American court hearing recordings and interviews - Prima Wawona bankruptcy hearing December 15, 2023 (In re MVK Farmco, Delaware bankruptcy case 23-11721)

Episode Date: December 23, 2023

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Please be seated. Good afternoon, Your Honor. For the record, Andrew Mark of Young Conaway, Sargat, and Taylor, co-counsel to the debtors, and I am joined this afternoon by my colleagues from Kirkland and Ellis, who are appearing via Zoom this afternoon. Your Honor, we just wanted to note that we greatly appreciate the court permitting parties from out of town to appear telephonically via Zoom this afternoon. So we thank Your Honor for that.

We were before the court this afternoon on what was calendared as an omnibus hearing. Yesterday, the debtor submitted a proposed third interim order for the use of cash collateral, which is uncontested. If Your Honor has any questions regarding the proposed order, I will cede the podium to my colleague, Ms. Fogelberg from Kirkland and Ellis, who is appearing virtually, and will also provide the court with an update on the sale process. Okay, let me hear an update on the sale process. I don't have any questions with respect to the red line that I see on the third interim order. It appears like it just rolls everything forward. But it wants to continue this to the 27th, which was given for a specific purpose and not for a contested cash collateral or dip order.

Let me hear what's happening. Thank you, Your Honor. Good afternoon. Whitney Fogelberg from Kirkland and Ellis on behalf of the debtors. Also, as hopefully you can see on the Zoom in the courtroom, Ryan Bennett also from Kirkland is on. I'm happy to answer these questions. I was prepared to give you kind of a process update anyways, so I think that those will hopefully answer some of the questions. and maybe we can get to figuring out the scheduling once I give you that update, if that's okay.

That's fine. Okay, great. So since our last hearing, the debtors have been hard at work to effectuate the sales process, as you mentioned. That was contemplated under the bidding procedures order. That included the debtor's investment banker, Hulahan Loki, continuing their efforts to reach out to interested sale parties. provide them with diligence and information needed to move forward to submit bids in advance of the bid deadline. As you may or may not have noticed on the docket, the debtors did not designate a stalking horse bidder. And then as of the bid deadline, the debtors received a total of seven third-party bid.

Ms. Fogelberg, you're muted now. Ms. Fogelberg, can you hear me? Apparently not. Sorry, go ahead. Okay, Ms. Fogelberg, we couldn't hear you for a lot of what you just said, for whatever reason. And you couldn't hear me when I was asking. So let's, where you left off was, as of the bid deadline, there were seven something. Okay.

Okay. Can you hear me now? I can. Okay, great, because I could not hear you. You are correct. It was not ignoring you. Okay, I will go back to that point. So as the bid deadline, seven third-party bid submissions of those four were Holco bids and three were land asset bids. The debtors also received two jointly submitted credit bids from the pre-petition lenders, totaling $275 million. Besides the lender's credit bid, none of the other bids received met the qualified bid requirements as laid out in the bidding procedures, and that specifically was the $275 million minimum bid requirement. Additionally, for the third-party bids that approached the minimum bid, there were several contingencies that would have needed to be negotiated or resolved in order to finalize any sale transaction. with one of those bidders. In order to try and, you know, encourage the process, the debtors filed a notice of adjournment

of the auction to continue discussions with bidders, but unfortunately, the debtors did not receive another bid or a collection of bids that was ultimately deemed a qualified bid. So on December 7th, the debtors filed a notice canceling the auction and declaring that the debtors planned to pursue a transaction with the pre-petition lenders on the terms set forth in the credit bid. So kind of moving on to the next step since we did post that notice on December 7th. Once the pre-petition's lender's credit bid was declared the high bid, the debtors started working diligently with the lenders to come up with a revised cash collateral budget and also a

down budget that will direct the debtor's use of cash collateral for the remainder of the case. As you mentioned, the debtors, the pre-petitioned lenders, the UCC, agreed to further consensual use of cash collateral and the short 12-day budget while discussions related to the wind-down budget ultimately continue. We are very close on the wind-down budget. I think there's one or two open options that I'm sure lender counsel can can speak to if need be, but we expect to have that wind down budget done today or tomorrow. That wind down budget will ultimately require incremental funding from the pre-petition letters in order to bridge to the conclusion of the case in February.

