All right, we're back on the record in case number
26 -90103. Go ahead, counsel. Thank you, Your
Honor. Just some very, very brief redirects.
I realize we're short on time here. Mr. Weitzman,
I'd like to pull up the organizational chart
that you were showing earlier in your testimony.
Can we do that? you can be the presenter Mr.
Amer. Yes. Okay. And a few non -data recipients.
Thank you. Mr. Chairman, let's zoom back in,
I think, to where you had it, actually. I may
have prematurely asked you to zoom out. Thank
you. I want to ask you about this box, SFA Holdings,
Inc., Tennessee. Do you see that box? Yes. What
is your understanding of what that entity is?
Well, that is the entity that... of a lot of
the operating company rolls up under. And is
your understanding that that company is an ultimate
corporate parent of Holdcode 2? Yes. Do you know
who Paul Aronson and Bill Tracy are? I do. They're
the two current independent directors of Snacks
Global. I believe they are. Do you know if Mr.
Aronson and Mr. Tracy made decisions with respect
to hold code two? Uh, they would have been part
of that decision as well. And did those decisions
include the following of the chapter 11 petition?
Yes. To be clear, when I refer to the independent
members of the board earlier in the cross examination
shows the two gentlemen I was referring to. I'm
sorry to enter into. The DIP financing? Yes.
You've been asked questions earlier about how
much debt Holdco 2 would be required to repay
under the DIP, isn't it? Do you recall that testimony?
Yes. There are lots of other assets that can
be used to satisfy the dip. Yes, there are those
claims at cold code two, but that doesn't mean
that at the end of the day that other assets
won't be used to address the ultimate resolution
of the dip. Are these other assets to make service
collateral for? They're not the only collateral
for the dip. I believe you've testified about
this a couple times, but I just want to ask again
to make sure your testimony is clear. Was there
any other executable proposal for dip financing
without liens on Gold Code 2006? No, there was
only one other executable dip financing proposal.
As I mentioned, the likelihood of success of
implementing that was significantly lower than
the proposal we're moving forward with, and that
was the only other proposal that had the same
treatment of hold -go -to. And my last question,
Mr. Winston, in view of time is, what would happen
if the debt financing is not approved today?
If the debt financing is not approved today,
there would very likely be irreparable harm to
the debtors. need to pay bills, there's really
two aspects to that. I think I alluded to this
earlier. A, there's our ability to pay bills
as they come due, which is obviously a requirement
under Chapter 11, as well as the critical trade
payments, which would address pre -petition,
which is also important, very important. But
there's also the perception of SAC Global. understandably
has been much more aligned over the last many
months and has lost credibility with the brand
partners and other important partners. And securing
financing today would communicate an extraordinarily
strong message to that community that we are
going to be here, we are going to continue to
do business, and we are going to be somebody
you want to do business with. And for our employees,
it's critically important. As you can imagine,
you know, irrespective of anything you say in
meetings and encourage people to feel good, once
you actually secure the financing, people feel
a lot better. And so it's really important to
get that messaging out today. And do you think
the company could continue to operate without
approval of the financing? No. It cannot. I have
no further questions, Your Honor. All right.
Any recross? All right, thank you, Mr. Weinstein.
You may call your next witness. Thank you, Your
Honor. I will turn the podium over to my colleague
Stuart Lombardo. Oh, I'm sorry, Your Honor. One,
just three brief clarification. One point of
Mr. Weinstein's testimony was imprecise. Bradley
firm having been hired by 12 East 49th Street
with respect to the reorganization of Chapter
11 case not entirely accurate. The Bradley firm
is conflict counsel to assist solely with reviewing
the operating lease amendment. So I just want
to clarify the scope of Thank you, Your Honor.
I know it's late in Houston. And I know, I suspect,
you're not the only one in the courtroom giving
us your time. We really, really appreciate your
time. As you know, there's a lot on the line
here. A century is old, the icon of retail, thousands
of jobs. We really appreciate you giving us the
chance to put on our test. I understood. raise
your right hand sir. You saw the sir affirmed
to tell the truth the whole truth and nothing
but the truth. I do. All right. Thank you. Go
ahead. Mr. Lombardi. Are you aware Mr. Baer that
Amazon has argued that Holdco 2 either does not
need DIP financing or if needed should procure
smaller more reasonable DIP financing. I heard
that. What's your reaction to that statement?
The entities in the flagship part of the structure
need dollars to service rent obligations and
the flagship needs. So you can sort of say they
don't need a dip, but they need dollars. And
dollars in bankruptcy come with associated costs.
