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IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re:
Chapter 11
OPTIMA SPECIALTY STEEL, INC., et al.,1
Case No. 16-12789 (KJC)
Debtors.
(Jointly Administered) Requested Objection Deadline: January 20, 2017 at 12:00 p.m. Requested Hearing Date: January 23, 2017 at 10:00 a.m.
MOTION FOR THE ENTRY OF INTERIM AND FINAL ORDERS (I) AUTHORIZING POSTPETITION SECURED FINANCING PURSUANT TO 11 U.S.C. §§ 105(A), 361 362, 364(c)(1), 364(c)(2), 364(c)(3), 364(d)(1) AND 364(e), (II) AUTHORIZING THE DEBTORS’ USE OF CASH COLLATERAL PURSUANT TO 11 U.S.C. § 363, (III) GRANTING ADEQUATE PROTECTION PURSUANT TO 11 U.S.C. §§ 361, 363 AND 364, AND (IV) SCHEDULING A FINAL HEARING PURSUANT TO BANKRUPTCY RULES 4001(b) AND 4001(c) The above-captioned debtors and debtors-in-possession (collectively, the “Debtors”) hereby move the Court (this “Motion”) pursuant to sections 105, 361, 362, 363, 364, 503, and 507 of title 11 of the United States Code, 11 U.S.C. §§ 101, et seq. (the “Bankruptcy Code”), Rules 2002, 4001, 6004, and 9014, of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”), and Rule 2002-1(b), 4001-2, 9006-1 and 9013-1 of the Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the District of Delaware (the “Local Rules”), for entry of an interim order, substantially in the form attached
1
The Debtors in these Chapter 11 Cases, along with the business addresses and the last four (4) digits of each Debtor’s federal tax identification number, if applicable, are: Optima Specialty Steel, Inc., 200 S. Biscayne Blvd., Suite 5500, Miami, FL 33131-2310 (0641); Michigan Seamless Tube LLC, 400 McMunn Street, South Lyon, MI 48178 (3850); Niagara LaSalle Corporation, 1412 150th Street, Hammond, IN 46327 (0059); KES Acquisition Company d/b/a Kentucky Electric Steel, 2704 South Big Run Road, Ashland, KY 41102 (2858); and The Corey Steel Company, 2800 South 61st Court, Cicero, IL 60804 (0255).
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hereto as Exhibit A (the “Interim DIP Order”), and a final order (the “Final DIP Order” and, together with the Interim DIP Order, the “DIP Orders”): (i)
authorizing each of the Debtors, in its capacity as a borrower (each “Borrower” and, collectively, the “Borrowers”), to obtain postpetition financing (the “DIP Facility”), on a joint and several basis, consisting of a superpriority term loan credit facility in an aggregate principal amount of up to $211,700,000 consisting of (i) a multiple-draw term loan of up to $50,000,000 in respect of new money funding (the “New Money DIP Loans” or the “New Money DIP Commitments”) provided by DDJ Capital Management, LLC (on behalf of certain of its managed accounts and investment funds, “DDJ” and, together with third parties acceptable to DDJ, the “New Money DIP Lenders”), of which $40,000,000 shall be approved pursuant to the Interim Order, and (ii) a single draw term loan (the “Replacement DIP Loans” and, together with the New Money DIP Loans, the “DIP Loans”) provided by DDJ and certain other holders of the Prepetition Secured Notes (as defined below) (exclusive of DDJ, the “Minority DIP Lenders” and, together with the New Money DIP Lenders and DDJ in its capacity as a provider of Replacement DIP Loans, the “DIP Lenders”) in an amount sufficient to repay in full, in cash, all Prepetition Secured Notes Obligations (as defined below) (the “Prepetition Secured Notes Repayment”), which Replacement DIP Loans shall be approved pursuant to, and Prepetition Secured Notes Repayment shall occur following entry of, the Final Order (as defined below), upon terms and conditions substantially consistent with the term sheet attached as Exhibit B hereto (the “DIP Term Sheet”); 2
(ii)
authorizing the Debtors to enter into that certain Senior Secured Super-Priority Debtor-In-Possession Credit Agreement among the Borrowers, the DIP Lenders party thereto, and the administrative agent thereto, as administrative agent (in such capacity, the “DIP Agent”) (as amended, restated or otherwise modified from time to time in accordance with the terms thereof, the “DIP Credit Agreement”; together with all agreements, documents, and instruments delivered or executed in connection therewith, the “DIP Documents”), and to perform such other and further acts as may be required in connection with the DIP Documents;3
(iii)
authorizing the Debtors to use the New Money DIP Loans, the proceeds thereof, and the Prepetition Secured Notes Collateral (as defined below), including Cash Collateral (as defined below), to provide working capital for, and for other general corporate purposes of, the Debtors, including for payment of any Adequate Protection Obligations (as defined below) and, subject to entry of the Final Order,
2
Capitalized terms used but not defined in this Motion shall have the meanings ascribed to them in the DIP Term Sheet. 3
The Debtors anticipate filing the form of DIP Credit Agreement in advance of the Interim Hearing.
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authorization for the Debtors to incur the Replacement DIP Loans and use the proceeds thereof to make the Prepetition Secured Notes Repayment; (iv)
granting adequate protection to the holders (collectively, the “Prepetition Secured Noteholders”) of the 12.500% Senior Secured Notes due 2016 issued by the Borrower (the “Prepetition Secured Notes”) under that certain Indenture dated as of December 5, 2011 (as amended, supplemented or otherwise modified, the “Prepetition Secured Notes Indenture” and, together with all related collateral and security documents, the “Prepetition Secured Notes Documents”), by and among OSS (defined below), as issuer, the guarantors party thereto and Wilmington Trust, National Association, as trustee and collateral agent (the “Prepetition Secured Notes Trustee”);
(v)
authorizing the Debtors to use the Prepetition Secured Notes Collateral, including Cash Collateral, in which the Prepetition Secured Noteholders and the Prepetition Secured Notes Trustee (collectively, the “Prepetition Secured Parties”) have an interest, and the granting of adequate protection to the Secured Parties with respect to, among other things, such use of their Cash Collateral and any diminution in the value of the Prepetition Secured Notes Collateral;
(vi)
granting valid, enforceable, non-avoidable and fully perfected first priority liens on and senior security interests in all of the property, assets and other interests in property and assets of the Debtors, whether such property is presently owned or after-acquired, and all other “property of the estate” (within the meaning of the Bankruptcy Code) of the Debtors, of any kind or nature whatsoever, real or personal, tangible, intangible or mixed, now existing or hereafter acquired or created, whether existing prior to or arising after the Petition Date, including, subject to entry of the Final Order (as defined below), proceeds of Avoidance Actions (as defined below), subject to (i) the Carve-Out (as defined below), (ii) prior to entry of the Final Order approving the Replacement DIP Loans and the occurrence of the Prepetition Secured Notes Repayment, the Prepetition Secured Notes Liens and the Adequate Protection Liens (each as defined below), in each case, unless there is an order of the Bankruptcy Court providing that (x) the claims arising in connection with the Prepetition Secured Notes Obligations are not allowed as secured claims or (y) such Prepetition Secured Note Liens do not constitute non-avoidable, valid and perfected liens, and (iii) any Senior Liens (as defined below), on the terms and conditions set forth herein and in the DIP Documents;
(vii)
granting superpriority administrative expense claims against each of the Debtors’ estates to the DIP Agent and the DIP Lenders with respect to the DIP Obligations (as defined below), subordinate to the payment of the Carve-Out and, which claims on account of the New Money DIP Loans, (i) prior to entry of the Final Order approving the Replacement DIP Loans and the occurrence of the Prepetition Secured Notes Repayment, shall be junior to the claims arising on account of the Prepetition Secured Notes Obligations and the Adequate Protection Claims (unless there is an order of the Bankruptcy Court providing that the claims 3
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arising in connection with the Prepetition Secured Notes Obligations are not allowed as secured claims) and (ii) following entry of the Final Order approving the Replacement DIP Loans and the occurrence of the Prepetition Secured Notes Repayment, shall be junior to the superpriority administrative expense claims on account of the Replacement DIP Loans, but in both instances otherwise senior to any and all other administrative expenses of any kind or nature other than the Carve-Out, on the terms and conditions set forth herein and in the DIP Documents; (viii) limiting the Debtors’ and the estates’ right to surcharge against the DIP Collateral (as defined below) and the Prepetition Secured Notes Collateral pursuant to Bankruptcy Code section 506(c); (ix)
scheduling and establishing deadlines related to a final hearing (the “Final Hearing”) to consider entry of the Final DIP Order, authorizing, among other things, the balance of the borrowing under the DIP Documents on a final basis, the Prepetition Secured Notes Repayment, and approving the form of notice with respect to the Final Hearing; and
(x)
granting related relief.
In support of this Motion, the Debtors rely upon and incorporate by reference the Declaration of James Doak in Support of the Debtors’ Motion for the Entry of Interim and Final Orders (I) Authorizing Postpetition Secured Financing Pursuant to 11 U.S.C. §§ 105, 361, 362, 363, 364(c)(1), 364(c)(2), 364(c)(3), 364(d)(1) and 364(e), (II) Authorizing The Debtors’ Use of Cash Collateral Pursuant to 11 U.S.C. §363, (III) Granting Adequate Protection Pursuant to 11 U.S.C. §§ 361, 363 and 364, and (IV) Scheduling A Final Hearing (the “Doak Declaration”), which was filed concurrently herewith. In further support of this Motion, Debtors respectfully state: Status of the Case 1.
On December 15, 2016 (the “Petition Date”), each of the Debtors commenced the
Bankruptcy Cases by filing voluntary petitions for relief under the Bankruptcy Code (the “Chapter 11 Cases”).
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The Debtors are in possession of their properties and are operating and managing
their businesses as debtors and debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. 3.
No request has been made for the appointment of a trustee or examiner.
4.
The United States Trustee for the District of Delaware (the “U.S. Trustee”)
appointed an official committee of unsecured creditors (the “Creditors’ Committee”) in these Chapter 11 Cases on January 4, 2017. Jurisdiction, Venue and Statutory Predicates 5.
The Court has jurisdiction over the Bankruptcy Cases and the Motion pursuant to
28 U.S.C. §§ 157 and 1334 and the Amended Standing Order of Reference from the United States District Court for the District of Delaware, dated February 29, 2012. Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409. This matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2). 6.
The statutory predicates for the relief set forth herein are sections 105, 361, 362,
363, 364, 503, and 507 of the Bankruptcy Code, Bankruptcy Rules 2002, 4001, 6004, and 9014, and Local Rules 2002-1(b), 4001-2, 9006-1 and 9013-1. Background A.
The Debtors
7.
The Debtors are leading independent manufacturers of specialty steel products.
These steel products include (i) special bar quality and merchant bar quality hot rolled steel bars, (ii) value-added precision-tolerance, cold drawn seamless tubes, and (iii) high quality engineered cold finished steel bars. The Debtors’ products are utilized across a diversified range of end markets, including transportation (e.g. automotive), energy (e.g. oil and gas shale extraction), 5
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agriculture, power generation, yellow goods/construction equipment, railroad car, industrial chain manufacturing, and trailer support beam flanges. 8.
All of the Debtors’ manufacturing facilities are located in the United States, and
each of the Debtors’ operating units has operated in the steel industry for more than 50 years. In the aggregate, the Debtors have more than one thousand customers in the United States. These customers span many industries including transportation, energy, agriculture and power generation. The Debtors collectively employ more than 900 people. 9.
Although the Debtors’ business is fundamentally sound, it has been affected by a
period of macroeconomic and industry distress. These external and other factors rendered the Debtors incapable of repaying their long-term indebtedness at maturity.
Accordingly, the
Debtors sought protection under Chapter 11 of the Bankruptcy Code to provide “breathing room” during which the Debtors intend to assess strategic options, address operational issues and consider restructuring proposals.
During this period, the Debtors intend to continue their
operations in the ordinary course of business. B.
Debtors’ Prepetition Debt and Equity Structures
10.
Debtor Optima Specialty Steel, Inc. (“OSS”) is the issuer of the Prepetition
Secured Notes which matured on December 15, 2016. The Prepetition Secured Notes are beneficially owned by various holders including DDJ and the Secured Noteholder Group (as defined below). It is the Debtors’ understanding that unaffiliated holders of a majority of the Prepetition Secured Notes have formed an ad hoc committee (the “Secured Noteholder Group”). 11.
The Prepetition Secured Notes were issued pursuant to an indenture dated
December 5, 2011, by and between OSS and its existing and future subsidiaries and Wilmington Trust, National Association as trustee and noteholder collateral agent (the “Prepetition Secured 6
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Notes Trustee”). Interest under the Prepetition Secured Notes was payable semi-annually in arrears on June 15 and December 15 of each year. Before the maturity date, interest was timely paid under the Prepetition Secured Notes. The Prepetition Secured Notes matured on December 15, 2016 and the Debtors did not make the interest payment due December 15, 2016. The Prepetition Secured Notes are fully guaranteed, on a senior secured basis, by each of the Debtors. The Prepetition Secured Notes and related guarantees are secured by substantially all of the Debtors’ assets, subject to permitted liens and specified excluded assets. 12.
