1 00:00:00,000 --> 00:00:06,000 Good afternoon everyone. This is Judge Jones. The time is 1 12 central. Today is March the 20th, 2023. 2 00:00:06,000 --> 00:00:18,000 This is the docket for Houston, Texas. Next on the one o'clock docket, we have the jointly administered cases under case number 22-90341, Core Scientific Inc. 3 00:00:18,000 --> 00:00:22,000 Folks, please don't forget to record your electronic appearance. That's a quick trip to the website. 4 00:00:22,000 --> 00:00:30,000 A couple of mouse clicks. You can do that at any time prior to the conclusion of the hearing. First time that you speak, if you would, please state your name and who you represent. 5 00:00:30,000 --> 00:00:36,000 That really does give the court reporters a good point of reference to do what is now a very difficult job. 6 00:00:36,000 --> 00:00:45,000 We are recording this afternoon using court speak. We'll have the audio up on the docket shortly after the conclusion of the hearing this afternoon. 7 00:00:45,000 --> 00:00:54,000 For folks in the courtroom, if you would, make sure you speak from the lectern since that's the only place we have a camera. That way you can both be seen and be heard. 8 00:00:54,000 --> 00:01:00,000 Alright. Mr. Perez? Good afternoon. 9 00:01:00,000 --> 00:01:09,000 Good afternoon, Your Honor. Alfredo Perez on behalf of the debtors. Your Honor, with me and who will be presenting the motion is Ms. Christine Calabrese. 10 00:01:09,000 --> 00:01:27,000 Your Honor, I think I'm happy to report that as a result of the good work done by all of the other people at the firm, not me, that we were able to come to a form of order that we have agreed, that is agreed among the parties, and that is 11 00:01:27,000 --> 00:01:48,000 filed at docket 702 and it has two red lines, one from what we filed originally about a week ago and then one from what we filed last night. I think with that, Your Honor, and the goal of the language that was put in there, I don't think anybody actually is complaining about the deal. 12 00:01:48,000 --> 00:02:07,000 The goal is to make sure we preserve everyone's rights and that's just been further refined. One other thing, Your Honor, we are working on a more detailed schedule of the actual equipment going back and that's just going to take a little bit of time, but we will file that schedule 13 00:02:07,000 --> 00:02:22,000 with the court at the appropriate time. It doesn't hold up anything, but just so if anybody wants to go back and look at it. And so that will actually delineate the equipment which has been delivered and is on site versus equipment that hasn't been delivered. 14 00:02:22,000 --> 00:02:38,000 That's an idea and most of it is that one picture that we showed you of the transformer. That's the biggest single component, but we're just going to do that just so there's no confusion. We don't want to hold up anything, but it's just for good form. 15 00:02:38,000 --> 00:03:00,000 So I got it and I've looked at the red line to the last red line. The approach just makes sense to me. I agree with you. I think everybody understands it's a good deal all the way around. And just everyone wants to make sure that they aren't the one that's paying for it. I totally got that. 16 00:03:00,000 --> 00:03:09,000 Thank you, your honor. All right. Miss Calabrese. 17 00:03:09,000 --> 00:03:14,000 Thank you, your honor. Thank you. No pressure, but I want your A plus game today. 18 00:03:14,000 --> 00:03:18,000 All right, I will bring my A plus game. 19 00:03:18,000 --> 00:03:36,000 All right, so thanks very much, your honor. We have Michael Brose here. He's joining remotely. He's a declarant for debtors on the 1990 factors. His declaration is docked at 699-9 and I'd like to move that declaration into evidence if it so pleases the court. 20 00:03:36,000 --> 00:03:52,000 Thank you. Any objection to the admission of Mr. Brose declaration found pursuant to the protocol at docket number 699-9. All right, then it's admitted. Anyone wish to cross examine Mr. Brose? 21 00:03:52,000 --> 00:03:54,000 You sure you don't want to take a shot? 22 00:03:54,000 --> 00:04:12,000 All right, then Mr. Brose excuses a witness. Thank you. I've read the declaration. Thank you, your honor. We've also prepared a presentation for the court. It's brief and the purpose is to set the stage from a factual perspective and also walk the court through some of the key terms from the settlement and the basis for approval. 