WEBVTT

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Hello, Your Honor. For the record, Christopher

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DiPompio of Wilmington -Gallagher proposed counsel

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for the global debtors. Your Honor, if it's the

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same with you, we'd like to move back to the

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end portion of the hearing. Yes, yes. That's

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what we're doing now. Let me just call the docket.

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So we're back on the record in case number 26

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-90103. Go ahead. And I think two housekeeping

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issues, Your Honor. One is that after reviewing

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Amazon's NIP, I know I said before it might be

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too fast to just deal with our issues in redirect.

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I actually think after reviewing the document,

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the court could benefit. It would probably be

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more efficient to do just 15 minutes of direct

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set the stage, particularly on issues that are

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outside the scope of the declaration. So I'd

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like to do that if it's okay with the court,

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and then turn the witness over for cross -conditions.

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Yeah, thank you. I think that would be very helpful.

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Great. And then one other just housekeeping matter.

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We saw an email from Council of Amazon to the

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court with an exhibit list that raised some ceiling

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issues. I thought maybe we could address that

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now if the court is prepared to do so. I have

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not seen any email to me. Oh, here it is. Wait

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a second. No, I haven't seen any, I haven't seen

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any issue. I haven't gotten anything from...

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Your Honor, we filed a... Go ahead. Your Honor,

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I believe what Council may be referring to is

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we filed a motion to seal certain of our exhibits

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that I believe the debtors have a possible confidentiality

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can turn over and we emailed debtors council

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to ask if they were asserting confidentiality

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over them. So we filed the motion to seal in

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an abundance of caution and maybe they don't

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have it and we don't have to worry about the

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ceiling, but I think that's what better councils

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are referring to. Okay. All right. I haven't

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seen anything, so. Hopefully I can make this

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relatively easy for you and I apologize if I

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misunderstood. I've been reading a lot during

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the hearing. Things get confused at times. The

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council for Amazon did submit an exhibit list

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I think four of their proposed exhibits. specific

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issues. But I do think it's worth noting, and

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you'll hear this as we get further in, that I

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think these issues are quite a big sideshow from

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the issues actually before the court. But the

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reality is that there was no Hold Code 2 -only

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dip that was never on the table. It was never

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a possibility. No one proposed it. There was

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no enterprise dip that did not involve Hold Code

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2. We had one other proposal which was not actionable

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for once it's an appropriate... exhibit less.

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Those are LLC agreements that are out there.

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The debtors, however, do maintain their objection

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to confidentiality with respect to number eight,

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which is an appraisal of the flagship property.

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And the reason, Your Honor, is Your Honor, may

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I be heard? Yes. First, I didn't realize we were

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arguing the motion. Just to be clear, Amazon

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proposed the hold code two only dip, which you

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will hear about. So that statement was not accurate.

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In terms of evaluation, it's a little hard for

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me to respond until I hear how the debtors are

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going to try to justify imposing over two billion

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of liabilities on hold code two. I assume they'll

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be doing so based on analyzing the benefits of

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Holko 2, which I think absolutely will turn on

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the value of the flagship property. And so the

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appraisal that was done is, I imagine, will be

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highly relevant. If the debtors don't want to

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have it discussed in open court, we'll find another

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way to deal with it. Unless this testimony is

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different than I expected, I will be using that

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valuation. So we can deal with it however the

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debtors like. It is highly relevant to whether

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this dip will severely prejudice Holocaust II's

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creditors, including just the interim dip itself.

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Your Honor, we disagree. Obviously, the only

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question for the court right now is a sealing

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question. We maintain our objection to disclosure

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of those values. All right. So the fact that

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it's sealed, that will continue to be sealed.

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to the extent that we're going to talk about

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it, then subject to any objection, we can deal

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with it at the time. And we can deal with it

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by not talking about the numbers. They did file

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them on the seals on the docket. So I do have

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it. So I'm sure we could figure out a way to

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do that without. disclosing any proprietary or

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confidential information. All right. So that

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works. Thank you. One final housekeeping and

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Council for Amazon mentioned a proposal which

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we'll actually believe was a proposal. But discussions

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between Amazon and the debtors. Those discussions

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were subject to an NDA. We are prepared to talk

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about those discussions. Again, you are just

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to be clear is debtors council already referred

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to it They referred to a letter to the letter

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we sent to them that included this proposal.

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So I'm not sure what NBA the debtors council

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thinks he's referring to but they already talked

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about the letter that contains that Invitation

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to do a holocaust only dip I'm not trying to

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cut off any questions. I'm just trying to clarify

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make clear that when that we're also going to

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be able to respond in full. I don't think it's

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anything more than that, Your Honor. All right.

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OK. That was good. All right. Why don't you call

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Mr. Weinstein? Absolutely. Your Honor, the debtors

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call Mark Weinstein to the stand. All right.

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Mr. Weinstein. You need to move over? OK. All

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right. That's it. We're good. We're going to

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try to stay in the screen together, your honor,

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so you can see both of us. All right. All right.

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Mr. Weinstein, would you raise your right hand,

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please? Do you solemnly, sir, affirm to tell

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the truth, the whole truth, and nothing but the

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truth? Yes. All right. Speak up so we can hear

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you. Sure. Good afternoon, Mr. Weinstein. Do

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you currently hold any positions with the debtors?

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Yes, I'm currently the chief restructuring officer.

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And do I understand that you're testifying here

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in support of the debtor's debtor possession

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financing motion, is that correct? Yes. Were

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you involved in the debtor's efforts to maintain

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debtor possession financing? Yes, I was involved

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in some aspects of it. What was your role? So

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my role, myself and my team were involved in

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sizing the amount of new capital that we believe

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was required to operate through the Chapter 11

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and exit on the other side. I was actively involved

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in diligence calls regarding the business on

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a regular basis and then had one -off meetings

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regarding questions, follow -up things, things

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of that nature. So in the course of your work

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with the debtors, did you form a belief as to

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whether the debtors need post -position financing?

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Yes. My belief was that it was critical and absolutely

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necessary if the debtors were going to continue

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to operate. Do you think that without the financing

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the debtors could operate in Chapter 11? No.

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Why not? We don't have enough liquidity. It's

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currently a $7 billion organization. We buy billions

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of dollars of goods. We pay hundreds of million

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in rent. We have very significant payroll obligations.

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And so, you know, and given the recent performance

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of the business, which has been significantly

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below what anyone would want, you know, you need

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a significant dip to pay for all the items I

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just identified, as well as many more, IT support,

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transportation, all those things, and to provide

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an opportunity for the operations to get back

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to the level that, where there's real value created.

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to enter into a liquidity crisis. Could you just

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describe at a high level what those events were?

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When you say the end of the year? From mid -2025

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through the end of the year. OK. So it actually,

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the debtors company at that time were facing

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liquidity issues actually in early 2025. And

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it was largely a result of the capital structure

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of the business, the lack of liquidity, as well

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as an inability to get new goods. We created

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a plan at that time that identified A, a need

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to raise more capital, and then look at other

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operational opportunities, including establishing

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new terms of brands, accelerating synergies,

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things of that nature. And the whole idea was

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to address the liquidity issues going forward.

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The DIP proceeds will be used to fund the operations

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of the business and to address the expenses associated

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with Chapter 11. The court previously entered

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an order approving the motion to pay critical

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vendors. Is that an aspect of the DIP financing?

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It is an aspect, and no pun intended, it is a

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critical aspect. One of the biggest issues facing

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Sachs Global was, and it's been stated already,

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on the record was the inability to get goods.

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If you don't have goods, you have nothing to

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sell. Additionally, we have a barring base. We

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have an acid -based facility. And if you don't

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have inventory to support the acid -based facility,

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your liquidity is lower. So a lot of the purpose

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of the critical trade motion is to ensure regular

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flow of goods. as well as what differentiates

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SAX Global in many ways is access to exclusive

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goods, access to exclusive brands, providing

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an environment that is conducive to the customer

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which we're trying to attract and critical trade

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motion is very important to ensure the steady

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stream and to entice those brands to ship and

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support us. Do you think what happened if the

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company were not able to pay big payments under

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its vendor program to its vendors? I don't believe

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we would get the level of goods. We would perpetuate

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the issue we already had. Is the company asking

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for all of the DIP funding now? No, on an interim

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basis. The first draw on the DIP would be about

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$400 million. Why do you think interim funding

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is necessary? very, very, very low liquidity

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at the moment. We have expenses to pay, some

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as imminent as tomorrow, and we need, it's desperately

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need to get the flow of goods going. We have

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many of our biggest brand partners, and I think

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council for some of those brand partners, identified

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this tonight. They're ready to ship to us, but

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they need to see, and we need to demonstrate

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an ability to pay. You mentioned, in your answer

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just now, some payments that are due tomorrow.

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Do you have any sense for how much funding would

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have to happen tomorrow? For tomorrow, it's probably

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in the 30 to 35 million range, and then there'll

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be more payments on Friday, et cetera. And the

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quicker we get, I mean, the quicker we get the

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funding in, A, it risks, it does a couple things.

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A, we need to make the immediate payments. B,

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You're always at risk of some functional issue

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any time you're going through a funding of this

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nature, and the quicker you get it, you de -risk

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it by ensuring you get the funding in faster.

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And lastly, you know, it's very, very well publicized.

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Actually, there were many articles in the springtime

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which were actually incorrect, and certainly

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a lot of articles recently about the issues facing

00:15:26.309 --> 00:15:30.049
SACs and it is... immensely important to us to

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be able to project to our brand partners and

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other very important partners as well as our

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employees that we have sufficient capital to

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operate. We have an outstanding team. The people

00:15:43.330 --> 00:15:47.190
on the SAX Global team are very highly skilled

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and know how to provide the customer experience

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that our customers are looking for, so having

00:15:55.110 --> 00:15:57.350
this immediately will provide the confidence

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of our ability to go forward. You mentioned 30

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to 35 million dollars of payments tomorrow. Do

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you have any sense for what things those disbursements

00:16:06.610 --> 00:16:08.590
are going to pay? Sure, some of it is to cover

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payroll, some of it is to cover insurance payments,

00:16:12.470 --> 00:16:15.049
some of it is to cover, BitChunk is to cover

00:16:15.049 --> 00:16:19.320
taxes, and then there are other associated you

00:16:19.320 --> 00:16:21.679
know, important payments that, you know, many

00:16:21.679 --> 00:16:25.980
of which were approved earlier today. So payroll,

00:16:26.220 --> 00:16:28.580
taxes, other payments approved today. There's

00:16:28.580 --> 00:16:31.600
insurance premiums as well. Insurance. What is

00:16:31.600 --> 00:16:33.779
your sense of what would happen if those things

00:16:33.779 --> 00:16:35.720
were not paid for, if we didn't have the funding

00:16:35.720 --> 00:16:38.960
to do so? Oh, I forgot one important one before

00:16:38.960 --> 00:16:42.100
I answer that. We have customer refunds outstanding.

00:16:43.680 --> 00:16:47.200
Well, the first two, the second that, you know,

00:16:47.200 --> 00:16:50.500
you don't pay anybody, it's not a full payroll,

00:16:50.559 --> 00:16:53.360
but there's payroll out there. The second that

00:16:53.360 --> 00:16:56.879
one person doesn't get paid, it has a multiplicative

00:16:56.879 --> 00:17:00.279
effect to the organization and people get really

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concerned that irrespective of everything, she's

00:17:02.480 --> 00:17:04.960
told them about a path forward, like, oh my God,

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I didn't get paid this week. As for customer

00:17:07.440 --> 00:17:09.940
refunds, we actually had some bad publicity.

00:17:10.430 --> 00:17:13.730
regarding customer refunds several months ago.

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And if there was any hint of not making good

00:17:18.329 --> 00:17:21.809
on legitimate customer refunds that are owed,

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once again, that would likely be highly publicized

00:17:24.970 --> 00:17:27.009
and create issues for us with our customer base.

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And then the obvious issues with taxes and insurance.

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So that's issues that might arise tomorrow, but

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let's step back and look more in the short term,

00:17:37.130 --> 00:17:40.250
a little more broadly. What would happen if the

00:17:40.250 --> 00:17:42.829
initial interim fund control is not approved?

00:17:43.450 --> 00:17:46.890
It would be hugely problematic. We have a budget

00:17:46.890 --> 00:17:51.029
that's predicated upon bringing in inventory

00:17:51.029 --> 00:17:53.750
as quickly as possible and reestablishing our

00:17:53.750 --> 00:17:56.309
credibility with our brands. I think our credibility

00:17:56.309 --> 00:17:59.369
has been damaged, understandably so, given what's

00:17:59.369 --> 00:18:01.150
transpired between the company and the brands.

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Nevertheless, we have great brand partners and

00:18:04.390 --> 00:18:06.569
other important partners, whether they be transportation

00:18:06.569 --> 00:18:09.549
partners, marketing partners. And they're there

00:18:09.549 --> 00:18:11.910
to support us, but if we do not have the ability

00:18:11.910 --> 00:18:14.849
to pay them immediately to provide the services

00:18:14.849 --> 00:18:18.170
and the goods that we need to meet the budget

00:18:18.170 --> 00:18:21.809
that we put forth, we'll be dead in the water.

00:18:23.009 --> 00:18:24.890
Do you think the company could survive without

00:18:24.890 --> 00:18:28.930
interim funding? No. How long do you think the

00:18:28.930 --> 00:18:32.529
company could potentially go until it fails?

00:18:33.349 --> 00:18:37.089
Based on current liquidity, maybe not past the

00:18:37.089 --> 00:18:40.599
end of the week. You know, right now, we're being

00:18:40.599 --> 00:18:43.579
funded, frankly, through the good cases of our

00:18:43.579 --> 00:18:46.359
ABL who has no, because we're in default, there's

00:18:46.359 --> 00:18:49.480
no obligation to fund us, but they've been cooperating,

00:18:49.720 --> 00:18:52.519
seeing the DIP out there and understanding that

00:18:52.519 --> 00:18:55.259
there's significant dollars coming in. They've

00:18:55.259 --> 00:18:57.460
actually been supporting us, even though they

00:18:57.460 --> 00:19:00.400
have no obligation to at this point, over the

00:19:00.400 --> 00:19:04.059
last several days. I'd like to take a step back

00:19:04.059 --> 00:19:07.299
and talk about the DIP process. more generally,

00:19:07.740 --> 00:19:10.660
recognizing Mr. Baird also provided a declaration.

00:19:10.960 --> 00:19:15.299
We'll talk about that more fully. But were you

00:19:15.299 --> 00:19:17.920
involved in the process of selecting the DIP

00:19:17.920 --> 00:19:26.240
facility? Ultimately, yes. And were any alternatives

00:19:26.240 --> 00:19:30.720
to the DIP facility? There was one definitive

00:19:30.720 --> 00:19:33.970
executable. although with a high level of risk

00:19:33.970 --> 00:19:39.109
of execution, but there was one other proposal

00:19:39.109 --> 00:19:44.730
out there. But given the risk of the actual ability

00:19:44.730 --> 00:19:48.710
to execute it and given the close proximity from

00:19:48.710 --> 00:19:51.769
an economic standpoint of this, the dip that

00:19:51.769 --> 00:19:54.450
we're trying to get approved today to the other

00:19:54.450 --> 00:19:57.970
one, it was a fairly easy decision to select

00:19:57.970 --> 00:20:01.089
the dip that was in front of us. He said there

00:20:01.089 --> 00:20:04.029
was one other potential proposal, just one other

00:20:04.029 --> 00:20:08.430
proposal. That I'm aware of. I know that while

00:20:08.430 --> 00:20:11.069
I was not active in the solicitation process,

00:20:11.589 --> 00:20:13.170
by the time I was getting more involved with

00:20:13.170 --> 00:20:15.049
the company, I was certainly aware of the efforts

00:20:15.049 --> 00:20:19.710
of the solicitation process. I know that PJT,

00:20:19.809 --> 00:20:22.809
who's our investment banker, was talking to anyone

00:20:22.809 --> 00:20:25.869
and everyone that they have an interest in providing

00:20:25.869 --> 00:20:30.049
any form of dip. And frankly, if there were opportunities

00:20:30.049 --> 00:20:32.990
to fund outside of a Chapter 11, but ultimately

00:20:32.990 --> 00:20:37.670
these were the two DIP proposals that were actionable.

00:20:38.730 --> 00:20:41.069
And just because it's come up today, was that

00:20:41.069 --> 00:20:48.250
alternative DIP proposed by Amazon? No. There's

00:20:48.250 --> 00:20:50.750
been a lot of talk today about an entity called

00:20:50.750 --> 00:20:52.950
HoldCode2. Are you familiar with that entity?

00:20:53.289 --> 00:20:56.549
Yes. Can you explain for the court, just at a

00:20:56.549 --> 00:20:59.650
very high level, how Holco 2 fits into the debtor's

00:20:59.650 --> 00:21:04.289
capital structure? Sure. So Holco 2 is an entity,

00:21:05.150 --> 00:21:07.829
the two subsidiaries underneath it. One is called

00:21:07.829 --> 00:21:11.170
Flagship, which is where the Flagship store,

00:21:11.490 --> 00:21:14.910
Sack Store on Fifth Avenue, sits. And the other

00:21:14.910 --> 00:21:18.250
subsidiary is 12 East 49th Street, which has

00:21:18.250 --> 00:21:26.279
a ground lease from Flagship. and they have an

00:21:26.279 --> 00:21:29.420
operating lease with the SACS operating entity.

00:21:31.400 --> 00:21:33.839
Just to make sure that I understand this, because

00:21:33.839 --> 00:21:37.119
I think about this more in pictures, but is it

00:21:37.119 --> 00:21:39.259
correct that there's hold code 2, then there's

00:21:39.259 --> 00:21:42.259
two subsidiaries, one is the flagship, the owner,

00:21:42.539 --> 00:21:44.799
the other is probably 49th Street, is that generally

00:21:44.799 --> 00:21:49.019
accurate? That's correct. And you mentioned that

00:21:49.019 --> 00:21:51.380
there were leases involved in that structure.

00:21:51.400 --> 00:21:55.220
Can you describe a little bit how the lease flow

00:21:55.220 --> 00:22:01.200
works? Sure. So the entity outside, I can't remember

00:22:01.200 --> 00:22:03.259
the exact name of it. Maybe Sax Holdings. I don't

00:22:03.259 --> 00:22:05.440
remember the exact name of the entity. But that

00:22:05.440 --> 00:22:11.660
has an operating lease to or with 12 East 49th

00:22:11.660 --> 00:22:15.460
Street, where it pays rent 12 East 49th Street.

00:22:16.380 --> 00:22:18.660
And with that, that's the only source of income

00:22:18.660 --> 00:22:21.769
to the best of my knowledge. revenue to 12 East,

00:22:21.769 --> 00:22:26.529
12 East 49th Street. So again, subsequently pays

00:22:26.529 --> 00:22:30.269
rent to flagship. So just again, to make sure

00:22:30.269 --> 00:22:34.890
I understand the flagship owner is in a ground

00:22:34.890 --> 00:22:37.769
lease with 12 East 49th Street. 12 East 49th

00:22:37.769 --> 00:22:41.190
Street is an operating lease with Saks, the Saks

00:22:41.190 --> 00:22:48.390
entity, Saks Globe. Correct. Now we've been talking

00:22:48.390 --> 00:22:51.609
about the Saks entity. the flagship store. Can

00:22:51.609 --> 00:22:53.990
you tell me a little bit about what the flagship

00:22:53.990 --> 00:22:58.890
store is? The flagship store is a historic very

00:22:58.890 --> 00:23:06.250
large retail building sitting in a very good

00:23:06.250 --> 00:23:12.329
location on 12 East 49th Street where Saks maintains

00:23:12.329 --> 00:23:17.190
retail operations. It has somewhat of a unique

00:23:17.190 --> 00:23:22.700
purpose in that it is really purpose, you know,

00:23:23.799 --> 00:23:30.400
it's utilized as a retail location and, you know,

00:23:30.660 --> 00:23:34.799
would be for any other purpose, you know, you

00:23:34.799 --> 00:23:37.279
would look at it and there would have to be massive

00:23:37.279 --> 00:23:45.339
reconfiguration for other purposes. Yes, there's

00:23:45.339 --> 00:23:51.500
CNBS debt roughly of a billion 250. Let's call

00:23:51.500 --> 00:23:54.539
level up. So the entity that owns the flagship

00:23:54.539 --> 00:23:57.740
store is owned by Holdco 2, I believe you testified.

