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

Episode Date: November 27, 2023

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Please be seated. Good afternoon, Your Honor. Whitney Fulkeberg from Kirkland and Ellis on behalf of the debtors. As an initial matter, I just wanted to thank you very much for entering our first-day orders yesterday and today, and also thank the Office of the United States Trustee and Counsel to the UCC, who's in the courtroom today, for working with us over the past couple of weeks to incorporate edits into those orders before submitting them to you. While we're all here, I thought it might be helpful to provide the court with a brief update regarding the debtor's marketing process and various discussions with other case stakeholders since the first day hearing. With respect to the marketing process, the debtors investment banker Hulahan has continued to reach out to potential sale parties, including parties that were contacted in connection with the pre-petition marketing process.

Since the petition date, we've had several parties indicate interest in submitting bids by the bid deadline, and the debtors are working with those parties to provide them with the diligence and information they need to move forward and submit those bids in advance of the bid deadline. Given the complexity of the debtor's business, certain of the debtors that we've been in contact with have expressed the need for additional time to complete their analysis before submitting bids. For that reason, as you may have seen in the revised bidding procedures order that we filed this morning, at docket number 236. We have worked with the lenders, the UCC, the United States trustee to extend out some of those sale deadlines to allow the bidders to complete their diligence process. The revised dates include November 21st as the date to designate a potential stalking horse bidder.

November 28th as the revised bid deadline, an auction scheduled for December 4th, and a sale hearing scheduled on December 8th. These changes simply move the sale hearing out a date by only, or sorry, out by only two days, but allow the debtors and the bidders to really take advantage of the time in between now and that sale hearing, so we can complete the diligence process and make sure that the bidders. have all the information that they need. We believe the bidders indicated that that's sufficient time for them to be able to complete their diligence and put in a bid?

At this time, yes. A lot of them, you know, the previous bid deadline was prior to the Thanksgiving holiday. We've heard from bidders that they're willing to work through the Thanksgiving holiday, but they just couldn't get it in before the holiday. Yeah. They'll love them, I'm sure. So we do, we believe that these dates will allow for a robust marketing process and will give bidders the time that they need to submit bids. With respect to stakeholder engagement, we have been working with the advisors to the UCC since their engagement a few weeks ago and have been providing responses to diligence and document requests that we've received.

To that end, the debtors, the lenders, and the UCC determined. that it made the most sense and was for the best interest of all parties to move forward today with a second interim cash collateral order rather than a final cash collateral order. That will give the UCC time to complete their lien review work and will also provide time for the debtors to give the UCC some information that they requested regarding liquidity past December, I'm forgetting now, but whatever the date that our current. budget goes through to make sure that there is liquidity past that point, which the debtors are working on right now, and we plan to exchange that information later today. The second interim order is affected for approximately two weeks, and the parties have arranged with the court for a final cash collateral hearing scheduled on November 29th. Finally, the debtors are hard at work on refining a plan and disclosure statement, which

I know we discussed at the first day hearing. We intend to file that in the near term, and that will provide for a toggle structure with the sale process as well as an equitization backstop if that sale process is ultimately not successful. Your Honor has any questions with respect to those matters. I can move on to the agenda today or open it up for anybody else who'd like to make an opening statement. How does that timeline on a toggle plan mesh with the timeline for the sale process as it currently exists? So the plan is to get the plan and disclosure statement on file as soon as possible so we can start the clock.

We will know prior to a disclosure statement hearing whether, I think, if I'm doing the math correctly, whether the sale process has come to fruition and we have a viable third party bidder. And if not, we already will have the plan on file that provides for the equitization toggle so we can move forward with that part of the plan. Okay. Okay, so the first item for today is agenda item number number two. 12, which is the second interim cash collateral order, filed at docket number 237. I also have a copy of the revised order and red line to the first interim order, if that's helpful for you. I'm looking at the second interim order that was filed November 15.