23 00:04:12,000 --> 00:04:18,000 The presentation is docked at 699-10. I'd also like to move that demonstrative into evidence. 24 00:04:18,000 --> 00:04:27,000 All right. Thank you. Any objection for purposes of today only. All right, then it's admitted as a demonstrative. Are you going to walk me through it? 25 00:04:27,000 --> 00:04:38,000 Yes. So if you could give control to my colleague Austin Crabtree. 26 00:04:38,000 --> 00:04:40,000 He has control. 27 00:04:40,000 --> 00:04:49,000 Thank you, your honor. So if we could please pull up first page of the deck. 28 00:04:49,000 --> 00:04:54,000 Let's get the minute Mr. Crabtree is also bringing his A plus game on the controls. 29 00:04:54,000 --> 00:05:00,000 I think he's related to Mr. Carlson. 30 00:05:00,000 --> 00:05:03,000 Okay, next slide please. 31 00:05:03,000 --> 00:05:12,000 So like I said, your honor, this is really for purposes of table setting the two data center facilities that are relevant here are the Cedarville and the Cottonwood data center facilities. 32 00:05:12,000 --> 00:05:24,000 We'll go through those briefly, talk through the debtors relationship with PPM disputes between the debtors and priority power walk through the key terms of the settlement and then the basis for approval. 33 00:05:24,000 --> 00:05:31,000 Next slide Austin. So the cottonwood and Cedarville facilities are in West Texas. 34 00:05:31,000 --> 00:05:43,000 This was Coors entry into the West Texas space. You can see the cottonwood facility on the map that's in Barstow and Cedarville and Pecos, which I, you know, googled and it looks like they're 26 miles apart. 35 00:05:43,000 --> 00:05:47,000 So pretty, pretty nearby. 36 00:05:47,000 --> 00:05:49,000 Next slide please. 37 00:05:49,000 --> 00:06:02,000 Okay, so this is the cottonwood data center facility. You can see that it's mostly a large large plot of land that's partially constructed. So there are some there's some infrastructure on the site and construction has halted. 38 00:06:02,000 --> 00:06:12,000 And as you I'm sure know from our motion, the reason construction halted is that core was anticipating a larger amount of energy across the cottonwood and Cedarville facilities. 39 00:06:12,000 --> 00:06:30,000 When core realize those facilities would not energize up to that amount core halted construction on the facilities. So cottonwood is partially constructed. And if we look at the next slide, you'll see that Cedarville is similarly partially constructed facility that would be hosting miners. 40 00:06:30,000 --> 00:06:42,000 Currently, the Cedarville facility is not operational. It was anticipated to energize up to 720 megawatts, but core is not currently operating that facility. 41 00:06:42,000 --> 00:06:53,000 The cottonwood facility is partially operational, but significantly under energized. The debtors were anticipating 300 megawatts for that facility. 42 00:06:53,000 --> 00:06:55,000 Next slide please. 43 00:06:55,000 --> 00:07:04,000 So in 2021 core decided to enter the West Texas space and wanted to build data center facilities in West Texas. And that's when core contracted with PPM. 44 00:07:04,000 --> 00:07:10,000 Party power is an energy management services procurement and infrastructure development firm. 45 00:07:10,000 --> 00:07:18,000 So here we'll talk through a little bit how what that means for the debtors that provides third parties like core with consulting and energy procurement services. 46 00:07:18,000 --> 00:07:32,000 So here there are four agreements that are relevant to the settlement to executed and two agreements that were un-executed pre petition, but priority power has been has been operating under in any event. 47 00:07:32,000 --> 00:07:42,000 So the first, your honor, all of these agreements have very similar names. So we've given them some user friendly short nicknames that I'm going to use for this presentation. 48 00:07:42,000 --> 00:07:55,000 So the first agreement that was executed is the power procurement agreement. It was executed in June of 2021 and under that agreement priority power provides a host of different consulting and power procurement services for core. 49 00:07:55,000 --> 00:08:02,000 The most relevant of which is negotiating cores electricity supply agreement with its retail electric provider. 50 00:08:02,000 --> 00:08:08,000 Here core's retail electric provider or rep is shut. 51 00:08:08,000 --> 00:08:18,000 So priority power under this power procurement agreement has the exclusive right to negotiate cores wrap agreement with shell or any other. 