American court hearing recordings and interviews - Prima Wawona bankruptcy hearing March 28, 2024 (In re MVK Farmco, Delaware bankruptcy case 23-11721)

Episode Date: April 19, 2024

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Please be seated. Good afternoon, Your Honor. Jamie Fidel from Kirkland Ellis on behalf of the debtors. We're here today for the adjourned confirmation hearing, as well as our lease rejection order and final financing order. Happy to dive into the confirmation order if that is all right with your honor. Obviously right before we broke yesterday, Mr. Bennett announced the terms of a resolution with

stone cold which would resolve their objection we filed an updated confirmation order at docket number 848 a few minutes before the hearing I have red lines here your honor it's mercifully there quite short changes may I approach and that confirmation order also includes one clarifying change with respect to the PGM sale order which is reflected in the red line as well but those were the the only changes from the version filed at docket 840. Okay. So I know other folks, Mr. Miller and representatives from the required lenders are in the UCC are in the courtroom,

but from the debtors perspective, this does resolve the Stone Cold objection. Okay, Mr. Miller, I take it you have client sign off. Your Honor, for the record, Curtis Miller of Morris-Nichols-Artsdonnell on behalf of Stone Cold. sign off. I very much appreciate the debtors and all the parties with the work that they did overnight to get us here, and were signed off on the language in both the revised confirmation order that I believe you're looking at, and there's also a separate component, a revised rejection order, which I think you'll see in a moment if you don't currently have it in front of you. Okay. Thank you. Thank you. Anyone else? Okay, so with the resolution of the sole remaining

objection I am prepared subject to the comments I have on the order to confirm the plan and a big picture a big picture look at this and the 1129 standards I find they are met the plan was proposed in good faith the plan passed the best interest test the liquidation analysis shows that the Holders of impaired claims have each accepted the plan or will receive or retain under the plan on account of their claims not less than they would receive in a Chapter 7. There are representations and stipulations that the debtor has sufficient assets to pay its administrative claims, so feasibility has been met. All classes voted to accept the plan, so we have at least one class of impaired creditors. With respect to cram down on those classes deemed to reject the plan,

they're appropriate, no class below a deemed rejecting class is receiving a distribution. With respect to the debtor releases, there are no objections to the debtor releases, and the releases are supported by declarations which were admitted into evidence. With respect to the third-party releases, I will find they are consensual. And, but I will find there were three creditors who were identified in the supplemental declaration of the claims agent who both checked a box opting out and voted in favor of the plan. Must be in the supplemental declaration. It's in docket 838, declaration of Lettisha Sanchez.

regarding the solicitation and tabulation of opt-outs and its exhibit B. G.A.R. Bennett, LLC, Primus Labs, Corps, and Ralfeia A. Hall, trustee of the Ralph H. Al-survivers Trust. Each of these both accepted the plan, and they opted out of the third-party release. The debtor's plan provides that if you accept the plan, you can't opt out. I think the checking of both accepting the plan and checking the box then makes it unclear about what these three creditors intent was with respect to the opt-out and I think again at best their intent is uncertain so these three parties need to get on the opt-out list with the others who handful that opted out by checking the box or

objecting to the plan on that basis. In terms of the settlements, specific settlements contained within the plan, again, there were no objections to any of the specific settlements, the settlement with the sponsor, the settlement with the Girowan entities, or the settlements between the Opco agent and the Propco lenders, I guess, that are contained within the the plan as settled to the and I guess the inter-creditor claim is a component of the plan so I will approve that as well under 2019 and I will approve each of those settlements under 2019 again there's been no objections and they resolve claims that at least is to

the two the debtors have against third parties so those are my big picture observations for confirming the plan and meeting the 1129 standards. Let's go through the order, and I'm looking at the red line in, I want to say, 840, which is my understanding is the most, yes, recent version of the form of order. The most recent version is 848, but I have 840 here, Your Honor, so we can follow along. With those few changes. Okay. Page, well, it's page eight here, F objections.

The first sentence says the bankruptcy case takes judicial notice of the docket, and all pleadings, I don't do that. If there's something in particular you want me to take judicial notice of, I will, but not the entire docket. I just don't know what that means. Understood, Your Honor. Okay. Paragraph G on the next page. The second to last sentence, all documents included in the plan's supplement are integral to and part of the plan. So I did have a list of all those documents, and it's not clear to me why they're all part of the plan.

