was going to suggest
the solution your honor came up with, and I think
my clients in France, so I need to reach them
in the morning. You are not taking credit. You're
not taking credit, Mr. Richards. I'm not giving
it. Okay, no, I just understood. But I think
that's a much better approach that'll get my
client more comfortable. Okay. Now, let's do
that. Someone draft it up. I don't want to mess
with the words, and then let Ms. Saldana know,
and then we'll get it there. Let's turn to wage.
Your honor, if I may, just to be sure we get
the drafting correct, we are drafting the order
as proposed on a solely interim basis with the
next hearing at 11. Yeah, yeah, yeah. Interim
hearing to the final date that we set previously.
Yeah, yeah, that's the way it would. That's the
way it would work. And then Mr. Luz, it'll be
a virtual. No one needs to come in for that.
Just another virtual hearing. We'll log in, we'll
meet, and then we'll go from there. Understood,
Your Honor. We appreciate that, and we will work
to get a revised file shortly. Okay. Thank you.
Okay. Sakuna. Good afternoon, or good evening,
or good something, wherever we are. Good running
between, I think. Can you hear me okay? Yes,
just fine. Good afternoon. Great. Good afternoon,
Your Honor. Olivia Cunha, Kirkland and Ellis,
proposed counsel to the debtors. Up next is the
debtors wages motion filed at docket number eight,
agenda item number nine. This means this motion
the debtors are seeking to pay in honor of pre
-petition wages, salaries, benefits, and other
compensation, including certain non insider severance
payments to employees across the world. And they're
seeking to continue their compensation and benefits
program in the ordinary course on a position
basis. As I know, Your Honor appreciates the
company's approximately 3000 employees are the
lifeblood of this company. And many of these
employees would experience the significant hardship
if their compensation and benefits were not paid.
This proposed form of order doesn't incorporate
comments from the US trustee and the defenders.
And we do not believe there are any outstanding
issues. So unless Your Honor has any additional
questions. We request entry of the proposed order
filed at docket number eight. Anyone wish to
be heard here? Is anyone over the cap council?
I'm sorry. Is anyone over that one more time?
Is anyone over the cap the priority cap? So under
the non insider severance program, there are
nine payments contemplated. There is one that
would potentially be over the cap. And I will
add that in paragraph 3 of the proposed order,
we did negotiate language with the DIP lenders
and the United States trustee's office. So we
contemplate, if there are going to be payments
made over the test, that we provide notice with
the court and then provide 14 days notice with
the name of the employee being paid, the amounts,
and the proposed date of payment. Okay, so you're
gonna provide an okay good, so so the US trustee
Gets notice any committee gets appointed in the
court gets notice as well. Okay. I'm comfortable
with it. Yeah, I am Thank you, I will prove again
I'm gonna Know that there's been proper notice
and service a relief request that is appropriate
under the bankruptcy code I do know that this
is going to take care of employees and make sure
that It's sensitive issue for us around here,
and so I appreciate those Making sure people
get paid it's really important And incredibly
important people can maintain their health benefits
and have some assurance about that, so I'll grant
the motion Thank you Up next is the debtors all
trade motion filed at docket number nine, agenda
item number 10. So pursuant to this motion, the
debtors are seeking to continue paying all trade
claims in the ordinary course of business, confirming
the administrative expense priority of outstanding
orders, and authorizing the debtors to satisfy
the outstanding orders. So due to the consensual
nature of this case and the substantial international
footprint of the debtor's operation, all trade
claims will be unimpaired, which is consistent
with the RSA and the plan. And the relief we're
seeking allows for uninterrupted operations of
the debtor's business, both domestically and
abroad. The proposed form of order does incorporate
comments from the United States trustee's office
and DIP lenders. And we don't believe that there
are any outstanding issues. So unless anyone
else has questions or your honor has any additional
questions We'd respectfully request entry of
the proposed form of order socket number nine
For the court is consider of the you want to
call the all trade motion and again, this is
going to take care of Creditors in the ordinary
course of business It's sound exercise of the
debtor's business judgment. It has approval of
its tip lender. I'm going to grant the relief
requested. I'm going to, again, just change the
objection deadline to 12 noon on November 26th,
but I will set the final hearing day for December
3rd at 1 p .m. and I'll sign that order and it'll
get hit the docket shortly. Great. Thank you,
Your Honor, and I will see the podium to Mr.
Black to take us through the rest of the agenda.
Thank you, Mr. Black. Can you hit five star,
Mr. Black? There you are. Good afternoon. Good
afternoon. For the balance of the motion. i believe
that we have involved any outstanding issues
or questions with the u .s. trustee and that
there are no more objections on the docket so
with your permission i'll try to go through them
a little bit quickly let's find out all right
i wanted to start with the utilities motion that
we filed asking if we could continue receiving
utility services related relief uh... we did
discuss with the u .s. trustee incorporated comments
we have received no other Unless your honor has
any questions about the utilities motion, we
would request you enter the order as filed. I
got a chance to review the utilities motion,
and it provides for adequate assurance within
the meaning of the code. Also allows parties
if they wish to believe, utilities if they believe
that they're entitled to additional adequate
assurance. There are procedures there. They're
not locked in. They could negotiate or they could
ask for More from the court and so there's a
procedure here just to make sure especially in
a business like this that the lights stay on
which is incredibly important, so I'll grant
the motion Thank you, your honor The next motion
is the insurance motion at socket number 11 and
this motion asks for release allowing us to maintain
insurance and related programs Insurance is important
for the debtors. It's required by the code and
unless there's any objections we'd ask Does anyone
wish to be heard in connection with the insurance
motion? Certainly, insurance is incredibly important.
