WEBVTT 00:00:01.770 --> 00:00:06.889 All right, we're back on the record in case number 00:00:06.889 --> 00:00:13.189 26 -90103. Go ahead, counsel. Thank you, Your 00:00:13.189 --> 00:00:16.390 Honor. Just some very, very brief redirects. 00:00:16.449 --> 00:00:21.489 I realize we're short on time here. Mr. Weitzman, 00:00:21.489 --> 00:00:23.850 I'd like to pull up the organizational chart 00:00:23.850 --> 00:00:25.890 that you were showing earlier in your testimony. 00:00:26.550 --> 00:00:44.579 Can we do that? you can be the presenter Mr. 00:00:45.820 --> 00:01:34.239 Amer. Yes. Okay. And a few non -data recipients. 00:01:34.900 --> 00:01:37.640 Thank you. Mr. Chairman, let's zoom back in, 00:01:37.640 --> 00:01:39.140 I think, to where you had it, actually. I may 00:01:39.140 --> 00:01:45.379 have prematurely asked you to zoom out. Thank 00:01:45.379 --> 00:01:48.640 you. I want to ask you about this box, SFA Holdings, 00:01:48.819 --> 00:01:52.739 Inc., Tennessee. Do you see that box? Yes. What 00:01:52.739 --> 00:01:54.780 is your understanding of what that entity is? 00:01:57.099 --> 00:02:03.560 Well, that is the entity that... of a lot of 00:02:03.560 --> 00:02:07.680 the operating company rolls up under. And is 00:02:07.680 --> 00:02:10.539 your understanding that that company is an ultimate 00:02:10.539 --> 00:02:17.180 corporate parent of Holdcode 2? Yes. Do you know 00:02:17.180 --> 00:02:20.900 who Paul Aronson and Bill Tracy are? I do. They're 00:02:20.900 --> 00:02:26.400 the two current independent directors of Snacks 00:02:26.400 --> 00:02:37.400 Global. I believe they are. Do you know if Mr. 00:02:37.500 --> 00:02:40.719 Aronson and Mr. Tracy made decisions with respect 00:02:40.719 --> 00:02:43.900 to hold code two? Uh, they would have been part 00:02:43.900 --> 00:02:46.900 of that decision as well. And did those decisions 00:02:46.900 --> 00:02:49.300 include the following of the chapter 11 petition? 00:02:50.340 --> 00:02:54.020 Yes. To be clear, when I refer to the independent 00:02:54.020 --> 00:02:56.819 members of the board earlier in the cross examination 00:02:56.819 --> 00:03:06.009 shows the two gentlemen I was referring to. I'm 00:03:06.009 --> 00:03:08.830 sorry to enter into. The DIP financing? Yes. 00:03:13.210 --> 00:03:16.270 You've been asked questions earlier about how 00:03:16.270 --> 00:03:18.889 much debt Holdco 2 would be required to repay 00:03:18.889 --> 00:03:21.210 under the DIP, isn't it? Do you recall that testimony? 00:03:21.669 --> 00:03:38.419 Yes. There are lots of other assets that can 00:03:38.419 --> 00:03:41.819 be used to satisfy the dip. Yes, there are those 00:03:41.819 --> 00:03:45.099 claims at cold code two, but that doesn't mean 00:03:45.099 --> 00:03:49.139 that at the end of the day that other assets 00:03:49.139 --> 00:03:55.280 won't be used to address the ultimate resolution 00:03:55.280 --> 00:04:00.039 of the dip. Are these other assets to make service 00:04:00.039 --> 00:04:13.960 collateral for? They're not the only collateral 00:04:13.960 --> 00:04:18.480 for the dip. I believe you've testified about 00:04:18.480 --> 00:04:23.180 this a couple times, but I just want to ask again 00:04:23.180 --> 00:04:25.500 to make sure your testimony is clear. Was there 00:04:25.500 --> 00:04:28.579 any other executable proposal for dip financing 00:04:28.579 --> 00:04:33.100 without liens on Gold Code 2006? No, there was 00:04:33.100 --> 00:04:36.959 only one other executable dip financing proposal. 00:04:37.300 --> 00:04:41.040 As I mentioned, the likelihood of success of 00:04:41.040 --> 00:04:44.139 implementing that was significantly lower than 00:04:44.139 --> 00:04:46.680 the proposal we're moving forward with, and that 00:04:46.680 --> 00:04:48.779 was the only other proposal that had the same 00:04:48.779 --> 00:04:52.019 treatment of hold -go -to. And my last question, 00:04:52.079 --> 00:04:55.899 Mr. Winston, in view of time is, what would happen 00:04:55.899 --> 00:04:58.319 if the debt financing is not approved today? 00:04:59.939 --> 00:05:02.420 If the debt financing is not approved today, 00:05:02.680 --> 00:05:08.259 there would very likely be irreparable harm to 00:05:08.259 --> 00:05:13.990 the debtors. need to pay bills, there's really 00:05:13.990 --> 00:05:17.430 two aspects to that. I think I alluded to this 00:05:17.430 --> 00:05:21.509 earlier. A, there's our ability to pay bills 00:05:21.509 --> 00:05:24.110 as they come due, which is obviously a requirement 00:05:24.110 --> 00:05:28.709 under Chapter 11, as well as the critical trade 00:05:28.709 --> 00:05:31.829 payments, which would address pre -petition, 00:05:31.850 --> 00:05:34.769 which is also important, very important. But 00:05:34.769 --> 00:05:41.660 there's also the perception of SAC Global. understandably 00:05:41.660 --> 00:05:43.560 has been much more aligned over the last many 00:05:43.560 --> 00:05:45.699 months and has lost credibility with the brand 00:05:45.699 --> 00:05:48.680 partners and other important partners. And securing 00:05:48.680 --> 00:05:53.980 financing today would communicate an extraordinarily 00:05:53.980 --> 00:05:57.639 strong message to that community that we are 00:05:57.639 --> 00:05:59.779 going to be here, we are going to continue to 00:05:59.779 --> 00:06:01.500 do business, and we are going to be somebody 00:06:01.500 --> 00:06:04.860 you want to do business with. And for our employees, 00:06:05.060 --> 00:06:07.500 it's critically important. As you can imagine, 00:06:07.639 --> 00:06:10.920 you know, irrespective of anything you say in 00:06:10.920 --> 00:06:15.959 meetings and encourage people to feel good, once 00:06:15.959 --> 00:06:18.420 you actually secure the financing, people feel 00:06:18.420 --> 00:06:21.120 a lot better. And so it's really important to 00:06:21.120 --> 00:06:24.699 get that messaging out today. And do you think 00:06:24.699 --> 00:06:27.279 the company could continue to operate without 00:06:27.279 --> 00:06:32.519 approval of the financing? No. It cannot. I have 00:06:32.519 --> 00:06:34.939 no further questions, Your Honor. All right. 00:06:35.360 --> 00:06:41.550 Any recross? All right, thank you, Mr. Weinstein. 00:06:42.449 --> 00:06:47.089 You may call your next witness. Thank you, Your 00:06:47.089 --> 00:06:50.069 Honor. I will turn the podium over to my colleague 00:06:50.069 --> 00:07:01.610 Stuart Lombardo. Oh, I'm sorry, Your Honor. One, 00:07:01.610 --> 00:07:06.129 just three brief clarification. One point of 00:07:06.129 --> 00:07:09.329 Mr. Weinstein's testimony was imprecise. Bradley 00:07:09.329 --> 00:07:12.649 firm having been hired by 12 East 49th Street 00:07:12.649 --> 00:07:15.250 with respect to the reorganization of Chapter 00:07:15.250 --> 00:07:18.569 11 case not entirely accurate. The Bradley firm 00:07:18.569 --> 00:07:21.910 is conflict counsel to assist solely with reviewing 00:07:21.910 --> 00:07:23.649 the operating lease amendment. So I just want 00:07:23.649 --> 00:07:50.439 to clarify the scope of Thank you, Your Honor. 00:07:50.600 --> 00:07:54.779 I know it's late in Houston. And I know, I suspect, 00:07:54.879 --> 00:07:57.639 you're not the only one in the courtroom giving 00:07:57.639 --> 00:08:00.379 us your time. We really, really appreciate your 00:08:00.379 --> 00:08:02.579 time. As you know, there's a lot on the line 00:08:02.579 --> 00:08:06.279 here. A century is old, the icon of retail, thousands 00:08:06.279 --> 00:08:10.480 of jobs. We really appreciate you giving us the 00:08:10.480 --> 00:08:19.889 chance to put on our test. I understood. raise 00:08:19.889 --> 00:08:23.470 your right hand sir. You saw the sir affirmed 00:08:23.470 --> 00:08:24.829 to tell the truth the whole truth and nothing 00:08:24.829 --> 00:08:28.930 but the truth. I do. All right. Thank you. Go 00:08:28.930 --> 00:08:33.450 ahead. Mr. Lombardi. Are you aware Mr. Baer that 00:08:33.450 --> 00:08:37.909 Amazon has argued that Holdco 2 either does not 00:08:37.909 --> 00:08:42.289 need DIP financing or if needed should procure 00:08:42.289 --> 00:08:46.370 smaller more reasonable DIP financing. I heard 00:08:46.370 --> 00:08:48.730 that. What's your reaction to that statement? 00:08:51.049 --> 00:08:55.269 The entities in the flagship part of the structure 00:08:55.269 --> 00:09:01.230 need dollars to service rent obligations and 00:09:01.230 --> 00:09:04.710 the flagship needs. So you can sort of say they 00:09:04.710 --> 00:09:07.610 don't need a dip, but they need dollars. And 00:09:07.610 --> 00:09:12.690 dollars in bankruptcy come with associated costs. 00:09:13.870 --> 00:09:18.149 What about the concept of a smaller hold -coat 00:09:18.149 --> 00:09:22.330 -to -unlit dip? Why didn't Holdcoat 2 enter into 00:09:22.330 --> 00:09:27.950 a smaller Holdcoat 2 -only dip? A couple reasons. 00:09:28.289 --> 00:09:32.870 One, it wasn't on offer. And then additionally, 00:09:32.870 --> 00:09:36.490 I think it would have jeopardized the dip we 00:09:36.490 --> 00:09:39.129 have. I don't think that the existing lenders 00:09:39.129 --> 00:09:42.570 would have wanted to lend into that structure. 00:09:42.929 --> 00:09:47.110 All right, jeopardized the dip we have. What 00:09:47.110 --> 00:09:50.649 do you mean by that? We have a billion dollars 00:09:50.649 --> 00:09:52.789 coming into the company during the pendency of 00:09:52.789 --> 00:09:56.389 the case from existing lenders to the company. 00:09:56.710 --> 00:09:59.529 I don't know that they would have been as forthcoming 00:09:59.529 --> 00:10:05.129 with those dollars in that structure if Holdco 00:10:05.129 --> 00:10:09.870 2 was leaned up by somebody else. Did the debtors 00:10:09.870 --> 00:10:14.929 have a financing proposal from anyone to finance 00:10:14.929 --> 00:10:24.509 the global debtors minus Holdco 2? Everybody 00:10:24.509 --> 00:10:26.429 wanted me to own the flagship part of the structure. 