What's the thinking behind that? Well, in terms of, for example, the new debt documentation, that is the treatment of certain classes, creditors and the dip rolls into a new facility, that it would be the actual, obviously, heavily negotiated between the parties, the terms of those documentation, while the plan at a high level refers to, you know, what piece of paper. someone would receive or the specific mechanics of the liquidation trust agreement, for example, that it is part of the Chapter 11 plan because it is, you know, the plan sets forth at a high level and then the definitive documentation implement the plan and all of those documents have been negotiated by the stakeholders and we think it would be appropriate to incorporate them into the plan as well. Okay.

sentence then says that subject to the terms of the plan all those documents could be modified through the effective date so are then we changing the plan only to the extent that it is an agreed change by the parties who have consent rights over the documents as set forth in the plan so for example just taking the dip the required dip lenders obviously have a consent right to support in the plan with respect to, you know, the treatment or the terms of the take-back facility. So parties who have seen the plan have effectively accepted that changes can be made to that definitive documentation from and after the confirmation date until the effective date. Does it say that in the plan or in the documents somewhere, or is it just say that in my order?

The plan, I can pull up the references to the consent provisions, but... 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. Maybe modifications to the plan subject to the consent of the required lender group and the debtors, including the liquidating trust and reorganized propco, to seek non-material modifications to the plan. On page 12, burden of proof, I will find I have found that the debtors have met their burden of proof by preponderance. Second sentence is unnecessary and I'm not finding clear and convincing evidence. I don't think that's a standard. Understood, Your Honor. Page 17, paragraph 31, compromise and settlement.

This is the paragraph that says a plan is a settlement. I don't believe a plan is a settlement, so I give you a chance to convince me or we can just strike it. You know, I think the plan contains settlements, so... And those are in the next two paragraphs as I read them. Correct. Which I'm generally okay with. That these specific settlements, and I looked at the definition of plan settlements, which is in the plan, which refers to the various actual settlements.

Yes. Certainly, we just want to be critical. We just want to be crystal clear that the plan settlements are absolutely defined term plan settlements are absolutely approved. But in terms of finding the plan in general as a settlement, we do not need that language specifically. Okay. Then let's strike paragraph 31. I think paragraph 32 and 33 address each of your, the three settlements that I've identified as in the plan. and I'm not aware of a different any others paragraph 38 and 39 these are the third party releases with respect to paragraph 38 I just had the comment I had before that we had those three people in Ms. Sanchez's declaration we need to I don't know that paragraph needs to change I think

they just need to get on the list so we may need an amended list. on the docket and then paragraph 39 I'm not approving the third-party releases as a settlement I'm approving them as consensual not to find deciding they're essential to the plan or finding that they're given in exchange for good and valuable consideration or they're fair and equitable or reasonable or anything else so it can just be approved as consensual looking sorry your honor looking at that actual paragraph um romanette seven given and made after notice an opportunity for hearing certainly everyone was on notice of the confirmation hearing so i think

that would be where the consent concept comes from so yes that can be included thank you your honor paragraph 47 i do not have any problems with the good faith finding which i think i make in it's just elaborated on in 37. But the further sentence, further the plans, classification, settlement, exculpation, release, and injunction provisions have been negotiated in good faith and are consistent with these sections and are necessary to consummate a value maximizing conclusion.

Is that a necessary finding to confirm the plan? I think that finding. from the perspective of the parties from who are the beneficiaries of the release is an important finding and specifically there's two evidentiary backup pieces and I was looking at paragraph 38 and 45 of the Fokin declaration at docket number 821 and then and also paragraph 16 of the Schwartz declaration at docket number 817. I just think this is a crossover between the plan being a settlement and then releases being necessary. And certainly the third party releases, I'm not making that finding, regardless of what the declarants may say.

Classification is not going to be. I mean, classification is either permitted under the plan or it's not permitted, regardless of what the parties negotiated, right? Yeah, I agree with that, Your Honor. So that's why I'm just – if you – and in terms of the settlement, the three settlements that we've specifically talked about, I don't have a problem. So maybe if this gets narrowed, and we take out classification and we put in the defined term plan settlements, I think it's the defined term.

and exculpation okay, the debtors releases, and injunction have been negotiated in good faith. I'm okay with that. And I actually don't think that good faith and value maximizing necessarily have to, you know, get the thing you get with good faith. I'm not sure where that comes from for why that piece is necessary

in a good faith finding. This would be the clause starting and are each necessary for the debtors. Yeah. Okay. Thank you. We can strike that. Curious, the Guck Administrator and the liquidating trustee, I did see the disclosures. I don't happen to know these two individuals.