The Debtors’ made an excess cash flow payment in 2015 in the amount of $13.3
million. The approximate amount currently outstanding under the Prepetition Secured Notes is $171.7 million, which includes interest in the approximate amount of $10 million through the Petition Date. 13.
OSS is also the issuer of $85 million of senior unsecured notes bearing interest at
12.0% per annum, payable semi-annually in arrears on March 15 and September 15 of each year (the “Prepetition Unsecured Notes”). The Prepetition Unsecured Notes were due to mature on or before December 30, 2016. Before the commencement of these Chapter 11 Cases, interest payments due under the Prepetition Unsecured Notes were paid timely. As a result of the chapter 11 filing, the Debtors did not make the interest payment due December 30, 2016. 14.
The Prepetition Unsecured Notes were issued pursuant to an indenture dated
January 29, 2015, by and between OSS and its existing and future subsidiaries and Wilmington Trust, National Association as trustee. The Prepetition Unsecured Notes are fully guaranteed by each of the Debtors. On or about January 4, 2017, Wilmington Savings Fund Society replaced Wilmington Trust as the indenture trustee for the Prepetition Unsecured Notes.
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The Debtors understand that the Prepetition Unsecured Notes are currently held
solely by DDJ. The approximate amount currently outstanding under the Prepetition Unsecured Notes is $87.5 million, which includes accrued interest in the approximate amount of $2.5 million as of the Petition Date. 16.
Aside from the Prepetition Unsecured Notes, the Debtors have general unsecured
claims which include, among others, trade claims, litigation claims and environmental claims. As of the Petition Date, the general unsecured claims (excluding the Prepetition Unsecured Notes) were in excess of $37.0 million. C.
Corporate Governance
17.
The Board of Directors of OSS is comprised of seven individuals. On December
14, 2016, the Debtors formed a special committee comprised of two independent directors (the “Special Committee”) to review, evaluate and make key decisions regarding the restructuring of the Debtors’ business, assets, liabilities, and interests during these Chapter 11 Cases (the “Restructuring Process”). The independent directors are John H. Goodish and Menachem M. Mayberg. Mr. Mayberg is a practicing attorney in Miami, Florida. Mr. Goodish has deep steelindustry experience having worked in the industry for forty years including serving as Chief Operating Officer and Executive Vice President of United States Steel Corp. from June 1, 2005 to December 31, 2010. 18.
The Debtors have proposed to retain Miller Buckfire & Co., LLC (“Miller
Buckfire”) to provide investment banking services to the Debtors in these Chapter 11 Cases. The Debtors have filed an application with the Court to approve the retention of Miller Buckfire as their investment bankers.
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The Debtors have also selected Michael Correra of Conway MacKenzie
Management Services, LLC as the Chief Restructuring Officer of the Debtors (the “CRO”). The CRO will report to the Special Committee. The Debtors are finalizing the terms of engagement for the CRO and expect to file an application for his retention within a few days. D.
Prepetition Restructuring Efforts
20.
Before the Petition Date, the Debtors, with the assistance of their pre-petition
financial advisor, devoted several months to extensive negotiations with existing debt holders, shareholders and potential new lenders. The Debtors and their stakeholders considered various proposals for the refinancing comprised of new senior secured debt plus a substantial infusion of new debt and equity capital by Optima Acquisitions, LLC. Those negotiations ultimately failed to result in a binding term sheet or any definitive agreement. With the refinancing negotiations breaking down in December 2016 and the maturity of the Prepetition Secured Notes looming on December 15, 2016, the Debtors filed these Chapter 11 Cases. E.
The Debtors’ Liquidity
21.
Although the Debtors obtained authority for the use of Cash Collateral on an
interim basis pursuant to the Interim Order (I) Authorizing the Use of Cash Collateral, (II) Granting Adequate Protection to the Secured Parties, (III) Scheduling a Final Hearing Pursuant to Bankruptcy Rule 4001(b) and (IV) Granting Related Relief [Docket No. 54] (the “Interim Cash Collateral Order”), the use of Cash Collateral alone does not allow the Debtors sufficient liquidity to meet their needs, including seasonal working capital requirements that traditionally begin increasing in mid-January 2017 and the costs of administration of these Chapter 11 Cases. Additional liquidity is necessary to continue operations, administer these Chapter 11 Cases and preserve the value of the Debtors’ estates. 9
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As a result, since the Petition Date, the Debtors have focused their efforts on
obtaining a debtor-in-possession financing.
Debtor-in-possession financing will permit the
Debtors to finance their operations, maintain business relationships with their vendors, suppliers and customers, pay their employees, and otherwise finance their operations. Without the ability to access post-petition financing, the Debtors, their estates and their creditors would suffer immediate and irreparable harm. F.
The Debtors’ DIP Financing Process (1)
23.
Solicitation and Marketing Efforts
Through their advisors and at the direction of the Special Committee, the Debtors
established an orderly, fair and transparent process for soliciting, negotiating and selecting proposals from parties interested in providing DIP financing. As set forth in the Notice of Debtor-in Possession Financing Process and Hearing to Approve Debtor-in-Possession Financing [Docket No. 90] (the “DIP Process Notice”) filed on December 23, 2016, the Debtors published the following schedule for such process:
Date
Event
December 22, 2016
Debtors’ financial advisor will make calls to potential lenders to assess interest
December 27-29, 2016
Debtors will conduct meetings and calls with select lenders
January 3, 2017
Financing proposals due
On or about January 6, 2017
DIP documentation will be filed with the Court
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The Debtors, through their professionals, contacted 28 parties to solicit their
interest in providing DIP financing on an unsecured, administrative, superpriority or even a priming basis. The Debtors entered into non-disclosure agreements with 18 of these parties. The Debtors established a virtual dataroom on December 20, 2016 and began granting access to lenders that day, upon execution of non-disclosure agreements. On December 26, 2016, a Confidential Information Memorandum (“CIM”) was distributed to potential lenders via the dataroom. On December 27, 2016, a process letter and model term sheet were also distributed to potential lenders via the dataroom. (2) 25.
Selection of Optima Acquisition, LLC’s Debtor-In-Possession Financing Proposal on January 6, 2017
Through January 6, 2017, the Debtors had obtained multiple DIP financing
proposals from five different potential lenders, including from certain of their secured noteholders and from their unsecured noteholders. On or about January 5, 2017, DDJ and the Secured Noteholder Group made a joint DIP financing proposal (the joint proposal, the “Secured Noteholder/DDJ Proposal”). 26.
In addition to the Secured Noteholder/DDJ Proposal, the Debtors also received
certain other proposals, including: (i) two different proposals from two separate third-party lenders each for a new money priming loan, and (ii) a proposal from Optima Acquisitions, LLC, a privately-owned U.S.-based investment firm that wholly owns OSS (the “Optima Acquisitions”), for a financing facility that the Debtors and Optima Acquisitions believe to be non-priming. 27.
In evaluating the proposals, the Debtors worked to assure that the proposals
provided sufficient liquidity, the best available economic terms, and, as much as possible, a level playing field for all of the Debtors’ constituencies during the expected future plan process. 11
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While attractive in meeting these three objectives, the two third-party proposals had execution risk in that they each required priming the Secured Noteholders. The Debtors, therefore, focused initially on negotiating the Secured Noteholder/DDJ Proposal and the proposal from Optima Acquisitions with the parties making each of those proposals. 28.
Before making their determination between these two proposals, the Debtors’
advisors discussed each of the proposals with the party submitting it and provided mark-ups of the proposals. Based on these discussions, the Debtors received revised proposals from the Secured Noteholders/DDJ and Optima Acquisitions.
The revised Secured Noteholder/DDJ
Proposal contemplated junior DIP financing, a refinancing of the Prepetition Secured Notes upon final approval and intercreditor provisions to ensure the preservation of the priority of the Senior Notes, but also included other provisions that the Debtors found problematic. Although the revised Secured Noteholders/DDJ Proposal contained fewer case controls than previous versions, it still contemplated milestones and other case control provisions that the Debtors’ requested be removed. By contrast, Optima Acquisitions submitted a revised proposal (as revised, the “OA Proposal”) that contemplated lower financing fees, no case control provisions and lower interest rates than those proposed by the third-party lenders. 29.
The Debtors’ evaluated the proposals and concluded that the OA Proposal was
superior to the Secured Noteholder/DDJ Proposal. Among other things, the Debtors believed that the initial economics of the OA Proposal were superior to the Secured Noteholder/DDJ Proposal. Although the pricing of the two proposals became comparable several quarters into either financing (due to the fact that the Secured Noteholder/DDJ Proposal would refinance the Prepetition Secured Notes at a lower interest rate, whereas the OA Proposal required the Debtors to make Adequate Protection interest payments at the default rate to the Secured Noteholders for 12
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the life of the Chapter 11 Cases), the Debtors believed that non-economic terms of the two proposals also weighed in favor of the OA Proposal. 30.
After considering the proposals and the recommendations of their advisors, the
Special Committee initially determined that the OA Proposal was more favorable for the Debtors’ estates than the existing Secured Noteholder/DDJ Proposal, because the proposal provided sufficient liquidity, had attractive economics, did not contain case control or other features that limited flexibility later in the case, could be taken out at any time without premium or penalty, and, according to the Debtors, was junior to and provided adequate protection for the Prepetition Secured Notes. 31.
On January 9, 2017, the Debtors sought approval of the OA Proposal by the filing
of their Motion for the Entry of Interim and Final Orders Pursuant to 11 U.S.C. §§ 105, 361, 362, 363, 364, 503 and 507 (I) Authorizing the Debtors to Obtain Non-Priming Senior Secured Postpetition Financing, (II) Authorizing Use of Cash Collateral, (III) Granting Liens And Providing Superpriority Administrative Expense Status, (IV) Granting Adequate Protection, (V) Modifying the Automatic Stay, (VI) Scheduling a Final Hearing, and (VII) Granting Related Relief [Docket No. 147] (the “OA DIP Financing Motion”) to authorize the Debtors to enter into DIP financing with Optima Acquisitions (the “OA DIP Financing”). Before and after the filing of the OA DIP Financing Motion, the Secured Noteholder Group and DDJ informed the Debtors that the OA Proposal contained a number of provisions that they found objectionable, including that they believed that the financing contemplated by the OA Proposal was not truly non-priming and was economically less favorable to the Debtors, and that they would be vigorously opposing approval of the OA DIP Financing Motion. The Secured Noteholders and DDJ promptly served the Debtors and Optima Acquisitions with document requests and deposition notices, the Debtors 13
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began to prepare an expedited document production, and the parties began to schedule multiple depositions prior to the scheduled hearing on the OA DIP Financing Motion. (3) 32.
Selection of the DIP Facility on January 12, 2017
As stated in the OA DIP Financing Motion, the Debtors also continued after the
filing of the OA DIP Financing Motion to negotiate the terms of the Secured Noteholder/DDJ Proposal.
The Debtors, the Secured Noteholder Group and DDJ engaged in extensive
negotiations throughout the week of January 9, 2017 through multiple telephone conferences and the exchange of multiple draft proposed modifications to the Secured Noteholder/DDJ Proposal. Advisors to Optima Acquisitions later joined in these negotiations in an effort to achieve a revised Secured Noteholder/DDJ Proposal that it could support. As a result of these continued efforts, the Debtors, the Secured Noteholder Group and DDJ were able to reach agreement on the terms of revised Secured Noteholder/DDJ Proposal for the DIP Facility. 33.
The DIP Facility features substantial improvements over the prior Secured
Noteholder/DDJ Proposal, including: (i) elimination of the exit fee, (ii) reduced case controls and extended case milestones, (iii) the removal of provisions the Debtors viewed as advantaging the Prepetition Unsecured Notes, (iv) appropriate budget and variance provisions controls, and (iv) the elimination of diligence and other contingencies. 34.
The Debtors evaluated the DIP Facility and concluded it was economically
comparable in the near term to the OA DIP Financing. Moreover, the Debtors determined that over the long term the DIP Facility was superior economically to the OA DIP Financing due to, among other reasons, the DIP Facility’s refinancing of the Prepetition Secured Notes at a rate 3.5% lower than the existing contractual default rate on the Prepetition Secured Notes. 35.
