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You

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Thank you.

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This is the court clerk again.

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There's someone who I've just admitted with an iPhone number.

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Would you please rename yourself or let me know who you are?

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Thank you.

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Hi, this is Anna Yarumali from Latham.

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That cell phone line is a Latham line and we will correct the name.

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Thank you very much.

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Good afternoon, everyone.

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This is Judge Owens.

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We are gathered together today virtually for a first day hearing in the Virgin Orbit Holdings

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case.

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We have a lot of ground to cover today, so I will turn the podium over to proposed counsel

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for the debtors and you can walk me through today's agenda.

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Good afternoon, Your Honor.

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Kara Coyle, Young Conaway, Stargate and Taylor, proposed co-counsel to the debtors Virgin

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Orbit Holdings Inc. and certain of its affiliates.

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Can you hear me, Your Honor?

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I can.

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On behalf of the company, we'd like to thank Your Honor and your chambers for making the

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time to hear us today.

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We certainly appreciate it.

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We'd also like to take the time to thank Ms. Sarkeesian and the Office of the United States

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Trustee for working with us so constructively over the past week.

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I believe we've narrowed many of the issues that were raised by Ms. Sarkeesian for purposes

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of today.

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Your Honor, we're pleased to be working with our colleagues from Latham and Watkins, many

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of whom you'll hear from today.

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They've each been admitted pro hoc VJ.

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If it pleases the Court, before I cede the podium, the virtual podium to Ms. Yuramali,

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I had one housekeeping matter.

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We're trying to meet a funding deadline today, so we were hoping to take the dip up first

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and then wages and then cash management.

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So we would be going outside of the order that was presented in the agenda.

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That would be fine.

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All right.

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Thank you, Your Honor.

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Unless Your Honor has any questions for me, I'll cede the virtual podium to Ms. Yuramali.

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Okay.

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And just so everyone knows, I've read all the pleadings.

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And since you have a funding deadline, you can tailor your presentations as you see fit.

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Of course, I know how important it is to tell your story on the first day, so I don't mean

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to imply that you should not present in the manner that you see fit.

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But if we are running up against a funding deadline, I'm happy to accommodate a shortened

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presentations on the first days and other papers as well.

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Ms. Yuramali, good afternoon.

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Thank you, Your Honor.

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Good afternoon.

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Anu Yuramali of Latham and Watkins, proposed council to the debtors.

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I'm here today with George Cladonis, Lisa Burton, Brian Rosen, and Mohini Rarick, who

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will all introduce themselves as they take the podium.

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I echo Ms. Coyle in thanking the court for accommodating us on short notice so that we

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have the opportunity today to seek the very important first day relief you'll hear about

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shortly.

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Your Honor, we have a few slides that we'd like to use for these introductory remarks.

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May I please ask the court to provide Gail Reiser with screen sharing privileges?

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Yep, we're all set.

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Thank you.

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Before we get into the substance, I want to introduce a few folks to the court.

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First, Dan Hart, the company's chief executive officer and one of the first day declarants.

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Brian Whitman of Alvarez and Marcell, the company's financial advisor and the other first day

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declarant.

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Agnes Tang and Dave Zubricki of Dusera Partners, the company's investment banker.

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Your Honor, we filed for Chapter 11 overnight Monday and served the motions and notice of

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the first day hearing on all of the relevant parties listed in the notice provision of

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each motion.

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We worked with our DIP lender and their counsel, Davis Polk, pre-filing and before the hearing

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on the form of proposed orders to accommodate their comments.

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We also have had very productive discussions with Ms. Sarkeesian of the Office of the United

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States Trustee, which has led to the resolution of almost all of the office's questions and

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concerns and because of her efforts, we will hopefully have a relatively straightforward

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hearing today.

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I will provide brief remarks now about the background of the company and how we ended

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up here today and then we'll turn the podium over to my colleagues to go through the agenda.

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I plan to introduce the debtors and their business to the court, review their corporate

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and capital structure, and spend some time explaining how the company arrived here today

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and the path forward.

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The DIP financing is a part of this story, but I'll leave that for Mr. Cladonis so that

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we are not being repetitive.

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I am also sure Your Honor has read the first day declaration and I will try to avoid redundancy

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there as well.

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Your Honor, the debtors were founded in 2017.

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And from 2017 to 2020, the debtors designed, manufactured, and tested their space equipment

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and refined their operations for state-of-the-art satellite and launch technologies.

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The debtors began commercial operations in 2020, achieving 33 successful satellite launches.

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The company is headquartered in Long Beach, California, and has a testing site in Mojave,

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California.

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The debtors provide rideshare satellite services to their customers, and by rideshare I mean

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that the debtors can launch multiple satellites belonging to multiple customers in a single

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mission.

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The debtors are vertically integrated from design and manufacturing to launch equipment

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and operations.

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They offer fully mobile launch services using a modified custom-fitted Boeing 747 named

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Cosmic Girl and a specially designed rocket named Launcher One that is the world's first

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and only liquid-fueled air-launched rocket to reach orbit successfully.

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The debtors have the capabilities to provide mobile launch services both domestically and

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internationally.

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So why is this company different from its competition?

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Rather than a ground launch system that is fixed to a specific location, the company

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uses an air-launch system that is more reliable and agile and allows the company to execute

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launches from any governmental-licensed horizontal spaceport with a runway long enough to support

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a Boeing 747-400 aircraft.

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The environmental impact of the launch – air-launch system is similar to commercial aircraft

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and the launch system is less susceptible to weather-cause delays.

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The debtors operate within the space economy, which is an exciting, growing, and competitive

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industry.

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The debtors serve both the private and public sector with several key contracts for government

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and national security agencies to provide their unique capabilities both in the U.S.

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and abroad.

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On the public side, key defense and national security customers include the governments

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of the United States and the United Kingdom.

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In addition, the debtors offer their launch services to private companies like ANA, ARCET,

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and SATRevolution, and civil launch organizations like NASA and UK Space.

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The debtors have had four successful launches in 2021 and 2022.

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The debtors did suffer one failed launch in early 2023 but have already determined its

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root cause.

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The debtors expect to receive return-to-flight status from the FAA during the month of April,

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and the next rocket launch is in final integration and test phase in advance of its planned launch

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in the third quarter of 2023.

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Your Honor, the company consists of five U.S. entities.

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Virgin Orbit Holdings, Inc. is the publicly traded parent company.

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The largest shareholder is Virgin Investments Limited, holding approximately 64 percent

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of the shares in Virgin Orbit Holdings, and Fifteenth Investment Company is another large

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shareholder.

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The stock traded on the NASDAQ until yesterday when it was delisted.

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Moving down the structure, there are four U.S. subsidiaries, which are all debtors.

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Virgin Orbit LLC is the company's operational entity, and together with Virgin Orbit National

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Systems LLC, these two entities are the domestic employers and both hold certain customer and

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vendor contracts, intellectual property, and equipment.

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In addition, JACM Holdings, Inc. holds certain equipment, and finally, Viaco USA, Inc. was

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part of the merger process.

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The company also has three foreign subsidiaries in Brazil, Mexico, and UK that hold limited

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assets, and these entities are non-debtors, and these entities do not anticipate receiving

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funding from the debtors.

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Pre-petition, the debtors issued approximately $70.9 million in secured convertible notes

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to Virgin Investments Limited from November 2022 to March 2023 to infuse liquidity into

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the company.

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These notes are issued by Virgin Orbit Holdings and are guaranteed by the U.S. debtors.

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The debtors also issued approximately $51 million in unsecured convertible notes to

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YA2PN Limited, who we call Yorkville, in January 2022 – in January 22 and March 2023.

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Through a series of conversions into equity over time and the recent issuance of additional

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convertible notes, Yorkville now has approximately $2 million in unsecured debt outstanding.

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Also as of the petition date, the debtors have approximately $34 million in unsecured

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trade payables, $41 million of contractual purchase obligations, and are holding approximately

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$25 million in customer deposits, as well as approximately $6 million in other unsecured

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liabilities or other contingent claims.

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With respect to the company's liquidity, it's worth going back to the beginning.

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The company was formed in 2017, and the debtors announced its plans to go public in July 2021

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through a merger with a SPAC.

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In December 2021, companies DSPAC and related transactions, including a pipe, raised $228

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million in net proceeds.

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However, this amount was less than anticipated.

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Since early 2022, in an effort to meet its capital needs, the company worked with Bank

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of America and Goldman Sachs on strategic transactions and capital raises.

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Numerous parties executed MDAs and explored options with the company, including strategic

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acquisitions and debt financing.

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The company continued these marketing efforts in earnest through March 2023, including after

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the failed launch I had described earlier.

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The company also engaged in contingency planning with the assistance of Latham, Ducera, and

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Alvarez and Marzal.

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While the company remained focused on out-of-court financing solutions up until the petition

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date, management proceeded down a dual track to ensure that the value of the business and

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the key assets was maintained.

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The company also formed a transaction committee in March 2023 to evaluate potential strategic

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alternatives, including but not limited to any debtor and possession financing and any

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Section 363 sale transactions, particularly those types of transactions involving the

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majority shareholders, including VIL.

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The company has faced numerous challenges in its business operations and the ability

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to raise additional funding.

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These include significant upfront investment needs to develop launch capabilities and acquire

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customers and scalability issues.

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This is coupled with challenging financial markets and high interest rates, competition

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in the commercial markets, attrition, and technical issues leading to slow production.

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And an unsuccessful launch in January 23 negatively impacted the company's ability to obtain

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significant additional liquidity.

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Despite those challenges, the company's out-of-court marketing efforts were robust and resulted

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in one indication of interest in a potential sale and one for a structured financing transaction.

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Unfortunately, neither of those transactions materialized despite significant effort from

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parties leading up to the petition date.

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In the run-up to the filing of these cases, the debtors faced liquidity constraints while

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they continued these out-of-market – out-of-court marketing efforts.

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In mid-March, the debtors paused operations and placed the vast majority of their workforce

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on vacation.

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To that end, they also raised an additional $1 million in unsecured financing from Yorkville

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that provided additional runway to seek an out-of-court transaction.

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Unfortunately, these out-of-court efforts did not materialize and additional liquidity

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was not available to the company.

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On March 30th, the debtors secured $10.9 million in bridge financing from the parent, BIL,

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to implement a reduction in force impacting approximately 670 employees and – which

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was used to provide these employees with severance, COBRA, and outplacement services.

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The company's workforce has now been reduced to 100 employees that have the key knowledge

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to maintain the assets and allow business operations to restart once a buyer is – buyer

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can be identified.

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These employees will also assist with marketing the business, maintaining the debtors' assets,

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and providing the necessary reporting during the Chapter 11 cases, all with an eye towards

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maximizing value.

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Even after these significant measures were taken, the debtors did continue to explore

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out-of-court options, but ultimately came to the conclusion that a fulsome open marketing

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process in court would be the most value-maximizing path forward.

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Your Honor, there are three key elements to these cases.

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First is the DIP.

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Mr. Clodonis will shortly provide more detail on that, but the debtors intend to fund these

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cases and ongoing operations using the DIP facility being provided by BIL, which includes

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a new money component of approximately $27 million.

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The company and its advisors had hard-fought negotiations with BIL and its advisors Davis

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Polk and FTI on the DIP and the timeline.

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Where do we go from here?

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We intend to continue the sale process.

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We've negotiated for a case timeline that will allow the company to continue marketing

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a sale for their assets in whole or in part.

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The debtors believe that the parties already identified in the pre-petition marketing process,

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as well as new parties, will have interest in pursuing an acquisition of the debtors.

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Mr. Clodonis will provide more detail on the milestones, but the debtors do believe that

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they provide the ability to seek value-maximizing bids, but will also ensure that the company

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does not linger in Chapter 11.

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Simultaneously with the sale efforts, the debtors will be working towards a plan and

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confirmation process.

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A UCC will be appointed in short order, and the debtors intend to work with all of their

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stakeholders to hopefully achieve a consensual and efficient conclusion to these cases.

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Unless Your Honor has any questions for me on the background that I just provided, I

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will cede the podium to my colleague, Amy Quartarola.

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Thank you very much.

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I have no questions.

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Thank you, Your Honor.

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Good afternoon, Your Honor.

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Can you hear me okay?

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I can.

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Okay.

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Amy, for the record, Amy Quartarola of Latham & Watkins has proposed counsel to the debtors.

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We will be offering an additional declaration when we get to the DIP motion, but for now,

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we have three declarations that we would like to offer into evidence in connection with

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the first day relief being sought today.

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First is the declaration of Daniel M. Hart in support of Chapter 11 petitions and first-day

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00:17:07,760 --> 00:17:09,280
pleadings.

236
00:17:09,280 --> 00:17:11,760
That can be found at Docket Number 13.

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00:17:11,760 --> 00:17:16,800
Second, the declaration of Brian Whitman in support of Chapter 11 petitions and first-day

238
00:17:16,800 --> 00:17:17,800
pleadings.

239
00:17:17,800 --> 00:17:20,680
That can be found at Docket Number 14.

240
00:17:20,680 --> 00:17:26,160
And third, the supplemental declaration of Brian Whitman in support of Chapter 11 petitions

241
00:17:26,160 --> 00:17:30,320
and first-day pleadings that was filed earlier this morning.

242
00:17:30,320 --> 00:17:33,480
That can be found at Docket Number 56.

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00:17:33,480 --> 00:17:38,840
In addition, at the request of the Office of the United States Trustee, the debtors

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00:17:38,840 --> 00:17:43,600
will make a short proffer, which is as follows.

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00:17:43,600 --> 00:17:48,480
Daniel M. Hart, the Chief Executive Officer of the debtors, is in the courtroom today

246
00:17:48,480 --> 00:17:53,160
and prepared to testify as a supplement to the statements in his filed declaration as

247
00:17:53,160 --> 00:17:54,160
follows.

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00:17:54,160 --> 00:18:01,800
Mr. Hart would testify that the statements contained in paragraphs 24 through 86 of the

249
00:18:01,800 --> 00:18:07,560
declaration of Brian Whitman, which is found at Docket Number 14, as offered in support

250
00:18:07,560 --> 00:18:12,000
of the first-day relief being sought by the debtors here today, are, to the best of Mr.

251
00:18:12,000 --> 00:18:14,000
Hart's knowledge, accurate.

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00:18:14,000 --> 00:18:20,280
Both Mr. Hart and Mr. Whitman are on Zoom and available for questioning.

253
00:18:20,280 --> 00:18:26,080
Accordingly, the debtors would request the Court admit into evidence Docket Numbers 13,

254
00:18:26,080 --> 00:18:27,080
14, and 56.

255
00:18:27,080 --> 00:18:28,080
Thank you very much.

256
00:18:28,080 --> 00:18:33,080
Does anyone object to the admission of the three declarations, the two of Mr. Whitman

257
00:18:33,080 --> 00:18:38,080
and the one of Mr. Hart, as well as the admission of the supplemental proffer?

258
00:18:38,080 --> 00:18:41,800
I'm hearing no objections, so they're admitted.

259
00:18:41,800 --> 00:18:46,600
For my housekeeping purposes, does anyone tend to cross-examine the witnesses today

260
00:18:46,600 --> 00:18:49,720
on the substance of their testimony?

261
00:18:49,720 --> 00:18:51,720
Okay.

262
00:18:51,720 --> 00:18:52,720
Thank you very much.

263
00:18:52,720 --> 00:18:56,520
I appreciate the declarants' time and attention to submitting their declarations.

264
00:18:56,520 --> 00:19:00,280
I had the opportunity to review them prior to taking the bench, and they were very helpful.

265
00:19:00,280 --> 00:19:03,000
So thank you very much for those submissions.

266
00:19:03,000 --> 00:19:05,000
Thank you, Your Honor.

267
00:19:05,000 --> 00:19:09,200
I'll now turn the podium over to my colleague, Mr. Flodones.