Are they both, I assume they're both in the restructuring field? That's right, Your Honor, and we're respectively selected in consultation with the creditors committee and the required lenders. Okay. In paragraph 51, best interests, the second sentence, the evidence in support of the plan that was proffered or reduced at the confirmation hearing, that's fine. But the facts and circumstances of these Chapter 11 cases is not what I considered in looking at this and in making that finding. In paragraph 52, towards the end, it has a sentence to the extent of class contains claims or interest eligible to vote. No holders of claims voted. I don't think we have that scenario here, and I haven't had to rule on that issue.

So I'd like to take that out because I don't think it matters. Correct. There were no vacant classes, Your Honor. Right. Curious about paragraph 67. The debtors have disclosed all material facts. What's that aimed at? I approved a disclosure statement as containing adequate information to make a decision.

I think that it is effectively restating the adequate information standard and supplementing it in terms, like essentially the plan, you know, disclosure statement said there will be a plan supplement that will have additional information regarding the documentation, and then we, in fact, did so. However, I would not view this as a necessary finding to confirm the plan, frankly. Okay, then let's take it out. Okay, in paragraph 75, again dealing with the plan's supplement, which I guess I'm okay with, but it also talks about agreements introduced into, documents and agreements introduced into evidence or being authorized. I'm not sure what that means.

I think, so what we, the parties, are looking for in the plan supplement is obviously that like an execution version of the credit agreement can be executed and approved but there would not be a document agreement introduced into evidence at the confirmation hearing so I think that sentence and then the clause and then the parenthetical right after it would be able to come out okay okay and the next sentence also deals with modifications again to the documents and it's mentioned a bunch of times, as long as you're consistent with the plan,

consistent with the code, they're not material, they don't impact third parties adversely as not contemplated by the plan, then we're okay. But I assume the debtors and all parties understand that. Okay, I'm on page 51 now, paragraph in. And I'm not sure if this has changed now with the additions that we're made. the Guck Administrator?

The last sentence, the Guck Administrator may rely upon written information previously generated by the debtors. Is that something specific? Off the top of my head, I do not know. I suspect the creditors, and I see Mr. Bellman coming off of, or on the Zoom. So Mr. Bellman would like to address that. Yes, Mr. Bellman. Your Honor. Good morning.

Good afternoon, Andrew Bellman from Loenstein on behalf of the committee. I believe the sole intent to that purpose of that language was that the debtors, to the extent the debtors have books and records that we look at in reconciling claims that the Guck administrator is able to rely upon the books and records as opposed to going out and creating them anew on his own. Certainly the Guck administrator can look at those records. So that's fine. I guess that's fine. The paragraph, it's 111, dissolution of the wind down debtors. The debtors are going to be dissolved. They need to comply with state law.

If you need to make a filing, you need to make a filing. But I'm not going to deem some debtor dissolved. Understood, Your Honor. I was just making a note, but that's fine. Page 55, paragraph U, the Section 1146 exemption. So I think that debtors are, and the post-referenced, Effective date debtors are entitled to the protections of 1146A, whatever they are. But that provision is about three lines in the code and this is a page and a half.

So it should just mirror the code. Is there a reason why it can't just mirror the code? I think the reason would be is that, I mean, I would start by saying that it's, there's a caveat at the beginning that it's to the fullest extent permitted by Section 11401. So if a taxing authority has an issue with something, you know, it either complies with 1146A or it does not. This is an attempt to make them think it does. I would describe it as to bolster those provisions and to clarify what type of actual transactions will be occurring. So I would put it to honor that it does not in any way conflict or expand 1146A and everyone's rights.