Is there something since then? No, that's exactly right. So as I mentioned just now, the parties determined it was best to move forward with the second interim rather than the final order. And the second interim preserves the various issues that the UCC wanted to preserve while they're, you know, reviewing or conducting their lien review. The filed order incorporates comments from the UCC, the lenders, United States trustee, as well as a reservation of rights language that was requested by an ad hoc group of lenders, and a separate reservation of rights language requested by Chubb.

And I'm happy to address any questions you have on the second interim order or walk through the changes that have been made from the first interim. I have a couple of questions. I actually don't remember the Chubb language, so you can point that out to me. They seem to be taking a very active role in the case. The Chubb language is at paragraph 23. If you're looking at the red line, it is page 52. It's at that, yes, the end of paragraph 23. Oh, okay. Okay, and it's striking me as an issue, so I didn't remember that.

Okay. Okay. I see on page, and I am looking at the red line, page 11, there's a new defined term, committees challenge. It comes up a couple of places, and each time it comes up, it says it's defined here, but I see no definition. And I just want to at least understand what it's supposed to mean. You are correct. It is not defined. Thank you. Your Honor. Andrews Asht from Wayne case on behalf of Robo Bank as the bridge agent.

The term committee is defined and the term challenge is defined. It looks like a new term when they're next to each other but they're each independently defined. Okay. So then my question is, does the fact that it says, for example, in this paragraph L on page 11 that no liability to third parties, um, that no liability, the third parties, um, is, that the fact that that cuts off anybody else's challenge? Because the challenge period,

as would be in the general challenge provision of a dip order, is a 75-day period in which any party in interest can bring a challenge. So is this cutting off other parties in interest right to bring a challenge? That is certainly not the intention. If you look to paragraph 7, which this cross-references, it's really all-encompassing provision that supersedes the rest of the order and gives all parties challenge rights as are set forth in that paragraph. I think the reason it reads the way it does now is because this was prophylactic language that the committee requested, and we just accepted their language as proposed. They were looking out for their own challenge rights, but all challenge rights are preserved as set forth in paragraph 7. You've finally broken loose from work.

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and the new paragraph 20, something page 4950, and in particular paragraph C, because again I'm not gonna read the language as limiting challenge rights to just a committee, but in paragraph C, I'd like to understand how this works given the timeline that we have. So the challenge period is 75 days, and paragraph C is address,

assessing if the credit bids are subject to a successful challenge, and it gives the pre-petition secured parties options, which are to exclude certain assets that successfully challenged assets I get from the credit bid or withdraw their credit bid. How does that work with the timeline of the challenge extending beyond the credit bid, period? So they will have their time to undertake their challenge period. And if, in fact, I mean, I guess we'll have to figure out in advance of the final order how to fix that language because the auction will be taking place the way that the timeline is built out about six or seven days after hopefully getting entrance.

of the final order. So at that time, we would, you know, have this piece resolved regarding the credit bid and the challenge and how the challenge period interplace with their credit bid. Well, I guess my better question would be, what happens on December 4 at the option when the challenge period hasn't expired? By myself yet. Mr. Siegel.

How are you? I'm Glenn Siegel. I'm here on behalf of Matt Ly. were actually the single largest creditor in this case. What I would expect would happen in these circumstances is the challenge period would end after the auction but before the closing. And we would have a backup bidder locked up in sufficient time to make a decision within all of these things,

and we could pivot to whatever was necessary as a result of the conclusion of the challenge. Does that make sense? I guess it could. I guess the question is, Do all the bidders understand that their bid could be out there for a substantial period of time? Well, more than one would expect usually. It is important to us to close quickly.

So if there is a challenge, it will be resolved one way or another, including, you know, we can pay cash. We can exclude the assets. There are ways to do this. But how do you exclude the action, the assets, all? after you've already had the auction, do you then have to reopen the auction? Because now you're excluding assets. Well, we have a plan that will equitize these things if need be, and we will have treatment under the plan for the unsecured creditors,

and we will have to meet the plan standards at that point. Does this make the auction illusory? I don't think so. The only... I understand Romanette 1, which is that if... There's a successful challenge and it's after the auction has taken place and the pre-petition lenders have credit bid, they pay cash. That's easy. That's an easy fix.