52 00:08:18,000 --> 00:08:26,000 Under this agreement, party power is paid a monthly fee based on kilowatt usage. 53 00:08:26,000 --> 00:08:32,000 The next relevant agreement was executed in August of 2021. We call it the construction agreement. 54 00:08:32,000 --> 00:08:39,000 Under this agreement, priority power agreed to build out the electrical infrastructure at the Cedarvale and cottonwood sites. 55 00:08:39,000 --> 00:08:48,000 And under this agreement, priority power was paid actual costs plus a certain percentage on top. 56 00:08:48,000 --> 00:08:56,000 There are also two draft agreements between core and priority power that were in draft form as of August 2021, but were never executed. 57 00:08:56,000 --> 00:09:04,000 Priority power has anyway been performing under them and the services under these agreements are very helpful for the debtors. 58 00:09:04,000 --> 00:09:18,000 The first agreement is an asset management agreement. So as I understand it, sometimes at the facilities like a fuse will blow or there'll be some sort of maintenance that's required and priority power will perform that maintenance, 59 00:09:18,000 --> 00:09:31,000 which is very helpful to core because there's not a lot of providers in the West Texas space and priority power is familiar with those facilities as the company that engineered them and built them out. 60 00:09:31,000 --> 00:09:41,000 The other is a curtailment agreement. This one's a little bit more complicated to explain, but there's basically a day ahead energy trading program. 61 00:09:41,000 --> 00:09:48,000 And priority power as core's qualified scheduling entity or queasy participates in that program. 62 00:09:48,000 --> 00:09:58,000 So if core, for example, decides or the debtors decide to curtail or not use energy during a high use period, they'll get revenue back. 63 00:09:58,000 --> 00:10:04,000 So it incentivizes the reduction of using energy during really high usage times. 64 00:10:04,000 --> 00:10:16,000 So the revenue that's generated through that program of that revenue that's generated priority power retains a certain percentage and passes the remainder along to core. 65 00:10:16,000 --> 00:10:30,000 So far priority power has been performing under that agreement, but has retained 514,000 or so approximately of revenue that was generated under that program. 66 00:10:30,000 --> 00:10:42,000 And that that's core share that is core's position is that that's core share and that priority power should have passed along to core in the motion. We call that the retained revenue. 67 00:10:42,000 --> 00:10:46,000 Next slide please. 68 00:10:46,000 --> 00:10:52,000 So I've already teed this up, but there are really two primary disputes between the debtors and priority power. 69 00:10:52,000 --> 00:11:05,000 On the one hand, core says that we have potential claims and causes of action against priority power arising from the anticipated amount of energy the debtors were anticipating at the Cedardale and Cottonwood facilities. 70 00:11:05,000 --> 00:11:09,000 We have potential claims and causes of action that we could pursue. 71 00:11:09,000 --> 00:11:22,000 On the other hand, priority power has two primary points. The first is that they are entitled to the retained DR revenues that 514,000 under the pro-tailman agreement. 72 00:11:22,000 --> 00:11:30,000 And the other are asserted mechanics liens relating to the work performed at the Cedarville and Cottonwood facilities, goods, labor, materials. 73 00:11:30,000 --> 00:11:35,000 So they have an asserted lien for approximately 20.8 million. 74 00:11:35,000 --> 00:11:44,000 That's the landscape of the dispute. Austin, next slide please. 75 00:11:44,000 --> 00:11:55,000 Okay, so it's against that backdrop that core, that the debtors and PPM started negotiating and ultimately executed a global settlement agreement. 76 00:11:55,000 --> 00:12:10,000 Before your honor today, this agreement would resolve all issues owed between the debtors and priority power. So it's structured as a walk away to restructure a positive go forward relationship between the debtors and priority power. 77 00:12:10,000 --> 00:12:21,000 So the principal terms of the PPM settlement. The first is that priority power would have a single allowed claim for the approximately 20.8 million, and that would be deemed paid in full. 78 00:12:21,000 --> 00:12:28,000 So when it's a single allowed claim, what type of claim? 