00:10:29.909 --> 00:10:33.090 What would have happened to the debtors as an 00:10:33.090 --> 00:10:36.710 operation without financing for the other boxes, 00:10:36.809 --> 00:10:40.970 the non -flagship boxes? I mean, I think I think 00:10:40.970 --> 00:10:44.570 you heard more talk about it, right? I think 00:10:44.570 --> 00:10:48.529 you'd run afoul of being able to pay bills and 00:10:48.529 --> 00:10:53.470 obligations to come due almost immediately, which 00:10:54.029 --> 00:10:58.330 in a retailer once, you know, pushes you ever 00:10:58.330 --> 00:11:01.649 closer to liquidation in any given day or week 00:11:01.649 --> 00:11:05.690 thereafter. So even though a dip like that wasn't 00:11:05.690 --> 00:11:09.629 on the table, a dip that carved out the flagship 00:11:09.629 --> 00:11:13.830 boxes, let's go back to talking about the flagship 00:11:13.830 --> 00:11:17.250 -only dip. At any point in your dip marketing 00:11:17.250 --> 00:11:22.029 process, did any prospective lender express a 00:11:22.029 --> 00:11:25.759 willingness to extend and the dip only to hold 00:11:25.759 --> 00:11:30.379 code two? No. I mean, again, we've heard about 00:11:30.379 --> 00:11:34.820 it. Amazon, the Friday before a presumed Sunday 00:11:34.820 --> 00:11:37.519 filing said that they would be willing to consider 00:11:37.519 --> 00:11:43.379 a hold code two dip. But there were no actual 00:11:43.379 --> 00:11:46.559 proposals from them prior to that, and no one 00:11:46.559 --> 00:11:52.159 else was prepared to do it. Now, at some point 00:11:52.159 --> 00:11:56.559 in time, prior to that Friday before the filing. 00:11:57.080 --> 00:12:00.519 Did the debtors approach Amazon seeking financing? 00:12:02.639 --> 00:12:06.639 There's a paragraph in my DIP declaration, I 00:12:06.639 --> 00:12:12.019 believe it's paragraph 15, that refers to someone 00:12:12.019 --> 00:12:14.980 generically. That was Amazon. We spent months 00:12:14.980 --> 00:12:19.440 with Amazon going through all range of options 00:12:19.440 --> 00:12:27.600 on flagship, collateral on the whole company, 00:12:27.919 --> 00:12:30.519 whether financing or potential sales of assets, 00:12:31.720 --> 00:12:34.820 and nothing bore fruit. When you say nothing 00:12:34.820 --> 00:12:40.120 bore fruit, did Amazon make any actionable proposals 00:12:40.120 --> 00:12:44.139 to you? No proposals. About how long did those 00:12:44.139 --> 00:12:47.779 discussions last? I think mid -November till, 00:12:47.779 --> 00:12:52.220 you know, the end of December, ballpark. They 00:12:52.220 --> 00:12:57.350 slowed down when it became clear that we weren't 00:12:57.350 --> 00:12:59.529 sort of getting equal engagement on the other 00:12:59.529 --> 00:13:01.769 side of the table. So we started emphasizing 00:13:01.769 --> 00:13:05.129 others. When you say you weren't getting equal 00:13:05.129 --> 00:13:09.330 engagement, what do you mean by that? Means in 00:13:09.330 --> 00:13:12.590 our discussions with Amazon, they took in a lot 00:13:12.590 --> 00:13:15.649 of information and they didn't provide a lot 00:13:15.649 --> 00:13:20.230 of solutions. And so we had to focus on where 00:13:20.230 --> 00:13:26.269 we could find solutions. Now when you say that 00:13:26.269 --> 00:13:31.509 Amazon didn't offer solutions Did you make any 00:13:31.509 --> 00:13:34.649 proposals to Amazon on behalf of the debtors? 00:13:34.929 --> 00:13:40.570 Yeah I don't know on paper proposals, but you 00:13:40.570 --> 00:13:43.029 know the beginning of the process in the middle 00:13:43.029 --> 00:13:46.850 of November and even into into December I mean 00:13:46.850 --> 00:13:49.649 at one point we were having daily calls to sort 00:13:49.649 --> 00:13:53.090 of brainstorm solutions again, they tapered off 00:13:53.090 --> 00:13:55.419 we have a you know, a long meeting to brainstorm 00:13:55.419 --> 00:13:59.440 solutions. So we, um, we were desperately searching 00:13:59.440 --> 00:14:02.480 for liquidity from every, um, milk and cranny 00:14:02.480 --> 00:14:05.399 we could find it. And we had hours and hours 00:14:05.399 --> 00:14:07.299 and hours of conversations with Amazon about 00:14:07.299 --> 00:14:09.799 all range of possibilities. Could you give the 00:14:09.799 --> 00:14:13.480 court an example of something in that range of 00:14:13.480 --> 00:14:17.860 possibilities? Yeah, we, um, we asked if they 00:14:17.860 --> 00:14:20.240 wanted to finance and, you know, effectively 00:14:20.240 --> 00:14:26.659 a philo piece on the ABL. So behind the DABL 00:14:26.659 --> 00:14:29.299 loan. We asked if they wanted to finance the 00:14:29.299 --> 00:14:31.299 flagship assets. We asked if they wanted to buy 00:14:31.299 --> 00:14:36.620 the flagship assets. We considered a range of 00:14:36.620 --> 00:14:38.080 options. Those are several that come to mind. 00:14:39.320 --> 00:14:41.740 Did Amazon move forward with any of those ideas? 00:14:41.820 --> 00:14:45.740 No. At any point in time, before the Friday, 00:14:45.799 --> 00:14:49.519 before the debtors filed for bankruptcy, did 00:14:49.519 --> 00:14:56.360 Amazon offer to provide No. Did Amazon offer 00:14:56.360 --> 00:14:59.960 to provide dip financing to any of the global 00:14:59.960 --> 00:15:04.620 debtor boxes? No. Let's talk a little more about 00:15:04.620 --> 00:15:09.220 that Friday letter. Were you present in the room 00:15:09.220 --> 00:15:12.039 when Mr. Weinstein was cross -examined about 00:15:12.039 --> 00:15:15.000 a January 9th letter from Amazon's counsel to 00:15:15.000 --> 00:15:20.700 the Global Debtors Council? Yes. Did you view 00:15:23.820 --> 00:15:26.820 potential dip floated in that letter is actionable? 