Everybody at the auction understands that. The auction isn't illusory. The pre-petition lenders cough up their money. But two and three, I'm having trouble understanding how that works with closing the auction and coming up with. with a high bidder. Let's talk about a couple of different scenarios. We could have a whole co-bid. That is, somebody's buying the entire business.

If that is not a credit bid, this problem doesn't exist, because then we can just deal with the proceeds. If the whole co-bid is a bid of the lenders acting collectively, we will either have to pay cash, or we will have to determine that those assets will not come with. us in a just to help a little bit because the plan's not on file we want to give you a little bit of help and how we would contemplate to effectuate this so maybe that will be helpful if we are the successful credit bidder the lenders collectively we will wind up taking the equity of the entities that's what we

will do if we intend to take the equity of the entities and there is an asset in which we do not have a security interest because of this, we will either have to compensate the unsecured creditors for that under the plan or we will not be able to confirm a plan. And we have not yet completed our negotiations over how we're going to treat the Gux. And this is, by the way, an OPCO issue as a general matter, but that's what we will have to do. And that will be part of the negotiation that we ultimately have over the treatment of the Gucks, which will vary depending upon whether they have a successful challenge or not. Or if it becomes too complicated and we have a backup bidder, we can just go to the backup bidder.

Now, when you say lock up the backup bidder, we're not talking about going on for a year. We're talking about maybe a month. I don't know how quickly can you get a plan to phone. We think we have the votes right now. honestly so I don't have anything on file no I know you know I'm just trying to play this out your honor you are absolutely right that we will have to go through due process and have a full-blown plan process and we completely accept that we do have a level of confidence given the number of creditors that have been involved in this

process that to the extent to which there are non-consenting predators we have a view about how to deal with them unfortunately we're talking about a plan that's not on file, which makes it a little bit difficult. But, you know, I think the best answer I have for this is if we're not able to do these three things, ultimately we're going to have to pay cash or this whole thing's going to fall apart. I understand that, I guess, and to me that's a perfectly acceptable

you just pay cash, okay? But these other options, I'm just trying to think if I'm another bidder, okay? What am I bidding against? A credit bid that maybe turns into cash, that's easy. If I'm going to now, some more assets come available, I'm not sure what that means. Your Honor, maybe this is helpful because I think,

I don't think the economics here are such that it doesn't, the imperative doesn't become quite as, it's not as dire as it may seem. Remember that there is a huge, there is likely to be a deficiency claim on the Opco side, which means the amount of cash that we would have to pay that are not lender cash is likely to be not substantial. So we think we can work it out. That's what it comes right down to. So what does that mean for purposes of paragraph C? You know what? Why don't we take a moment and talk amongst those.

Okay, and y'all can do that, and it might be easier if I left. Let me warn you that I do have a few questions on the auction procedures, so you may want to hear those too. We can come, Your Honor, this Whitney Fulgeberg on behalf of the debtors. We can come back to this one while people continue to discuss. and maybe we'll either have a solution or maybe we can figure out in connection with the auction procedures too.

That sounds good. Those were the questions I had in reading the red line. Okay. And I don't know if there's anyone else who wants to be heard on the revised form or has any different questions. But that's the extent of my questions. Yes.

Good afternoon, Your Honor. Alex Lees of Milbank for an ad hoc group of opco lenders. We filed a 2019 statement at docket number 241. Our issue is not one with a relief that's specifically being requested today, but with an issue that might come up down the road. We want to make very clear that our decision not to object to cash collect, at this stage should not be interpreted as a consent to that issue down the road, and it's this. We've got two silos here, two entities that are legally distinct, that have different capital structures and different loans.