79 00:12:28,000 --> 00:12:34,000 It would be the complete claim that would be extinguished by the transfer of assets to the party. 80 00:12:34,000 --> 00:12:39,000 And we're going to work our way through this. So what kind of claims are there? 81 00:12:39,000 --> 00:12:41,000 There are secured claims. 82 00:12:41,000 --> 00:12:43,000 And they're asserting an M&M lien claim, aren't they? 83 00:12:43,000 --> 00:12:45,000 Yeah, so that would be a secure. 84 00:12:45,000 --> 00:12:59,000 Okay, got it. So they're going to get a, they're going to get an allowed secured claim for 20.8 million, which is going to be deemed paid in full by the transfer of all the debtors interest in the equipment back, whatever that is. 85 00:12:59,000 --> 00:13:06,000 Yes. Okay. Any, the debtors interest to the extent they have any in the equipment that's listed in M&M. Got it. 86 00:13:06,000 --> 00:13:10,000 And that would be free and clear. 87 00:13:10,000 --> 00:13:15,000 And how are you going to meet the 363 F requirement? 88 00:13:15,000 --> 00:13:30,000 So, Your Honor, first, my understanding is that because of the proposed order that we submitted today that Mr. Perez mentioned at the outset, my understanding is that we actually don't have any, that we, that we do have the consent we need to move forward with this deal. 89 00:13:30,000 --> 00:13:32,000 Because that's one of the requirements. 90 00:13:32,000 --> 00:13:34,000 Or one of the options, right? 91 00:13:34,000 --> 00:13:39,000 So our best option for meeting 363 F would be consent, and I believe we have it. 92 00:13:39,000 --> 00:13:42,000 Always. What was going to be your Plan A? 93 00:13:42,000 --> 00:13:58,000 Plan B would be 363 F3, Your Honor. So that would be a little bit of a trickier question, but we could discuss in more detail the value of the assets and whether we could satisfy 363 F3. 94 00:13:58,000 --> 00:14:01,000 Did you have a Plan C? 95 00:14:01,000 --> 00:14:11,000 Mr. Perez might have a Plan C, Your Honor, but I just had Plan A and B. That's nice pivot. All right, go ahead. 96 00:14:11,000 --> 00:14:23,000 Okay, so in addition to that transfer and extinguishing of the $20.8 million, the debtors would assume the power procurement agreement with some terms amended. 97 00:14:23,000 --> 00:14:26,000 And the parties have agreed to the language? 98 00:14:26,000 --> 00:14:35,000 Yes, the parties have agreed to the language on the amendment, the most important of which is that the debtors will have the optionality to negotiate its own rep agreement. 99 00:14:35,000 --> 00:14:37,000 Okay. 100 00:14:37,000 --> 00:14:45,000 We would also enter into those two other agreements I mentioned, the asset management and curtailment agreements. So those would be executed. 101 00:14:45,000 --> 00:14:51,000 The purpose there is just to really give some clarity and execute agreements that priority power has been performing under. 102 00:14:51,000 --> 00:15:01,000 Yeah, and so, you know, let them keep what's been generated to date and then going forward, there's the split will then occur for the terms of the agreement. 103 00:15:01,000 --> 00:15:08,000 That's right, Your Honor. So they can keep the retained DR revenue. Obviously, we reserve all arguments that we were entitled to it in the first place. 104 00:15:08,000 --> 00:15:17,000 But as part of the settlement, priority power keeps the $514,000 and will also pay an additional $85,000 for their legal and out of pocket expenses. 105 00:15:17,000 --> 00:15:19,000 Okay. 106 00:15:19,000 --> 00:15:25,000 And then there's some other terms the debtors would agree to introduce priority power to any acquire of the facility. 107 00:15:25,000 --> 00:15:34,000 So that priority power has the option to potentially work without acquiring moving forward and a mutual release of off claims and potential causes of action. 108 00:15:34,000 --> 00:15:37,000 Okay. 109 00:15:37,000 --> 00:15:49,000 So the equipment that's listed on annex a that the debtors will be transferring to priority power really splits up into three large buckets as we see it. 110 00:15:49,000 --> 00:15:58,000 Well, let's start all the way on the right. The largest bucket of equipment is the is currently in priority powers possession and was never delivered or shipped to core. 111 00:15:58,000 --> 00:16:02,000 And that's about 17 million dollars. And why is that important? 