00:15:27.539 --> 00:15:34.480 No. Why not? So we were miles down the road with 00:15:34.480 --> 00:15:38.759 both the existing lenders and a potential third 00:15:38.759 --> 00:15:44.759 party non -consensual priming dip that is detailed 00:15:44.759 --> 00:15:48.700 in my declaration as well. We were documenting 00:15:48.700 --> 00:15:52.149 both. I think we're moving closer and closer 00:15:52.149 --> 00:15:56.490 with the existing lenders every hour. And we 00:15:56.490 --> 00:15:59.529 were actually aiming at a filing on Sunday night. 00:16:02.429 --> 00:16:05.269 So the letter came two days before we were actually 00:16:05.269 --> 00:16:10.110 aiming to file. We wound up extending the filing 00:16:10.110 --> 00:16:13.149 in order to finalize papering the transaction. 00:16:14.629 --> 00:16:17.429 But I don't think you're getting that dip done 00:16:17.429 --> 00:16:22.110 in two days. And again, the history that we've 00:16:22.110 --> 00:16:24.289 had in the discussions didn't indicate that it 00:16:24.289 --> 00:16:28.970 was going to bear fruit. I ask the witness for 00:16:28.970 --> 00:16:32.250 cross, Your Honor. All right. Anyone wish to 00:16:32.250 --> 00:16:37.169 cross -examine Mr. Beard? Yes, Your Honor. Chris 00:16:37.169 --> 00:16:42.110 Harris for Amazon. Go ahead, Mr. Harris. Thank 00:16:42.110 --> 00:16:46.429 you, Your Honor. You were in the room for the 00:16:46.429 --> 00:16:48.129 earlier testimony, so I don't need to go over 00:16:48.129 --> 00:16:52.210 these terms again, right, sir? I'll try to remember. 00:16:52.690 --> 00:16:56.490 Yep. You don't have to be trying to save some 00:16:56.490 --> 00:17:00.710 time. Um, just to remember, PKT was retained, 00:17:00.710 --> 00:17:06.269 uh, in May 2025, right? Uh, that was a previous 00:17:06.269 --> 00:17:09.609 engagement. Yes. Okay. And that was in connection 00:17:09.609 --> 00:17:13.650 with, um, the liability management transaction 00:17:13.650 --> 00:17:17.450 in the summer of 25, right? Yeah. You're, you're 00:17:17.450 --> 00:17:19.950 breaking up for me a little bit, but yes. That 00:17:19.950 --> 00:17:22.269 was with the liability management transaction. 00:17:23.509 --> 00:17:27.970 OK. And at the time, did Sachs' advisors, including 00:17:27.970 --> 00:17:30.809 PBT, advise the company that they thought they 00:17:30.809 --> 00:17:33.410 would address the company's liquidity needs? 00:17:35.930 --> 00:17:41.750 That's not what we do. No. We heard from the 00:17:41.750 --> 00:17:46.589 company an estimate of the dollars that they 00:17:46.589 --> 00:17:49.920 thought they need. and that was on the order 00:17:49.920 --> 00:17:54.019 of magnitude of $600 million, and we spent time 00:17:54.019 --> 00:17:57.059 trying to figure out how to raise it. Okay, so 00:17:57.059 --> 00:17:59.400 the company thought the LME transaction would 00:17:59.400 --> 00:18:02.339 provide the equity it needed, right, sir? Yes, 00:18:02.779 --> 00:18:05.720 that's my understanding. Okay. And then very 00:18:05.720 --> 00:18:10.279 quick wrong, right, sir? That happened to be 00:18:10.279 --> 00:18:13.099 the case, yes. Okay. And in fact, the company 00:18:13.099 --> 00:18:16.640 has continued to miss its projections, updated 00:18:16.640 --> 00:18:22.119 projections throughout 2025, right, sir? I don't 00:18:22.119 --> 00:18:26.839 I don't recall sitting here. You don't recall 00:18:26.839 --> 00:18:29.819 the company has missed its updated projections, 00:18:29.819 --> 00:18:33.299 is that right? I don't know what you mean by 00:18:33.299 --> 00:18:35.519 updated projections. The company has not been 00:18:35.519 --> 00:18:40.720 doing well, if that's your question. OK. And 00:18:40.720 --> 00:18:45.339 both PJT and BRD have been involved since early 00:18:45.339 --> 00:18:52.000 2025, right, sir? Uh, we were not involved in 00:18:52.000 --> 00:18:55.460 early 2025. No, we got involved for the liability 00:18:55.460 --> 00:18:57.839 management transaction and towards sort of the 00:18:57.839 --> 00:19:03.039 middle of 2025. Okay. And what entity has retained 00:19:03.039 --> 00:19:09.140 PJP? I mean, I think a lot of them. I don't know. 00:19:09.140 --> 00:19:12.539 I have to go look. Um, we provide advice to the 00:19:12.539 --> 00:19:16.099 debtors and affiliates. Do you don't know if 00:19:16.099 --> 00:19:19.200 you've been retained by Whole Soap Food? I believe 00:19:19.200 --> 00:19:25.279 we have. OK. And PJT led the company's efforts 00:19:25.279 --> 00:19:30.619 to secure DIP financing, right? Yes, we were 00:19:30.619 --> 00:19:33.500 one of the advisors that solicited DIP financing, 00:19:33.779 --> 00:19:37.579 yes. OK. And that process started in mid -December 00:19:37.579 --> 00:19:44.140 2025, right? No. Well, we started educating people 00:19:44.140 --> 00:19:47.539 before then. Well, but the actual outreach to 00:19:47.539 --> 00:19:50.700 potential lenders was in mid -December 2025, 00:19:50.859 --> 00:19:55.299 right, sir? That's when it started. Maybe for 00:19:55.299 --> 00:19:58.579 a dip specifically, but again, we were talking 00:19:58.579 --> 00:20:01.420 to potential financing sources about other things 00:20:01.420 --> 00:20:05.380 in well in advance of that. But outreach about 00:20:05.380 --> 00:20:07.599 a potential dip specifically was just a few weeks 00:20:07.599 --> 00:20:13.099 ago, right, sir? I can't recall the exact date 00:20:13.099 --> 00:20:18.970 sitting here, but sure. Okay. And who from SACS 00:20:18.970 --> 00:20:22.130 participated in the process of attempting to 00:20:22.130 --> 00:20:30.170 procure DIP financing? Who from SACS? I mean, 00:20:30.349 --> 00:20:35.809 the management team was involved in all different 00:20:35.809 --> 00:20:38.029 ways. I'm not sure I understand the question, 00:20:38.289 --> 00:20:40.690 though. OK. Well, let me ask a good question. 