In addition to the economic features of the DIP Facility, the final case milestones
and Maturity Date incorporated in the DIP Facility, which have been agreed to by the Debtors, 14
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the Secured Noteholder Group, DDJ and Optima Acquisitions, will provide the Debtors with the time necessary to negotiate and consummate the terms of their exit from the Chapter 11 Cases. Further, the DIP Facility is supported by the Secured Noteholder Group, DDJ, and Optima Acquisitions. Proceeding with the DIP Facility (as improved through negotiations) in lieu of the OA DIP Financing allows the Debtors to secure financing on favorable terms and minimizes significant uncertainty and litigation expense associated with continuing to prosecute the OA DIP Financing Motion over the objection of the Secured Noteholder Group and DDJ. These factors were deemed particularly important in light of the Debtors’ urgent need for liquidity no later than January 30, 2017. 36.
After considering the DIP Facility in comparison to the OA DIP Financing, and
the recommendations of the Debtors’ advisors and the CRO, for the foregoing reasons, the Special Committee determined that, subject to finalizing the DIP Documents, proceeding with the DIP Facility as revised through this process is preferable to proceeding with the OA DIP Financing and in the best interests of the Debtors’ estates and constituencies. 37.
The Debtors and the DIP Lenders were represented by separate advisors during
the negotiations. In obtaining the DIP Facility, the Debtors followed a full, transparent, at times contentious, and competitive process. Thus, the Debtors’ negotiations with the DIP Lenders were conducted in good faith and at arm’s-length. G.
Use of the DIP Facility
38.
The proceeds of the DIP Facility will be used in accordance with the provisions of
a budget (as defined in the DIP Term Sheet, the “Budget”), subject to permitted variances. The Budget will provide for the payment of operating expenses such as for the purchase of raw materials to be used in the manufacture of the Debtors’ specialty steel products, the cost for 15
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supplies, repairs and dies relating to the Debtors’ machinery, and payroll for the Debtors’ employees. The Budget also provides for adequate protection in the form of the payment of postpetition interest to the Prepetition Secured Noteholders. In addition, the Budget provides for the expenses of administration of these Chapter 11 Cases. Payment of these and other expenses is necessary to maintain the Debtors’ enterprise as a going concern and to maximize the value of the Debtors’ estates for all of their stakeholders. Summary of the Terms and Conditions of the Proposed DIP Facility4 A.
Summary of Essential Terms under Bankruptcy Rule 4001(c)(1)(B) and Local Rule 4001-2(a)(ii)
39.
Pursuant to Bankruptcy Rule 4001(c)(1)(B) and Local Rule 4001-2(a)(ii), the
following chart summarizes the essential terms of the proposed DIP Facility, together with references to applicable sections of the relevant source documents. Bankruptcy Rule / Local Rule DIP Credit Agreement Parties
Summary of Material Terms Borrowers: The Debtors Guarantors: [ ]
Fed. R. Bankr. P. 4001(c)(1)(B); Local Agent: An entity designated by DDJ Capital Management, LLC R. 4001-2(a)(ii) Lenders: The debtor-in-possession lenders from time to time party to the DIP Credit Agreement See DIP Term Sheet - “Borrowers,” “Guarantors” & “DIP Agent and DIP Lenders” Commitment Fed. R. Bankr. P. 4001(c)(1)(B); Local R. 4001-2(a)(ii)
Subject to the closing conditions and funding conditions set forth in the DIP Documentation, a total facility of $211,700,000, with the proceeds of the DIP Loans consisting of and be used by the Company as follows: (i) up to $50,000,000 to fund the payment of expenses of the type and in the amounts set forth in the Budget, subject to Permitted Variances and
4
The summaries contained in this Motion are qualified in their entirety by the provisions of the DIP Term Sheet and the DIP Documents. To the extent anything in this Motion is inconsistent with such documents, the terms of the applicable documents shall control.
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Summary of Material Terms the other Budget Covenants; and (ii) upon entry of the Final Order, to repay, in full, in cash, all Prepetition Secured Notes Obligations and the termination of the liens securing the same. Up to $40,000,000 of the DIP Loans will be available upon entry of the Interim Order. See DIP Term Sheet - “DIP Loans”
Interest Rates and Fees Fed. R. Bankr. P. 4001(c)(1)(B); Local R. 4001-2(a)(ii)
Interest on the DIP Obligations shall be payable monthly in arrears in cash. The outstanding principal amount of all DIP Obligations shall bear interest at 10.00% per annum plus 3-month LIBOR (subject to a 1% floor). After the occurrence and during the continuance of an Event of Default (as defined below), all outstanding DIP Obligations shall bear an additional 2.00% per annum of interest, which additional interest will be payable on demand. Calculation of interest shall be on the basis of the actual days elapsed in a year of 360 days. See DIP Term Sheet - “Interest Rate”
Fees Fed. R. Bankr. P. 4001(c)(1)(B); Local R. 4001-2(a)(ii)
A “Closing Fee” equal to 2.00% of the total commitments for New Money DIP Loans under DIP Facility (including, without limitation, commitments subject to entry of a Final Order) and payable in cash on the closing date from the proceeds of the DIP Facility. In addition, the Debtors shall pay the actual fees of the DIP Agent. See DIP Term Sheet, “Fees”
Term Fed. R. Bankr. P. 4001(c)(1)(B); Local R. 4001-2(a)(ii)
The Maturity Date of the DIP Facility is the earliest of (i) October 31, 2017 or such later date to which Required DIP Lenders consent in writing in its sole discretion, (ii) the occurrence of the effective date of any chapter 11 plan, or (iii) the sale of substantially all of the Debtors’ assets; provided that immediately upon written notice by the DIP Agent, Secured Noteholder Group or Prepetition Secured Notes Trustee (as applicable) to counsel for the Debtors, counsel to any Official Committee of Unsecured Creditors, counsel for the Secured Noteholder Group, counsel to the Prepetition Secured Notes Trustee, counsel to the DIP Agent, counsel to DDJ, and the Office of the United States Trustee, as applicable, following the occurrence and during the continuance of any Event of Default or Termination Event (as defined in the Interim Order), the DIP Facility shall terminate without further notice, motion, hearing or action of any kind. See DIP Term Sheet - “Maturity Date”
Use of DIP Facility
The proceeds of the DIP Loans will be used, in accordance with the 17
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Summary of Material Terms terms of the Budget and the DIP Orders to (i) fund the working capital needs and chapter 11 administrative costs of the Borrowers during the pendency of the Chapter 11 Cases, (ii) provide for repayment of all of the Prepetition Secured Notes Obligations, (iii) provide adequate protection to the Debtors’ Prepetition Secured Notes Parties as provided in the DIP Orders and the DIP Credit Agreement, (iv) pay fees, costs and expenses of the DIP Facility on the terms and conditions described in the DIP Term Sheet, and (v) pay other amounts as specified in the Budget. See DIP Term Sheet - “DIP Loans,” “Fees,” “Adequate Protection,” “Budget Covenants,” and “Expense Reimbursement”
Limitations on Use of DIP Facility Fed. R. Bankr. P. 4001(c)(1)(B); Local R. 4001-2(a)(ii)
Without the prior written consent of the DIP Agent (with the consent of the Required DIP Lenders) and, prior to entry of the Final Order approving the Replacement DIP Loans and the occurrence of the Prepetition Secured Notes Repayment, the Prepetition Secured Notes Trustee (but solely with respect to cash collateral or Prepetition Secured Notes Collateral and with the consent of the Required Prepetition Secured Noteholders), none of the DIP Loans, Prepetition Secured Noteholder Collateral, cash collateral or other Collateral, or Carve-Out (as defined and except as expressly provided below) may not be used for any of the following purposes:
to investigate (except as expressly provided in the Interim Order), initiate, prosecute, join, or finance the initiation or prosecution of any claim, counterclaim, action, suit, arbitration, proceeding, application, motion, objection, defense, or other litigation of any type (i) against any of the DIP Agent, the DIP Lenders or the Prepetition Secured Parties (each in their capacities as such) or seeking relief that would impair the rights and remedies of the DIP Agent, the DIP Lenders or the Prepetition Secured Notes Parties (each in their capacities as such) under the DIP Documents, the Prepetition Secured Notes Documents or this Interim Order, including, without limitation, for the payment of any services rendered by the professionals retained by the Debtors or the Creditors’ Committee in connection with the assertion of or joinder in any claim, counterclaim, action, proceeding, application, motion, objection, defense, or other contested matter, the purpose of which is to seek, or the result of which would be to obtain, any order, judgment, determination, declaration, or similar relief that would impair the ability of any of the DIP Agent, the DIP Lenders or the Prepetition Secured Notes Parties to recover on the DIP Collateral or the Prepetition Secured Notes Collateral or seeking affirmative relief against any of the DIP Agent, the DIP Lenders or the Prepetition Secured Notes Parties (each in their capacities as such) related to the DIP Obligations or the Prepetition 18
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Summary of Material Terms Secured Notes Obligations; (ii) invalidating, setting aside, avoiding, or subordinating, in whole or in part, the DIP Obligations or the DIP Agent’s and the DIP Lenders’ liens or security interests in the DIP Collateral or the Prepetition Secured Notes Obligations or the Prepetition Secured Parties’ liens or security interests in the Prepetition Secured Notes Collateral; or (iii) for monetary, injunctive, or other affirmative relief against the DIP Agent, the DIP Lenders or the Prepetition Secured Parties (each in their capacities as such), or their respective liens on or security interests in the DIP Collateral or the Prepetition Secured Notes Collateral that would impair the ability of any of the DIP Agent, the DIP Lenders or the Secured Parties to assert or enforce any lien, claim, right, or security interest or to realize or recover on the DIP Obligations or the Prepetition Secured Notes Obligations;
for objecting to or challenging in any way the legality, validity, priority, perfection, or enforceability of the claims, liens, or interests (including the Prepetition Secured Notes Liens) held by or on behalf of each of the Prepetition Secured Notes Parties related to the Prepetition Secured Notes Obligations or by or on behalf of the DIP Agent and the DIP Lenders related to the DIP Obligations; (c) for asserting, commencing, or prosecuting any claims or causes of action whatsoever, including, without limitation, any Avoidance Actions related to the DIP Obligations, the DIP Liens, or the Prepetition Secured Notes Obligations or the Prepetition Secured Notes Liens; or (d) for prosecuting an objection to, contesting in any manner, or raising any defenses to, the validity, extent, amount, perfection, priority, or enforceability of: (x) any of the DIP Liens or any other rights or interests of the DIP Agent or the DIP Lenders related to the DIP Obligations or the DIP Liens, or (y) any of the Prepetition Secured Notes Liens or any other rights or interests of any of the Secured Parties related to the Prepetition Secured Notes Obligations or the Prepetition Secured Notes Liens; provided that no more than $25,000 of the proceeds of the DIP Facility, the DIP Collateral or the Prepetition Secured Notes Collateral, including the Cash Collateral, in the aggregate, may be used by the Creditors’ Committee, if appointed, solely to investigate the foregoing matters within the Challenge Period (as defined below); or
to object to or contest the validity or enforceability of the Prepetition Unsecured Notes Obligations.