268
00:19:09,200 --> 00:19:10,200
Okay.

269
00:19:10,200 --> 00:19:11,200
Great.

270
00:19:11,200 --> 00:19:12,200
Thank you.

271
00:19:12,200 --> 00:19:13,200
Good afternoon, Your Honor.

272
00:19:13,200 --> 00:19:18,200
George Clodones of Latham and Watkins, representing the debtors in possession here.

273
00:19:18,200 --> 00:19:19,200
Good afternoon.

274
00:19:19,200 --> 00:19:27,600
I'd like to turn to the motion for entry of interim and final orders with respect to

275
00:19:27,600 --> 00:19:33,800
the post-petition financing, use of cash collateral, granting leads providing super-priority admin

276
00:19:33,800 --> 00:19:38,320
expense, adequate protection, and modifying the automatic stay.

277
00:19:38,320 --> 00:19:44,680
As part of that request for relief, we submit an additional declaration for David Zubricki,

278
00:19:44,680 --> 00:19:50,120
who's the investment banker from DuSera, docket number 18.

279
00:19:50,120 --> 00:19:52,120
Okay.

280
00:19:52,120 --> 00:19:58,640
Does anyone object to the admission of Mr. Zubricki's declaration today?

281
00:19:58,640 --> 00:20:01,160
Hearing no objection, the declaration is admitted.

282
00:20:01,160 --> 00:20:05,560
For housekeeping purposes, does anyone intend to examine Mr. Zubricki on the substance of

283
00:20:05,560 --> 00:20:08,560
his testimony today?

284
00:20:08,560 --> 00:20:09,560
All right.

285
00:20:09,560 --> 00:20:10,840
I'm not hearing anyone.

286
00:20:10,840 --> 00:20:11,840
Thank you very much.

287
00:20:11,840 --> 00:20:12,840
Thank you, Your Honor.

288
00:20:12,840 --> 00:20:24,440
First, I'd like to thank the U.S. trustee for working with us all weekend, up until right

289
00:20:24,440 --> 00:20:28,040
before the hearing, to get to an almost consensual dip order.

290
00:20:28,040 --> 00:20:32,520
I do believe that the negotiations between the company and the dip lender on one hand

291
00:20:32,520 --> 00:20:37,000
and the U.S. trustee on the other have gotten very close to a consensual dip order.

292
00:20:37,000 --> 00:20:40,040
That said, the latest version that we filed was about an hour ago.

293
00:20:40,040 --> 00:20:41,040
I docked at number 55.

294
00:20:41,040 --> 00:20:47,560
At some point, we can turn to that and go through some more comments and thoughts from

295
00:20:47,560 --> 00:20:50,240
the U.S. trustee.

296
00:20:50,240 --> 00:20:54,680
But before we get into the details of the dip facility itself, I just want to highlight

297
00:20:54,680 --> 00:21:01,160
a few points here on the background, and my colleague, Mr. Amali, mentioned them, but

298
00:21:01,160 --> 00:21:05,400
I just want to highlight that the company has been out in the market since the closing

299
00:21:05,400 --> 00:21:09,920
of its lease back in December 2021, trying to raise capital.

300
00:21:09,920 --> 00:21:15,040
And although it's been out since December 2021 or early 2022, the negotiations really

301
00:21:15,040 --> 00:21:18,000
intensified towards the end of 2022.

302
00:21:18,000 --> 00:21:24,360
More specifically, the company hired two bankers pre-petitioned to run a variation of a public

303
00:21:24,360 --> 00:21:30,440
equity raise and a debt raise and other sources of capital to try to bring in liquidity.

304
00:21:30,440 --> 00:21:34,760
That process was run by two independent members of the board, but unfortunately, the company

305
00:21:34,760 --> 00:21:38,800
was running out of money and continued to run out of cash a number of times between

306
00:21:38,800 --> 00:21:43,480
November 2022 up until the eve of bankruptcy a couple days ago.

307
00:21:43,480 --> 00:21:50,200
So at the time that Virgin Group or VIL, which is the company's largest shareholder, had

308
00:21:50,200 --> 00:21:54,720
agreed to provide liquidity in the form of debt, and we call those the pre-petition notes

309
00:21:54,720 --> 00:21:55,720
in the declaration.

310
00:21:55,720 --> 00:22:00,960
More specifically, Your Honor, there were five instances that Virgin Group had provided

311
00:22:00,960 --> 00:22:09,000
the company with liquidity, totaling approximately $70.9 million, $70.9 million.

312
00:22:09,000 --> 00:22:14,640
A central part of the negotiations with respect to those pre-petition notes pertained to post-petition

313
00:22:14,640 --> 00:22:20,400
financing, which would definitely be necessary if the company were to implement any transaction

314
00:22:20,400 --> 00:22:24,760
through an in-court process.

315
00:22:24,760 --> 00:22:29,480
As payables and wages were coming due, the key here was to get the company into a Chapter

316
00:22:29,480 --> 00:22:36,160
11 process as soon as possible, build consensus around a sale process, and inject these estates

317
00:22:36,160 --> 00:22:38,040
on the company with much needed liquidity.

318
00:22:38,040 --> 00:22:44,240
It's important to note that the company filed with little liquidity, enough to pay for wages,

319
00:22:44,240 --> 00:22:50,360
and so the dip financing here is crucial to stabilize the company.

320
00:22:50,360 --> 00:22:55,040
So through the dip motion, Your Honor, we're seeking to enter into, or have authorization,

321
00:22:55,040 --> 00:22:59,760
rather, to enter into the dip credit agreement and incur the dip financing, as well as the

322
00:22:59,760 --> 00:23:04,280
rollout on an interim basis, which I'll get to in a second.

323
00:23:04,280 --> 00:23:07,520
In terms of the numbers and what the dip does for the company, let me just lay out real

324
00:23:07,520 --> 00:23:10,560
quickly exactly what we're asking for.

325
00:23:10,560 --> 00:23:17,240
There's $12.5 million of new money today on an interim basis.

326
00:23:17,240 --> 00:23:19,840
That's fresh new capital post-petition.

327
00:23:19,840 --> 00:23:25,240
The company is also seeking to roll out $10.9 million of what we call bridge notes, which

328
00:23:25,240 --> 00:23:31,600
are pre-petition, which were issued last Thursday and used to pay for severance for pre-petition

329
00:23:31,600 --> 00:23:33,920
reduction in force.

330
00:23:33,920 --> 00:23:42,080
It also gives the debtors an additional $15,150,000 in the final date, and it also has the capability

331
00:23:42,080 --> 00:23:48,640
of accessing $4.2 million if the company needs to undergo another reduction in force, depending

332
00:23:48,640 --> 00:23:50,440
on where the marketing process goes.

333
00:23:50,440 --> 00:23:56,000
Finally, there's a rollup in there for a total of $42.5 million, and if you do the math between

334
00:23:56,000 --> 00:24:03,680
both pre-petition and post-petition, it comes out to be about a one-to-one ratio.

335
00:24:03,680 --> 00:24:08,320
Some of the key terms to highlight, but they're pretty clear in the motion.

336
00:24:08,320 --> 00:24:12,480
In terms of interest, the new money in the bridge is cash pay at 12%.

337
00:24:12,480 --> 00:24:14,320
The rollup loans are not cash pay.

338
00:24:14,320 --> 00:24:15,480
They're PIC.

339
00:24:15,480 --> 00:24:21,000
There are upfront fees for fresh capital, the 3%, and that's interim, final, severance,

340
00:24:21,000 --> 00:24:24,320
and these bridge notes, which pay for the severance.

341
00:24:24,320 --> 00:24:29,680
The maturity date is July 8, 2023, and it gives the company the capability to run the

342
00:24:29,680 --> 00:24:38,120
sale process and get to a plan, too, at the end of the case.

343
00:24:38,120 --> 00:24:46,760
The company submitted... Sorry, let me just go back for a second.

344
00:24:46,760 --> 00:24:51,080
The company believes that the debtors have met their burden based on the first aid declaration

345
00:24:51,080 --> 00:24:55,400
and the declaration of Mrs. Zubricki, as well as Mr. Whitman.

346
00:24:55,400 --> 00:24:58,640
The company also believes that this is the best and only dip out there.

347
00:24:58,640 --> 00:25:04,360
Ducera did assess the market for dip financing, and in fact, not only shopped potential dip

348
00:25:04,360 --> 00:25:09,120
financing, but shopped the dip proposal that was provided by Virgin Group.

349
00:25:09,120 --> 00:25:13,440
They not only shopped what you would typically see as a junior dip and as a senior dip or

350
00:25:13,440 --> 00:25:18,360
priming dip, albeit on a contested basis, but also whether any third parties were interested

351
00:25:18,360 --> 00:25:22,360
in doing something a little more holistic in the form of refinancing the pre-petition

352
00:25:22,360 --> 00:25:27,680
notes to effectuate some kind of in-court or out-of-court transaction.

353
00:25:27,680 --> 00:25:30,040
There was no interest.

354
00:25:30,040 --> 00:25:35,000
The dip financing and the proposed roll-up amounts is integrated with the lender's support

355
00:25:35,000 --> 00:25:39,400
for the company and the sale process, which is why we're here today.

356
00:25:39,400 --> 00:25:43,760
The lender, who is also the company's largest shareholder, has consistently supported this

357
00:25:43,760 --> 00:25:48,840
company, both in assuring that there's adequate liquidity to run a strategic process, as well

358
00:25:48,840 --> 00:25:52,520
as for the company to take care of its workforce, including the employees that were severed

359
00:25:52,520 --> 00:25:55,520
a couple days ago.

360
00:25:55,520 --> 00:26:01,360
Your Honor, I mentioned the two components of the dip, the roll-up, and the fact that

361
00:26:01,360 --> 00:26:05,480
it's what has been referred to as an insider dip.

362
00:26:05,480 --> 00:26:09,640
I do have a little bit to say on that, but I don't know if you have any questions on

363
00:26:09,640 --> 00:26:10,640
the dip itself.

364
00:26:10,640 --> 00:26:11,640
I do.

365
00:26:11,640 --> 00:26:19,400
Am I correct in understanding that there is an 18% interest wealth pick on the rolled-up

366
00:26:19,400 --> 00:26:22,680
loans that are currently at 16% or lower?

367
00:26:22,680 --> 00:26:23,680
Yes.

368
00:26:23,680 --> 00:26:26,920
Okay, so it's a higher interest rate for the roll-up loan?

369
00:26:26,920 --> 00:26:27,920
Correct.

370
00:26:27,920 --> 00:26:36,320
Am I understanding that the dip lender is demanding a 3% fee on the roll-up portions?

371
00:26:36,320 --> 00:26:39,320
Or has that been taken out?

372
00:26:39,320 --> 00:26:46,320
The 3% fee, which is the upfront cash fee, is on the interim, on the final, on the severance,

373
00:26:46,320 --> 00:26:47,320
which is the 4.2.

374
00:26:47,320 --> 00:26:52,400
Those are the three post-petition fresh new money components, as well as the bridge, which

375
00:26:52,400 --> 00:26:55,920
is the 10.9 that was just done pre-petition.

376
00:26:55,920 --> 00:27:00,440
So yes, there's a component that's on the roll-up, but not on the interim final.

377
00:27:00,440 --> 00:27:01,440
Sorry.

378
00:27:01,440 --> 00:27:04,480
The interim, final, and severance are all post-petition.

379
00:27:04,480 --> 00:27:13,240
Was there a fee charge for the 10.9 bridge loan just a week ago?

380
00:27:13,240 --> 00:27:17,160
You mean fee charge pre-petition that we paid as a company?

381
00:27:17,160 --> 00:27:18,160
Yes.

382
00:27:18,160 --> 00:27:24,600
Is the company already obligated to pay a fee for the 10.9 that was extended last week

383
00:27:24,600 --> 00:27:25,600
by VIL?

384
00:27:25,600 --> 00:27:28,600
No, we didn't pay a fee pre-petition.

385
00:27:28,600 --> 00:27:29,600
No fees.

386
00:27:29,600 --> 00:27:30,600
Okay.

387
00:27:30,600 --> 00:27:33,800
All right, thank you.

388
00:27:33,800 --> 00:27:35,800
Those are my only questions right now.

389
00:27:35,800 --> 00:27:36,800
Okay.

390
00:27:36,800 --> 00:27:41,520
I just want to touch briefly on the roll-up point and the insider point, because I think

391
00:27:41,520 --> 00:27:44,440
it's kind of important to the narrative.

392
00:27:44,440 --> 00:27:49,120
The company does use the roll-up important as part of the DIP, and there's a few reasons

393
00:27:49,120 --> 00:27:50,120
why.

394
00:27:50,120 --> 00:27:54,600
First, I mean the obvious, it's a condition to the DIP financing, and we need the DIP

395
00:27:54,600 --> 00:27:56,600
financing, so it's important to the company.

396
00:27:56,600 --> 00:28:00,360
The second is 10.9 million from last Thursday.

397
00:28:00,360 --> 00:28:05,880
That was effectively viewed as a pre-DIP financing facility, allowed the company to pay approximately

398
00:28:05,880 --> 00:28:12,720
671 employee severance, and allowed the company to treat its people properly, and most importantly,

399
00:28:12,720 --> 00:28:16,880
retain the people that are currently still at the company, approximately 100 people,

400
00:28:16,880 --> 00:28:21,360
so that they understand that they're still, you know, that the people are important to

401
00:28:21,360 --> 00:28:24,960
this company during this process.

402
00:28:24,960 --> 00:28:29,400
The roll-up economics are slightly similar, although to your point, Your Honor, they're

403
00:28:29,400 --> 00:28:34,240
a little higher at 2% on the roll-up piece.

404
00:28:34,240 --> 00:28:38,280
The bridge notes have allowed the company to maintain, and when I say the bridge notes,

405
00:28:38,280 --> 00:28:42,400
the pre-petition notes that were entered into the 10.9 million, they've allowed the

406
00:28:42,400 --> 00:28:47,520
company to maintain the core business, the core employees, the key components that are

407
00:28:47,520 --> 00:28:55,080
required to run a good marketing process here, and to entice potential buyers to make bids.

408
00:28:55,080 --> 00:28:59,520
I also think a key component here, at least on an interim basis, is the roll-up is also

409
00:28:59,520 --> 00:29:03,800
subject to the challenge, so I'm not sure how unsecured creditors could be harmed, because

410
00:29:03,800 --> 00:29:08,680
when a committee is formed, they'll have the ability to challenge.

411
00:29:08,680 --> 00:29:14,960
And then finally, on the insider piece, I mean, there is a board here.

412
00:29:14,960 --> 00:29:22,160
That board, when discussions began about SIPP, decided to create a transaction committee.

413
00:29:22,160 --> 00:29:27,360
That transaction committee consisted of existing board members, Susan Helms and Katerina McFarland,

414
00:29:27,360 --> 00:29:28,920
who were independent.

415
00:29:28,920 --> 00:29:34,200
The transaction committee had authority to provide recommendations to the full board.

416
00:29:34,200 --> 00:29:40,400
And when the board realized that this is going more toward the Chapter 11 restructuring process,

417
00:29:40,400 --> 00:29:45,560
the board decided to bring in two restructuring independents to be added to that transaction

418
00:29:45,560 --> 00:29:47,840
committee, Alan Carr and Jill Friesly.

419
00:29:47,840 --> 00:29:52,760
And in the end, there was very much active engagement between the committee and the advisors

420
00:29:52,760 --> 00:29:57,920
on one hand, and Virgin Group on the other hand, arms-length negotiations.

421
00:29:57,920 --> 00:30:02,600
At the end, the transaction committee recommended that the board enter into the DIP.

422
00:30:02,600 --> 00:30:07,360
We think it's squarely false, it's in the companies and the board's business judgment.