It required my U .S. Trustee guideline as well
to maintain adequate insurance. I will grant
the motion. Thank you, Your Honor. The debtors
maintain two types of customer programs, and
at docket number 12, we filed a motion requesting
relief to continue these programs. We have warranty
programs and rebate programs that we offer. We
don't believe that there are any cash dollar
amounts outstanding, but if they come due, we
want to honor them. Okay. Anyone wish to be heard
with respect to the customer programs motion
is this uh So you're just going to maintain the
programs just to kind of keep the business going
keep good Well, you're going to take care of
trade creditors already, and you're going to
keep customer programs going so that the customers
stay happy and the lenders are okay with that
and Consistent with the overall package of relief
requested so I will had a chance to review this
it's all publicly noted. It's going to benefit
the estates. The debtors are exercising their
business judgment here. I will grant the relief
requested. Thank you, Your Honor. Moving to docket
number 13, the taxes motion requests relief,
allowing us to pay taxes and other related relief.
This is a motion that we need. We need to pay
taxes, even in bankruptcy. And we've talked with
the U .S. Trustee. We've seen no other objections
on the docket. And unless there are questions
that Your Honor has that I can answer, ask that
you enter the order of file. the ability to pay
it and to take every care of that. There could
be liability issues that arise. And I've actually
seen a case in which the government has come
back and asserted claims against someone because
the tax returns were not timely filed on payroll
taxes. And so these are real issues and they
affect people individually. and dealing with
foreign jurisdictions as well. There could be
similar liabilities. So I'm going to take, I'll
sign the order and authorize the payment of taxes.
And I would know that it's consistent with the
overall package of satisfying these types of
claims as well in connection with the prepack.
So I'll grant the motion. Thanks, Your Honor.
The next motion is the, we call it the NLL motion
filed at docket number 14. It allows the debtors
to have the opportunity to preserve tax attributes.
We have about $200 million worth of 163 -J carry
forwards, and we'd like to preserve those and
other NOLs and other positive tax attributes.
We did the share this with the U .S. trustee
and we don't believe that there are any outstanding
comments or questions on this and unless your
honor has any questions we'd request the order
be granted as filed. I took a look at this obviously
you want to preserve NOLs in connection with
especially a case like this it's going to be
incredibly important this is really just providing
notice to parties and providing procedures. for
them to kind of understand and to make sure that
valuable tax attributes are preserved throughout
the Chapter 11 cases. It's customary to approve
this type of relief on a first -day basis because
they're really important, especially in a case
like this. So I'll sign the order in loud straddle
to get to work and notifying folks about their
rights. Thank you, Your Honor. The next motion
is docket number 15, the creditor matrix. It
is a procedural motion that allows us to file
a consolidated creditor and some other reports
of relief. We think it's important. It's gonna
reduce the fee burn in the case to be able to
administrate it and send notice on one consolidated
creditor matrix. And unless your honor has any
other questions, we don't believe there are outstanding
objections or questions or comments from the
U .S. trustee on this. Anyone wish to be heard
in connection with the creditor matrix motion?
Okay, the motion is granted. The last motion,
your honor, is at docket number 17. You heard
a little bit about the foreign complexities of
the case. The automatic stay order is requesting
basically that we can send notice of the bankruptcy
code protections and provisions for the benefit
of our foreign vendor -based customers, others
who do not understand the bankruptcy code and
what it means for us to be in chapter. We believe
it's necessary, especially given our multinational
business. And once your honor has any questions,
we request your entry. I think it's important
and I understand why you're doing this and the
trick is you've Actually cited the code which
is what's really important here and you're not
trying to extend Interpretations of the code
but more just informing people about what the
code says so it's I'm comfortable with this type
of relief and I understand that it's important
so I'll grant the relief requested Thank you
I think that brings us to the conclusion of our
agenda today. Okay. Anything else we need to
take care of today? You've got dates. Mr. Huesnicki
will upload some orders and then get them to
my folks, and we'll get them on file. I've –
let me just give me one second. If it's not just
to give everyone kind of a heads up I know that
you're all going to get me a revised of that
order if If you can get it tonight, and I can
probably enter it tonight or first thing in the
morning but at 9 a .m. I've got a Hearing that's
probably going to be a while and so I probably
couldn't get to it to like Lunch hour, so I just
you get it tonight. I'll do it first thing in
the morning if not it might be noon hour if not
You're on your own whenever that hearing ends.
So I will Just wanted to give you a heads up
about that. So just from a timing so if my case
manager You kind of know what it is, but if you
can get it tonight, I can yeah I Guess you're
just adding just kind of this further hearing
concept in the order So maybe if you can get
it to me tonight, I can I'll sign. I promise
you before Either tonight or first thing in the
morning Before I step out on the bench on on
the other one and then we'll see where things
go. I really appreciate everyone's time. I really
want to thank Mr. Jimenez and Court staff as
well for for all their efforts here And I think
everyone who participated today. Thank you very
much. Have a good day Thank you