See DIP Term Sheet - “Limitations on Use of DIP Loans and Cash Collateral” Conditions
Customary conditions precedent for debtor-in-possession financings of 19
Case 16-12789-KJC
Bankruptcy Rule / Local Rule Precedent Fed. R. Bankr. P. 4001(c)(1)(B); Local R. 4001-2(a)(ii) Repayment Features Fed. R. Bankr. P. 4001(c)(1)(B); Local R. 4001-2(a)(i)(E)
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Summary of Material Terms this type acceptable to the Required DIP Lenders and DIP Agent, including, without limitation, the entry of the Interim Order and the absence of any Event of Default or any Default. See DIP Term Sheet - “Conditions Precedent” Upon entry of the Final Order, the proceeds of the loans made under the DIP Facility shall be used for the repayment, in full, in cash, all Prepetition Secured Notes Obligations and the termination of the liens securing the same. See DIP Term Sheet - “DIP Loans”
The Debtors will prepare a 13-week budget, acceptable to the Required Budget and Permitted Covenants DIP Lenders in their sole discretion, which shall include detailed line items for receipts and disbursements (the “Budget”). Prior to the entry Fed. R. Bankr. P. of the Final Order approving the Replacement DIP Loans and the 4001(c)(1)(B); Local occurrence of the Prepetition Secured Notes Repayment, the Budget R. 4001-2(a)(ii) shall also be acceptable to the Prepetition Secured Notes Trustee and the Secured Noteholder Group. Further, the Budget may be amended, amended and restated, supplemented or otherwise modified from time to time only with the prior written approval of the Required DIP Lenders and, prior to the entry of the Final Order approving the Replacement DIP Loans and the occurrence of the Prepetition Secured Notes Repayment, the Prepetition Secured Notes Trustee and the Secured Noteholder Group. The Debtors shall comply with the Budget, and not permit disbursements other than the types, in the amounts and at the times set forth in therein, subject to Permitted Variances; provided that the fees and expenses of the DIP Agent, the DIP Lenders, the Prepetition Secured Notes Trustee and the Secured Noteholder Group that are required to be reimbursed hereunder shall not be considered disbursements for purposes of the Budget provisions and shall not be included in any Budget Covenants for purposes of determining any Permitted Variances. “Permitted Variances” means 15% variance on total disbursements and 25% variance on total receipts, tested weekly on a rolling 8-week cumulative basis, beginning with the week of January 16, 2017; provided that to the extent that fewer than eight (8) weeks have elapsed since January 16, 2017, Permitted Variances shall be tested based on the actual number of weeks elapsed (i.e., the first test shall occur with delivery of the variance report on Wednesday, January 25, 2017 for 20
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Summary of Material Terms week of January 16, 2017, which test shall be based on the variance of disbursements and receipts for that week only; the following weekly test shall use a 2-week period, etc.). See DIP Term Sheet - “Budget Covenants”
Reporting Information Fed. R. Bankr. P. 4001(c)(1)(B); Local R. 4001-2(a)(ii)
On or before 5:00 p.m. (Prevailing Eastern Time) on Wednesday of each week, the Debtors shall provide to the DIP Agent and DIP Lenders a weekly a variance report, certified by the chief financial officer of the Debtors, and in a form reasonably satisfactory to the DIP Agent and Required DIP Lenders, comparing actual cash disbursements and cash receipts on a line item basis for the immediately preceding week and for the cumulative period from the week in which the Petition Date occurred to the amounts for the same weekly and cumulative periods set forth in the Budget, with a reasonably detailed explanation of the significant variances. Prior to the entry of the Final Order approving the Replacement DIP Loans and the occurrence of the Prepetition Secured Notes Repayment, (x) the Debtors shall also provide the variance report to the Prepetition Secured Notes Trustee and Secured Noteholder Group when provided to the DIP Agent and DIP Lenders and (y) such report shall be in form and substance reasonably satisfactory to the Prepetition Secured Notes Trustee and the Secured Noteholder Group. No less frequently than every four weeks commencing on February 1, 2017, the Debtors shall deliver an updated budget (each, a “Proposed Budget”) to the DIP Lenders and, prior to the occurrence of the Prepetition Secured Notes Repayment, the Prepetition Secured Notes Trustee and Secured Noteholder Group, which Proposed Budget, upon written approval of the DIP Lenders and Required Prepetition Secured Noteholders shall become the Budget effective as of the first Monday following such written approval; provided, however, that unless and until a Proposed Budget is approved in writing, the Debtors shall still be subject to and be governed by the terms of such Budget then in effect in accordance with the terms of the DIP Orders. Modifications to the Budget shall not require further order or approval of the Bankruptcy Court. Further, the Debtors shall provide to the DIP Agent and DIP Lenders such other financial and operating reports and such other information relating to the business as the DIP Agent and Required DIP Lenders may reasonably request from time to time. Prior to the entry of the Final Order approving the Replacement DIP Loans and the occurrence of the Prepetition Secured Notes Repayment, the Debtors shall provide the Prepetition Secured Notes Trustee and the Secured Noteholder Group such financial and operating reports provided to the DIP Agent 21
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Summary of Material Terms and DIP Lenders. Copies of the above Proposed Budgets, variance reports, and other operating and financial reports shall also be provided (substantially contemporaneously as provided to the DIP Agent and DIP Lenders) to counsel for the Official Committee of Unsecured Creditors (the “Committee”) and counsel to Optima Acquisitions LLC (“OA”). Each of (a) the DIP Lenders, (b) the DIP Agent, (c) prior to the entry of the Final Order approving the Replacement DIP Loans and the occurrence of the Prepetition Secured Notes Repayment, the Prepetition Secured Notes Trustee and the Secured Noteholder Group, (d) OA, and (e) each of their respective financial advisors, consultants and other professionals and representatives (including, for the avoidance of doubt, such advisors, consultants, professionals and representatives of the Minority DIP Lenders), shall (i) have reasonable access to and shall be entitled to visit and inspect, any of the Debtors’ facilities, assets, and/or books and records at reasonable times during normal business hours and on reasonable notice, and (ii) subject to appropriate confidentiality agreements and excluding legally privileged information, shall be entitled to discuss any matter relating to any of the Debtors’ business affairs, their operations or any sale process with any of the Debtors, and their respective officers, directors, advisors and other professionals at reasonable times and upon reasonable notice. In addition, each of (a) the DIP Lenders, (b) the DIP Agent, and their financial advisors, consultants and other professionals and representatives, (c) prior to the entry of the Final Order approving the Replacement DIP Loans and the occurrence of the Prepetition Secured Notes Repayment, the Prepetition Secured Notes Trustee and the Secured Noteholder Group and their respective financial advisors, consultants and other professionals and representatives, and representatives, and (d) OA and its financial advisors, consultants and other professionals and representatives, shall be entitled to communicate directly with any and all vendors, customers, creditors or other parties in interest with respect to any matter involving the Debtors, relating to the Debtors’ business affairs, operations or the restructuring process; provided that prior to the occurrence of an Event of Default, such communications shall be made only with the consent of the CRO (not to be unreasonably withheld, conditioned or delayed). The Debtors and their Boards of Managers/Directors shall cooperate, and shall use commercially reasonable efforts to cause the Debtors’ officers, employees, advisors and other professionals to cooperate, with the DIP Lenders, the DIP Agent, the Prepetition Secured Notes Trustee, the Secured Noteholder Group, the Committee, and OA in connection 22
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Summary of Material Terms with the exercise of access and informational rights as set forth in the immediately preceding paragraph. See DIP Term Sheet - “Budget and Variance Reports and other Financial Reporting”
For so long as the DIP Facility remains outstanding, unless the Secured Noteholder Group and DDJ otherwise agree, the Debtors shall retain Conway MacKenzie to provide Michael Correra to act as chief Fed. R. Bankr. P. restructuring officer or another individual reasonably acceptable to the 4001(c)(1)(B); Local Secured Noteholder Group and DDJ (the “CRO”), with such R. 4001-2(a)(ii) responsibilities and authority typically provided to chief restructuring officers in chapter 11 cases. The Secured Noteholder Group, Required DIP Lenders, the DIP Agent, the Committee, and OA shall be entitled to communicate directly with the CRO on any matter relating to the Debtors, their businesses or the restructuring process. Chief Restructuring Officer
See DIP Term Sheet - “Budget and Variance Reports and other Financial Reporting” Chapter 11 Milestones Fed. R. Bankr. P. 4001(c)(1)(B)(vi); Local R.4001-2(a)(ii)
The DIP Documentation shall provide for the following Case Milestones:
on or before July 14, 2017, the Debtors shall: file a chapter 11 plan of reorganization, which plan shall provide for payment in full in cash of the DIP Obligations (the “Debtors’ Plan”), and related disclosure statement;
on or before August 28, 2017, entry of an order approving the disclosure statement for the Debtors’ Plan;
on or before October 6, 2017, entry of an order confirming the Debtors’ Plan; and
on or before October 27, 2017, the Debtors’ Plan shall have been substantially consummated and the effective date thereof shall have occurred.
Failure to comply with any of the Case Milestones, unless waived or modified by the Required DIP Lenders in their sole discretion and, prior to the Prepetition Secured Notes Repayment, the Required Prepetition Secured Noteholders, shall constitute an Event of Default. See DIP Term Sheet - “Case Milestones” 23
Case 16-12789-KJC
Bankruptcy Rule / Local Rule Liens and Priority Claims Fed. R. Bankr. P. 4001(c)(1)(B)(i); Local R. 40012(a)(i)(D), 40012(a)(ii)
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Summary of Material Terms All DIP Loans and all other DIP Obligations owing by the Debtors to the DIP Agent and DIP Lenders, shall, at all times be secured by liens on and security interests in all of the Debtors’ assets as set forth below (all Property subject to any of the DIP Agent’s claims and liens, the “Collateral” and the DIP Agent’s liens thereon, the “DIP Liens”); provided, however, that in the case of any DIP Liens on any capital stock of any Debtor or any direct or indirect subsidiary thereof, the DIP Liens shall extend to (i) 100% of the capital stock of such Debtor and each direct and indirect domestic subsidiary of such Debtor directly owned by any Debtor, and (ii) (A) 100% of the non-voting capital stock of each direct or indirect foreign subsidiary directly owned by any Debtor and (B) 65% of the voting capital stock of each foreign subsidiary directly owned by any Debtor and for avoidance of doubt, in the case of any foreign entity as to which any or all of the Debtors hold a joint venture interest or equity interest that does not constitute a majority interest in such entity, the DIP Lien shall extend to the entirety of any such joint venture interest or other equity interest): Superpriority Claims: Pursuant to section 364(c)(1) of the Bankruptcy Code, constitute allowed super-priority administrative expense claims in each of the Bankruptcy Cases, having priority over (i) all super-priority administrative claims granted to any other creditors of the Debtors (as adequate protection or otherwise) and (ii) all administrative expenses of the kind specified in sections 503(b) and 507(b) of the Bankruptcy Code and any and all expenses and claims of the Debtors, whether heretofore or hereafter incurred, including, but not limited to, the kind specified in, or ordered pursuant to, sections 105, 326, 328, 330, 331, 503(b), 506(c), 507(a), 507(b), 546(c), 726, 1113, 1114 and any other provision of the Bankruptcy Code or otherwise, subject only to the Carve-Out (the “DIP Superpriority Administrative Claim”), provided, however, (x) prior to entry of the Final Order approving the Replacement DIP Loans and the occurrence of the Prepetition Secured Notes Repayment, any DIP Superpriority Administrative Claims shall be junior to the allowed secured claims of the Prepetition Secured Notes Trustee and the Prepetition Secured Noteholders with respect to the Prepetition Secured Notes Obligations and the Adequate Protection Claims and (y) following the entry of the Final Order approving the Replacement DIP Loans and the occurrence of the Prepetition Secured Notes Repayment, the DIP Superpriority Administrative Claims granted on account of the New Money DIP Loans shall be subject to payment in full in cash of the DIP Superpriority Administrative Claims granted on account of the Replacement DIP Loans. 24
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Summary of Material Terms Unencumbered property: Pursuant to section 364(c)(2) of the Bankruptcy Code, be secured by valid, perfected, first-priority security interests in and liens on all property and assets of the Debtors, and its estate, of every kind or type whatsoever, tangible, intangible, real, personal or mixed, whether now owned or hereafter acquired or arising, wherever located; all property of the estate of the Debtors within the meaning of section 541 of the Bankruptcy Code; and all proceeds, rents and products of the foregoing (collectively, the “Property”) that is not subject to non-avoidable, valid and perfected liens in existence as of the Petition Date (or to non-avoidable valid liens in existence as of the Petition Date that are subsequently perfected as permitted by section 546(b) of the Bankruptcy Code), subject only to (i) the Carve-Out; and (ii) prior to entry of the Final Order approving the Replacement DIP Loans and the occurrence of the Prepetition Secured Notes Repayment, the Adequate Protection Liens. Junior liens: Pursuant to section 364(c)(3) of the Bankruptcy Code, be secured by valid, perfected second-priority security interests in and liens on all Property subject to non-avoidable, valid, and perfected security interests and liens in existence as of the Petition Date or that are subsequently perfected as permitted by section 546(b) of the Bankruptcy Code (for the avoidance of doubt, until the occurrence of the Prepetition Secured Notes Repayment the DIP Liens shall be junior to the perfected, enforceable, non-avoidable prepetition security interests in and liens on all Property securing the Prepetition Secured Notes Obligations (the “Prepetition Secured Notes Collateral”)), subject to the Carve-Out and the Adequate Protection Liens; and Liens on Prepetition Secured Notes Collateral: Upon entry of the Final Order approving the Replacement DIP Loans and the occurrence of the Prepetition Secured Notes Repayment, pursuant to section 364(d)(1) of the Bankruptcy Code, be secured by valid, perfected first priority security interests and liens on the Prepetition Secured Notes Collateral, which security interests and liens shall be senior to all other security interests in and liens on such Collateral except for the Carve-Out and any perfected, enforceable, non-avoidable prepetition security interests in and liens on such Collateral that, after taking into account any intercreditor or subordination agreements, are senior to the security interests and liens securing the Prepetition Secured Notes and permitted under the Prepetition Secured Notes Documents. See DIP Term Sheet - “Collateral”
Cross-
The DIP Facility does not include cross-collateralization provisions. 25
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Summary of Material Terms
Fed. R. Bankr. P. 4001(c)(1)(B); Local R. 4001-2(a)(i)(A) Events of Default Fed. R. Bankr. P. 4001(c)(1)(B); Local R. 4001-2(a)(ii)
5
In addition to customary events of default for debtor-in-possession loans, the occurrence of any of the following events, unless waived in writing (x) following entry of the Final Order approving the Replacement DIP Loans and the occurrence of the Prepetition Secured Notes Repayment by the Required DIP Lenders, in their sole discretion or (y) prior to entry of the Final Order approving the Replacement DIP Loans and the Prepetition Secured Notes Repayment, by the Required DIP Lenders and the Required Prepetition Secured Noteholders, shall constitute an event of default (each an “Event of Default”) under the DIP Documentation, Interim Order and/or Final Order, as applicable, and with respect to use of cash collateral, the Prepetition Secured Notes Collateral, the DIP Loans and proceeds thereof:
failure to obtain entry of the Interim Order on or before January [ ], 2017;5
failure to obtain the entry of the Final Order in form and substance satisfactory to the Required DIP Lenders and the Secured Noteholder Group by the 45th day following the entry of the Interim Order, which Final Order shall approve the Replacement DIP Loans and the Prepetition Secured Notes Repayment;
failure of the Prepetition Secured Notes Repayment to occur within four (4) business days of entry of the Final Order;
failure to comply with any of the Case Milestones;
filing of any motion by the Debtors seeking to obtain credit or incur indebtedness, or the obtaining of credit and incurrence of indebtedness (or the entry of an order of the Bankruptcy Court or other court of competent jurisdiction authorizing the obtaining of credit and incurrence of indebtedness), by the Debtors that is: (i) secured by a security interest, mortgage or other lien on all or any Collateral which is equal or senior to any DIP Lien, Adequate Protection Lien or the Prepetition Secured Note Liens, as applicable, or (ii) entitled to administrative
Date to be one (1) business day following the interim hearing on the Motion.