to come back a reserve, there's not a specific finding than any transaction falls within the meeting of 1146A. I just, I think this, if I had to guess, I'd say this goes beyond 1146. Your Honor, for the record, Curtis Miller, you'll see it in our rejection order. We have a similar provision in our rejection order where some of the property that we talked about yesterday, as the debtor is vacating, it's getting transferred back to Stone Cold. And because it's being done pursuant to this plan settlement, we have a similar provision in our rejection order. At least when we do this in our own plans,

the reason is because when we go to taxing authorities, if you just use the simple words that are in the code, which mean things if you go and you look at the cases in the history of interpreting the bankruptcy code, it means something to us as bankruptcy lawyers, but to those taxing authorities it doesn't. So stating things like excise taxes, specific types of taxes it would otherwise qualify under 1146

makes a difference when you're dealing with those authorities. And so that's the reason, at least why we are typically expounding upon that. I think everything still fits within what would be 1146, but at least that's the reason why we do it, because depending on who it is you're dealing with in what state and whatever that taxing authority is, if you have to come to them with a case or something that's interpreting what's in the bankruptcy code, it can be challenging, and we don't want to have to come back to you.

But I'll sit down now because this isn't the debtor file. I'll let you keep this expansive thing, which quite frankly, I don't know if it goes beyond a stamp tax, which was probably, you know, some term from the 18 whatever. But the last sentence then needs to be changed to simply authorize filing and recording officers to accept these documents and forego the imposition of these taxes rather than the mandatory shall language. Yes, Your Honor, thank you. Paragraph W, preservation of causes of action, category W, paragraph 121, which probably isn't that anymore. And actually, it's the next one, 122 that begins, we organize Propco and wind down debtors may pursue such retained causes of action as appropriate.

Okay? About halfway down, there's a sentence that starts, unless otherwise agreed upon in writing by the parties to the applicable causes of actions, all objections to the schedule of retained causes of action must be filed on or before 30 days after the effective date, and then it goes on till the end of the paragraph. I really don't know what that's getting to.

I believe it is specifically referring to if a party sees a cause of action that it believes is subject to the debtor release that would not otherwise be transvested in the, you know, reorganized entities or the wind down debtors, that they would have an opportunity to assert that a specifically delineated cause of action would be subject to the release within that 30-day period. Instead of just filing a motion to dismiss when they're sued? They could certainly do that as well, and I suspect in all likelihood would end up doing that with or without that language. It's the next sentence that prohibits them from doing that. I've never seen this type of provision before. We can remove that provision, really. Okay. I think from unless otherwise to the end of the paragraph,

comes out we'll deal with what happens if someone tries to sue a release party when that happens we're still similarly in paragraph 120 the next paragraph 123 the doctrines of issue preclusion race judicata etc we'll deal with those when they get raised in a motion to dismiss I'm not going to preclude future defendants from raising defenses so while the first part of that's fine but that and therefore no preclusion doctrine etc is forward looking understood here in paragraph is it's section Z or guess Y N Z these refer to provisions of the plan that permit proofs of claim to be white

off the claims docket without bringing an objection, I'm not going to permit that. If you have any objection, if it's late filed, it's duplicative, whatever it is, you need to, whoever's going to object to claims has to file their objection. Um, understood, Your Honor, I just can't seem to find the provision, but I understand the concept. It's in, if they refer to our... Article 7 of the plan. And I looked at Article 7, and it permits claims to be excised without objection,

without notice to parties, those claimants, and I am not going to permit that. Understood, Your Honor. Okay, and it's OO, notice of confirmation and effective date. There's a provision towards the bottom that, a sentence that says, Further, the debtors shall only be required to serve those members who have not filed a proof of claim in these Chapter 11 cases with the confirmation order notice to the extent that such members have active electronic mail addresses. I don't know who members are and who the service is here. I don't think it's referring to members of the creditors committee. Or, and there's not membership units in this case.

This may be a holdover from precedent, to be frank, Your Honor. Okay, well, I think we've got mailing of it, and I think that's what should happen to creditors who are impacted. So let's take that out because probably unnecessary here in a holdover. Yes, Your Honor. Okay, and then the next paragraph, if the reorganized debtors or whoever wants to make people file another notice of appearance, there needs to be a specific notice of that done after, not as a part of this.