While the exact amount of funding is currently being worked on under the wind down budget, the pre-petition lenders have committed to the debtors that they will provide the dip financing to fund the costs necessary to achieve confirmation of the debtor's plan and have told the debtors that we can expect a dip term sheet in the near term the next couple of days. Once the debtors have that dip term sheet is hand, we will quickly file documents requesting court approval of incremental financing. We believe that that. will resolve the arguments that were raised by the UCC in their cash collateral objection and ensure that all the necessary costs are covered throughout the case.

Now, additionally, in connection with their consent to the debtors' continued use of cash collateral and this forthcoming dip financing, the pre-petition lenders are requiring the debtors to promptly minimize operations and materially reduce operating in costs. in line with how the pre-petition lender intend to maintain these assets post-confirmation. Therefore, as soon as next week, the debtors will be taking certain steps to reduce their go-forward operations and related expenditures to ensure compliance with the budget and our ability to confirm the Chapter 11 plan. Likewise, we will be filing an amended Chapter 11 plan no later than this Monday, which in light of the pre-petition lender's prevailing credit bid will now be structured as more of a liquidating Chapter 11 plan, which will address the transfer of control of the Propco assets to the Propco lenders, and then a wind down of the Opco assets for the benefit of the Opco lenders. The revised plan will, as the first plan on file did, will continue to conform to the lender support agreement.

The lender signed free petition, and therefore we believe we'll have the support of the vast majority of the debtor's senior impaired classes. We also plan to continue to work to the UCC to reach a settlement as we move forward with confirmation. While we had hoped for a more fruitful outcome to the sale process, we do believe that we can drive the case to a successful conviction and close the credit bid transaction with the pre-partition lenders. Now, I know I did not answer your question on scheduling or getting entry of a final cash collateral order or a dip order. And I understand that the 27th is just for the disclosure statement hearing. So I think I would propose, given that the parties are very close on the wind down budget, that hopefully we can submit an agreed order with that agreed budget attached. And if not, we will have to find just a different date to get in front of Your Honor,

because I know that the 27th was just for the disclosure statement. But, you know, my, I think our aim would be able to just submit something that's agreed by the parties on final cash collateral once the final budget is determined. Okay, let me hear from anyone else. Mr. Siegel. Good afternoon, Your Honor. As I mentioned, I'm Glenn Siegel from Morgan Lewis. I'm here on behalf of Metropolitan Life. As I mentioned the last time, we are the single largest creditor, both Opco and Propco.

We are part of the required lenders group. My colleague who I've been working with at Moran Van Allen, Luis Obata, I believe, is on the phone, and he will correct me, if anything I say, is not consistent with what we think the plan is moving forward. Your Honor, you know, we went through an auction process, and fortunately, nobody hit the bid. and that has forced us to conclude that the liquidation value of the company exceeds its going concern values, so we're going to do what we have to do, which is the liquidate business. Now, by the way, when I say that, of course, that is ultimately the debtor's decision,

and it's ultimately what this court rules at the end of the day, but it does inform how we are prepared to finance the case moving forward. Much of this happened very quickly after the auction process and people who had been previously budgeting for a going concern had to pivot to budget for a wind down and we've worked very hard in order to come up with a budget that makes sense under these circumstances. So what we were able to do was we did a lot of the work and we were able to figure out how to proceed based on cash collateral until the time. the end of the month. We are very close to, and I expect that there will be a dip term sheet provided to the debt or by the end of the day today. That dip term sheet, again, given the exigencies of time, will be backstopped by the required lenders. Not that the group might not change by the time we have an approved dip. It's simply that we don't have

enough time to get everybody to do their approvals, and it is imperative that we stay along this time frame because the company's burning a lot of cash and we want to move forward expeditiously on that so what does that mean that means ideally if everything goes the way we hope it will and we're all working very hard towards that we will be in a position or the debtor will be in a position to file a dip motion early next week with a budget attached to it that will take us to the end of the case and with the support of the rec lenders. That also means, ideally, subject to your calendar, that it would make the most sense to have that dip hearing on the same day as the disclosure statement.