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Summary of Material Terms priority status which is equal or senior to the Adequate Protection Claims or DIP Superpriority Administrative Claims (other than the Carve-Out); provided that it shall not be an Event of Default for the Debtors to seek an order from the Bankruptcy Court approving financing that provides for the repayment in full in cash of all of the DIP Obligations immediately upon consummation of such financing, so long as (i) any order so entered contemplates such repayment and (ii) such repayment occurs immediately upon consummation, and directly out of the proceeds, of any such financing;
institution of any judicial proceeding, or the filing of any motion, by, or supported by, any Debtor seeking to challenge the validity of any portion of the DIP Documentation, the DIP Obligations, or the applicability or enforceability of same, or the Prepetition Secured Note Obligations, Prepetition Secured Note Liens or which seeks to void, avoid, limit, subordinate or otherwise adversely affect any security interest created by or in relation to the DIP Documentation, the Prepetition Secured Notes Documents, or the Adequate Protection Liens or the entry of any order of the Bankruptcy Court having any such effect;
reversal, vacatur, modification or stay of the Interim Order or Final Order;
dismissal of any of the Bankruptcy Cases or conversion of any such Bankruptcy Case to a chapter 7 case;
the failure of the Debtors to make any adequate protection payments as and when due (subject to expiration of applicable grace periods, if any);
failure of the Debtors to comply with the Budget, subject to the Permitted Variances, or any other failure to comply with the Budget Covenants;
any material breach by any Debtor of any provision of the Interim Order or the Final Order;
appointment of an interim or permanent trustee in any Bankruptcy Case or the appointment of a receiver or an examiner in any Bankruptcy Case with expanded powers to operate or manage the financial affairs, the business, or reorganization of any Debtor;
payment of, or application for authority to pay, any pre-petition claim against any Debtor, without the Required DIP Lenders’ prior written consent (and, prior to the entry of the Final Order 27
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Summary of Material Terms approving the Replacement DIP Loans and the occurrence of the Prepetition Secured Notes Repayment, the Required Prepetition Secured Noteholders’ prior written consent) or unless otherwise permitted by the Budget;
allowance of any claim or claims under Section 506(c) of the Bankruptcy Code or otherwise against the DIP Agent, the DIP Lenders, the Prepetition Secured Notes Trustee, the Prepetition Secured Noteholders or any of the foregoing parties’ claims or Collateral;
entry of an order by the Bankruptcy Court granting relief from or modifying the automatic stay of Section 362 of the Bankruptcy Code to allow any creditor to execute upon or enforce a lien or other interest in any Property having a fair market value of at least $200,000;
filing of a motion seeking to sell a material portion of the Property of any Debtor that does not permit (i) the DIP Agent to credit bid any or all of the DIP Obligations or (ii) prior to the occurrence of the Prepetition Secured Notes Repayment, the Prepetition Secured Notes Trustee to credit bid any or all of the Prepetition Secured Notes Obligations; and
failure to pay (i) when and as required to be paid, any amount of principal of any DIP Loan, or (ii) within two (2) Business Days after the same becomes due, any interest on any Loan or any other amount payable hereunder or with respect to any of the other DIP Documents.
See DIP Term Sheet - “Events of Default”; Interim DIP Order ¶22. Carve Out Fed. R. Bankr. P. 4001(c)(1)(B); Local R. 4001-2(a)(i)(F)
“Carve-Out” shall be defined as the following expenses: (i) all fees required to be paid to the Clerk of the Bankruptcy Court and to the Office of the United States Trustee under 28 U.S.C. § 1930(a); (ii) to the extent applicable, all reasonable fees and expenses incurred by a trustee under section 726(b) of the Bankruptcy Code in an amount not to exceed $50,000; (iii) to the extent allowed at any time, all accrued unpaid fees, disbursements, costs and expenses incurred by professionals or professional firms retained by the Debtors and any Official Committee of Unsecured Creditors at any time before or on the first business day following delivery by the DIP Agent of a Carve Out Trigger Notice (as defined below) (the “Pre-Termination Amount”); and (iv) after the first business day following delivery by the DIP Agent of the Carve Out Trigger Notice, to the extent allowed at any time, all unpaid fees, disbursements, costs and expenses incurred by 28
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Summary of Material Terms professionals or professional firms retained by the Debtors and any Official Committee of Unsecured Creditors in an aggregate amount not to exceed (x) with respect to professionals or professional firms retained by the Debtors, $300,000 and (y) with respect to professionals or professional firms retained by the Official Committee of Unsecured Creditors, $150,000 (the amount set forth in this clause (iv)(x) and (y), collectively, the “Post-Carve Out Trigger Notice Cap”); provided, however, the aggregate amount of fees, disbursements, costs and expenses incurred (whether before or after the delivery of any Carve Out Trigger Notice) by professionals or professional firms retained by any Official Committee of Unsecured Creditors in connection with any investigation of or objection to the validity, perfection, or priority of the Secured Notes Obligations, the liens and security interests securing the Secured Notes Obligations that may be included in the Carve-Out shall not exceed $25,000. For purposes of the foregoing, “Carve Out Trigger Notice” shall mean a written notice delivered by the DIP Agent to the Debtors and their counsel, the United States Trustee, and lead counsel to any official committee, which notice may be delivered following the occurrence and continuance of an Event of Default, and stating that the Post-Carve Out Trigger Notice Cap has been invoked. On the day on which a Carve-Out Trigger Notice is given to the Debtors, such Carve-Out Trigger Notice shall constitute a demand to the Debtors to utilize all cash on hand as of such date and any available cash thereafter held or received by any Debtor to fund a reserve in an aggregate amount equal to (A) the Pre-Termination Amount plus (B) an amount equal to the Post-Carve Out Trigger Notice Cap, and the Debtors shall deposit and hold any such amounts in a segregated account for the professionals or professional firms (it being understood that liens and security interests in any residual amount in such segregated account shall be granted to the Prepetition Secured Notes Trustee and/or the DIP Agent, as applicable, in accordance with priorities set forth in the DIP Orders). For the avoidance of doubt, so long as a Carve-Out Trigger Notice shall not have been delivered, the Carve-Out shall not be reduced by the payment of any professional fees allowed at any time by the Bankruptcy Court. See DIP Term Sheet - “Carve-Out”
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Case 16-12789-KJC
Bankruptcy Rule / Local Rule Section 506(c) Waiver Fed. R. Bankr. P. 4001(c)(1)(B)(x); Local R. 40012(a)(i)(C) Section 552(b) Waiver Fed. R. Bankr. P. 4001(c)(1)(B); Local R. 4001-2(a)(i)(H) Stipulations to Prepetition Liens and Claims Fed. R. Bankr. P. 4001(c)(1)(B)(iii); Local R. 40012(a)(i)(B)
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Summary of Material Terms All rights to surcharge the Collateral under Section 506(c) of the Bankruptcy Code shall be waived on terms and conditions acceptable to the Required DIP Lenders and Required Prepetition Secured Noteholders. See DIP Term Sheet “Other Terms” The Interim Order does not provide for a waiver of section 552(b) or “equities of the case” claims.
The DIP Orders shall include stipulations as to the validity, enforceability, and perfection of the Secured Notes Obligations and liens and security interests on the Secured Notes Collateral, subject to investigation budget and time limitations consistent with the Interim Cash Collateral Order and otherwise acceptable to the DIP Agent, Required DIP Lenders, the Prepetition Secured Notes Trustee and the Secured Noteholder Group, each in their sole discretion. See DIP Term Sheet - “Other Terms”
Adequate Protection Fed. R. Bankr. P. 4001(c)(1)(B)(ii)
Adequate Protection Liens. As security for and to the extent of any diminution in value, the Prepetition Secured Notes Trustee, for the benefit of the Prepetition Secured Noteholders, will be granted, additional and replacement valid, binding, enforceable non-avoidable, and automatically perfected postpetition security interests in and liens (the “Adequate Protection Liens”), without the necessity of the execution by the Debtors (or recordation or other filing) of security agreements, control agreements, pledge agreements, financing statements, mortgages, or other similar documents, on all Collateral. Prior to the occurrence of the Prepetition Secured Notes Repayment, the Adequate Protection Liens shall be subordinate only to the (i) CarveOut and (ii) other unavoidable liens, if any, existing as of the Petition Date that are senior in priority to the Prepetition Secured Notes Liens as permitted by the terms of the Prepetition Secured Notes Documents. The Adequate Protection Liens shall otherwise be senior to the DIP Liens and all other security interests in, liens on, or claims against any of the Collateral (including any lien or security interest that is avoided and preserved for the benefit of the Debtors and their estates under section 551 of the Bankruptcy Code).
