American court hearing recordings and interviews - Del Monte Foods - July 2 2025 bankruptcy hearing (District of New Jersey, USA)

Episode Date: July 6, 2025

For more information about the Del Monte Foods bankruptcy proceedings see Del Monte Foods Corporation II Inc., et al.

Okay, good afternoon, everyone. This is Judge Kaplan, and the court will be hearing the Del Monte Foods Corporation's two matters, first day matters. I'll allow everybody an opportunity to adjust their screens. As the hearing is fully remote, I will lead off with my usual admonishment to make sure if you wish to be heard, you please use the raise handphone. and I will do my best to spot you and call upon you. I will take appearances as we go along rather, since I know there's a time crunch, there are orders that need to be entered and everyone has some place to go. So we'll get these moving forward. Let me turn to debtors' counsel and have appearances.

Thank you, Your Honor. Good afternoon. Felice Yudkin, Mike Sarota, David Bass, Colchatz, PC, proposed co-counsel to the debtors. I wanted to start off and thank Your Honor for scheduling this hearing on such an expedited basis. The debtors truly appreciate your courtesy in doing so. I wanted to also quickly make a few introductions to the court before turning over the podium to our co-counsel. The first introduction, Your Honor, is our proposed co-counsel, H.S.F. Kramer. Additional debtor professionals, Your Honor, are Jonathan Goulding, the CR Chief Restructuring Officer from Alvarez and Marcell. Alvarez and Marcell is also serving as financial advisor in the case, and PJT Partners, Your Honor, is the debtor's proposed investment banker. With those introductions, Your Honor, I'm going to turn the podium over. over to Adam Rogoff from H.S.F. Kramer, who's going to provide the court with some background regarding today's filings. Sounds good. Thank you and welcome all.

I am aware that because of the short time, we have ProHoc VCHA applications that have been filed and pending for purposes of today's hearing. We'll take a very liberal approach, and I'll just say welcome to New Jersey and we'll move on. All right. let's continue. Good afternoon, Mr. Ruggoff. Good afternoon, Your Honor. First of all, can you hear me okay? I can. Thank you. Excellent.

Adam Ruggoff, H.S.F. Kramer, formerly you would know us as Kramer 11. And I'm here today with a variety of my colleagues, and I'll have them introduce themselves as they address the various motions before, Your Honor. First of all, thank you very much to Your Honor and the Court for accommodating us for hearing this afternoon. In my overview, I'm not going to get into all the details that are laid out in the first day declaration of John Goulding as Chief Restructuring Officer. We come into this case with a dip facility in excess of $900 million inclusive of $165 million of additional liquidity. As you will hear from Ms. Ringer, we have a pressing need to have the order approving our dip facilities entered this afternoon, assuming your honor

is inclined to approve them. So I'm going to focus my presentation on key areas before turning to the rest of the agenda over to my colleagues. Fair enough. Headquartered in Walnut Creek, California, Del Monte has been a cornerstone of American grocery stores for more than 130 years. It's an internationally renowned producer, distributor, and marketer of plant-based packaged food products with a powerful portfolio of brands that people enjoy daily, including Delmante, Cantadena, Collagen, and Joyba. Dalmante enjoys market-leading brand recognition and trust to an large part to its long legacy of its flagship brand. It's driven by its mission, nourishing families, enriching lives every day. Partnering with hundreds of family farmers in the United States and Mexico, the majority of Domante's products are locally sourced

and travel less than 100 miles to the company's production facilities. Del Monte distributes its products through a wide variety of channels. The debtors operations are divided into three segments, the well-recognized brand of products, a U.S. private label business, and sales through other outlets like food service industry. The debtors also license various of their brands that they own to third parties for use in certain parts of the world. Del Monte has over 2,700 employees and operates four plants, two in the United States, two in Mexico, and a large number of the employees are seasonal. I'll come back to that concept. Some business operations are undertaken by certain non-debted subsidiaries, specifically in Mexico and South America.

Del Monte has a packed season production cycle that generally runs between the months of June and October, depending upon the specific product. This concept of a PAC season is key to what you're going to hear about today. The 2025 PAC season is underway and is a driver of our imminent need for liquidity. We have 18 debtors, and starting with Delmante Foods Holdings Limited, or DMFHL, that is the direct or indirect parent of the other 17 debtors. DMFHL, in turn, is a private company whose majority share, is ultimately Del Monte Pacific Limited, or DMPL. DMPL is a public company listed on the Singapore Stock Exchange.

DMFHL maintains a 10-member board of directors, and 80% of the board members are unaffiliated with DMPL. Looking at our capital structure, the company has substantial debt leverage. As of the petition date, the debtor's long-term secured funded debt obligations alone totaled approximately $1.23 billion outstanding. And Your Honor can see the chart identifying the breakdown between the ABL facility and our different term loan facilities. I'm not going to go through the details of the various secured facilities. It's laid out in the Goulding Declaration.

The debtors also have material unsecured obligations owing to vendors, suppliers, service providers, as well as intercompany claims owing to DMPL for inventory, like pineapples, and for services. Let's talk about the events leading up to the filing. As I preview, Delmante has a peak liquidity need tied to its pack season, which is when the company purchases its inventory and packs its products. The pack season runs June through October for many products. The resulting inventory is typically sold over the next 12 to 18 months. the company is currently in its 2025 pack season.

Del Monte has faced substantial market constraints in recent years, including excess inventory in the wake of the COVID-19 pandemic and anticipated increases in demand. However, this increased demand was not ultimately met as consumers change their buying habits. Left with substantial excess inventory, Delmante was forced to store, write off, or sell this inventory, at substantial losses. This also affected the company's borrowing base under its pre-petition ABL facility,

which further reduced liquidity. Following the 2020-PAC season, the company's scale-back production in response to changing consumer demand. To manage liquidity, Del Monte relied on favorable trade terms from its vendors and stretched vendor payments resulting in substantial accounts payable. Vendors began to contract trade terms, which in turn further reduce the company's liquidity. Despite challenging conditions, the company took actions to reduce overhead and improve cost margins as a broader part of an operational transformation and pivot

towards an asset light operational structure. The debtor's liquidity need for the 2024 PAC season last year resulted in entering into a liability management transaction last summer. Again, this is laid out in the Goulding Declaration, so I won't spend much time on it here. but the funds provided necessary liquidity for the 2024 Pax season last year. Since I'd like to move forward to the main meal, I'll bring us to the 2025 Pax season. The debtors require material new liquidity, which fortunately they have obtained in the form of the facilities. This includes $165 million of additional liquidity to fund the necessary working capital payroll and vendor payments. We come into this case with a production unable to move forward and tens of millions of dollars owed to vendors and suppliers to meet the needs of this current Pax season.

Without the new liquidity from the dip facilities, the debtors cannot operate, the alternative is simple but stark. It's an immediate liquidation of the debtors. Instead, we have a path forward that provides for immediate funds for operations and supports a value, maximizing sale as a going concern. A sale that will allow for employees, trade, contract, counterparties to have a going forward business and preserve brands that consumers have loved for over 130 years. The debtors believe that a drawn-out bankruptcy process is value-destructive. Instead, to provide for a value-maximizing marketing process, the debtors have entered into a restructuring support agreement with the ad hoc term lender group. The debtors with the assistance of

their investment banker, PJ, partner, will run a post-petition sale process to identify potential third-party bidders for some or all of their assets. And subject to reaching agreement on mutually acceptable bidding procedures, the ad hoc term lender group agrees to credit bid their claims and serve as a stocking horse for all the substantially all of the debtors' assets. The debtors plan to file their bidding procedures motion within 10 days, and a timeline is laid out on the next slide. My goal, Your Honor, was to set the table for today recognizing that larger portions

of the story will now be served up by today's motions. Hopefully all of this will be easy to digest. Having exhausted my pun limit, I'm going to turn the podium over to Ms. Mandel, unless Your Honor, of course, has any questions for me. No, I do not. I appreciate the overview. For the record, the court did have an opportunity

to read through the declaration of Mr. Goulding, as well as the supporting declaration of Mr. Mates from BJT. So I have a broader understanding of how we got here. Let me hear from counsel. Thank you. Ms. Mandel, good afternoon. Good afternoon, Your Honor. For the record, I'm Lee Mandel, EHS up for the debtors.

I'm going to be recovering the joint administration motion. I'm going to ask Mr. Rogoff. The motion for designation as a complex chapter 11 case. We're getting an echo feedback. I'll ask everybody to make sure their mics are off. Let me just continue. Let's see how we do. Are you still getting the feedback? I think we're okay.

Okay. There we go. So I'm going to be covering joint administration and the debtor's motion for application as a complex Chapter 11 case, starting with the application for designation as a complex Chapter 11 case, which is agenda item one and filed at docket number four. We believe the relief requested is customary and applicable with court rules, and unless the court has questions, we respectfully request entry of the proposed order. All right.

Let me turn. Thank you. Let me just so we understand how we'll go forward with all of these first aid matters. Ms. Bilski, good afternoon. I see you for the U.S. trustee. I'm going to, as usual, just depend on you to interject if there are issues relative to the debtor's first day application. Does that work for you? Yes, Your Honor, and if it's helpful, I could also thank you, Lauren Bilski with the Office of the United States Trustee.

I can also represent that we provided comments to the debtors based on drafts prior to the filing last night. The debtors have agreed to accept the vast majority of our comments, and we have signed off on revised redline orders that we were provided with this morning and last night. Except for the dip motion and the wages motion, I do not believe I'm going to raise any objections to the balance of the orders, Your Honor. All right, then. So I'll assume I have the support of the U.S. trustee, and your comments have been incorporated apart from the dip motion and the wages. motion and we'll return to those we'll address those as they come forward thank you then let me ask on the first motion is there anyone who wishes to be heard I don't see any raised hands so that will be granted and miss Vandelle and I guess

I'll address this to all your colleagues I assume following this afternoon's hearing you'll put together the final version of the proposed orders and get them down have them emailed directly to my chambers rather than the clerk rather than the clerk's office so we can see to it that they're handled all right okay great thank you your honor thank you I believe next is joint administration which is agenda item two and filed at docket number three the motion requests the administration of the Chapter 11 cases of the 18 affiliated debtors.