It is of course possible that there will be objections to that dip. We are going to endeavor to resolve all those objections. We also think that the objections to existing cash collateral will be resolved by its replacement by this dip order, which we hope would be, Your Honor, would be able to enter on or around the 27th. The plan is also, lots of people are working very hard right now, Your Honor. People are in the process of revising the plan to deal with the changes associated with this, and we are going to do everything we can to get to a consensual plan. We've had a lot of things going on. We understand there are constituencies who have or may have

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hoping to persuade you to overrule those. But the time frame that we've been talking about

is to emerge in early February. We've made tremendous progress in getting a budget done. Again, we

apologize for the time it's taken to get that done, but a bunch of people who are working very hard on a going

concern now, unfortunately, had to pivot to a liquidation budget, and that's a very different exercise.

Again, And it's not the result we wanted. As I mentioned to you before, MetLife is impacted equally. In fact, slightly more so on the Opco side, on the operating side. But we think this is what maximizes value. And given the current economic environment, we couldn't do better than this. I'm happy to answer any questions you have. I was trying to tell you kind of how we get from here to the end of the case and what we're thinking.

No, thank you. I don't have any questions. Thank you, Your Honor. Anyone else like to be heard? Thank you, Your Honor. And just briefly, Genevieve Weiner, on behalf of RBC and with Siddeley Austin. I don't have any issue or dispute at this moment in time with anything that Mr. Siegel said. I would just note for the court that there are multiple constituents involved, and there is still very much a fair bit of work to be done in terms of coming to a resolution.

So we are happy to be before your honor whenever you can accommodate us either via Zoom or in person here. And we thank you for your time. Thank you. Anyone else? Okay. It's not my schedule that's an issue. I don't celebrate Christmas. I'm here.

I don't have any. Unfortunately, I have no great plans to be anywhere. So it's not my schedule. but I know that this particular week, a lot of people are out and do have plans. And the disclosure statement hearing was scheduled during that week, really on the representations that it was time-sensitive and we needed to get it done. sounds like, and it really couldn't wait, sounds like we're going to have a very different disclosure statement that's on file

than that which is on file. And that's going to be, but I don't know, maybe that's not the case. I have not read the plan or the disclosure statement. My concern now in hearing what's happening is, will people have enough time to review whatever is filed next week with respect to a new plan and disclosure statement? Let's put aside for the moment a dip order when we don't have a dip motion filed yet,

but are people going to have enough time to review all of this before a hearing on the 27th? Your Honor, this is Whitney Fulkeberg again from Kirkland Ellis on behalf of the debtors. The plan and disclosure statement that we did file included this toggle structure of a sale or an acquitization. Now, I wouldn't necessarily call the exact equitization that we had imagined. We are trying to be very minimal in our revisions to the plan. We had already, and the disclosure statement, we had already included a wind down mechanism in the plan. so it is kind of shifting over the assets that are going to be in that wind down, not necessarily saying that, you know, it's not going to be,

there's not going to be zero changes to the plan and disclosure statement that we get on file, but we are trying to minimize the changes that will be shown in those revised documents. I think what Ms. Vogelberg is describing is the plan, the plan essentially said that the plan is going to be this or it's going to be that. It's not going to be that. So the changes to the disclosure statement are going to focus on it being that versus this or that. Which is a toggle. Right.

Okay. Gloss on that. We do have a conclusion to a bidding process. There was a successful bid at a specific valuation, and that valuation will work itself through the capital structure in a way that this plan already anticipated. We just didn't know what the number was going to be. So again, obviously subject to objections and the judge's ruling, you're ruling, we think the disclosure statement will not require a lot of changes to it. Okay. We'll go forward with the disclosure statement hearing as scheduled, and I'll see what kind of objections, if any, I get to it and whether anybody's had express as

with respect to the ability to have adequate time to review it. I'll deal with that. Certainly a cash collateral, an agreed cash collateral order can be submitted under certification of counsel. And if you've got a dip motion that you're going to file, I will hear it consistent with the rules. So we can have an interim hearing on what's absolutely necessary to get us to a next hearing, recognizing that we're closed the 22nd and the 25th. So, but I'll have a hearing on the 27th. Well, do we?