423
00:30:07,360 --> 00:30:10,320
Virgin Group did not fixate the terms of this transaction.

424
00:30:10,320 --> 00:30:13,440
There was an independent negotiation involved.

425
00:30:13,440 --> 00:30:18,440
The directors weren't uninformed, did not lack independence.

426
00:30:18,440 --> 00:30:25,320
So we don't think the insider piece is relevant here in terms of the way the process was done

427
00:30:25,320 --> 00:30:27,080
at the board level.

428
00:30:27,080 --> 00:30:31,840
And finally, just to close it out, the company believes that if this DIP financing is not

429
00:30:31,840 --> 00:30:37,000
approved along with the 10.9, the company will be irreparably harmed.

430
00:30:37,000 --> 00:30:42,520
There's virtually not enough cash on hand after we make our next payroll.

431
00:30:42,520 --> 00:30:48,760
So Your Honor, we ask that the motion for DIP financing be entered on an interim basis.

432
00:30:48,760 --> 00:30:49,760
Okay.

433
00:30:49,760 --> 00:30:54,920
Well, I think you've previewed through a reply what Ms. Sarkeesian's issues or objections

434
00:30:54,920 --> 00:30:56,560
might be with the DIP.

435
00:30:56,560 --> 00:31:00,440
I'm happy to hear from all the parties that are in support of the DIP.

436
00:31:00,440 --> 00:31:07,000
And then I'll hear from Ms. Sarkeesian and then you'll have the opportunity to reply.

437
00:31:07,000 --> 00:31:09,000
Mr. Resnick, are you here for VLI?

438
00:31:09,000 --> 00:31:10,000
Hi, Your Honor.

439
00:31:10,000 --> 00:31:13,000
Nice to be back before you and good afternoon.

440
00:31:13,000 --> 00:31:15,720
Good afternoon and nice to see you again.

441
00:31:15,720 --> 00:31:21,800
So I'm here virtually with my colleagues, Josh Sturm and Jared Erickson, as well as

442
00:31:21,800 --> 00:31:26,800
our co-counsel from Morris Nichols, Robert Denny and Eric Schwartz.

443
00:31:26,800 --> 00:31:32,240
We are representing Virgin Investments Limited, which is the 64% shareholder, as well as the

444
00:31:32,240 --> 00:31:38,200
existing pre-petition lender and the proposed DIP lender.

445
00:31:38,200 --> 00:31:45,000
As Your Honor has heard, our client has been funding the company since last November, the

446
00:31:45,000 --> 00:31:55,440
tune of $70.9 million as the company has engaged in its process to seek various types of transactions,

447
00:31:55,440 --> 00:31:59,560
retail transactions, financing transactions, et cetera.

448
00:31:59,560 --> 00:32:08,440
And Your Honor, just in terms of the roll-up here, just to directly, we were very surgical

449
00:32:08,440 --> 00:32:12,880
and targeted in what we're requesting on the first day here.

450
00:32:12,880 --> 00:32:17,160
The remaining part of the roll-up is subject to the final order.

451
00:32:17,160 --> 00:32:23,520
And despite the fact that we engaged in five financings leading up to the bankruptcy, we

452
00:32:23,520 --> 00:32:30,640
decided, our clients decided that for these purposes to request just a roll-up of the

453
00:32:30,640 --> 00:32:37,920
financing that was provided four days in advance of the bankruptcy, it was to fund, as you

454
00:32:37,920 --> 00:32:45,720
heard, the reduction in force and allow severance payments to 87% of the workforce, this is

455
00:32:45,720 --> 00:32:51,680
671 employees, to right-size the workforce for this process.

456
00:32:51,680 --> 00:32:56,400
And just to reiterate what was said before, we understand that the debtors were working

457
00:32:56,400 --> 00:33:04,000
until literally the petition date to find alternatives to Chapter 11.

458
00:33:04,000 --> 00:33:12,120
So we believe that the funding gave the company the chance of potentially avoiding Chapter

459
00:33:12,120 --> 00:33:13,120
11.

460
00:33:13,120 --> 00:33:19,200
And we think that this is the type of funding that was done as a quote-unquote pre-DIP and

461
00:33:19,200 --> 00:33:26,480
was done expressly with a covenant to seek a roll-up of this amount.

462
00:33:26,480 --> 00:33:33,720
We think this is the type of funding that should be promoted and supported.

463
00:33:33,720 --> 00:33:38,080
And so we think it's entirely appropriate to be rolled up.

464
00:33:38,080 --> 00:33:45,000
And as Mr. Pladona said, very importantly, the roll-up is fully subject to the challenge

465
00:33:45,000 --> 00:33:46,760
rights of a committee.

466
00:33:46,760 --> 00:33:50,680
And so we don't believe there are any issues with the financing.

467
00:33:50,680 --> 00:33:55,680
But of course, if there were any issues with the $10.9 million financing, a committee would

468
00:33:55,680 --> 00:34:01,360
be totally entitled to raise whatever challenge that they have.

469
00:34:01,360 --> 00:34:05,080
Your Honor, I would also just echo the thanks to Ms. Sarkeesian.

470
00:34:05,080 --> 00:34:10,360
We've been working with her nonstop since yesterday and several hours this morning.

471
00:34:10,360 --> 00:34:13,840
And I believe we've come to a largely consensual order.

472
00:34:13,840 --> 00:34:18,920
I do think there are a few other provisions throughout that I understand that she intends

473
00:34:18,920 --> 00:34:19,920
to raise, Your Honor.

474
00:34:19,920 --> 00:34:24,920
And we will be happy to respond when she does so.

475
00:34:24,920 --> 00:34:25,920
Okay.

476
00:34:25,920 --> 00:34:26,920
Thank you, Mr. Resnick.

477
00:34:26,920 --> 00:34:29,920
Could you shed some light?

478
00:34:29,920 --> 00:34:35,440
I understand, or at least I can anticipate the issues that Ms. Sarkeesian may have with

479
00:34:35,440 --> 00:34:39,480
respect to the roll-up and putting those issues aside for the moment.

480
00:34:39,480 --> 00:34:46,280
I'm interested in the basis for the higher interest rate on the roll-up loan as well

481
00:34:46,280 --> 00:34:49,040
as the 3% fee on the interim bridge.

482
00:34:49,040 --> 00:34:51,400
Can you shed some light onto that?

483
00:34:51,400 --> 00:35:01,600
I think that's a fairly unusual, perhaps detrimental give by the estate on these roll-up loans.

484
00:35:01,600 --> 00:35:06,640
And while I may not take issue on giving roll-ups on a bridge, this does seem to give the lender

485
00:35:06,640 --> 00:35:10,560
more than to which it was entitled to one week ago.

486
00:35:10,560 --> 00:35:14,080
And so could you shed some light on why that would be appropriate at the interim?

487
00:35:14,080 --> 00:35:15,080
Sure.

488
00:35:15,080 --> 00:35:23,080
At the time that our clients did the financing, last Thursday, I believe we were looking to

489
00:35:23,080 --> 00:35:27,800
match the terms of the prior funding that had been done.

490
00:35:27,800 --> 00:35:32,200
And so I think we matched the pre-petition rates that were in effect.

491
00:35:32,200 --> 00:35:37,040
That's my understanding, I don't have it in front of me, so...

492
00:35:37,040 --> 00:35:41,120
I think you were at 12 to 16% on the prior loans.

493
00:35:41,120 --> 00:35:42,120
Exactly.

494
00:35:42,120 --> 00:35:45,120
And the 4% differential represents...

495
00:35:45,120 --> 00:35:48,000
That's right, now I've put this in front of...

496
00:35:48,000 --> 00:35:54,640
So the 4% differential represents the default rate.

497
00:35:54,640 --> 00:36:01,240
So the March 30th financing matched the interest rate of the February and the January financings.

498
00:36:01,240 --> 00:36:07,440
Because if the company were to avoid Chapter 11, then we would have been fine with the

499
00:36:07,440 --> 00:36:10,240
same rate being in effect.

500
00:36:10,240 --> 00:36:14,920
The default rate is the additional 4% that would get you to 16%.

501
00:36:14,920 --> 00:36:20,520
And so now, Your Honor, our view that if this is being rolled up into a debt, it should

502
00:36:20,520 --> 00:36:29,640
have the same rate as the new money loans, albeit I understand it's being paid in kind.

503
00:36:29,640 --> 00:36:33,800
And then there were no upfront fees charged last Thursday, the company did not have the

504
00:36:33,800 --> 00:36:35,760
liquidity to pay it.

505
00:36:35,760 --> 00:36:39,960
So we just would have had to upsize the loans and...

506
00:36:39,960 --> 00:36:47,080
Sorry, upsize the node and round trip the 3% to ourselves, which we didn't think would

507
00:36:47,080 --> 00:36:49,960
make sense to do last Thursday.

508
00:36:49,960 --> 00:36:56,280
And so that's why we're seeking payment of the fee today, where the company will have

509
00:36:56,280 --> 00:36:59,960
the liquidity under the financing.

510
00:36:59,960 --> 00:37:00,960
Okay.

511
00:37:00,960 --> 00:37:01,960
Thank you.

512
00:37:01,960 --> 00:37:02,960
Okay.

513
00:37:02,960 --> 00:37:13,560
Well, why don't I hear from Ms. Sarkeesian?

514
00:37:13,560 --> 00:37:14,560
Thank you, Your Honor.

515
00:37:14,560 --> 00:37:15,560
Can you hear me?

516
00:37:15,560 --> 00:37:16,560
Yes, I can.

517
00:37:16,560 --> 00:37:17,560
Thank you.

518
00:37:17,560 --> 00:37:22,360
Good afternoon, Your Honor.

519
00:37:22,360 --> 00:37:26,900
So for the record, Juliet Sarkeesian on behalf of the U.S. Trustee.

520
00:37:26,900 --> 00:37:32,000
So I'm going to start with the issue of the roll up.

521
00:37:32,000 --> 00:37:38,720
So my understanding and counsel can correct me if I'm wrong, is that on an interim basis,

522
00:37:38,720 --> 00:37:44,120
there's going to be a total amount of $23.1 million.

523
00:37:44,120 --> 00:37:48,600
Of that, $10.9 million is a roll up.

524
00:37:48,600 --> 00:37:57,360
So by my math, that's 47% of the interim DIP financing is a roll up.

525
00:37:57,360 --> 00:37:59,400
This is an insider loan.

526
00:37:59,400 --> 00:38:09,240
So the DIP lender is the majority shareholder of the debtors, controls, is an indirect parent.

527
00:38:09,240 --> 00:38:10,960
It is the prepetition lender.

528
00:38:10,960 --> 00:38:17,120
And it also, my understanding is, is the licensor of the trademark of Virgin.

529
00:38:17,120 --> 00:38:20,240
I'll talk a little bit about that in a minute.

530
00:38:20,240 --> 00:38:23,200
So it is unquestionably an insider loan.

531
00:38:23,200 --> 00:38:31,200
And to have such a significant percentage of the interim financing, almost 50%, be a

532
00:38:31,200 --> 00:38:37,800
roll up on the first day with an insider loan, the U.S. Trustee objects to that.

533
00:38:37,800 --> 00:38:43,320
In addition, as Your Honor pointed out, the interest rate is 18% on the roll up, and it's

534
00:38:43,320 --> 00:38:44,320
12% on the new money.

535
00:38:44,320 --> 00:38:47,320
I mean, that's what I saw in the motion.

536
00:38:47,320 --> 00:38:52,280
I just heard Lenders Council, I thought said something higher than that.

537
00:38:52,280 --> 00:38:57,120
But my understanding based on the motion is it's 12% for new money that is paid in cash,

538
00:38:57,120 --> 00:39:01,940
and then the 12% is paid in kind, plus the 3% fee.

539
00:39:01,940 --> 00:39:06,640
So that's a very significant difference in addition to being more than what it was for

540
00:39:06,640 --> 00:39:08,840
the prepetition piece of it.

541
00:39:08,840 --> 00:39:13,080
The U.S. Trustee believes that the committee absolutely should have an opportunity to be

542
00:39:13,080 --> 00:39:14,760
heard on the roll up.

543
00:39:14,760 --> 00:39:20,680
And if a roll up is allowed on the first day, they certainly can't, they could challenge

544
00:39:20,680 --> 00:39:26,520
the rest of it at the final hearing, but they will not be able to challenge rolling up that

545
00:39:26,520 --> 00:39:27,520
10.9 million.

546
00:39:27,520 --> 00:39:34,080
Now, I heard Lenders Council say, well, you know, it's subject to the challenge period.

547
00:39:34,080 --> 00:39:39,640
So if someone, if the committee or another party in interest were to challenge the, say,

548
00:39:39,640 --> 00:39:45,520
the validity or the perfection of the prepetition liens, and that was successful, then of course

549
00:39:45,520 --> 00:39:47,880
the roll up would be unwound.

550
00:39:47,880 --> 00:39:50,520
But that's only a piece of it.

551
00:39:50,520 --> 00:39:56,960
The other piece is the fact that the roll up takes what was a prepetition-sutured loan

552
00:39:56,960 --> 00:40:03,760
with, which would going into bankruptcy be a prepetition-sutured claim and turns it into,

553
00:40:03,760 --> 00:40:09,720
certainly the claim then becomes a super priority claim.

554
00:40:09,720 --> 00:40:13,320
So that is a difference and that does not change.

555
00:40:13,320 --> 00:40:19,160
Again, of course, if the underlying prepetition liens are set aside, if there's a successful

556
00:40:19,160 --> 00:40:21,200
challenge, yes, that would affect everything.

557
00:40:21,200 --> 00:40:26,200
But it may be that there's not a successful challenge, but nevertheless, one could still

558
00:40:26,200 --> 00:40:32,520
object to taking the prepetition claim and turning it into a super priority claim.

559
00:40:32,520 --> 00:40:38,360
And that is something I believe that the committee should have the opportunity to object to.

560
00:40:38,360 --> 00:40:42,560
I do also want to put on the record that the U.S. trustee reserves its right at the final

561
00:40:42,560 --> 00:40:46,800
hearing to object to the roll up even on a final basis, but we're not addressing that

562
00:40:46,800 --> 00:40:53,380
at this point in time, just the, just the interim.

563
00:40:53,380 --> 00:40:56,000
We also believe that a roll up here is unnecessary.

564
00:40:56,000 --> 00:41:01,000
And again, this is based on the many hats that the lender's wearing here.

565
00:41:01,000 --> 00:41:06,800
I mean, it really appears honestly that this bankruptcy is being run primarily, if not

566
00:41:06,800 --> 00:41:12,800
exclusively for the benefit of the lenders, who again are also the majority shareholders

567
00:41:12,800 --> 00:41:14,200
here.

568
00:41:14,200 --> 00:41:20,440
And I can't, it's really hard for me to imagine an entity in this position where the majority

569
00:41:20,440 --> 00:41:25,840
shareholder, they already have the prepetition loans to walk away if they're not getting

570
00:41:25,840 --> 00:41:30,400
a 47% roll up on the first day.

571
00:41:30,400 --> 00:41:34,640
And I now want to talk about that trademark issue, which is really concerning me.

572
00:41:34,640 --> 00:41:41,840
So it's my understanding based on the documents that prior to the petition being filed, that

573
00:41:41,840 --> 00:41:46,640
the lenders who are also, again, the prepetition slash dip lenders who are also the holders

574
00:41:46,640 --> 00:41:52,120
of the Virgin license have terminated that license.

575
00:41:52,120 --> 00:41:57,640
Or I understand that the debtors can continue to use the Virgin name until the sale is done,

576
00:41:57,640 --> 00:42:05,560
but it effectively means that the debtors will not be able to sell as part of the sale.