00:20:40.809 --> 00:20:43.789 Was there anyone, whether from SACS or any of 00:20:43.789 --> 00:20:46.559 the advisors to SACS, who was acting just on 00:20:46.559 --> 00:20:50.559 behalf of Hold Code 2 in the DIP process? I'm 00:20:50.559 --> 00:20:54.700 not sure. Can you identify any person for the 00:20:54.700 --> 00:21:01.700 court? They said I'm not sure. Okay. PJT was 00:21:01.700 --> 00:21:04.680 authorized to seek a Hold Code 2 -only DIP, right? 00:21:04.680 --> 00:21:07.220 That was within the scope of its mandate, right, 00:21:07.299 --> 00:21:10.880 sir? We were authorized to seek DIP financing 00:21:10.880 --> 00:21:14.869 in the best possible form for the better. for 00:21:14.869 --> 00:21:24.069 the debtor entities. We solicited dips in any 00:21:24.069 --> 00:21:25.990 possible form that people would give them to 00:21:25.990 --> 00:21:39.869 us. I did not call everybody and ask about every 00:21:39.869 --> 00:21:42.190 box on this page, no, if that's your question. 00:21:42.569 --> 00:21:46.630 asked people if they would finance the company 00:21:46.630 --> 00:21:49.170 and how they would do it on the best possible 00:21:49.170 --> 00:21:52.829 terms to get us the most possible proceeds to 00:21:52.829 --> 00:21:56.710 finance the case. You never asked anyone if they'd 00:21:56.710 --> 00:21:58.730 provide a whole code to only dip, right sir? 00:22:01.569 --> 00:22:07.230 I'm not sure if it was for a dip or pre -bankruptcy 00:22:07.230 --> 00:22:09.269 conversations, but we certainly asked Amazon 00:22:09.269 --> 00:22:13.779 if they would finance the flagship. under any 00:22:13.779 --> 00:22:16.839 circumstances. Sir, you asked Amazon if they 00:22:16.839 --> 00:22:18.759 would buy the flagship. You never asked Amazon 00:22:18.759 --> 00:22:21.519 to provide a loan for HoldCode2 only, did you, 00:22:21.640 --> 00:22:24.880 sir? We asked Amazon if they would finance the 00:22:24.880 --> 00:22:27.920 flagship. I didn't say HoldCode2 specifically, 00:22:28.180 --> 00:22:30.980 no, but we asked if they would want to put financing 00:22:30.980 --> 00:22:34.680 at the flagship. Okay. You never asked Amazon 00:22:34.680 --> 00:22:38.180 or any HoldCode2 -only creditor whether it would 00:22:38.180 --> 00:22:41.279 provide an unsecured HoldCode2 -only dip, right? 00:22:43.479 --> 00:22:47.640 Um, we, again, not specifically to HoldCo2. We 00:22:47.640 --> 00:22:51.740 asked for, um, we asked a number of parties if 00:22:51.740 --> 00:22:54.700 they would provide junior financing. Mm -hmm. 00:22:55.000 --> 00:22:57.440 So we never asked them, asked about a dip size 00:22:57.440 --> 00:23:00.539 just for the cash fees of HoldCo2, right? The 00:23:00.539 --> 00:23:02.640 CNBS monthly payments of under $5 million. You 00:23:02.640 --> 00:23:04.779 never asked anyone if they'd be willing to provide 00:23:04.779 --> 00:23:07.539 a HoldCo2 -only dip size to that amount, right, 00:23:07.640 --> 00:23:09.720 sir? We did not ask that specific question, no. 00:23:09.900 --> 00:23:21.099 When we spoke to Amazon, we said, would you provide 00:23:21.099 --> 00:23:25.119 financing for the flagship on any day? Like, 00:23:25.180 --> 00:23:28.940 it wasn't specific to secured or unsecured or 00:23:28.940 --> 00:23:31.160 otherwise. It was, would you finance for flagship 00:23:31.160 --> 00:23:38.740 entities? that, you know, could be in our being 00:23:38.740 --> 00:23:41.039 used to secure dip financing, right? Like Neiman 00:23:41.039 --> 00:23:45.000 Marcus and Bergdorf Goodman, right, sir? Yep. 00:23:46.119 --> 00:23:48.640 Okay. And did the debtors ask any third -party 00:23:48.640 --> 00:23:50.759 lenders whether they'd be willing to provide 00:23:50.759 --> 00:23:54.839 a dip of any size secured by assets other than 00:23:54.839 --> 00:24:02.940 the flagship property? We, again, we ask if anybody 00:24:02.940 --> 00:24:06.839 would be willing to finance pieces of the company 00:24:06.839 --> 00:24:11.660 or the whole. We tried that out of court and 00:24:11.660 --> 00:24:16.720 that didn't land and so then we started soliciting 00:24:16.720 --> 00:24:22.740 dips in whatever form people would lend to the 00:24:22.740 --> 00:24:26.000 company. So my question is when you're soliciting 00:24:26.000 --> 00:24:28.359 dips, did you ever ask any of the third parties 00:24:28.359 --> 00:24:32.099 if they provide a non -flagship dip? Did you 00:24:32.099 --> 00:24:35.140 ever ask that question? Yes, we asked people 00:24:35.140 --> 00:24:38.460 to finance the company excluding the flagship, 00:24:38.640 --> 00:24:40.920 but the answer was no. We asked the existing 00:24:40.920 --> 00:24:43.519 lenders if they would do it without the flagship, 00:24:43.599 --> 00:24:46.779 and they said no. Did you ask third -party lenders? 