American court hearing recordings and interviews - Prima Wawona bankruptcy hearing March 27, 2024 (In re MVK Farmco, Delaware bankruptcy case 23-11721)

Episode Date: April 19, 2024

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Please be seated. Good morning, Your Honor. Jamie Fidel of Kirkland and Ellis on behalf of the debtors. We are very pleased to be here today to present confirmation of the Debtors Chapter 11 Plan. I'm joined in the courtroom by my partners, Ryan Bennett, and Mike Esser, and my colleagues, Dave Gremlin and Rob Jacobson. Well, I'm happy to report that there is near global consensus today. We do have one outstanding objection to come from.

to confirmation that will be going forward. So with Your Honor's indulgence, what I would propose to do is to put up a presentation on our case in chief, then get into the evidence, and then we can get into the arguments on the outstanding objection of Stone Cold. And I had the opportunity to confer with Stone Cold's counsel, and he was good with that approach. Thank you, Your Honor.

So if I can put the presentation up, which is already on the screen, happy to dive in. Starting off, I think it is important, Your Honor, to remember where the debtors were in these cases only two months ago at the time of our first interim dip hearing in mid-January. At that time, the debtors had yet to reach a deal with the creditors committee regarding the settlement of sponsor claims. the Garawan parties continued to object to a number of motions and were not yet supporters of the plan, and the required lenders and agents had essentially declared open war on each other. While we were able to bring the UCC into the fold shortly after that hearing, by the time the voting deadline passed on the original plan in early February, it was obvious we did not have the votes, and that plan failed. But like responsible fiduciaries, we, of course, did not give up.

We resolicited the plan and kept hammering away at the secured lender groups. It came down to the wire, and I'm sure Your Honor has seen the flurry of paper that has been filed. Apologies for the volume, but we are beyond thrilled, ultimately the level of consensus here, save for the single remaining objector. Just at a very high level summarizes this slide. A very high level summarizes the key terms of the plan, but I think what is more important is on the next slide, which is the unanimous voting results. every single class has voted in favor of the plan 100% of our funded debt creditors in fact voted to accept and approximately 95% of Class 8 7a general and secure creditors

So what does the plan contain in addition to the orderly wind down the opco debtors and reorganization of Propco at bottom there are three core settlements contained in the chapter 11 plan the first of which is the original settlement with the UCC, the equity sponsor, and McKinsey, which I will refer to as the 1990 settlement. That settlement is incorporated into the plan, and there is a separate 1990 motion, but to the extent the plan is confirmed, that motion can be withdrawn as moved.

Effectively, the 1990 settlement provides that the sponsors contribute $2.2 million in cash, the majority of which will be used to fund a Guff truck, to distribute assets to general insecure creditors and administer claims. Certain of the debtors secured lenders in Class 7B are gifting the recovery on account of their deficiency claims to the Gup Trust as well. McKinsey has also agreed to waive their significant unsecured claims against the estates, thereby improving recovery for other unsecured creditors. And finally, there are mutual releases and a waiver of potential avoidance actions. The second settlement is the Garabon Settlement. Garawan settlement whereby the Garawan parties are contributing an additional $250,000 to the Guff Trust.

The debtors will agree to cooperate with respect to delivery of certain electronic information, and the Garawan parties have become released parties under the plan. And the last settlement, which I think I can say was the hardest settlement to reach, was the inner lender settlement between the required lenders under the DIP facility, who are slightly more heavily concentrated on the Propco side of the house, and the agents under the Opco credit agreements, rival bank, and RBC. The technical modification version of the plan filed at docket number 808 reflects the terms of this interlinter settlement, and there was also a settlement term sheet filed with the plan supplement.

It's suffice to say there were a number of negotiated terms contained in those definitive documents in addition to the highlights presented here, but I think the core economic terms can be summarized as follows. The ProPco, Reorganized Propco will agree to maintain a collateral coverage ratio that requires reorganized Propco to have 150% coverage ratio in terms of its assets, and that will protect the value of the $30 million promissory note. The settlement also provides an allocation of repayment obligations with respect to the dip and the remaining outstanding obligations under the bridge facility, which is set at 80% to Propco and 20% to Opco. And the 20% Opco contribution will have a liquidation preference in the liquidating trust agreement of Opco.

OPCO will also waive any claim it may have to land assets, and Propco will waive any claim it may have to equipment assets. And upon the effective date, Propco will pay to OPCO a fixed price per acre for reimbursable cultural costs for acres which are not subject to an early possession agreement and are not under contract for sale. And in terms of the reimbursable cultural costs for acres subject to an EPA early possession agreement or whose sale is closed, OPCO will also receive those reimbursable cultural costs. And finally, on the effective date, the OPCO MSA will be rejected, and OPCO will pay an $8.5 million administrative rent claim to Propco. So these are the core terms of the Interiminalard settlement contained in the plan. Turning to our actual case in chief, obviously, as I mentioned, we filed a host of documentation.

And the plan that I mentioned was filed at docket number 808, and we just filed a revised plan at docket number 841. That was only a few minutes ago, Your Honor. So we're happy to walk that up and walk through the changes. But between 841 and 808, it specifically reflected. agreement with two of the objecting parties, Chubb and the 1970 group with respect to certain insurance provisions, which was not yet finalized at the time we filed docket data ways, but now I believe we have a full agreement with those parties. We also filed a proposed form of confirmation order at docket number 840 and had filed

previous versions at dockets number 810 and 823. obviously we're more than happy to walk your honor through those red lines as well to the extent you don't have any questions at this point I would like absolutely understood your honor so at this point I would like to submit our declarations in support of confirmation if that's all right with your honor thank you the first declaration is the declaration of John Boken at docket number 820 which addresses the 1129 factors, including feasibility and the best interest test. Mr. Boken is here in the courtroom today, and we request that his declaration be submitted into evidence. Is there any objection to Bokin's declaration? Oh, I'm sorry. Morning, Your Honor. For the record, Curtis Miller of Morris-Nichols-Arstead panel on behalf of Stone Cold.

We entered into a stipulation with the debtors, and it was mentioned earlier. We are going to be consenting to the admission of the different declarations, and I believe there are 17 different exhibits by the debtors in exchange for some stipulations that will be made on the record by the debtors with respect to administrative rent that's owed to my client in real estate taxes, plus the admission of two documents, my client's lease and the guarantee of that lease. So I just wanted to, as we're going starting to go through evidence, I just wanted you to be aware of that. Thank you, Your Honor. And I can confirm that as well. We agree with that. Thank you. Directions to Mr. Bowdof's declaration that's admitted.