577
00:42:05,560 --> 00:42:10,320
And this is a, from what I understand, a fast sale case, that is the lenders are pushing

578
00:42:10,320 --> 00:42:16,360
a really fast deadline here, that they're not going to be able to market that when we

579
00:42:16,360 --> 00:42:20,040
sell this, you are going to be able to use the Virgin name.

580
00:42:20,040 --> 00:42:22,440
So that's not going to be part of what's being sold.

581
00:42:22,440 --> 00:42:28,720
And I'm not disputing that the lenders may be within their rights contractually to have

582
00:42:28,720 --> 00:42:29,720
done that.

583
00:42:29,720 --> 00:42:30,720
I have no idea.

584
00:42:30,720 --> 00:42:31,720
I haven't seen the license.

585
00:42:31,720 --> 00:42:34,000
I assume that the committee will look into that.

586
00:42:34,000 --> 00:42:42,800
But it does hamper the ability of the debtors to get the highest possible recovery for their

587
00:42:42,800 --> 00:42:43,800
assets.

588
00:42:43,800 --> 00:42:50,120
So I think in light of all of these things and how many hats that the dip lenders are

589
00:42:50,120 --> 00:43:00,760
wearing here, that a roll-up is just, again, on the first day, we would ask that it not

590
00:43:00,760 --> 00:43:03,000
be approved.

591
00:43:03,000 --> 00:43:07,520
Your Honor, unless you have further questions with respect to the, my argument with respect

592
00:43:07,520 --> 00:43:09,400
to the roll-up is finished.

593
00:43:09,400 --> 00:43:15,080
And I would just ask, Your Honor, you may like to hear other parties respond to my argument

594
00:43:15,080 --> 00:43:20,360
on the roll-up before we get on to the other issues, which are, I would say, much less

595
00:43:20,360 --> 00:43:23,280
significant than this one?

596
00:43:23,280 --> 00:43:26,000
My preference is to hear your argument in its entirety.

597
00:43:26,000 --> 00:43:29,760
And then I'll hear from other parties in interest, and we'll move forward.

598
00:43:29,760 --> 00:43:30,760
Absolutely.

599
00:43:30,760 --> 00:43:31,760
Okay.

600
00:43:31,760 --> 00:43:34,960
And just so everyone is aware, I have a contested dip hearing starting at 3 today.

601
00:43:34,960 --> 00:43:41,840
So while I am anxiously awaiting, and will give you as much time as I can, just be mindful

602
00:43:41,840 --> 00:43:44,840
of that 3 o'clock hearing.

603
00:43:44,840 --> 00:43:57,360
And Your Honor, if it pleases the Court, I would like to refer to the black line that

604
00:43:57,360 --> 00:44:05,200
was, for pagination purposes, the black line that was filed with the Court at around noon.

605
00:44:05,200 --> 00:44:06,200
That's fine.

606
00:44:06,200 --> 00:44:11,400
It should be document number 55, I believe, Your Honor.

607
00:44:11,400 --> 00:44:12,400
I have it up.

608
00:44:12,400 --> 00:44:13,400
Thank you.

609
00:44:13,400 --> 00:44:14,400
Perfect.

610
00:44:14,400 --> 00:44:15,400
Okay.

611
00:44:15,400 --> 00:44:33,400
So the first page would be on 31 of the black line, which is paragraph 7B as in boy.

612
00:44:33,400 --> 00:44:52,080
Okay, one subsection B as in boy.

613
00:44:52,080 --> 00:45:00,680
So the issue here is that these are the dip financing liens, and this has to do with the

614
00:45:00,680 --> 00:45:03,080
priority of the dip financing liens.

615
00:45:03,080 --> 00:45:11,680
So in A, talks about unencumbered property, so we're not dealing with that.

616
00:45:11,680 --> 00:45:19,320
But in B, I had asked that these are the priming liens, and it states in the third line that

617
00:45:19,320 --> 00:45:25,720
this will be, these liens shall be first priority senior priming security interests in all tangible

618
00:45:25,720 --> 00:45:30,120
and intangible pre-petition, post-petition property of the dip loan parties, which are

619
00:45:30,120 --> 00:45:31,120
the debtors.

620
00:45:31,120 --> 00:45:40,640
So I had asked, this is what I understand is standard to have an exception, which is

621
00:45:40,640 --> 00:45:46,680
to make such liens subject to any valid perfected and non-avoidable lien in existence as of

622
00:45:46,680 --> 00:45:54,040
the petition date, maybe other than the primes, other than the pre-petition lenders liens,

623
00:45:54,040 --> 00:45:58,800
and any valid non-avoidable lien in existence as of the petition date that is subsequently

624
00:45:58,800 --> 00:46:02,760
perfected pursuant to 546B of the code.

625
00:46:02,760 --> 00:46:12,400
Now that is included in subsection C, but it's not in B, and I think that that is appropriate

626
00:46:12,400 --> 00:46:15,880
to be in B as well, subsection B as well.

627
00:46:15,880 --> 00:46:20,880
And I know that the heading of it is liens priming certain pre-petition secured party

628
00:46:20,880 --> 00:46:21,880
liens.

629
00:46:21,880 --> 00:46:26,880
If you read the language, it is not actually limited to the pre-petition secured party

630
00:46:26,880 --> 00:46:34,240
liens, because these dip liens are becoming first priority senior pronging security interests.

631
00:46:34,240 --> 00:46:39,680
So that is, does Your Honor have any question about that point?

632
00:46:39,680 --> 00:46:41,960
I apologize.

633
00:46:41,960 --> 00:46:44,360
What paragraph are you in?

634
00:46:44,360 --> 00:46:49,480
I understand what your position is, but I'm, there's, seems as if there's three paragraphs

635
00:46:49,480 --> 00:46:52,560
that this could be relevant to, and I just want to make sure I'm looking at, or at least

636
00:46:52,560 --> 00:46:53,560
two paragraphs.

637
00:46:53,560 --> 00:47:04,600
Seven B is in boy, and it's on page 30, it's like the top of page 31 of the of the file

638
00:47:04,600 --> 00:47:07,600
black line.

639
00:47:07,600 --> 00:47:11,160
Okay.

640
00:47:11,160 --> 00:47:14,600
And you said that this language you requested is in another paragraph?

641
00:47:14,600 --> 00:47:22,280
Well, it's in paragraph C is in cat, but the difference is that they specify it's under,

642
00:47:22,280 --> 00:47:31,640
well, so it's one, two, three, four, four, starting at four lines down in C is in cat,

643
00:47:31,640 --> 00:47:35,200
and it continues over to the next page.

644
00:47:35,200 --> 00:47:39,920
The difference there is there it specifically says senior, uses the word senior liens, whereas

645
00:47:39,920 --> 00:47:45,960
again, just in my experience with at least with interim orders, it usually doesn't say

646
00:47:45,960 --> 00:47:55,240
specify senior just says valid perfected non-avoidable security interest as a petition date or that

647
00:47:55,240 --> 00:47:58,840
becomes so pursuant to 546b.

648
00:47:58,840 --> 00:47:59,840
Okay.

649
00:47:59,840 --> 00:48:00,840
So, okay.

650
00:48:00,840 --> 00:48:01,840
All right.

651
00:48:01,840 --> 00:48:21,280
So the next one is seven, I'm sorry, so the next one is in seven D is in dog, and that

652
00:48:21,280 --> 00:48:28,880
is on page 32 of the black line.

653
00:48:28,880 --> 00:48:34,880
And this is the heading is liens senior to certain other liens.

654
00:48:34,880 --> 00:48:48,000
And if your honor goes down starting in line and line five, going on to seven, it's including,

655
00:48:48,000 --> 00:48:53,360
so it's senior to certain liens and it specifies any liens or security interest granted in

656
00:48:53,360 --> 00:48:57,880
favor of federal, state, municipal or other governmental units.

657
00:48:57,880 --> 00:49:04,960
And I had requested or regulatory bodies, and I had requested that that particular provision

658
00:49:04,960 --> 00:49:10,800
regarding governmental units and regulatory bodies, you need subject to final order just

659
00:49:10,800 --> 00:49:16,400
to give such entities an opportunity to come in as I am not particularly knowledgeable

660
00:49:16,400 --> 00:49:22,880
about regulatory governmental regulatory liens and what certainly like the opportunity for

661
00:49:22,880 --> 00:49:28,840
those entities to be heard at the final hearing.

662
00:49:28,840 --> 00:49:33,240
And that's also it's the exact same issue in paragraph 19a.

663
00:49:33,240 --> 00:49:34,960
I don't think you need to look at that.

664
00:49:34,960 --> 00:49:38,400
It's exactly the same wording.

665
00:49:38,400 --> 00:49:48,440
And unless your honor has any questions about that, I will move on.

666
00:49:48,440 --> 00:49:54,560
So the next one is paragraph 10, there's no subsection paragraph 10.

667
00:49:54,560 --> 00:50:02,640
And on the black line, it's at the towards the bottom of page 35.

668
00:50:02,640 --> 00:50:08,840
And this this provision relates to rights and remedies upon default.

669
00:50:08,840 --> 00:50:12,760
And I'm looking at three lines from the bottom of page 35.

670
00:50:12,760 --> 00:50:17,640
It's talking about what issues can be raised in an emergency hearing.

671
00:50:17,640 --> 00:50:22,600
If there is a default and the debtors or other parties want to run in an expert emergency

672
00:50:22,600 --> 00:50:28,760
hearing, this says that the sole purpose of the hearing would be to contest whether or

673
00:50:28,760 --> 00:50:33,280
not an event of default has occurred or is continuing.

674
00:50:33,280 --> 00:50:38,680
Your honor, I know I don't know that I had this issue discussed before your honor, but

675
00:50:38,680 --> 00:50:45,760
I know some other judges do have an objection to the word soul for limiting them to just

676
00:50:45,760 --> 00:50:50,080
addressing whether or not an event of default has occurred or is continuing.

677
00:50:50,080 --> 00:50:53,760
So I'm actually just flagging this for your honor.

678
00:50:53,760 --> 00:51:00,880
If your honor wishes to change that.

679
00:51:00,880 --> 00:51:02,880
Should I move on to the next?

680
00:51:02,880 --> 00:51:04,880
Yes, I agree.

681
00:51:04,880 --> 00:51:13,440
The next is paragraph 13, which is on page 37 of the black line.

682
00:51:13,440 --> 00:51:15,920
And there's two issues here.

683
00:51:15,920 --> 00:51:22,920
So this provision is headed payments free and clear.

684
00:51:22,920 --> 00:51:25,440
And is your honor caught up?

685
00:51:25,440 --> 00:51:27,440
Yes, I'm there.

686
00:51:27,440 --> 00:51:28,440
Okay.

687
00:51:28,440 --> 00:51:33,840
So it says any and all payments or proceeds remitted to the dip agent by through or on

688
00:51:33,840 --> 00:51:38,480
behalf of the dip secured parties pursuant to the provisions of this interim order, comma

689
00:51:38,480 --> 00:51:39,480
the dip documents.

690
00:51:39,480 --> 00:51:46,800
And then the next piece of it says or any subsequent order of the court shall be irrevocable,

691
00:51:46,800 --> 00:51:50,000
receive free and clear of all claims, et cetera.

692
00:51:50,000 --> 00:51:55,800
And I had a concern, you know, talking about any subsequent order of the court.

693
00:51:55,800 --> 00:51:58,760
We don't know what those words might be.

694
00:51:58,760 --> 00:52:03,680
So I was uncomfortable with with having that language in here.

695
00:52:03,680 --> 00:52:07,640
I'm sure that if there's a subsequent order of the court that's relevant that the dip

696
00:52:07,640 --> 00:52:12,360
agents will ask for whatever they deem is necessary for their protection.

697
00:52:12,360 --> 00:52:17,640
But I was concerned about putting it putting it in here.

698
00:52:17,640 --> 00:52:20,960
And then the other piece, and it's the same paragraph.

699
00:52:20,960 --> 00:52:27,640
So you'll see if you go down to line five and six, there is a reference to sections

700
00:52:27,640 --> 00:52:31,680
506 C and 552 B of the code.

701
00:52:31,680 --> 00:52:37,040
And there I had asked that those provisions be subject to final order.

702
00:52:37,040 --> 00:52:44,040
Just as they are in paragraphs 11 and 12, I believe.

703
00:52:44,040 --> 00:52:46,920
11 and 12.

704
00:52:46,920 --> 00:52:50,080
And I know this is a little bit different because it has to do with payments.

705
00:52:50,080 --> 00:52:54,400
But again, nevertheless, it seemed consistent with what is typically done with respect to

706
00:52:54,400 --> 00:53:00,600
506 C and 552 B to make that anything related to that be subject to final order so that

707
00:53:00,600 --> 00:53:03,800
the committee can raise any concerns they might have.

708
00:53:03,800 --> 00:53:08,160
Your honor, should I move on?

709
00:53:08,160 --> 00:53:13,480
Just keep going forward and I'll let you know if we need to go slower.

710
00:53:13,480 --> 00:53:26,160
The next one is page 46 and it's paragraph 19.

711
00:53:26,160 --> 00:53:36,600
At the end of paragraph 19 B is in boy, it's towards the top of page 46.

712
00:53:36,600 --> 00:53:42,000
And this is the actual the last three lines of this paragraph.

713
00:53:42,000 --> 00:53:47,760
It's subsection C and it says this court shall retain jurisdiction and not withstanding such

714
00:53:47,760 --> 00:53:52,960
dismissal, meaning dismissal of the case for the purposes of enforcing the claims, liens,

715
00:53:52,960 --> 00:53:58,080
and security interests referred to in this paragraph and otherwise in this in-home order.

716
00:53:58,080 --> 00:54:04,000
And I do know, again, I don't know if I've had this issue before you, but I know that

717
00:54:04,000 --> 00:54:06,760
some judges object to this provision.

718
00:54:06,760 --> 00:54:11,520
And surely, your honor, I mean, if the case is reopened, there's no question that the

719
00:54:11,520 --> 00:54:12,520
court would have jurisdiction.

720
00:54:12,520 --> 00:54:18,680
But prior to the case being reopened, I don't think it makes a whole lot of sense here.

721
00:54:18,680 --> 00:54:23,200
But again, I'm really mostly, your honor, flagging it for you so that you would see

722
00:54:23,200 --> 00:54:28,440
it and make whatever ruling is consistent with what you've done in the past.

723
00:54:28,440 --> 00:54:29,440
Okay.

724
00:54:29,440 --> 00:54:35,240
So that is okay.

725
00:54:35,240 --> 00:54:45,160
Next is paragraph 20, which is on okay, 20 is payment of fees and expenses and we're

726
00:54:45,160 --> 00:54:46,160
on page 49.

727
00:54:46,160 --> 00:54:54,640
So what this provision relates to is it requires the debtors to pay the professional fees,

728
00:54:54,640 --> 00:54:58,520
among other things, but the professional fees of the lenders.

729
00:54:58,520 --> 00:55:04,720
And it has the usual language that we negotiated in the past and they put it in here where

730
00:55:04,720 --> 00:55:06,440
they would send the invoices to our office.

731
00:55:06,440 --> 00:55:09,400
We would have 10 days to review the invoices.

732
00:55:09,400 --> 00:55:10,400
They're limited.

733
00:55:10,400 --> 00:55:11,400
We're not getting full invoices.

734
00:55:11,400 --> 00:55:17,760
We're getting a limited amount of information, but it's at least some information.

735
00:55:17,760 --> 00:55:25,800
And then we have the opportunity to object if we feel that the fees are unreasonable.

736
00:55:25,800 --> 00:55:33,560
And so that's fine until you get to page 49, where in the middle of the page, they make

737
00:55:33,560 --> 00:55:35,240
an exception.

738
00:55:35,240 --> 00:55:39,320
And let me tell you what it is first and I'll tell you where you can find it because it

739
00:55:39,320 --> 00:55:40,320
doesn't really stand out.