Again, we believe this is customary relief, and we would respectfully request entry of the proposed order. All right. Anyone wish it to be heard? Hearing and seeing no one. Motion granted. Thank you. And with that, I'm going to turn it over to my colleague, Rachel Ringer, who will be presenting the dip motion. All right.

You've finally broken loose from work. three friends, one tea time, and then the text. Honey, there's water in the basement. Not exactly how you pictured your Saturday. That's when you call us, Cincinnati Insurance. We always answer the call, because real protection means showing up, even when things are in the rough. Cincinnati Insurance, let us make your bad day better.

Find an agent at cINFIN.com. It's a pleasure to see you again. Pleasure to see you, too, Your Honor. Great to see you. Just for the record, Rachel Ringer from HSF Kramer on behalf of the company. So first, I do want to echo Mr. Rogoff's thanks to your chambers, to the U.S. trustee, and to all of the other case parties, as you heard from Mr. Rogoff, we're under a bit of time pressure today.

And I certainly wanted to recognize that we've all been working very hard under the time constraints that we've got. But, you know, we appreciate everyone's cool. operations so that we can do what we need to do today to avoid any interruption in operations. On that note, I'm actually going to take my presentation a little bit out of order because we do have a deadline today for funding, so we need to make sure that we get the orders to your honor, assuming you're otherwise inclined to grant the relief. So I want to start actually with talking to you about scheduling a final hearing, if at all possible. And then that's I can jump into a more substantive

presentation, but given that we have to actually fill in the order with those dates, I'd love for my team to be able to do that while we're having a discussion of the actual relief requested, if at all possible. That makes sense. So we have a 40-day milestone

under our RSA. I think that we were hoping, Your Honor, might have time available the week of August 4th. I believe, you know, August 4th, itself would work for the parties if that works for your honor that that's a Monday that certainly works for the court I would schedule it at 10 o'clock I guess my question will be

and you all have to decide what it'll depend upon whether the nature and the scope of the objections whether it will be remote hybrid or in court for now Understood, Your Honor. We're aware of your preference with respect to live testimony. So to the extent that that final hearing requires it, we understand we need to be in person for that. Great. So we'll leave that date August 4th at 10 a.m. And that would be for a return date for the bidding procedures?

That would be for the final dip hearing. Your Honor, the bid procedures themselves have not yet been filed. Right. I'm just trying to get a sense. So that would be the final hearing on the dip. All right. Presumably on the other first day relief to the extent it needs a phone order. Okay.

Thank you, Your Honor. You're welcome. So unless there were any other scheduling matters at the outset, I'm happy to jump into the more substantive presentation of the relief requested. The only question I had was, is it likely you're going to need a date in advance of August 4th for any of the second day here matters, or does August 4th work for them all? It is possible we need a date between now and then maybe I will defer to some of my colleagues who are going to be addressing some of the other first day relief to maybe talk through dates then.

But it is possible we may want a date, let's call it, you know, the week or two prior. I was going to say keep in the back of your mind that in July 28th, that's the prior Monday, again at 10 o'clock. The court has time that day. Okay. Thank you, Your Honor. You're welcome. Okay, so before, Your Honor, the company is seeking approval of really two dip facilities. We filed a motion at docket number 17 with a proposed interim order attached. We also filed two declarations in support, the declaration of our CRO, John Goulding, that's docket number 19,

and the declaration of Scott Mates from PJT at Docket 18. before I go any further, I would be remiss if I did not seek to move the two declarations we filed into evidence. Both Mr. Goulding and Mr. Mates are on the line and in the virtual courtroom today. All right. Let's start with Mr. Goulding's declaration, a market for identification as D1. Mr. Goulding, good afternoon. Good afternoon. All right.

The court has read your declaration, and it's being proffered in lieu of your direct testimony. If you were to testify before the court at this hearing, would the content of your testimony be the same as reflected in your declaration? Yes, it would. You had the opportunity to review your declaration prior to being filed with the court? I did. And everything is truthful and accurate to the best of your knowledge? Yes. All right.

Thank you. Let me ask any other counsel who are on the line for any parties and interest. Is there any objection to Mr. Goulding's declaration coming in in lieu of direct testimony? I see no raised hand. That's always a good sign. Does anyone wish the opportunity to cross-examine? Again, I see no raised hands. So you're off the hook, Mr. Goulding.

We'll mark the, again, it's D1, and the declaration is admitted to test into evidence. Let me turn to Mr. Mates. Good afternoon, Mr. Mates. Good afternoon, Your Honor. Am I pronouncing it right or correctly? You are indeed. All right, thank you. I'm going to run through the same inquiry.

I had an opportunity to read your declaration. We'll mark it as D2. did you have an opportunity to review this document before it was filed with the court? Sorry, the audio just cut out. Can you repeat that? Sure. Did you have an opportunity to review your declaration before it was filed with the court? Yes, sir.

Okay. And you want to understanding the declarations being offered in lieu of giving direct testimony this afternoon? I do. All right. And if you were going to give direct testimony, would the content of your declaration be the same as your direct testimony? Yes, it would. And everything was truthful and accurate to the best of your knowledge?

Yes, it is. All right, thank you. Any counsel for any party and interests wish to object to the entry? Your Honor, can Your Honor hear me? Yes, I can. And I apologize for speaking over you, Your Honor, the nature of the medium. Your Honor, I would object to certain. provisions in the in the declaration that believe are hearsay.

You know, Your Honor, we represent an head-hot group of minority, you know, lenders, which includes some of the, you know, the first out, you know, term loans. We object to, we don't object to the ABL, you know, facility. We don't object to the use of cash collateral. And we're okay with the dip other than, you know, the roll-up. of the $150 million on the, you know, on the first day. You know, so that's where we're coming from, Your Honor. There are a couple of things in the declaration that we believe are hearsay or potentially hearsay. We, you know, I was retained just a few hours ago this morning.

Our clients were surprised by the filing. We were not, the proposed dip was embedded with them. They weren't aware of it. So, you know, we've been drinking out of a fire hose, you know, the, you know, all morning, trying to, you know, get up to speed. Obviously, you know, given it just the first day, the case was filed less than 24 hours ago, you know, we'd have an opportunity to cross-examine, you know, to post the witness. But we do have some concerns about, you know, some of the language in the affidavit in particular on paragraph 14,

where he says based on my participation in the process and my experience, these efforts were unsuccessful because, and then he lists why they weren't able to find any other dip financing, but doesn't necessarily say what the basis that is other than his experience. So, you know, we don't believe that, you know, that's appropriate, you know, for the document. So at least with respect to that provision, you know, we would ask that you're on our, not, you know, admit the declaration until after we have cross-examined him in connection with the alternative, potential alternative dips.

Are you, let me have your appearance just formally. I didn't. It's Alan Brilliant from Decker at LLP. I was joined here with my colleague who was admitted in New Jersey, Gary Bennett, but he stepped out moments ago. we represent an ad hoc group of minority, you know, lenders. All right. Are you intending or seeking to cross-examine Mr. Mates this afternoon on the content of his declaration? Or are you looking towards the final hearing?

That's from trying to get a sense. Yeah. Our issue is, Judge, that we don't want the roll-up to occur on the interim basis. So I guess we would, you know, we would, you know, would want to cross him. you know, this afternoon. All right. And obviously we would reserve our rights with respect to the final hearing. So you're taking issue with the latter portion of paragraph 14.

Paragraph 14, and then also, you know, I would cross him on it. I don't object to the admission of it, but, you know, some of the provisions where he says that the terms are reasonable. All right. Sorry, just to clarify, if I may, the bottom part of that, this is direct feedback that we got from the all parties that were contacted as part of this process. I'll give you an opportunity to expand on your declaration. Ms. Ringer, do you wish to be heard? Yes, Your Honor.

Thank you. I was going to maybe suggest that I finish out my presentation before we actually do any sort of cross of Mr. Mates. I tend to believe that the issues that Mr. Brilliant is raising are, frankly, legal ones that could be done just on argument. but if he would like to cross Mr. Mates on these provisions of his declaration, certainly within his right to do so. So I would submit that I should get through the presentation.

I can address some of the issues that he's now previewed as I'm walking through it. And then to the extent he still needs or wants to cross Mr. Mates at that point, I think it would make sense to wait for that cross-examination until after I've finished the argument portion, if that makes sense to your honor. It does. We'll hold off on the admission of D2. pending further inquiry. Mr. Brunian, I'll come back to you.

Thank you, Your Honor. At a later point in time. Ms. Rangel, please continue. Thank you, Your Honor. As I, as you now kind of started to understand, the dip facilities that we're seeking approval of are facilities that are being provided by our current lenders. And I know that Mr. Rogoff,

just by virtue of trying to truncate his presentation, didn't go into a lot of detail on the current capital structure of the company. I thought it might make sense to just quickly hit on that for purposes of the record. The company has two secure facilities. They have a pre-petition ABL facility, and then what is called the Super Senior Credit Facility that has three loans within that facility. It's a first out-term loan, a second-out term loan,

and a third-out-term loan, first-out-term loan. first out, second out, and third out, being, you know, referring to the relative order of priority. With respect to the pre-petition ABL, there's a maximum availability of $550 million. It's subject to certain borrowing-based limitations. It is secured by substantially all the assets of the obligoras under that facility. There are certain exceptions there.

But it has a first priority lien on accounts receivable and inventory, and it has a second lien on term. loan priority collateral. As of the petition date, there was about $211 million outstanding and about $26 million in pre-petitioned letters of credit. With respect to the super senior credit agreement, it provides for three tranches of term loans, as I mentioned. As of the petition date, there was approximately $395 million in first-out term loans, which includes $122 million of incremental first out loans that were issued in April of this year. There was $468 million in second out and $135 million in third out term loans. It's important, though, to note that the liens and the

securities granted on each of the first out, second out, and third out are actually separate and distinct for each of these tranches. Your Honor, in May of this year, the debtors, you know, as they were heading into the PAC season, as you heard from Mr. Rogoff, the debtors concluded that they did need additional financing and liquidity. And, you know, they needed this liquidity quickly in order to continue operations in the ordinary course throughout the PAC season. As Mr. Mates testified in his declaration, the debtors did do a market test of the dip financing, but there were no third parties that were willing to provide financing on a junior basis. on a non-consensually priming basis

or against what are otherwise very limited to the extent they existed all unencumbered assets here. Nor would they be able to achieve a refinancing of the ABL on the timeline that was ultimately required by the company. So the debtors negotiated dip financing with their existing lenders.