00:23:57.819 --> 00:24:03.859
Is that right? Correct. And are there any additional

00:24:03.859 --> 00:24:12.940
claims at Holdco 2? There are. There's various

00:24:12.940 --> 00:24:15.720
vendor claims at whole code to somewhere in the

00:24:15.720 --> 00:24:18.839
vicinity of 180 million. I believe Amazon has

00:24:18.839 --> 00:24:24.059
a claim at whole code to about 475 million and

00:24:24.059 --> 00:24:29.359
then there is a Pledge to the SPV notes of approximately

00:24:29.359 --> 00:24:34.339
200 million I Know we're talking about the flagship

00:24:34.339 --> 00:24:36.759
store. You mentioned it was valuable in the sacks.

00:24:36.759 --> 00:24:38.980
Do you do you think it would be as valuable but

00:24:38.980 --> 00:24:42.839
we're not the sacks? No, not at all. Objection.

00:24:43.079 --> 00:24:46.380
Objection, Your Honor. Objection. Lack of foundation.

00:24:46.559 --> 00:24:49.779
This witness is not a valuation expert. He's

00:24:49.779 --> 00:24:53.119
not qualified to opine. They have evaluation,

00:24:53.960 --> 00:24:55.839
which they apparently don't want people to see.

00:24:56.319 --> 00:24:59.200
But the witness here is not a real estate expert

00:24:59.200 --> 00:25:03.019
and has any basis to opine on the value of the

00:25:03.019 --> 00:25:06.619
flagship property. Your Honor, our witness is

00:25:06.619 --> 00:25:08.380
not opining on the value of the flagship property.

00:25:08.750 --> 00:25:11.869
He's simply opining on the use of the property

00:25:11.869 --> 00:25:15.910
and what its most highest and best use is. The

00:25:15.910 --> 00:25:17.710
question literally was, do you think the value

00:25:17.710 --> 00:25:20.829
of the property would be less if Saks was an

00:25:20.829 --> 00:25:23.910
occupier? That is an issue for a real estate

00:25:23.910 --> 00:25:27.210
appraisal to opine on. Right. Why don't you re

00:25:27.210 --> 00:25:29.849
-ask your question? I think the way you phrased

00:25:29.849 --> 00:25:34.769
it was not objectionable. Yes, thank you, Your

00:25:34.769 --> 00:25:38.289
Honor. So Mr. Weinstein, my question was, would

00:25:38.329 --> 00:25:41.269
the Saks store be as valuable if it were not

00:25:41.269 --> 00:25:49.750
a Saks? I don't believe so. And why not? Me?

00:25:49.849 --> 00:25:56.829
My objection? If Saks wasn't there, there would

00:25:56.829 --> 00:26:02.170
be no income to 12, 12 East 49th Street. You

00:26:02.170 --> 00:26:06.069
would liquidate the store. You would. pair the

00:26:06.069 --> 00:26:07.990
value of the SAC's name, which I'm not sure is

00:26:07.990 --> 00:26:11.769
volunteer. But if there's no income, it becomes

00:26:11.769 --> 00:26:16.250
a dark store ultimately, and it would be worth

00:26:16.250 --> 00:26:21.150
a lot less to then as an operating entity, while

00:26:21.150 --> 00:26:25.289
not an operating valuation expert, there's typically

00:26:25.289 --> 00:26:28.569
higher value associated with properties that

00:26:28.569 --> 00:26:31.869
have active tenants. that are paying rent and

00:26:31.869 --> 00:26:35.250
a property that is dark and is not receiving

00:26:35.250 --> 00:26:39.150
a rent stream. Your honor, I renew my objection

00:26:39.150 --> 00:26:41.630
and move to strike. This witness admits he's

00:26:41.630 --> 00:26:44.130
not a valuation expert. He's not a real estate

00:26:44.130 --> 00:26:47.470
expert. You would need to bring in a real estate

00:26:47.470 --> 00:26:50.089
expert to appraise the properties on a dark versus

00:26:50.089 --> 00:26:57.289
lit basis to give that testimony. I'm going to

00:26:57.289 --> 00:26:59.809
overrule the objection. He's the CRO. He's just

00:26:59.809 --> 00:27:04.769
giving his basically business judgment view of

00:27:04.769 --> 00:27:08.250
the business judgment of what they did. I'm not

00:27:08.250 --> 00:27:12.069
taking it for whether it's value. And again,

00:27:12.569 --> 00:27:18.910
as of this moment, the issue of valuation is

00:27:18.910 --> 00:27:22.490
not really in front of me at this point. So I'm

00:27:22.490 --> 00:27:32.029
going to go ahead and allow the testimony. Mr.

00:27:32.150 --> 00:27:35.750
Winston, do you think that without the DIP, the

00:27:35.750 --> 00:27:37.930
flagship store could continue to operate as a

00:27:37.930 --> 00:27:43.170
SACS? No, it can't because the DIP will support

00:27:43.170 --> 00:27:51.150
the operations of SACS Global, including the

00:27:51.150 --> 00:27:55.809
flagship store 12 -49. It will allow that store

00:27:55.809 --> 00:27:59.170
to be merchandised. It will allow store employees

00:27:59.170 --> 00:28:03.579
to be paid. It will have rent to be paid back

00:28:03.579 --> 00:28:07.579
to the 12th East 49th subsidiary. So the DIP

00:28:07.579 --> 00:28:14.460
will actually help support the operations of

00:28:14.460 --> 00:28:18.519
that store concurrently allowing a flow of revenue

00:28:18.519 --> 00:28:25.240
into the Holdco 2 subsidiaries. And what do you

00:28:25.240 --> 00:28:27.579
think as the CRO would happen to the value of

00:28:27.579 --> 00:28:32.130
Holdco 2? if the dip were denied. Just for the

00:28:32.130 --> 00:28:37.089
record, I'm repeating my objection to that. All

00:28:37.089 --> 00:28:41.309
right, an overall rule. Go ahead. I mean, if

00:28:41.309 --> 00:28:43.269
the company, you know, without the dip and the

00:28:43.269 --> 00:28:46.710
company are forced into liquidation, I believe

00:28:46.710 --> 00:28:48.509
that the value of whole code 2 would be diminished.

00:28:49.809 --> 00:28:51.710
Do you think in that context whole code 2 would

00:28:51.710 --> 00:28:58.410
be solvent? No. I'd like to go back and talk

00:28:58.480 --> 00:29:01.000
about the DIP process again, to the extent you

00:29:01.000 --> 00:29:04.720
know it. Did anyone offer to lend only on Holdcode

00:29:04.720 --> 00:29:10.339
2's assets? Not that I was aware of during the

00:29:10.339 --> 00:29:14.619
process of the DIP solicitation, where we were

00:29:14.619 --> 00:29:16.900
in numerous conversations, at least I was in

00:29:16.900 --> 00:29:18.839
several of them, where we have daily calls with

00:29:18.839 --> 00:29:23.619
Amazon and their advisors anyway. And I don't

00:29:23.619 --> 00:29:26.700
recall that coming up. I may have missed that

00:29:26.700 --> 00:29:32.440
meeting. But I don't recall that coming up. And

00:29:32.440 --> 00:29:35.400
I believe you testified that there were two executable

00:29:35.400 --> 00:29:38.299
proposals. One is the proposal accepted. Another

00:29:38.299 --> 00:29:41.960
was from a third party, not Amazon. Did either

00:29:41.960 --> 00:29:45.819
of those proposals involve an offer to lend only

00:29:45.819 --> 00:29:51.740
a whole could use assets? No. Did either of those

00:29:51.740 --> 00:29:56.099
proposals involve an offer to lend the financing

00:29:56.099 --> 00:30:25.940
without? No. Not that I'm aware of. Yes. Without

00:30:25.940 --> 00:30:31.880
that, you know, you would liquidate, the operating

00:30:31.880 --> 00:30:34.819
lease would not generate any revenue. So, yes,

00:30:34.819 --> 00:30:40.720
I do believe that Whole Codes II benefits from

00:30:40.720 --> 00:30:44.960
the dip financing. I believe as CRO, you are

00:30:44.960 --> 00:30:47.079
an officer of Whole Codes II, is that correct?

00:30:47.339 --> 00:30:50.839
Correct. And in your business judgment as an

00:30:50.839 --> 00:30:53.440
officer of Whole Codes II, do you think it was

00:30:53.440 --> 00:30:55.339
in Whole Codes II's interest to participate?

00:30:55.880 --> 00:31:00.380
I do. Why is that? For the reasons that we just

00:31:00.380 --> 00:31:05.900
discussed, by creating value for the entire enterprise,

00:31:06.099 --> 00:31:08.160
you are creating value for a whole group, too.

00:31:08.859 --> 00:31:13.660
And I believe in the debtor's business judgment,

00:31:13.920 --> 00:31:18.500
it was a prudent decision to move forward with

00:31:18.500 --> 00:31:22.039
this step. And last question, and deep picture,

00:31:22.180 --> 00:31:25.490
just stepping back. do you think would happen

00:31:25.490 --> 00:31:27.490
in the short term if the debtors were not able

00:31:27.490 --> 00:31:30.769
to obtain the financing on an interim basis today?

00:31:31.569 --> 00:31:35.230
I think I stated that earlier. There would be

00:31:35.230 --> 00:31:37.730
significant impairment to the business and likely

00:31:37.730 --> 00:31:41.190
a liquidation. Your Honor, I have no further

00:31:41.190 --> 00:31:44.430
questions. I would like to reserve time for redirect

00:31:44.430 --> 00:31:46.809
if necessary. All right. Thank you. All right.

00:31:46.910 --> 00:31:52.730
Mr. Harris? Thank you, Your Honor. Would it be

00:31:52.730 --> 00:31:55.250
possible to give my colleague, Tiffany Austin,

00:31:55.549 --> 00:32:05.849
presenter privileges? Yes. Great. Thank you,

00:32:05.849 --> 00:32:13.109
Your Honor. Good evening, Mr. Weinstein. I'm

00:32:13.109 --> 00:32:16.630
Chris Harris, on behalf of Amazon. We haven't

00:32:16.630 --> 00:32:19.029
met before, and I apologize if this is a little

00:32:19.029 --> 00:32:22.640
rough. doing this kind of on the fly. But I'd

00:32:22.640 --> 00:32:25.000
like to start by just making sure we're all in

00:32:25.000 --> 00:32:27.279
agreement on some terms for the different corporate

00:32:27.279 --> 00:32:30.420
identities or entities that we just talked about.

00:33:03.440 --> 00:33:06.839
Is that better, Your Honor? Yes, it's better.

00:33:07.279 --> 00:33:10.079
Can you hear me now? I can hear you. For some

00:33:10.079 --> 00:33:13.380
reason, you're in the system as Simpson Thatcher,

00:33:13.559 --> 00:33:18.200
so that's wrong. I'll take it as a compliment.

00:33:19.480 --> 00:33:21.980
Well, I am from Lakeland and Watkins, if I didn't

00:33:21.980 --> 00:33:25.059
say that before and we represent Amazon. I understand.

00:33:26.680 --> 00:33:30.619
Okay. Thank you, Your Honor. So, Mr. Weinstein,

00:33:30.680 --> 00:33:33.779
I just wanted to go through some of the names

00:33:33.779 --> 00:33:35.799
of the entities that we used before to hopefully

00:33:35.799 --> 00:33:38.720
make this examination a little clearer. But again,

00:33:38.720 --> 00:33:41.160
I apologize that this is a little rushed because

00:33:41.160 --> 00:33:44.319
I'm doing this on the fly. But this is from the

00:33:44.319 --> 00:33:45.960
organization chart at the back of your first

00:33:45.960 --> 00:33:48.259
day declaration. Do you recognize this document?

00:33:49.119 --> 00:33:53.200
Yes. OK. And I just zoomed in on the, can we

00:33:53.200 --> 00:33:55.319
zoom in on the part that deals with the hold

00:33:55.319 --> 00:34:02.319
code two entity? OK, thank you. So. You see there's

00:34:02.319 --> 00:34:06.359
four triangles here and the middle one is called

00:34:06.359 --> 00:34:09.940
Saks Fifth Avenue hold code to LLC and that's

00:34:09.940 --> 00:34:11.659
the entity we've all been calling hold code to

00:34:11.659 --> 00:34:17.139
right sir correct Okay, and beneath it. There's

00:34:17.139 --> 00:34:20.559
it has two holy on subsidiaries. There's Saks

00:34:20.559 --> 00:34:24.340
Flagship real property LLC on the left and then

00:34:24.340 --> 00:34:29.699
12 14 East 49 3 LLC on the right correct Yes

00:34:30.570 --> 00:34:33.050
Okay, and if it's already I'm going to use the

00:34:33.050 --> 00:34:37.070
term flagship entity to refer to that left triangle

00:34:37.070 --> 00:34:41.130
flagship Saks flagship real property LLC that

00:34:41.130 --> 00:34:46.110
okay, sir Yes, it is Okay, I think you explained

00:34:46.110 --> 00:34:50.070
that that entity the flagship entity owns essentially

00:34:50.070 --> 00:34:53.389
the Land and building where the Saks flagship

00:34:53.389 --> 00:34:57.170
store on Fifth Avenue is right, sir That's correct

00:34:58.300 --> 00:35:00.519
Okay, and just for convenience, I'm gonna call

00:35:00.519 --> 00:35:05.760
that the flagship property, all right? Yes. Okay,

00:35:05.940 --> 00:35:09.960
and then the right triangle, 12 East 493 LLC,

00:35:10.039 --> 00:35:13.239
that leases the flagship property from the flagship

00:35:13.239 --> 00:35:17.860
entity, right, sir? Correct. Okay, and I'm gonna

00:35:17.860 --> 00:35:22.260
call that right box 12 East, is that okay? Yes.

00:35:23.559 --> 00:35:26.519
Okay, and then 12 East then subleases the flagship

00:35:26.519 --> 00:35:30.280
property to another Sachs entity called Sachs

00:35:30.280 --> 00:35:35.199
and Company LLC, right? That is correct. OK.

00:35:35.480 --> 00:35:38.820
Does Sachs and Company LLC intend to assume that

00:35:38.820 --> 00:35:45.219
lease? We will make that determination right

00:35:45.219 --> 00:35:49.820
now. The answer is yes. But there will be an

00:35:49.820 --> 00:35:53.739
ultimate decision made at a later point. But

00:35:53.739 --> 00:35:58.460
right now, the answer is yes. So if I understand

00:35:58.460 --> 00:36:01.500
you're saying tentatively the answer is yes,

00:36:01.599 --> 00:36:03.360
but you'll ultimately decide that at a later

00:36:03.360 --> 00:36:06.860
point, is that right? My point is there have

00:36:06.860 --> 00:36:13.360
been no definitive decisions as today what we're

00:36:13.360 --> 00:36:16.860
assuming or rejecting. We have some time that

00:36:16.860 --> 00:36:20.739
allows us the ability to make that decision.

00:36:20.920 --> 00:36:23.320
But as of today, I would say the answer is yes.

00:36:24.599 --> 00:36:26.579
OK. But no definitive decision has been made,

00:36:26.739 --> 00:36:30.469
right, sir? We haven't filed anything one way

00:36:30.469 --> 00:36:34.210
or the other today. Okay. And what is the term

00:36:34.210 --> 00:36:37.349
of that lease between Sachs and Company and 12

00:36:37.349 --> 00:36:40.429
East? I don't recall the duration of the lease.

00:36:41.630 --> 00:36:44.650
Okay. Do you recall it about a 30 year and then

00:36:44.650 --> 00:36:46.650
a 20 year renewal, about a 50 year lease? Do

00:36:46.650 --> 00:36:50.929
you recall that, sir? Sounds about right. Okay.

00:36:51.150 --> 00:36:53.630
And if the company prepared a business plan showing

00:36:53.630 --> 00:36:56.210
that Sachs and Company will have the ability

00:36:56.210 --> 00:36:59.150
to perform on that lease for the life of the

00:36:59.150 --> 00:37:03.250
lease? We haven't prepared a 50 -year business

00:37:03.250 --> 00:37:06.989
plan. Okay. Do you know what percentage likelihood

00:37:06.989 --> 00:37:09.590
it is that Sachs & Company is going to perform

00:37:09.590 --> 00:37:12.449
on the lease for the life of the lease? Well,

00:37:12.449 --> 00:37:14.710
that's partly contingent upon whether we get

00:37:14.710 --> 00:37:20.050
a dip, but having said that, you know, if we

00:37:20.050 --> 00:37:22.750
receive a dip financing that we are proposing

00:37:22.750 --> 00:37:26.630
today, then the obligations under that lease

00:37:26.630 --> 00:37:30.489
should be able to be met. Well, my question is

00:37:30.489 --> 00:37:32.789
for the life of the lease, the next 40 or so

00:37:32.789 --> 00:37:36.889
years. I can't - You know that, Fred? I don't

00:37:36.889 --> 00:37:40.530
know the answer to that question. Is it because

00:37:40.530 --> 00:37:45.110
Holdco 2, the middle box, and 12 East 49th, those

00:37:45.110 --> 00:37:50.590
are both debtors, right? Holdco 2 and 12 East,

00:37:50.590 --> 00:37:54.119
yes. Okay, but the flagship entity, the left

00:37:54.119 --> 00:37:57.300
box, that's not a debtor, right? That is correct.

00:37:58.519 --> 00:38:00.559
Okay, and just one more term that may come up.

00:38:00.760 --> 00:38:02.639
I'm going to refer to those three boxes combined

00:38:02.639 --> 00:38:08.039
as the flagship silo. Is that okay, sir? Yeah,

00:38:08.159 --> 00:38:10.860
that's fine. Now that you've defined it, that's

00:38:10.860 --> 00:38:16.659
okay. Okay, and just to back up a bit, when did,

00:38:16.820 --> 00:38:20.840
you're employed by BRG, right, sir? That is correct.

00:38:21.869 --> 00:38:25.329
Okay, and when did BRG first get involved with

00:38:25.329 --> 00:38:38.730
SACS? Late January of 2025. All right, so about

00:38:38.730 --> 00:38:43.349
a year at this point? Approximately. Okay, and

00:38:43.349 --> 00:38:46.329
you were the interim CFO of SACS starting in

00:38:46.329 --> 00:38:50.829
February 25, right sir? That's correct. Okay,

00:38:50.909 --> 00:38:52.869
and you're currently the Chief of Structuring

00:38:52.869 --> 00:38:56.429
Officer of SACS Global Enterprises LLC, right

00:38:56.429 --> 00:39:00.510
sir? That is correct. Okay, and you have fiduciary

00:39:00.510 --> 00:39:05.750
duties to that entity, right? Yes. Okay, now

00:39:05.750 --> 00:39:09.730
Hold Code 2 is a member -managed LLC, right sir?

00:39:14.710 --> 00:39:22.300
I believe so. Hold go to you know if you that's

00:39:22.300 --> 00:39:27.440
right sir hold go to Do they know if you've actually

00:39:27.440 --> 00:39:31.239
been appointed an officer of hold go to I believe

00:39:31.239 --> 00:39:36.900
I have Okay Now whole code 2 is a wholly on subsidiary

00:39:36.900 --> 00:39:40.300
of the box above it Saks 5th Avenue hold. Go

00:39:40.300 --> 00:39:45.980
LLC, right? Correct Okay, and that box above

00:39:45.980 --> 00:39:48.860
it, you know which maybe I'll call Holdco 1.

00:39:48.900 --> 00:39:51.480
That's the sole member of Holdco 2, right, sir?

00:39:53.059 --> 00:39:58.159
Yes. So, before the bankruptcy, Holdco 1 was

00:39:58.159 --> 00:40:00.440
making all the decisions on behalf of Holdco

00:40:00.440 --> 00:40:05.980
2, right, sir? I can't speak to that. I don't

00:40:05.980 --> 00:40:08.420
know what the, you know, I don't know what the

00:40:08.420 --> 00:40:12.119
governance was, sir. You don't know who is making

00:40:12.119 --> 00:40:16.389
decisions for Holdco 2? can't speak specifically

00:40:16.389 --> 00:40:20.590
to before the before the check alone. Okay. How

00:40:20.590 --> 00:40:23.170
about today? Who's making decisions for old go

00:40:23.170 --> 00:40:26.769
to? Well, I'm the chief restructuring officer

00:40:26.769 --> 00:40:29.510
and there is a restructuring committee of the

00:40:29.510 --> 00:40:35.530
board that is making decisions. So the people

00:40:35.530 --> 00:40:40.309
making decisions would be you and the restructuring

00:40:40.309 --> 00:40:43.710
committee of the board of the top sex entity.

00:40:43.769 --> 00:40:47.750
Is that right? I'm sorry, when you say the top

00:40:47.750 --> 00:40:49.869
SACS entity, I'm not sure what you're referring

00:40:49.869 --> 00:40:52.550
to. Well, you just referred to a restructuring

00:40:52.550 --> 00:40:55.090
committee. Restructuring committee of what entity?