Thank you, Your Honor. The second declaration is from Ryan Sandall, from the Houlihan firm filed at Docket 816, which addresses the debtor's marketing process and certain inputs into our liquidation analysis. Mr. Sandall is appearing by Zoom today, but is present to be sent there are any questions. So we would ask that his declaration be submitted as well.

Thank you, Your Honor. The third declaration is the declaration from Aaron Schwartz, independent director of the debtors and member of our special committee, which was filed at docket number 817. Mr. Schwartz's declaration addresses the parallel estate claim investigations conducted by K&E and Young Conway, the settlements that led to the creation. of the Guck Trust and Mr. Schwartz's support for the releases contemplated by the plan.

Mr. Schwartz is also appearing by Zoom today, but is present to the extent anyone has any questions, and we would ask that Mr. Schwartz's declaration be admitted. 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. The report is traveling, so to the extent no one. The declarations are the voting reports from Letitia Sanchez of Stredo, are noticing in claims agent, which were filed at docket 38. the reason that we filed an original voting declaration and amended voting declaration in this case is that we extended the voting deadline for certain of our secured lenders and an unsecured creditor passed the original voting deadline of last Friday as we continued negotiations. Per your honor's comments at the supplemental DS hearing this was plainly disclosed who we extended and through what time in the declarations and as I mentioned previously the voting declaration shows an overwhelmingly supportive voting report at each and every box and every class.

So with that, Your Honor, and Ms. Sanchez is in the courtroom today, but we would ask that the declarations at dockets 819 and 838 be admitted into evidence. Do you, Your Honor? And we also filed our brief at docket number 229 that summarizes our case in chief, and I have the 1129 factors up here. here in the various evidentiary support. Of course, I'm happy to dive into any factor if you're on a request, but I did want to highlight a few points. The first is that the only objection to any of the 1129A factors is an 1129A1 objection

that the plan complies with all sections of the title. I'll turn to that in a moment when I get to the objection, but that's the only. actual contested issue in terms of the 1129 factors. And as set forth in Mr. Bokin's declaration under the plan, each impaired class, each holder of claims or interest will receive as much as they would recover in the hypothetical liquidation. The best interest test is satisfied.

Set forth in Mr. Bokin's declaration, the debtors have received over $100 million in sale proceeds to date or under contract for an additional $140 million of proceeds. We expect significant cultural costs, reimbursements in excess of this amount, and have yet on significant land and equipment acres, excuse me, assets yet to be sold. We submit that the plan is feasible. And finally, wanted to note, so the discretionary provisions of the plan, Mr. Schwartz's declaration set forth the specifics of the investigations conducted to support the settlements incorporated into the plan. third-party releases are also fully consensual, consistent with the case law in this district. And we, of course, work with the U.S. trustee to resolve many concerns with the release and exculpation provisions. I believe that discretionary provisions of the plan are appropriate under the circumstances and should be approved.

So that concludes my presentation. I'm happy to address any questions your honor has, or I can dive into the outstanding objection okay so as mr. as Stonecold's council mentioned we will seek to introduce he will seek to introduce excuse me two exhibits to which the debtors have no objection but at this time I would post that the debtors move exhibits five through 17 on our witness and exhibit list into evidence the first four exhibits were the declarations that were previously admitted Those have already been admitted.

So what do you want on your list? Exhibits 5 through 17. I'm happy to run through as well. What are these being admitted for? These are being admitted for. These are being admitted for purposes of the objection, but in particular, from the debtor's perspective, exhibits 11 through 17, which are excerpts from our schedules and statements.

are particularly cogent to the objection. Any objections, I'll admit them, but you'll need to explain to me why they're relevant of something. Understood, Your Honor. So turning to the objection, and it's from our landlord Stone Cold, which is a landlord at a packing facility in California. They raised two issues to confirmation in their objection. The first was related to feasibility. which we can resolve.

The debtors obviously submit that the plan pays administrative claims in full to the extent that Stone Cold has an administrative claim, it will be paid in full. And we can represent that the debtors have sufficient assets to pay that administrative plan to the extent it is due and owing. So with that... Do you have evidence on that? Yes, Your Honor.

That would be contained in Mr. Bokin's declaration. A duck at 821. So the only contested issue in the objection relates to Article 4C of our plan specifically. That provision, which was a term of the 1990-settlement with the UCC, provides that for solely for purposes of making distributions to general and secure creditors, from receiving distributions from the Duck Trust. All general and secure claims are deemed to be claims against Walona Farm Co. Farmco LLC and second all guarantee claims or claims against multiple debtors are deemed to be a single obligation against Farmco. As I mentioned earlier in my presentation, the distribution to unsecured

creditors was a hard fought settlement and unfortunately results in a relatively limited pot of cash of 2.45 million and some of that 2.45 million in cash is earmarked for distribution and to certain secured lenders on account of deficiency claims. So the actual pool of assets for general unsecured creditors is quite small in this case. The treatment in Class 7A, including that GUT trust distribution, was put to all general and secure creditors, from whom 137 out of the 142 ballots cast voted in favor of the plan. When we formulated the settlement, the debtors and the UCC were faced with the dilemma of divvying up a small pool of settlement proceeds in the most efficient and fair way possible.

And we believe that the deemed distribution provisions in the plan are integral to that settlement, and at bottom should be considered a planned treatment issue, which the general and secure creditors voted to accept. I believe that's don't... You didn't brief it that way. in the memorandum? Understood, Your Honor. There are sub-con issues, we'll get to them, but we do believe that this is an 1123A3 issue and an 1126 issue.

The plan... We don't have any law on that. Just to summarize, 1123A, excuse me, 1123A3 provides that the plan may obviously treat certain classes of claims and as part of that treatment and any chapter 11 plan for example it will specify if consideration is in the form of cash or securities or some combination thereof and it also can set forth mechanics for how creditors receive that distribution and we think that

and you can treatment eliminate somebody's plan treatment by itself cannot eliminate someone's claim however claim entitlements there's no entitlement to a claim other than what the bankruptcy code provides the bankruptcy code provides that you only you need to satisfy that something is in the best interest of creditors and the schedules and statements show that the claims that stone cold the ledges are excuse you know they're against boxes that have zero assets and these are empty shells you're saying this is a treatment yes Treatment can eliminate someone's claim in the con.