The OPCO and the PROPCO. My clients are exclusively lenders at the OPCO entity. And we are here on a cash collateral motion where funding would be used to accomplish a sale. That is fine. What is not fine is that is that another group of lenders has agreed among themselves to an allocation of net proceeds of any sale that might result and that is an allocation with which we take issue we think it skews value far too heavily in favor of Propco and away from the Opco lenders I think this is an issue that could come up maybe at confirmation but and at that time I think we will take issue with it we may have a

evaluation fight, objections along those lines. But I just want to make very clear that in saying it's okay to use cash collateral, we're not objecting to the use of cash collateral to accomplish the sale, we're not agreeing to the pre-cooked allocation that has just been agreed among some lenders. I think the debtors have made very clear. They submitted a reply to our statement making this point. They made very clear rightly that the debtors have not yet signed on to this allocation. The debtors have not yet put this allocation before the court rightly so.

but should they do that? Should it show up in a plan, for example, or in some proposed order, that's when we are going to take issue. I also expect that in light of this issue lurking in the background, some discovery may be needed. So I think shortly we will be reaching out to the debtors to start negotiating that. And if we need to, we might wind up with a Rule 2004 examination. So I just wanted to make that very clear to the court what it is we are agreeing to and not agreeing to today. So it's not for now, but it very well could come up in the future. Thank you, Your Honor.

Mr. Siegel takes umbrage. Well, it's hard to take umbrage to something that isn't an objection, but somebody kind of staking out territory, I gather. People do that all the time. I know. So now it's my turn. Every day. So now it's my turn.

So what can I tell you? The first point is I'll make the point that I made earlier, which is MetLife is the single largest creditor in this case. What this court may not know. not know is we're actually slightly skewed towards the Opco side or exposed a little larger on the Apco side than it is on the Propco side. We negotiated very heavily with the various constituencies. The farm banks are more skewed on the Propco side. Robo, I'm talking about a whole bit signatories to the agreement are. Robo and RBC are skewed towards the

SOPCO side and at the end of the day what we all wanted to do was to make sure there was a maximization of value with a reasonable allocation of value and we agreed to this process and again we don't have a plan we don't have anything in front of your honor and I apologize for having conversations about something that's that's not before you but people want to talk about this stuff I want to at least give you the background we are very confident first of all that the allocation is there we're also very very confident that under the plan that the classes that are affected by this will be voting in favor of the plan and under the terms of the agreement that we reached

and that to the extent to which parties want to contest that we're very comfortable the plan will be confirmed we can deal with that at another point in time but we are very confident we reached an equitable arrangement between the parties that reflects a reasonable allocation of value and whether or not that's true will be determined by a number of things but I want to make sure that it's clear that a class vote actually matters here too so that that that's the point okay thank you I'll deal with that issue as it arises in the course of these cases in whatever place it happens I simply say of course that the

court hasn't approved any allocation The lender support agreement I saw reference, so I went back and looked at it. It was filed in the case, but it's not in front of me, and I make no decisions on it. Nothing I'm entering today impacts that. And everyone is reserved, all rights, and I do want to mention that we don't necessarily even concede they have standing to object to this. For another point in time, we can deal with all of this. again I apologize for us talking to you about something that's not filed and not before you. Okay, thank you.

Winnie Fulgeberg on behalf of the debtors again. Then next item on the agenda is item number 13, which is the bidding procedures order that was filed at docket number 236 today. There was a red line attached as well as a cumulative red line or a change page from what was filed. yesterday on the 14th. Okay, so what I am working on is what was filed yesterday. I understand there are only these three pages in the order that were different. That's exactly right, Your Honor. Okay. So in connection with the bidding procedures motion, the debtor submitted a declaration at docket number 136, and the declarant Mr. Sandall from Hulahan is in the courtroom today.