00:24:48.339 --> 00:24:54.859 Yes. Okay. Now, I believe you said both the ad 00:24:54.859 --> 00:24:56.559 hoc group and third -party lenders said they 00:24:56.559 --> 00:24:58.980 would not provide a dip unless it was secured 00:24:58.980 --> 00:25:02.420 by the flagship property. Is that right? Yeah. 00:25:02.410 --> 00:25:04.630 They were both the same structure and they wouldn't 00:25:04.630 --> 00:25:07.970 change the structure. So the ad hoc group was 00:25:07.970 --> 00:25:10.769 only willing to do a dip if they could obtain 00:25:10.769 --> 00:25:13.029 the value with the flags of property, right sir? 00:25:14.809 --> 00:25:18.470 Yes, that's my understanding. The ad hoc group 00:25:18.470 --> 00:25:21.930 has liens on the operating assets, right sir? 00:25:25.109 --> 00:25:29.170 Among others, yes. So they apparently didn't 00:25:29.170 --> 00:25:32.089 think that the dip Increase the value of those 00:25:32.089 --> 00:25:35.450 operating assets enough to just by making a dip 00:25:35.450 --> 00:25:38.589 just based on those operating assets, right sir? 00:25:38.910 --> 00:25:41.230 Objection your honor calls for speculations state 00:25:41.230 --> 00:25:45.609 of mind of the third party. Sustained. I don't 00:25:45.609 --> 00:25:50.750 know why. I sustained the objection. Okay, sorry. 00:25:56.240 --> 00:26:00.099 You said a little on your direct about expenses 00:26:00.099 --> 00:26:05.079 that the Holocaust II entity needs that would 00:26:05.079 --> 00:26:07.000 be funded by the DIP. Do you recall that, sir? 00:26:08.559 --> 00:26:11.019 No, I said somebody had to pay rent on the flagship. 00:26:12.240 --> 00:26:14.920 I see. Are you aware of any other material expenses 00:26:14.920 --> 00:26:19.400 at Holocaust II or its subsidiaries besides the... 00:26:19.400 --> 00:26:22.480 Our system will end this conference in five minutes. 00:26:22.680 --> 00:26:25.940 To extend this call for one hour... Please enter 00:26:25.940 --> 00:26:34.779 the moderator pin now. Your conference has been 00:26:34.779 --> 00:26:48.680 extended for 60 minutes. I believe the company 00:26:48.680 --> 00:26:51.039 needs to make the payments down to those boxes 00:26:51.039 --> 00:26:53.720 so I would assume that they need that money. 00:26:55.470 --> 00:26:58.970 Well, SACS needs the money to make its pay its 00:26:58.970 --> 00:27:02.869 obligations, right sir? Under the lease, yeah. 00:27:03.650 --> 00:27:06.630 Okay, now you heard Mr. Weinstein testify that 00:27:06.630 --> 00:27:09.650 the SACS lease payment was just reduced? You 00:27:09.650 --> 00:27:12.230 heard that tax money, right sir? I did hear that. 00:27:13.069 --> 00:27:16.309 In fact, it sounds like it was just reduced down 00:27:16.309 --> 00:27:20.670 to mass the amount of the CNBS interest payments, 00:27:20.670 --> 00:27:28.029 right sir? I don't. Okay. Well, if in fact the 00:27:28.029 --> 00:27:30.349 lease payments were reduced from 7 .7 million 00:27:30.349 --> 00:27:33.750 down to 4 .6 million, that'd be about a 40 % 00:27:33.750 --> 00:27:38.809 reduction, right, sir? Okay. I trust your math. 00:27:39.690 --> 00:27:42.049 Okay. You've done discounted cash flows before, 00:27:42.049 --> 00:27:45.990 right, sir? I have done discounted cash flows 00:27:45.990 --> 00:27:49.390 before. Okay. So if I'm valuing the value of 00:27:49.390 --> 00:27:52.309 the property encumbered by the lease and the 00:27:52.309 --> 00:27:56.000 lease payments go down by 40%, The value of the 00:27:56.000 --> 00:27:58.019 encumbered property probably goes down by approximately 00:27:58.019 --> 00:28:01.960 that amount, right, sir? Objection, your honor. 00:28:02.220 --> 00:28:05.680 Improper, hypothetical, and less foundation. 00:28:07.000 --> 00:28:10.019 It hasn't been established that that's why any 00:28:10.019 --> 00:28:15.140 lease reduction was done. Well, I don't think 00:28:15.140 --> 00:28:17.500 that's the question. I think the question is, 00:28:17.819 --> 00:28:23.519 if you reduce the cash flow by 40%, does that 00:28:23.519 --> 00:28:26.539 impact value? I think that's the thrust of the 00:28:26.539 --> 00:28:29.440 question. I think Mr. Beard can answer that. 00:28:31.240 --> 00:28:35.640 I did not value the real estate. I don't know 00:28:35.640 --> 00:28:38.140 what the payments were, what the expectations 00:28:38.140 --> 00:28:42.859 of future payments were. I don't know what the 00:28:42.859 --> 00:28:45.859 cash flows are today or yesterday. In general, 00:28:46.460 --> 00:28:50.000 if you lower the cash flow of an enterprise, 00:28:50.700 --> 00:28:54.559 then the value could go down. a million other 00:28:54.559 --> 00:28:57.720 factors that could come into that. Have you seen 00:28:57.720 --> 00:29:02.359 any analyses, quantitative analyses of the value 00:29:02.359 --> 00:29:05.539 of the property encumbered by the SACS lease 00:29:05.539 --> 00:29:12.559 at its new reduced value? I don't know what you 00:29:12.559 --> 00:29:15.180 mean by new reduced value. I've not seen analyses 00:29:15.180 --> 00:29:18.819 of the value of the property as