00:40:56.889 --> 00:41:00.289
The restructuring committee is a committee of

00:41:00.289 --> 00:41:05.170
the board of SACS Global. SACS Global, okay.

00:41:05.510 --> 00:41:07.110
So the people making decisions for Holocaust

00:41:07.110 --> 00:41:10.389
II are yourself, and then the members, the restructuring

00:41:10.389 --> 00:41:13.550
committee of SACS Global, is that right? Well,

00:41:13.630 --> 00:41:17.530
with the management team, yes. Okay, those are

00:41:17.530 --> 00:41:19.610
the same people making decisions on behalf of

00:41:19.610 --> 00:41:30.949
all of the debtors, right? Yes. Okay, so there's

00:41:30.949 --> 00:41:33.690
no one whose duties solely run to Whole Code

00:41:33.690 --> 00:41:36.429
2 that's making decisions on behalf of Whole

00:41:36.429 --> 00:41:41.590
Code 2, right sir? No, but there's still fiduciary

00:41:41.590 --> 00:41:46.269
obligations there and decisions were made I'm

00:41:46.269 --> 00:41:50.670
confident of that. But just to be clear, there's

00:41:50.670 --> 00:41:53.730
no one who's only fiduciary duty is a Holocaust

00:41:53.730 --> 00:41:58.110
II, right, sir? Not that I'm aware of. Okay.

00:41:58.489 --> 00:42:03.230
Now you... In your declaration, you noted that

00:42:03.230 --> 00:42:06.469
two independent managers had been appointed to

00:42:06.469 --> 00:42:10.190
the Board of Managers of HBCGPLLC. Do you recall

00:42:10.190 --> 00:42:16.300
that, sir? Yes. Okay. And you noted that those

00:42:16.300 --> 00:42:20.099
independent managers were appointed at each subsidiary

00:42:20.099 --> 00:42:22.900
global debtor that is not member managed. Do

00:42:22.900 --> 00:42:27.960
you recall that, sir? Yes. So those independent

00:42:27.960 --> 00:42:31.880
managers have fiduciary duties to each of the

00:42:31.880 --> 00:42:34.340
global debtors that are not member managed, right,

00:42:34.460 --> 00:42:40.900
sir? I'm sorry. Can you repeat the question?

00:42:41.840 --> 00:42:44.420
Yeah, those independent managers, there's two

00:42:44.420 --> 00:42:46.840
new independent managers. They have fiduciary

00:42:46.840 --> 00:42:49.639
duties to each of the global debtors that are

00:42:49.639 --> 00:42:59.579
not member -managed. Right, sir? I believe so.

00:43:00.639 --> 00:43:03.699
Okay. Hold code two and those other two boxes,

00:43:03.760 --> 00:43:07.940
they are member -managed. Right, sir? No, 12

00:43:07.940 --> 00:43:13.219
East 49th Street is not member -managed. Your

00:43:13.219 --> 00:43:18.880
day is not member managed. Okay, okay Okay, okay

00:43:18.880 --> 00:43:24.059
to his member manage, right? Yes Okay, so those

00:43:24.059 --> 00:43:26.099
independent managers do not have a fiduciary

00:43:26.099 --> 00:43:33.900
duty the whole co2, right? Wait, I'm sorry. I'm

00:43:33.900 --> 00:43:36.320
getting lost a little bit which independent managers

00:43:36.320 --> 00:43:41.800
The two new independent managers They were appointed

00:43:41.800 --> 00:43:47.900
to the board of managers of HBCGPLC. Yes. OK.

00:43:51.639 --> 00:43:54.380
So I want to talk then a little bit. So just

00:43:54.380 --> 00:43:56.280
to be clear, the record's clear. Those two independent

00:43:56.280 --> 00:43:58.980
managers do not have fiduciary duty to hold Code

00:43:58.980 --> 00:44:05.960
2, right, sir? Objection, Your Honor. Objection,

00:44:05.960 --> 00:44:08.019
Your Honor. Calls for legal conclusion. The state.

00:44:08.570 --> 00:44:11.449
Your Honor, it's right in his declaration. He

00:44:11.449 --> 00:44:13.269
said that these people were appointed. He seemed

00:44:13.269 --> 00:44:15.510
to have that factually in his declaration. He

00:44:15.510 --> 00:44:18.250
can speak to what the governance is at these

00:44:18.250 --> 00:44:19.730
entities. He can speak to the facts. Your Honor,

00:44:19.769 --> 00:44:22.269
he can speak to the governance. Yeah. He could

00:44:22.269 --> 00:44:25.250
justify as to the facts. I think he has. I don't

00:44:25.250 --> 00:44:29.030
think there's any dispute on that. But then the

00:44:29.030 --> 00:44:31.710
next question was, then that means they don't

00:44:31.710 --> 00:44:33.949
have fiduciary duties. That does call for a legal

00:44:33.949 --> 00:44:36.510
conclusion, and I'm going to sustain the objection.

00:44:37.250 --> 00:44:41.989
OK. Let me ask this, sir. Has anyone told those

00:44:41.989 --> 00:44:44.449
independent managers that they have a fiduciary

00:44:44.449 --> 00:44:48.909
duty to Holocaust II? Attention, Your Honor,

00:44:49.030 --> 00:44:51.789
to the extent it goes into privileged information.

00:44:53.650 --> 00:44:55.570
Yeah, so if you can answer the question without

00:44:55.570 --> 00:44:57.969
divulging any privileged information, you may.

00:44:58.030 --> 00:45:00.510
Otherwise, I'm going to sustain the objection.

00:45:03.550 --> 00:45:05.150
I'm sorry if you repeat your question, please.

00:45:05.989 --> 00:45:09.510
Has anyone? inform those independent managers

00:45:09.510 --> 00:45:11.769
whether they have a fiduciary duty to hold Code

00:45:11.769 --> 00:45:19.630
2? I don't know. Okay. A few more questions on

00:45:19.630 --> 00:45:22.230
the bottom left entity, the flagship entity.

00:45:23.230 --> 00:45:25.750
I couldn't tell from the papers that were filed

00:45:25.750 --> 00:45:29.269
whether the flagship entity is becoming a guarantor

00:45:29.269 --> 00:45:31.929
or otherwise becoming obligated under the DIP.

00:45:33.590 --> 00:45:40.000
What is the situation? I believe I would defer

00:45:40.000 --> 00:45:43.460
to Mr. Baird on that question who is more involved

00:45:43.460 --> 00:45:48.000
with the structure. Let me make sure I understand.

00:45:48.340 --> 00:45:51.300
You don't know whether the flagship entity is

00:45:51.300 --> 00:45:54.059
becoming a guarantor or otherwise obligated under

00:45:54.059 --> 00:46:02.840
the dip? I'm trying to remember at the moment.

00:46:02.880 --> 00:46:07.949
I apologize. Do you know if the flagship entity

00:46:07.949 --> 00:46:10.869
is providing a mortgage on the flagship property?

00:46:12.710 --> 00:46:14.989
There is a mortgage on the flagship property.

00:46:16.530 --> 00:46:18.150
So that was a bad question. Do you know if under

00:46:18.150 --> 00:46:22.889
the DIP, the flagship entity is providing a mortgage

00:46:22.889 --> 00:46:25.409
on the flagship property to the DIP lenders?

00:46:35.239 --> 00:46:42.119
Again, I don't recall. Okay. Now hold code two

00:46:42.119 --> 00:46:44.219
is the manager of the flagship entity, right,

00:46:44.219 --> 00:46:49.400
sir? Correct. Okay. So it made all the decisions

00:46:49.400 --> 00:46:52.739
on behalf of the flagship entity, right? Yes.

00:46:53.920 --> 00:46:57.900
Okay. And so it has sole discretion, for instance,

00:46:57.900 --> 00:47:01.920
to decide whether to flagship entity will enter

00:47:01.920 --> 00:47:04.380
into a financing or provide a mortgage, right,

00:47:04.460 --> 00:47:11.000
sir? I believe so, yes. Okay. And there's no

00:47:11.000 --> 00:47:14.039
independent fiduciary at the flagship entity

00:47:14.039 --> 00:47:16.159
to decide whether transactions are beneficial

00:47:16.159 --> 00:47:19.179
to the flagship entity, right, sir? Again, Your

00:47:19.179 --> 00:47:21.719
Honor, objection to the extended calls for liquid

00:47:21.719 --> 00:47:23.940
pollution as to the extent of the fiduciary duties.

00:47:25.420 --> 00:47:27.360
Good. So, Stan, you can answer the question,

00:47:27.800 --> 00:47:31.920
but go, but... Yeah, I don't believe there's

00:47:31.920 --> 00:47:36.809
independent person at Holcomb, too. Okay, and

00:47:36.809 --> 00:47:41.750
then on the right box 12 East And I write that

00:47:41.750 --> 00:47:43.929
whole code to makes all the decisions on behalf

00:47:43.929 --> 00:47:49.730
of its holy on subsidiary 12 East Lack of foundation

00:47:49.730 --> 00:47:52.969
that that question has not been asked with us

00:47:52.969 --> 00:47:55.329
Yeah, rephrase your question. I don't understand

00:47:55.329 --> 00:47:58.789
justified that hope that 12 East was not member

00:47:58.789 --> 00:48:07.119
managed Well, who's making the decisions for

00:48:07.119 --> 00:48:14.280
12 East, sir? 12 East is manager managed. You

00:48:14.280 --> 00:48:22.179
said it is manager managed? Yes. Okay. So who

00:48:22.179 --> 00:48:28.000
is making decisions for 12 East? The manager

00:48:28.000 --> 00:48:38.460
is HBC Garden City, I believe. Okay. And who's

00:48:38.460 --> 00:48:43.159
the actual person making those decisions? I forget.

00:48:44.099 --> 00:48:49.760
The person was recently installed. That's the

00:48:49.760 --> 00:48:55.639
person who is the independent manager there,

00:48:55.639 --> 00:49:08.030
right? I'm trying to understand the witness's

00:49:08.030 --> 00:49:14.889
testimony. Rephrase your question. Sure. You

00:49:14.889 --> 00:49:23.170
mentioned that some entity is making decisions

00:49:23.170 --> 00:49:25.949
on behalf of 12 Easts. I'm trying to find out

00:49:25.949 --> 00:49:28.050
who that is. So can you tell us again who that

00:49:28.050 --> 00:49:35.840
is? It is the manager who is the manager. who

00:49:35.840 --> 00:49:55.199
is managing is HPC garden city. As the LLC agreement

00:49:55.199 --> 00:50:01.400
for 12 he's been amended recently. Yes. When

00:50:01.400 --> 00:50:07.289
was that? I believe it went effective yesterday.

00:50:08.670 --> 00:50:11.670
I see. Copies of that been provided any creditors

00:50:11.670 --> 00:50:17.130
or any other constituency? I believe so. Oh,

00:50:17.170 --> 00:50:24.849
who received those? I think the Exonic received

00:50:24.849 --> 00:50:27.349
copies of it. I'm not sure if others may have.

00:50:27.349 --> 00:50:37.989
I don't know who else. OK. You aware that my

00:50:37.989 --> 00:50:41.570
client, Amazon, has asked for all relevant agreements

00:50:41.570 --> 00:50:45.510
and does not receive them? I'm not aware of what's

00:50:45.510 --> 00:50:50.289
been asked for. Okay. We'll get to that in a

00:50:50.289 --> 00:50:52.269
minute, but I want to talk about advisors to

00:50:52.269 --> 00:50:55.670
the different debtor entities now. In the Chapter

00:50:55.670 --> 00:50:59.469
11 cases, the debtors are all proposing to retain

00:50:59.469 --> 00:51:04.190
the same legal counsel, Wilkie, right, sir? That

00:51:04.190 --> 00:51:07.389
is incorrect. I believe 12 East 49th has separate

00:51:07.389 --> 00:51:19.989
counsel. Who is that, sir? The Bradley firm.

00:51:22.469 --> 00:51:29.929
OK. Does Holdco 2 have separate counsel? I'm

00:51:29.929 --> 00:51:35.739
not sure. OK. Are the debtors all using the same

00:51:35.739 --> 00:51:45.239
financial advisor, BRG? Yes. Debtors are all

00:51:45.239 --> 00:51:51.679
using the same bankers, PJT? Yes. So there's

00:51:51.679 --> 00:51:54.340
no advisors whose duties run only to Holocaust

00:51:54.340 --> 00:51:58.480
II, right sir? Not only to Holocaust II, but

00:51:58.480 --> 00:52:03.750
certainly in consideration of Holocaust II. And

00:52:03.750 --> 00:52:05.730
just to be clear, when was Bradley retained by

00:52:05.730 --> 00:52:11.389
12 East? By the way, I may have mis - I'm trying

00:52:11.389 --> 00:52:16.789
to remember. I know, I believe it would have

00:52:16.789 --> 00:52:21.329
been recently as well. Okay. Also in the last

00:52:21.329 --> 00:52:23.809
couple days, you think? Last few days? Yeah.

00:52:24.409 --> 00:52:29.590
Yes. Okay. I want to talk about the cash needs

00:52:29.590 --> 00:52:34.610
of this flagship silo. Does a hold code two or

00:52:34.610 --> 00:52:41.929
a flagship silo cash flow budget exist? I have

00:52:41.929 --> 00:52:45.050
not seen a separate cash flow budget for that

00:52:45.050 --> 00:52:49.170
entity. Okay. And presumably if one existed as

00:52:49.170 --> 00:52:51.550
a CRO, you would have knowledge of it, right,

00:52:51.710 --> 00:53:01.139
sir? Yes. Okay. Your knowledge, has anyone? Analyze

00:53:01.139 --> 00:53:04.820
what expenses Hold Code 2 or this silo has over

00:53:04.820 --> 00:53:14.400
the next 30 days? Analyzed, no. I know that there

00:53:14.400 --> 00:53:21.119
are definitely payments due under the CNBS and

00:53:21.119 --> 00:53:24.380
other payments, but specifically analyze that,

00:53:24.539 --> 00:53:26.639
no. Looked at rent in the aggregate, of which

00:53:26.639 --> 00:53:30.179
that's part. Okay. Well, let's let's talk about

00:53:30.179 --> 00:53:37.039
what you do know about them. So, um, first of

00:53:37.039 --> 00:53:40.619
you, you mentioned, um, just focusing on whole

00:53:40.619 --> 00:53:42.760
code to itself and not the subsidiaries. Does

00:53:42.760 --> 00:53:45.679
whole code to itself have any expenses in the

00:53:45.679 --> 00:53:52.579
next 30 days? Whole code to, I do not believe

00:53:52.579 --> 00:53:59.650
has any, um, specific expenses. in the next 30

00:53:59.650 --> 00:54:03.610
days. How about annually? Does it have any expenses?

00:54:05.849 --> 00:54:15.409
I'm not sure. Can you tell the court any specific

00:54:15.409 --> 00:54:21.949
expenses you know that Whole Coat II has? I can't

00:54:21.949 --> 00:54:24.170
speak to specific expenses of Whole Coat II.

00:54:26.630 --> 00:54:30.710
Although it would, as a debtor, it would be responsible

00:54:30.710 --> 00:54:32.829
to throw out a share of expenses of the case

00:54:32.829 --> 00:54:36.190
and other, but I don't know exactly what those

00:54:36.190 --> 00:54:40.030
are. But you would certainly allocate expenses

00:54:40.030 --> 00:54:45.030
of the entire case to HOCO 2 as well. No attempt

00:54:45.030 --> 00:54:48.250
has been done to do that today, right, sir? Today,

00:54:48.329 --> 00:54:51.710
no. Okay. All right. Now I want to wrap on the

00:54:51.710 --> 00:54:53.829
subsidiary, because I think you were going to...

00:54:54.829 --> 00:54:57.769
The two subsidiaries, I think you mentioned that

00:54:57.769 --> 00:55:01.630
there's a CNBS loan that has monthly payments

00:55:01.630 --> 00:55:06.090
due, right, sir? Correct. And that's about $4

00:55:06.090 --> 00:55:10.190
.6 million per month, right? It sounds about

00:55:10.190 --> 00:55:13.630
right. Were there any other monthly cash needs

00:55:13.630 --> 00:55:22.789
if we included the subsidiaries? There's... Well,

00:55:22.829 --> 00:55:26.889
there are other expenses of the flagship that,

00:55:26.889 --> 00:55:32.429
you know, that need to be maintained, but I can't

00:55:32.429 --> 00:55:36.010
quantify those for you at the moment. The only

00:55:36.010 --> 00:55:39.010
thing you can quantify is the $4 .6 million monthly

00:55:39.010 --> 00:55:43.469
CNBS payment, right, sir? Yes. Okay. And then

00:55:43.469 --> 00:55:45.670
let's talk about the revenues that come in. We

00:55:45.670 --> 00:55:49.269
talked about how SACS operating LLC makes the

00:55:49.269 --> 00:55:52.869
lease payments at 12 East, right, sir? Correct.

00:55:54.170 --> 00:55:57.389
And that lease payment is $7 .7 million, right

00:55:57.389 --> 00:56:03.730
sir? Correct. And then 12E makes a payment on

00:56:03.730 --> 00:56:05.989
its lease to the flagship entity which he uses

00:56:05.989 --> 00:56:11.250
to pay the CNBS loan, right sir? Yes. And it's

00:56:11.250 --> 00:56:13.250
more than the amount of the CNBS loan, right

00:56:13.250 --> 00:56:16.329
sir? It's more, but there are other expenses

00:56:16.329 --> 00:56:19.349
as well. But you can't tell me what they are

00:56:19.349 --> 00:56:23.230
right now? specific right now. Okay, and you

00:56:23.230 --> 00:56:25.570
know those expenses are in fact also covered

00:56:25.570 --> 00:56:28.510
by SACS and company under the triple net lease

00:56:28.510 --> 00:56:34.530
it has. Yes. Okay, so as long as SACS and company

00:56:34.530 --> 00:56:36.449
pays on the operating lease, that's going to

00:56:36.449 --> 00:56:39.230
more than cover all the cash needs of HoldCo2

00:56:39.230 --> 00:56:42.789
and its subsidiaries, right sir? It should be

00:56:42.789 --> 00:56:48.730
equal to yes. Okay, now kind of focusing on the

00:56:48.730 --> 00:56:53.699
assets of HoldCo. two. Um, it obviously owns

00:56:53.699 --> 00:56:59.579
these two entities, right, sir? Yes. So it indirectly

00:56:59.579 --> 00:57:04.500
owns the flagship property, right? Yes. Okay.

00:57:04.500 --> 00:57:08.739
Does it also have any cash on hand? Uh, I don't

00:57:08.739 --> 00:57:12.880
know what cash on hand is today. Okay. Not something

00:57:12.880 --> 00:57:16.219
you've looked at, I guess. I may have at one

00:57:16.219 --> 00:57:23.219
point, but I didn't, I didn't today. Okay. Now,

00:57:23.219 --> 00:57:26.239
you're aware there was an appraisal of the flagship

00:57:26.239 --> 00:57:32.039
property done in 2024 by JLL, right? I know there

00:57:32.039 --> 00:57:35.119
have been several appraisals done of the property.

00:57:36.400 --> 00:57:39.260
Okay. Well, that specific appraisal was used

00:57:39.260 --> 00:57:44.559
in SACS' SEC filings, right? I'm not sure what

00:57:44.559 --> 00:57:47.940
appraisal was used in SEC filings. You're not

00:57:47.940 --> 00:57:50.539
aware that it was... relied upon and cited in

00:57:50.539 --> 00:57:55.960
the offering memorandum? I wasn't. I wasn't with

00:57:55.960 --> 00:58:00.420
a company at the time. OK, have you seen the

00:58:00.420 --> 00:58:05.639
2024 flagship property appraisal by JLL? I may

00:58:05.639 --> 00:58:08.699
have. I don't recall. I just know that in conversations

00:58:08.699 --> 00:58:12.420
with employees of the real estate side of the

00:58:12.420 --> 00:58:14.380
house, there are multiple appraisals for multiple

00:58:14.380 --> 00:58:18.440
values. I just want to make sure you think there's

00:58:18.440 --> 00:58:21.760
been. other appraisals of the flagship property

00:58:21.760 --> 00:58:27.360
since the 2024 JLL valuation? Is that right,

00:58:27.440 --> 00:58:29.179
sir? I don't know if they were before or after.

00:58:29.239 --> 00:58:32.960
I just know there's more than one. OK, so in

00:58:32.960 --> 00:58:35.340
doing whatever work you were doing and analyzing

00:58:35.340 --> 00:58:38.320
the benefits to Holco 2, you didn't focus on

00:58:38.320 --> 00:58:48.630
that appraisal, I guess? I... I think the whole

00:58:48.630 --> 00:58:51.349
lot of questions is presuming the fact that it's

00:58:51.349 --> 00:58:53.469
not evidence, which is that there's some lack

00:58:53.469 --> 00:58:56.010
of identity of interest within this organization.