112 00:16:02,000 --> 00:16:18,000 It's important because we would say that priority powers lean is controlling and that title never shifted to the debtors, which would have an impact on cores other consistent for the debtors, other constituents and their interest in that. 113 00:16:18,000 --> 00:16:20,000 So it's not sure it's not yours. 114 00:16:20,000 --> 00:16:23,000 It's theirs. 115 00:16:23,000 --> 00:16:32,000 And that's it. That's the bulk of this, your honor. So that's 17 million never transferred to core. So priority power is retaining that. 116 00:16:32,000 --> 00:16:35,000 Free of any claims by the debtor. 117 00:16:35,000 --> 00:16:37,000 Yes, I got it. 118 00:16:37,000 --> 00:16:45,000 Then the next bucket I'd like to talk about is the equipment that was delivered to core, but never installed. 119 00:16:45,000 --> 00:16:56,000 That's five point eight million worth of equipment and core has that equipment currently staged at the facilities. Austin, if you can go to the next slide quickly. 120 00:16:56,000 --> 00:17:06,000 So here's here's one piece of equipment that's been delivered and staged. It's an uninstalled and unassembled substation power transformer at the cottonwood facility. 121 00:17:06,000 --> 00:17:12,000 This is listed on annex a and it will transfer back to P.P.M. 122 00:17:12,000 --> 00:17:17,000 You hadn't hooked up the wires, you're just going to go out, put it on the truck and take it. 123 00:17:17,000 --> 00:17:23,000 Well, I'm not going to do that. But that will happen. 124 00:17:23,000 --> 00:17:30,000 I'll think you could flip back. OK, then we have the equipment that was delivered and installed. That's a much smaller amount. 125 00:17:30,000 --> 00:17:35,000 It's three hundred forty thousand or so. 126 00:17:35,000 --> 00:17:38,000 And what has to happen there? 127 00:17:38,000 --> 00:17:44,000 So there I believe it's a bit I'm a little bit out of my depth here, but I believe that's a finish. 128 00:17:44,000 --> 00:17:48,000 And it's fun. So it's a fixture. 129 00:17:48,000 --> 00:17:56,000 And I believe that priority powers mechanics lean is is the priority lean on that three hundred forty thousand as well. 130 00:17:56,000 --> 00:18:00,000 Right. So the M&M lean attaches where? 131 00:18:00,000 --> 00:18:09,000 The M&M lean attaches to the equipment and it stays with it. 132 00:18:09,000 --> 00:18:14,000 I'm sorry. It stays with the equipment. So priority power now that it's a fixture. 133 00:18:14,000 --> 00:18:20,000 Is it when it was a fixed, Avelina? 134 00:18:20,000 --> 00:18:24,000 I've remembered it attaches the land improvements and fixtures. 135 00:18:24,000 --> 00:18:31,000 There you go. OK. And so who's responsible? Because this is where wires have been hooked up. 136 00:18:31,000 --> 00:18:38,000 Right. Wires have been hooked up to the extent you ever seen one of these things in real life. 137 00:18:38,000 --> 00:18:46,000 I have not seen one of these in real life. So, you know, it's I grew up an engineer, electrical, as a matter of fact. 138 00:18:46,000 --> 00:18:55,000 So, you know, this is this has got some this has got some work involved in actually doing this stuff. 139 00:18:55,000 --> 00:18:59,000 Who's responsible for disconnecting it? 140 00:18:59,000 --> 00:19:04,000 I believe priority power is to pick up the equipment that's being transferred back. 141 00:19:04,000 --> 00:19:11,000 All right. So they're responsible for safely disconnecting the equipment and removing it. 142 00:19:11,000 --> 00:19:19,000 I can't say, Your Honor, that I remember speaking about that specific term, but I'm sure that the debtors and priority power could reach some mutually acceptable. 143 00:19:19,000 --> 00:19:24,000 Of course. But, you know, you're going to do these for the next 40 years. Right. 144 00:19:24,000 --> 00:19:31,000 Yeah. So as you're looking at them, you want to make sure you understand how that's going to be accomplished, because that's not free. 145 00:19:31,000 --> 00:19:37,000 And you also want to make sure as a fiduciary that you have appropriate oversight. 146 00:19:37,000 --> 00:19:41,000 And that may mean that somebody's just standing out there watching. 147 00:19:41,000 --> 00:19:49,000 It may mean that you have to have an expert, but you always want to make sure as you're working through this, because you want to be able to get this done and move on. 148 00:19:49,000 --> 00:19:57,000 You don't want to have to look back over your shoulder. Make sense. Yes. Okay. Absolutely. All right. Keep going. 149 00:19:57,000 --> 00:20:04,000 So those are the three big categories of the equipment divides into Austin. If we can go to the next slide, please. 