of today, if 00:29:18.819 --> 00:29:22.299 that's what you're asking. Do you know whether 00:29:22.299 --> 00:29:26.740 the new Brownlee's payment is more or less what 00:29:26.740 --> 00:29:31.779 a replacement tenant would pay? I don't. Okay. 00:29:32.500 --> 00:29:34.920 Um, would you agree Holdcomb II is essentially 00:29:34.920 --> 00:29:39.299 a holding company for real estate, right? Not 00:29:39.299 --> 00:29:43.119 my area of expertise, but if you say so. Well, 00:29:43.220 --> 00:29:47.759 it's essentially a landlord, right? Again, if 00:29:47.759 --> 00:29:51.400 you say so. Okay. Would you agree that Through 00:29:51.400 --> 00:29:55.599 this dip, Holker 2 is essentially guaranteeing 00:29:55.599 --> 00:30:02.299 a loan to its tenant? I don't know what you mean. 00:30:03.799 --> 00:30:06.460 Well, you realize the Sachs operating entity 00:30:06.460 --> 00:30:10.160 is its tenant, right? The tenant of its subsidiary, 00:30:10.319 --> 00:30:16.500 right sir? Sachs owns the boxes in this chain. 00:30:17.640 --> 00:30:21.259 Sachs is... Pudging those boxes to a loan that 00:30:21.259 --> 00:30:24.559 it's that it's taking if that's what you're saying 00:30:24.559 --> 00:30:26.980 Yeah, well, I'm trying to analyze just from the 00:30:26.980 --> 00:30:28.759 benefit of a whole code to it because we're actually 00:30:28.759 --> 00:30:31.180 an independent company with independent fiduciary. 00:30:31.180 --> 00:30:34.440 So from that perspective It's a landlord and 00:30:34.440 --> 00:30:38.859 you have to guarantee a loan to its tenant, right 00:30:38.859 --> 00:30:44.839 sir? A loan to its tenant. I'm not again. I'm 00:30:44.839 --> 00:30:48.039 not howling but the chain is owned by Sachs Right? 00:30:48.259 --> 00:30:50.740 So it's an asset of the SACs global enterprises. 00:30:51.660 --> 00:30:53.700 So it's pledging an asset to a loan that it's 00:30:53.700 --> 00:30:58.019 taking out. Does anyone run a quantitative analysis 00:30:58.019 --> 00:31:01.240 just on behalf of Holocaust II to determine whether 00:31:01.240 --> 00:31:05.079 it was net beneficial to Holocaust II to guarantee 00:31:05.079 --> 00:31:09.000 a $2 .6 million loan through a bankrupt tenant? 00:31:11.619 --> 00:31:15.500 I don't know. In your experience, have you ever 00:31:15.500 --> 00:31:18.710 seen a landlord guarantee a A third party's loan 00:31:18.710 --> 00:31:30.490 to its tenant? I don't know. Okay. Has PJT or 00:31:30.490 --> 00:31:33.829 any other advisor analyzed the likelihood that 00:31:33.829 --> 00:31:40.289 Holocaust II's guarantee will be called? I wouldn't 00:31:40.289 --> 00:31:42.250 know what that means. I'm not sure what you're 00:31:42.250 --> 00:31:45.450 asking. You don't know what the guarantee is? 00:31:46.640 --> 00:31:50.279 the likelihood that it would be called? Yeah, 00:31:50.480 --> 00:31:53.500 what's the likelihood that, in fact, Polco 2 00:31:53.500 --> 00:31:56.140 is going to have to make a payment on account 00:31:56.140 --> 00:32:01.039 of a guarantee? Do you know, sir? That's perfect. 00:32:06.480 --> 00:32:11.339 I think we were on too long. Just dial back in. 00:32:12.240 --> 00:32:56.660 Sorry. Next slide. Mr. Barrett, are you still 00:32:56.660 --> 00:33:02.880 on the line? Yeah, we're back. Sorry about that. 00:33:02.940 --> 00:33:11.019 Distracted by cameras blowing out. We're back. 00:33:31.589 --> 00:33:40.069 My question was, has anyone performed an analysis 00:33:40.069 --> 00:33:42.910 on behalf of Holocaust II indicating how likely 00:33:42.910 --> 00:33:47.150 it is that it will have to perform under the 00:33:47.150 --> 00:33:49.089 guarantee, make payments under the guarantee? 00:33:53.799 --> 00:33:55.980 All right, can you just imagine with me that 00:33:55.980 --> 00:33:59.460 HOCO 2 was an actually independent company, like 00:33:59.460 --> 00:34:03.420 Vornado or Simon, and they came to you and said 00:34:03.420 --> 00:34:09.679 their tenant wanted for Vornado to guarantee 00:34:09.679 --> 00:34:12.739 a loan to that tenant. And that is if you want 00:34:12.739 --> 00:34:14.420 to know the percentage likelihood the guarantee 00:34:14.420 --> 00:34:23.389 would get called, right? I mean, it's not that 00:34:23.389 --> 00:34:25.349 crazy if you think about it, because those guys 00:34:25.349 --> 00:34:27.610 benefit from having that tenant in their door. 00:34:28.849 --> 00:34:32.849 So I might not be tracking the question. No, 00:34:32.849 --> 00:34:34.849 I think you are, sir. I think you are. I mean, 00:34:34.869 --> 00:34:36.449 you'd want to know, for instance, whether the 00:34:36.449 --> 00:34:38.789 current lease of that tenant is above or below 00:34:38.789 --> 00:34:45.710 market, right, sir? I'd want to know that they 00:34:45.710 --> 00:34:49.250 can pay the lease. Well, if in fact they could. 00:34:50.039 --> 00:34:52.099 where NATO could get more from having the lease 00:34:52.099 --> 00:34:54.139 canceled, they wouldn't really have an interest 00:34:54.139 --> 00:34:56.980 to guarantee their tenants a loan, right sir? 00:34:59.039 --> 00:35:02.340 I mean, there's a lot that goes into that question. 