Those negotiations were very hard-fought, and they were done at arm's length, and they resulted in the dip facilities that were proposing today. I want to hit on a couple of the key terms of those facilities, although you did get a little bit of a preview of them from Mr. Brilliant. So first is the DIP term loan facility, and that is a priming, super priority, senior secured. You've finally broken loose from work. Three friends, one tea time, and then the text.

Honey, there's water in the basement. Not exactly how you pictured your Saturday. That's when you call us, Cincinnati Insurance. We always answer the call because real protection means showing up, even when things are in the rough. Cincinnati Insurance, let us make your bad day better. Find an agent at CINFIN.com. Facility, it's in the amount of $412.5 million, and that includes $165 million of new money commitments. 100 million of that new money is going to be available upon entry of the interim order.

And then 247.5 million of rolled up loans, 150 million of which would be rolled up upon entry of the interim order. So we're talking about a 1.5 to one roll up here, which is in line with precedent. Then we've got the dip ADL facility, which is a $500 million super priority secured, revolving ADL facility. This is a roll-up of amounts under the pre-petition ADL, and this is important because it will allow the debtors access to their working capital facility, absent which the debtors would actually have to go out and obtain even more new money financing. we're talking about potentially $100 million based on current projections for the case.

So the roll-up of the ABL was necessary for getting access to that working capital and to fund the operations during the course of the case. I would note, though, they're not actually rolling up all $500 million, much less is outstanding and drawn at this point, but $500 million is the availability. just quickly on the fees and the interests because they are structured in a way here that is actually very favorable to the company. First on the term loan dip, a portion of the interest on the new money dip is really the only component of fees and interest here that are payable in cash, not at exit. Interest on the rolled-up loans is payable in kind. the fees on the dip term loan facility are twofold.

First, there is a backstop premium of 10%, and that's 10% of the new money commitments. This is payable in kind, and it's payable on a prerata basis to the backstop parties. This is important because the backstop parties, which is the ad hoc group represented by Gibson Dunn, they are agreeing to backstop and earmark funds now for the full amount of the dip new money commitment. And they're agreeing to do that now. So getting approval of the backstop premium has to happen because the actual backstop happens between the interim and the final hearing. I will say, though, that the way that this dip has been structured,

any holder of a first out loan that agrees to sign the RSA, will be offered the ability to participate in the new money loans and therefore have their first out rolled up on a pro rata basis between the first out initial loans and the incremental loans through a syndication process. And I can tell you that that syndication process is going to commence, I think, starting Monday, the debtors professionals are going to hold a lender call.

Obviously, for folks listening that are interested in that, just be aware that that is going to kick off next week. following the holiday. The other fee is a commitment fee. It's 4% of the new money commitments. It's also payable in kind. And the fees are only payable on the new money component of the term loan dip. And the commitment fee is on the amount being funded.

So it goes pro rata to the full thing. So it's not like the commitment fee will ultimately go to that whole group rather than, So it's essentially like you're only agreeing to approve a fee now that is commensurate with the amount of money that's being provided. And then with respect to the fees on the DIP AVL facility, those are actually payable at exit, again, which is important from the company's standpoint, given its current liquidity position. A couple other points just worth flagging on the DIP. It does provide for a lien on all encumbered property. This is fairly standard. Notably, though, the lien on proceeds

of avoidance actions is only upon entry of a final order. The dip does provide for adequate protection packages, for pre-petition secured lenders in the form of replacement liens and super priority adequate protection claims. And

it does include waivers of certain statutory and other protections. Although I flag that the waivers with respect to 506C, 532B, and marshalling, these are all, these all only kick in upon entry of the final order, which I think is important to note. There is a carve-out here, just again for the record to explain a little bit of how the carve-out works, it's slightly unusual. The carve-out here consists of $3 million, plus all accrued and unpaid professional fees as of the date of a carve-out trigger notice.

and the $3 million plus those accrued and unpaid become the carve-out reserve. The Carbout reserve has a first out with respect to the term loan dip collateral, not the ABL collateral. So as the term loan collateral is liquidated, the Carbett Reserve gets funded and paid. Just on process, we did send a copy of the dip order to the U.S. trustee, albeit only very recently. and we did try to work to resolve as many of the open issues as we could with the U.S. trustee. We did get a markup of the order from them earlier this afternoon. We went through with the lenders.

We were able to incorporate many of their comments. Many of them were previewing issues that we would expect to be raised by a committee or identifying that the committee will and should negotiate those issues in the order, all of which we were okay with incorporating. There were some requests to make certain relief subject to entry of the final order, but those were ultimately just not acceptable to the lenders, as Your Honor can imagine, given that the lenders are agreeing to fund the dip on the first day, the protections that were built in to the dip for their benefit,

you know, for the vast majority of them, other than the ones that I've mentioned, those need to kick in now in order to make sure that they're protected on on what they're funding and what they're otherwise committing to. So with that, maybe I will pause. I don't know if Your Honor has any questions, but I obviously would like the opportunity to respond to anything that's raised by Mr. Brilliant or by the U.S. trustee. Well, all right.

Thank you, Ms. Ringer. Let me turn first to the U.S. trustee, Ms. Bielski, and hear her concerns. Thank you, Your Honor. Again, Lauren Bielski with the Office of the United States Trustee. As counsel said, we were given a copy of the DIP motion in advance of the filing, but it was only yesterday afternoon, and we tried to turn around comments as soon as possible, and work with debtors counsel right up until 2 o'clock today to go over some of the, I guess, requests that were not accepted. And I am working off of the red line that we provided them, and I did not confirm with counsel whether this is the same draft that ended up being filed since the timing of when we started doing. our red lines and when it was submitted to the court was a few hours later.

So I apologize in advance of some of the things I go over don't quite match up, but I think it'll still work that I can point to certain particular provisions. And as Your Honor knows, for the first day matters, our objective is to ensure that the interim relief granted is narrowly tailored to what is needed during the interim period and to preserve as much as possible for the final hearing so that a committee can be appointed and have time to meaningfully contribute to the process and to make their own comments. And we did get our solicitation out already today to the top 30,

and we asked that those packages be returned next week, and we are also trying to get the package onto our website, hopefully by tomorrow at the latest. I'm saying that so that those who are viewing today can start looking for that. We also try to ensure that there is an appropriate challenge, period, and that any future trustee is not inappropriately hindered by any language in the interim order. And, of course, we also try to make sure that the relief request that does not run afoul

with the bankruptcy code, such as making sure the adequate protection claims are limited to what's allowed by Section 507B. And so to that end, Your Honor, some of the remaining open issues that I want to bring before the court have to do with our request for language predominantly in the first couple pages of the order in which we asked that the debtors insert the language subject to an effective upon entry of the final order granting such relief. And the one other spot where this language appears that we had asked that it be included as well is, I believe it's page 85 at paragraph 14. The section that has to do with releases an indemnification. Again, we had asked for additional language

that says subject to an effective upon entry of a final order. I, the counsel explained their position as to why they find this language objectionable. And I guess the only thing I would ask is if our comments aren't accepted by the court either, just to confirm my understanding of the court's position in prior cases in which, I believe, Your Honor, stated that if information comes to light, that would have changed your ruling on these early hearings, that you have the ability to revisit your own orders, to at least make sure that my understanding of that is correct.

I could say at the outset, I've always maintained the court as an inherent authority to revisit any order that's on an interim basis should the circumstances warrant it. But we'll go through your specific concerns. Thank you, Your Honor. The other concerns, again, it appears multiple times throughout the order,

but I think the first place it appears is on page 40, beginning with paragraph 6, which is the dip super priority claims and the language that has to do with, I guess, the code sections that and section 507B. And what are concerned here, especially with the inclusion of Section 326, 726, and anything beyond 707B is that this is trying to change the, I guess, what would happen in the events that the case is converted to Chapter 7 and that the Chapter 7 administrative claims would have, or should have priority over all other administrative claims. And the language as written removes that. and also, I guess, keeping in Section 726, as it appears the way the language is here, also changes what is really the priorities for distribution of property of the state,

again, if the case would ever convert to Chapter 7. And so we find that provision as written, objections law, and ask that certain revisions were made to that, but again, it was not agreed to. and I guess the last point that remains outstanding, Your Honor, has to do with the challenge period and it's rather lengthy provision, but I believe it begins on page, apologize, begins on page 70 at paragraph 15 and the language we requested be at the end of the section, and again, Your Honor doesn't have the benefit of our red line but I will just read the language that we request be included. And again, it goes to possibility of there being a trustee appointed at some point.

And the language we're requesting states further for the avoidance of doubt. Any trustee appointed or elected shall until expiration of the period provided herein for asserting challenges and thereafter for the duration of any adversary proceeding or protested matter. and I'm just going to skip over some of the language, but be deemed a party other than the debtors and shall not, for purposes of such adversary proceeding or protested matter, be bound by the acknowledgments, omissions, commissions, confirmations,

and stipulations of the debtor in this interim order. And again, this is just to make sure that a chapter, a trustee, a chapter 7 or chapter 11 trustee, is not bound by the debtor's stipulations. And that is why we requested that inclusion in the order. And I believe that is the balance of our objections to the border, Your Honor. All right, thank you, Ms. Bielski. Before I turn to Mr. Brilliant and hear from him, Ms. Ringer, do you want to address?