Yeah, 1123 also provides that the plan can deem certain creditors to reject if they receive no recovery. So treatment certainly can eliminate and discharge claims or creditors. Understood. Moving away from the treatment issue, Your Honor, specifically on the subcon point. So I think there's two relevant cases here. The first is Genesis Health, a Third Circuit case, and Owens Corning, also a Third Circuit case. Genesis Health, which was decided a few months before

Owens Corning, clearly states that Dean consolidation does not necessarily result in substantive consolidation. And we believe that this is not a substantive consolidation issue. This is, it was put into the plan for administrative convenience. There is a single pot of cash. which is an asset of Opco in this case was recovery and account of preference claim. Stone Cold has a claim against Opco.

We don't dispute that. They have a rejection claim against Opco. They also have five claims against other boxes that are not Opco do not have any assets. And so what they're attempting to do is effectively bootstrap those five claims into a six-time's recovery against the Guth trust that will completely swamps the claim pool. I believe the rejection damages claim is in the order of $15 to $20 million. So at a factor of six, there would be effectively no recovery to other general and secure creditors. So on hold we received the entire, or almost the entire recovery under the plan.

From the gut. Well, no, the Dean consolidation provision provides us. but that's not the result. And how does the Genesis Health case, which I did read, how does, and I haven't seen me, so you can point me to it, how does that aid the debtor? What Genesis Health stands for is the proposition that a deemed consolidation is not automatically

substantive consolidation. And this is not substantive consolidation here, because there's a single asset, which belongs to a single debtor. So, what, just, But the plan provides that all general unsecured claims against all the debtors shall be deemed general unsecured claims against debtor 1-1 loan a farm company LLC. It does appear facially to look like a subcon provision. We don't dispute that.

But that doesn't mean it's substantive consolidation because... Because the genesis facts are totally wholly different than these facts, right? In that case, yes, the debtors were actually arguing in favor of subcons to avoid U.S. trustee fees the facts were different I and nobody objected to that provision at confirmation or suggested that whether it was appropriate or not if you've been after the fact taking a look at what the debtor did and saying that provision for purposes of payment of US trustee fees doesn't a staff doesn't do a subcom I agree with that your honor but I would also submit that the facts in Owen Corning

are quite different in that case there was a two billion dollar loan from lenders. I think it was something like 55 debtors, and the debtors respectfully proposed to eliminate that structural seniority entirely and significantly disadvantaged those lenders and upend the world of secured lending, as the court noted, or unsecured lending in that case,

it's code noted in Norn Corning. Here, Stone Cold has a claim against Opco, which is an operating entity with assets and liabilities, and it has five claims against empty shell, entities and it's if their argument is correct they would you know no no unsecured creditor effectively would get on any recovery which unsecured creditors voted to accept so we don't think that's an equitable result in any way whatsoever nor is it supported by the law what's the standard provision in the

plan well the debtor's position is that this is an 1123 a 3 and 1126 issue but if your honor does if your honor doesn't accept that contention i think the standard would be o'en corning which provides that there can be consent to substantive consolidation and the class 7a voted to accept this provision um stone cold didn't vote but they had every opportunity to do so they knew they had a rejection potential rejection damages claim they could have appeared at the disclosure statement hearing rejected to the solicitation procedures They could have filed a 3018 moment to estimate their claim for voting purposes. They did none of that.

Now they're appearing at... That is fair, but the solicitation procedures provided that we sent the claims to folks that had filed groups of claims or were scheduled. We didn't send ballots to potential unsecured creditors who had a rejection damages claim. Stone Cold was on notice that the contract would have been rejected. So if they had wanted to vote on the plan, certainly they'd ever have opportunity to do so. Well, I think they, I can't speculate to them, but their vote on the plan could have resulted in certain unsecured classes at some debtors voting to reject the plan, and then that would have implicated the death trap revisions reducing the pool. I don't think they likely would have done that, but I don't know.

Well, we don't believe it's subcon. I know I've said that, but to the extent it is, Owen Corning applies. I don't know if the debtor is taking a position. I'm arguing in the alternative, respectively. So for the sake of argument, if it is subcon, Owen's Corning would apply, and Owens Corning states that subcon can be accomplished through consent, and we believe that Class 7A has consented to this treatment,

and it should be found on all creditors. Yes, if your honor is anything. I kind of look at this consolidation issue as somewhat moot, given other issues within the plan. Whether these are consolidated or not, if you treated these as non-consolidated, isn't the only issue at this point since the classes carry whether they're consolidated or not consolidated, whether they're getting at least as much as they would in a liquidation? I'll be brief for me. I'll, you know, I spent time with these objections last night and all the options. Your Honor, let me see if I can try and cast a little light on this from the unsecured creditors' perspective. Andrew Bellman from Lowenstein on behalf of the committee.

I think to Mr. Fidel's final point, it doesn't really matter if it's sub-con or not because Class 7A consented to whatever Class 7A is, whether, whether you know, whether, you call it treatment and say class 7a voted to accept so clearly. That's my question. Treatment. Let me pose a hypothetical which I think is where Mr. Siegel

was hinting that that may help. The goal of this provision was simply administrative convenience. With the expectation that if somebody filed a claim against the wrong debtor, you know, somebody thought they were doing business with one of the other

Wobona entities, these things have confusing names. Somebody files a claim against the wrong entity all of the unsecured claims are at Opco, other than these five sort of inchoate landlord claims that we'll talk about in a second. But all of the unsecured claims were expected to be at Opco. And the anticipation was, like any other case,

we probably would have some slug of unsecured creditors that might file claims against the wrong debtor. It wouldn't matter. They have a claim against Opco deemed under the plan. They're deemed to only have one claim. They get their distribution. They go home. There's not a lot of money in this case for unsecured creditors.

you know it's a it's a nice recovery in the context of the case frankly but it's a it's a very small sum in the context of the the capital structure of this debtor and the the debt load that we're looking at if the plan were written differently and I understand that your your honor may tell me that it's not but if the plan were written differently frankly I think your honor probably has the pen to make this happen So if the plan were written differently, and you just had, I don't remember how many debtors there are, we'll say eight or nine class seven A's. You had, you know, 7A1 through whatever, one for each debtor. There is no dispute that at each of these five boxes other than OPCO where Stone Cold asserts claims, they would get nothing. They would get zero.