I request that Mr. Sandahl's declaration be entered into evidence at this time. Does anyone object? Anyone wish to cross-examine Mr. Sandal? I hear no one. The declaration is admitted. Thank you, Your Honor. The proposed bidding procedures will enable the debtors to expeditiously sell their assets on a timeline that's supported by their current liquidity forecasts,

and the revised deadlines that we discussed earlier will allow bidders additional time to complete the diligence process and submit bids by the new bid deadline. If you have any questions or comments, which I believe you do, regarding the bidding procedures order or the procedures themselves, my colleague Mr. Gremling is going to step up to the podium and can address those. I have actually one question on Mr. Sandahl's declaration. One second. Well, I get a good afternoon, Your Honor. Dave, Graham, Lane, Kirkman, and Alice on behalf of the debtors. Paragraph 15, Mr. Sandall refers to the lender support agreement

and the requirement to conduct a sale as soon as possible. But then he, in the last sentence, he says, the debtor's path to a viable sale is more streamlined by the agreement of the LSA parties to support a whole-of-company sale? I don't understand what that means. And does that have anything to do with the timeline? And if you need to ask him, you can ask him. So I think what he means is that the LSA, a partially redacted version of which I think was filed on the docket with the first-day declaration. provides for an agreement among the parties there too for a whole company sale at a, I believe,

a specified dollar threshold, but that doesn't preclude bidders who may be interested in just buying a parcel of land or certain operational assets from participating in the process as well in the event that that would be value maximizing. Does that answer your question? That's what it means. Mr. Sandal, did you? disagree with me but he did provide some additional context which is that it's a useful signal to potentially interested buyers to let them know that they don't need to negotiate with the opco or the propco or their you know discrete lender silos separately and that they're dealing with one sort of unified enterprise for purposes

of this sale process thank you he said I was right though and I know you said working off yesterday's red line. The changes in the change paid red line that Ms. Vogelberg referred to are pretty minor, but I have a copy of The Comprehensive and that change paid red line with me here, in case that's helpful. Yeah, no, actually the cumulative wasn't helpful

because I'd already read the one from yesterday. Understood. So, and yes, I think that changes to the three pages of the order, I don't have any problems or questions about it. First, in paragraph F of the order, and this is a change to the order, not a question, I'm not going to incorporate Mr. Sandahl's declaration into my order, so that reference has to come out.

Let's talk about consultation parties and how that's going to work here. And the way I understand it, pre-petition lenders specifically the lenders that are I guess signatories to the lender support agreement and are going to be well I guess it's all a credit bidding want to be consultation parties and the question I have here is why should they be consultation parties when they set the floor for the price, they're already participating,

or at the very least, why shouldn't they have to tell people, why shouldn't there be a date by which they have to tell people they're credit bidding or they're not credit bidding? So I have two thoughts, and I suspect that counsel to certain of the pre-petition secured parties might have thoughts of their own, but on the former, while I acknowledge that they are effectively participating in the sale process virtue of their ability to bid on the company's assets we think it is appropriate generally to include as consultation parties the economic

stakeholders in a chapter 11 case like this who are likely to be the party that benefits from additional sale proceeds that come into the process we think that they are the stakeholder who will be most affected by our sale process just in terms of maximizing their recovery we think that value is unlikely to in the unsecured debt and so we think that they're the real interested stakeholder here in terms of how the process shakes out and then I would also point out that our process our procedures provide and I can find the reference if that's helpful that they're disqualified as a consultation party to the

extent that they do submit a bid other than a credit bid and then on the timing that your honor asked I appreciate that parties in the process may want an amount of finality that comes with a credit bid deadline but we think practically the as evidenced by the LSA the parties have been negotiating among themselves and have landed on numbers that they believe are appropriate for dividing up sale proceeds so I think as a practical matter at the conclusion of any auction there'll be a number on the table that they will have decided you know a reservation price as to whether as to where

what they would accept or not. And when the auction ends, there'll be another number on the table that are either at above or lower than that reservation price. So I acknowledge that setting aside the challenge period issue that Your Honor has raised, that there isn't an official backstop. I think practically they'd be able to determine

whether or not they want a credit bid almost immediately upon the conclusion of an auction. Okay, so I'm thinking about this from the standpoint not of the lenders who have agreed already to what they're willing to take and have set the floor, but other bidders who want to come in and don't want one bidder to have an advantage over another bidder. And how is being a consultation party not an advantage over every other bidder?