150 00:20:04,000 --> 00:20:21,000 This is the substation Austin next time, which very cool picture, by the way. 151 00:20:21,000 --> 00:20:29,000 Your Honor, I see that I see the slide on Mr. Crouch trees computer, but it's not there again. 152 00:20:29,000 --> 00:20:36,000 So, again, that backdrop, you know, from the debtors perspective, approval of the PPM settlement is warranted. 153 00:20:36,000 --> 00:20:43,000 This is a good deal for the debtors estate, litigating the debtors potential claims, you know, success is uncertain. 154 00:20:43,000 --> 00:20:50,000 It will be expensive. It will be costly. The priority power settlement is the product of good faith arms like negotiation. 155 00:20:50,000 --> 00:20:58,000 We've been heavily negotiating this agreement since middle of February, but have been in talks since a little dating a little earlier than that. 156 00:20:58,000 --> 00:21:06,000 And it's also reasonable and in the debtors best interest. This will satisfy priority powers claim and the PPM liens with surplus equipment. 157 00:21:06,000 --> 00:21:13,000 I did not mention that this is surplus equipment that the debtors cannot utilize because they're not going to continue building out those facilities. 158 00:21:13,000 --> 00:21:25,000 Right. So it's just excess. The debtors will also have the flexibility to negotiate that electricity supply agreement I mentioned with the rep, which will provide valuable optionality to the debtors. 159 00:21:25,000 --> 00:21:29,000 My understanding is that the debtors believe they might be able to negotiate a better agreement. 160 00:21:29,000 --> 00:21:37,000 But if they can't party power is still there to negotiate an agreement for the debtors and the choice of the debtors, whether it does its own or goes with power. 161 00:21:37,000 --> 00:21:43,000 And then it will. This is important as well. It will stabilize the relationship between the debtors and party power moving forward. 162 00:21:43,000 --> 00:21:49,000 Party power is important to the debtors. This is a key relationship for them in the context of the Cedarville and Cottonwood sites. 163 00:21:49,000 --> 00:21:55,000 And this settlement agreement will provide some much needed clarity going forward. 164 00:21:55,000 --> 00:22:04,000 Right. Makes sense to me. What else? Thank you, your honor. That's all I have on the motion unless I'm happy to address any additional questions. 165 00:22:04,000 --> 00:22:15,000 And so what what do you want me to do? Oh, yes. So we would like you to please approve the 90 19 motion. 166 00:22:15,000 --> 00:22:25,000 Allow the debtors to assume the power procurement agreement and also enter into the new agreements that I mentioned the curtailment agreement and the asset management. 167 00:22:25,000 --> 00:22:33,000 Got it. And the latest form of order is what? It's docked at 702. There are a bunch of things docked at 702, right? 168 00:22:33,000 --> 00:22:43,000 There are the latest form of order is the proposed order docked at 702 along with additional red lines that reflect the changes. 169 00:22:43,000 --> 00:22:50,000 OK, so 702 dash one. OK, thank you. Nice job. 170 00:22:50,000 --> 00:22:58,000 All right, Mr. Hanson, any comment that you want to make on behalf of your clients? I think I understand the business decision that got made. 171 00:22:58,000 --> 00:23:10,000 I think you got I think you got the right balance. But obviously, I didn't want to take away your ability to make any statements you thought were appropriate. 172 00:23:10,000 --> 00:23:20,000 Oh, Mr. Hanson, I'm sorry, we can't hear you. Can you hit five star for me? 173 00:23:20,000 --> 00:23:24,000 There we go. 174 00:23:24,000 --> 00:23:29,000 Can you hear me? OK, you're on. Yes, sir. Loud and clear. Thank you. 175 00:23:29,000 --> 00:23:45,000 All right, great. Yes, you are right. I did want to make a couple of remarks on behalf of the ad hoc committee of secured convertible note holders, the first of which is we're obviously withdrawing our objection in connection with the consent that we're rendering with the entry of the order. 176 00:23:45,000 --> 00:23:56,000 But I didn't want to just give a little bit of history as to how we arrived at having to file our objection of reservation rights last night, because I think it's helpful for the court, not only on this issue, but context as we move forward. 