There are no assets there. There's nothing to distribute to them there. You know, it's not like we're substantively consolidating in taking away valuable claims. that they would otherwise have, we're simply providing the same result that they would have gotten in a separate, you know, messier plan with eight, nine, ten different class seven A's.

What they're trying to do now, as Mr. Fidel very artfully put, is multiply their claim by a factor of six and swamp the unsecured creditor class and take the whole distribution for themselves. To my hypothetical, though, and I hope I'm not speaking out of school with respect to the debtors or lenders,

I don't think it would be that big of a deal if the debtors simply did rewrite the plan to say okay fine There's eight nine ten different class seven a's all of these are getting nothing and they're deemed to reject There would be no impact from that they would be deemed to reject your honor would still be looking you know at the the best interest test based on mr. Bokin's declaration Those folks are all getting more under this plan than they would in a hypothetical chapter seven Not what the class voted on they voted on this plan Not some other plan. Sure, but nobody would be affected at any other debtor than Upco. I don't know that.

How do I know that? Other than counsel's represented, representations of what's in each class, I have no idea. If claims pool is against each of these debtors. Okay. I think those are all things Your Honor can see from the record. You know, perhaps there would be some supplemental briefing needed on that, but I think that's something that could be done. I don't think it needs to be done.

a waste of effort for the debtor to have to do that I think there's a there's a very simple path which is to find class 7a consented to whatever the plan says class 7 a gets and that's it that's the end of the discussion but you know if need be there are alternatives but those alternatives I'll get you back to the exact same place which frankly is why the plan was written the way it was and why presumably class 7 a voted to accept understood and your honor our position is where those claims are intrinsically worthless, it can and it should.

Thank you. It's always fun to be the only person objecting to a plan. Yeah, I know. So I guess, you know, I'll respond to the comments from everyone on both sides of the courtroom in a minute. But I guess where I wanted to start was with respect to the evidentiary record. Could I please hand up copies of the lease in the guarantee? Please. I understand there are no.

Sorry, for the record, the lease would be Exhibit 1, and the guarantee would be Exhibit 2. Okay. Let me just distribute copies real quickly. Thank you. And they're both admitted. Thank you, Your Honor. Second, with respect to the stipulation, which I appreciate from Debtors' Council, we made a feasibility objection.

And the debtors stated that there would be sufficient cash to pay administrative rent, and real estate taxes that's owed to my client. I just wanted to specify the amounts for the record. So for the March 1 quarterly rent, which came due during obviously the post-petition pre-confirmation period, it was $1,342,748, and the prorated taxes are $290,575. And what I'm, the representation is that there would be sufficient cash to pay those amounts.

If I could ask debtor's counsel to confirm those specific amounts. Thank you. Thank you. Okay, so why don't I start by just addressing some of the later points and then I'll get into my presentation because I think those are the issues that Your Honor, I think is correctly focused on. First, with respect to this concept of Stone Cold having consented to this treatment under the plan, we obviously did not. We objected to confirmation. We did not vote in favor of the plan. And as you mentioned, there's nothing briefed in the confirmation memorandum that says simply because a clear.

class votes in favor of a plan, that that eliminates the ability of a creditor to object to substantive consolidation. 1123. And I don't remember Owens Corning, but was the consent in Owens Corning, I remember you can do it by consent, but did they address what consent is, and does it, could it be done by class, or is it all creditors? Owens Corning does not address specifically class consent, but what it does very specifically say is that if a creditor is adversely impacted by consolidation, they have the right to object. That's what we're doing.

So regardless of what Class 7a did, and again, that's the way they set up their plan. We're just coming to the court with the claims that we have. We have, as you'll see in the leases, in the lease and in the guarantee, we have a lease against five debtors, and we have a guarantee against a sixth debtor. They are all jointly and severally liable for all obligations under the lease. These are the state and contract law rights that we have. All we're doing is coming to the court under the plan that they've proposed and said, here are our claims.

We haven't even filed claims yet because the debtors are still in our property. But here are our claims, and when you do start paying out money under this settlement plan construct, we are part of that creditor body that's going to receive payment on our claims. That's all that we're doing. We're not coming in here, trying to, in some nefarious way, sneak our way in and take more money from the estate. We have the rights that we have, and we're just presenting those under the plan construct that's been put before, Your Honor. So with respect to consent, Your Honor, we don't think there is any way that we actually consented. With respect to administrative convenience, we see that all the time.

I put in my plans all the time, substantive consult. deemed consolidation solely for administrative purposes. It's one thing if no one's objecting and isn't having their claims eliminated. It's another thing entirely, if exactly like under Owens Corning, the Third Circuit decision, which your Honor is compelled to follow, they are trying to eliminate claims. Owens Corning, the debtor tried to eliminate a guarantee claim of a lender. The Third Circuit said you can't use substantive consolidation in that way

unless you satisfy one of two tests, neither of which the debtors have put on any evidence or even tried to say that they can satisfy because their statements to your honor are they are not substantively consolidating the estates. And, Your Honor, I think it's important, and if you actually look at page 77 of the plan, Article 7D, it actually states, and this is, let me find the provision because I have lots of documents up here. The section is titled, Adjustment to Claims or Interests Without Objection. It's in the latest version of the plan that I had before the one that was filed today. But what it states is any duplicate claim or interest or any claim or interest that has been paid, satisfied, amended, or superseded, and then in friends, whether by virtue of substantive consolidation of Class 7A general unsecured claims provided for under the plan settlements, this plan, or otherwise.