00:58:56.150 --> 00:58:58.889
The witness testified on direct that the entire

00:58:58.889 --> 00:59:02.530
operation exists to preserve operations of facts,

00:59:02.989 --> 00:59:05.349
and that there's a unity of interest there because

00:59:05.349 --> 00:59:07.530
that's what protects the asset. So I think this

00:59:07.530 --> 00:59:09.929
whole lot of questions that tries to create a

00:59:09.929 --> 00:59:12.090
divergence of interest I just think is all based.

00:59:13.860 --> 00:59:17.019
Can I ask the council to limit his objections

00:59:17.019 --> 00:59:18.760
and not be speaking objections? I would also

00:59:18.760 --> 00:59:22.079
just note in this direct testimony, he literally

00:59:22.079 --> 00:59:24.179
testified the value of Hulko 2 would diminish

00:59:24.179 --> 00:59:29.579
if SACS closed. So clearly he is providing some

00:59:29.579 --> 00:59:33.179
amount of testimony about the impact on the value

00:59:33.179 --> 00:59:37.340
of the property. I'm going to overrule the objection.

00:59:37.739 --> 00:59:42.579
I think the question was fairly limited to, you

00:59:42.579 --> 00:59:45.480
know, Did he use this appraisal in connection,

00:59:45.559 --> 00:59:48.599
or any appraisal, in connection with his determination?

00:59:48.739 --> 00:59:53.559
I think it was a fairly limited question. Go

00:59:53.559 --> 00:59:57.179
ahead. You want to rephrase the question. Just

00:59:57.179 --> 00:59:59.139
re -ask the question so that we have a clean

00:59:59.139 --> 01:00:05.440
record. Yes. Sir, did you use the 2024 JLL appraisal

01:00:05.440 --> 01:00:08.099
of the Flagship property, or any other appraisal

01:00:08.099 --> 01:00:11.000
of the Flagship property, in making decisions

01:00:11.000 --> 01:00:14.539
about HOCO 2? in relation to the DIP or the bankruptcy

01:00:14.539 --> 01:00:19.579
filing? There, I'm not sure which appraisal it

01:00:19.579 --> 01:00:26.320
was, but there was a dark appraisal that, there

01:00:26.320 --> 01:00:29.079
was appraisal we used to, you know, run various

01:00:29.079 --> 01:00:34.559
scenarios if there was a liquidation and, but

01:00:34.559 --> 01:00:37.900
I'm not sure which appraisal was used. Okay.

01:00:38.190 --> 01:00:41.110
I want to make sure I want to have you look at

01:00:41.110 --> 01:00:43.030
the document that I think you're referring to.

01:00:43.289 --> 01:00:46.789
It is the one that's filed under seal. And for

01:00:46.789 --> 01:00:51.590
the court's benefit, we filed that at ECF 145.

01:00:51.789 --> 01:00:54.610
I believe it's probably dash four, although I

01:00:54.610 --> 01:00:57.969
don't have access to whatever number system the

01:00:57.969 --> 01:01:01.349
court used. And maybe your counsel could show

01:01:01.349 --> 01:01:13.940
it to you. We do have a copy. I'm trying to do

01:01:13.940 --> 01:01:15.639
this without saying numbers, because I understand

01:01:15.639 --> 01:01:20.440
the data is of a concern. So let me know, Your

01:01:20.440 --> 01:01:24.099
Honor, when you're ready and witness as well,

01:01:24.539 --> 01:01:32.260
obviously. All right. So it is 145 -4. I'm ready.

01:01:32.480 --> 01:01:35.619
OK. And it should say JLL on the cover, if everyone

01:01:35.619 --> 01:01:44.889
has that. Sir, if you look at page, if you look

01:01:44.889 --> 01:01:46.530
at the cover page and then if you look at page

01:01:46.530 --> 01:01:51.449
four, you see this is a JLL appraisal and it

01:01:51.449 --> 01:01:54.030
has value conclusions including a go dark value

01:01:54.030 --> 01:01:57.190
on page four in a chart. Yes. Do you see that,

01:01:57.389 --> 01:02:01.349
sir? Yes. Okay. Is this the valuation you were

01:02:01.349 --> 01:02:13.199
thinking of? The go dark value is? The Godark

01:02:13.199 --> 01:02:15.039
value is the value you were thinking of, right,

01:02:15.420 --> 01:02:20.900
sir? Yes. OK. And I don't want to say the number

01:02:20.900 --> 01:02:23.760
out loud, but you see it there right on the far

01:02:23.760 --> 01:02:29.280
right of this. Your Honor, I would like to lodge

01:02:29.280 --> 01:02:31.980
an objection to this document as hearsay, to

01:02:31.980 --> 01:02:36.179
the extent we're using numbers or things that

01:02:36.179 --> 01:02:39.119
are in this document as evidence of the truth

01:02:39.119 --> 01:02:40.679
of the matter, sir. I don't think that's appropriate.

01:02:41.679 --> 01:02:45.219
I think the only question was, is this the document

01:02:45.219 --> 01:02:48.739
that he used, that he testified that he used

01:02:48.739 --> 01:02:51.079
in connection with the Go Dark scenario? I think

01:02:51.079 --> 01:02:53.900
that's the only question. I don't think there's

01:02:53.900 --> 01:02:58.500
been any testimony offered as to the actual value

01:02:58.500 --> 01:03:02.099
of it. I think it's just a question, is this

01:03:02.099 --> 01:03:05.260
the document that he used? OK. Thank you, Your

01:03:05.260 --> 01:03:10.679
Honor. So I did not use it directly, but members

01:03:10.940 --> 01:03:16.739
of my team used it and also in conjunction with

01:03:16.739 --> 01:04:08.000
the real estate team at Sachs Global. I'm sorry,

01:04:08.079 --> 01:04:10.039
if he's talking, I can't hear him. There may

01:04:10.039 --> 01:04:12.340
be a mic or phone issue again, Your Honor. I'm

01:04:12.340 --> 01:04:18.920
sorry. Mr. Harris, can you say something? I can't

01:04:18.920 --> 01:04:21.239
hear you, and I didn't do anything this time.

01:04:23.440 --> 01:04:36.639
No, we can't hear you. Think you may have disconnected

01:04:36.639 --> 01:04:55.880
yourself No Did you dial back in dial back in

01:04:55.880 --> 01:05:18.300
All right dial back in yes Hit five star All

01:05:18.300 --> 01:05:23.179
right, can you hear me now Yeah, can you hear

01:05:23.179 --> 01:05:25.360
me your honor I can I don't know what happened

01:05:25.360 --> 01:05:30.239
but the I had I changed you to Latham conference

01:05:30.239 --> 01:05:33.079
room and it disappeared so I don't know what

01:05:33.079 --> 01:05:39.059
happened there Okay, well, my audio is on a cell

01:05:39.059 --> 01:05:40.980
phone and here's the video, so hopefully this

01:05:40.980 --> 01:05:42.559
will work for your honor. All right, no problem.

01:05:44.219 --> 01:05:47.119
Okay, so I think when I stopped being heard,

01:05:47.300 --> 01:05:49.039
I was just asking the witness to confirm that

01:05:49.039 --> 01:05:52.420
he sees the Go Dark value at the bottom right

01:05:52.420 --> 01:05:58.619
of this chart. All right, I do. Okay, and you

01:05:58.619 --> 01:06:01.300
understand that Go Dark means... If the property

01:06:01.300 --> 01:06:03.699
is vacant and unencumbered, in other words, if

01:06:03.699 --> 01:06:09.739
the fax lease is canceled, right, sir? Yes. OK.

01:06:11.980 --> 01:06:15.440
I want to now talk about Whole Coaches' liabilities.

01:06:15.519 --> 01:06:18.460
So if you could go through them. And I have a

01:06:18.460 --> 01:06:20.480
demonstrative chart I just want to show you.

01:06:20.619 --> 01:06:22.980
If we could, you can take this one down and put

01:06:22.980 --> 01:06:24.920
up the demonstrative. And it pretty much reflects

01:06:24.920 --> 01:06:29.820
what you said. If I cheat, I can swap them out.

01:06:31.920 --> 01:07:01.760
I'm sorry. Do you hear me? Are you able to pull

01:07:01.760 --> 01:07:04.360
down that chart instead, pull up the demonstrative?

01:07:13.079 --> 01:07:34.539
Can you zoom in on that? Okay, thank you. So,

01:07:35.260 --> 01:07:38.619
on the left side, under pre -petition, you know,

01:07:38.619 --> 01:07:41.679
we've listed what we believe to be the liabilities

01:07:41.679 --> 01:07:44.900
at Whole Code 2 or at subsidiaries. I think you

01:07:44.900 --> 01:07:48.260
testified to most of these already, but you see

01:07:48.260 --> 01:07:51.320
there's a CNBS loan down at the Whole Code entity

01:07:51.320 --> 01:07:57.360
of $1 .25 billion, right, sir? Yes. And we listed

01:07:57.360 --> 01:08:00.530
a potential make -hole. claim a $30 million there.

01:08:00.690 --> 01:08:05.289
Is that the mayor to you, sir? Uh, yes. Okay.

01:08:05.289 --> 01:08:10.150
And then we lifted the $200 million SBB notes

01:08:10.150 --> 01:08:12.869
that holds Code 2 is guaranteed. Do you see that,

01:08:13.510 --> 01:08:19.590
sir? Yes. And do you recall that Exxonic also

01:08:19.590 --> 01:08:26.649
has a lien on the equity of 12 East? Uh, yes.

01:08:26.729 --> 01:08:29.829
$480 million. Okay. So I just lifted all those

01:08:29.829 --> 01:08:33.069
up in a bonus of caution. And the total of claims

01:08:33.069 --> 01:08:35.590
that would be ahead of my client, Amazon, are

01:08:35.590 --> 01:08:41.609
about $1 .6 billion, right, sir? Yes. OK. And

01:08:41.609 --> 01:08:43.609
then you also mentioned vendor claims that are

01:08:43.609 --> 01:08:48.310
about $180 million, right, sir? Yes. So that

01:08:48.310 --> 01:08:50.489
would bring us to a little under $1 .8 billion

01:08:50.489 --> 01:08:53.970
of claims at hold code two at subsidiaries, right,

01:08:54.029 --> 01:08:59.720
sir? Correct. Are you aware of any other material

01:08:59.720 --> 01:09:06.680
liabilities of hold co -tour subsidiaries? Currently,

01:09:06.880 --> 01:09:09.420
no, although there would be additional liabilities

01:09:09.420 --> 01:09:11.500
and expenses if you were actually to go down

01:09:11.500 --> 01:09:14.619
the point of having to monetize, which aren't

01:09:14.619 --> 01:09:17.899
reflected there. But current liabilities, no.

01:09:18.859 --> 01:09:22.319
OK. So as long as the flagship property on a

01:09:22.319 --> 01:09:26.020
dark basis is worth more than 1 .6 billion Amazon

01:09:26.020 --> 01:09:30.840
could receive some recovery, right, sir? That

01:09:30.840 --> 01:09:33.159
presumes a treatment under a plan that hasn't

01:09:33.159 --> 01:09:37.500
filed yet. Well, I think he's just asking him.

01:09:37.500 --> 01:09:43.920
I just think he's asking him, does the math work?

01:09:44.239 --> 01:09:46.100
I mean, I think he's just asking him a math question.

01:09:46.159 --> 01:09:50.100
I don't think it has any particular legal ramifications.

01:09:50.399 --> 01:09:53.600
So I'll let him answer. No, I think that's incorrect.

01:09:54.540 --> 01:09:57.699
I mean, it's possible, but on the face of it,

01:09:57.760 --> 01:10:00.899
it's not definitive because their cost to market

01:10:00.899 --> 01:10:03.260
the building, their expenses incurred while you're

01:10:03.260 --> 01:10:05.859
marketing the building, their risk to things,

01:10:06.220 --> 01:10:08.739
you know, actions the CNBS could take that would

01:10:08.739 --> 01:10:11.739
require payments to them, which obviously wouldn't

01:10:11.739 --> 01:10:13.380
affect the ultimate recovery, but it certainly

01:10:13.380 --> 01:10:15.159
in the near term would have to come up with incremental

01:10:15.159 --> 01:10:17.279
cash and there's a cost associated with that.

01:10:17.640 --> 01:10:21.489
So just because the building... you know, a building

01:10:21.489 --> 01:10:28.750
might be worth more doesn't mean that Amazon

01:10:28.750 --> 01:10:31.409
would see a recovery because you have to account

01:10:31.409 --> 01:10:33.869
for all those costs. All right. Well, so you

01:10:33.869 --> 01:10:35.770
have made no attempt to estimate those costs,

01:10:35.850 --> 01:10:44.310
right, sir? Actually, we have in certain scenarios.

01:10:44.449 --> 01:10:49.739
And the other point I would add is that We also

01:10:49.739 --> 01:10:52.140
believe in consultation with the real estate

01:10:52.140 --> 01:10:56.659
team at Sachs Global believe that you know there

01:10:56.659 --> 01:11:02.199
in this scenario That we're currently contemplating

01:11:02.199 --> 01:11:04.260
where you shut down a liquid date There could

01:11:04.260 --> 01:11:07.420
easily be a discount against the dark value which

01:11:07.420 --> 01:11:11.399
would further bring down the value recovery so

01:11:11.399 --> 01:11:14.720
That that I wouldn't necessarily use the value

01:11:14.720 --> 01:11:17.739
and here's the starting point Well, sir, you

01:11:17.739 --> 01:11:20.800
did use the value here when you were analyzing

01:11:20.800 --> 01:11:23.079
scenarios for Holco 2. You testified earlier,

01:11:23.140 --> 01:11:26.260
right, sir? I'm just sure that that's sustained

01:11:26.260 --> 01:11:28.800
the way this is testified. Sustained. That's

01:11:28.800 --> 01:11:30.579
the question, right? I'm just asking a question.

01:11:30.619 --> 01:11:33.520
You did use that dark value when you were analyzing

01:11:33.520 --> 01:11:37.319
Holco 2 interest. You said earlier, right, sir?

01:11:38.079 --> 01:11:40.140
I didn't say the user should be looked at it,

01:11:40.140 --> 01:11:42.159
but that's not the number we actually think would

01:11:42.159 --> 01:11:45.180
ultimately be a recovery if you were to attempt

01:11:45.180 --> 01:11:48.590
marketing. Do you have another estimate evaluation

01:11:48.590 --> 01:11:52.149
if you were to liquidate the flagship property?

01:11:54.069 --> 01:11:56.789
I think there's been a recurring theme. We're

01:11:56.789 --> 01:11:58.310
using the same word value. We're talking about

01:11:58.310 --> 01:12:01.670
two very different things. I think council is

01:12:01.670 --> 01:12:04.510
using value to refer to numbers. We're not doing

01:12:04.510 --> 01:12:06.609
that. We're not relying on the value of the property.

01:12:06.710 --> 01:12:08.250
We're not relying on an equity question. We don't

01:12:08.250 --> 01:12:10.350
think it's appropriate. We talked about value.

01:12:10.369 --> 01:12:12.989
We're talking about general value, highest and

01:12:12.989 --> 01:12:15.750
best use, the kind of things a CRO would know.

01:12:15.819 --> 01:12:18.739
And I think trying to match up those two concepts

01:12:18.739 --> 01:12:21.579
with numbers that are, frankly, not in evidence

01:12:21.579 --> 01:12:24.500
and are... He testified the value of the property

01:12:24.500 --> 01:12:26.720
would diminish. If he's walking away from that,

01:12:26.739 --> 01:12:28.180
then I don't need to ask any more questions.

01:12:28.220 --> 01:12:30.539
But if he's sticking to it, I get to find out

01:12:30.539 --> 01:12:32.420
what the basis for that is and to challenge it

01:12:32.420 --> 01:12:36.659
with the only appraisal that exists. Your Honor,

01:12:36.840 --> 01:12:38.600
the witness has testified this is not the only

01:12:38.600 --> 01:12:41.140
appraisal that exists. And again, we're not walking

01:12:41.140 --> 01:12:42.739
away from any testimony. We're talking about

01:12:42.739 --> 01:12:47.510
value in terms of highest and best... The question

01:12:47.510 --> 01:12:50.850
is, have you quantified... Sorry. Go ahead, ask

01:12:50.850 --> 01:12:57.149
your question. So have you quantified how much

01:12:57.149 --> 01:13:03.409
less than the bark value appraisal in the JLL

01:13:03.409 --> 01:13:06.609
appraisal that the debtors believe the flagship

01:13:06.609 --> 01:13:10.250
property would receive in a liquidation? We ran

01:13:10.250 --> 01:13:16.020
scenarios from 25 and more. as to what that would

01:13:16.020 --> 01:13:27.960
look like. The debtor's view was that ultimately

01:13:27.960 --> 01:13:35.420
the best decision, the value maximizing decision

01:13:35.420 --> 01:13:39.359
was to obtain the dip because the likelihood

01:13:39.359 --> 01:13:43.029
of the creditors in HOCO 2 getting nothing in

01:13:43.029 --> 01:13:46.869
the event of a liquidation was fairly significant.

01:13:47.510 --> 01:13:50.069
That wasn't my question. Have you quantified

01:13:50.069 --> 01:13:53.010
what the value of the flagship property would

01:13:53.010 --> 01:13:57.390
be in a liquidation? I just said we ran various

01:13:57.390 --> 01:14:01.310
scenarios for 25 and above discount to the 2

01:14:01.310 --> 01:14:05.550
.1. Okay, so you run scenarios where there's

01:14:05.550 --> 01:14:08.409
a 25 % discount. Have the debtors formed a view

01:14:08.409 --> 01:14:12.319
that that is the appropriate discount? The debtors

01:14:12.319 --> 01:14:14.420
didn't form a view of the appropriate discount.

01:14:14.479 --> 01:14:17.680
The debtors formed a view that the risk of that

01:14:17.680 --> 01:14:21.439
happening was significant. We didn't land on

01:14:21.439 --> 01:14:24.119
a specific number, but understood that there's

01:14:24.119 --> 01:14:27.479
significant risk in the appraisal number that

01:14:27.479 --> 01:14:30.500
was used. And therefore, in the debtor's business

01:14:30.500 --> 01:14:34.000
judgment, took a discount against that and recognized

01:14:34.000 --> 01:14:36.939
that with the other items I mentioned to market,

01:14:37.199 --> 01:14:41.479
the expense of winding down, you know, running

01:14:41.479 --> 01:14:48.539
that process, there's a very good chance of ending

01:14:48.539 --> 01:14:51.960
up with no recovery whatsoever. And that's the

01:14:51.960 --> 01:14:57.000
decision to enter into the diff would create

01:14:57.000 --> 01:14:59.539
a situation, increase the likelihood of getting

01:14:59.539 --> 01:15:03.439
a recovery. Have you quantified this in a way

01:15:03.439 --> 01:15:05.500
you can produce to me in response to the document

01:15:05.500 --> 01:15:09.680
request? I haven't seen it, I mean, I'm not sure

01:15:09.680 --> 01:15:13.300
what document request you're referring to. Well,

01:15:13.680 --> 01:15:15.359
assuming I serve a document request in the next

01:15:15.359 --> 01:15:17.000
day or two, there'll be an actual, I think you're

01:15:17.000 --> 01:15:18.760
saying there's not an actual written document

01:15:18.760 --> 01:15:25.600
that shows the analysis you just asserted? I'm

01:15:25.600 --> 01:15:27.539
sorry, I didn't understand the question. I saved

01:15:27.539 --> 01:15:31.479
it in the microphone issue. Is there an actual

01:15:31.479 --> 01:15:35.359
document that shows this quantitative analysis

01:15:35.359 --> 01:15:40.119
you just asserted? I'll have to say, we definitely

01:15:40.119 --> 01:15:42.239
ran the analysis. I don't know the format it's

01:15:42.239 --> 01:15:45.359
currently in. OK. Have the debtors performed

01:15:45.359 --> 01:15:50.380
a liquidation analysis for hold code 2? We performed

01:15:50.380 --> 01:15:57.180
a liquidation analysis of the entity which included

01:15:57.180 --> 01:16:02.020
hold code 2. That's not my question. Have the

01:16:02.020 --> 01:16:03.800
debtors performed the liquidation analysis of

01:16:03.800 --> 01:16:08.979
hold code 2 itself? That was part of the analysis

01:16:08.979 --> 01:16:14.039
I just referred to. When you do a liquidation

01:16:14.039 --> 01:16:17.039
analysis of the whole entity, you have to look

01:16:17.039 --> 01:16:19.020
at the waterfall at different entities and to

01:16:19.020 --> 01:16:21.899
the extent there were specific claims at HOCA

01:16:21.899 --> 01:16:23.920
too, that would be part of the overall analysis.