What about the concept of a smaller hold -coat
-to -unlit dip? Why didn't Holdcoat 2 enter into
a smaller Holdcoat 2 -only dip? A couple reasons.
One, it wasn't on offer. And then additionally,
I think it would have jeopardized the dip we
have. I don't think that the existing lenders
would have wanted to lend into that structure.
All right, jeopardized the dip we have. What
do you mean by that? We have a billion dollars
coming into the company during the pendency of
the case from existing lenders to the company.
I don't know that they would have been as forthcoming
with those dollars in that structure if Holdco
2 was leaned up by somebody else. Did the debtors
have a financing proposal from anyone to finance
the global debtors minus Holdco 2? Everybody
wanted me to own the flagship part of the structure.
What would have happened to the debtors as an
operation without financing for the other boxes,
the non -flagship boxes? I mean, I think I think
you heard more talk about it, right? I think
you'd run afoul of being able to pay bills and
obligations to come due almost immediately, which
in a retailer once, you know, pushes you ever
closer to liquidation in any given day or week
thereafter. So even though a dip like that wasn't
on the table, a dip that carved out the flagship
boxes, let's go back to talking about the flagship
-only dip. At any point in your dip marketing
process, did any prospective lender express a
willingness to extend and the dip only to hold
code two? No. I mean, again, we've heard about
it. Amazon, the Friday before a presumed Sunday
filing said that they would be willing to consider
a hold code two dip. But there were no actual
proposals from them prior to that, and no one
else was prepared to do it. Now, at some point
in time, prior to that Friday before the filing.
Did the debtors approach Amazon seeking financing?
There's a paragraph in my DIP declaration, I
believe it's paragraph 15, that refers to someone
generically. That was Amazon. We spent months
with Amazon going through all range of options
on flagship, collateral on the whole company,
whether financing or potential sales of assets,
and nothing bore fruit. When you say nothing
bore fruit, did Amazon make any actionable proposals
to you? No proposals. About how long did those
discussions last? I think mid -November till,
you know, the end of December, ballpark. They
slowed down when it became clear that we weren't
sort of getting equal engagement on the other
side of the table. So we started emphasizing
others. When you say you weren't getting equal
engagement, what do you mean by that? Means in
our discussions with Amazon, they took in a lot
of information and they didn't provide a lot
of solutions. And so we had to focus on where
we could find solutions. Now when you say that
Amazon didn't offer solutions Did you make any
proposals to Amazon on behalf of the debtors?
Yeah I don't know on paper proposals, but you
know the beginning of the process in the middle
of November and even into into December I mean
at one point we were having daily calls to sort
of brainstorm solutions again, they tapered off
we have a you know, a long meeting to brainstorm
solutions. So we, um, we were desperately searching
for liquidity from every, um, milk and cranny
we could find it. And we had hours and hours
and hours of conversations with Amazon about
all range of possibilities. Could you give the
court an example of something in that range of
possibilities? Yeah, we, um, we asked if they
wanted to finance and, you know, effectively
a philo piece on the ABL. So behind the DABL
loan. We asked if they wanted to finance the
flagship assets. We asked if they wanted to buy
the flagship assets. We considered a range of
options. Those are several that come to mind.
Did Amazon move forward with any of those ideas?
No. At any point in time, before the Friday,
before the debtors filed for bankruptcy, did
Amazon offer to provide No. Did Amazon offer
to provide dip financing to any of the global
debtor boxes? No. Let's talk a little more about
that Friday letter. Were you present in the room
when Mr. Weinstein was cross -examined about
a January 9th letter from Amazon's counsel to
the Global Debtors Council? Yes. Did you view
potential dip floated in that letter is actionable?
No. Why not? So we were miles down the road with
both the existing lenders and a potential third
party non -consensual priming dip that is detailed
in my declaration as well. We were documenting
both. I think we're moving closer and closer
with the existing lenders every hour. And we
were actually aiming at a filing on Sunday night.
So the letter came two days before we were actually
aiming to file. We wound up extending the filing
in order to finalize papering the transaction.
But I don't think you're getting that dip done
in two days. And again, the history that we've
had in the discussions didn't indicate that it
was going to bear fruit. I ask the witness for
cross, Your Honor. All right. Anyone wish to
cross -examine Mr. Beard? Yes, Your Honor. Chris
Harris for Amazon. Go ahead, Mr. Harris. Thank
you, Your Honor. You were in the room for the
earlier testimony, so I don't need to go over
these terms again, right, sir? I'll try to remember.