Your Honor, Andrews, that's again from Waiton Case on behalf of Bravo Bank. But I do think this issue about the consultation parties is a little bit of a matter of semantics because the reality is the lenders collectively do have that power by virtue of having their secured claims which could be credited and we've set a floor that's well south of the full amount of the debt under the lender support agreement which was signed by the required lenders under each of the three facilities the bridge facility the Opco facility and the Propco facility there is a range effectively parties need to

hit the minimum of $275 million to be in the game, and there is a level which if bidding gets up to a certain point, the credit bid, the lenders will not credit bid any further. Do we know what that is? We're not making that number publicly available because that would taint the process otherwise. Would it, or would that give parties knowledge as to what they're bidding against?

The issue is there hasn't been a determination yet made, and about where the lenders are willing to, in that range, call it, right? The lenders want some degree of flexibility to be a participant in the auction at that time. If at that time the lenders are, in fact, participating and driving bids up, I think the bid procedures are already structured in a way where they would no longer be consultation parties. Yeah, I understand that the procedures say once, the lender's credit bid until they take themselves out of the credit bid. They're not consultation parties.

But the lenders have their rights as secure creditors. Okay? You don't want me to pay attention to the lender support agreement yet, but it's in front of me and it's underlining exactly how this auction is playing out, is what it sounds like. Okay? But we shouldn't look at it and we shouldn't worry. about it. Okay? So the lenders have set a floor. So essentially you're a stalking horse

better. You set a floor is what it has to be over. You may not think of it that way, but why is it an alternative for that? Just another way of getting to that. Am I missing something? Because it's setting a floor. And it's not the debtor setting a floor, actually. It's the lender setting a floor. So it's a non-debtor party setting a floor, which you may have the right as secured lenders to accept whatever you want to accept or not, but now we're talking bid procedures. Now we're talking about other parties coming in and wanting a level playing field, and I want to make sure there is a level playing field. And that's what I'm struggling with a little, so I want to hear this, because normally I would not let a lender be a consultation party if they're credit

bidding, or they're the stocking horse bidder. Okay? And I would make them make that decision, certainly before the auction begins. So again, everybody knows. So are you a buyer or a seller, and you're telling me you're maybe both, and you don't know. But what I'm trying to figure out is how does that set a level playing field so that people want to come into the process so they understand whether it's worth their time to come into the process. So I understand your point, Your Honor, and I think we should talk as the steering committee offline, but I understand the desire to have the lenders either be in or out by the time the auction starts.

At a minimum. At a minimum, they have to be in or out before the auction starts because then you're going to be privy, the lenders would be privy to how the debtors are analyzing everything, how they're looking at different, how they're negotiating with the other bidders, et cetera, and I don't think you can be both. And I actually, though I haven't had this issue before, I kind of think you're effectively that now by setting a minimum bid. But I could maybe be convinced or not. Let me ask this question, too.

In terms of the minimum purchase price for a subset of the debtor's assets, how is that going to be determined and when? Again, in terms of other parties coming in and knowing what they're bidding for, and knowing what a minimum price is that they have to come over. So if I understand the question, it's for non-whole-co bids, how potential purchasers will know if there's a minimum price that they need to be, I guess how else they'll participate in the process. So as I'm sure Your Honor sees, we don't have a minimum price established for any less-than-who-co-bids. and I think we wanted to maintain flexibility as the debtors to be able to see what assets folks have interest in and who we can piece together for as near a whole co-bid as we could.

And I think we were reluctant to establish a minimum bid for that, given the sheer number of potential combinations of assets that you could break the debtor's assets down into. you know if we set it at five million dollars maybe that would make sense for a piece of equipment but it almost certainly wouldn't make sense for any particular parcel of land so I think we were reluctant to set a floor and I think we wanted to see you know as we got more publicity for the process upon the filing of these chapter 11 cases and continue to engage in some instances re-engaged with parties who are involved in the pre-petition process see where interest lied and if we thought that there was a potentially value maxed combination of non-whole COVID's available. So I think that was why we were reluctant to put any particular framework around that process because we just weren't sure if we put it out there what might come back. Well, that makes sense to me. And maybe it's why this sentence in paragraph six of the, I guess I'm in the order, sort of stood at.