01:16:26.659 --> 01:16:28.880
Do you do have a liquidation analysis you can

01:16:28.880 --> 01:16:31.619
produce in response to a document request, you're

01:16:31.619 --> 01:16:36.159
saying? Like I said, I don't know the current

01:16:36.159 --> 01:16:40.800
form of it. But we could sort of go through it.

01:16:41.600 --> 01:16:45.380
Okay. Do the debtors agree that Whole Co. 2 is

01:16:45.380 --> 01:16:54.420
currently solvent? Solvent as long as the rent

01:16:54.420 --> 01:16:58.300
payments from Sachs and Co. continue, yes. Without

01:16:58.300 --> 01:17:05.239
those, no. Do the debtors have decided if the

01:17:05.239 --> 01:17:09.869
rent payments stop? Polco 2 is not solvent? Well,

01:17:10.050 --> 01:17:12.529
part of solvency is the ability to meet your

01:17:12.529 --> 01:17:14.649
obligations. It depends what the definition of

01:17:14.649 --> 01:17:17.810
solvency is. But under that definition of solvency,

01:17:17.949 --> 01:17:19.829
no, they wouldn't be able to meet their obligations.

01:17:20.829 --> 01:17:29.010
I put on a balance sheet. It depends. There's

01:17:29.010 --> 01:17:33.149
a good chance it wouldn't be. Today, with the

01:17:33.149 --> 01:17:36.539
rent payments, I would argue uh, their solvency

01:17:36.539 --> 01:17:40.319
without those rent payments? Um, perhaps not.

01:17:41.500 --> 01:17:46.359
Perhaps they're, perhaps Holco 2 is insolvent.

01:17:46.539 --> 01:17:50.060
I think that's what you said. If the rent payments

01:17:50.060 --> 01:17:52.739
were to stop, but today the rent payments are

01:17:52.739 --> 01:17:59.020
actually being made. And why is Holco 2 in bankruptcy?

01:18:02.889 --> 01:18:05.909
is in bankruptcy because at the end of the day,

01:18:06.869 --> 01:18:09.130
we needed to get a dip. In order to get a dip,

01:18:09.270 --> 01:18:11.909
we needed to pledge certain assets, and that

01:18:11.909 --> 01:18:15.390
was required in order to get the lien to satisfy

01:18:15.390 --> 01:18:19.449
the dip lenders. And without that, as I stated

01:18:19.449 --> 01:18:22.050
earlier, the enterprise would likely liquidate.

01:18:22.890 --> 01:18:28.270
And we believe that the creditors at HOCO 2 would

01:18:28.270 --> 01:18:31.829
receive little, if anything, and very likely

01:18:31.829 --> 01:18:36.789
nothing, regarding their claims. And this was

01:18:36.789 --> 01:18:43.229
the best opportunity to go forward. Sorry, sir.

01:18:43.989 --> 01:18:46.289
I say including all constituents, including those

01:18:46.289 --> 01:18:48.510
in Holkoff 2, or parties in interest, I should

01:18:48.510 --> 01:18:52.890
say. I believe you indicated Holkoff 2 was put

01:18:52.890 --> 01:18:55.090
in bankruptcy because that was required in order

01:18:55.090 --> 01:18:59.180
to get the zip. Is that right, sir? Yep. Yes,

01:18:59.300 --> 01:19:03.880
he does. And who authorized the bankruptcy filing

01:19:03.880 --> 01:19:10.000
on behalf of Holco 2? Myself and the board. Was

01:19:10.000 --> 01:19:12.880
that part of a standalone meeting for Holco 2

01:19:12.880 --> 01:19:16.119
or was it the same meeting for all the debtors?

01:19:18.399 --> 01:19:20.140
It was the same meeting for all the debtors.

01:19:21.079 --> 01:19:25.100
I'm sorry, Your Honor. I think there's a lack

01:19:25.100 --> 01:19:29.159
of clarity. I'm not sure. The witness testified

01:19:29.159 --> 01:19:32.680
the board. I'm not sure which board he means.

01:19:37.859 --> 01:19:41.180
There's lengthy resolutions. I'm not sure I would

01:19:41.180 --> 01:19:43.500
call them board resolutions. There's lengthy

01:19:43.500 --> 01:19:49.199
resolutions attached to the petition, which show

01:19:49.199 --> 01:19:51.840
what was done in order to put it in bankruptcy

01:19:51.840 --> 01:19:56.949
and to authorize the dip. I've reviewed those

01:19:56.949 --> 01:19:59.010
in connection with preparing for this hearing.

01:20:00.050 --> 01:20:03.710
So I'm not sure, you know, that this testimony

01:20:03.710 --> 01:20:11.729
is particularly relevant. Was there any meeting

01:20:11.729 --> 01:20:16.409
or analysis just to analyze Whole Code 2's decision,

01:20:17.289 --> 01:20:23.649
not the other donors? There was not a specific

01:20:23.649 --> 01:20:27.500
meeting. regarding Whole Code 2, but there was

01:20:27.500 --> 01:20:30.939
definitely consideration of Whole Code 2 in the

01:20:30.939 --> 01:20:38.159
decision in that meeting. For 12E, is that entity

01:20:38.159 --> 01:20:44.800
solvent? Same. As long as it receives rent payments,

01:20:45.180 --> 01:20:48.399
yes. If it doesn't receive rent payments, I would

01:20:48.399 --> 01:20:50.899
say it's not because it doesn't have the ability

01:20:50.899 --> 01:20:55.609
to meet its obligations. Timely. If it doesn't

01:20:55.609 --> 01:20:57.590
receive the rent payment, is it solvent on a

01:20:57.590 --> 01:21:03.850
balance sheet basis? On a balance sheet, again,

01:21:04.050 --> 01:21:07.390
it may or may not be, but solvency requires multiple

01:21:07.390 --> 01:21:10.189
tests and, you know, it would definitely fail

01:21:10.189 --> 01:21:12.529
that one test. Therefore, I would say it's insolvent

01:21:12.529 --> 01:21:16.789
without the rent payments. And who authorized

01:21:16.789 --> 01:21:28.489
the bankruptcy filing for 12 East? Same. I'm

01:21:28.489 --> 01:21:30.670
sorry, just a lack of foundation. I don't think

01:21:30.670 --> 01:21:33.270
we know whether the witness knows off the top

01:21:33.270 --> 01:21:35.789
of his head who authorized the accuracy calling.

01:21:35.989 --> 01:21:37.930
As Your Honor mentioned, there are lengthy resolutions,

01:21:37.970 --> 01:21:52.729
and I think those speak for themselves. I've

01:21:52.729 --> 01:21:55.670
relied on advice from council as my understanding.

01:21:55.770 --> 01:21:59.550
It was better to keep it out. And so the decision

01:21:59.550 --> 01:22:06.689
was made that way. Is there anything that doesn't

01:22:06.689 --> 01:22:08.229
reveal, President, you can tell me about why

01:22:08.229 --> 01:22:10.270
that decision was made? I don't want to get into

01:22:10.270 --> 01:22:15.430
your advice to council. I'm not certain. OK.

01:22:21.159 --> 01:22:24.579
Let me talk about the debt burden of the DIP

01:22:24.579 --> 01:22:29.800
and start with the interim DIP itself. So the

01:22:29.800 --> 01:22:33.699
debtor's interim DIP has, so they're just taking

01:22:33.699 --> 01:22:36.420
on a total of $400 million of new money debt,

01:22:36.460 --> 01:22:41.600
right, sir? Yes. Okay. And HoldCo 2 is guaranteeing

01:22:41.600 --> 01:22:47.859
all of that debt, right? Yes. Okay, and that

01:22:47.859 --> 01:22:50.199
none of that is paying an interim expense of

01:22:50.199 --> 01:22:57.739
whole code two, right sir? I think the witness

01:22:57.739 --> 01:23:00.159
has testified that whole code two is part of

01:23:00.159 --> 01:23:04.260
the enterprise and it's receiving benefits This

01:23:04.260 --> 01:23:07.199
is really getting it appropriately speaking objections.

01:23:07.699 --> 01:23:10.159
You want to object a floor on or whatever that's

01:23:10.159 --> 01:23:13.359
fine, but like he shouldn't be testifying Yeah

01:23:13.359 --> 01:23:17.930
Try to limit your objections But what was the

01:23:17.930 --> 01:23:21.869
objection? I'm sorry, Your Honor, I've forgotten

01:23:21.869 --> 01:23:25.409
the question. I remember the question. I believe

01:23:25.409 --> 01:23:28.789
that that would be incorrect, because the DIP

01:23:28.789 --> 01:23:33.010
is allowing for the operating lease to continue,

01:23:33.090 --> 01:23:36.289
which is serving to pay for the expenses of Holco

01:23:36.289 --> 01:23:40.609
2. So the DIP is necessary for that to occur.

01:23:42.270 --> 01:23:45.779
So Holco 2 has no expenses, right, sir? Well,

01:23:45.939 --> 01:23:48.039
the subsidiaries as well, I'm including those

01:23:48.039 --> 01:23:51.100
as well. Okay, so you're saying the DIP is needed

01:23:51.100 --> 01:23:55.119
so Dax and Co. can make payments if obligated

01:23:55.119 --> 01:23:59.159
to make. Is that what you're saying, sir? To

01:23:59.159 --> 01:24:02.180
12E49, who turns around and makes payments to

01:24:02.180 --> 01:24:06.279
the flagship. Right, okay. And the proposed interim

01:24:06.279 --> 01:24:11.199
DIP also includes a $359 million roll -up of

01:24:11.199 --> 01:24:15.399
the pre -sufficient SBD notes, right, sir? Yes.

01:24:16.300 --> 01:24:19.239
Okay, and only 200 million of that pre -petition

01:24:19.239 --> 01:24:22.260
FDV debt was, is currently debt of whole code

01:24:22.260 --> 01:24:29.220
2, right? Uh, correct. So 159 million of that

01:24:29.220 --> 01:24:32.399
pre -petition FDV debt was solely a debt of other

01:24:32.399 --> 01:24:37.199
debtors currently, right sir? I'm sorry, can

01:24:37.199 --> 01:24:42.079
you repeat that? 159 million of the pre -petition

01:24:42.079 --> 01:24:45.560
FDV debt was solely a pre -petition liability

01:24:45.560 --> 01:24:48.720
of other debtors, not Whole Coat II, right? I

01:24:48.720 --> 01:24:50.680
would disagree with that because Whole Coat II

01:24:50.680 --> 01:24:54.899
was a beneficiary of that financing at the time.

01:24:55.539 --> 01:24:59.460
So I would say they were a beneficiary of that

01:24:59.460 --> 01:25:01.960
financing. Well, that went into my question,

01:25:02.060 --> 01:25:03.680
my question about liabilities. Whole Coat II

01:25:03.680 --> 01:25:08.819
is not currently liable on $159 million of the

01:25:08.819 --> 01:25:11.539
SPV notes that are intended to be rolled up,

01:25:11.539 --> 01:25:17.489
right, sir? Correct. Okay. And then the interim

01:25:17.489 --> 01:25:23.729
dip would also convert $751 million of pre -petitioned

01:25:23.729 --> 01:25:27.029
second out notes into dip obligations, right,

01:25:27.390 --> 01:25:34.430
sir? Yes. Okay. And none of that $751 million

01:25:34.430 --> 01:25:37.250
is currently debt, a liability of HOCO 2, right,

01:25:37.289 --> 01:25:41.550
sir? It's not a liability, but again, it was

01:25:41.550 --> 01:25:46.449
a beneficiary of it. Okay, so it's effectively

01:25:46.449 --> 01:25:49.609
sort of like another roll -up. That's $751 million,

01:25:49.670 --> 01:25:55.149
right, sir? Yes. Okay, so that's about the $1

01:25:55.149 --> 01:25:59.170
.1 billion pre -petition debt roll -up in the

01:25:59.170 --> 01:26:04.630
interim trip order, right, sir? Uh, yes. Okay,

01:26:05.250 --> 01:26:07.029
and right, sir, there's a debtor's obligation

01:26:07.029 --> 01:26:11.409
to participate in that $751 million second -out

01:26:11.409 --> 01:26:15.340
notes program is irrevocable upon entry of the

01:26:15.340 --> 01:26:17.939
dip order, right, sir? Objection, Your Honor,

01:26:17.979 --> 01:26:20.020
that the documents speak for themselves. I don't

01:26:20.020 --> 01:26:21.859
think this witness has the basis to make that

01:26:21.859 --> 01:26:26.220
conclusion. Distinct. He testified he made decisions

01:26:26.220 --> 01:26:28.079
on the Apple over two. I need to know if he was

01:26:28.079 --> 01:26:29.460
aware of that when he made that decision. Well,

01:26:29.460 --> 01:26:32.939
you can ask him if he was aware. OK. Yeah. Are

01:26:32.939 --> 01:26:36.000
you sure he's aware that the debtor's obligation

01:26:36.000 --> 01:26:42.220
to participate in the $751 million Pre -petition

01:26:42.220 --> 01:26:46.000
second note purchase is irrevocable upon entry

01:26:46.000 --> 01:26:48.899
of the disorder? I'm sorry. I just object to

01:26:48.899 --> 01:26:50.260
the use of the word irrevocable. I think that's

01:26:50.260 --> 01:26:53.300
a legal term and will be determined by the interpretation

01:26:53.300 --> 01:26:55.720
of the documents themselves. I'm going to go

01:26:55.720 --> 01:26:57.939
ahead and let him answer. Overruled. Go ahead.

01:26:59.859 --> 01:27:05.279
You can answer the question. That's my understanding.

01:27:06.380 --> 01:27:09.960
OK. So in total, the interim dip order will impose

01:27:10.199 --> 01:27:14.460
more than $1 .5 billion in liabilities on Holocaust

01:27:14.460 --> 01:27:20.840
II when entered, right, sir? Yes. Okay. And $1

01:27:20.840 --> 01:27:23.560
.3 billion of those are liabilities that don't

01:27:23.560 --> 01:27:27.039
currently exist on Holocaust II, right, sir?

01:27:28.180 --> 01:27:30.539
No, but again, it would be the beneficiary of

01:27:30.539 --> 01:27:35.199
those liabilities. Okay. So you haven't quantified

01:27:35.199 --> 01:27:39.909
how much Holocaust II will benefit? from the

01:27:39.909 --> 01:27:44.289
continuation of Sachs, right? I haven't quantified

01:27:44.289 --> 01:27:47.810
it, but if I think the alternative is the whole

01:27:47.810 --> 01:27:52.569
code two claimants get nothing, then I believe

01:27:52.569 --> 01:27:56.470
it's a better alternative and the debtor's business

01:27:56.470 --> 01:28:01.850
judgment to get the dip and on the basis that

01:28:01.850 --> 01:28:04.829
with significant value being created in Sachs

01:28:04.829 --> 01:28:07.649
Global, that ultimately those claims would be

01:28:07.649 --> 01:28:11.109
addressed. If the option in the debtor's business

01:28:11.109 --> 01:28:15.470
judgment is zero, the alternative is better.

01:28:16.329 --> 01:28:20.909
The longer that... Go ahead. I didn't mean to

01:28:20.909 --> 01:28:24.369
cut you off. Sorry, sir. That's it. I'm done.

01:28:25.350 --> 01:28:28.630
Okay. Do you have a quantification that shows

01:28:28.630 --> 01:28:32.630
the benefit to Whole Co2 is more than $1 .5 billion,

01:28:32.930 --> 01:28:39.630
please? Not with me today, no. But again, when

01:28:39.630 --> 01:28:42.369
I'm looking at quantifying greater than zero

01:28:42.369 --> 01:28:48.449
is, well, whatever the expected value is, as

01:28:48.449 --> 01:28:50.789
long as it's greater than zero, that's a benefit.

01:28:52.090 --> 01:28:55.010
So you'd agree that a roll -up of $1 .1 billion

01:28:55.010 --> 01:28:59.510
today would make it more difficult to find an

01:28:59.510 --> 01:29:01.850
alternative DIP provider to come in at the final

01:29:01.850 --> 01:29:11.859
hearing, right, sir? Well, if maybe objection

01:29:11.859 --> 01:29:14.880
to lack of foundation, I don't think any of the

01:29:14.880 --> 01:29:18.760
assumed several facts that are not evidence Overruled

01:29:18.760 --> 01:29:31.859
that way I let him I don't know I don't know

01:29:31.859 --> 01:29:33.279
if it would be more difficult, but what I do

01:29:33.279 --> 01:29:35.640
know is there would not be an opportunity to

01:29:35.640 --> 01:29:38.579
come in and refinance without this interim financing.

01:29:41.340 --> 01:29:43.699
Well, if there's interim financing without a

01:29:43.699 --> 01:29:46.460
roll -up, it'd be a lot easier to refinance in

01:29:46.460 --> 01:29:48.779
an interim financing with this $1 .1 billion

01:29:48.779 --> 01:29:52.260
roll -up, right, sir? Correct, but the roll -up

01:29:52.260 --> 01:29:54.479
is a condition of the new money, so it goes part

01:29:54.479 --> 01:29:57.340
and parcel, and it's fairly standard than Chapter

01:29:57.340 --> 01:29:59.819
11 cases to have a roll -up associated with new

01:29:59.819 --> 01:30:02.810
money coming in. Okay. And you agree there's

01:30:02.810 --> 01:30:06.770
no creditors committee appearing today to, you

01:30:06.770 --> 01:30:08.529
know, advocate for the interest of unsecured

01:30:08.529 --> 01:30:13.069
creditors like Amazon or vendors. Right, sir?

01:30:13.909 --> 01:30:15.689
No, there's not been a committee formed yet.

01:30:16.550 --> 01:30:19.130
Okay. And then in terms of the remaining $600

01:30:19.130 --> 01:30:23.109
million commitment, I assume there are contingencies

01:30:23.109 --> 01:30:26.109
and conditions precedent and closing conditions

01:30:26.109 --> 01:30:29.829
in the dip agreement. Is that right, sir? There

01:30:29.829 --> 01:30:32.970
are some, but there Fairly standard, I would

01:30:32.970 --> 01:30:36.149
say that there's nothing out of the ordinary

01:30:36.149 --> 01:30:40.369
or onerous there. But until those contingencies

01:30:40.369 --> 01:30:42.789
are met, it's not guaranteed that 600 million

01:30:42.789 --> 01:30:47.789
will come in, right, sir? No, it's not guaranteed.

01:30:47.949 --> 01:30:51.289
The only thing that's, but like I said, they

01:30:51.289 --> 01:30:54.390
were, they're reasonable milestones. Debtors

01:30:54.390 --> 01:30:57.369
do the judgment. They believe they're attainable

01:30:57.369 --> 01:31:01.520
and You know are not concerned at this moment

01:31:01.520 --> 01:31:04.399
in time about the ability to meet those milestones

01:31:04.399 --> 01:31:08.420
Okay, it's really possible that hold code incurs

01:31:08.420 --> 01:31:13.039
its additional 1 .5 billion of liabilities and

01:31:13.039 --> 01:31:15.359
It ends up only extending the operating company's

01:31:15.359 --> 01:31:17.600
business for another 30 days, right? So that's

01:31:17.600 --> 01:31:27.189
possible It's possible Sorry go ahead I'd say

01:31:27.189 --> 01:31:29.609
it's punishable, but again, the alternative is

01:31:29.609 --> 01:31:35.909
worse. I see. And you haven't done an analysis

01:31:35.909 --> 01:31:38.029
to determine the likelihood that that happens,

01:31:38.170 --> 01:31:42.909
right, sir? I'm not sure what that analysis would

01:31:42.909 --> 01:31:45.689
look like. We're ascertaining milestones and

01:31:45.689 --> 01:31:49.529
the company's ability to meet them. And the management

01:31:49.529 --> 01:31:53.350
team and the board of the company, or the debtors,

01:31:54.159 --> 01:31:57.300
are comfortable with our ability to meet those

01:31:57.300 --> 01:32:01.340
milestones and secure the additional funding.

01:32:01.600 --> 01:32:04.779
If we weren't comfortable with those milestones,

01:32:05.399 --> 01:32:07.739
we would not have entered into this agreement

01:32:07.739 --> 01:32:11.659
because it would have been probably a bad decision

01:32:11.659 --> 01:32:14.800
in that case. So we're quite comfortable of our

01:32:14.800 --> 01:32:17.960
ability to meet those milestones. Okay. And SACS

01:32:17.960 --> 01:32:21.399
is also not today committing to assume the lease

01:32:21.399 --> 01:32:27.359
on the flagship property, right, sir? If we don't

01:32:27.359 --> 01:32:32.979
have CF, it would be fairly abnormal to assume

01:32:32.979 --> 01:32:38.560
that any lease on day one. So it's possible that

01:32:38.560 --> 01:32:43.000
Holco incurs this $1 .5 billion of new obligations

01:32:43.000 --> 01:32:45.680
and is still faced with a dark property, right

01:32:45.680 --> 01:32:52.899
sir? It's possible, but the likelihood is reduced.