Yep. You don't have to be trying to save some
time. Um, just to remember, PKT was retained,
uh, in May 2025, right? Uh, that was a previous
engagement. Yes. Okay. And that was in connection
with, um, the liability management transaction
in the summer of 25, right? Yeah. You're, you're
breaking up for me a little bit, but yes. That
was with the liability management transaction.
OK. And at the time, did Sachs' advisors, including
PBT, advise the company that they thought they
would address the company's liquidity needs?
That's not what we do. No. We heard from the
company an estimate of the dollars that they
thought they need. and that was on the order
of magnitude of $600 million, and we spent time
trying to figure out how to raise it. Okay, so
the company thought the LME transaction would
provide the equity it needed, right, sir? Yes,
that's my understanding. Okay. And then very
quick wrong, right, sir? That happened to be
the case, yes. Okay. And in fact, the company
has continued to miss its projections, updated
projections throughout 2025, right, sir? I don't
I don't recall sitting here. You don't recall
the company has missed its updated projections,
is that right? I don't know what you mean by
updated projections. The company has not been
doing well, if that's your question. OK. And
both PJT and BRD have been involved since early
2025, right, sir? Uh, we were not involved in
early 2025. No, we got involved for the liability
management transaction and towards sort of the
middle of 2025. Okay. And what entity has retained
PJP? I mean, I think a lot of them. I don't know.
I have to go look. Um, we provide advice to the
debtors and affiliates. Do you don't know if
you've been retained by Whole Soap Food? I believe
we have. OK. And PJT led the company's efforts
to secure DIP financing, right? Yes, we were
one of the advisors that solicited DIP financing,
yes. OK. And that process started in mid -December
2025, right? No. Well, we started educating people
before then. Well, but the actual outreach to
potential lenders was in mid -December 2025,
right, sir? That's when it started. Maybe for
a dip specifically, but again, we were talking
to potential financing sources about other things
in well in advance of that. But outreach about
a potential dip specifically was just a few weeks
ago, right, sir? I can't recall the exact date
sitting here, but sure. Okay. And who from SACS
participated in the process of attempting to
procure DIP financing? Who from SACS? I mean,
the management team was involved in all different
ways. I'm not sure I understand the question,
though. OK. Well, let me ask a good question.
Was there anyone, whether from SACS or any of
the advisors to SACS, who was acting just on
behalf of Hold Code 2 in the DIP process? I'm
not sure. Can you identify any person for the
court? They said I'm not sure. Okay. PJT was
authorized to seek a Hold Code 2 -only DIP, right?
That was within the scope of its mandate, right,
sir? We were authorized to seek DIP financing
in the best possible form for the better. for
the debtor entities. We solicited dips in any
possible form that people would give them to
us. I did not call everybody and ask about every
box on this page, no, if that's your question.
asked people if they would finance the company
and how they would do it on the best possible
terms to get us the most possible proceeds to
finance the case. You never asked anyone if they'd
provide a whole code to only dip, right sir?
I'm not sure if it was for a dip or pre -bankruptcy
conversations, but we certainly asked Amazon
if they would finance the flagship. under any
circumstances. Sir, you asked Amazon if they
would buy the flagship. You never asked Amazon
to provide a loan for HoldCode2 only, did you,
sir? We asked Amazon if they would finance the
flagship. I didn't say HoldCode2 specifically,
no, but we asked if they would want to put financing
at the flagship. Okay. You never asked Amazon
or any HoldCode2 -only creditor whether it would
provide an unsecured HoldCode2 -only dip, right?
Um, we, again, not specifically to HoldCo2. We
asked for, um, we asked a number of parties if
they would provide junior financing. Mm -hmm.
So we never asked them, asked about a dip size
just for the cash fees of HoldCo2, right? The
CNBS monthly payments of under $5 million. You
never asked anyone if they'd be willing to provide
a HoldCo2 -only dip size to that amount, right,
sir? We did not ask that specific question, no.
When we spoke to Amazon, we said, would you provide
financing for the flagship on any day? Like,
it wasn't specific to secured or unsecured or
otherwise. It was, would you finance for flagship
entities? that, you know, could be in our being
used to secure dip financing, right? Like Neiman
Marcus and Bergdorf Goodman, right, sir? Yep.