It's like, yes, I wouldn't expect you necessarily to see. to set a minimum purchase price. I would expect that you'd let people bid on what they want to bid, and you'd put the combinations together, and you see if the pieces more value maximized than the whole. I mean, you're going to take a look at it. But this suggested to me that at some point,

and I guess when, there's going to be a minimum purchase price for a subset. And if there's going to be one established, and I'm a bidder, I'd like to know that. to know that. If it's going to be sort of done in a stealth fashion or halfway through the auction, I guess I want to know that too. If what you're doing is what I would consider to be what usually comes in front of me is, yeah, we're not setting a price. We'll just see what happens and we'll put the pieces together and the professionals to do their thing, then that's okay. But I

didn't know what that means, and there may also be something in the bid procedures that addresses that as well. So I just really want to understand that. In the procedures, I think it's on page 11 of the procedures. The pre-petition secured parties, I believe it's the agents specifically, have sort of upgraded their consultation right into a consent right, essentially over whole co-bids that come in under the minimum bid to deem those qualified. There is no such consent right. It's a consent right. It's a consent right. consultation right again for subsets of bids.

Well, I guess that consent rate is not applicable to subsets of bids. So I think if I understand the question that you're asking, and you can correct me if I'm not, I think you're asking, I think you're saying that the construct we have in place for subsets of bids is similar to what you're used to seeing, which is we don't have a floor price established,

we're gonna run our marketing process we're going to see what comes in and it's particularly in juxtaposition to the minimum bid for the whole co that that partial asset bidders might wonder you know what is there a minimum price here are there any other hurdles I need to jump over before to participate in the process paragraph six suggests there is we just don't know what it is it suggests there is a minimum price but it doesn't for subsets but it doesn't tell us what it is so to me either there is one or there isn't one and if there's going to be one that people have to have to better they need to know that okay so I don't think we intend there to be a minimum threshold for any subset of assets I see that the sentence reads provided however

each bid for a portion of the debtor's assets may be deemed a qualified bid regardless of the minimum threshold suggesting that maybe there is one for a subset of assets, would Your Honor be happy if we change that proviso to just say that there is no minimum threshold for a subset of assets? I don't know if there is or there isn't. All I'm suggesting is that this suggests there is, but it's unknown. So if it is. Or it's not disclosed.

So I'm not suggest, I don't know if there is or there isn't one. This suggests there is one. If there isn't one, and there isn't going to be one set, then maybe you ought to change your sentences. If there is one, then that's a different issue. Understanding is that there's not intended to be a minimum because we could cobble together any combination of assets and maybe we'll sell you a tractor for $5,000

in addition to a chunk of land for $100 million. But anybody can let me know here or later if they think that's incorrect, and we'll take that drafting suggest and back. I want to understand the procedures for contracts and in particular I guess this starts at particular paragraph 21 and the timeline is really tight on contracts like I think less than 24 hours people are supposed to respond so that's an issue too but here I'm not sure what happens at the sale hearing. It tells me cure objections won't be heard. Okay, that's fine.

You're in paragraph 21. I'm in paragraph 22 actually. Well maybe I should just let you explain to me the process, but I, it seems to me like there's some conditional assumption and assignment going on here to be revisited later and I'm not clear on this. So I believe that your read is correct. I think we would propose that in the event, in light of the timeline that is tight, as Your Honor points out, in the event that there's a dispute as to the appropriate cure amount, we're asking that without letting that dispute, which we think would be sort of ancillary to the general process to delay the closing of a sale, with the dispute in this instance just being about the appropriate amount of money to pay the counterparty,

we could continue performance under the contract according to its terms until we either consensually or in front of your honor determine what the appropriate cure amount is and pay it at that time to the extent if there's anything additional. Okay, well, if that were the issue and we were only talking cure and you were saying I'm going to reserve the amount in dispute and then pay it or not pay it depending on the ruling, then that would be okay. But as I'm reading this, it says, the debtors shall proceed with the assumption and assignment of a particular contract for a lease at the sale hearing. So that sounds like that's an assumption and assignment. And that shall not prevent or delay. The pure amount shall not prevent or delay the assumption and assignment.