I think there are basically three areas of concern that Ms. Bielski outlined. Certainly, Your Honor. I think I may have already addressed the request of the U.S. trustee to hunt much of the relief to a final order or make it subject to entry of the final order. I think that the couple of places that were identified on the record, again, I mean,

these are fundamental components of the relief being requested today and fundamental to the lender's agreement to, you know, fund and agree to consensual use of cash collateral. So those are unfortunately changes that we are not, that the

lenders, and therefore the company are not willing to accept. With respect to some of the references to making adequate protection claims, subject to, you know, not subject to 726 of the bankruptcy code, I mean, again, these are fairly standard protections for dip lenders in interim orders, as well as in final orders. And so, again, our dip lenders here are not willing to break the mold, particularly in a case where, you know, neither is the debtors,

particularly in a case where this funding is so necessary and so urgent. So, you know, again, we tried to adhere to fairly standard language on those provisions, but we're unfortunately not able to accommodate the requests of the U.S. trustee. Finally, the changes that were referenced in paragraph 15 about the trustee in a Chapter 7 or 11 not being bound by the debtor stipulations, I would submit that the language that the U.S. trustee is requesting actually changes the playing field a little bit. If a Chapter 11 trustee is appointed or if the case that's ever converted into a seven, I think the parties would have whatever rights they would have to argue about what the implications are of the appointment

of that trustee at that time. But it's not something that the company or the lenders are willing to embed into the dip order at this point. So I think I hit on each of the issues. If your honor has other questions, please let me know. But I, you know, we appreciate the U.S. trustees' comments. We did try to accommodate many of the, many of the other comments, and unfortunately, these were ones that we just, we just could not do. All right. Thank you. Let me turn. Oh, Your Honor, the lenders may wish to be heard. I see Mr. Goldstein raising his hand manually. All right. Okay. Mr. Goldstein, well, do you wish to wait before we hear from

Mr. Brilliant, or do you want to address these issues that were raised? And let me have your appearance, Mr. Goldstein. Thank you, Your Honor. And apologies, I did want to interrupt. So I tried to raise my hand visually so people could say. I appreciate being recognized. It's Jason Goldstein from Gibson Dunn on behalf of the ad hoc super senior term lender group. We filed our 2019 statement at docket number 47 this morning.

We represent 73.2% of the first outlenders and 58.2% of the second outlanders and 58.2% of the second out. lenders. I think that's really important just so that the court understands that that's the required lenders threshold within the document. It also represents the majority of two different tranches secured by separately in the term facility. The reason I raised my hand was just I thought it could be helpful to give the court some context before we hear other arguments about what we're asking for today. Yes. And I think the situation of these cases has been very challenging. It's been a a short run for my clients to understand the funding need of the company. The company is very unique in its funding need in that it's really a working capital issue

consistently. You've heard a little bit from the company about the PAC and the PAC season. Basically what it means is the company needs a lot of funding up front to be able to operate in order to pay its employees, in order to pay suppliers and vendors, in order to service customers. So it is paramount that they have more funding. than they might need on a day-to-day basis coming into this season. And then on the back end of this ramp-up, the company is able to collect on what it's actually doing

from an operational standpoint after the fact. But it creates a sort of continuous working capital need. And this is something that my clients are agreeing to fund in this context on a sort of short time frame in that we did not understand that the company was going to need this. this is not something where we've been working at this for six months. We're agreeing to really bridge this entire case for the benefit of the companies in order to maximize value for everyone here. This isn't a case where we're looking at non-prorata dip funding. This isn't a case where we're excluding anyone.

As Ms. Ringer said, this is something that's open on a prorata basis to all of the senior lenders to participate in. They get the benefit of commitment fees for that. They get the benefit of any roll-up for that. It's really about being able to bridge to what the company needs to do here, and we're providing extensive material new value here in order to allow the company to run a helpful process. That process is a sale process. So we are looking for a market test of value. No one's trying to predetermine value here.

It's really a waterfall type case. The hope is that there is tremendous value in the market. This is a brand-name company that everyone recognizes. We think there will be robust bidding here, and we are looking to maximize value for everyone's benefit. And in that context, someone really needed to step up to provide this funding. It was a relatively complex situation from the company's working capital standpoint. And that's really what my clients are doing here. So I thought it might be helpful if I just gave that background in advance of any objections,

because we are putting in real value on an interim basis. it's $100 million in new cash today that's going to fund all of this operating of the company. The company doesn't have it. Not only do I understand they'll miss a payroll today, but it will really severely impact the value of the company going forward. The PAC is the most critical operational time, and we're agreeing to fund that on this interim basis in order to make sure that we're preserving the going concern value of the business,

and that is what is going to benefit all of the lenders in this. case. So I have much more that I can say, but I'll stop there for the court. If you have any questions, Your Honor, I'm happy to answer them. All right. Now at this juncture, I thank you for your position. All right, let me turn to Mr. Brilliant at this juncture. Thank you, Your Honor. Can you hear me, Your Honor? I can. Thank you, Your Honor. So as I said earlier, you know, we were very surprised at the timing of the filing. You know, we, you know, had no expectation that this was going to happen. You know, the, you know, the minority lenders who aren't part of the, you know, ad hoc group, you know,

got together this morning. They contacted me. As I said, we're kind of drinking out of a fire hose here and trying to get up to speed as best we can in such a short period of time. But the filing came as a surprise to the other lenders, and consequently we weren't as prepared as we would like to be. There's a bunch of things in the order, like the U.S. trustee, we have the same view, which is that on interim basis, Your Honor, should only approve, you know, what is necessary to get to a final hearing and should approve anything that improves other parties' positions and appropriately under the bankruptcy code or otherwise, you know, prejudice the case. When they file the case today, Your Honor, they tell us that they're going to do a very quick sale process.

the dip loan itself is only a nine-month term loan. On the first day of the hearing, they want to roll up the entire amount of the ABL, and my clients don't object to that, and they want to roll up $150 million of the term loans, including on a peri-passu basis a portion of the incremental term loans, which were just issued in April and used to pay out, you know, sub portion, you know, of the loans that were, you know, had filed a lawsuit in connection with a, they were holdouts in connection with an LME transaction. You know, we, we think that there's a possibility here that there could be, you know, preference claims against the parties

who receive the money and there may be, you know, issues as to whether or not, you know, those, you know, loans are, you know, are valid. But the, but the bottom line is, you're on honor a roll-up of a large amount of debt like this on a contested basis on the first day of the case with virtually no notice. You know, the debtors filed less than 24 hours ago. The dip motion was, you know, filed at that point. So, you know, we're at 3 o'clock in the afternoon here with pretty much no notice to anybody we think, you know, is, you know, not appropriate it violates due process and it's just, you know, not an appropriate thing. The lenders council makes it seem like they're stepping up, you know,

they're providing, you know, financing to benefit everyone. But the reality is, Your Honor, what they're doing is they're providing the financing and trying to improve their position here dramatically in connection with that, you know, through, you know, the roll-up, a portion of which they're asking, Your Honor, $150 million, which is a huge amount of, you know, here that they're asking your honor to approve today. So they're not doing this for the other, you know, term lenders or not doing this for the unsecure. They're doing this for themselves because it benefits them.

Now, they tell you that everybody has the opportunity to participate in this, but that's right. You have the opportunity to participate in it if you sign an RSA and you give up all the other rights you have, you know, in connection with the case and just go along with the rest of the ad hoc group. And that may very well be something that some of the members of my group would want to do, but they can't decide that on five days, you know, notice as to whether that's appropriate. But the fact that they're acquiring that, Your Honor, in a first-day hearing, is, you know, is inappropriate. The other thing, Your Honor, is the dip, if approved, will be the first out dollars. It's going to be, you know, the, you know, top of the waterfall, excluding, you know, the collateral for the AVL lenders.

it's not going to be, you know, risk collateral. So they're basically putting in money that will be repaid because it's the first dollars out, but they're asking for huge fees that they're asking, Your Honor, to approve today, you know, a 4% commitment fee, a 10% backstop fee, you know, interest of SOFER, you know, plus 9.5%. So, I mean, I don't know what the, you know, the rate of return for the lenders are on the loan itself

before you take into account. the roll-up of the loan. I guess we'll ask, you know, Mr. Mates about that in the cross-examination, but we know it's going to be a huge number because it's not as if you're going to be amortizing the 14% of fees, you know, over a two or three-year period. You're amortizing them at most, at most nine months, which is the, you know, the term of the dip loan, but under the milestones that are required here, this case, you know, will be over if the debtors and the in the ad hoc lender group get their way will be over, you know, much, you know, earlier than that.

So, Your Honor, you know, like the U.S. trustee, we just want to make sure that Your Honor enters an order today that doesn't allow people to inappropriately, you know, improve, you know, their position. You know, a roll-up, as Your Honor knows, it's even better than a cross-collateralization, you know, which is, you know, frowned out from the standpoint. It makes pre-petition debt, you know, post-petition debt means that it can't be, you know, dealt with under, you know, a plan of reorganization and, you know, can't be challenged. In particular, you know, it shouldn't be done on the first day with no notice, especially the limited notice that's been given here. But more importantly, given all the LME transactions, the fact that a portion of the money they want to roll over is less than 90 days old, And within the, you know, the preference period, there's no sense here evaluation, whether or not these loans are even over-secured, you know, at this point. So they're basically, you know, they say they're, you know, doing this for everybody else, but they're getting a huge fee for providing the dip and getting something which improves their position dramatically

on the first day of the case without, you know, anybody having an opportunity to investigate it and determine whether or not, you know, it's appropriate. So we don't have a problem with the APL loans being rolled up, given the nature of those loans, but we do have a problem with the ad hoc groups loan, the term loans being rolled up, and we do have an issue with the total amount of fees that they're asking, Your Honor, to approve on the interim basis.

Everything else, Your Honor, we would reserve to the final hearing. All right. Ms. Ringer? Thank you, Your Honor. I'm wondering if now, to the extent Mr. Brilliant is actually going to cross Mr. Mates, I'm wondering if now is the appropriate time. I certainly have responses to every single thing he just said, but I think maybe we should do any cross of Mr. Mates first,

and then I can maybe conclude perhaps Mr. Mates' testimony will actually assist in that regard. I think it would be appropriate. Mr. Brillion, I read through Mr. Mates' declaration. And I looked at the paragraph 14 that you highlighted. I don't see hearsay issue because I take his testimony in the declaration as being his view based on the information that he assembled. I'm not accepting the statements as being for the truth of what they're asserted. They may have helped form his view, but you're subject, you have the ability to to cross-examine him on his views and on the merits of formulating those views based on his information.

So I'm going to allow D-2 into evidence subject to cross-examination, and we can proceed on that basis. Let me see if I'm looking for Mr. Mates. I'm here. Oh, there you are. Mr. Mates, I'm going to ask you to raise your hand. This is virtually. Do you swear or affirm to tell the truth, the whole truth? and nothing but the truth under penalty of perjury.

I do. All right. Do you have anybody in the room there with you? Yes, I do. Who is there? I've got members of the Kramer 117. Kramer 11th. All right.