They're very clearly trying to substantively consolidate all claims in Class 7A. With respect to their statement, the committee's statement, that if they had come to you with a different plan, the result would be different, it very well may be, Your Honor. But what we are doing is coming to you under the plan that was filed, solicited, went out for vote, and they're trying to present for confirmation today. We're just coming with the rights that we had, as I already said, and that's the plan that's before Your Honor. If they want to go back, change that plan, we'll take a look at it. They can resolicit it. We'll decide if we want to object. or not. But that's the plan that's before your honor, not some hypothetical plan that doesn't

currently exist. Also, with respect to this whole, you know, argument of these boxes of different debtors have no assets, look at the presentation that the debtors made at the beginning of this hearing, and look at the settlement that's put forth under the plan. What it has is consideration flowing from each of the different debtors to the settling parties. They're giving releases to the sponsor, they're giving releases to the GERALAN parties, and in exchange, this $2 million, or $2.2 million payment is coming from the sponsors, and the $250,000 payment is coming from GERWON. That's where the consideration is flowing in both ways,

and then what they're trying to do is say that, well, nothing should be in these other boxes because there's nothing there. But if those debtors who allegedly have nothing are giving consideration as part of the same, settlement, the releases. It's more than the releases, but the releases, I think, are probably the biggest one for the sponsor and the heroin parties. There are

other items, but the concept is, is if there's consideration flowing from the debtors to the settling parties, it's not coming from just one of the debtors. It's coming from all of the debtors. And that's the way they structured this settlement. I understand why they want releases from

all the debtors, but clearly that's consideration coming from all of them. And so, Your Honor, just to get into my presentation, so the debtors that are jointly and severally liable on the lease are Wobona Packing Company LLC, Geroon Supply, Inc., Geroon Farming LLC, GER1 Farming Services GFP LLC, and Garawan Farming Partners LLC. As mentioned, they are jointly and severally liable under the lease. The lease is separately guaranteed by MVK Intermediate Holdings LLC. So, Your Honor, my client has no wish to prevent confirmation of the plan or preclude a reasonable settlement,

but the plan that's presented to, Your Honor, significantly prejudiced my client by trying to eliminate five of its six claims. You heard Debtors' Council say that just one of our rejection damages claim is going to be approximately $20 million. So we have six of those. It's $120 million claim. They're trying to eliminate $100 million of my client's claims. in this case. And then when you get 20 million, that's right. I stated it incorrectly.

We can't get more than one satisfaction, but under the plan, you know, the settlement consideration as it exists, that will never happen. So you're correct. But the point is that whatever that distribution is, they're trying to eliminate five, six of it. I looked at each of these debtors. Some of them have zero assets or zero, at least according, I guess, to the liquidation analysis, if I remember them correctly.

I don't think that it does, Your Honor, because that's not the way the plan is set up. The way the plan is set up is 7A gets this distribution or gets this pot of cash. It's going to be about $2.45 million. And all creditors in Class 7A, which is the consolidated voting class, get to share pro rata. That's the way the plan is set up. We're just coming to the court with the state court and the contract rights that we have, and they're trying to eliminate them. So also, Your Honor, and we'll get to this in more detail.

But if you look at section, it's Roman numeral 4C of the plan, they actually title that section deemed consolidation of Class 7A. And that's really important under the Owens Corning decision. So this deemed consolidation, and that is exactly what the Third Circuit dealt with in Owens Corning, the Third Circuit held very clearly that a deemed consolidation is not permitted when it adversely affects non-consenting creditors. Here it's unquestionable that eliminating five of my clients, six years, claims would be adversely impacting them. Your Honor, that is not the way Owens Corning is set up, and that's not the way the analysis is set up.

The way that it's set up is, does a consolidation, in that case, a deemed consolidation, just like here, does that have the impact of adversely affecting a creditor's claim? There it was a guarantee. Here it's a guarantee. We have a guarantee, and they're trying to eliminate that guarantee. We also have other claims, but they're trying to eliminate our guarantee, just like the Third Circuit said, the court can't do. do. So the motion that was before Owens Corning and the Third Circuit, that was the Third

Circuit reversed that motion to approve a deemed consolidation, as I mentioned, that eliminated guarantees held by a lender. In Owens, they were separate debtors and that had separate purposes. And here, and I forget if there was one actually stipulation that we forgot to put on the record, and I'll have the debtors confirm that, is that the debtors here did treat each of their entities separately. They filed separate MORs, they filed separate schedules and statements for each debtor. So it's very clear these were different entities.

They had different purposes. Here, one, as your honor is well aware, one debtor owned the property, one debtor owned the equipment, and that was the way that they operated. So they were set up as legally separate entities and distinct entities. But in Owens, the debtor through their motion,

tried to eliminate guarantees through their motion for a deemed consolidation. The Third Circuit called that remedy rough justice, said it should be extremely rare and could only be approved in two circumstances if it adversely impacted a creditor that did not consent. One is it pre-petitioned the debtors disregarded separateness so significantly that their creditors relied on the breakdown of entity borders and treated them as one. We know that didn't exist here because we had schedules and statements filed by separate debtors. Or two, post-petition, their assets and liabilities are so scrambled that separating them is prohibitive and hurts all creditors. Again, debtor's filing separate MORs for each debtor.

And in addition to that, they went out to all of the different debtor's creditors and had them vote. So by debtor. If you look at the voting report, the voting is recorded by debtor. So clearly separating them is not going to cause this great harm where it would eat up all. the costs of the estate. And the debtors who have the burden under Owens Corning, they have not made any effort to prove that either of those circumstances exist.

They say we're not trying to subcon. So let's talk about also one item that the debtors council said was that there's no other provision of the bankruptcy code that's being said as being violated by their plan. That's just not accurate, Your Honor. If you look at the objection that we file, we also objected, in addition to substantive consolidation, to 1123A4, and that's in paragraph 22 of our objection.

And that is because the plan provides different treatment for claims of a particular class. So here, if you're a creditor that has only one claim, you get X distribution on all of your claims. It's just, it's just one. But if you have more than one claim, your extra claims, any claim, than one gets eliminated. That is very plainly different treatment to similar creditors in Class 7A, and that is where we sit, Your Honor. Yeah, I wasn't quite as sure about that. The only cases I could think about in that context weren't really this type of case where someone tries to argue that case out of the D.C.

Circuit, in any event, I don't know about that argument, but I did read it. Okay, Your Honor, my point is we raised it. It's in addition to our Owens Corning objection, but we did object to the de facto substantive consolidation of Class 7A. So let's talk about the debtor's response to our objection, specifically what's in their confirmation memorandum, and then I'll touch on the other points that they raised. First, they say the plan expressly states no subcon is occurring,

so Your Honor doesn't need to worry about Owens Corning. Obviously, you know, that's a form over substance. And in addition, as I mentioned, if you look at page 77 of the plan, Article 7D, the debtor actually admits they're trying to substantively consolidate all claims in Class 7A. And as to 1123A4, the debtors don't respond at all. So, Your Honor, I think that argument is waived. But let's look at what the plan actually says. So if you look at page 44 of the plan, and it's the section titled Deemed Consolidation,

of Class 7A. It's really clear, and actually the language just puts it squarely within Owens Corning when they call it the deemed consolidation. But if you look at subpart B, it states all guarantees or responsibility of one debtor for the obligations of any other shall be deemed eliminated. And then subpart C, solely for the purposes of distribution from the Guck Trust and no other purpose, each general unsecured claim filed or to be filed in the Chapter 11 case of any. debtor shall be deemed filed against and shall be a single obligation of Wawona Farmco with respect to any distribution from the Guck Trust.