We have a confirmation date. We have an number of this hearing date. Well, I'll take a look. It depends on what it looks like. Sure. You know, I don't know. But I will entertain, if it's filed, and if it's noticed out, I will entertain an interim dip. I'm not sure a final dip should wait a whole other month.

Okay? I really think it should be targeted, given the notice we're talking here. But I'll deal with it like I would. any other dip motion. Your Honor, it's Luis Jouvarez at Warren-Mid Allen. Can you hear me okay? Yes. Thank you, Your Honor.

Good afternoon. I represent four Farm Credit Bank institutions, Compeer Financial, Ag First, Ag Country, and Farm Credit Bank of Texas. And those four Farm Credit Bank institutions, along with four other Farm Credit Bank institutions, are a critical mass of the required lender group that Mr. Siegel was identifying. Your Honor, I think I can give you a little bit of comfort in terms of timing. My understanding on the hash need is that it may not be as immediate as late December or very early January,

although we certainly don't want to push it. And my constituency is, and I say this in a non-pejorative way, probably the most unwieldy. We have eight different approval channels. We have eight different underwriting approaches. So it may be the case that, and while I am supportive of the timeline that Mr. Siegel identified, and we certainly want to get a motion in front of Your Honor as soon as possible, it may well likely be the case that we don't have something that is committed, committed too far in advance of the 27th for Your Honor to even feel comfortable having a hearing that day. I don't want to prejudge anything. We're working extremely hard.

but, Your Honor, just in terms of timing, my own constituencies limitations may ultimately result in a motion being on file and an interim hearing being most likely early January. So I just wanted to have that in front of Your Honor just so that Your Honor understands that we're all trying to move as fast as possible, but there are a few folks who will need more time just to get something in front of Your Honor. So I just wanted to articulate that for your honor and the benefit of this group as well. Okay, well, again, I will consider the motion when I get it. And certainly for dip financing, it needs to be committed financing. So I'll handle it when I see it. It sounds like, Your Honor, we're all in sort of a violent agreement that to the extent we can get the dip pulled together and finalized, we'll file it and tee it up on an interim basis for the 27th. We'll work out the logistics of a final hearing whenever we can, but I don't think that's a today issue.

And we will amend the disclosure statement, tee it up for the 27th. Your Honor is obviously reserving judgment, as would be the case, depending on the nature of the changes. But we will be back in front of you on the 27th. Disclosure statement, possibly a dip, and we will submit a further cash collateral order under cert if that's what we need. You can have that if you don't have a step. Yeah. Okay. What else do we have today?

That is all, Your Honor, other than, I think, again, entry of the third interim cash collateral order that was submitted and uploaded? Okay. If that's been uploaded, that's fine. I will approve it, as I said, I reviewed it, and it just seems to carry things forward. Correct. So that's fine, and things are where they are. So we'll go with there. Yes?

Oh, I said one logistical question. So there's 27. If it's not contested, if it's not, and that's always the difficulty with scheduling something that week, I recognize that, but that's not my, you know, I didn't schedule it. So if it's not contested, yes. And I will also note that many of you

have very able local council who can handle contested matters. Okay, many of you, all of you. That was – I shouldn't have qualified that. All of you. You looked at me when you said most, Your Honor. All of you. I shouldn't – I shouldn't qualify that. Okay.

Your Honor, we know we've imposed on your calendar in this case at various times, so we do – we very much appreciate it. No, that's okay. And, you know, things move. So – and this one obviously has some moving pieces to it, which justify adding something to the 27th docket. So we'll do it. And we'll see what, we'll see how it proceeds. Very well.

Okay, thank you. Thank you, Your Honor. Everyone, have a great holiday. Thank you, Your Honor. Thank you, Your Honor. Thank you. Thanks, Judge.