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Summary of Material Terms Adequate Protection Claims. To the extent of any diminution in value, as further adequate protection, and to the extent provided by sections 503(b) and 507(b) of the Bankruptcy Code, the Prepetition Secured Notes Trustee will be granted, for the benefit of itself and the Prepetition Secured Noteholders, an allowed administrative expense claim in each of the Bankruptcy Cases ahead of and senior to any and all other administrative expense claims in such Bankruptcy Cases (the “Adequate Protection Claim”), except the Carve-Out. Subject to the Carve-Out in all respects, prior to the occurrence of the Prepetition Secured Notes Repayment, the Adequate Protection Claim will not be junior to any claims and shall have priority over the DIP Superpriority Administrative Claims and any other administrative expense claims against each of the Debtors, now existing or hereafter arising, of any kind or nature whatsoever, including, without limitation, administrative expense claims of the kinds specified in or ordered pursuant to Bankruptcy Code sections 105, 326, 328, 330, 331, 365, 503(a), 503(b), 506(c), 507(a), 507(b), 546(d), 726, 1113 and 1114. Fees and Expenses. As further adequate protection, the Debtors shall pay all pre-petition and post-petition fees and expenses of the Prepetition Secured Notes Trustee and the Secured Noteholder Group; provided that the fees and expenses for retained professionals shall be limited to one primary counsel for the Secured Noteholder Group (presently Akin Gump Strauss Hauer & Feld LLP), one primary counsel for the Prepetition Secured Notes Trustee (presently Morrison & Foerster LLP), one local counsel (presently Morris, Nichols, Arsht & Tunnell LLP), and one financial advisor (currently Berkeley Research Group, LLC). For avoidance of doubt, all such fees and expenses described in the immediately preceding sentence shall be reimbursed without regard to the amounts set forth in the Budget with respect thereto. Postpetition Payment & Accrual of Interest. As further adequate protection, within four (4) business days of entry of the Interim Order, the Debtors shall pay (and within one day of entry of the Interim Order, the Debtors’ shall issue a borrowing request under the DIP Facility in an amount sufficient to pay) all accrued and unpaid interest (including, for the avoidance of doubt, accrued and unpaid interest at the default contract rate pursuant to the Interim Cash Collateral Order) on account of the Prepetition Secured Notes Obligations and prior to the occurrence of the Prepetition Secured Notes Repayment the Prepetition Secured Notes Obligations will continue to accrue interest at the default contract rate set forth in the Prepetition Secured Notes Documents and the Debtors shall pay such interest monthly in arrears. For the avoidance of 31
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Summary of Material Terms doubt, all payments on the Prepetition Secured Notes Obligations shall be subject to a customary investigation and challenge period consistent with the Interim Cash Collateral Order and otherwise acceptable to the Required Prepetition Secured Noteholders and, to the extent any challenge thereto is sustained, all such payments shall be subject to appropriate remedies including, to the extent ordered by the Court, disgorgement and reinstitution of applicable claims and security interests. See DIP Term Sheet - “Adequate Protection�
32
Case 16-12789-KJC
Bankruptcy Rule / Local Rule Waiver/Modification of the Automatic Stay; Remedies Fed. R. Bankr. P. 4001(c)(1)(B)(iv)
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Summary of Material Terms Upon the occurrence of any Event of Default (following the expiration of any applicable grace period), and following the giving of five (5) days’ prior written notice to counsel for the Debtors, the Office of the United States Trustee, counsel to the Prepetition Secured Notes Trustee, counsel to the Secured Noteholder Group (or counsel to the Minority DIP Lenders), counsel to DDJ, counsel to the DIP Agent and counsel to any appointed Official Committee of Unsecured Creditors, as applicable, the Debtors’ ability to use cash collateral shall terminate (including funds in the DIP Accounts) and the Prepetition Secured Notes Trustee, the Prepetition Secured Noteholders, the DIP Agent and the DIP Lenders, as applicable, shall have relief from the automatic stay to foreclose on any or all of the Collateral and otherwise enforce the Adequate Protection Liens, the Prepetition Secured Note Liens and the DIP Liens, as applicable. During such five (5) business day notice period, the Debtors and any Official Committee of Unsecured Creditors shall be entitled to any emergency hearing with the Bankruptcy Court for the sole purpose of contesting whether an Event of Default has occurred and is continuing. Unless during such period the Bankruptcy Court determines that an Event of Default has not occurred or is not continuing, then (i) the automatic stay, as to the Prepetition Secured Notes Trustee, the Prepetition Secured Noteholders, DIP Agent and DIP Lenders, as applicable, shall be automatically terminated at the end of such notice period, without further notice, hearing or order, (ii) neither Section 105 nor any other provision of the Bankruptcy Code shall be utilized to preclude or restrict the Prepetition Secured Notes Trustee, the Prepetition Secured Noteholders, DIP Agent or DIP Lenders, as applicable, from exercising their default-related rights and remedies, and (iii) the Debtors shall cooperate with the Prepetition Secured Notes Trustee, the Prepetition Secured Noteholders, DIP Agent and the DIP Lenders, as applicable, to effect an orderly liquidation of their Collateral on terms and conditions acceptable to the Prepetition Secured Notes Trustee and/or the DIP Agent, as applicable. See DIP Term Sheet “Remedies Upon the Occurrence of an Event of Default”
33
Case 16-12789-KJC
Bankruptcy Rule / Local Rule Waiver/Modification of Applicability of Nonbankruptcy Law Relating to Perfection or Enforceability of Liens Fed. R. Bankr. P. 4001(c)(1)(B)(vii)
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Summary of Material Terms Upon prior written notice by the DIP Agent to counsel for the Debtors, the Office of the United States Trustee (and counsel to any appointed Official Committee of Unsecured Creditors) of the occurrence and continuance of an Event of Default (following the expiration of any applicable grace period), but subject to the provisions of the third paragraph in this section with respect to any enforcement action by the DIP Agent against any Collateral, the DIP Agent or Required DIP Lenders may (i) declare the DIP Obligations to be immediately due and payable; (ii) terminate the Debtors’ ability to access the DIP Loans; and/or (iii) subject in all respects to the “Intercreditor Provisions” set forth below exercise all default-related rights and remedies against Collateral, without further order of or application or motion to the Bankruptcy Court, and without restriction or restraint by any stay under sections 362 or 105 of the Bankruptcy Code or otherwise. Prior to entry of the Final Order approving the Replacement DIP Loans and the occurrence of the Prepetition Secured Notes Repayment, upon written notice by the Prepetition Secured Notes Trustee or the Secured Noteholder Group to counsel for the Debtors, the Office of the United States Trustee, counsel to DDJ, counsel to the DIP Agent and counsel to any appointed Official Committee of Unsecured Creditors of the occurrence and continuance of an Event of Default (following the expiration of any applicable grace period), but subject to the provisions of the third paragraph in this section with respect to any enforcement action by the Prepetition Secured Notes Trustee or the Required Prepetition Secured Noteholders against any Collateral, the Prepetition Secured Notes Trustee or the Required Prepetition Secured Noteholders may exercise all remedies available to them under the Interim Order, the Prepetition Secured Notes Documents and applicable non-bankruptcy law, and all adequate protection obligations shall be due and payable. Effective immediately upon entry of the Interim DIP Order, the DIP Liens and the Adequate Protection Liens shall be immediately binding, perfected, continuing, enforceable and non-avoidable, subject to a customary investigation and challenge period consistent with the Interim Cash Collateral Order and, to the extent any challenge thereto is sustained, the holders of Secured Notes receiving the Prepetition Secured Notes Repayment shall be subject to appropriate remedies including, to the extent ordered by the Court, disgorgement and reinstitution of applicable claims and security interests. See DIP Term Sheet -“DIP Loans,” “Collateral” and “Adequate Protection”
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Bankruptcy Rule / Local Rule Release Fed. R. Bankr. P. 4001(c)(1)(B)(viii)
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Summary of Material Terms Subject to a customary investigation and challenge period consistent with the Interim Cash Collateral Order, the Debtors provide complete releases of claims against the DIP Agent, the DIP Lenders, and the Prepetition Secured Notes Parties relating to the DIP Obligations, the DIP Liens, the Prepetition Secured Notes Obligations, or the Prepetition Secured Notes Liens, as applicable, including, without limitation, (i) any so-called “lender liability” or equitable subordination claims or defenses, (ii) any and all claims and causes of action arising under the Bankruptcy Code, and (iii) any and all claims and causes of action regarding the validity, priority, extent, enforceability, perfection or avoidability of the liens or claims of the DIP Agent, the DIP Lenders, the Prepetition Secured Notes Trustee, or the Prepetition Secured Noteholders. Interim DIP Order ¶ 32.
Challenge Period Fed. R. Bankr. P. 4001(c)(1)(B); Local R. 4001-2(a)(i)(B)
Notwithstanding the Prepetition Secured Notes Repayment, the allowance of the claims arising on account of the Prepetition Secured Notes and the validity, enforceability and perfection of the Prepetition Secured Note Liens shall be subject to a customary investigation and challenge period consistent with the Interim Cash Collateral Order and, to the extent any challenge thereto is sustained, the holders of Secured Notes receiving the Prepetition Secured Notes Repayment shall be subject to appropriate remedies including, to the extent ordered by the Court, disgorgement and reinstitution of applicable claims and security interests. (b) In the event any the Prepetition Secured Notes Collateral, the Prepetition Secured Notes Liens or the Prepetition Secured Notes Obligations are subject of a successful challenge, the Prepetition Secured Notes Parties shall be subject to appropriate remedies including, to the extent ordered by the Bankruptcy Court, disgorgement of any Adequate Protection Interest Payments or, following entry of the Final Order, the Prepetition Secured Notes Repayment, in each case to the extent made to the Prepetition Secured Notes Parties, and reinstitution of the applicable claims, liens and security interests; provided that any amounts disgorged or other proceeds, if any, of such remedies shall constitute DIP Collateral, shall be subject to the DIP Liens and DIP Superpriority Claims in accordance with the priority of such liens and claims as provided in the DIP Documents and this Interim Order, and shall be promptly remitted to the DIP Agent for application to the DIP Obligations in accordance with the DIP Documents and the Interim DIP Order. 35
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Summary of Material Terms See DIP Term Sheet - “DIP Loan”; Interim DIP Order ¶ 31(b).
Indemnification Fed. R. Bankr. P. 4001(c)(1)(B)(ix)
The Debtors shall indemnify and hold each of the DIP Agent, the DIP Lenders, and their respective shareholders, directors, agents, members, partners, advisors, officers, subsidiaries, investment managers, managed accounts and funds, and affiliates (each, an “Indemnified Person”) harmless from and against any and all damages, losses, settlement payments, obligations, liabilities, claims, actions or causes of action, and reasonable costs and expenses incurred, suffered, sustained or required to be paid by an Indemnified Person by reason of or resulting from the DIP Facility, the DIP Documentation, the transactions contemplated thereby or hereby, in connection with responding to subpoenas (third party or otherwise) or any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any of such Indemnified Person is a party thereto, except to the extent resulting from the willful misconduct of such Indemnified Person as determined by a final non-appealable order of a court of competent jurisdiction. The indemnity includes indemnification for the DIP Agent and DIP Lenders exercising discretionary rights granted under the DIP Facility. In all such litigation, or the preparation therefor, the DIP Agent and DIP Lenders shall be entitled to select their own counsel and, in addition to the foregoing indemnity, the Debtors agree to pay promptly the reasonable fees and expenses of such counsel. See DIP Term Sheet - “Indemnification”
Liens on Avoidance Actions Fed. R. Bankr. P. 4001(c)(1)(B)(xi); Local R. 40012(a)(i)(D) Priming Liens Fed. R. Bankr. P. 4001(c)(1)(B); Local R. 4001-2(a)(i)(G)
The DIP Orders will provide for the granting of a lien any proceeds or property recovered in connection with the pursuit of claims or causes of action arising under chapter 5 of the Bankruptcy Code, if any, subject to entry of a Final Order.
Upon entry of the Final Order approving the Replacement DIP Loans and the occurrence of the Prepetition Secured Notes Repayment, pursuant to section 364(d)(1) of the Bankruptcy Code, be secured by valid, perfected first priority security interests and liens on the Prepetition Secured Notes Collateral, which security interests and liens shall be senior to all other security interests in and liens on such Collateral except for the Carve-Out and any perfected, enforceable, nonavoidable prepetition security interests in and liens on such Collateral that, after taking into account any intercreditor or subordination agreements, are senior to the security interests and liens securing the 36
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Summary of Material Terms Prepetition Secured Notes. And permitted under the Prepetition Secured Notes Documents. See DIP Term Sheet - “Collateral”
B.
Highlighted Provisions under Local Rule 4001-2(a)(i)
40.
Local Rule 4001-2(a)(i) requires this Motion to recite whether the DIP Orders or
the other DIP Documentation contain any of the following seven provisions and, to the extent such provisions are present, to identify their location in the relevant documents justify their inclusion. (i)
Local R. 4001-2(a)(i)(A)—Cross-Collateralization Protection. The DIP Facility does not include cross-collateralization provisions.
(ii)
Local R. 4001-2(a)(i)(B)—Challenge Period. The DIP Orders provide the same stipulations and challenge periods set forth in the Interim Cash Collateral Order.
(iii)
Local R. 4001-2(a)(i)(C)—506(c) Waiver. All rights to surcharge the Collateral under Section 506(c) of the Bankruptcy Code shall be waived. See DIP Term Sheet - “Other Terms.”
(iv)
Local R. 4001-2(a)(i)(D)—Liens on Avoidance Actions. The DIP Orders will provide for the granting of a lien any proceeds or property recovered in connection with the pursuit of claims or causes of action arising under chapter 5 of the Bankruptcy Code, if any, subject to entry of a Final Order.
(v)
Local R. 4001-2(a)(i)(E)—Repayment Features. Upon entry of the Final DIP Order, the proceeds of the loans made under the DIP Facility shall be used for the repayment in full, in cash, all Prepetition Secured Notes Obligations and the termination of the liens securing the same. See DIP Term Sheet - “DIP Loans.”
(vi)
Local R. 4001-2(a)(i)(F)—Disparate Carve Out Treatment. The DIP Facility does not provide for disparate carve-out treatment for the professionals retained by and creditors’ committee from the professionals retained by the Debtors, provided that, in the event of a Carve-Out Trigger Notice, the Post-Termination Amount reserved for the Debtors’ Professionals is $300,000, and the PostTermination Amount reserved for the Committee’s Professionals is $150,000. See DIP Term Sheet “Carve-Out.” This is similar treatment, but more favorable to the professionals, as the treatment set forth in the Interim Cash Collateral Order. 37
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(vii)
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Local R. 4001-2(a)(i)(G)—Nonconsensual Priming. The DIP Facility does not provide for any nonconsensual priming lien.
(viii) Local R. 4001-2(a)(i)(H)—Section 552(b)(1). The DIP Orders will provide for section 552(b) or “equities of the case” waivers. 41.
For the reasons discussed below, the Debtors believe these provisions are
reasonable in light of the facts and circumstances of these Chapter 11 Cases and should be approved. Relief Requested 42.
The Debtors seek entry of the Interim DIP Order and, pending the Final Hearing,
the Final DIP Order, in each case: (a) authorizing the Borrowers to obtain the DIP Facility, consisting of the New Money DIP Loans and, upon entry of the Final Order the Replacement DIP Loans; (b) authorizing the Debtors the DIP Documents; (c) authorizing the Debtors to use the New Money DIP Loans, the proceeds thereof, and the Prepetition Secured Notes Collateral, including Cash Collateral and, subject to entry of the Final Order, authorization for the Debtors to incur the Replacement DIP Loans and use the proceeds thereof to make the Prepetition Secured Notes Repayment; (d) granting Adequate Protection; (e) authorizing the Debtors to use the Prepetition Secured Notes Collateral, including Cash Collateral; (f) granting the DIP Liens and Superpriority Claims; (g) scheduling a Final Hearing to consider entry of the Final DIP Order and a deadline to file any objection to the Final Order, and approving the form of notice with respect to the Final Hearing; and (h) granting related relief. Basis for Relief A.