740
00:55:40,320 --> 00:55:48,120
Basically, the exception is, well, anything, any of the professional fees relating to the

741
00:55:48,120 --> 00:55:54,880
dip financing, so the dip fees and expenses, including those relating to professionals

742
00:55:54,880 --> 00:56:01,520
engaged by the dip secure parties or the prepayment secure parties, they get paid without having

743
00:56:01,520 --> 00:56:06,400
to follow the provisions set forth in this order.

744
00:56:06,400 --> 00:56:11,600
The lenders had offered to, I understand the closing is, if the dip is approved by the

745
00:56:11,600 --> 00:56:13,920
court, that the closing is planned for tomorrow.

746
00:56:13,920 --> 00:56:21,080
They offered to give me these invoices, I guess, now.

747
00:56:21,080 --> 00:56:22,080
I appreciate that offer.

748
00:56:22,080 --> 00:56:23,080
It's not a lot of time.

749
00:56:23,080 --> 00:56:28,440
And if I had any objection to them, I would really not have enough time to run in here.

750
00:56:28,440 --> 00:56:32,520
I also think the committee is one of the parties that also gets copies of these.

751
00:56:32,520 --> 00:56:36,600
Obviously, they're not going to be formed by tomorrow.

752
00:56:36,600 --> 00:56:41,560
And so, you know, we think that that should come out.

753
00:56:41,560 --> 00:56:43,000
I think it could be subject to the same procedures.

754
00:56:43,000 --> 00:56:47,360
I don't have a problem with them getting paid as long as it's subject to discouragement.

755
00:56:47,360 --> 00:56:53,920
If we or the committee later challenge the amounts as unreasonable and are successful.

756
00:56:53,920 --> 00:56:54,920
Okay.

757
00:56:54,920 --> 00:56:55,920
All right.

758
00:56:55,920 --> 00:57:05,520
Now we get to paragraph 21, which is the effect of the stipulation on third parties.

759
00:57:05,520 --> 00:57:10,360
This is commonly what's known as a challenge provision.

760
00:57:10,360 --> 00:57:14,120
And it starts, there's a few issues here.

761
00:57:14,120 --> 00:57:17,240
It starts on page 50.

762
00:57:17,240 --> 00:57:26,600
So if I would go to about the middle of the page, two, four, six, eight, ten, I think

763
00:57:26,600 --> 00:57:33,240
it's the beginning of ten, line ten, there's a parenthetical that says that in each case,

764
00:57:33,240 --> 00:57:41,320
what was it standing has to be obtained pursuant to an order for the court prior to the expiration

765
00:57:41,320 --> 00:57:43,360
of the challenge period.

766
00:57:43,360 --> 00:57:50,640
So a party has to file the motion for standing and your honor has to rule on it prior to

767
00:57:50,640 --> 00:57:53,840
the expiration of the challenge period.

768
00:57:53,840 --> 00:57:56,640
We had an issue with that.

769
00:57:56,640 --> 00:57:58,640
We don't think that's fair.

770
00:57:58,640 --> 00:58:03,880
Then in fact, in this case, the challenge period might even be less than 75 days because

771
00:58:03,880 --> 00:58:09,420
it's the shorter of 75 days or I think plan confirmation.

772
00:58:09,420 --> 00:58:17,040
So we typically, the language, what we typically ask for, and I know we've certainly gotten

773
00:58:17,040 --> 00:58:18,040
this in many cases.

774
00:58:18,040 --> 00:58:22,360
Again, I don't know that I've had this issue before, your honor.

775
00:58:22,360 --> 00:58:28,640
Sorry, I'm just trying to get to my page on this.

776
00:58:28,640 --> 00:58:33,600
Okay.

777
00:58:33,600 --> 00:58:43,480
So we asked for that language to come out and instead we asked for language that said

778
00:58:43,480 --> 00:58:49,120
that the filing of a motion seeking standing to file a challenge before the end of the

779
00:58:49,120 --> 00:58:54,680
challenge period, if it attaches the proposed challenge, shall extend the challenge period

780
00:58:54,680 --> 00:59:00,480
with respect to that party until two business days after the court rules on the standing

781
00:59:00,480 --> 00:59:05,160
motion, if the court grants the standing motion, they would then have two days after entry

782
00:59:05,160 --> 00:59:14,880
of the court order in order to go ahead and file so that it doesn't otherwise, effectively,

783
00:59:14,880 --> 00:59:18,720
that 75 days becomes a much, much shorter period.

784
00:59:18,720 --> 00:59:26,680
And again, also, I think forces the court to have to make somebody, the person making

785
00:59:26,680 --> 00:59:30,760
the motion has to guess as to how long it's going to take the court to rule on it.

786
00:59:30,760 --> 00:59:34,800
So that was one issue that we had.

787
00:59:34,800 --> 00:59:42,880
And then the other issue, and I will have to say to debtors council and lenders council,

788
00:59:42,880 --> 00:59:43,880
I apologize.

789
00:59:43,880 --> 00:59:47,160
I had not, this was language I gave you.

790
00:59:47,160 --> 00:59:48,680
You did not accept it.

791
00:59:48,680 --> 00:59:52,340
In our call, I had overlooked it.

792
00:59:52,340 --> 01:00:00,800
So we had asked that if the case converts to a case under Chapter 7 or Chapter 11, I'm

793
01:00:00,800 --> 01:00:06,720
sorry, if the case converts to a Chapter 7 or if a Chapter 11 trustee is appointed prior

794
01:00:06,720 --> 01:00:10,320
to the end of the challenge period, so before the end of the challenge period, a trustee,

795
01:00:10,320 --> 01:00:14,960
either Chapter 7 or Chapter 11 is appointed, then the challenge period shall be extended

796
01:00:14,960 --> 01:00:21,320
for that Chapter 7 or Chapter 11 trustee to 30 days after their appointment.

797
01:00:21,320 --> 01:00:27,320
And we have some flexibility on the days, but if they got appointed, say, two or three

798
01:00:27,320 --> 01:00:32,080
days before, or the case converts two or three days before the challenge period ends, it

799
01:00:32,080 --> 01:00:38,760
would be nearly impossible for a trustee to pull everything together in a day or two to

800
01:00:38,760 --> 01:00:40,760
do what's being demanded.

801
01:00:40,760 --> 01:00:44,720
And again, that's pretty standard to have some period.

802
01:00:44,720 --> 01:00:49,320
It might not be 30 days in every case, but that's pretty standard, asking a pretty standard

803
01:00:49,320 --> 01:00:53,320
agreement that we get.

804
01:00:53,320 --> 01:00:54,320
Okay.

805
01:00:54,320 --> 01:01:01,080
And we are getting to the end of this, Your Honor.

806
01:01:01,080 --> 01:01:15,080
I think, okay, this extension, okay, just two more things, Your Honor.

807
01:01:15,080 --> 01:01:26,880
Okay, so we have 24, so that is on page 56 of the black line, and this provision is titled

808
01:01:26,880 --> 01:01:32,640
interim order, interim order governs, and the first, well, the only sentence now is

809
01:01:32,640 --> 01:01:37,240
that in the event of any inconsistency between the provisions of this interim order and the

810
01:01:37,240 --> 01:01:42,520
DIP documents, that's fine, but then it says in the third line, or any other order entered

811
01:01:42,520 --> 01:01:45,240
by this court, the provisions of this interim order shall govern.

812
01:01:45,240 --> 01:01:52,080
So the interim order governs over any other order Your Honor may enter, whether today

813
01:01:52,080 --> 01:01:56,920
or apparently at any point in the future, and that, what we think is problematic.

814
01:01:56,920 --> 01:01:57,920
We're okay with the rest of that.

815
01:01:57,920 --> 01:02:03,080
Obviously, interim order should govern over the DIP documents, but not any other order

816
01:02:03,080 --> 01:02:08,720
that is entered by this court.

817
01:02:08,720 --> 01:02:13,680
And I think that's consistent with, I know Your ruling's in the past with respect to

818
01:02:13,680 --> 01:02:21,120
having similar language in the actual, like, individual orders, like wages or insurance,

819
01:02:21,120 --> 01:02:25,040
that I know in the past Your Honor has just excised that type of provision in those orders.

820
01:02:25,040 --> 01:02:29,280
This is the same provision as just in the financing order instead of the individual.

821
01:02:29,280 --> 01:02:33,020
They did not put that in the individual orders.

822
01:02:33,020 --> 01:02:37,080
And the very last thing, Your Honor, is that I just don't know Your Honor's preference

823
01:02:37,080 --> 01:02:43,260
for this, so it has to do with the wording of the subject to final order.

824
01:02:43,260 --> 01:02:49,960
So the language that they've used throughout is just subject to entry of final order.

825
01:02:49,960 --> 01:02:56,700
And I know particularly that Judge Silverstein, the language that she has said that she likes

826
01:02:56,700 --> 01:03:06,320
is subject to, subject to entry, subject to and effective upon entry of a final order

827
01:03:06,320 --> 01:03:08,520
granting such relief.

828
01:03:08,520 --> 01:03:12,080
So I had asked, you know, I think that it would be appropriate after final order to

829
01:03:12,080 --> 01:03:16,320
say granting such relief, because if the final order doesn't grant the relief, then you're

830
01:03:16,320 --> 01:03:17,320
not going to get it.

831
01:03:17,320 --> 01:03:22,520
But again, I just bring this up so that Your Honor, whatever Your preference is in that

832
01:03:22,520 --> 01:03:26,520
regard to make sure that that gets incorporated.

833
01:03:26,520 --> 01:03:30,280
And I believe that those are all of my issues.

834
01:03:30,280 --> 01:03:31,280
Okay.

835
01:03:31,280 --> 01:03:32,280
All right.

836
01:03:32,280 --> 01:03:34,760
Thank you, Ms. Sarkeesian.

837
01:03:34,760 --> 01:03:38,600
Let me ask before I hear from Lenders' Council or Debtors' Council in response, is there

838
01:03:38,600 --> 01:03:42,640
anyone else that wishes to be heard in connection with approval of the interim dip in use of

839
01:03:42,640 --> 01:03:43,640
cash collateral today?

840
01:03:43,640 --> 01:03:44,640
Okay.

841
01:03:44,640 --> 01:03:45,640
I'm not hearing anyone.

842
01:03:45,640 --> 01:03:54,640
Mr. Resnick, Mr. Clodonis, I'll defer to you on how you want to handle the issues.

843
01:03:54,640 --> 01:04:00,520
Quite frankly, I've highlighted many of the same myself that Ms. Sarkeesian pointed out.

844
01:04:00,520 --> 01:04:07,720
So if you want to respond on certain points, this is your opportunity to do that.

845
01:04:07,720 --> 01:04:15,720
Can I just respond on a few points that are not in the context of the dip order, and then

846
01:04:15,720 --> 01:04:17,520
we can talk about the dip order?

847
01:04:17,520 --> 01:04:23,640
I think there was a discussion about the percentage or the ratio being 47%.

848
01:04:23,640 --> 01:04:26,640
I just want to be clear what we're asking for today.

849
01:04:26,640 --> 01:04:33,400
We're asking for 12.25 million new money post-petition under the interim plus the 10.9 million roll

850
01:04:33,400 --> 01:04:36,400
of the bridge notes for the severance.

851
01:04:36,400 --> 01:04:39,920
As far as the interest rate goes, I think there's a little back and forth on that.

852
01:04:39,920 --> 01:04:40,920
Let me just be clear.

853
01:04:40,920 --> 01:04:50,760
The pre-petition bridge notes are 12% with the plus 4% default rate, so 16%, and then

854
01:04:50,760 --> 01:04:53,360
our roll-up on those notes is 18%.

855
01:04:53,360 --> 01:04:54,360
Right.

856
01:04:54,360 --> 01:04:58,600
So it's 2% higher.

857
01:04:58,600 --> 01:05:03,760
And the new money loan interest I read in the pleadings is 12%, so it seems to be 6%

858
01:05:03,760 --> 01:05:06,440
higher than the new money loans.

859
01:05:06,440 --> 01:05:07,440
Is that correct?

860
01:05:07,440 --> 01:05:10,440
Am I misunderstanding the pleadings?

861
01:05:10,440 --> 01:05:11,440
No.

862
01:05:11,440 --> 01:05:22,600
The new money loan for interest is 12% cash.

863
01:05:22,600 --> 01:05:30,680
As far as the role of the pre-petition secured claim and running this process for the benefit

864
01:05:30,680 --> 01:05:33,680
of lenders, just a very quick few points.

865
01:05:33,680 --> 01:05:40,840
If this thing gets challenged by a committee, I think effectively what can happen is 10.9

866
01:05:40,840 --> 01:05:46,640
comes unsecured, and it falls below the pre-petition secured debt.

867
01:05:46,640 --> 01:05:51,880
By the way, VIL is the only other pre-petition secured funded debt holder, so there aren't

868
01:05:51,880 --> 01:05:52,880
any other inter-creditories here.

869
01:05:52,880 --> 01:06:00,080
I think effectively we get to the same place, but it ends up being unsecured.

870
01:06:00,080 --> 01:06:05,480
As far as running for the benefit of the lenders, I think the process of being run for the benefit

871
01:06:05,480 --> 01:06:10,280
of as many people as being benefited from it, which includes employees, vendors, taxing

872
01:06:10,280 --> 01:06:14,040
authorities, insurance, the things we're asking for on day one, because I think the alternative

873
01:06:14,040 --> 01:06:19,160
would have been something worse, and at least we can stabilize on day one to get people

874
01:06:19,160 --> 01:06:21,160
paid on account of certain claims.

875
01:06:21,160 --> 01:06:23,120
Then we'll see where the process goes.

876
01:06:23,120 --> 01:06:26,280
We don't want to say where it's going to go, but we're optimistic and we're hopeful that

877
01:06:26,280 --> 01:06:29,280
the process is going to go well.

878
01:06:29,280 --> 01:06:34,080
On the trademark issue, Your Honor, yes, it was terminated.

879
01:06:34,080 --> 01:06:42,440
I think it was in Mr. Zubricki's declaration that the trademark was terminated pre-petition.

880
01:06:42,440 --> 01:06:45,120
The counterparty had the right to terminate pre-petition.

881
01:06:45,120 --> 01:06:51,440
Laterally, we decided if we could get a better deal by mutual termination, we should do it.

882
01:06:51,440 --> 01:06:53,440
We thought we could, and we did.

883
01:06:53,440 --> 01:06:55,440
Basically, we have supposed to de-brand.

884
01:06:55,440 --> 01:07:05,360
It was called de-branding for Virgin by the time of the disposition, the sale order effectively,

885
01:07:05,360 --> 01:07:08,800
or the closing of the sale, so it gives us some time and some runway.

886
01:07:08,800 --> 01:07:14,920
I mean, I don't think we'd be able to assume and assign it as a licensee over their objection.

887
01:07:14,920 --> 01:07:19,040
The reality is, look, people can do whatever they want, potentially.

888
01:07:19,040 --> 01:07:25,080
If there's a buyer and there's a conversation with anybody on this point, they'll have the

889
01:07:25,080 --> 01:07:26,080
conversation.

890
01:07:26,080 --> 01:07:31,120
We at least wanted to make sure that the bidding process was open and clear, that everybody

891
01:07:31,120 --> 01:07:34,760
understands where we are in terms of the Virgin trademark.

892
01:07:34,760 --> 01:07:42,280
Other than that, we can get into the orders, like the specific things that were raised.

893
01:07:42,280 --> 01:07:45,280
I don't know, Brian, if you have anything you want to add.

894
01:07:45,280 --> 01:07:46,280
Hold on.

895
01:07:46,280 --> 01:07:47,280
Before we move forward, I just want to be clear.

896
01:07:47,280 --> 01:07:51,400
I'm not approving anything today in connection with the trademark termination, am I?