177 00:23:56,000 --> 00:24:10,000 There may be others that come up. So, you know, we obviously we appreciate that the better came to us early and identified these issues for us, talk to us about the context of the settlement. 178 00:24:10,000 --> 00:24:25,000 Of course, with a lean to a new CC one that the debtors stipulated to on the debtors equipment, which includes the fixtures, we're a bit concerned that they were not going to be able to satisfy section three sixty three because there are no cash proceeds from the settlement. 179 00:24:25,000 --> 00:24:34,000 So from a, you know, from an F three perspective, it didn't look like anything was coming in that obviously would have exceeded the value of the equipment. 180 00:24:34,000 --> 00:24:44,000 So it was really a question of consent at that point. And there are other things that as well. They may be junior in nature, given that and others, but they're out there. 181 00:24:44,000 --> 00:25:00,000 And so we had that concern and we do have this kind of curious situation where it is a settlement, but it's also a transfer of collateral for you clear of the interest of the interest in that collateral for no active consideration. 182 00:25:00,000 --> 00:25:12,000 Right. There is consideration of the former relief of a claim, which doesn't necessarily benefit our parties because we believe that we are seeing a lean, but we never more or less understood that it was important for the debtors to try to move through. 183 00:25:12,000 --> 00:25:26,000 We want to be constructive here. So the suggestion that we made was incorporated into the order was that we receive effectively an equivalent we need in value on something that we don't currently have a lead in for effectively a trade, if you will. 184 00:25:26,000 --> 00:25:40,000 And the doubt is minimal to that. I think the reason we had to file the objection, the R.O.R. last night is because we were looking through it with the debtors and all the other parties and people have not yet agreed on the concept that's contained on the order. 185 00:25:40,000 --> 00:26:01,000 I think we in the debtors' office, it gets a little bit of time for others to get there. And that concept is instead of trying to litigate today what the value of this equipment is and the debtors' interest in it and the extent of the lean, let's push that off a little bit because it may or may not be important in the context of what's become from a plan negotiation, which is where we all need to get to. 186 00:26:01,000 --> 00:26:18,000 We were prepared, obviously, to come before the court and make all kinds of arguments about whose interests were in what and what the value might be, but it didn't make sense to do that today. So that was the idea behind the punt and I'm glad that public parties agreed on that this morning because it was the debtors and the no-holders thought that that was the right approach. 187 00:26:18,000 --> 00:26:35,000 It is important to look at those three buckets of assets though because, and I did want to just point out that while you have the Q&A with debtors' counsel, the whole point is we have the equipment at PPM's facility. I don't think that there should be, there's obviously no finding in the record yet. 188 00:26:35,000 --> 00:26:58,000 It was really just colloquy between you and counsel, but the point that the equipment being at PPM's facility means that it is not the debtors' equipment. We've, no one's been able to establish that for us. We've asked for whether or not the debtors have actually paid for that equipment, whether there was a purchase order which demonstrates one title to that property would transfer, you know, as a result of a title of payment. 189 00:26:58,000 --> 00:27:17,000 Just because it's out there at the facility doesn't mean that it belongs to them. So that's an issue that if we have to get to in the future, we'll get to it. The other two, whether it be on the debtors' property or a little bit easier, you know, to deal with, but that's pretty important and obviously to assist us in dealing with the issue going forward. 190 00:27:17,000 --> 00:27:46,000 The debtors are still trying to determine whether or not they have paid for that equipment and where those purchase orders are so that we can determine title transfer. And then lastly, I just wanted to say for the record that it's really important to the ad hoc group of secured convertible mill holders that nothing in connection with the order entered today sets that in precedent for any future transaction, whether that's a settlement with other mechanics, leaning holders, other secured parties, et cetera. Our view is that it's a very bespoke situation. 