Okay. And did the debtors ask any third -party
lenders whether they'd be willing to provide
a dip of any size secured by assets other than
the flagship property? We, again, we ask if anybody
would be willing to finance pieces of the company
or the whole. We tried that out of court and
that didn't land and so then we started soliciting
dips in whatever form people would lend to the
company. So my question is when you're soliciting
dips, did you ever ask any of the third parties
if they provide a non -flagship dip? Did you
ever ask that question? Yes, we asked people
to finance the company excluding the flagship,
but the answer was no. We asked the existing
lenders if they would do it without the flagship,
and they said no. Did you ask third -party lenders?
Yes. Okay. Now, I believe you said both the ad
hoc group and third -party lenders said they
would not provide a dip unless it was secured
by the flagship property. Is that right? Yeah.
They were both the same structure and they wouldn't
change the structure. So the ad hoc group was
only willing to do a dip if they could obtain
the value with the flags of property, right sir?
Yes, that's my understanding. The ad hoc group
has liens on the operating assets, right sir?
Among others, yes. So they apparently didn't
think that the dip Increase the value of those
operating assets enough to just by making a dip
just based on those operating assets, right sir?
Objection your honor calls for speculations state
of mind of the third party. Sustained. I don't
know why. I sustained the objection. Okay, sorry.
You said a little on your direct about expenses
that the Holocaust II entity needs that would
be funded by the DIP. Do you recall that, sir?
No, I said somebody had to pay rent on the flagship.
I see. Are you aware of any other material expenses
at Holocaust II or its subsidiaries besides the...
Our system will end this conference in five minutes.
To extend this call for one hour... Please enter
the moderator pin now. Your conference has been
extended for 60 minutes. I believe the company
needs to make the payments down to those boxes
so I would assume that they need that money.
Well, SACS needs the money to make its pay its
obligations, right sir? Under the lease, yeah.
Okay, now you heard Mr. Weinstein testify that
the SACS lease payment was just reduced? You
heard that tax money, right sir? I did hear that.
In fact, it sounds like it was just reduced down
to mass the amount of the CNBS interest payments,
right sir? I don't. Okay. Well, if in fact the
lease payments were reduced from 7 .7 million
down to 4 .6 million, that'd be about a 40 %
reduction, right, sir? Okay. I trust your math.
Okay. You've done discounted cash flows before,
right, sir? I have done discounted cash flows
before. Okay. So if I'm valuing the value of
the property encumbered by the lease and the
lease payments go down by 40%, The value of the
encumbered property probably goes down by approximately
that amount, right, sir? Objection, your honor.
Improper, hypothetical, and less foundation.
It hasn't been established that that's why any
lease reduction was done. Well, I don't think
that's the question. I think the question is,
if you reduce the cash flow by 40%, does that
impact value? I think that's the thrust of the
question. I think Mr. Beard can answer that.
I did not value the real estate. I don't know
what the payments were, what the expectations
of future payments were. I don't know what the
cash flows are today or yesterday. In general,
if you lower the cash flow of an enterprise,
then the value could go down. a million other
factors that could come into that. Have you seen
any analyses, quantitative analyses of the value
of the property encumbered by the SACS lease
at its new reduced value? I don't know what you
mean by new reduced value. I've not seen analyses
of the value of the property as of today, if
that's what you're asking. Do you know whether
the new Brownlee's payment is more or less what
a replacement tenant would pay? I don't. Okay.
Um, would you agree Holdcomb II is essentially
a holding company for real estate, right? Not
my area of expertise, but if you say so. Well,
it's essentially a landlord, right? Again, if
you say so. Okay. Would you agree that Through
this dip, Holker 2 is essentially guaranteeing
a loan to its tenant? I don't know what you mean.
Well, you realize the Sachs operating entity
is its tenant, right? The tenant of its subsidiary,
right sir? Sachs owns the boxes in this chain.
Sachs is... Pudging those boxes to a loan that
it's that it's taking if that's what you're saying
Yeah, well, I'm trying to analyze just from the
benefit of a whole code to it because we're actually
an independent company with independent fiduciary.
So from that perspective It's a landlord and
you have to guarantee a loan to its tenant, right
sir? A loan to its tenant. I'm not again. I'm
not howling but the chain is owned by Sachs Right?
So it's an asset of the SACs global enterprises.
So it's pledging an asset to a loan that it's
taking out. Does anyone run a quantitative analysis
just on behalf of Holocaust II to determine whether
it was net beneficial to Holocaust II to guarantee
a $2 .6 million loan through a bankrupt tenant?