897
01:07:51,400 --> 01:07:54,880
Is there something in the DIP document that I did not see?

898
01:07:54,880 --> 01:07:55,880
No.

899
01:07:55,880 --> 01:08:01,680
No, we just thought it would... I mean, look, it's a condition to funding.

900
01:08:01,680 --> 01:08:02,680
But it's already happened.

901
01:08:02,680 --> 01:08:03,680
You already signed the agreement, correct?

902
01:08:03,680 --> 01:08:04,680
Correct.

903
01:08:04,680 --> 01:08:05,680
Okay.

904
01:08:05,680 --> 01:08:08,680
And we don't want to bury it in the credit agreement, so we put it in one of the declarant

905
01:08:08,680 --> 01:08:13,600
declarations so people saw it.

906
01:08:13,600 --> 01:08:17,960
And we understand somebody might have questions about it, but we don't want it to come up

907
01:08:17,960 --> 01:08:18,960
with one from them, but wait a second.

908
01:08:18,960 --> 01:08:19,960
What is this trademark thing?

909
01:08:19,960 --> 01:08:23,960
So we thought putting it in someone's declaration so that people saw it.

910
01:08:23,960 --> 01:08:24,960
Okay.

911
01:08:24,960 --> 01:08:25,960
Thank you.

912
01:08:25,960 --> 01:08:28,480
I just wanted to make sure that I wasn't essentially approving that termination.

913
01:08:28,480 --> 01:08:31,480
It's just a disclosure issue, it sounds.

914
01:08:31,480 --> 01:08:32,480
Okay.

915
01:08:32,480 --> 01:08:33,480
Thank you.

916
01:08:33,480 --> 01:08:34,480
Mr. Resnick?

917
01:08:34,480 --> 01:08:35,480
Yeah, that's right.

918
01:08:35,480 --> 01:08:36,480
Sure, thank you.

919
01:08:36,480 --> 01:08:39,480
I just wanted to make sure that I was getting everything Mr. Cladonis just said, and I'm

920
01:08:39,480 --> 01:08:44,480
happy to walk through the various provisions of the order if that's helpful and express

921
01:08:44,480 --> 01:08:45,720
our view.

922
01:08:45,720 --> 01:08:52,120
So starting on page 31, I don't think there's a disagreement on substance here, Your Honor.

923
01:08:52,120 --> 01:08:54,120
I think it's just drafting.

924
01:08:54,120 --> 01:09:01,800
But section B talks about the pre-petition secured liens, and I just don't think it's

925
01:09:01,800 --> 01:09:08,800
the right place for the 546B language, which is in section C that refers to the liens

926
01:09:08,800 --> 01:09:10,800
jr. to certain other liens.

927
01:09:10,800 --> 01:09:15,800
And so this is where C is the section that describes the liens being jr. to other liens.

928
01:09:15,800 --> 01:09:20,800
And so I think it's just a proper placement of that provision, but I don't believe there's

929
01:09:20,800 --> 01:09:23,800
anything substantive that we have disagreement on there.

930
01:09:23,800 --> 01:09:32,800
I'll pummel through, but please stop me if you have any questions or want to discuss

931
01:09:32,800 --> 01:09:33,800
any of it.

932
01:09:33,800 --> 01:09:40,800
So I believe page 45 was the next one.

933
01:09:40,800 --> 01:09:42,800
And that is the part...

934
01:09:42,800 --> 01:09:44,800
No, actually, I'm sorry to interrupt.

935
01:09:44,800 --> 01:09:47,800
You did skip one, which was page 32.

936
01:09:47,800 --> 01:09:50,800
Sorry, I think what?

937
01:09:50,800 --> 01:09:53,800
7D is in dog.

938
01:09:53,800 --> 01:09:54,800
7D.

939
01:09:54,800 --> 01:09:55,800
Okay, I'm sorry.

940
01:09:55,800 --> 01:09:56,800
Page 30 what?

941
01:09:56,800 --> 01:09:57,800
32.

942
01:09:57,800 --> 01:10:01,800
This is the issue about the liens by governmental and regulatory...

943
01:10:01,800 --> 01:10:02,800
Got it.

944
01:10:02,800 --> 01:10:04,800
Okay, I said the wrong thing.

945
01:10:04,800 --> 01:10:05,800
That one.

946
01:10:05,800 --> 01:10:06,800
So, right, this is the...

947
01:10:06,800 --> 01:10:15,800
The dip liens are senior to any liens that come up, including those that may be in favor

948
01:10:15,800 --> 01:10:18,800
of governmental units.

949
01:10:18,800 --> 01:10:27,800
So if a governmental creditor wants to raise an issue at the final, they can do that, but

950
01:10:27,800 --> 01:10:31,800
we're not used to seeing this as being subject to the final order.

951
01:10:31,800 --> 01:10:36,800
So in the highly unlikely event that anything were to happen in between interim and final,

952
01:10:36,800 --> 01:10:40,800
we think this is perfectly appropriate relief that we don't have to worry about there being

953
01:10:40,800 --> 01:10:44,800
other liens that are inappropriately ahead of the dip lien.

954
01:10:44,800 --> 01:10:51,800
And quite frankly, I haven't seen that subject to entry of the final order.

955
01:10:51,800 --> 01:10:52,800
Okay.

956
01:10:52,800 --> 01:11:04,800
And then, Your Honor, in terms of the issues that the debtors can raise at a remedies hearing,

957
01:11:04,800 --> 01:11:09,800
I understand that this goes both ways and judges have their preference.

958
01:11:09,800 --> 01:11:14,800
I mean, our view is that a committee can come in and raise what the committee wants, but

959
01:11:14,800 --> 01:11:19,800
the debtors have entered into their agreement with the lender here as to what happens if

960
01:11:19,800 --> 01:11:20,800
there's a default.

961
01:11:20,800 --> 01:11:25,800
And of course, if there's a debate about whether in fact there was a default, and that's perfectly

962
01:11:25,800 --> 01:11:26,800
properly before, Your Honor.

963
01:11:26,800 --> 01:11:30,800
But if there is a default, then the debtors have agreed that lender has the rights that

964
01:11:30,800 --> 01:11:32,800
they have under the agreements.

965
01:11:32,800 --> 01:11:37,800
And so that would be our position on the word sole.

966
01:11:37,800 --> 01:11:44,800
We do understand that courts go various ways on that one, but we think it's appropriate

967
01:11:44,800 --> 01:11:52,800
as between the agreement between the lenders and the debtor.

968
01:11:52,800 --> 01:11:56,800
Page 37, paragraph 13.

969
01:11:56,800 --> 01:12:00,800
So I read this provision is basically saying that if there are any payments made to the

970
01:12:00,800 --> 01:12:06,800
dip, but lenders, so repayments of the dip loan, that those are irrevocable.

971
01:12:06,800 --> 01:12:12,800
And, et cetera.

972
01:12:12,800 --> 01:12:26,800
And this has the subject to sections 506C and 552B of the Bankruptcy Code.

973
01:12:26,800 --> 01:12:33,800
So this is different than I think the sections elsewhere that refer to the 506C waiver and

974
01:12:33,800 --> 01:12:37,800
the equities of the case waiver being subject to final order, which they always are.

975
01:12:37,800 --> 01:12:40,800
This refers to actual repayments of the dip loan.

976
01:12:40,800 --> 01:12:46,800
And so while I'm not entirely sure where you get repayments before the final order, if

977
01:12:46,800 --> 01:12:52,800
the dip loan is repaid prior to the final order, our view is that those should not be

978
01:12:52,800 --> 01:13:01,800
discourageable or subject to any claims retroactively under 506C and 552B.

979
01:13:01,800 --> 01:13:14,800
I will move to, I think, oh, sorry, there was one other point on that paragraph 13.

980
01:13:14,800 --> 01:13:23,800
I believe Ms. Ecclesiastin raised that payments are free and clear if they're required under

981
01:13:23,800 --> 01:13:26,800
any other subsequent order of the court.

982
01:13:26,800 --> 01:13:32,800
So I think this is a little bit more theoretical, to be honest, but if another order of the

983
01:13:32,800 --> 01:13:37,800
court were to require pay down of the dip loan with proceeds, say, of an asset sale,

984
01:13:37,800 --> 01:13:41,800
I think that pay down should be irrevocable.

985
01:13:41,800 --> 01:13:46,800
And I mean, Ms. Ecclesiastin's view is, well, the other order could say that, but of course

986
01:13:46,800 --> 01:13:52,800
our clients are extending the credit today based on this dip order and based on an expectation

987
01:13:52,800 --> 01:14:01,800
that if it receives repayment under the dip, that that is not discourageable.

988
01:14:01,800 --> 01:14:07,800
With that, I will move to page 46.

989
01:14:07,800 --> 01:14:17,800
This is the court retaining jurisdiction, like, for purposes of enforcing claims.

990
01:14:17,800 --> 01:14:22,800
I think it's appropriate.

991
01:14:22,800 --> 01:14:27,800
Maybe courts go different ways on this, but we think it's perfectly fine for the court

992
01:14:27,800 --> 01:14:33,800
to retain jurisdiction following dismissal of a case for the purpose of enforcing the

993
01:14:33,800 --> 01:14:34,800
dip claims.

994
01:14:34,800 --> 01:14:40,800
I don't think we're going to be worried about that in this case, but it's perhaps theoretical,

995
01:14:40,800 --> 01:14:47,800
but we think it's fine and appropriate.

996
01:14:47,800 --> 01:14:51,800
Page 49.

997
01:14:51,800 --> 01:14:54,800
This is the payment of fees.

998
01:14:54,800 --> 01:15:01,800
So in our experience, Your Honor, payment of fees, payment of lender fees are always

999
01:15:01,800 --> 01:15:09,800
paid at closing and are not subject to the review period that, in our experience, starts

1000
01:15:09,800 --> 01:15:10,800
thereafter.

1001
01:15:10,800 --> 01:15:22,800
The dip lender here is funding an amount that takes into account prepetition and fees entered

1002
01:15:22,800 --> 01:15:29,800
through closing and would be appropriate and is universal, quite frankly.

1003
01:15:29,800 --> 01:15:35,800
We couldn't find a precedent otherwise for fees to be paid at closing and not subject

1004
01:15:35,800 --> 01:15:37,800
to the 10-day review period.

1005
01:15:37,800 --> 01:15:45,800
We also think this is not a practical issue, but we don't anticipate any issues on fees,

1006
01:15:45,800 --> 01:15:52,800
but just as a matter of what is customary and appropriate, we think that if the lender

1007
01:15:52,800 --> 01:15:59,800
is funding an amount today that accounts for fees to be paid at closing, that those should

1008
01:15:59,800 --> 01:16:04,800
be paid and should not be discourteous based on any process.

1009
01:16:04,800 --> 01:16:10,800
We have nothing to hide with the respective professional fees, and we have offered to

1010
01:16:10,800 --> 01:16:17,800
share those today with Ms. Sarkisian to be paid at closing, but that would be our position

1011
01:16:17,800 --> 01:16:23,800
on that one.

1012
01:16:23,800 --> 01:16:30,800
Paragraph 21 is – oh, this is the challenge period in terms of whether a committee or

1013
01:16:30,800 --> 01:16:37,800
somebody else pursuing a challenge has to get standing by the deadline or just file

1014
01:16:37,800 --> 01:16:38,800
a challenge.

1015
01:16:38,800 --> 01:16:42,800
We understand, Your Honor, that courts go different ways on this.

1016
01:16:42,800 --> 01:16:48,800
We do have several precedents of Your Honor that provide for this formulation.

1017
01:16:48,800 --> 01:16:54,800
We think – we'd like this to be a quick and orderly case, and we think having this

1018
01:16:54,800 --> 01:16:59,800
requirement will help in that regard as opposed to having a lender continue to pay at closing.

1019
01:16:59,800 --> 01:17:04,800
We do think that the lender will continue to fund an ongoing longer process, but we

1020
01:17:04,800 --> 01:17:10,800
do respect the fact that courts go both ways on this issue and would defer to Your Honor's

1021
01:17:10,800 --> 01:17:19,800
preference on it, but we believe this is justifiable.

1022
01:17:19,800 --> 01:17:28,800
I think paragraph – okay, this was – oh, the extension of –

1023
01:17:28,800 --> 01:17:33,800
the extension of the challenge period for 30 days after the appointment of a trustee.

1024
01:17:33,800 --> 01:17:37,800
Your Honor, I think if a trustee were appointed, we have no doubt that they would come in,

1025
01:17:37,800 --> 01:17:44,800
Your Honor, and seek an extension to pre-legislate for that, which I don't think is necessary.

1026
01:17:44,800 --> 01:17:55,800
I know so 30 days is perhaps a long period, but we would defer to Your Honor on that one.

1027
01:17:55,800 --> 01:18:01,800
Paragraph 24, in terms of the interim order of governing – so, Your Honor, we did have

1028
01:18:01,800 --> 01:18:03,800
language in all the other orders.

1029
01:18:03,800 --> 01:18:08,800
They were subject to the DIP Order and the DIP Budget, and we had specific language on

1030
01:18:08,800 --> 01:18:10,800
the DIP Budget and stuff.

1031
01:18:10,800 --> 01:18:18,800
We agreed to delete that, although I do think it's a helpful language that is justified.

1032
01:18:18,800 --> 01:18:23,800
I believe what Ms. Narcissian has an issue now is just a reference to any other order

1033
01:18:23,800 --> 01:18:24,800
of the court.

1034
01:18:24,800 --> 01:18:29,800
This order says a lot of things, and there are a lot of protections in this order, and

1035
01:18:29,800 --> 01:18:37,800
I think we just wanted to be clear that there's no other order that could impact or take away

1036
01:18:37,800 --> 01:18:42,800
all the rights, protections, means, and claims, and everything else that is very carefully

1037
01:18:42,800 --> 01:18:51,800
and meticulously spelled out and granted in this order.

1038
01:18:51,800 --> 01:18:58,800
And then I have – oh, the language of subject entry, the final order.

1039
01:18:58,800 --> 01:19:03,800
Yeah, Your Honor, we went with the simple version that we see in many precedents, and

1040
01:19:03,800 --> 01:19:04,800
we just think that's appropriate.

1041
01:19:04,800 --> 01:19:08,800
I think we were to add additional language, which is arguably superfluous.

1042
01:19:08,800 --> 01:19:13,800
It could lead to an ambiguity and a question of whether the relief that we're getting

1043
01:19:13,800 --> 01:19:17,800
is similar to the same to the very usual and customary relief that's granted in other

1044
01:19:17,800 --> 01:19:18,800
orders.

1045
01:19:18,800 --> 01:19:21,800
So, yeah, other preference for our formulation.

1046
01:19:21,800 --> 01:19:26,800
I believe I hit all the issues, but I would ask Ms. Narcissian or anybody else to let

1047
01:19:26,800 --> 01:19:29,800
me know if I missed any.

1048
01:19:29,800 --> 01:19:30,800
You hit them all.

1049
01:19:30,800 --> 01:19:31,800
You hit them all.

1050
01:19:31,800 --> 01:19:32,800
Thank you very much.

1051
01:19:32,800 --> 01:19:36,800
I will say this is one of the more thoroughly argued DIP Orders.

1052
01:19:36,800 --> 01:19:44,800
And in the interest of time, I am prepared to rule, given what I have after this hearing.

1053
01:19:44,800 --> 01:19:51,800
So let me just say, based on the facts and circumstances described in the declaration

1054
01:19:51,800 --> 01:19:58,800
– in the declarations and on the records today – record today, I have no doubt that

1055
01:19:58,800 --> 01:20:06,800
the relief requested here, the DIP and the cash collateral usage, are absolutely necessary

1056
01:20:06,800 --> 01:20:09,800
to the success of these cases.