Do you have any counsel with you in that room? Yes. Mr. Mates is in Kramer's offices, Your Honor. All right. I'm going to give you an instruction. you are not to take any instructions from anyone else in that room as part of your testimony. You're not to look to them, not to seek guidance from them. If there is an objection to your testimony, it will be raised by counsel, and I will address it.

If you're going to view any notes or any written information apart from your declaration, You must advise us that you are reviewing independently any written documents in assisting your testimony. Do you understand? I do. All right. Mr. Brilli, will you be conducting the quest examination? I will, Your Honor. All right.

You may proceed. Has he been sworn in? Yes, Your Honor. Yes, I did. Thank you, Your Honor. You're welcome. Mr. Mates, the interest on the dip loans is Soper plus 9.5%. Is that correct? Yes.

And there's a 10% backstop fee for the backstop lenders? That's correct. And there's a 4% commitment fee that would be given to the members of the ad hoc group as well, correct? Along with anybody else who participates in the new money financing, that's correct. Okay. And with respect to the 10% backstop fee, the only people, parties who get that are the members of the IDHAC committee. Is that correct? That's correct.

And the term loan itself, that matures in nine months. Is that right? That's right. And what is the total internal internal rate of return that's expected for the lenders on the loan? I believe it's somewhere between 35 and 38%. It's not too dissimilar from other internal rates of return that we see for loans like this. Your Honor, I'd ask that you direct the witness, just answer my questions, not editorialize afterwards. Mr. Mates, you heard a request.

Please continue. Thank you, Your Honor. I just moved to strike everything. after 35 to 38%. So streaking. Thank you, Your Honor. Now, in determining it's 35 to 38%, what assumption did you make with respect to the 4% commitment to you?

What assumption did you make there? The assumption is that the 4% is earned on the new money, but payable at exit. Okay, but did you assume that members of the ad hoc group just received a pro rata portion of it? based on the amount of their loans, did you assume that no one else participated and they got a higher percentage? What assumption did you make with respect to that? It's for the entire facility.

So the math is 4% of the new money is the dollar amount that we used when calculating the IRR. So it's irrespective of who comes in. Okay, but if the members of other people don't come in, members of the committee would get a large, I'll strike that. And the outside of the term date is nine months, right? That's correct. And when you said that, the expectation is that the company would have its assets sold or emerged from bankruptcy prior to that. Isn't that right?

That's right. And that, in fact, may be two or three months shorter than that, isn't that right? Okay. And the 35 to 38% that you gave us, that assumes that it's a full, you know, nine-month loan. Isn't that right? That's correct. So if it's shorter, the internal rate of return would be even higher. Isn't that right?

That's right. Okay. And, you know, here there's a large portion of the first out term loan that's asking to be rolled up on day one. Isn't that right? Yes, it depends on your definition of. large. Do you not think $150 million is large? I think about it relative to other similar dips in these situations. What's the total amount of the first lien, the first out term loan? It's about $400 million. So $150 million is more than a third of that, right? That's correct.

And a third of the loan is a large portion, wouldn't you say? Okay. And a portion of the loans that are being rolled up on a peri-passive basis are the incremental term loans. Is that correct? That's correct. And the incremental term loans have been outstanding for less than 90 days. Isn't that right? That's my understanding. And the use of those proceeds was used to pay out what I'm going to refer to as the stub lenders. Is that right? Can you clarify, please? Do you not understand what I mean by stub lenders?

Yeah, I'm not sure of the courts. Okay, so. All right. The court understands the purpose of the payments and the history, if that will assist the process. I understand the derivation of $122 million. But there were parties who didn't participate in the LME transaction. Is that right?

That's right. And they filed a lawsuit against the company in Delaware courts? Correct. and then in April they were paid off. Is that correct? I believe it was April. April 9th sound right to you? I'm not sure of the exact date.

You agree with me, though. It was less than 90 days ago, right? That's my understanding. Now, the dip loan is going to be secured by all of the non-ABL assets on a first priority basis. Is that correct? That's my understanding, yes. And that's going to be senior to the first out-term loans? That's my understanding.

And senior to the second-out-term loans? That's my understanding. And senior to the third-out-term loans, right? That's my understanding, yes. Okay. And there's $165 million of new loans that are being made under the DIP. Is that correct? That's correct.

And do you believe that the DIP collateral is worth more than $165 million? $1.5. Objection. Your Honor, this is premature for today to talk about valuation. Mr. Mates is talking about the dip process, not about evaluation of dispute. I'll overrule the objection. He can ask the question. Mr. Mates, you can answer? We haven't done evaluation of the collateral. But you think there's a possibility here that the collateral could be worth less than $165 million? dollars? We haven't done evaluation of the collateral. Okay, so if the

if the collateral was worth less than $165 million and $150 million was rolled up here, then the $150 million, which is Perry Passu

with, I think it testified earlier over $400 million, that would be dramatically undersecured then, right? No question. Okay. I think you testified earlier that there's approximately $400 million in first out-term loans, correct? That's correct. About $3.99.

If I have it right, it's about $395 million, correct? My recollection is approximately $400 million. Okay. And if those loans, if the collateral that secures them is worth less than $165 million, then those loans are undersecured. Is that right? You've been doing bankruptcy advisory work for over 20 years, correct? How long have you been doing bankruptcy advisory work? But 14 years.

14 years. And you're familiar with the term undersecured, right? Yes. So if a loan is worth, the face amount of a loan were $165 million and its collateral were worth less than $165 million, you'd agree with me, it's undersecured, right? Okay. So I guess what I'm asking you is if the collateral is worth less than $165 million, and you have $400 million of first-out-term loans,

then it's possible that the loans that are being rolled up are undersecured. Is that right? Jeff, I'm kind of object, again, on a hypothetical speculation, et cetera. I think Mr. Brilliant has made his point. At this point, I'm going to sustain the objection. I understand the argument, Mr. Brilliant. Let's move on. Okay, thank you.

Do you have your declaration in front of you? I do. Can you turn to paragraph 29 for me? Okay, before we get to the language, let me just ask you a few questions. You're familiar with roll-ups, right? Yes. And the effect of a roll-up is to make pre-petition debt post-pest. addition debt, right? That's right. And then it can't be, without the lender's consent,

under the bankruptcy code, it can't be compromised through a plan. Is that right? That's my understanding. And then it would be senior administrative claims or senior to pre-petition claims. Is that right? That's right. Okay. The, and, you know, you, have you been involved in situations where there was a roll-up of collateral on an interim basis on the first day over objection of creditors? In the, other than this case? I don't recall over objection of creditors. Okay.

And ordinarily, wouldn't you? you agree with me that roll-ups occur on the final hearing date, not an interim date. Isn't that right? I don't think that's necessarily the case, no. Okay, so tell me in what situations you've been involved in where roll-ups occurred on the first day. Most recently was at-home group, which was two weeks ago. The lenders, advised by your firm, rolled up two times the ratio of the money funded and that was and there was okay and there was no objection there at the interim hearing isn't that right i don't recall that being an objection but how do you how do you know that that occurred who told you that or how do you know were you involved in the matter yes

okay all right but but there was no as far as are you aware of any objections that that occurred at uh at that hearing i don't recall there being objections where were you at the dip hearing I participated in the first part. Okay, and you don't recall there being any objection there. Yeah, I don't recall there being any objection. Okay, and then what other matters are you aware of where there was a roll-up on the first day? Okay, so you would agree with me that roll-ups are not common, right? I would say they're not uncommon.

Okay, but there's a difference, and that's the language you use in paragraph 29, But there's a difference between something that's common and something that's uncommon. Isn't that right? Okay. I mean, is that a yes, sir? The question, can you repeat the question, please? In paragraph 29, use the word that roll-ups are not uncommon features required by dip lenders under the dip financings of this type. Did I read your language properly?

That's right. That's right. Yeah. And, you know, although you say they're not uncommon, you don't say that they're common, because there's a difference between common and uncommon, right? Yeah, that's right. I said, yeah, they're not uncommon. That's correct.

Okay. That's right, because they're, right, and there's a difference between common and uncommon, right? In your mind, this is your language, right? In your mind, there's a difference. Isn't that correct? Objection, this is getting a little argument today of that unclear. Sistine, I understand the difference between the words. Let's move forward.

All right. So just a few more questions, Mr. Mates. You say that you did a, you know, a search for other, you know, diplomas. Is that correct? That's correct. And you say that no other proposal was actionable. Did you receive any proposals? We did not.

So when you say there were no actionable proposals, what you really meant? in your declaration, is there were no proposals at all? I meant that there are no, no actionable proposals. If that's what I wrote, that's what I meant. Well, is there, okay, but is there, were there, so when you say there are no actionable proposals, what you really mean is there were just no proposals at all? I meant that there were no actionable proposals. If you're asking me, if we received any proposals, we did not receive any proposals,

if that helps move things along here. It does. All right, thank you. And so the only proposal you received was from the ad hoc group. Is that correct? That's correct. And the ad hoc group required the roll-up feature? Yes, they did.

And the debtors, you know, agreed to that. Is that right? Yes, we did. And you agreed to that because there were no other proposals? There were no other proposals. and, again, you know, roll-ups are not on common features of dip facilities. I have nothing else you are. Thank you, Mr. Brilliant.

Any redirect, Mr. Hemmerman? Yes, very briefly, Judge. And first of all, can you hear me okay? Because we're in the same room, we're using Mr. Mates' microphone, and I'm just trying to avoid that. I can hear you. Thank you. Great.

Mr. Mates, Mr. Brilliant asked you about the backstop, The backstop premium going only to the ad hoc group. Can you explain why that's going to the ad hoc group? Yes, the backstop fee is going to the ad hoc group because the ad hoc group is the one that's agreed to backstop the financing. Are they the group that's taking the risk and earmarking capital? That's correct. in your Mr. Billion asking all sorts of questions about the size of the roll-off

can you tell the court a little bit more about why you think the size of the roll-up here 1.5 to 1 is acceptable? Yeah, again, I think it's supported by other dip roll-ups that we've seen. We've seen certainly, as I mentioned, at-home group was 2-1. We've seen other ones that are two to one. So, you know, this one being one and a half to one was, again, within the range of what we tend to say. Mr. Brilliant asked you about whether the roll-up was a requirement of the lenders, and you said yes. Can you describe for the court again what happens if the lenders do not fund the dip because there is no roll-up? What are the consequences to the company?