And until that's done, people who are on the 2002 list remain on the 2002 list. Okay, and my last comment is on paragraph P.P. Return of adequate assurance deposits. I think it needs to be consistent with the utility order. I don't know what the utility order said, but it just needs to be consistent with the order. Sure. So those are my comments and when I get a form of order that's consistent with that circulated to everyone who it should be circulated to I will sign it. Thank you your honor one practical issue I believe tomorrow is a federal holiday technically that is our milestone for entry of the

confirmation order of course you know your honor indicated that it would be approved. We will endeavor to get you the order as soon as possible but just wanted to I guess put that out there including for the required lenders who expect would not default the dip given the holiday but one would hope not if you if you email miss Bats and miss Johnson and let them know that it has been uploaded they will get in touch with me and unfortunately I'll probably be here tomorrow so I'll look at it okay thank you your honor and we had we and thank you for entry of the confirmation

order of course we do have two further items on our agenda I'll turn it over to I can't remember which we're going first mr. Gremlin good afternoon your honor Dave Gremlin and Alice on behalf of the debtors It's actually not on the agenda from yesterday because as you're aware, our issues with Mr. Miller's clients have sort of pulled forward a consensual rejection of a lease that had been documented, but we negotiated the form of order. We submitted a certificate of counsel just before this hearing. I would like to just state for the record. We will submit a further revised form of order, who was pointed out pretty immediately by the folks at valid. bar that we inadvertently omitted agreed language about their client Wells Fargo

Equipment Finance I can read to you the agreed language or we can just put it in the agreed form and I have a clean and red line of what is on the docket if you'd like it. Thank you. I have two and I think Mr. Miller better come up. Okay I see in paragraph two the abandonment of pursuant to 554 which is just fine and then it says that Stone Cold Bay in its sole discretion and without further order the court utilize and disposes such property consistent with state law. That's that's the one paragraph that's going to change with Wells Fargo.

So they have some solar equipment on our property and we've worked out some language that are going to deal with their property because they didn't they weren't happy with the original abandonment language. Okay. will go in there. Okay. But if you want to, could you tell me where you want the state law? Well, it just needs your ability to dispose of, basically a landlord's ability to dispose

of property should be consistent with state law, however you would do it under state law. I'm sure we would do that anyway, so that's fine, Your Honor. Okay, so just that concept. And then your language on the tax law. language on the tax, the stamp tax, should be qualified similar to how it was qualified in the confirmation order consistent with the code. Because I don't, although this may be, well, it's... I think it's actually narrower?

It is narrower, but I couldn't tell you whether all of these taxes are a stamp tax or not. So as long as it's consistent with 1146, I am fine with that. So how about right before where it says shall not be subject? I just add in consistent with Section 1146 of the code. Or as permitted by, or as – I forget what the language is. Either of those are fine, Your Honor. Yeah, something that qualifies it a little bit so that it is consistent. And other than that –

And then I see Ms. Roglan. Ms. Roglan. Good afternoon, Your Honor. Laurel Roglin of Ballard's Bar on behalf of Wells Fargo Equipment Finance. wearing my real property lessor hat, or excuse me, my personal property lessor hat today instead of my real property less sore hat, that's usual. So it's unusual for me to be on the other side of Mr. Milford and the debtors on these abandonment issues. But I just wanted to say that the clarification that Your Honor is requested, that the disposal of the property consistent with

state law is acceptable from Wells Fargo's perspective, in addition to the language that we all had agreed will be in this order. I like how you clarify who you have your hat on for that particular concession. Okay. We're going to hold this in the future, Your Honor. We've all heard this obviously settled a rejection, but a rejection issue. And with the language that will also satisfy Ms. Rutherland's client. Thank you, Your Honor. I'll turn the podium to my colleague, Mr. Jacobson, for the debtor. Good afternoon, Your Honor. Rob Jacobson, Kirkland and Ellis on behalf of the debtors. Your Honor, we are pleased after five interim cash collateral orders and four interim dip orders to be in a position to ask for approval of the final dip order. The final order is substantially the same as the fourth interim dip order with modifications necessary to convert it into a final order.

As noted in the certification of counsel that we filed, that was at docket number 831. The debtor circulated the proposed order to the dip lender. the Bridgen-Opco agents, the committee, the U.S. trustee, and none of those parties have objected to entry of this order. We also receive no general objections to the order on the docket or informally. I am happy to answer any questions Your Honor has, but otherwise we'd respectfully request entry of the order. I do not have any questions does anyone wish to be heard. I hear no one. I will sign it as an agreed form of final fifth order.

Yeah. Our 10th order. date of confirmation of the plan. Thank you, Your Honor. Anything else? That's the balance of our agenda. Then we are adjourned. Thank you.