I don't know. In your experience, have you ever
seen a landlord guarantee a A third party's loan
to its tenant? I don't know. Okay. Has PJT or
any other advisor analyzed the likelihood that
Holocaust II's guarantee will be called? I wouldn't
know what that means. I'm not sure what you're
asking. You don't know what the guarantee is?
the likelihood that it would be called? Yeah,
what's the likelihood that, in fact, Polco 2
is going to have to make a payment on account
of a guarantee? Do you know, sir? That's perfect.
I think we were on too long. Just dial back in.
Sorry. Next slide. Mr. Barrett, are you still
on the line? Yeah, we're back. Sorry about that.
Distracted by cameras blowing out. We're back.
My question was, has anyone performed an analysis
on behalf of Holocaust II indicating how likely
it is that it will have to perform under the
guarantee, make payments under the guarantee?
All right, can you just imagine with me that
HOCO 2 was an actually independent company, like
Vornado or Simon, and they came to you and said
their tenant wanted for Vornado to guarantee
a loan to that tenant. And that is if you want
to know the percentage likelihood the guarantee
would get called, right? I mean, it's not that
crazy if you think about it, because those guys
benefit from having that tenant in their door.
So I might not be tracking the question. No,
I think you are, sir. I think you are. I mean,
you'd want to know, for instance, whether the
current lease of that tenant is above or below
market, right, sir? I'd want to know that they
can pay the lease. Well, if in fact they could.
where NATO could get more from having the lease
canceled, they wouldn't really have an interest
to guarantee their tenants a loan, right sir?
I mean, there's a lot that goes into that question.
You don't just cancel leases because you can
get a different price in the market. You want
to know at least by how much the current lease
is above market if it is, right sir? I lost the
chain. In terms of what analysis? Say bornado
Was the owner of the flagship property they would
want to know whether sacks is paying above or
below market And it's above they want to know
how much above market right sir? In order to
do what? They're determined whether they provide
a two point six billion dollar guarantee to sacks
or NATO would want to know Whether the sacks
lease is above market or not. They'd want to
know how much above market it is They'd want
to know how likely the guarantee is going to
get called. They want to know all that right
sir. I Think you'd want to know a lot of things,
but I think most important is that your tenants
going to pay the rent Mm -hmm You also want to
know if the tenant is going to pay the rent through
the life of the lease right? You're going to
want to know that they're going to pay the rent
for this foreseeable future. Yeah. Okay. And
no one here has done an analysis to determine
whether the new market, the new lease is above
or below market and whether it's so much above
market to justify imposing a $2 .6 billion liability
on HOPE O2. Isn't that right, sir? I'm not sure
what the question was. I don't, I don't, I didn't
track the question. Do you recall anyone doing
an analysis to determine whether the new SACS
lease is sufficiently above market to justify
imposing a $2 .6 billion liability? I'm not sure
if anybody... I don't know what analysis exists
or doesn't on the lease payments. Okay. A few
more questions. Did debtors ever send a proposal
to the ad hoc group that did not include... I
don't recall if we sent one on paper, but we
certainly discussed alternatives that would have
included not leaning up the flagship. Okay. Just
a couple more questions. Can you tell me today
another interim DIP that imposes $1 .5 billion
of DIP obligations on an entity that doesn't
need a dip? I think the entity needs cash flow
and the entity is in bankruptcy and in order
for people to provide capital to bankrupt enterprises
they usually want liens and that often takes
the form of dip status. Will you tell me another
dip where the debtors rolled up onto one entity,
almost $1 .4 billion in prepetition debt that
sits with other debtors? I don't know that that's
the case. Okay. Nothing further. Thank you. Thank
you. All right. Anyone else wish to cross -examine,
Mr. Baird? This is Jim Ducay from Sidley. No,
Your Honor. I think Mr. Harris covered the couple
questions I was going to ask. All right. Anyone
else? All right. Any redirect? No redirect, Your
Honor. All right. Thank you, Mr. Baird. We just
wanted to flag that the utilities order was uploaded.
I believe it's document number 189. All right.
Just give me a minute. Thank you. Your Honor,
while we're, this is Caroline Reckler, while
we're waiting to join, could you try to reset
perhaps the GoToMeeting because we can't get
back on. We tried with computers, phones, everything.
All right, why don't we, let's just take a five
-minute recess and I will get off a GoToMeeting
and then we can come back on. Thank you. We'll
be back at 10 -15. Thank you, Your Honor.