Yeah, look, the company needs capital. today, given where they are in their working capital cycle and their lack of liquidity. So without raising this capital today, it's a mess. They will be able to make certain payments that they need to withstand the ongoing operations of enterprise. Are you aware, sir, that about a week ago there was a press leak about Del Monte looking for a dip facility? Yes, I am.

Yes, I am. Did anyone, other than the group you would contact you, in an effort to make a competing DIP proposal? No. So the DIP proposal that we had today is the only one available to the company, correct? That's correct. I have nothing further, Judge. All right, thank you.

Mr. Brilliant, anything more on your end? Just argument, Your Honor, at the appropriate time. All right, well, now is the appropriate time. Let me have your argument. And Ms. Ringer, I'll let you address the arguments. Thank you, Your Honor. Your Honor, we don't think that, you know, the DIP meets standards, you know, for being approved here.

Again, we have no objection to the ABL portion of the DIP, and we would have no problem with the DIP if the fees were appropriate here. and the roll-up doesn't occur on the first day, but would be subject to, you know, final hearing. Your Honor, it's really unprecedented to have a, you know, on the first day of a case to, with, you know, here less than 24 hours, you know, notice, no committee being formed, you know, to approve a $150, you know, million dollar roll up. As I said, we all know about the case law in connection with cross-collateralization. this is, you know, significantly, you know, worse from the same point that, you know, it enables, you know, party to, you know, have debt, which can't be compromised as part of the Chapter 11 case. You know, here, Judge, there is no evidentiary record for Your Honor to find that the lenders aren't being dramatically advantaged, you know, by the roll-up debtors, you know, I believe the testimony,

quite frankly, you know, from Mr. Mates was a little disingenuous on the valuation issues, but leaving that aside, there's no testimony here that the first out-term loan is over-secured and therefore, you know, that, you know, that by being rolled up, that they're not receiving, you know, a huge benefit, the reality is they will be senior to the other members of the, you know, the first-out-term loan group who don't participate in the loan. there's no evidence here that, you know, that they're oversecured. You know, it's clear here that, and there's argument, you know,

or they've left open the issue that the amount of the new money, you know, might not even, you know, be sufficiently, you know, covered. I don't believe that to be the case, Your Honor, but that's the, you know, that's the evidentiary records you're dealing with. So you're being asked basically to, you know, allow on the first day of the case a roll-up of a large portion of the unsecured debt over the objection of other, you know, other lenders in a way that, you know, may dramatically, you know, benefit the, you know, those, you know, those lenders. You know, their argument that this is being done on a, on a prorata basis, and there's a backstop fee,

and that everybody would share rateably, you know, in the dip is also disingenuous that you have to agree, you know, to sign, you know, the RSA and to support, you know, their sale process. And again, it's being done on 24 hours, less than 24 hours notice with no opportunity for the lenders to really, you know, bet the whole process. The total amount of the fees here, Your Honor, are huge. You know, there's testimony from Mr. Mates. They're between 35 and 38 percent, you know, on the new money, again, for the first out dollars, you know, in this case. And that, in of itself, seems, too high and the amount that they're asking, Your Honor, you know, to approve on day one, the full commitment fee for the full amount of the loan, you know, plus, you know, the backstop fee is,

you know, inappropriate, you know, here under the circumstances. You know, we think that the debtors have an obligation to negotiate harder, you know, with their lenders and to come up with something that was better or at least to, you know, get the things that, that Your Honor and the creditors need an opportunity to vet and to, you know, to review, you know, to be decided on the final hearing. I think the U.S. trustee has it exactly right that on the interim basis, Your Honor, you know, should only improve what's necessary, you know, to get the, you know, to the final hearing and that, you know, without, you know,

irreparably, you know, changing the rights of the various parties in the case. And unfortunately, this dip, you know, doesn't, you know, doesn't do that. And this is all exacerbated as well by the fact that part of the loans that they want to, you know, roll up were, you know, were incurred, you know, less than 90 days ago within the preference period, you know, to pay, you know, parties who presumably were not over-secured and are subject to, you know, preference attack. And here you're trying to, you know, insulate, you know, a portion of that, which is also inappropriate. Effectively, what they're saying, Your Honor, is that a secure creditor who has a lien on substantially all the assets can just demand whatever they want for terms of a dip and that Your Honor doesn't have to look at whether it's reasonable, that, you know, that reasonableness is effectively determined by what they want. and because they're over-secured, you know, there's no other alternative here. If you look carefully at the language from Mr. Mates in his affidavit,

he isn't say that this is reasonable. He says, you know, based on the circumstances on the case and no other proposals, you know, that, you know, that, you know, that your honor should approve it. It's not, you know, it's not under, you know, fair, you know, terms, you know, your honor. And the court has an obligation, you know, to look at it and make sure that it's appropriate. under the circumstances of this of this case. And we submit, Your Honor, that it's not, and that it shouldn't be approved, and that, you know, the debtors should just have, Your Honor, approve the AVL roll-up and the

use of cash collateral, or ask the lenders to remove the roll-up and push more of the fees to the final hearing, move the roll-up on an interim basis, push it to the final hearing, and if they'll agree to that, that could be approved as well. Does Your Honor have any questions for me? otherwise, I think I'm finished with my argument. No, I don't. Thank you, Mr. Brilliant. I appreciate the argument.

Ms. Ringer. Thank you, Your Honor. I think maybe it would be appropriate to start with where Mr. Brilliant left off, which is the question to Your Honor is, is it appropriate under the circumstances of this case? And I would point, Your Honor, to paragraph 30 of the Mates Declaration, which actually does say that he believes it's reasonable under the circumstances. But more fundamentally, I think what Your Honor sees in the testimony, including the testimony from Mr. Goulding, which came in without opposition, and what you heard from Mr. Mates, is that we need this money today. And I will tell you, I personally have been sitting here watching the clock as this hearing is going on because I am concerned about us missing deadlines for funding.

We are already in the middle of the pack season with manufacturing plants running 24-7, and the company needs the cash urgently in order to be able to continue to operate. Without it, the business will just shut down, which is not good for Mr. Brilliance clients or any of the creditors of this case. So, you know, I'm happy to address each of the points that he raised. I mean, they've got an issue with the term loan roll-up. This was required by the term loan lenders as a condition to their commitment to provide the new money financing. I will flag that it is relatively unusual for this new money dip to be syndicated in the way that they're proposing to do it here,

where folks can come in, and if they do, they can provide a portion of the new money dip, and they will get their first out rolled up as part of that syndication process. on a pro rata basis. So that is unusual. It is an option. Yes, there is a requirement that they sign the RSA. It sounded like Mr. Brilliant was suggesting

maybe some of his clients will actually decide to take that opportunity. I think it is too early to say today whether or not they will. They can look at the circumstances of the case and decide whether they want to. What you heard from Mr. Mates is that he hasn't done evaluation of the company.

That's all that his testimony was. So, you know, I think that the insinuations from Mr. Brilliant about what the dip or any rolled up pieces of debt are impaired, I think those are extrapolating far more than what Mr. Mates actually testified to. On the fees itself, I think that in throwing out numbers and percentages, Mr. Brilliant is ignoring the fact that these fees are picked. They're paid and kind. that's not a cash outlay from the debtors at the outset of the case. That is extremely favorable to the company. I will take issue with the suggestion from Mr. Brilliant

that the company didn't negotiate hard enough with its lenders. I will tell you personally, and the negotiations were very hard fought. And the fact that these fees are payable in kind is very important because liquidity is a problem. And, you know, we're telling you today that this, business will shut down without it. I think that, I mean, I think I've addressed the commitment fee. The commitment fee, I think I did in my original remarks, but if other folks participate in the new

money term loan, they share in that portion of the commitment fee. So it's not, it's not like that commitment fee is just on day one going entirely to the ad hoc group. If other folks do decide to participate during the syndication process, they share in that commitment fee. And we'll with respect to the backstop fee, that backstop fee is going to folks who are backstopping, which is entirely appropriate and, frankly, standard as far as backstops go. They're having to earmark funds now, and so the fee needs to be approved now. And the other provisions of the dip that were raised by the U.S. trustee and that Mr. Brilliant, I think, was tagging onto, I mean, again, I addressed that at the outset of

my remarks, but we actually tried to craft a dip that punted a lot of issues that usually a committee will raise to a final hearing, right? You heard me say that 506C, 512B, marshaling, all of those issues are punted to a final hearing, and I think has been ignored. I mean, there is a challenge period that is embedded into the dip that the committee can take advantage of if and when it is appointed, the committee will do an investigation, and that is preserved in this dip. So, you know, with that, Your Honor, unless you have specific questions that you'd like me to address, I am actually going to be a little bit more brief than I otherwise might be just given the timing today. But please, Your Honor, if you have questions, I am certainly happy to answer them.

All right. Thank you, Ms. Ringer. Mr. Goldstein, last comment. Thanks so much, Your Honor. I'll be brief as well because I have the same concerns as Ms. Ringer about timing and ensuring we can fund today. I'll just say a couple points that Mr. Brilliant raise. He's talking about the dip being sort of first out dollars at the top of the stack here. It's actually just inaccurate.

This is a harder dip to fund because we both have an ABL dip and a term loan dip. So it will not be first dollars on ABL collateral. And I think that's something that's important for the context of how this dip was put together, what my clients are willing to do. I'll just highlight one feature. Ms. Ringer used the word unusual. I think she meant in a way that my clients were offering participation to everyone else in a helpful way. Another helpful feature my clients agreed to.

So the carve-out is actually not senior in this instance to the ABL. It is only senior on the term collateral. So my clients have agreed to effectively fund the professional fee costs of the case on their backs and not put that at the top of the stack, as you would normally see, because the ABL, structure here. So if that's something that shows action speaking louder than words, we really are trying to help bridge this through a robust sale process. In terms of the size of the facility, Ms. Ringer mentioned the rates. Most of the rate is pick on the actual new money, which I think is another unusual but helpful feature. That is how we kept the size of the overall dip down. The

dip would have to fund itself if it was cash pay interest. The roll-up is a all pick. I'll also note that the AP packages here are the same across all of the tranches in the pre-petition facility. They do not include any cash pay interests. And I'll just also note, given there was some discussion about it with Mr. Mates, sex, terra, charismatic, thraccio, bedbath and beyond, Vaire, are all examples of roll-ups that are larger than one and a half to one. And most importantly, franchise group, a two-to-one roll-up had an objection on day one from junior creditors. In Phoenix services, we had informal objections from the U.S. trustee on the roll-up provision.