1057
01:20:09,800 --> 01:20:14,800
The issue here, as demonstrated by the parties and myself, comes down to what would be reasonable

1058
01:20:14,800 --> 01:20:15,800
terms.

1059
01:20:15,800 --> 01:20:18,800
Let's talk about the roll-up first.

1060
01:20:18,800 --> 01:20:22,800
Given that the roll-up is subject to the challenge period and the fact that the pre-petition

1061
01:20:22,800 --> 01:20:27,800
bridge loan was extended a few days prior to the bankruptcy, I have in the past allowed

1062
01:20:27,800 --> 01:20:32,800
roll-ups under these circumstances, even if it is an insider providing the pre-petition

1063
01:20:32,800 --> 01:20:37,800
bridge loan, which quite frankly is one of the more common circumstances that I find

1064
01:20:37,800 --> 01:20:41,800
on a first aid, given the liquidity issues that are presented by a debtor coming into

1065
01:20:41,800 --> 01:20:45,800
a case and the lack of available third-party funding.

1066
01:20:45,800 --> 01:20:49,800
Effectively, it's a pre-DIP, as one mentioned.

1067
01:20:49,800 --> 01:20:52,800
So I don't take issue with that, nor the amount.

1068
01:20:52,800 --> 01:20:58,800
But I am wary of allowing the roll-up at this interim hearing on less than 24 hours notice

1069
01:20:58,800 --> 01:21:04,800
if it will be on less favorable terms than what the pre-petition loan was.

1070
01:21:04,800 --> 01:21:09,800
That's something that this Court has consistently disfavored.

1071
01:21:09,800 --> 01:21:17,800
And so I'm taking issue with the interest rate, which is 18 percent, which is above

1072
01:21:17,800 --> 01:21:22,800
the new money loan interest at 12 percent and higher than the pre-petition interest.

1073
01:21:22,800 --> 01:21:30,800
And I also am wary of the 3 percent fee being approved at this time.

1074
01:21:30,800 --> 01:21:37,800
I would ask the parties consider that those two items be subject to an interim, provided

1075
01:21:37,800 --> 01:21:42,800
that I would be prepared to approve the same interest rate on the roll-up loans, the 12

1076
01:21:42,800 --> 01:21:47,800
percent or the 16, whichever one it was prior to the filing.

1077
01:21:47,800 --> 01:21:50,800
If you want more, you can seek it at a final.

1078
01:21:50,800 --> 01:21:55,800
And I think the 3 percent fee, given that it's paid on the closing, I'm not prepared

1079
01:21:55,800 --> 01:22:00,800
for that because it would be out the door before a chance for a committee to review

1080
01:22:00,800 --> 01:22:01,800
that and weigh in.

1081
01:22:01,800 --> 01:22:10,800
So those are two material issues, and I wanted to effectively address those head-on.

1082
01:22:10,800 --> 01:22:15,800
With respect to the actual form of order and the terms of the lending, to the extent that

1083
01:22:15,800 --> 01:22:21,800
VLI is willing to move forward with the diplomas, given my comments with respect to the interim

1084
01:22:21,800 --> 01:22:26,800
roll-up, I am fine with most of the changes suggested by Ms. Sarkeesian.

1085
01:22:26,800 --> 01:22:28,800
I think they're reasonable.

1086
01:22:28,800 --> 01:22:33,800
However, there are a few that I will not require, and I'll just, for the sake of time, tell

1087
01:22:33,800 --> 01:22:34,800
you what those are.

1088
01:22:34,800 --> 01:22:43,800
Those are the changes that were requested by Ms. Sarkeesian in paragraph 7b, 7d, 19b,

1089
01:22:43,800 --> 01:22:46,800
the standing issue in paragraph 21.

1090
01:22:46,800 --> 01:22:51,800
For this point, I see that as a final issue, and I'd like the committee to weigh in on

1091
01:22:51,800 --> 01:22:52,800
that.

1092
01:22:52,800 --> 01:22:56,800
And the final point about subject to entry of a final order.

1093
01:22:56,800 --> 01:23:02,800
I have two other further comments to the form of order, and then I think we need to talk

1094
01:23:02,800 --> 01:23:09,800
about breaking so I can handle my hearing and coming back at a later time to finish

1095
01:23:09,800 --> 01:23:10,800
this hearing.

1096
01:23:10,800 --> 01:23:14,800
So let me just highlight the two other issues I have with the form of order.

1097
01:23:14,800 --> 01:23:21,800
Mr. Resnick, with respect to the remedies period, my position has been that the debtor

1098
01:23:21,800 --> 01:23:25,800
can raise what it wants to raise.

1099
01:23:25,800 --> 01:23:27,800
So that provision would need to be struck.

1100
01:23:27,800 --> 01:23:32,800
But there's a paragraph after the at-issue sentence that starts, except to set forth

1101
01:23:32,800 --> 01:23:37,800
in this paragraph 10, or otherwise ordered by the court prior to the expiration of the

1102
01:23:37,800 --> 01:23:38,800
remedies period.

1103
01:23:38,800 --> 01:23:43,800
And then it goes on that the debtor waives this right and shall not be entitled to seek

1104
01:23:43,800 --> 01:23:48,800
relief under 105 or any other provision that would impair or restrict the rights and remedies

1105
01:23:48,800 --> 01:23:51,800
of the DIP agent and the other secured parties.

1106
01:23:51,800 --> 01:23:56,800
I think that's inconsistent with the prior paragraph or the prior sentence.

1107
01:23:56,800 --> 01:24:01,800
If the debtor could come in and raise what it would like to raise with me during the

1108
01:24:01,800 --> 01:24:05,800
remedies period, then this waiver is not an appropriate waiver.

1109
01:24:05,800 --> 01:24:11,800
So I would ask that that sentence be struck.

1110
01:24:11,800 --> 01:24:14,800
My second and final comment.

1111
01:24:14,800 --> 01:24:20,800
Your Honor, I just want to make sure I'm sure what sentence that is.

1112
01:24:20,800 --> 01:24:22,800
It's still in paragraph 10?

1113
01:24:22,800 --> 01:24:28,800
Yes, it's the paragraph that starts after the sentence that you had issue, the clause.

1114
01:24:28,800 --> 01:24:30,800
And I'm sorry, I lost my page.

1115
01:24:30,800 --> 01:24:33,800
And it starts with except for.

1116
01:24:33,800 --> 01:24:38,800
So but it's still in the main part of the debtors know where the language is.

1117
01:24:38,800 --> 01:24:41,800
As long as the debtors know, I'm fine.

1118
01:24:41,800 --> 01:24:43,800
I'm just having trouble.

1119
01:24:43,800 --> 01:24:49,800
Top of page 36, page 35, where they reference the section one.

1120
01:24:49,800 --> 01:24:50,800
I see it.

1121
01:24:50,800 --> 01:24:51,800
Okay.

1122
01:24:51,800 --> 01:24:52,800
Okay.

1123
01:24:52,800 --> 01:24:55,800
So that entire sentence should come out then, Your Honor.

1124
01:24:55,800 --> 01:24:56,800
Yes.

1125
01:24:56,800 --> 01:24:57,800
And I'm sorry.

1126
01:24:57,800 --> 01:25:01,800
I'm sorry that I'm acting quickly, but I have many, many people waiting outside my door.

1127
01:25:01,800 --> 01:25:03,800
So I'm just trying to push this along.

1128
01:25:03,800 --> 01:25:07,800
So my last comment is in paragraph 35 in the paragraph that states payments held in

1129
01:25:07,800 --> 01:25:08,800
trust.

1130
01:25:08,800 --> 01:25:10,800
It's more of a question.

1131
01:25:10,800 --> 01:25:13,800
I certainly understand the point of this provision.

1132
01:25:13,800 --> 01:25:18,800
I guess I would ask if there's primed, if there's non-primed lien holders that receive

1133
01:25:18,800 --> 01:25:24,800
payment, are they required under this paragraph to hold the funds in cash?

1134
01:25:24,800 --> 01:25:27,800
It is the dip collateral.

1135
01:25:27,800 --> 01:25:30,800
So I don't think that's what you intend, Mr. Resnick.

1136
01:25:30,800 --> 01:25:34,800
I think if you're not priming someone and they receive payment on account of their non-prime

1137
01:25:34,800 --> 01:25:38,800
statutory lien, it's of course not going to be held in trust for you.

1138
01:25:38,800 --> 01:25:44,800
So if our understanding is aligned, perhaps we need to tweak this paragraph to account

1139
01:25:44,800 --> 01:25:53,800
for the non-primed lien holders.

1140
01:25:53,800 --> 01:25:58,800
So I don't think my comments to the form of order, quite frankly, are material.

1141
01:25:58,800 --> 01:26:02,800
However, I will defer to your client, Mr. Resnick.

1142
01:26:02,800 --> 01:26:08,800
But my comments with respect to the interest rate and the fee are material.

1143
01:26:08,800 --> 01:26:14,800
And I understand that I'm asking something of the pre-petition lender that perhaps it

1144
01:26:14,800 --> 01:26:16,800
was not expecting.

1145
01:26:16,800 --> 01:26:21,800
And so I guess I would ask from you, how would you like to proceed given my timing constraints

1146
01:26:21,800 --> 01:26:30,800
and also for now basically and the need that we get this order entered as fast as possible

1147
01:26:30,800 --> 01:26:36,800
if your client is going to continue to lend?

1148
01:26:36,800 --> 01:26:41,800
So, Your Honor, I would like a brief time period to confer with our clients.

1149
01:26:41,800 --> 01:26:45,800
I think we can do it briefly if Your Honor didn't have to, but in light of Your Honor's

1150
01:26:45,800 --> 01:26:53,800
hearing, is there a time later this afternoon that you'd hear us and does that work for the debtors?

1151
01:26:53,800 --> 01:26:59,800
Well, let me ask on the balance of the first days, I have examined all of the first day

1152
01:26:59,800 --> 01:27:02,800
pleadings as well as the orders that were submitted.

1153
01:27:02,800 --> 01:27:11,800
Are there open issues with respect to those orders that are going to be argued to me today?

1154
01:27:11,800 --> 01:27:15,800
Your Honor, if I may speak, I'm Julia Sarkisian on behalf of the U.S.

1155
01:27:15,800 --> 01:27:16,800
Trustee.

1156
01:27:16,800 --> 01:27:17,800
From the U.S.

1157
01:27:17,800 --> 01:27:23,800
Trustee's perspective, the only thing that was open is we needed a clarification with

1158
01:27:23,800 --> 01:27:27,800
respect to insurance to be put on the record.

1159
01:27:27,800 --> 01:27:36,800
And I am required to, by my client, to read into the record a statement relating to 345B

1160
01:27:36,800 --> 01:27:37,800
requirements.

1161
01:27:37,800 --> 01:27:41,800
Those are the only two things I'm aware of from the U.S.

1162
01:27:41,800 --> 01:27:42,800
Trustee's perspective.

1163
01:27:42,800 --> 01:27:43,800
Okay.

1164
01:27:43,800 --> 01:27:48,800
Just in the interest of time and attempting to conclude this hearing and give you all

1165
01:27:48,800 --> 01:27:54,800
adequate time, as well as my other case that I have, I am going to do something that's

1166
01:27:54,800 --> 01:27:58,800
very unorthodox, which is I am going to take all of the remaining orders that are being

1167
01:27:58,800 --> 01:28:00,800
presented to me on an interim basis.

1168
01:28:00,800 --> 01:28:07,800
I'm going to ask, does anybody that's appearing today wish to be heard in opposition to the

1169
01:28:07,800 --> 01:28:12,800
interim relief?

1170
01:28:12,800 --> 01:28:13,800
Okay.

1171
01:28:13,800 --> 01:28:14,800
I'm not hearing anyone.

1172
01:28:14,800 --> 01:28:19,800
I have no questions or concerns with respect to the substance of that interim relief.

1173
01:28:19,800 --> 01:28:22,800
Again, I have read all of the declarations.

1174
01:28:22,800 --> 01:28:26,800
They are entered into evidence and support the necessity for that relief.

1175
01:28:26,800 --> 01:28:27,800
It's clear that the U.S.

1176
01:28:27,800 --> 01:28:32,800
Trustee has weighed in and commented on all those forms of order, and they are consistent

1177
01:28:32,800 --> 01:28:36,800
and customary with those that I have seen in every one of my cases.

1178
01:28:36,800 --> 01:28:43,800
And so subject to the representations that are going to be made on insurance and cash

1179
01:28:43,800 --> 01:28:47,800
management, I am going to approve those orders.

1180
01:28:47,800 --> 01:28:52,800
I also take solace in the fact that we have a local rule that provides reconsideration

1181
01:28:52,800 --> 01:28:57,800
of these orders within 30 days, given that we're under extreme time constraints today.

1182
01:28:57,800 --> 01:29:02,800
So why don't we hear those two representations?

1183
01:29:02,800 --> 01:29:06,800
And then Ms. Coyle, you can announce on the record what the second day hearing is going

1184
01:29:06,800 --> 01:29:07,800
to be.

1185
01:29:07,800 --> 01:29:12,800
Once those orders are uploaded, we will get them entered as soon as possible, contingent,

1186
01:29:12,800 --> 01:29:17,800
of course, on the DIP.

1187
01:29:17,800 --> 01:29:19,800
So why don't we take the insurance representation first?

1188
01:29:19,800 --> 01:29:27,800
And Ms. Sarkisian, I'll hear you on your 345B representation or explanation that my understanding

1189
01:29:27,800 --> 01:29:30,800
is your office is going to put on the record.

1190
01:29:30,800 --> 01:29:32,800
Thank you.

1191
01:29:32,800 --> 01:29:34,800
Good afternoon, Your Honor.

1192
01:29:34,800 --> 01:29:41,800
My name is Mohini Rarick on behalf of proposed counsel to the debtors for Latham and Watkins.

1193
01:29:41,800 --> 01:29:47,800
So for the insurance order at Ms. Sarkisian's request, we can confirm that the debtors seek

1194
01:29:47,800 --> 01:29:53,800
authority to pay premiums for workers' compensation and aircraft hull policies under the insurance

1195
01:29:53,800 --> 01:29:54,800
order.

1196
01:29:54,800 --> 01:30:00,800
And these policies benefit only the debtors, specifically only debtor Virgin Orbit LLC,

1197
01:30:00,800 --> 01:30:05,800
and not any of the foreign non-debtor subsidiaries to Virgin Orbit Holdings Inc.

1198
01:30:05,800 --> 01:30:06,800
Thank you.

1199
01:30:06,800 --> 01:30:09,800
Thank you very much.

1200
01:30:09,800 --> 01:30:11,800
Ms. Sarkisian.

1201
01:30:11,800 --> 01:30:13,800
Thank you, Your Honor.

1202
01:30:13,800 --> 01:30:15,800
Again, for the record, Juliet Sarkisian on behalf of the U.S. Trustee.

1203
01:30:15,800 --> 01:30:17,800
I will read this as quickly as I can.

1204
01:30:17,800 --> 01:30:19,800
That would be great.

1205
01:30:19,800 --> 01:30:25,800
Section 345 of the Bankruptcy Code obliges the debtors in possession to require from

1206
01:30:25,800 --> 01:30:29,800
an entity in which estate monies are invested.

1207
01:30:29,800 --> 01:30:36,800
Number one, a bond, having features defined in the Code Section 345B or alternatively

1208
01:30:36,800 --> 01:30:40,800
Section 345B2, the deposit of securities consistent with 31 U.S.C.

1209
01:30:40,800 --> 01:30:44,800
Section 9303 unless the court orders otherwise.

1210
01:30:44,800 --> 01:30:50,800
So in connection with the cash management motion, we make four observations.

1211
01:30:50,800 --> 01:30:56,800
First, Section 345 places an obligation on the debtor in possession to require protection

1212
01:30:56,800 --> 01:30:59,800
for its monies from the institutions which hold such monies.