01:32:52.939 --> 01:32:56.720
because if we get the whole premise of getting

01:32:56.720 --> 01:32:59.579
the funding is to allow us to continue to operate,

01:33:00.039 --> 01:33:03.619
to assume that lease, and to move forward without

01:33:03.619 --> 01:33:09.159
the funding, that becomes less likely. Okay,

01:33:09.260 --> 01:33:11.279
so now let's talk about the proposed final dip.

01:33:12.199 --> 01:33:15.220
So the final dip has Holocaust II taking on another

01:33:15.220 --> 01:33:20.880
$600 million of new money debt, right, sir? Correct.

01:33:21.640 --> 01:33:26.119
And another $449 million roll -up, right, sir?

01:33:27.760 --> 01:33:32.979
Correct. And that entire $449 million additional

01:33:32.979 --> 01:33:36.000
roll -up is of debt that is not currently at

01:33:36.000 --> 01:33:41.220
Holocaust II, right, sir? That is correct. OK.

01:33:42.199 --> 01:33:47.220
So that's a total of $2 .6 billion of additional

01:33:47.220 --> 01:33:50.420
obligations that would be imposed on Holocaust.

01:33:50.729 --> 01:34:01.630
team, right, sir? Uh, yes. Okay. And all that

01:34:01.630 --> 01:34:04.090
would have to be repaid before whole co twos

01:34:04.090 --> 01:34:06.970
existing creditors get anything, right, sir?

01:34:07.970 --> 01:34:13.869
Uh, I think that assumes, um, that whole co two

01:34:13.869 --> 01:34:16.829
is the only source of payment for the dip. I

01:34:16.829 --> 01:34:21.600
don't think it's never You could just object

01:34:21.600 --> 01:34:28.420
not enough. You don't need a speech. Refresh

01:34:28.420 --> 01:34:38.340
your question, please. 2 .6 billion would come,

01:34:38.720 --> 01:34:41.439
would be an obligation of HOCO 2 before HOCO

01:34:41.439 --> 01:34:44.500
2's existing unsecured creditors, right sir?

01:34:46.579 --> 01:34:55.090
Correct. Okay. Um, so, and I'm just going to

01:34:55.090 --> 01:34:57.489
do some hypothetical numbers here. If the flagship

01:34:57.489 --> 01:35:02.470
property is worth, say, $3 billion, currently,

01:35:02.689 --> 01:35:04.649
whole court, two creditors could be repaid in

01:35:04.649 --> 01:35:09.970
full, right, sir? On a dark basis. I'm sorry,

01:35:10.029 --> 01:35:13.069
did you say it's worth 3 billion? 3 billion,

01:35:13.210 --> 01:35:17.770
yep. Which would be... significantly more than

01:35:17.770 --> 01:35:20.750
the appraisal you referenced earlier but by just

01:35:20.750 --> 01:35:25.829
doing that math that's correct okay but at that

01:35:25.829 --> 01:35:28.529
value they might still receive nothing once the

01:35:28.529 --> 01:35:33.770
dip is put in place right sir it's possible it's

01:35:33.770 --> 01:35:36.489
also possible they wouldn't even a three billion

01:35:36.489 --> 01:35:39.930
depending on how long it would take to actually

01:35:39.930 --> 01:35:42.829
receive the three billion If you were talking

01:35:42.829 --> 01:35:45.050
hypotheticals, it's possible at a $3 billion

01:35:45.050 --> 01:35:47.250
valuation, they wouldn't receive anything either.

01:35:48.369 --> 01:35:51.670
Okay. You agree, sir, there's an evaluation where

01:35:51.670 --> 01:35:54.310
the flags, where they, where an immediate liquidation

01:35:54.310 --> 01:35:57.189
is better for a whole code creditor than a good

01:35:57.189 --> 01:36:01.850
facility, right, sir? I did not agree with that

01:36:01.850 --> 01:36:04.329
at all. An immediate liquidation we don't believe

01:36:04.329 --> 01:36:06.689
is better than for a whole code, too, and I've

01:36:06.689 --> 01:36:09.510
never said that. Well, that wasn't my question.

01:36:09.920 --> 01:36:14.460
There is a valuation somewhere above this 1 .6

01:36:14.460 --> 01:36:17.640
billion of existing debt where focal cutters

01:36:17.640 --> 01:36:19.659
are better off with immediate liquidation, right,

01:36:19.899 --> 01:36:21.560
sir? There is a value where that would be true,

01:36:21.659 --> 01:36:25.319
right, sir? There is some value, but again, in

01:36:25.319 --> 01:36:29.939
the realm of hypotheticals, you know, as a debtor,

01:36:30.100 --> 01:36:32.680
it needs to risk assess the likelihood of obtaining

01:36:32.680 --> 01:36:39.630
those values and doesn't believe that the opportunity

01:36:39.630 --> 01:36:42.890
to attain those values reasonably exists and

01:36:42.890 --> 01:36:46.750
therefore going down the path of obtaining the

01:36:46.750 --> 01:36:49.569
diff is the better course of action for HOCO2

01:36:49.569 --> 01:36:52.550
as well as the rest of the SAX global entities.

01:36:53.890 --> 01:36:55.550
Okay, but there's no quantification you've done

01:36:55.550 --> 01:36:59.010
that you can point me to to show that HOCO2 benefits

01:36:59.010 --> 01:37:03.109
by two and a half billion dollars as a result

01:37:03.109 --> 01:37:07.930
of this diff rate? As I said, if you think the

01:37:07.930 --> 01:37:11.390
outcome is zero, anything above that is better,

01:37:11.689 --> 01:37:17.789
or the opportunity is better. And the opportunity

01:37:17.789 --> 01:37:20.670
for the company to continue to exist presents

01:37:20.670 --> 01:37:24.430
opportunities to create much more value for the

01:37:24.430 --> 01:37:29.529
claimants it will go to. OK. You're aware, sir,

01:37:29.529 --> 01:37:32.729
that Amazon has a consent right over any new

01:37:32.729 --> 01:37:36.199
debt secured by the flagship property? or guaranteed

01:37:36.199 --> 01:37:38.960
by those flagship silo entities? You aware of

01:37:38.960 --> 01:37:41.779
that, sir? Objection counter calls for a legal

01:37:41.779 --> 01:37:45.760
conclusion. No, I'm asking if he's aware of it.

01:37:47.279 --> 01:37:51.939
Yeah. I'm aware. Go ahead. I'm aware that there

01:37:51.939 --> 01:37:54.899
are consent rights, but I'm not sure those consent

01:37:54.899 --> 01:38:00.119
rights, as I understand them, preclude the debtors

01:38:00.119 --> 01:38:05.899
from seeking the liens and the dip. uh, you know,

01:38:06.140 --> 01:38:08.760
the diff and the leads associated with the diff.

01:38:09.399 --> 01:38:11.399
You mean because of bankruptcy? Is that what

01:38:11.399 --> 01:38:15.699
you mean, sir? I, in consultation with council,

01:38:15.760 --> 01:38:20.180
my understanding is that in the manner in which

01:38:20.180 --> 01:38:24.119
the decision, you know, the authority was sought,

01:38:24.539 --> 01:38:28.060
we did not need to seek the consent of Amazon.

01:38:29.159 --> 01:38:32.159
Okay. Did anyone sign dip agreements on behalf

01:38:32.159 --> 01:38:34.439
of The DIP agreement is on behalf of any of these

01:38:34.439 --> 01:38:43.260
communities? Again, Your Honor, I think we've

01:38:43.260 --> 01:38:45.100
discussed this before, but I believe you said

01:38:45.100 --> 01:38:47.119
that consent and everything are in the record

01:38:47.119 --> 01:38:49.800
and should be for themselves. I don't know that

01:38:49.800 --> 01:38:52.960
Mr. Weinstein remembers at the moment, although

01:38:52.960 --> 01:38:57.000
he can tell me if he does. I thought it was a

01:38:57.000 --> 01:38:58.600
different question. I thought the question was,

01:38:58.859 --> 01:39:01.600
has there has anyone actually signed the DIP

01:39:01.600 --> 01:39:05.420
agreement? Was that the question? Did I mishear

01:39:05.420 --> 01:39:15.720
it? Yes, your honor. Yes, your honor. I'm trying

01:39:15.720 --> 01:39:26.060
to think. I believe you've been executed. I'm

01:39:26.060 --> 01:39:30.159
not, sir. I still recall. OK. And you're aware,

01:39:30.300 --> 01:39:33.770
sir, that Amazon informed SACS that Amazon did

01:39:33.770 --> 01:39:37.029
not consent to new debt procured by the flagship

01:39:37.029 --> 01:39:41.029
property. Are you aware of that, sir? I am aware.

01:39:42.930 --> 01:39:49.949
OK. And are you aware that, did you consider

01:39:49.949 --> 01:39:53.430
that under the LLC agreement, the flagship entity

01:39:53.430 --> 01:39:56.529
is barred from taking on new debt? Do you consider

01:39:56.529 --> 01:40:00.869
that a new alpha? Again, in consultation with

01:40:00.869 --> 01:40:03.729
advisors, it's my understanding that it was not

01:40:03.729 --> 01:40:08.649
barred, and therefore we're seeking the dip that

01:40:08.649 --> 01:40:14.170
we're seeking. Are you aware that the 12 -eat

01:40:14.170 --> 01:40:17.270
LLC agreement, it's also barred from taking on

01:40:17.270 --> 01:40:22.689
new debt? Is that something you considered? Similarly,

01:40:24.250 --> 01:40:29.340
my understanding is that we... ultimately were

01:40:29.340 --> 01:40:32.619
not barred based on consultation with the advisors

01:40:32.619 --> 01:40:40.539
for seeking the dip financing and including Toby's

01:40:40.539 --> 01:40:45.619
49th. Before today, were you aware that Amazon

01:40:45.619 --> 01:40:49.439
offered to provide a dip to Holdco 2 to finance

01:40:49.439 --> 01:40:52.520
any cash needs of Holdco 2? That's actually an

01:40:52.520 --> 01:40:55.659
assumed fact, not evidence. I think he's aware

01:40:55.659 --> 01:40:59.720
of it. He's aware of it, yeah. I believe there

01:40:59.720 --> 01:41:03.260
was some reference to it in the letter. However,

01:41:04.760 --> 01:41:07.279
given the timing that we're on, I can't see how

01:41:07.279 --> 01:41:10.560
that was possibly actionable. And given the fact

01:41:10.560 --> 01:41:13.539
that we were in regular daily conversations with

01:41:13.539 --> 01:41:20.739
Amazon and its advisors for weeks, and this never

01:41:20.739 --> 01:41:23.460
came up, the fact that it came up in a letter

01:41:23.460 --> 01:41:27.239
on the eve of a filing. seem to indicate that

01:41:27.239 --> 01:41:29.800
it was highly unlikely that it was actionable.

01:41:33.020 --> 01:41:35.000
The debtors never even responded to Amazon's

01:41:35.000 --> 01:41:37.800
proposal to discuss a whole person's debt, right?

01:41:39.079 --> 01:41:43.260
I don't know. Are you aware of the debtors ever

01:41:43.260 --> 01:41:47.359
responding to Amazon's proposal? I'm not aware

01:41:47.359 --> 01:41:51.100
of it, no. Are you aware that Amazon asked for

01:41:51.100 --> 01:41:54.170
financial information regarding Whole Code II's

01:41:54.170 --> 01:41:55.909
expenses, but they could size it up. Do you wear

01:41:55.909 --> 01:42:01.069
that, sir? I'm not aware of it, and to go back

01:42:01.069 --> 01:42:03.710
for a second, I'm not sure what constitutes a

01:42:03.710 --> 01:42:07.930
proposal. In my mind, a proposal is an actual

01:42:07.930 --> 01:42:11.970
term sheet with proposed terms, not a passing

01:42:11.970 --> 01:42:16.189
reference to, hey, we would do, we propose that

01:42:16.189 --> 01:42:19.100
possibly we would do this. Okay. Well, why don't

01:42:19.100 --> 01:42:21.159
we pull up the letter then that we've all been

01:42:21.159 --> 01:42:29.340
talking about. It's ECF 144 -9. Maybe if you

01:42:29.340 --> 01:42:44.579
could pull that up. It's Oscar, I'm sorry. Okay.

01:42:45.479 --> 01:42:47.399
I guess blow up the first paragraph. because

01:42:47.399 --> 01:42:50.880
it's really hard to see. I'm sorry. Can I just

01:42:50.880 --> 01:42:52.539
give a hard copy to the witness so that you can

01:42:52.539 --> 01:43:28.189
look at the whole document? Yes. Thank you. Mr.

01:43:28.189 --> 01:43:33.329
Harris. Okay. Do you see that the letter is from

01:43:33.329 --> 01:43:37.590
Latham and Watkin, who will be far? And then

01:43:37.590 --> 01:43:39.729
the first paragraph it says we request you immediately

01:43:39.729 --> 01:43:43.989
share this letter with Mr. Aaronson, Mr. Tracy,

01:43:44.090 --> 01:43:46.449
and then SACS Chief Restructuring Officer, which

01:43:46.449 --> 01:43:53.670
is yourself? Yeah. Okay. And could we go to the

01:43:53.670 --> 01:44:04.520
third page, Ms. Austin? And, um, the principal

01:44:04.520 --> 01:44:06.960
paragraph starts, if HOCO 2 requires financing,

01:44:07.060 --> 01:44:10.439
if we could blow that up if possible. There it

01:44:10.439 --> 01:44:19.300
is. Do you see? Thank you. Do you see, sir, that

01:44:19.300 --> 01:44:23.300
Amazon is asking, um, in the third line for information

01:44:23.300 --> 01:44:26.039
about HOCO 2's expenses for purposes of sizing

01:44:26.039 --> 01:44:31.350
of the proposal? Do you see that? Yep. Okay,

01:44:31.550 --> 01:44:34.250
and then, and SACS never responded to this request,

01:44:34.350 --> 01:44:40.149
right, sir? I don't know if it responded, but

01:44:40.149 --> 01:44:45.250
even if it had, given the timing of our Chapter

01:44:45.250 --> 01:44:48.050
11, I'm not sure how this possibly could have

01:44:48.050 --> 01:44:52.170
been actionable. But I don't know if anybody

01:44:52.170 --> 01:44:58.829
responded to it. This letter dated January 9th,

01:44:58.829 --> 01:45:04.689
sir, right? Yes. Okay. Was there anyone who was

01:45:04.689 --> 01:45:08.270
acting only on behalf of HoldCo2 that considered

01:45:08.270 --> 01:45:14.130
Amazon's proposal or an idea of providing a dip

01:45:14.130 --> 01:45:21.079
just for HoldCo2? There was nobody singularly

01:45:21.079 --> 01:45:23.199
looking out for a whole course, too, but in the

01:45:23.199 --> 01:45:26.500
fiduciary responsibility towards all the entities,

01:45:26.659 --> 01:45:33.199
it was considered. Okay. A couple questions about

01:45:33.199 --> 01:45:35.479
the debtor's ZIP budget then, and I think then

01:45:35.479 --> 01:45:37.920
we'll be done. So, thank you for your patience.

01:45:39.039 --> 01:45:40.859
So, actually, I'm sorry, my colleague has something

01:45:40.859 --> 01:45:44.439
to... Okay. You did say you were involved in

01:45:44.439 --> 01:45:46.920
preparing the debtor's 13 -week ZIP budget, right,

01:45:47.300 --> 01:45:53.520
sir? My team was. I reviewed it. Okay. Um, uh,

01:45:53.659 --> 01:45:55.680
Ms. Hawking, can we display that? I think it's

01:45:55.680 --> 01:45:57.840
the last page of the dig motion, but it's also,

01:45:58.000 --> 01:46:19.100
I think, a separate document. So this is the

01:46:19.100 --> 01:46:24.439
entire budget, right, sir? It looks like it.

01:46:24.439 --> 01:46:26.500
I know it's kind of hard to read from here, but

01:46:26.500 --> 01:46:31.399
it certainly looks like it. OK. Are you aware

01:46:31.399 --> 01:46:33.760
that Amazon asked the debtors to provide the

01:46:33.760 --> 01:46:35.939
13 -week budget and advance the filing, but didn't

01:46:35.939 --> 01:46:41.260
get it? I don't recall if it was in the letter,

01:46:41.859 --> 01:46:45.100
perhaps, but I don't recall specifically a request.

01:46:46.140 --> 01:46:51.270
OK. Now, you see there's one line item for total

01:46:51.270 --> 01:46:54.649
disbursements. It's row number two. Is that right,

01:46:54.930 --> 01:47:00.329
sir? Yes. And it shows that, you know, over 700

01:47:00.329 --> 01:47:02.729
million of disbursements in the first four weeks.

01:47:02.750 --> 01:47:07.270
Right, sir? I can't read it, but that sounds

01:47:07.270 --> 01:47:10.630
about right from memory. But it doesn't tell

01:47:10.630 --> 01:47:13.369
anyone what those disbursements are. Right, sir?

01:47:14.670 --> 01:47:18.470
Correct. Doesn't show the amount of professional

01:47:18.470 --> 01:47:21.569
fees, or critical vendors, or utilities, or insurance,

01:47:21.670 --> 01:47:25.050
or any other details, right sir? No, this is

01:47:25.050 --> 01:47:31.189
a pretty standard form to file. You think it's

01:47:31.189 --> 01:47:32.970
pretty standard to a DIP budget not to provide

01:47:32.970 --> 01:47:35.310
any details about what the cash is being used

01:47:35.310 --> 01:47:40.189
for? In conjunction with a DIP, yeah. And a DIP

01:47:40.189 --> 01:47:42.010
motion, yeah. This is a pretty standard format.

01:47:43.449 --> 01:47:45.909
So how much of the interim budget is for professional

01:47:45.909 --> 01:47:51.289
fees? Um, I'd have to go back to the underlying

01:47:51.289 --> 01:47:54.310
detail. I believe there's a funding of a carve

01:47:54.310 --> 01:47:57.529
out early on, but besides that, I don't know

01:47:57.529 --> 01:47:59.829
that there are any other additional professional

01:47:59.829 --> 01:48:08.270
fees since there's, um, you remember? Excuse

01:48:08.270 --> 01:48:13.859
me. I didn't mean to interrupt you. Sorry. That

01:48:13.859 --> 01:48:17.340
was it. OK. Do you remember what the amount of

01:48:17.340 --> 01:48:21.100
that target was being funded? I think approximately

01:48:21.100 --> 01:48:27.039
$40 million. OK. And that's being funded in the

01:48:27.039 --> 01:48:33.680
interim period? Yes. OK. And how much of the

01:48:33.680 --> 01:48:36.619
interim budget is being used to pay pre -petition

01:48:36.619 --> 01:48:42.899
claims of critical vendors? I believe requested

01:48:42.899 --> 01:48:48.380
about, I want to say, I don't know if I had maybe

01:48:48.380 --> 01:48:54.479
120 initially, and the dollars are spent over

01:48:54.479 --> 01:49:00.279
a 10 -week period pretty easily. Okay. Can you

01:49:00.279 --> 01:49:02.840
tell us what post -petition obligations are coming

01:49:02.840 --> 01:49:09.100
due in the next 14 days? The next 14 days, you

01:49:09.100 --> 01:49:13.829
would have So you only have payroll. You'd have

01:49:13.829 --> 01:49:18.069
rent. You'll have goods, merchandise that we

01:49:18.069 --> 01:49:21.069
need to pay for. We have marketing contracts

01:49:21.069 --> 01:49:24.770
we need to pay for. We have transportation we

01:49:24.770 --> 01:49:27.970
need to pay for. We have insurance programs we

01:49:27.970 --> 01:49:30.789
need to pay for. We have benefit programs we

01:49:30.789 --> 01:49:33.829
need to pay for. And there will be disbursements

01:49:33.829 --> 01:49:38.010
on all of those over the next 14 days. So how

01:49:38.010 --> 01:49:41.850
much are those? post -petition obligations that

01:49:41.850 --> 01:49:47.930
will need to be paid the next 14 days. According

01:49:47.930 --> 01:49:51.189
to the budget, there's a fairly significant amount.

01:49:51.210 --> 01:49:53.289
Now, do I think that the number will come in

01:49:53.289 --> 01:49:56.229
less than that? Yes, but it's a fairly significant

01:49:56.229 --> 01:49:58.869
amount. Well, you say according to the budget.