So there is precedent for that. We do think to Mr. Mates' comments that one and a half to one is not out of line with precedent and honestly on the low end. So I appreciate that, of course, I'm in consideration. I'm happy to answer any other questions, Your Honor may have. I do not. Thank you. All right.

Is there anyone else who wishes to be heard? Your Honor, can I be heard very quickly in rebuttal? Just very briefly, please. Yes, Your Honor. So just a few things. I mean, obviously we have the record, you know, that's, you know, in front of us in connection, you know, with the, you know, with the, you know, the dip and the fees. You know, there was no testimony from Mr. Bates about, you know, what, you know, other comparable entities in his dip or, you know, here as to, you know, what is reasonable. And obviously, you know, we had this issue here about the collateral.

Well, one thing I would say is, you know, this is first now dollars, 38% interest, you know, is unprecedented. With respect to, you know, Ms. Ringer, you know, said that, you know, absent your honor approving the dip today, you know, that the, you know, the company, you know, will be forced to liquidate. There's nothing in the record, you know, that supports that other than, you know, her statement. So I don't think that's, you know, a justification here for that.

And with respect to this issue of the ABL collateral, I was very clear, Your Honor, in my cross-examination with Mr. Mates about that. That is not something that we didn't bring out on cross-examination or understand the nature of the collateral here, and that doesn't change our argument at all. As for the fact that, you know, the roll-up itself, you know, on a final basis may be consistent, you know, with other transactions doesn't change the fact that roll-ups are frowned upon.

You know, your honor, I'm sure is familiar with Sweetland, the other, you know, cases that deal with cross-collateralization, of which this is even, you know, even worse, but just not appropriate on a first day hearing over an objection. That's all I have, Your Honor. All right. Thank you, Mr. Brilliant. And anyone else? I don't see any raised hands. All right.

These issues are always difficult for a court. Countless times both in court in cases in front of me, as part of seminars. I've heard the plea and the argument raised that courts should start calling the bluff when presented with dire consequences, failure to fund under a dip or use of cash collateral. In other words, the court should challenge.

And in effect, what I view is take a gamble. That the bluff will not result in a force liquidation or destructive value to an entity. This court does not wish to gamble with the interest of employees, with vendors, with investors. I understand the argument, Mr. Brilliant. I certainly understand the frustration in being presented with alternatives, with limited notice, where the argument is, Judge, you have to approve this, or there will be catastrophic consequences.

That's why the court does take into account all the circumstances of the case, all the elements of the proposed transaction, and tries to find and identify what is reasonable, what is not reasonable. The court, in viewing the situation at hand, has considered the testimony of Mr. Mates through his declaration and across-examination, has considered the testimony of Mr. Goulding through his declaration. It's clear to the court that from the debtor's perspective and the debtor's professionals' perspective, there are no competing proposals to consider. that this transaction, this proposed transaction has been market tested.

It may result in a costly transaction, but there's nothing to suggest that there's a better alternative. What the court must look at then is how to does the transaction

limit the ability of unsecure creditors or junior creditors to protect their interests. So the The court looks at the ratio of the roll-up, one and a half to one. The court looks at the amount of the dollars in new money compared to the overall finance and how much is being requested on an interim basis and finds that there is over $300, well, $250

million roughly, if not more. that is not being addressed until the final hearing. The percentage of the advance on an interim basis, the nature of the payments being picked all are positive elements that ultimately serve to potentially give room for further negotiation or at least for further inquiry by a committee or junior creditor. The court accepts the testimony that the professionals made reasonable and efforts and undertook due diligence in trying to secure the best terms that are available. The court has experience both from cases in front of it, from other cases in front of my colleagues in this district and from other cases across the country,

where ratios, roll-up ratios are far higher, where the fees are more draconian, the court views the proposed transaction to fall within reason. Now, with respect to the U.S. trustees' concerns, I'm not going to dicker with the language. I'm going to put on the record right now. I'm overruling the objections. However, to the extent it turns out that facts that have not been made available to the court turn to suggest that the court was an error or that the court has injured an order which contravenes the bankruptcy code, the court will employ its inherent authority to revisit any prior order.

but all of the language probably all of the objections can still can be addressed at the final hearing if they're relevant at that time but I'm approving on interim basis the language proposed by debtors counsel over the objection of the U.S. trustee and let me be clear if I muddled that I'm not saying they can be revisited at the final hearing, absent it being demonstrated that the court relied on factual predicate that turned out to be inaccurate or that there's an inconsistency with the bankruptcy code. Again, the court focuses on the percentage that's being made available in the $150 million compared to the overall transaction, the use of PIC, as a significant portion of the payment obligations, remove cash, what the court views as a reasonable ratio, and the agreement by the debtor to defer most of the challenge issues

to the final hearing in language, during many of the protections. So with that, the court will approve on an interim basis the dip finance. I'll leave it to Ms. Bilski. I see your hand raised. And it means to instruct your honor, wait. I was going to say I'm going to leave it to the debtors' counsel to get down the best version of the order they can within, we're talking minutes.

Minutes. Thank you, Your Honor. Yes, but, Your Honor, it looks like orders are getting into real time, so I want to see it in real time. So I want to say it confirmed that. Thank you. All right. For purposes of clarity, the court is so ordering it from the bench. but will await the submission of final order.

Thank you, Your Honor. Much appreciated it. You've put the question before I even have the ability to ask it, so thank you very much. All right. I will now hand, I guess, the virtual podium over to my colleague, Megan Watson. All right. Good afternoon. Good afternoon, Ms. Watson.

Good afternoon, Your Honor. Can you hear me all right? Yes, I can. Thank you so much. It's Megan Watson from HSF Kramer, proposed co-counsel to the debtors. I will kick it off with the first few operative first-day motions and then turn it over to a few of my colleagues. But I wanted to start by thanking Ms. Gielsey at the U.S. Trustee's office for working with us on these on what I know was very tight timing. As she previewed, I think we are resolved on an all-beau-one issue in the Rageous Motion, but I'll get to in a few minutes.

So first, to start with our cash management motion, which we filed at docket number 15. As Ms. Ringer said, it was a dip order. I have to note that it is critical that we do get this entered as soon as possible in order to regain access to the debtor's bank accounts in connection with the dip-financing being advanced. Just to give a brief overview of the cash management system, it is relatively simple. It is a few different disbursement accounts and one lockbox account controlled by J.P. Morgan as part of the ABL facility. Because we are under active cash dominion, all receipts get swept into that J.P. Morgan account, and then we draw down into a concentration account to fund distributions through disbursement accounts. We are seeking authorization to continue operating that cash management system in the ordinary course of business and to pay all related fees and expenses We are also seeking authorization to continue ordinary post-fetition intercompany transfers critically transfers to and from our non-debtor subsidiaries who are located outside of the US

And we are seeking to continue the company's ordinary course purchase card program with Wells Fargo There is one issue I've been asked by Wells Fargo to flag during the hearing today We've been informed that there may have been up to two bank accounts, love off of the schedule in the motion. We will reflect this in the order, but I would like to supplement the record with the details of those two bank accounts. All right. Both accounts are held with Wells Fargo. One is a zero-balance account in the name of Debtor Del Monte Foods Inc. And the last four digits of the account are 8224. We are still

clarifying if the last account is a non-debtor or debtor controlled account, as it has two different company entities listed on it. One is a debtor, Del Monte Fuse Inc., the other is a non-debtor and Dina. The last four digits of that account are one. 1523. We will submit a revised proposed form of order reflecting those two accounts and their balances as of the petition date, as well as an updated cash management schematic to the extent necessary. And I think we've confirmed during the course of my speaking that the language we propose is okay with Wells Fargo. So we will include that in the proposed order. But we would ask that the terms of the motion apply to those two bank accounts to the extent applicable.

And I believe we addressed all comments from the U.S. trustee prior to the hearings. We would ask that the court enter the to be revised interim order unless there are any objections. Does anyone else wish to be heard? Motion is granted. The market order to be submitted. I'll move on to our critical vendor motion at docket number 13. The debtors are seeking to make payments on account of pre-petition amounts owed to certain vendors that are critical to the company's ongoing operations. Those include both domestic and foreign critical vendors, lien holders, five with three v9 claimants and packet vendors, with aggregate interim requested release of approximately $100 million.

In response to a concern raised by the U.S. trustee prior to the hearing, we did add some additional evidentiary support for the motion at the end of the first day declaration by those to the critical nature of the relief being requested. And with that, I believe we had also addressed all comments we received on the order in advance of the hearing, so it would also ask the court to enter this order if there are no objection. I see no hands raised. Granted, order to be submitted. Thank you, Your Honor. Up next is our wages motion, which was filed at Docton. number 10. The company has about 2,800 employees and a somewhat complex compensation and benefit structure given historical M&A that has led to the formation of the company. We are

seeking to continue all programs in the ordinary course, subject to certain limitations in the motion regarding post-petition payments to insiders. With one exception, we are not keeping to make any payments on account of pre-petition amount that exceed the statutory cap. And that one exception is, I believe, the subject of the objection the U.S. trustee has raised that we've not been able to resolve, so I will turn to that. We are seeking to make pre-petition severance payments to nine individuals in excess of the statutory cap upon entry of the interim order. That is one individual more than we noted in the motion because we found out over the course of today that one additional check we had issued pre-petition was not cashed in advance of filing for pre-petition severance. We have shared the breakdown of these funds with the U.S. trustee.