That's precisely the type of treatment that the Third Circuit in Owens Corning said is impermissible without showing satisfying either of the one of two tests that Owens Corning said is okay or consent. But we clearly have not consented, Your Honor. Next, with respect to Genesis Health, you have some calls. back and forth on that, I actually think it's a little puzzling that they cited to it because I think it actually supports my position. You know, there the debtor tried to, even though they had deemed consolidation in their plan, they tried to say, well, we don't have to pay U.S. trustee fees for all of the debtors. And U.S. trustee said, no. Went to the district court.

District court said, sorry, debtor, you lose. Went to the Third Circuit, Third Circuit affirmed. And this was Judge Ambrough before he wrote Owens Corning. It was only a couple months before, but it was right before he wrote Owens Corning. clearly had this issue on his mind, and when you go back and you actually read Owens Corning, at page 216, Judge Ambrow cites Genesis for the proposition that it deemed consolidation, and I'll quote, fails even to qualify for consideration. And then the next argument that debtor makes, and they're...

Mr. Siegel? Is there a reason you're standing, Mr. Siegel? Well, you're going to get a break, but I'm going to let Mr. Miller finish his argument. No, that's fine. I just say... You're going to get a break because, as everyone knows, this time was scheduled for a non-opposed hearing. There were not supposed to be any objections remaining, so I don't have all day for this hearing. But Mr. Miller's going to get to continue.

No, no, and I fully understand. It's going to be soon because I have a commitment. Thank you, Your Honor. Next, with respect to the argument that Your Honor should approve it over our objection because it's fair, and we are being inequitable. As I already mentioned, we're just coming with the rights that we have. The debtor signed that contract. The debtor signed the guarantee.

It's not inequitable for us in bankruptcy to assert our contractual rights. It's just not. That's why anyone has a claim. There's nothing that says that the court can just go ahead and eliminate claims held by a party simply because the committee says and the debtor says it would be unfair to others. We have the rights that we have. That's why I asked if it was treatment. That's why I'm trying to understand how that could be treatment.

And maybe it can be, but it wasn't briefed that way. I mean, I didn't look at it because it wasn't briefed, but I've never seen any case say that treatment under 1123 means that it can eliminate all the rights of any credit. Because otherwise, every plan that I ever file as a debtor would be much easier, Your Honor. Obviously, we can't do that. So in sum, Your Honor, the Owens Corning decision in 1123A4 requires. that the deemed consolidation be denied.

Just let me take a quick look at my notes to see if I missed anything. That's all that I have, Your Honor. Thank you, unless you have any questions. No, thank you. Your Honor, understood, and I'll be extremely brief. I just want to respond to a few points. So I think it's clear on the definition of consent

under Owens Corning. I don't believe that Owens Corning or any case. I'm not aware of any, maybe Stone Cold is, but actually gets into what consent means under the subcon factors and if a class can consent or if this is an individual creditor right. I don't know. I would look to the code, Your Honor, and there's, of course, certain rights that can be waived by a class. Obviously, the absolute priority rule can be waived if a class consents, and unfair discrimination can also be waived. on a class-by-class basis. And of course, creditors have individual rights,

like the best interest tests, and equal treatment. But under 1123 , I do think it's clear that equal treatment, under Third Circuit law, I'm specifically referring to the EFH case. That side is federal appendix, 638 federal appendix 277. Did that to me again? 638 federal appendix 277. that equal treatment does not guarantee equal consideration. So I think-

That's not a precedential case, though, because it's in federal appendix. That's correct. It's, I would say, guidance as to, but it is citing. And what's the fact pattern there? It was referring to the application to certain Maycoal claims that had, I can't, I don't have the exact factual reference,

but it was provision in a plan settlement in the 1990, sorry, a pre-planned settlement in the 1990 context with regards to the treatment of make-hole claims that benefited certain creditors over another that held the make-hole claims. And in that case, the guidance from the Third Circuit was that that was fine in that situation. And it does not, if the provisions are applied equally as to every creditor, which this deemed consolidation, revision does apply to every creditor. It obviously would have different results based on which creditor holds a claim at certain boxes, but that does not per se

mean that something is unequal treatment outside the realm of 1123-8-4. So it's... I don't know. I haven't read those cases, and if you're going to make me read a Sanchi case that's 100 pages to understand something, then that's going to take me some time. Point well taken, Your Honor.

But the point I was making is that there are certainly certain rights that can be waived on a class-by-class basis. There could be, but I don't know if this is one of them. I just don't know. It strikes me it shouldn't be, but I don't know. Understood. And I don't think we have guidance from the case law on this issue, unfortunately. But we do know that... Did anybody look for it?

Yes, certainly, Your Honor. Okay, so it doesn't exist. Okay? I can't make a reference. So it's a matter of first impression that I'm deciding on no briefing. And the only other points I quickly want to make is that Stone Cold, I believe, is consenting to the fact that these five other boxes that they have a claim that do not have any assets. I didn't hear that consent at all. I heard them say that, in fact, they're giving some consideration.

so maybe there is something there. I did not hear that at all. Okay. And then the last point I would like to make is your honor asked if you can consider the impact on other unsecured creditors because if Stone Cold did prevail and they had six claims around a hundred million dollars up to the 20 million dollar recovery, which really they would never get to that level. So you know 80, 90 percent I'd don't have a number but I think we can all agree it would be a very significant amount of that claims will go to Stone Cold. Yes. Owens Corneen in any case on unsubesive consolidation makes clear that this is a doctrine of

equity so I do think it would at least be appropriate to consider the impact on the other unscured creditors. If the debtor is saying this isn't subcon. If it were subcon I, we do say that it is a true treatment issue and not a sub-kind issue. However, if Your Honor disagreed and said that it's a sub-kind issue, I think it would be appropriate to consider the impact on the other unsecured creditors. Okay. Thank you, Your Honor. Mr. Miller, you have a quick –

MR. Very quickly, Your Honor. MR. – apologies for standing up here for so long. Just the last point about considering the impact on other unsecured creditors, Your Honor, my client has a huge claim. It's already being capped under 502 .20 million. So that tells you how big our claims are. And then we're only going to be able to share in this small pot. And then they're trying to eliminate five of our six claims. You know, it's just not equitable.