01:49:58.909 --> 01:50:01.090
I mean, I can't tell. There's just a total disbursements

01:50:01.090 --> 01:50:02.890
line. I know that doesn't tell me how much of

01:50:02.890 --> 01:50:06.369
those is the post -petition obligation. So that's

01:50:06.369 --> 01:50:08.090
what I'm asking you, sir. Can you tell the...

01:50:09.900 --> 01:50:12.760
Most of it is post -petition. There's not much

01:50:12.760 --> 01:50:18.039
pre -petition in there. Sir, if you only pay

01:50:18.039 --> 01:50:20.079
post -petition obligations, do you know if you

01:50:20.079 --> 01:50:22.220
need to draw on the dip in the next 14 days?

01:50:23.000 --> 01:50:28.159
Yes. By how much? A significant amount. I don't

01:50:28.159 --> 01:50:30.939
know the exact amount off my head, but it's a

01:50:30.939 --> 01:50:34.600
significant amount. We are actually largely out

01:50:34.600 --> 01:50:38.319
of liquidity. And we are incurring post -petition

01:50:38.319 --> 01:50:44.380
expenses as we speak. And we need to start receiving

01:50:44.380 --> 01:50:48.100
product. And some of that, you know, I don't

01:50:48.100 --> 01:50:50.579
know what terms we're going to get. And we're

01:50:50.579 --> 01:50:53.739
going to have to pay for that product. And so

01:50:53.739 --> 01:50:56.680
we need to start making significant disbursements

01:50:56.680 --> 01:51:02.880
in very short order. And because we have almost

01:51:02.880 --> 01:51:05.420
no liquidity at the moment, We need to draw on

01:51:05.420 --> 01:51:09.899
the dip. Okay. And then just focus on hole code

01:51:09.899 --> 01:51:12.060
two, kind of last point. Hole code two doesn't

01:51:12.060 --> 01:51:16.520
have any operations, right, sir? Well, it's subsidiaries

01:51:16.520 --> 01:51:22.500
do. Well, one subsidiary just owns real property

01:51:22.500 --> 01:51:24.840
and the other subsidiary just passes it through

01:51:24.840 --> 01:51:27.579
on a lease, right, sir? Yeah, but there are expenses

01:51:27.579 --> 01:51:29.560
associated with that. That's why I consider that

01:51:29.560 --> 01:51:33.609
operation. Well, none of those have any vendors

01:51:33.609 --> 01:51:35.590
providing goods and services to them, right,

01:51:36.010 --> 01:51:42.930
sir? Certainly the store has, you know, the flagship

01:51:42.930 --> 01:51:47.390
has services provided to it. But those services

01:51:47.390 --> 01:51:52.550
are provided to SACS, not to any of the three

01:51:52.550 --> 01:51:55.329
entities we've been talking about, right, sir?

01:51:56.250 --> 01:52:00.579
Well, you know, I... the store would incur, I

01:52:00.579 --> 01:52:03.539
mean, ultimately they'll get funded through the

01:52:03.539 --> 01:52:05.840
lease, but there are expenses at the flagship

01:52:05.840 --> 01:52:09.159
that subsequently get paid for, but they have

01:52:09.159 --> 01:52:14.119
to get the cash. So my question is, the vendors,

01:52:14.659 --> 01:52:17.600
there are no vendors who provide goods and services

01:52:17.600 --> 01:52:21.600
to these three entities, right, sir? Well, services,

01:52:21.859 --> 01:52:27.100
yes, goods, not their worth. What services do

01:52:27.100 --> 01:52:28.880
you think are being provided to these three entities

01:52:28.880 --> 01:52:33.539
by a vendor? The flagship has legal services

01:52:33.539 --> 01:52:39.659
that it is the beneficiary of. 12 East 49th Street

01:52:39.659 --> 01:52:42.279
has legal services that it is the beneficiary

01:52:42.279 --> 01:52:45.779
of. There's accounting services which they are

01:52:45.779 --> 01:52:49.520
the beneficiary of. So there are incurring services.

01:52:50.619 --> 01:52:52.760
Can you tell me how much those are on a monthly

01:52:52.760 --> 01:52:57.069
basis? I don't. I can't. Do you know whether

01:52:57.069 --> 01:52:59.710
any of the critical vendors provide good news

01:52:59.710 --> 01:53:04.630
services to HOCO 2? We haven't fully identified

01:53:04.630 --> 01:53:07.510
the critical vendors yet, but indirectly, yes,

01:53:07.609 --> 01:53:11.510
because to the extent that the DIP provides for

01:53:11.510 --> 01:53:14.229
paying for critical vendors and other critical

01:53:14.229 --> 01:53:17.729
services, HOCO 2 is the beneficiary, so it is

01:53:17.729 --> 01:53:21.649
the indirect beneficiary of those payments. I

01:53:21.649 --> 01:53:25.729
see. But they're not directly vendors to Holocaust

01:53:25.729 --> 01:53:29.930
II, right, sir? That's correct. OK. And Holocaust

01:53:29.930 --> 01:53:31.989
II is not obligatory for those critical vendors,

01:53:32.149 --> 01:53:37.130
right? Yes, Your Honor. Close for legal conclusion.

01:53:38.829 --> 01:53:42.329
Well, I think the question is, do they have a

01:53:42.329 --> 01:53:46.010
contract? Does the entity that owns the real

01:53:46.010 --> 01:53:48.449
estate have contracts with trade vendors? I think

01:53:48.449 --> 01:53:55.840
that's the question. No. Yes, sir. OK. So can

01:53:55.840 --> 01:54:00.060
you tell the court how much liability Polco 2

01:54:00.060 --> 01:54:03.319
is incurring to pay pre -petition claims of other

01:54:03.319 --> 01:54:10.779
debtors just on an interim basis? Well, the liabilities

01:54:10.779 --> 01:54:13.260
it's incurring are the ones you outlined earlier.

01:54:16.060 --> 01:54:17.600
Just one second, Your Honor. I think I may be

01:54:17.600 --> 01:54:51.819
done. Okay. Thank you, Your Honor, and thank

01:54:51.819 --> 01:54:54.060
you, sir, for your patience. Okay, thank you.

01:54:54.119 --> 01:54:58.239
Does anyone else wish to cross examine Mr. Weinstein?

01:54:59.899 --> 01:55:02.800
Yes, Your Honor. It's Jim Ducaille. Can you hear

01:55:02.800 --> 01:55:07.199
me? Yes, I can. Okay. Good evening, Your Honor.

01:55:07.279 --> 01:55:09.600
Jim Ducaille from Sidley Austin on behalf of

01:55:09.600 --> 01:55:13.920
Exonic. I do have a few questions. May I proceed?

01:55:14.260 --> 01:55:18.170
Yes. Your Honor, can I just raise one? I think

01:55:18.170 --> 01:55:22.109
we've gone on the record about two hours. If

01:55:22.109 --> 01:55:23.930
council has significant amount of questions,

01:55:24.109 --> 01:55:25.850
it may make sense to take a break. If not, I'm

01:55:25.850 --> 01:55:28.210
happy to go through. I just want to raise that

01:55:28.210 --> 01:55:31.010
with the court. Yeah. Good point. Mr. DuPay,

01:55:31.010 --> 01:55:33.630
how long do you think you're going to be? I don't

01:55:33.630 --> 01:55:36.029
think it's very long, Your Honor. Maybe 10 minutes.

01:55:36.649 --> 01:55:38.989
OK. We'll only push through, and then we'll take

01:55:38.989 --> 01:55:44.550
a break before any redirect. OK. Thank you, Your

01:55:44.550 --> 01:55:49.789
Honor. May I proceed? Yes. Thank you. Mr. Weinstein,

01:55:49.930 --> 01:55:52.470
my name is Jim Ducaille. I represent Exonic.

01:55:53.729 --> 01:55:55.789
I just have a few questions for you and I'll

01:55:55.789 --> 01:55:59.470
try to keep this relatively brief. I want to

01:55:59.470 --> 01:56:04.789
focus, sir, in particular on the 12 East 49th

01:56:04.789 --> 01:56:08.569
entity. We've been talking about that over the

01:56:08.569 --> 01:56:12.109
past couple of hours. That's the entity that

01:56:12.109 --> 01:56:14.770
holds the ground lease for the flagship store,

01:56:14.810 --> 01:56:21.039
correct? Correct. And you're aware of the fact

01:56:21.039 --> 01:56:25.420
that Exonic has a security interest in the form

01:56:25.420 --> 01:56:30.199
of a pledge of all of the LLC interests that

01:56:30.199 --> 01:56:35.180
are held by Holdco 2 of 12 East 49th Street.

01:56:35.399 --> 01:56:41.340
You aware of that? Yes. And you understand that

01:56:41.340 --> 01:56:44.920
the debtors here are asking for authorization

01:56:44.920 --> 01:56:50.880
for 12 East forty -ninth street to be a dip uh...

01:56:50.880 --> 01:56:56.140
borrower under the proposed it right and in connection

01:56:56.140 --> 01:57:00.979
with that uh... twelve eastwood pledge its assets

01:57:00.979 --> 01:57:04.699
uh... at collateral connection that that right

01:57:04.699 --> 01:57:16.840
are you aware of an estoppel certificate that

01:57:16.840 --> 01:57:20.619
prohibited SACs from amending or modifying the

01:57:20.619 --> 01:57:24.920
ground lease that is held by 12 East or modifying

01:57:24.920 --> 01:57:35.579
the operating lease payments? I'm not certain,

01:57:35.739 --> 01:57:41.180
but what I do know is that in consultation with

01:57:41.180 --> 01:57:48.920
advisors that we had the ability to change the

01:57:48.920 --> 01:57:55.399
terms of the operating lease. Did you do that,

01:57:55.720 --> 01:57:58.899
sir? Has that happened recently? Yes. Yes. How

01:57:58.899 --> 01:58:06.960
recently? Within the last year or two. And what

01:58:06.960 --> 01:58:10.699
was the nature of that modification, sir? There

01:58:10.699 --> 01:58:16.279
was a reduction in the rent paid. In the debtor's

01:58:16.279 --> 01:58:20.880
judgment, given the fact we were on the verge

01:58:20.880 --> 01:58:25.399
of Chapter 11, it made sense to try to preserve

01:58:25.399 --> 01:58:32.340
cash in the Sachin Co -entity and otherwise would

01:58:32.340 --> 01:58:34.460
have rejected that lease because the amounts

01:58:34.460 --> 01:58:37.960
being paid under the operating lease were excessive.

01:58:38.720 --> 01:58:42.520
So either A, modify it or B, reject it. So we

01:58:42.520 --> 01:58:45.710
opted to modify it. Did you seek Exonic's consent

01:58:45.710 --> 01:58:53.590
to do that? We did not. Okay. Are you aware of

01:58:53.590 --> 01:58:55.510
the fact that the pledge that I just described

01:58:55.510 --> 01:58:59.029
that Exonic holds of the Holdco 2's interest

01:58:59.029 --> 01:59:05.649
in 12 East 49th Street prohibits Holdco 2 from

01:59:05.649 --> 01:59:09.409
taking action that would materially impair the

01:59:09.409 --> 01:59:14.199
rights of my client, Exonic? And as I just stated,

01:59:14.479 --> 01:59:17.439
based on consultation with advisors, it was my

01:59:17.439 --> 01:59:21.439
understanding that we could do this and should

01:59:21.439 --> 01:59:28.300
do this, and therefore went ahead for the reasons

01:59:28.300 --> 01:59:35.180
previously stated, as well as, well, no. OK.

01:59:36.039 --> 01:59:38.619
Let me just ask you a little bit more about the

01:59:38.619 --> 01:59:42.329
12 East 49th Street entity. uh... i think you

01:59:42.329 --> 01:59:45.149
just testified a few minutes ago that entity

01:59:45.149 --> 01:59:47.789
doesn't have any employees it doesn't have any

01:59:47.789 --> 01:59:53.810
vendors correct uh... correct uh... it doesn't

01:59:53.810 --> 01:59:56.850
purchase or sell inventory of any kind right

01:59:56.850 --> 02:00:02.710
it does not and prior to this it does not but

02:00:02.710 --> 02:00:05.829
it is the beneficiary of entities that do but

02:00:05.829 --> 02:00:10.220
it doesn't itself does it okay and and uh...

02:00:10.220 --> 02:00:13.819
prior to the petition date uh... there wasn't

02:00:13.819 --> 02:00:17.380
any funded debts uh... that uh... twelve east

02:00:17.380 --> 02:00:22.140
forty ninth street at water i don't believe so

02:00:22.140 --> 02:00:26.279
in connection with the bankruptcy filing was

02:00:26.279 --> 02:00:30.000
there ever any sort of stand -alone liquidation

02:00:30.000 --> 02:00:34.300
analysis done that specifically in respect of

02:00:34.300 --> 02:00:37.520
twelve east forty ninth street It would have

02:00:37.520 --> 02:00:41.159
been part and parcel with the broader liquidation

02:00:41.159 --> 02:00:44.479
analysis I referred to earlier. And what did

02:00:44.479 --> 02:00:47.539
it show, sir? Do you know? I don't recall. Top

02:00:47.539 --> 02:00:54.439
of my head. Now, it's true, sir, that the dip

02:00:54.439 --> 02:00:57.880
proceeds of the dip that's being sought here,

02:00:58.300 --> 02:01:01.300
those are not in any way specifically earmarked

02:01:01.300 --> 02:01:05.979
for 12 East 49th Street Fuse, are they? No. not

02:01:05.979 --> 02:01:10.319
specifically, but 12 East 49th Street is a beneficiary

02:01:10.319 --> 02:01:14.140
of those dip proceeds by maintaining the ability

02:01:14.140 --> 02:01:17.880
to operate the 12 East 49 flagship store, and

02:01:17.880 --> 02:01:21.539
therefore it is a beneficiary of it. Well, just

02:01:21.539 --> 02:01:23.939
to be clear though, 12 East 49th doesn't operate

02:01:23.939 --> 02:01:26.140
the store. It simply holds the lease, right?

02:01:26.880 --> 02:01:29.119
Yes, but there wouldn't be any lease payments

02:01:29.119 --> 02:01:34.220
to it in the absence of the store functioning.

02:01:34.569 --> 02:01:41.789
in the ordinary course. Did you, in preparation

02:01:41.789 --> 02:01:44.229
for the bankruptcy, ever perform any sort of

02:01:44.229 --> 02:01:47.409
valuation of 12 East 49th Street specifically?

02:01:49.090 --> 02:01:54.569
I did not. And do you know if that was done by

02:01:54.569 --> 02:01:59.050
any of your advisors? I'm not aware of that entity

02:01:59.050 --> 02:02:05.340
specifically, no. Are you familiar with the terms

02:02:05.340 --> 02:02:09.899
of the dip credit agreement that was just filed

02:02:09.899 --> 02:02:13.939
with the court this afternoon? The basic terms,

02:02:14.100 --> 02:02:18.239
yes. In reviewing this, there's a provision in

02:02:18.239 --> 02:02:19.979
there I just wanted to ask you if you know anything

02:02:19.979 --> 02:02:24.819
about. Section 5 .17 of the credit agreement

02:02:24.819 --> 02:02:29.300
has a bunch of affirmative covenants that relate

02:02:29.300 --> 02:02:34.340
to the flagship material agreements, which is

02:02:34.340 --> 02:02:36.539
a defined term that includes the ground lease.

02:02:37.939 --> 02:02:41.180
But the footnote in the version that was filed

02:02:41.180 --> 02:02:46.439
with the court says, to revise, to reflect business

02:02:46.439 --> 02:02:50.659
agreements with respect to treatment of the flagship.

02:02:51.760 --> 02:02:53.399
Do you know what that business agreement is,

02:02:53.800 --> 02:02:58.859
sir? I'm not specifically sure what agreement

02:02:58.859 --> 02:03:13.859
that's referring to. Give me a second. I may,

02:03:13.859 --> 02:03:22.619
I actually may be done. Can you tell me, sir,

02:03:22.640 --> 02:03:25.960
what are the cash needs of 12 East 49th Street

02:03:25.960 --> 02:03:31.460
over the next 30 days? At a minimum they need

02:03:31.460 --> 02:03:39.119
to pay the rent back to the flagship entity.

02:03:39.390 --> 02:03:42.869
So that would be, first and foremost, that expense.

02:03:44.630 --> 02:03:49.050
OK. But that's money that would be paid as a

02:03:49.050 --> 02:03:54.869
result of a payment from the lessor, right? Correct.

02:03:55.869 --> 02:04:07.369
OK. I don't have anything further. Thank you.

02:04:07.479 --> 02:04:10.920
All right, thank you. All right, Mr. Lahane?

02:04:13.140 --> 02:04:16.380
I just wanted to technical issue, and Mr. Ghilardi

02:04:16.380 --> 02:04:18.659
has asked me to put, you know, he's been trying

02:04:18.659 --> 02:04:20.939
to get your attention to know about. Oh, I'm

02:04:20.939 --> 02:04:24.899
sorry. All right. I'm sorry, Mr. Ghilardi. Mr.

02:04:25.300 --> 02:04:29.699
Ghilardi, go ahead. I'm sorry. All right. Did

02:04:29.699 --> 02:04:43.430
you hit five star? I can't hear you. Are you

02:04:43.430 --> 02:04:48.789
muted on your side? Say something. No, I can't

02:04:48.789 --> 02:04:56.090
hear you. And there's nobody. If you hit five

02:04:56.090 --> 02:05:15.000
star, I've unmuted everybody. Say something again.

02:05:16.720 --> 02:05:21.899
Why don't you dial back in and can you hear me?

02:05:23.300 --> 02:05:28.079
Okay, go ahead, Mr. Haynes. Thank you, your honor.

02:05:28.699 --> 02:05:31.560
Mr. Weinstein, Robert Lee Hayne, Kelly Dry and

02:05:31.560 --> 02:05:33.460
Warren, as you know, we represent a number of

02:05:33.460 --> 02:05:36.039
landlords. What I'd like to try to get at is

02:05:36.039 --> 02:05:39.119
if you know the total amount of the monthly rent

02:05:39.119 --> 02:05:46.539
obligations portfolio wide. Total rent is 35,

02:05:46.640 --> 02:05:51.460
49. And thank you. And do you know whether that

02:05:51.460 --> 02:05:55.079
rent was paid for the month of January? A little

02:05:55.079 --> 02:05:59.699
bit of it. You have an approximate amount of?

02:06:01.800 --> 02:06:07.579
Between two and five, probably. Between two and

02:06:07.579 --> 02:06:10.260
five million was paid, leaving approximately

02:06:10.260 --> 02:06:16.060
30 million unpaid? Approximately. Thank you.

02:06:16.300 --> 02:06:18.899
And are you familiar with the concept of stub

02:06:18.899 --> 02:06:22.340
rent or the portion of the rent applicable from

02:06:22.340 --> 02:06:24.399
the first day of the case being today through

02:06:24.399 --> 02:06:29.560
the end of this month? Yes, I am. And do you

02:06:29.560 --> 02:06:33.060
know whether that rent that accrued during that

02:06:33.060 --> 02:06:36.479
stub period is in the budget that we had up on

02:06:36.479 --> 02:06:41.180
the screen previously? It is in the budget. I

02:06:41.180 --> 02:06:44.260
don't believe it's in the 13 week period that

02:06:44.260 --> 02:06:48.060
was on the screen, but it is accounted for in

02:06:48.060 --> 02:06:51.159
the overall budget and it's certainly expected

02:06:51.159 --> 02:06:55.539
to be paid before exit. Thank you. That's all.

02:06:55.859 --> 02:06:59.880
All right. Thank you. All right. Mr. Gallardi.

02:07:04.460 --> 02:07:07.640
All right. I don't see Mr. Gallardi. All right.

02:07:07.699 --> 02:07:10.960
Here we go. All right, Mr. Gallardi, I think

02:07:10.960 --> 02:07:14.640
I hear you. And I hear you, Your Honor. Thank

02:07:14.640 --> 02:07:17.239
you very much. But I was happy to defer to Mr.

02:07:17.800 --> 02:07:23.680
Mahaney. Okay. Go ahead. Has Mr. Mahaney already

02:07:23.680 --> 02:07:27.340
finished so I can? Yes, he has. Thank you, Your

02:07:27.340 --> 02:07:31.699
Honor. Mr. Weinstein, as you know, I'm Greg Gallardi,

02:07:31.920 --> 02:07:33.340
and I know we've known each other a number of

02:07:33.340 --> 02:07:36.840
years. I have a few questions to ask you. First,

02:07:38.350 --> 02:07:43.130
Was any separate dip ever solicited for holdings,

02:07:43.270 --> 02:07:49.710
too? Well, there was a separate dip that had

02:07:49.710 --> 02:07:52.409
the same treatment to hold a whole code, too.