The Debtors’ Decision to Obtain the DIP Facility Should Be Approved as an Exercise of the Debtors’ Sound Business Judgment.
43.
Courts grant debtors in possession considerable deference in acting in accordance
with their business judgment in obtaining post-petition secured credit, as long as the agreement 38
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to obtain such credit does not run afoul of the provisions of, and policies underlying, the Bankruptcy Code. See, e.g., In re Trans World Airlines, Inc., 163 B.R. 964, 974 (Bankr. D. Del. 1994) (approving post-petition loan and receivables facility because such facility “reflect[ed] sound and prudent business judgment”); In re L.A. Dodgers LLC, 457 B.R. 308, 313 (Bankr. D. Del. 2011) (“[C]ourts will almost always defer to the business judgment of a debtor in the selection of the lender.”); In re Ames Dep’t Stores, Inc., 115 B.R. 34, 40 (Bankr. S.D.N.Y. 1990) (“[C]ases consistently reflect that the court’s discretion under section 364 is to be utilized on grounds that permit reasonable business judgment to be exercised so long as the financing agreement does not contain terms that leverage the bankruptcy process and powers or its purpose is not so much to benefit the estate as it is to benefit a party-in-interest.”). 44.
To determine whether the business judgment standard is met, a court need only
“examine whether a reasonable business person would make a similar decision under similar circumstances.” In re Exide Tech., 340 B.R. 222, 239 (Bankr. D. Del. 2006); see also In re Curlew Valley Assocs., 14 B.R. 506, 513-14 (Bankr. D. Utah 1981) (noting that courts should not second guess a Debtors’ business decision when that decision involves “a business judgment made in good faith, upon a reasonable basis, and within the scope of [the Debtors’] authority under the [Bankruptcy] Code”). 45.
Furthermore, in considering whether the terms of post-petition financing are fair
and reasonable, courts consider the terms in light of the relative circumstances of both the debtor and the potential lender. In re Farmland Indus., Inc., 294 B.R. 855, 886 (Bankr. W.D. Mo. 2003); see also Unsecured Creditors’ Comm. Mobil Oil Corp. v. First Nat’l Bank & Trust Co. (In re Elingsen McLean Oil Co., Inc.), 65 B.R. 358, 365 (W.D. Mich. 1986) (recognizing a debtor may have to enter into “hard bargains” to acquire funds for its reorganization). The Court 39
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may also appropriately take into consideration non-economic benefits to the Debtors offered by a proposed post-petition facility. For example, in In re ION Media Networks. Inc., the Bankruptcy Court for the Southern District of New York held that: Although all parties, including the Debtors and the Committee, are naturally motivated to obtain financing on the best possible terms, a business decision to obtain credit from a particular lender is almost never based purely on economic terms. Relevant features of the financing must be evaluated, including non-economic elements such as the timing and certainty of closing, the impact on creditor constituencies and the likelihood of a successful reorganization. This is particularly true in a bankruptcy setting where cooperation and establishing alliances with creditor groups can be a vital part of building support for a restructuring that ultimately may lead to a confirmable reorganization plan. That which helps to foster consensus may be preferable to a notionally better transaction that carries the risk of promoting unwanted conflict. No. 09-13125, 2009 WL 2902568, at *4 (Bankr. S.D.N.Y. July 6, 2009) (emphasis added). 46.
Here, the DIP Facility is clearly within the Debtors’ reasonable business
judgment. As more fully set forth above, the DIP Facility contains competitive economic terms, provides for reasonable milestones and limited other control mechanisms, and is pre-payable at any time without an exit fee. The DIP Facility is the product of a vigorous, competitive process conducted by the Debtors’ advisors in a manner that was thoroughly tested in the market. The Special Committee considered the terms of the various proposals received and findings and recommendations of the Debtors’ advisors. Finally, of all the proposals received by the Debtors, the DIP Facility is the only proposal supported by their prepetition secured lenders and therefore its approval subject to less uncertainty and expense than any other proposal. B.
The DIP Facility Meets the Requirements to Authorize Post-Petition Financing on a Secured and Superpriority Basis under Section 364(c).
47.
The statutory requirement for obtaining post-petition credit under section 364(c)
is a finding, made after notice and hearing, that a debtor is “unable to obtain unsecured credit 40
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allowable under section 503(b)(1) of [the Bankruptcy Code].” 11 U.S.C. § 364(c). See In re Crouse Grp., Inc., 71 B.R. 544, 549 (Bankr. E.D. Pa. 1987) (secured credit under section 364(c) of the Bankruptcy Code is authorized, after notice and hearing, upon showing that unsecured credit cannot be obtained). To meet this requirement, a debtor need only demonstrate “by a good faith effort that credit was not available without” the protections afforded to potential lenders by sections 364(c) of the Bankruptcy Code. See In re Snowshoe Co., 789 F.2d 1085, 1088 (4th Cir. 1986) (“[t]he statute imposes no duty to seek credit from every possible lender before concluding that such credit is unavailable”). 48.
Courts have articulated a test to determine whether a debtor is entitled to
financing under section 364(c) of the Bankruptcy Code. Specifically, courts look to whether: a.
the credit transaction is necessary to preserve the assets of the estate; and
b.
the terms of the transaction are fair, reasonable, and adequate, given the circumstances of the debtor-borrower and proposed lenders.
In re Ames Dep’t Stores, 115 B.R. at 37-39 (Bankr. S.D.N.Y. 1990); see also In re St. Mary Hosp., 86 B.R. 393, 401-02 (Bankr. E.D. Pa. 1988); Crouse Grp., 71 B.R. at 549. 49.
For the reasons stated above, the Debtors have been unable to obtain unsecured
credit, and believe that the liquidity provided by the DIP Facility is necessary to meet their imminent working capital requirements and that its terms are fair, reasonable and adequate under the circumstances. C.
The DIP Facility Meets the Requirements to Authorize Post-Petition Financing on a Priming Basis under Section 364(d)(1).
50.
The DIP Facility does not contemplate the granting of priming liens; rather, upon
the occurrence of the refinancing of the Prepetition Secured Notes, the DIP Facility will in effect step into the Prepetition Secured Notes Liens. The DIP Facility is junior to any valid, perfected and non-avoidable liens existing as of the Petition Date that are senior to the Prepetition Secured 41
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Notes Liens and permitted under the Prepetition Secured Notes Documents. Accordingly, the Debtors submit that the proposed DIP Facility satisfies the requirements of section 364(d) of the Bankruptcy Code. D.
The Debtors’ Request to Use Cash Collateral and the Proposed Adequate Protection is Appropriate.6
51.
The Debtors’ use of property of their estates, including Cash Collateral, is
governed by section 363 of the Bankruptcy Code. Pursuant to section 363(c)(2) of the Bankruptcy Code, a debtor may use cash collateral as long as “(A) each entity that has an interest in such cash collateral consents; or (B) the court, after notice and a hearing, authorizes such use, sale, or lease in accordance with the provisions of this section.” 11 U.S.C. § 363(c)(2). 52.
Section 363(e) of the Bankruptcy Code provides for adequate protection of
interests in property when a debtor uses cash collateral. Further, section 362(d)(1) of the Bankruptcy Code provides for adequate protection of interests in property due to the imposition of the automatic stay. See In re Cont’l Airlines, 91 F.3d 553, 556 (3d Cir. 1996). While section 361 of the Bankruptcy Code provides examples of forms of adequate protection, such as granting replacement liens and administrative claims, courts decide what constitutes sufficient adequate protection on a case-by-case basis. In re Swedeland Dev. Grp., Inc., 16 F.3d 552, 564 (3d Cir. 1994); In re Satcon Tech. Corp., No. 12-12869, 2012 WL 6091160, at *6 (Bankr. D. Del. Dec. 7, 2012); In re N.J. Affordable Homes Corp., No. 05-60442, 2006 WL 2128624, at *14 (Bankr. D.N.J. June 29, 2006); In re Columbia Gas Sys., Inc., Nos. 91-803, 91-804, 1992 WL 79323, at *2 (Bankr. D. Del. Feb. 18, 1992); see also In re Dynaco Corp., 162 B.R. 389, 394 (Bankr. 6
Unless otherwise defined herein, capitalized terms used in this Section D and the following Section E shall have the meaning ascribed to them in the Motion to Approve Use of Cash Collateral Debtors' Motion for Entry of Interim and Final Orders (I) Authorizing Postpetition Use of Cash Collateral, (II) Granting Adequate Protection to the Secured Parties, (III) Scheduling a Final Hearing Pursuant to Bankruptcy Rule 4001(b) and (IV) Granting Related Relief Filed By Optima Specialty Steel, Inc. filed on December 15, 2016 [Docket No. 17].
42
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D.N.H. 1993) (citing 2 Collier on Bankruptcy ¶ 361.01 [1] at 361-66 (15th ed. 1993) (explaining that adequate protection can take many forms and “must be determined based upon equitable considerations arising from the particular facts of each proceeding”). 53.
The concept of adequate protection is designed to shield a secured creditor from
diminution in the value of its interest in collateral during the period of a debtor’s use. See In re Carbone Cos., 395 B.R. 631, 635 (Bankr. N.D. Ohio 2008) (“The test is whether the secured party’s interest is protected from diminution or decrease as a result of the proposed use of cash collateral.”); see also In re Cont’l Airlines, Inc., 154 B.R. 176, 180—81 (Bankr. D. Del. 1993) (holding that adequate protection for use of collateral under section 363 of the Bankruptcy Code is limited to use-based decline in value). 54.
Subject to the terms and conditions of the Interim Cash Collateral Order and the
Interim DIP Order, the Secured Noteholders have consented to the use of Cash Collateral. In addition, as set forth in the DIP Term Sheet and the Interim DIP Order, the Debtors propose to provide the Secured Noteholders with Adequate Protection, including the Adequate Protection Liens, the Adequate Protection Superpriority Claims, Fees and Expenses and the Postpetition Payment of Interest. 55.
The Prepetition Secured Parties have agreed to allow use of their Cash Collateral
in exchange for the Adequate Protection contemplated by the DIP Facility. In addition to the replacement liens, superpriority claims, payment of fees and expenses, and payment of postpetition interest, the use of Cash Collateral in accordance with the terms of the Budget preserves and maximizes the value of the Secured Noteholders Collateral. See In re 495 Cent. Park Ave. Corp., 136 B.R. 626, 631 (Bankr. S.D.N.Y. 1992) (evaluating “whether the value of the debtor’s property will increase as a result of the” use of collateral in determining sufficiency 43
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of adequate protection); In re Salem Plaza Assocs., 135 B.R. 753, 758 (Bankr. S.D.N.Y. 1992) (holding that debtor’s use of cash collateral to pay operating expenses, thereby “preserv[ing] the base that generates the income stream,” provided adequate protection to the secured creditor). 56.
Under the Budget, Cash Collateral will be used to pay operating expenses such as
for the purchase of raw materials to be used in the manufacture of the Debtors’ specialty steel products, the cost for supplies, repairs and dies relating to the Debtors’ machinery, and payroll for the Debtors’ employees. In addition, the Cash Collateral Budget provides for the expenses of administration of these Chapter 11 Cases. Payment of these and other expenses in accordance with the terms of the Budget is necessary to maintain the Debtors’ enterprise as a going concern and thereby to maximizing the value of the Debtors’ estates. In light of the foregoing, the Debtors submit that the proposed Adequate Protection to be provided for the benefit of the Secured Noteholders is appropriate. Thus, the Debtors’ proposed Adequate Protection is not only necessary to protect the Secured Noteholders against any diminution in value, but is also fair and appropriate on an interim basis under the circumstances of these Cases to ensure the Debtors are able to continue using the Cash Collateral in the near term, for the benefit of all parties in interest and their estates. E.
The Prepetition Secured Noteholder Repayment Should be Approved.
57.