191 00:27:46,000 --> 00:28:04,000 We are happy to support it, but we don't want to have any type of methodology or tier binding anybody for in terms of whose property belongs to who, what the value of those liens are, what the value of other property may be, et cetera. And we'll cross that bridge when we get to it on this one. 192 00:28:04,000 --> 00:28:14,000 And what we hope is that we have a business plan to get our suit and a plan negotiation to try to bring some consensus to the court. But again, we're reserving all of our rights, obviously, on future settlements. 193 00:28:14,000 --> 00:28:20,000 Thank you. Anyone else have any comments? 194 00:28:20,000 --> 00:28:23,000 Yes, sir. 195 00:28:23,000 --> 00:28:31,000 Good afternoon, Your Honor. Scott Bowling, Baker-Bots, priority power. With me in the courtroom today is my partner, Danny David. 196 00:28:31,000 --> 00:28:38,000 Together with two members of priority senior management team, Mr. John Bick, chairman and chief commercial officer. 197 00:28:38,000 --> 00:28:39,000 Afternoon. 198 00:28:39,000 --> 00:28:42,000 As well as Mr. Brooks Antwile, the chief legal officer. 199 00:28:42,000 --> 00:28:44,000 Got it. Good afternoon to you. 200 00:28:44,000 --> 00:28:55,000 Your Honor, we obviously support the settlement. We'd only like to thank the court for your time today and thank the debtors, the wild team, and the other parties for their constructive work for the settlement. 201 00:28:55,000 --> 00:28:56,000 All right. Thank you. 202 00:28:56,000 --> 00:29:13,000 So first, Mr. Hanson, let me go back and deal with the issues that you've raised. Number one, I very much appreciate the business approach that your client took. I think that the right balance has been struck. You are right. 203 00:29:13,000 --> 00:29:35,000 I was really just having a little fun with counsel. I agree that title can be driven by many things, including contracts, including documentary evidence, and again, not trying to get too far in that. But I do think that it is an evidentiary issue that will have to be flushed out if as and when necessary. 204 00:29:35,000 --> 00:29:46,000 So again, just having some fun with the young lawyer just to see what she read and see what she hadn't read. So did not intend for that to in any way be binding on your clients. 205 00:29:46,000 --> 00:30:12,000 Likewise, again, every situation exists on its own merits, and this is not indicative of a path forward for any particular transaction other than the one that is before me. And so hopefully that will give your clients some comfort that they can make business decisions and not inadvertently stub their toe along the way with respect to the next one. 206 00:30:12,000 --> 00:30:27,000 With respect to the motion that I have before me, I do find that I have jurisdiction over the matter pursuant to 28 USC section 1334. I do find that the approval of a compromise constitutes a court proceeding under 28 USC section 157. 207 00:30:27,000 --> 00:30:49,000 Further find that I have the requisite constitutional authority to enter a final order. I am comfortable based upon the uncontested record that the debtor has prudently exercised its business judgment and again in those cases that we all know and recite all the time that the Fifth Circuit has said I'm not to substitute my own judgment for that of the debtor. 208 00:30:49,000 --> 00:31:05,000 I'm simply to look at the range of business judgment and see that it falls within the reasonable range. This is prudent business judgment. It's at the top. I again I think it's just the right balance. I understand the economics from the debtor's point of view from PPM's point of view. 209 00:31:05,000 --> 00:31:28,000 I got the transaction that has been proposed. It just makes good sense to me to the extent that the compromise includes a transfer property, not something that doesn't happen on a regular basis. Again, all of the issues that might have been issues have been resolved with the consent by the note holders don't have any concerns whatsoever. 210 00:31:28,000 --> 00:31:39,000 I will grant the motion using the order at 702-1. We will get that on the docket promptly so that will show up this afternoon. Anything else we need to address? 211 00:31:39,000 --> 00:31:59,000 Nothing further, Your Honor. May we be excused? Absolutely. Thank you all. Be well. And folks who are on for the 115. Thank you.