We have a huge loss. And like I said, we're just coming with the rights that we have. We're not doing anything on Toward. We just read the plan that was filed with the court and noticed that something is being done that's not permitted under Third Circuit law. Thank you, Your Honor. Thank you. Okay.

Well, this is a good time for a break. I do have a commitment. I'm going to have to read Owenspornin. I don't know if I have to read F.H. I'm going to let the parties talk. We will reconding a two. A lengthy one, but I do have it. We're in recess.

I assume so. As part of the assignment. Hi, Judge. Ryan Bennett, on behalf of the debtors, I think folks are still trickling in here. All right, I'll just get started here, Judge. Mr. Miller? He's not out of here.

That's a good call. I did just leave him. Yep. All right, Your Honor, Ryan Bennett again. On behalf of the debtors, Your Honor, thanks for the time. Ended up being a productive use for everyone. We've come to terms of a settlement of Stone Cold's plan objection and the lease rejection order that will be associated with their claims.

Your Honor, the terms of that resolution, which we will build into the confirmation order are as follows, and this is agreed to between the creditors committee and the rec lenders who were part of that fruitful negotiation. It'll be a one-time $800,000 cash distribution from the Guck Trust to Stone Cold, and one $5 million allowed general insecure claim in the recovery class. So that is in consideration of settling their claim amount objection. The debtors and the reclenders further agreed to payment of the March administrative claim rent that's due on the leased property and payment of the prorated real estate taxes as well, and that payment would come out within the next week.

It was already in our budget, which is administrative timing. The parties, including the rec lenders, the Guff trustee and the debtors, reserve all their rights with respect to any remaining administrative claim associated with the lease. Likewise, so does Stone Cold, and that will be. an issue to be adjudicated in the future or agreed to in the future. And then finally, the parties agreed to a representation from the Racklenders Council with respect to lien release associated with the lease property. And I'll let Reklenders Council make that representation themselves.

Good afternoon, Your Honor. Luis Jouberis, with Mormon now on behalf of four of the farm credit banks that along with MetLife and a host of other unrepresented farmers. credit banks constitute the required lenders in this matter. As counsel just identified the required lenders, and I would stipulate on behalf of my clients, and Mr. Siegel can certainly confirm the same on behalf of MetLife, that the required lenders will instruct the bridge agent and the opco agent to not assert liens on and in fact release their liens on any immovable personal property or fixtures located on the lease premises.

And this would not affect any rights to assert liens on movable property. And we would ultimately work to make sure that the appropriate estoppel certificate or whatever is necessary has the right legal description of the things that we're agreeing on. But the concept is immovable personal property. The liens would be released on that. Thank you, Your Honor. Thank you. And, Judge, that sums up the settlement. And I can yield the podium back to my colleagues unless Your Honor has questions.

Let me hear from Mr. Miller. Yes, please. Your Honor, thank you again for your time. We very much appreciate it. Just a couple points which I think everyone, I think we're in agreement with this, is first, I need final sign off from my client. I believe this is within the parameters of which I can resolve this,

but I do need final sign off. I don't have that, and I wanted to be straightforward with the court. With respect to the admin rent, our rent, as I mentioned before, it's quarterly rent. So what they're going to pay immediately is going to be, the real estate taxes that are prorated, plus the March portion of that quarterly rent. And then we're going to deal with the remaining two pieces down the road, whether it's by a motion for payment of an allowed, of an administrative claim,

or some other vehicle that will agree to put before your honor. I would expect we'll do that relatively quickly, but I need to talk to my client. With respect to the RBC piece and the rec lender representation that you just heard, I'm in agreement with their representation of the fixed assets they're going to leave behind. These are like the fruit processing lines, is my understanding. But with respect to removable property, if they think there's value, they may come back and take that. And that was within our agreement.

But just so you're aware, this is in the broader context of the rejection of my client. lease. We don't current the debtors are still in our property but this agreement is obviously to have that lease rejected by Monday so you know we have a few days left in this week the idea would be we'll use that time to come to an agreed upon order on rejection that will allow us to move forward with the property and I believe that that is and like I said I just need confirmation from my from my client I don't know if how you would like that to be communicated to you or if I get that confirmation that we don't need to say anything to you.

However best you... Well, we'll figure that out. I still, as I said, I have to review the form of order, so we have some time. Okay. To, uh, that will hopefully be enough for you to get the sign off from your client. Thank you, honor. Okay, thank you. Okay, thank you.

Just want to make sure I understand the terms of, uh, of this. So out of the 2.5-45, right, 2.45 million, in the Guck that's going to the Guck Trust 800,000 of that is going to Stone Cold. That's correct, Judge. So that reduces the Guck Trust

by $800,000. And then as against that net amount, Stone Cold has a $5 million general unsecured claim that would share with everyone else in the remainder of that. That's correct. on the denominator. That's right. Okay. Okay. Judge, it looks like. Your Honor. Yes.

Hi, Your Honor. I apologize. This is Genevieve Weiner with Sidley Austin. I was wondering if I could be heard briefly, even though I'm remote here. Yes, Ms. Weiner. Who do you represent? Thank you. I represent RBC. And I just wanted to clarify, as there were a couple of comments made with respect to the lease rejection and in particular reference to the Estoppel certificate. that's for the benefit of RBC. So I agree with the parties that we, we RBC are not interested in maintaining liens on property that the debtors have determined will be abandoned. And we anticipate negotiating a consensual form of order.

I don't think, though, that we have yet that consensual form of order on the lease rejection. And so I just wanted to make it clear for the record that we're reserving our rights to comment on the order, including the list of abandoned and excluded property. Thank you. One else who wishes to be heard with respect to the resolution that's been reached with Stone Cold. Jamie Fidel of Kirkland Loss again on behalf of the debtors. You had mentioned that you would like to review the form of order. It was filed at Dock at 840.