00:35:02.400 --> 00:35:04.099 You don't just cancel leases because you can 00:35:04.099 --> 00:35:09.000 get a different price in the market. You want 00:35:09.000 --> 00:35:11.199 to know at least by how much the current lease 00:35:11.199 --> 00:35:16.880 is above market if it is, right sir? I lost the 00:35:16.880 --> 00:35:21.170 chain. In terms of what analysis? Say bornado 00:35:21.170 --> 00:35:25.090 Was the owner of the flagship property they would 00:35:25.090 --> 00:35:27.710 want to know whether sacks is paying above or 00:35:27.710 --> 00:35:29.570 below market And it's above they want to know 00:35:29.570 --> 00:35:35.730 how much above market right sir? In order to 00:35:35.730 --> 00:35:38.869 do what? They're determined whether they provide 00:35:38.869 --> 00:35:42.349 a two point six billion dollar guarantee to sacks 00:35:42.349 --> 00:35:45.400 or NATO would want to know Whether the sacks 00:35:45.400 --> 00:35:47.380 lease is above market or not. They'd want to 00:35:47.380 --> 00:35:49.500 know how much above market it is They'd want 00:35:49.500 --> 00:35:51.079 to know how likely the guarantee is going to 00:35:51.079 --> 00:35:52.639 get called. They want to know all that right 00:35:52.639 --> 00:35:55.659 sir. I Think you'd want to know a lot of things, 00:35:55.739 --> 00:35:58.800 but I think most important is that your tenants 00:35:58.800 --> 00:36:03.619 going to pay the rent Mm -hmm You also want to 00:36:03.619 --> 00:36:06.000 know if the tenant is going to pay the rent through 00:36:06.000 --> 00:36:11.079 the life of the lease right? You're going to 00:36:11.079 --> 00:36:13.159 want to know that they're going to pay the rent 00:36:13.159 --> 00:36:17.119 for this foreseeable future. Yeah. Okay. And 00:36:17.119 --> 00:36:19.400 no one here has done an analysis to determine 00:36:19.400 --> 00:36:22.320 whether the new market, the new lease is above 00:36:22.320 --> 00:36:24.659 or below market and whether it's so much above 00:36:24.659 --> 00:36:29.699 market to justify imposing a $2 .6 billion liability 00:36:29.699 --> 00:36:35.719 on HOPE O2. Isn't that right, sir? I'm not sure 00:36:35.719 --> 00:36:39.980 what the question was. I don't, I don't, I didn't 00:36:39.980 --> 00:36:42.869 track the question. Do you recall anyone doing 00:36:42.869 --> 00:36:46.030 an analysis to determine whether the new SACS 00:36:46.030 --> 00:36:49.150 lease is sufficiently above market to justify 00:36:49.150 --> 00:36:56.750 imposing a $2 .6 billion liability? I'm not sure 00:36:56.750 --> 00:36:59.730 if anybody... I don't know what analysis exists 00:36:59.730 --> 00:37:04.530 or doesn't on the lease payments. Okay. A few 00:37:04.530 --> 00:37:07.449 more questions. Did debtors ever send a proposal 00:37:07.449 --> 00:37:15.200 to the ad hoc group that did not include... I 00:37:15.200 --> 00:37:18.900 don't recall if we sent one on paper, but we 00:37:18.900 --> 00:37:23.920 certainly discussed alternatives that would have 00:37:23.920 --> 00:37:29.739 included not leaning up the flagship. Okay. Just 00:37:29.739 --> 00:37:32.739 a couple more questions. Can you tell me today 00:37:32.739 --> 00:37:36.940 another interim DIP that imposes $1 .5 billion 00:37:36.940 --> 00:37:39.809 of DIP obligations on an entity that doesn't 00:37:39.809 --> 00:37:49.309 need a dip? I think the entity needs cash flow 00:37:49.309 --> 00:37:55.050 and the entity is in bankruptcy and in order 00:37:55.050 --> 00:38:00.389 for people to provide capital to bankrupt enterprises 00:38:00.389 --> 00:38:04.829 they usually want liens and that often takes 00:38:04.829 --> 00:38:08.760 the form of dip status. Will you tell me another 00:38:08.760 --> 00:38:11.380 dip where the debtors rolled up onto one entity, 00:38:12.340 --> 00:38:15.239 almost $1 .4 billion in prepetition debt that 00:38:15.239 --> 00:38:23.699 sits with other debtors? I don't know that that's 00:38:23.699 --> 00:38:28.860 the case. Okay. Nothing further. Thank you. Thank 00:38:28.860 --> 00:38:31.099 you. All right. Anyone else wish to cross -examine, 00:38:31.300 --> 00:38:37.260 Mr. Baird? This is Jim Ducay from Sidley. No, 00:38:37.380 --> 00:38:39.159 Your Honor. I think Mr. Harris covered the couple 00:38:39.159 --> 00:38:42.380 questions I was going to ask. All right. Anyone 00:38:42.380 --> 00:38:50.159 else? All right. Any redirect? No redirect, Your 00:38:50.159 --> 00:39:29.809 Honor. All right. Thank you, Mr. Baird. We just 00:39:29.809 --> 00:39:34.550 wanted to flag that the utilities order was uploaded. 00:39:34.750 --> 00:39:51.989 I believe it's document number 189. All right. 00:39:52.010 --> 00:41:15.150 Just give me a minute. Thank you. Your Honor, 00:41:15.210 --> 00:41:17.050 while we're, this is Caroline Reckler, while 00:41:17.050 --> 00:41:20.070 we're waiting to join, could you try to reset 00:41:20.070 --> 00:41:23.050 perhaps the GoToMeeting because we can't get 00:41:23.050 --> 00:41:26.750 back on. We tried with computers, phones, everything. 00:41:27.710 --> 00:41:31.829 All right, why don't we, let's just take a five 00:41:31.829 --> 00:41:34.889 -minute recess and I will get off a GoToMeeting 00:41:34.889 --> 00:41:40.510 and then we can come back on. Thank you. We'll 00:41:40.510 --> 00:41:45.920 be back at 10 -15. Thank you, Your Honor.