02:07:52.430 --> 02:07:57.489
But there was not a specific dip solicited, to

02:07:57.489 --> 02:08:02.229
my knowledge. But having said that, the PJT investment

02:08:02.229 --> 02:08:08.340
bankers ran a fairly open process to allow anybody

02:08:08.340 --> 02:08:15.060
that wanted to come present to the debtors dip

02:08:15.060 --> 02:08:17.659
options. And I'm not, to my knowledge, there

02:08:17.659 --> 02:08:21.579
wasn't a, aside from the reference in the letter

02:08:21.579 --> 02:08:23.640
that Amazon referenced earlier, I'm not aware

02:08:23.640 --> 02:08:27.520
of anybody offering a whole code to specific

02:08:27.520 --> 02:08:31.100
dip. I'm going to just ask a very simple yes

02:08:31.100 --> 02:08:35.960
or no question. Did anybody authorize PJT to

02:08:35.960 --> 02:08:40.279
solicit a dip solely for the purpose of Holdings

02:08:40.279 --> 02:08:45.819
2? Well, yes, on the basis they were authorized

02:08:45.819 --> 02:08:50.140
to solicit dips on any basis available. So by

02:08:50.140 --> 02:08:52.279
definition, that would include whole code 2.

02:08:53.100 --> 02:08:55.819
And did they provide or have materials ready

02:08:55.819 --> 02:08:58.960
to anybody who was interested in providing a

02:08:58.960 --> 02:09:03.779
dip solely to Holdings 2? I don't know. You have

02:09:03.779 --> 02:09:06.539
to ask them that question. I don't know. OK.

02:09:06.720 --> 02:09:10.699
And it is the case that Holdings 2 is giving

02:09:10.699 --> 02:09:14.500
first -leaning priority debt, securing the DIP

02:09:14.500 --> 02:09:17.079
with first -leaning priority debt. Is that correct?

02:09:18.199 --> 02:09:22.560
Correct. And are you aware that anybody solicited

02:09:22.560 --> 02:09:28.520
on behalf of Holdings 2 unsecured debt? I'm sorry,

02:09:28.579 --> 02:09:29.859
can you repeat that question? I'm not sure I

02:09:29.859 --> 02:09:33.560
understood it. I'm asking you, in determining

02:09:33.560 --> 02:09:36.960
whether there was a DIP for Holdings 2, I'm going

02:09:36.960 --> 02:09:39.220
to go through the code and ask you the question,

02:09:39.300 --> 02:09:42.800
one, was own secure credit for Holdings 2 ever

02:09:42.800 --> 02:09:54.180
solicited? I don't know. Again, there was an

02:09:54.180 --> 02:09:58.460
open solicitation for any financing. So once

02:09:58.460 --> 02:10:02.079
again, that would have been certainly considered

02:10:02.079 --> 02:10:04.560
in part of the solicitation process. I don't

02:10:04.560 --> 02:10:07.079
know if anybody stepped up and made that offer

02:10:07.079 --> 02:10:13.539
but but there was no specific holdings to materials

02:10:13.539 --> 02:10:17.100
prepared in this general process to solicit dips

02:10:17.100 --> 02:10:19.340
for holding tubes that's your testimony correct

02:10:19.340 --> 02:10:22.859
that's not my testimony my testimony was i don't

02:10:22.859 --> 02:10:26.220
know if pjt had those materials but if somebody

02:10:26.220 --> 02:10:28.079
had asked for them i'm sure they could have been

02:10:28.079 --> 02:10:31.439
provided do you think that anybody at the board

02:10:31.439 --> 02:10:34.180
of the committee on which you sat ever requested

02:10:35.069 --> 02:10:39.390
PJT to look for or consider a Holdings 2 -only

02:10:39.390 --> 02:10:42.710
DIP. Are you aware of that ever happening? I'm

02:10:42.710 --> 02:10:46.569
not aware of that happening. And when did the

02:10:46.569 --> 02:10:51.810
DIP solicitation process actually begin? I believe

02:10:51.810 --> 02:10:55.489
the process of, I'll call it financing solicitation

02:10:55.489 --> 02:10:58.010
because it wasn't necessarily DIP solicitation

02:10:58.010 --> 02:11:01.390
starting in November before I began to re -engage

02:11:01.390 --> 02:11:08.279
with the company. So it was any financing, not

02:11:08.279 --> 02:11:10.079
just DIP, because at that point in time, there

02:11:10.079 --> 02:11:12.279
was not a commitment to go down a Chapter 11

02:11:12.279 --> 02:11:17.180
path. OK. And I think you've used the word beneficiary

02:11:17.180 --> 02:11:19.939
of the financing about nine times in your testimony.

02:11:20.079 --> 02:11:23.380
I could be wrong. When you say that Holdings

02:11:23.380 --> 02:11:26.779
2 or what's been called the flagship entities

02:11:26.779 --> 02:11:30.699
are the beneficiary of the DIP, what do you actually

02:11:30.699 --> 02:11:35.159
mean by that phrase? that by, first I didn't

02:11:35.159 --> 02:11:38.380
say they would be beneficiaries, they were beneficiaries

02:11:38.380 --> 02:11:41.439
or are beneficiaries. So to be clear, I'm not

02:11:41.439 --> 02:11:43.899
trying to suggest that they're the sole beneficiaries

02:11:43.899 --> 02:11:48.979
of doing the DIP. But by maintaining the operations,

02:11:49.720 --> 02:11:53.000
the ongoing retail operations of SAX Global,

02:11:53.760 --> 02:11:59.199
they are beneficiaries and the Holdco 2 is a

02:11:59.199 --> 02:12:02.500
beneficiary. because there are unsecured creditors

02:12:02.500 --> 02:12:08.140
in Whole Code 2 who are trade vendors who may

02:12:08.140 --> 02:12:12.260
be the beneficiary of critical trade dollars.

02:12:12.279 --> 02:12:15.859
Don't know yet, but they could be. Those same

02:12:15.859 --> 02:12:18.560
trade vendors could also be the beneficiaries

02:12:18.560 --> 02:12:23.600
of ongoing business with Sachs Global. And therefore,

02:12:23.800 --> 02:12:26.739
without the dip, those unsecured claims would

02:12:27.039 --> 02:12:29.119
that whatever they would get in a liquidation,

02:12:29.420 --> 02:12:32.680
as opposed to as an ongoing business, they would

02:12:32.680 --> 02:12:36.479
very likely continue to do business with Sachs,

02:12:37.020 --> 02:12:40.359
may get pre -petition payments on account of

02:12:40.359 --> 02:12:45.100
that through the critical trade, and continue

02:12:45.100 --> 02:12:47.979
to make money by selling goods to Sachs Global,

02:12:48.199 --> 02:12:50.680
who now has the financial wherewithal to pay

02:12:50.680 --> 02:12:56.779
for those goods. Let me start with a premise

02:12:56.779 --> 02:12:59.920
question. You have testified there's about $180

02:12:59.920 --> 02:13:05.220
million of unsecured trade debt at Holdings 2.

02:13:05.220 --> 02:13:09.060
Is that correct? That's correct. That's my understanding.

02:13:10.140 --> 02:13:13.079
And you've also testified that Holdings 2 doesn't

02:13:13.079 --> 02:13:16.840
really have operations. So how did that $180

02:13:16.840 --> 02:13:20.659
million of unsecured debt become an obligation

02:13:20.659 --> 02:13:28.739
of Holdings 2? It was... I was not, as I understand

02:13:28.739 --> 02:13:31.739
it, because I wasn't there at the time, but it

02:13:31.739 --> 02:13:36.340
was an inducement for trade vendors to shift,

02:13:36.439 --> 02:13:41.159
understanding they would get a claim at whole

02:13:41.159 --> 02:13:45.159
code two. And do you understand that there were

02:13:45.159 --> 02:13:47.680
representations made to those vendors that that

02:13:47.680 --> 02:13:50.520
was because that was a sovereign entity and that

02:13:50.520 --> 02:13:53.119
would be serving as credit support for those

02:13:53.119 --> 02:13:56.850
claims? I actually don't know what representations

02:13:56.850 --> 02:14:03.449
were made. And at the time, it was solvent. But

02:14:03.449 --> 02:14:05.869
as I testified earlier in the liquidation, I

02:14:05.869 --> 02:14:08.369
don't believe it would be solvent. But at the

02:14:08.369 --> 02:14:11.850
time, I think that's a fair characterization.

02:14:13.109 --> 02:14:15.789
And do you have an understanding that some of

02:14:15.789 --> 02:14:19.470
those agreements were entered into as late as

02:14:19.470 --> 02:14:25.100
December, the end of December of 2025? I actually

02:14:25.100 --> 02:14:27.479
don't know when those agreements were entered

02:14:27.479 --> 02:14:30.140
into. I'm not aware. I just know the aggregate

02:14:30.140 --> 02:14:36.960
amount. As I said, my greater involvement with

02:14:36.960 --> 02:14:40.319
Sachs Global occurred in mid to late December

02:14:40.319 --> 02:14:44.220
and became CRO in January 1st. I was not aware

02:14:44.220 --> 02:14:49.760
of when those took place. And you've done credit

02:14:49.760 --> 02:14:51.840
support agreements in your history as a CRO,

02:14:51.880 --> 02:14:57.649
correct? Yes. And when you said the credit support

02:14:57.649 --> 02:15:01.229
agreements of Holdco 2, they thought that Holdco

02:15:01.229 --> 02:15:04.829
2 was a separate entity outside of the other

02:15:04.829 --> 02:15:06.890
entities with which they did business, you would

02:15:06.890 --> 02:15:10.670
presume that too, correct? I would not presume

02:15:10.670 --> 02:15:13.149
anything. I have no idea what they were assuming

02:15:13.149 --> 02:15:18.449
at the time. Well, if you got a guarantee from

02:15:18.449 --> 02:15:21.149
Holdco 2, did you believe it was the same as

02:15:21.149 --> 02:15:24.960
having the claim against the entity with which

02:15:24.960 --> 02:15:33.920
you did business? I don't know what they would

02:15:33.920 --> 02:15:37.600
think. Well, what would you think if you offered

02:15:37.600 --> 02:15:39.520
a guarantee? Would you think that's the same

02:15:39.520 --> 02:15:41.899
thing as the primary obligation or an obligation

02:15:41.899 --> 02:15:46.520
of the second entity that may be solvent? I would

02:15:46.520 --> 02:15:51.600
think the latter. Okay, and is it your testimony

02:15:51.600 --> 02:15:55.239
today that by adding $1 .5 billion of additional

02:15:55.239 --> 02:15:58.880
debt, you are not undermining their ability to

02:15:58.880 --> 02:16:03.420
recover from holdings too? No, with that particular

02:16:03.420 --> 02:16:05.859
constituency, I actually think they're greatly

02:16:05.859 --> 02:16:08.840
enhancing their ability to recover the amounts

02:16:08.840 --> 02:16:12.220
owed, that 180, by continuing to do business

02:16:12.220 --> 02:16:16.020
with the debtors. They're uniquely positioned,

02:16:16.039 --> 02:16:19.239
actually, to continue to do business, potentially

02:16:19.239 --> 02:16:24.680
get critical trade, and to ongoing sales to Sachs

02:16:24.680 --> 02:16:27.859
Global make margin on a go -forward basis. So

02:16:27.859 --> 02:16:33.120
I actually think that their position is dramatically

02:16:33.120 --> 02:16:37.299
enhanced through the dip. With respect to go

02:16:37.299 --> 02:16:39.579
forward, what about with respect to the outstanding

02:16:39.579 --> 02:16:43.079
amount? I just said that. I refer to the critical

02:16:43.079 --> 02:16:47.120
trade. about they could be considered for that.

02:16:47.299 --> 02:16:50.659
I don't know that those commitments haven't been

02:16:50.659 --> 02:16:53.420
arrived at yet, but that could be, but without

02:16:53.420 --> 02:16:57.200
a dip, there is no critical trade. Okay, so it's

02:16:57.200 --> 02:16:58.840
your testimony that they're going to benefit

02:16:58.840 --> 02:17:02.739
on by critical vendor on where they will get

02:17:02.739 --> 02:17:06.879
funds under the dip, not from the holdings too,

02:17:07.799 --> 02:17:10.520
but on the other terms where they're actually

02:17:10.520 --> 02:17:14.959
doing business. It is my testimony that, A, they

02:17:14.959 --> 02:17:23.079
will continue to be able to do business and ostensibly

02:17:23.079 --> 02:17:27.299
make margin by selling to the debtors. And secondly,

02:17:27.799 --> 02:17:31.379
they remain in a position to potentially receive

02:17:31.379 --> 02:17:33.639
critical trade dollars to offset their prepetition

02:17:33.639 --> 02:17:41.120
plans. Now, I have not seen, because I have not

02:17:41.120 --> 02:17:44.079
privy to it, There's been talk about an appraisal.

02:17:44.079 --> 02:17:48.299
Who did that appraisal? I believe it was JLO.

02:17:49.639 --> 02:17:52.719
Yes. And what is the date of that appraisal?

02:17:56.120 --> 02:18:02.340
March 27, 2024. OK. And is it your testimony

02:18:02.340 --> 02:18:06.139
that the company discounted that appraisal by

02:18:06.139 --> 02:18:08.840
about or did range? I don't know if it discounted

02:18:08.840 --> 02:18:12.870
it. But in determining whether or not to give

02:18:12.870 --> 02:18:17.069
the dip, it was at least in consideration that

02:18:17.069 --> 02:18:21.569
the company believes that the Go Dark value could

02:18:21.569 --> 02:18:24.809
be as much as 25 % less than what is in that

02:18:24.809 --> 02:18:31.950
appraisal? If not more. In addition to other

02:18:31.950 --> 02:18:35.170
expenses associated with monetizing that asset.

02:18:35.850 --> 02:18:38.950
And is it your testimony that the JLL Go Dark

02:18:38.950 --> 02:18:45.850
value didn't include those expenses? As a Go

02:18:45.850 --> 02:18:49.030
Dark, to be honest, I'm not 100 % sure, but we

02:18:49.030 --> 02:18:51.489
believe there would be incremental because we

02:18:51.489 --> 02:18:54.770
believe that with the liquidation of the business,

02:18:54.790 --> 02:18:58.469
it will be a harder property to sell and therefore

02:18:58.469 --> 02:19:02.010
will take longer and incur additional expenses

02:19:02.010 --> 02:19:06.440
as well as the equity issue. potentially posed

02:19:06.440 --> 02:19:10.780
by a default of the CMBS. And as you sit there

02:19:10.780 --> 02:19:14.180
giving that testimony, are you familiar with

02:19:14.180 --> 02:19:17.120
the JLL appraisal to say that they didn't consider

02:19:17.120 --> 02:19:20.879
those things? I'm certain they didn't consider

02:19:20.879 --> 02:19:23.620
the payment of the CMBS on a potential default.

02:19:23.899 --> 02:19:27.700
I'm not as certain regarding what expenses they

02:19:27.700 --> 02:19:33.409
included with the Godard value. And do you know

02:19:33.409 --> 02:19:37.569
if that was based on a go dark of SACS in general

02:19:37.569 --> 02:19:41.610
or just that particular location? That location.

02:19:43.209 --> 02:19:51.450
And only that location? I believe so. And going

02:19:51.450 --> 02:19:53.510
back to the phrase the beneficiary, you're saying

02:19:53.510 --> 02:19:57.229
they are a beneficiary, but they would not, they

02:19:57.229 --> 02:20:01.010
being the hold code too, it would not be legally

02:20:01.010 --> 02:20:05.040
obligated though it is a beneficiary, right?

02:20:05.239 --> 02:20:08.780
They're now being legally obligated to repay

02:20:08.780 --> 02:20:13.940
the additional $1 .5 billion, correct? I just

02:20:13.940 --> 02:20:15.680
didn't understand the question. I wonder if the

02:20:15.680 --> 02:20:18.719
council would agree. Sorry. It was pretty inarticulate,

02:20:18.719 --> 02:20:20.659
so I'll agree with that, and I'll try to raise

02:20:20.659 --> 02:20:26.379
it again. Before the DIP is approved, or before

02:20:26.379 --> 02:20:31.020
there was a DIP, you said that... the vendors

02:20:31.020 --> 02:20:38.260
or whole code 2 is a beneficiary of the operations

02:20:38.260 --> 02:20:46.159
of SACS, correct? Yes. Okay. And so now you're

02:20:46.159 --> 02:20:49.639
testifying that they are a beneficiary of the

02:20:49.639 --> 02:20:52.239
DIP because SACS will continue as a going concern

02:20:52.239 --> 02:20:57.180
company, correct? Correct. And if all of the

02:20:57.180 --> 02:21:00.649
DIP was on all the other companies, they would

02:21:00.649 --> 02:21:03.829
still remain a beneficiary of the dip, correct?

02:21:04.870 --> 02:21:09.270
Or would it go to? The answer is yes, but that

02:21:09.270 --> 02:21:11.290
was not a viable option because we did not have

02:21:11.290 --> 02:21:14.549
an executable dip that provided for that. Therefore,

02:21:15.510 --> 02:21:18.909
you either allow this or you don't have a dip.

02:21:19.590 --> 02:21:24.540
So that wasn't a viable option. Okay, and so

02:21:24.540 --> 02:21:28.780
now you add 1 .5 billion dollars of debt on Holdings

02:21:28.780 --> 02:21:34.819
2, correct? Yes. And are you saying that Holdings

02:21:34.819 --> 02:21:39.200
2 is getting 1 .5 billion dollars of benefit

02:21:39.200 --> 02:21:42.719
for that? That's not what I'm saying. What I

02:21:42.719 --> 02:21:45.579
said is that without the dip, the likelihood

02:21:45.579 --> 02:21:49.680
of any claim in Holdcode 2 recognizing on that

02:21:49.680 --> 02:21:54.559
claim is likely zero and through the dip, you

02:21:54.559 --> 02:22:00.299
create the opportunity to provide recovery, maybe

02:22:00.299 --> 02:22:05.020
in full, maybe partial, to those claimants at

02:22:05.020 --> 02:22:10.420
Holdco 2. And were you party to any negotiations

02:22:10.420 --> 02:22:14.719
where the debtors pushed back on the roll -up

02:22:14.719 --> 02:22:19.020
aspects of the dip being encumbering Holdings

02:22:19.020 --> 02:22:24.319
2? I was not part of the negotiations. I was

02:22:24.319 --> 02:22:26.639
aware they were taking place, not just for Hold

02:22:26.639 --> 02:22:32.659
Co. 2, but more broadly. OK. So are you aware

02:22:32.659 --> 02:22:36.239
of any specific negotiations on behalf of Hold

02:22:36.239 --> 02:22:41.399
Co. 2 to either limit the roll -up or limit the

02:22:41.399 --> 02:22:45.139
amount of new money that it would be burdened

02:22:45.139 --> 02:22:48.760
with as a result of the dip? As I said, I wasn't

02:22:48.760 --> 02:22:50.819
specifically involved in those negotiations,

02:22:50.979 --> 02:22:56.059
so I would defer to others that were. I don't

02:22:56.059 --> 02:22:59.739
know the answer. I have no further questions.

02:23:01.379 --> 02:23:05.680
All right. Does anyone have any questions of

02:23:05.680 --> 02:23:11.920
Mr. Weinstein? All right. So why don't we take

02:23:11.920 --> 02:23:22.170
a 10 -minute recess? come back at 9 20 9 9 25

02:23:22.170 --> 02:23:25.989
and then to the extent you have redirect and

02:23:25.989 --> 02:23:30.430
then we'll have short closing argument thank

02:23:30.430 --> 02:23:36.190
you all right so we're in recess till 9 25 actually

02:23:36.190 --> 02:23:38.129
your honor just one point we do have another

02:23:38.129 --> 02:23:40.329
witness we have another witness with mr. bear

02:23:41.040 --> 02:23:44.000
Okay. All right. Well, then, do you want to do

02:23:44.000 --> 02:23:46.440
redirect now and then we'll take the break after

02:23:46.440 --> 02:23:50.819
that? I would actually prefer to do. Okay, I

02:23:50.819 --> 02:23:52.899
prefer to take the break now with Ken. Okay,

02:23:52.899 --> 02:23:54.959
we'll do that. We'll take the break and we'll

02:23:54.959 --> 02:23:59.940
be back. Thank you. The witness just be reminded

02:23:59.940 --> 02:24:03.860
he's under oath and cannot be spoken with. Yes,

02:24:04.559 --> 02:24:08.399
Mr. Weinstein, you're under oath now and you

02:24:08.399 --> 02:24:12.020
cannot talk about your testimony with anyone

02:24:12.020 --> 02:24:16.120
until you come back. Understood. Alright, thank

02:24:16.120 --> 02:24:16.319
you.