1213
01:30:59,800 --> 01:31:04,800
Second, while Section 345 does not mention the United States Trustee's office, this

1214
01:31:04,800 --> 01:31:08,800
office in its supervisory role pursuant to 28 U.S.C.

1215
01:31:08,800 --> 01:31:14,800
Section 586 assists with protection of debtor in possession funds by its entry into uniform

1216
01:31:14,800 --> 01:31:18,800
depository agreements, also known as UDAs.

1217
01:31:18,800 --> 01:31:23,800
UDAs obligate depositories to maintain collateral for bankruptcy funds on deposit in an amount

1218
01:31:23,800 --> 01:31:29,800
not less than 115% of debtor in possession and trustee deposits which exceed FDIC insurance

1219
01:31:29,800 --> 01:31:30,800
limits.

1220
01:31:30,800 --> 01:31:35,800
The United States Trustee maintains information on the banks who have executed UDAs regularly,

1221
01:31:35,800 --> 01:31:40,800
provide this list to debtors' advisors, and is working to post a current list to its website.

1222
01:31:40,800 --> 01:31:44,800
Third, in order for a debtor in possession to comply with Section 345 where a UDA bank

1223
01:31:44,800 --> 01:31:49,800
is involved, the debtor in possession must, first, identify and disclose all of the depository

1224
01:31:49,800 --> 01:31:54,800
accounts where monies are held, and second, contact those banks to ensure that the relevant

1225
01:31:54,800 --> 01:31:57,800
accounts are designated as debtor in possession accounts.

1226
01:31:57,800 --> 01:32:00,800
If the debtor in possession does not identify all of its accounts and take steps to ensure

1227
01:32:00,800 --> 01:32:04,800
that its accounts are properly designated, then the bank will not treat such accounts

1228
01:32:04,800 --> 01:32:06,800
as debtor in possession accounts.

1229
01:32:06,800 --> 01:32:10,800
Fourth, recent bank failures highlight the importance of the debtor in possession's

1230
01:32:10,800 --> 01:32:13,800
compliance with Section 345 for the benefit of its stakeholders.

1231
01:32:13,800 --> 01:32:18,800
U.S. trustees seek specific language in any interim cash management order that identifies

1232
01:32:18,800 --> 01:32:23,800
concrete steps and a definite timeframe to achieve compliance with Section 345.

1233
01:32:23,800 --> 01:32:25,800
That was done in this instance.

1234
01:32:25,800 --> 01:32:29,800
The United States Trustee encourages the debtors to act promptly to ensure full compliance

1235
01:32:29,800 --> 01:32:33,800
with Section 345 and reserves the right to be heard on the cash management motion at

1236
01:32:33,800 --> 01:32:35,800
the final hearing.

1237
01:32:35,800 --> 01:32:37,800
Thank you, Your Honor.

1238
01:32:37,800 --> 01:32:39,800
Thank you, Mr. Akijian.

1239
01:32:39,800 --> 01:32:44,800
I think that that statement is very helpful, and I'm glad that it's being read into the record.

1240
01:32:44,800 --> 01:32:46,800
As I mentioned, this is very unorthodox.

1241
01:32:46,800 --> 01:32:51,800
I understand that there are many first-day motions and applications that have been filed,

1242
01:32:51,800 --> 01:32:56,800
but again, given my time constraints, I'm going to make the ruling that based on the

1243
01:32:56,800 --> 01:33:02,800
facts and circumstances described in the various declarations emitted into evidence today,

1244
01:33:02,800 --> 01:33:13,800
I will approve the interim relief sought in those motions and applications.

1245
01:33:13,800 --> 01:33:16,800
With one exception, of course, CROHL is being retained on a final basis, and so there's

1246
01:33:16,800 --> 01:33:18,800
no interim relief with respect to that.

1247
01:33:18,800 --> 01:33:19,800
It's on a final basis.

1248
01:33:19,800 --> 01:33:23,800
I am satisfied that the debtors have met their burden necessary to carry the motions and

1249
01:33:23,800 --> 01:33:28,800
applications, including that of Rule 6003, and that the relief is appropriate and warranted.

1250
01:33:28,800 --> 01:33:33,800
I thank all the attorneys that have worked on all the various first-day motions and applications.

1251
01:33:33,800 --> 01:33:37,800
I appreciate that many of you were going to present them today.

1252
01:33:37,800 --> 01:33:42,800
Perhaps it was your first or second time presenting in court, and I don't take that lightly,

1253
01:33:42,800 --> 01:33:46,800
and I apologize that you did not get your opportunity to do that, but I hope to see you

1254
01:33:46,800 --> 01:33:50,800
in second-day hearings and further hearings at the podium, and you'll certainly get,

1255
01:33:50,800 --> 01:33:52,800
I'm sure, your opportunity to do that.

1256
01:33:52,800 --> 01:33:55,800
So this is not the last time I will see you.

1257
01:33:55,800 --> 01:34:00,800
Ms. Coyle, when is the second-day hearing for all those that are participating?

1258
01:34:00,800 --> 01:34:04,800
The second-day hearing will be May 1st at 930 in the morning.

1259
01:34:04,800 --> 01:34:06,800
Excellent. Thank you.

1260
01:34:06,800 --> 01:34:09,800
And then the objection deadlines will be when?

1261
01:34:09,800 --> 01:34:12,800
April 24th at 4 p.m.

1262
01:34:12,800 --> 01:34:14,800
Okay, perfect.

1263
01:34:14,800 --> 01:34:22,800
And Your Honor, just before we close it out, the orders have all been uploaded with two exceptions.

1264
01:34:22,800 --> 01:34:28,800
With respect to the critical vendor order and the lien holder order, we noticed there was a typo

1265
01:34:28,800 --> 01:34:33,800
where we referenced the trade agreements as being attached to the order.

1266
01:34:33,800 --> 01:34:39,800
I don't think that's a substantive change, and we were going to submit revised orders removing that,

1267
01:34:39,800 --> 01:34:44,800
and we'll submit those under certification of counsel right after the hearing and upload the orders.

1268
01:34:44,800 --> 01:34:46,800
Excellent. Thank you very much.

1269
01:34:46,800 --> 01:34:51,800
All right. Mr. Resnick, given that we're only going to be hearing the dip in cash collateral,

1270
01:34:51,800 --> 01:34:56,800
I would suggest we come back at 330, and I would give you 15 minutes at that point,

1271
01:34:56,800 --> 01:35:03,800
and then I have to go forward on an emergency contested dip hearing, so I cannot give you any more time.

1272
01:35:03,800 --> 01:35:06,800
But I certainly want to give what this case needs.

1273
01:35:06,800 --> 01:35:14,800
So let's come back at 330 unless you feel like you can get an answer quicker than 330.

1274
01:35:14,800 --> 01:35:18,800
That should work, Your Honor.

1275
01:35:18,800 --> 01:35:20,800
Can I ask one clarifying question?

1276
01:35:20,800 --> 01:35:22,800
I think at 330 it will work.

1277
01:35:22,800 --> 01:35:23,800
Okay, great.

1278
01:35:23,800 --> 01:35:27,800
Can I ask one clarifying question?

1279
01:35:27,800 --> 01:35:32,800
We've been sort of going back and forth, and I just want to make sure you know the discrepancy in what we heard.

1280
01:35:32,800 --> 01:35:43,800
In terms of paragraph 20, Your Honor, you heard us heard different things on whether this is payment of visa closing,

1281
01:35:43,800 --> 01:35:49,800
whether you are requiring any changes to that effect.

1282
01:35:49,800 --> 01:35:53,800
Well, I guess I would say you have two ways to go.

1283
01:35:53,800 --> 01:36:02,800
Either you delete the subject sentence that Ms. Sarkeesian highlighted, which effectively nullifies her review period,

1284
01:36:02,800 --> 01:36:07,800
or you make it subject to disgorgement.

1285
01:36:07,800 --> 01:36:09,800
Got it.

1286
01:36:09,800 --> 01:36:15,800
Because you're using estate funds to pay fees and claims, and they need to be reviewed by the U.S. Trustee's office,

1287
01:36:15,800 --> 01:36:18,800
and their office needs adequate time to review them.

1288
01:36:18,800 --> 01:36:20,800
One day is not sufficient.

1289
01:36:20,800 --> 01:36:27,800
So I have no issue with you getting paid, and I think Ms. Sarkeesian made it clear she has no issue with you getting paid,

1290
01:36:27,800 --> 01:36:30,800
but we need to have a true review period.

1291
01:36:30,800 --> 01:36:32,800
Understood, Your Honor. Thank you.

1292
01:36:32,800 --> 01:36:37,800
And when I say disgorgement, I don't mean it to be a lengthy process.

1293
01:36:37,800 --> 01:36:38,800
Okay.

1294
01:36:38,800 --> 01:36:40,800
If I get it right.

1295
01:36:40,800 --> 01:36:41,800
Okay.

1296
01:36:41,800 --> 01:36:42,800
Yeah, yeah.

1297
01:36:42,800 --> 01:36:45,800
At least I would presumably be the same review process as the go-forward.

1298
01:36:45,800 --> 01:36:50,800
Once that 10 days passes, I assume that the disgorgement ends.

1299
01:36:50,800 --> 01:36:52,800
The same review process, essentially.

1300
01:36:52,800 --> 01:36:54,800
Yes.

1301
01:36:54,800 --> 01:36:55,800
Thank you, Your Honor.

1302
01:36:55,800 --> 01:36:57,800
Your Honor, could I ask one clarifying question as well?

1303
01:36:57,800 --> 01:36:59,800
Sure.

1304
01:36:59,800 --> 01:37:06,800
On the provision relating to the challenge period, I heard your ruling regarding standing.

1305
01:37:06,800 --> 01:37:12,800
How about the issue of if a Chapter 7 or Chapter 11 Trustee is appointed prior to the end of the challenge period,

1306
01:37:12,800 --> 01:37:14,800
getting some additional time?

1307
01:37:14,800 --> 01:37:15,800
I agree with you.

1308
01:37:15,800 --> 01:37:21,800
My only issue with that paragraph that I don't think needs to be incorporated is changes to standing,

1309
01:37:21,800 --> 01:37:23,800
because I want the Committee to weigh in on that.

1310
01:37:23,800 --> 01:37:32,800
However, it is customary and appropriate for the Trustees to have additional time if the challenge period has not run prior to their appointment.

1311
01:37:32,800 --> 01:37:38,800
So I agree that change should be made, and I apologize for not being clear and running through these issues very quickly.

1312
01:37:38,800 --> 01:37:45,800
Does anyone else need anything clarified before we part ways and I see you at 3.30?

1313
01:37:45,800 --> 01:37:50,800
Okay. If something comes up between now and then, you bring it up at 3.30, all right?

1314
01:37:50,800 --> 01:37:51,800
Thank you, Your Honor.

1315
01:37:51,800 --> 01:37:52,800
So we'll take a momentary adjournment.

1316
01:37:52,800 --> 01:38:09,800
Thank you all. See you at 3.30.

1317
01:38:22,800 --> 01:38:47,800
Thank you.

1318
01:38:52,800 --> 01:39:17,800
Thank you.

1319
01:39:22,800 --> 01:39:47,800
Thank you.

1320
01:39:52,800 --> 01:40:17,800
Thank you.

1321
01:40:22,800 --> 01:40:47,800
Thank you.

1322
01:40:52,800 --> 01:41:17,800
Thank you.

1323
01:41:22,800 --> 01:41:47,800
Thank you.

1324
01:41:52,800 --> 01:42:17,800
Thank you.

1325
01:42:22,800 --> 01:42:47,800
Thank you.

1326
01:42:52,800 --> 01:43:17,800
Thank you.

1327
01:43:22,800 --> 01:43:47,800
Thank you.

1328
01:43:52,800 --> 01:44:17,800
Thank you.

1329
01:44:22,800 --> 01:44:47,800
Thank you.

1330
01:44:52,800 --> 01:45:17,800
Thank you.

1331
01:45:22,800 --> 01:45:47,800
Thank you.

1332
01:45:52,800 --> 01:46:17,800
Thank you.

1333
01:46:22,800 --> 01:46:47,800
Thank you.

1334
01:46:52,800 --> 01:47:17,800
Thank you.

1335
01:47:22,800 --> 01:47:47,800
Thank you.

1336
01:47:52,800 --> 01:48:17,800
Thank you.

1337
01:48:22,800 --> 01:48:47,800
Thank you.

1338
01:48:52,800 --> 01:49:17,800
Thank you.

1339
01:49:22,800 --> 01:49:47,800
Thank you.

1340
01:49:52,800 --> 01:50:17,800
Thank you.

1341
01:50:22,800 --> 01:50:47,800
Thank you.

1342
01:50:52,800 --> 01:51:17,800
Thank you.

1343
01:51:22,800 --> 01:51:47,800
Thank you.

1344
01:51:52,800 --> 01:52:17,800
Thank you.

1345
01:52:22,800 --> 01:52:47,800
Thank you.

1346
01:52:52,800 --> 01:53:17,800
Thank you.

1347
01:53:22,800 --> 01:53:47,800
Thank you.

1348
01:53:52,800 --> 01:54:17,800
Thank you.

1349
01:54:22,800 --> 01:54:47,800
Thank you.

1350
01:54:52,800 --> 01:55:17,800
Thank you.

1351
01:55:22,800 --> 01:55:47,800
Thank you.

1352
01:55:52,800 --> 01:56:17,800
Thank you.

1353
01:56:22,800 --> 01:56:47,800
Thank you.

1354
01:56:52,800 --> 01:57:17,800
Thank you.

1355
01:57:22,800 --> 01:57:47,800
Thank you.

1356
01:57:52,800 --> 01:58:17,800
Thank you.

1357
01:58:22,800 --> 01:58:47,800
Thank you.

1358
01:58:52,800 --> 01:59:17,800
Thank you.

1359
01:59:22,800 --> 01:59:47,800
Thank you.

1360
01:59:52,800 --> 02:00:17,800
Thank you.

1361
02:00:17,800 --> 02:00:32,800
Thank you.

1362
02:00:32,800 --> 02:00:47,800
Thank you.

1363
02:00:47,800 --> 02:01:02,800
Thank you.

1364
02:01:02,800 --> 02:01:17,800
Thank you.

1365
02:01:17,800 --> 02:01:32,800
Thank you.

1366
02:01:32,800 --> 02:01:47,800
Thank you.

1367
02:01:47,800 --> 02:02:02,800
Thank you.

1368
02:02:02,800 --> 02:02:17,800
Thank you.

1369
02:02:17,800 --> 02:02:32,800
Thank you.

1370
02:02:32,800 --> 02:02:47,800
Thank you.

1371
02:02:47,800 --> 02:03:02,800
Thank you.

1372
02:03:02,800 --> 02:03:17,800
Thank you.

1373
02:03:17,800 --> 02:03:25,800
All right. Thank you. Thank you all very much. I'll just ask, is there anything that we need to discuss before we part ways and I see you at the second day hearing?

1374
02:03:27,800 --> 02:03:28,800
No, okay.

1375
02:03:29,800 --> 02:03:36,800
Okay. Thank you all very much for your time and attention to this matter. The first day papers were excellent as well as the declarations.

1376
02:03:36,800 --> 02:03:45,800
I really understood the issues prior to taking the bench and I know a lot of hard work went into drafting those papers as well as the agreements reached in the DIP.

1377
02:03:45,800 --> 02:03:52,800
Look forward to seeing you all as we move forward in these cases. And with that, we're adjourned and I'll see you at the second day hearing. Thank you all very much.

1378
02:03:53,800 --> 02:03:54,800
Thank you, Your Honor.

1379
02:03:54,800 --> 02:04:16,800
Thank you.

1380
02:04:24,800 --> 02:04:52,800
Thank you.