They range from about $80,000 a person to $20,000 a person. Seven of the relevant employees are former union employees and the remainder are non-union employees, all of which, which are at the company's plant in PANford, California. The amounts include outstanding severance payments and other benefits obligations on Pover Payments. The aggregate total of the funds we're requesting that is largely consistent with that in the motion. It's $317,000, about $160,000 of which

is in excess of the statutory cap. And as we noted in the motion, there are a few reasons that we're seeking to pay these obligations on the interim order as opposed to the final order. So the first is that we would submit these are priority claims. So the timing payment only, payment now only goes to timing

payment, not necessarily the eventuality of payment as we have reflected these upon entry of the final order. Second, we submit that these payments are justified under Section 363B1 and the doctrine of necessity. And third, and I think most critically, not making these payments would put the debtors in the position of reaching their obligations under their collective bargaining agreements with their unions who are critical partners in California. And under California law, which would apply to these employees, these payments can be considered wages, and the company's directors and officers can be subject to personal

liability for unpaid wages. As a result, if these amounts are not paid now, they could simply be asserted as post-petition indemnity claims against the estate by the debtors directors and officers. But for that reason, we would submit this is a requested relief, including payment of the severance claims, is appropriate and would ask that support entry and interim interim. Let me turn to Ms. Bilski. Ms. Bilski, your first. Thank you, Your Honor. Lauren Bielski with the Office of the United States Trustee. It can be extremely short. We object simply to the extent any payments exceed the statutory cap under Section 507, night four and five. I'm going to sustain the trustee's objection for those payments that are beyond

the statutory cap as an interim payment. We can address it at the final hearing. So you're authorized to make such payments within the statutory limits. You can make it pro rata or I'll defer to the business judgment or the debtor to whom and how much the payment should be made. Any any amounts above the priority, statutory priorities need to be revisited by the final hearing. We could wait a couple of weeks, a few weeks. Thank you, Your Honor. Thank you. Understood, Your Honor.

You could submit a revised order. Thank you. We'll revise it. I'll move on to our insurance motion, which is filed at docket number 10. Just to keep it short here, we are seeking authorization to continue our pre-petition insurance and surety programs in the ordinary force of business and to pay any outstanding amounts owed on account of those programs. I believe we also address any comments from the U.S. trustees prior to the hearing and not heard from anyone else, but we would ask the report enter the interim order absent any objections.

All right. I see no objection and no no objection granted. Thank you, Your Honor. And for my last motion, that is our transfer procedures and NOL's motion, which we filed a docket number 16. Well, it is actually a very long motion. It is really only seeking to do two things. It's seeking to prevent transfers of the common stock of the topmost debtor, that are Del Monte Foods Holdings Limited, which is fully owned by the debtor's ultimate parent,

and to prevent any folders of that stock from taking a worthwhile stock deduction. As we noted in the motion, the debtors have various substantial tax attributes, that includes more than 400 million in federal, or more than 700 million in federal NOLs, and more than 580 million in state NOLs. Those are very valuable assets of the state that we are seeking to preserve, and we are seeking implementation of the procedures laid out in the NOL's motion to prevent, those valuable assets from being in any way impaired. We did not receive any objections to or comments on the motion

and would absent any objection to raise today with the court and through the interim order. All right. Court has reviewed that motion. I've seen it repeatedly. I've never seen an objection. Who knows one day? The motion will be granted. Thank you.

Thank you, Your Honor. And with that, I will turn the virtual podium over to my colleague Ashland Bernard to continue with the operative person. All right, Ms. Bernard. Welcome. Good afternoon, Your Honor. Can you hear me okay? Yes, I can. Thank you. Ashlyn Bernard of the HSF. Kramer for the proposed debtor counsel. I just want to start by saying it's a pleasure to appear before your honor today.

We appreciate your consideration throughout this hearing, and we look forward to working with you and all other parties throughout the case. With that in the interest of time, I'll turn to the motions I'll be presenting today. The first item all covers the debtor's tax motion. That's filed at Docket number 12 and item number nine on the agenda. Your Honor, the motion seeks customary relief in the form of authorizing the debtors to remit and pay taxes and fees incurred in the ordinary course, including income taxes, use taxes, and property taxes, as well as various other customs licensing regulatory and other fees. The motion further requests to continue engaging in tax planning activities in order to provide the debtors with flexibility in pursuing a value-maximizing sale transaction, as contemplated by the RSA with the ad hoc group. Lastly, the debtor seek authority to continue to pay pre-petition fees owed to their logistics brokers in connection with import and export and ultimate distribution of the debtor's products in the ordinary course.

and to continue utilizing their services and pay any related fees and post-petition fees. Your Honor, the debtor's timely payment of taxes fees as well as services provided by the debtor's logistic brokers is critical to the continued and uninterrupted operations of their business. We shared the debtor's tax motions with the U.S. trustee in advance of filing, and as Ms. Bilski noted on at the outset of the hearing, I believe the U.S. trustee does not have any objections to this motion. All right. So unless Your Honor has any further questions of me, we'd respectfully ask that you enter the order.

There are no objections, nor does the court object. It is docket 12, I believe, the motion. So it will mark it granted. That takes us to the utilities motion. Yep. So as Your Honor flagged, the next item is the utilities motion. which is the debtors request for customary relief in the form of prohibiting utility providers from altering, refusing, or discontinuing utility services while the debtors navigate through these Chapter 11 cases.

The motion also seeks approval of the proposed adequate assurance in the form of establishing a segregated escrow count with Wells Fargo, and by depositing approximately two weeks of the average aggregate cost of utility services, paid on a monthly basis. In connection with that, the debtors request to implement the related procedures covered in the motion in connection with resolving disputes over any adequate assurance with utility providers. Again, I believe the U.S. trustee does not have any objections to this motion, and we have received none from any other parties.

We would ask the Your Honor enter the order. this is an interim, the final hearing again on August 8th? Yes, yes. I forget that's the date, August 4th, rather. August 4th. August 4th. All right. Motion granted.

Thank you. Thank you. The next item, it's number 11 on the agenda, is the debtor's customer programs motion, filed at docket number 14. The motion seeks to continue to honor certain customer programs as described in the the motion on a post-petition basis and to honor any pre-petition obligations owed to their customers as listed in the motion. The Dutters' customer programs include a range of programs relating to volume-based and promotion-based, as well as incentive-based discounts, rebates,

and allowances offered to their customers in the ordinary course. The bulk of these are credited toward gross invoiced amounts and do not reflect an actual cash, sorry, do not reflect an actual cash liability on the debtors, current cash liability for the debtors. In addition, the debtors maintain a military sale program facilitated through military distributors and a broker, which involves the purchase and sale of the debtors products to certain military basis. As highlighted in the motion, the success and viability of the debtor's business and thus maximizing value for the debtor's assets and for the debtors' estates are dependent upon the loyalty of their customers. Again, I do not believe the U.S. trustee has an objection to this motion,

and with that, unless Your Honor has any questions for me, we would respectfully request entry of the order. I have no questions, and I see no objections. Motion granted. The next motion I'll cover is the creditor's matrix motion. That's filed at Docket number eight. The motion seeks authority to file a consolidated matrix of the debtors' creditors and a consolidated list of their largest 30 unsecured creditors, as well as to redact certain personally identifiable information,

specifically the email addresses and home addresses of certain individual creditors. A proposed redacted version of the creditor matrix was filed this morning. That's at Dock at number 29. Again, I do not believe that there are any objections to this motion, and unless Your Honor has any questions for me, we would respectfully request Your Honor enter that order. No questions. Motion granted. Thank you.

The last item I will be presenting today is Agenda item number 13. That's the debtor's motion for an extension of the deadline to file their schedules and statements of financial affairs. This is found at docket number five. Here, the debtors are seeking a 31-day extension for a total of 45 days following the petition date. This pushes that deadline to file the schedules and statements to August 15th. We've reached an agreement with the U.S. trustee on this timeline,

including based on scheduling considerations surrounding scheduling the 341 meeting. And unless your honor has any further questions, we would respectfully request entry of the interim proposed order. Just to confirm, Ms. Bilski, the 18-date works for you. You've already undertaken the solicitation? I guess on both accounts, Your Honor. Thank you. Thank you. Motion granted. Thank you. Thank you, Your Honor. And with that, I'll seat the podium to my colleague, Evan Raskin, who will cover the balance of the motions on for today. All right, Mr. Raskin. You're up at the end.

Thank you, Your Honor. Can you hear me? Yes, I can. Great. Thanks again, for the record, Evan Raskin from H.S.F. Kramer, on behalf of the debtors. Thank you for the court's time today. Moving to the penultimate motion, the debtor's motion to enforce the automatic stay worldwide, which was filed at docket number eight and is item number 14 on the agenda.

The debtors operate on a global scale and have significant operations outside the United States, including in Mexico and South America. The debtors' foreign creditors and contract counterparties may be unfamiliar with the United States Chapter 11 process and may seek to take various actions that would violate the automatic stay, which could result in significant harm to the debtors and their estates. The debtors do not seek to expand or enlarge the rights afforded to them under the bank of the bank of the bankers. code rather simply to affirm them. We have shared this motion with the U.S. trustee and believe they are signed off. We believe this relief is customary and in the best interests of the debtors, their estates, and all of their creditors.

And with that, unless Your Honor has any questions, we respectfully request entry of the order enforcing the automatic stay, anti-discrimination, anti-subfactor provisions of the bankruptcy code. All right. All right. I have to chuckle since my article three colleagues have been. restricting their ability to enter nationwide injunctions, but I can enter an order globally worldwide. Yeah, I'll enjoy it. That's fine. Motion granted.

Thank you, Your Honor. Finally, moving to the debtor's application to appoint Stretto as their claims noticing agent. This was filed at docket number seven and is item number 15 on the agenda. In connection with Stretto's retention application, the debtors also filed the declaration of Cheryl Batam. which is attached to the application as exhibit B. This time I would like to move that declaration into evidence. Is there any objection? Hearing and saying no one admitted into evidence. Thank you.

As D3, I believe. Thank you, Your Honor. We have shared this application with the U.S. trustee and believe they are signed off. And so with that, unless Your Honor has any questions, we would respectfully request entry of the order related to Stredo's retention application. All right. I see no objections. Ms. Bilski, your office is fine with it? Yes, Your Honor. All comments that we had to the drafts had been incorporated.

All right. Motion granted. Thank you. Application granted. Thank you, Your Honor. Unless you have any final questions for us, that wraps up what we had on our agenda today. I do not. Is there anyone who wishes to be heard on any matters? All right. I'll urge you all. Please get it. the orders down to us reach out for chambers reach out for Becca Earl my law clerk I know she's happy to hear that as needed I thank you for your time and I guess unless I'm told otherwise we'll be seeing everybody again on August 4th