I'm certainly happy to address any questions that Your Honor may have. I haven't reviewed it. Oh, understand. So I have no questions at the moment. I need time to review it. Is there, I guess I want to make certain, do we have any other issues to be raised and addressed for confirmation other than the form of order,

and Mr. Miller's need to confirm that he has signed off from his client? Judge, subject to obviously anyone else who wishes to make an appearance, the debtors believe that the plan, the revised plan that was filed at docket 841, obviously didn't address Mr. Miller's concern, but did address the issues of all other parties and also the confirmation order filed at docket number 840, included, agreed upon resolutions with every other objection that was filed. Okay, and is there new, is there language in the newest form of order that addresses the Chubb in 1970 objections?

That is correct. In the, both the plan at 841 and nothing in the confirmation order, so solely in the plan at docket number 841. I'm more happy to pass your honor. The specific red lines to which would. Can I see what that is? Yes. Yes. Thank you.

Okay, where am I looking? At the end of the definitions, 241 and 242, we have three new definitions that's on page 25 of the red line. Those relate to a new administrative claim reserve that we're putting in place earmarked specifically for workers' comp. Claimants that have allowed administrative claims, and it's not a cap. on their claim amount it's just funds earmarked for them and then that's obviously addressed later in the plan you like me to guide you the next revisions yes next I go to apologies and flipping page by page just to make sure I don't miss anything next I go to I think it's article for workers comp administrative administrative

claims reserve that's on page 55 of the rest and runs over to page 56, which provides for what I just described with respect to the new defined terms. One thing I had neglected to mention that in addition to not being a cap, if not all of the funds are used, they do at a point when the liquidating trustee determines that all other liquidating trust assets have been liquidated, then these can also be distributed to the extent there are any left to other creditors and consistent with the plan and the agreement. Next we move to I apologize again going page by page assumption and rejection of executive contracts and unexpired leases we have provided just that insurance contracts are not automatically rejected by virtue of not having been listed outside side of this. This provision generally provides for automatic rejection, if not specifically known otherwise. We are not committing to assume them all at this point. There are, you know,

a few that we need to look at, but we are just providing that they're not automatically rejected by virtue of not being listed somewhere else yet. So is that to resolve the two objections or is that a more general provision? It was in part to resolve the two objections. We spoke with each of the objectors and in particular we thought it was an appropriate way to address Chubb for now on page 72 of the red line insurance contracts I apologize I'm not quite sure what the the article citation is I'm happy to address any of this if you think it's helpful obviously some of these are just clean-up line edits or clarifying edits and the revisions to this provision I just

want to flag for you run on to the next page as well yes I'm a little confused if all of the contracts are revesting all the insurance contracts shall revest and either reorganize propco or the wind down debtors then how does that work with the first provision that everything isn't yet assumed so get rejected if they're revesting so it relates to the revision on the next page the concern that we were trying to address with Chubb, their legacy workers comp provider. They were concerned that if they are not able to say that the insurance policies have vested with the go forward entities, that they won't be able to try to, you know, get what they

can consistent with the plan on account of anything that comes due. I understand that. And so they wanted to be able to trace through to the new entities, I think in part to help administer their program generally and then we included the proviso at the end with our other constituents in mind it just says your contract is revesting and notwithstanding that you are not getting a priority claim that you're not otherwise entitled to okay this is agreed upon language this is agreed upon language between us and Chubb in particular in this provision okay I'm

hoping nobody's gonna ask me to interpret it And just while I'm here, the 1970s group asked me to note two things. Their objection largely addressed arguments related to administrative claims that they believe that they have, tabling that for another day. They're fully resolved. They agree that it should not and is not so relevant to confirmation of the plan. And they wanted to specifically note our confirmation order I think is consistent with this, but that on those issues, their objection is not overruled,

and their objection is resolved. Okay. Anyone else? Your Honor, for the record, Curtis Miller, Morris-Nichlarsson Tunnel. Just one question. Based on the comments from RBC's counsel, they obviously feel like they need some more diligence to complete. If we don't have – I mean, Friday is obviously – the court is closed.

It's an issue for us to have the lease rejected by Monday. Do you have any time tomorrow afternoon in case there's any open issues? We're going to meet tomorrow because we're going to need to discuss the order tomorrow. If I have any issues, I'm going to have to review it tonight. Okay. So. Obviously, our hope is that we have no issues on the lease rejection order, but just in case. I need to take a moment and double check with her on a particular map.

So we're going to be in recess for a moment while I get my calendar straightened out. Thank you, Your Honor. Please be seated. Okay. back here tomorrow at two. Parties who really don't anticipate say anything can be by Zoom. So not everybody has to be back here tomorrow.

Okay? If you really think you're going to need to discuss the order with me, it's probably best if you're in the courtroom. Any questions? Okay. Then we are adjourned until tomorrow at two. Oh, there's an... Apologies all around.

have other stuff on the agenda? On the agenda, we have one sale order, which we filed a COC for in a declaration from Mr. Sandall. And the only reason that I would like to handle it today instead of tomorrow is the PSA that relates to it has a milestone for your order being entered today. The objection deadline, I believe, ran on the 23rd, maybe. Okay. And that contemplates one sale, I lost the copy of the order in the shuffle, but it's what we're. one sale to a PGM, which is a prudential affiliate. Okay.

Does anyone want to be heard with respect to that? Yes. Thanks for not forgetting about us. Matthew Brooks, Your Honor, with Troutman Pepper on behalf of the buyer. We do have the order on file. We try to keep it relatively short for the court at 15 pages, I believe. But if Your Honor has any questions, I'm prepared to answer those for the buyer. I doubt that I do if it's consensual and nobody has objected.

And I've got a declaration that supports it. Okay. And has that been uploaded? Okay. People will double check that it's been uploaded for me. Then I will take a look at it. I wouldn't anticipate having any issues. I think I've signed all the previous orders without any changes.

So as long as you didn't put anything unusual in it, then we're good. I think you'll be fine. But I will look at it this afternoon. Thank you, Your Honor. Okay. Anything else? Your Honor, Jamie Fedal. the record. I would just know we do have the final financing order, but I believe the intention

would be to defer that to tomorrow's hearing as well. Okay. Okay. Okay, very good. One last chance. Okay, thank you. We're adjourned. See you tomorrow.