The DIP Facility contemplates upon entry of the Final DIP Order the Prepetition
Secured Noteholder Repayment—i.e., the refinancing of all Prepetition Secured Notes Obligations from the proceeds of the DIP Loans. Courts have permitted debtors to use postpetition financing to pay prepetition claims of a lender where, as here, the prepetition secured lenders are providing the financing and the claims of the prepetition lenders are fully secured. As the United States District Court for the District of Delaware recently observed:
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[P]repetition secured claims can be paid off through a “roll-up.” Most simply, a [roll up] is the payment of a pre-petition debt with the proceeds of a post-petition loan. Roll-ups most commonly arise where a pre-petition secured creditor is also providing a post-petition DIP loan under section 364(c) and/or (d) of the Bankruptcy Code. The proceeds of the DIP loan are used to pay off or replace the pre-petition debt, resulting in a post-petition debt equal to the pre-petition debt plus any new money being lent to the debtor. As a result, the entirety of the prepetition and post-petition debt enjoys the post-petition protection of section 364(c) and/or (d) as well as the terms of the DIP order. In both a refinancing and a roll-up, the pre-petition secured claim is paid through the issuance of new debt rather than from unencumbered cash. Del. Trust Co. v. Energy Future Intermediate Holdings, LLC (In re Energy Future Holding Corp.), 527 B.R. 157, 167 (D. Del. 2015) (quoting In re Capmark Fin. Group, Inc., 438 B.R. 471, 511 (Bankr. D. Del. 2010)). 58.
The Debtors believe that the proposed Prepetition Secured Noteholder
Repayment, which is a non-severable part of the overall Secured Noteholder/DDJ Proposal, is appropriate under the circumstances and will not prejudice the Debtors or their estates. First, the interest rate of the Replacement DIP Loans is 350 basis points less than the current default rate on the Secured Notes that the Debtors are paying as adequate protection under the Interim Cash Collateral Order (and would be continuing to pay for the life of the chapter 11 cases under the OA Proposal)
Second, the claims of the prepetition lenders are fully secured. Third, the
validity, enforceability, and priority of the liens granted by the Debtors to the Secured Noteholder Trustee for the benefit of the Secured Noteholders are subject to the “challenge” rights of third parties, including the Committee.
Thus, insofar as the satisfaction of the
Prepetition Secured Notes Obligations is premised upon the validity of the blanket liens granted by the Debtors thereunder, the Committee will have an opportunity to examine the propriety of such repayment, and to seek to claw-back such repayment to the extent that the underlying liens are avoided. Hence, there should be no prejudice to other creditors of these estates. The Secured Noteholder Trustee already asserts fully secured security interests in the assets that the Debtors 45
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propose to pledge to the DIP Lenders that are providing the funds to satisfy the Prepetition Secured Notes Obligations. See, e.g., Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1, 4-5 (2000) (recognizing that administrative expense claims allowable under section 503(b) of the Bankruptcy Code “do not have priority over secured claims”). 59.
Accordingly, the Debtors submit that the proposed Prepetition Secured
Noteholder Repayment is appropriate under the circumstances and should be approved. F.
The DIP Lenders Should Be Deemed Good-Faith Lenders under Section 364(e).
60.
Section 364(e) of the Bankruptcy Code protects a good-faith lender’s right to
collect on loans extended to a debtor, and its right in any lien securing those loans, even if the authority of the debtor to obtain such loans or grant such liens is later reversed or modified on appeal. Section 364(e) of the Bankruptcy Code provides that: The reversal or modification on appeal of an authorization under this section [364 of the Bankruptcy Code] to obtain credit or incur debt, or of a grant under this section of a priority or a lien, does not affect the validity of any debt so incurred, or any priority or lien so granted, to an entity that extended such credit in good faith, whether or not such entity knew of the pendency of the appeal, unless such authorization and the incurring of such debt, or the granting of such priority or lien, were stayed pending appeal. 61.
As set forth above, the DIP Facility is the result of the Debtors’ reasonable and
informed determination that the DIP Agent offered the most favorable terms on which to obtain needed post-petition financing, and of arm’s length, good-faith negotiations between the Debtors and the DIP Agent. In addition, the terms and conditions of the DIP Facility are reasonable and appropriate under the circumstances, and the proceeds of the DIP Facility will be used only for purposes that are permissible under the Bankruptcy Code. Accordingly, the Court should find that the DIP Agent is a “good faith” lender within the meaning of section 364(e) of the Bankruptcy Code and are entitled to all of the protections afforded by that section. 46
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G.
The DIP Lenders and Prepetition Secured Noteholders Should be Granted a Bankruptcy Code Section 506(c) Waiver and Waiver of the Equities of the Case Exception under Bankruptcy Code Section 552.
62.
The DIP Term Sheet provides for a waiver of the any rights to charge costs and
expenses against the collateral of the Prepetition Secured Noteholders and DIP Lenders. The Debtors request that the Court approve the waiver. Such waivers and provisions are standard under financings between sophisticated parties. As one court noted, “the Trustee and Debtors-inPossession in this case had significant interests in asserting claims under § 506(c) and have made use of their rights against the Lender under § 506(c) by waiving them in exchange for concessions to the estates (including a substantial carve-out for the benefit of administrative creditors).” In re Molten Metal Technology, Inc., 244 B.R. 515, 527 (Bankr. D. Mass. 2000). See also In re Nutri/System of Florida Assocs., 178 B.R. 645, 650 (E.D. Pa. 1995) (noting that debtor had waived § 506(c) rights in obtaining debtor in possession financing); In re Telesphere Communications, Inc., 179 B.R. 544, 549 (Bank. N.D. Ill. 1994) (approving settlement between debtor and certain lenders wherein debtor waived certain rights (including 506(c) rights) against the lenders in exchange for valuable consideration). 63.
The waiver of surcharge rights is appropriate where, as here, the Prepetition
Secured Noteholders and DIP Lender have consented to the Carve-Out and to the continued use of Cash Collateral and the proceeds of the Prepetition Collateral to fund the administration of the Debtors’ estates in accordance with the Budget. 64.
Moreover, a surcharge of the Prepetition Secured Notes, which are senior to the
New Money DIP Loans, would instead amount to an indirect surcharge of the New Money DIP Loans. As stated above, such a surcharge whether direct or indirect is not appropriate because the New Money DIP Loans are funding the administration of these cases through the Carve-Out.
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Similarly, the waiver of the equities of the case exception under section 552(b) of
the Bankruptcy Code is appropriate under the circumstances here. The equities of the case exception under section 552(b) of the Bankruptcy Code is, by definition, inapplicable to postpetition liens. Here, because the New Money DIP Loans are provided on a junior basis, any application of the equities of the case exception to the Prepetition Secured Notes would not affect the holders of Prepetition Secured Notes, but instead would amount to a back-door application of the equities of the case exception to the postpetition DIP Facility. As such, the facts of these cases do not warrant application of the equities of the case exception and the requested waiver is justified. 66.
While such waivers as to prepetition secured claims are more frequently approved
at the final order stage (they typical for postpetition secured claims at the interim stage), here, such waivers are appropriate at the interim stage because (i) the Creditors' Committee has been formed, (ii) these waivers as to the Prepetition Secured Notes were contemplated in the Cash Collateral Order, which has been in effect for over [30] days, and (iii) as noted above, any section 506(c) surcharge or application of the equities of the case exception is unwarranted here because it would, in effect, apply to the postpetition New Money DIP Loans, not to Prepetition Secured Notes. H.
The Automatic Stay Should Be Modified on a Limited Basis.
67.
The Debtors request that automatic stay imposed by section 362 be modified to
the extent necessary to implement and effectuate the terms and provisions of the Interim DIP Order and the Final DIP Order, as applicable. Such and similar stay modifications are commonplace and standard features of debtor-in-possession financing arrangements, and are reasonable and fair under the circumstances of these Chapter 11 Cases. See, e.g., In re Peak Broad., LLC, No. 12-10183 (PJW) (Bankr. D. Del. Feb. 2, 2012) (terminating automatic stay after occurrence 48
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of termination event); In re TMP Directional Mktg, LLC, No. 11-13835 (MFW) (Bankr. D. Del. Jan. 17, 2012) (modifying automatic stay as necessary to effectuate the terms of the order); In re Broadway 401 LLC, No. 10-10070 (KJC) (Bankr. D. Del. Feb. 16, 2010) (same); In re Haights Cross Commc’ns, Inc., No. 10-10062 (BLS) (Bankr. D. Del, Feb. 8, 2010) (same). I.
Failure to Obtain the Immediate Interim Access to the DIP Facility and Cash Collateral Would Cause Immediate and Irreparable Harm.
68.
Bankruptcy Rules 4001(b) and (c) provides that a final hearing on motion to use
cash collateral pursuant to section 363 and to obtain credit pursuant to section 364 of the Bankruptcy Code may not be commenced earlier than 14 days after the service of such motion. Upon request, however, the Court is empowered to conduct a preliminary expedited hearing on such motions and authorize the obtaining of credit and use of cash collateral to the extent necessary to avoid immediate and irreparable harm to a Debtors’ estates. 69.
The Debtors have an immediate postpetition need to use Cash Collateral. The
Debtors cannot maintain the value of their estates during the pendency of these Chapter 11 Cases without access to cash. The Debtors will use cash to, among other things, continue operating their business and satisfy other working capital needs during these Chapter 11 Cases. Substantially all of the Debtors’ available cash may constitute the Prepetition Secured Parties’ cash collateral, as that term is used by section 363(c) of the Bankruptcy Code. If accurate, the Debtors will therefore be unable to proceed with operating their business without the ability to use Cash Collateral, and will suffer immediate and irreparable harm to the detriment of all creditors and other parties in interest. In short, the Debtors’ ability to finance their operations and the availability of sufficient working capital and liquidity to the Debtors through the use of Cash Collateral is vital to the preservation and maintenance of the value of the Debtors’ estates.
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The Debtors also have an immediate need to receive advances contemplated by
the DIP Facility to provide sufficient liquidity to maintain operations beyond January 30, 2017. The Debtors require these advances prior to the Final Hearing and entry of the Final DIP Order to be able to continue to operate and pay administrative expenses. This relief will enable the Debtors to preserve and maximize value and, therefore, avoid immediate and irreparable harm and prejudice to the estates and all parties in interest, pending the Final Hearing. Request for Final Hearing 71.
Pursuant to Bankruptcy Rule 4001(c)(2), the Debtors request that the Court set a
date for the Final Hearing that is as soon as practicable and fixes the time and date prior to the Final Hearing for parties to file objections to this Motion. Waiver of Bankruptcy Rule 6004(a) and 6004(h) 72.
To implement the foregoing successfully, the Debtors request that the Court enter
an order providing that notice of the relief requested herein satisfies Bankruptcy Rule 6004(a) and that the Debtors have established cause to exclude such relief from the 14-day stay period under Bankruptcy Rule 6004(h). Consent to Jurisdiction 73.
Pursuant to Rule 9013-1(f) of the Local Rules, the Debtors consent to the entry of
a final judgment or order with respect to this Motion if it is determined that the Court would lack Article III jurisdiction to enter such final order or judgment absent consent of the parties. Notice 74.
Notice of this Motion has been given to the following parties or, in lieu thereof, to
their counsel, if known: (a) the Office of the United States Trustee for the District of Delaware; (b) counsel for Wilmington Trust, National Association, as indenture trustee for the Prepetition 50
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Secured Notes; (c) counsel for the Secured Noteholder Group; (d) Wilmington Savings Fund Society, FSB, as indenture trustee for the Prepetition Unsecured Notes; (e) counsel for DDJ Capital Management, LLC, as the sole holder of the Prepetition Unsecured Notes; (f) counsel to the Creditors’ Committee; and (g) all other parties requesting to receive notice pursuant to Bankruptcy Rules 2002 prior to the date of the Motion. As the Motion is seeking expedited relief, the Debtors will serve copies of the Motion and any order entered with respect to the Motion in accordance with the Local Rules. The Debtors submit that, in light of the nature of the relief requested, no other or further notice is required. No Prior Request 75.
No prior Motion for the relief requested herein has been made to this or any other
court other than in connection with the Interim Cash Collateral Order and the OA DIP Financing Motion as described herein. Conclusion WHEREFORE, the Debtors respectfully request that this Court enter an order granting the relief requested herein and granting the Debtors such other and further relief as is just and proper. Dated: January 17, 2017
GREENBERG TRAURIG, LLP /s/ Dennis A. Meloro Dennis A. Meloro (DE Bar No. 4435) The Nemours Building 1007 North Orange Street, Suite 1200 Wilmington, Delaware 19801 Telephone: (302) 661-7000 Facsimile: (302) 661-7360 Email: melorod@gtlaw.com -and-
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Nancy A. Mitchell (admitted pro hac vice) Greenberg Traurig, LLP 200 Park Avenue New York, New York 10166 Telephone: (212) 801-9200 Facsimile: (212) 801-6400 Email: mitchelln@gtlaw.com -andPaul J. Keenan Jr. (admitted pro hac vice) John R. Dodd (admitted pro hac vice) Ari Newman (admitted pro hac vice) Greenberg Traurig, P.A. 333 S.E. 2nd Avenue, Suite 4400 Miami, FL 33131 Telephone: (305) 579-0500 Facsimile: (305) 579-0717 Email: keenanp@gtlaw.com doddj@gtlaw.com newmanar@gtlaw.com Counsel for the Debtors and Debtors-in-Possession
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