And then half a paragraph later, it says, the debtors reserve the right to reject and not assume and assign any contract. depending on the ultimate resolution of the cure amount. So what's happening in that interim period? Has the contract been assumed or has it not been assumed? And if it hasn't been assumed, who's performing or not having to perform or not having to perform?

So I think that the idea that we have in this paragraph is that we would assume the contract and pay, I imagine, any dispute over QAWRM. would be they saying that we should pay more to cure. And so we'll pay up to the amount that we don't dispute. And each party would continue performance under the contract according to its terms until the dispute is resolved. Or, well, either consensually or by your honor.

And then at the point that the debtors are faced with, you know, a dollar figure that says this is what you need to pay to continue in performance of this contract with the counterparty, I think we're just asking to reserve the right to at that point say, you know, our good faith view was that it was a lower number. Now that Your Honor has given us a higher number, we think that this contract is actually burdensome to the estate and reject it at that point. So you're going to assume it and then reject it?

I believe that's correct. Can we do that? That's how I'm reading this, and that's why I'm asking the questions. I'm not, I'm, I'm, since you're asking me to say this is the process, I want to make sure I understand it. Would Your Honor be more comfortable if we rework this paragraph to not use the legal term of assumption and instead designates if there are disputes, contracts for assumption, or potential assumption at a later time with the contract that we were just talking about,

where we pay up to the amount that the debtors agree to continue performance, until such time as we resolved the dispute and instead of assuming we've sort of provisionally continued performance and made the undisputed portion of the cure amount payments until such time as the dispute is resolved and then at which point we'll either fully assume or reject the contract, which I think I would argue makes the counterparty no worse off because they will have gotten at least a partial cure payment, which they're unlikely to get in this case if we were to have to, in the uncertainty, reject their contract because they said that we owe them

ten times what we thought we owed them. Maybe we would then just reject the contracts in light of the dispute where here they would get a cure amount. some continued performance according to the terms of the contract, and then if at such time that a dispute is not resolved in our favor, we choose not to pay whatever amount we were incorrect about and reject at that point. I think you can leave the assumption or rejection open, pending a determination of the appropriate amount of the cure amount,

but I don't know that I can force a party to perform for a non-debtor party, which is what it sounds like is what people want to happen. Maybe I can, but it hasn't been briefed, and I don't know. So I think you can leave, and I think this is what typically happens, is that if there's a contract dispute, a cured dispute, or otherwise, then that contract doesn't get assumed and assigned. And we wait until the resolution, and then the debtor and the successful bidder can make a determination as to whether or not the cure amount

makes it a profitable contract or not. But I don't think in the middle of bid procedures, I should be determining the rights of parties to counter contracts and changing the rules, the normal rules of assumption and assignment or rejection. So is your concern addressed if we strike the sentence beginning, the debtors shall proceed with the assumption and assignment of a particular contract or lease at the sale hearing and dependency of the dispute relating to cure amounts shall not prevent or delay the assumption and assignment of a contract or lease? It might be. I haven't thought about how it needs to be rewritten, but it might be as long as we're not changing the codes. requirements on assumption and rejection and that's fine.

Again, I'm not sure in bid procedures, we need to be defining contract rights. I think what you should be doing is setting a date, what people have to object. But beyond that, I don't think I should be affecting people's substantive rights. I think I understand, Your Honor, we don't need to, as a lot of lawyers in the courtroom, we don't need to live draft this paragraph. submit a proposed order to chambers after this year. Okay. It'll be the fourth, I think, bidding procedures order to hit your docket in the last 24 hours, but...

Okay, let's look at the timeline. In the procedures? I am in the procedures. Thank you. Thank you. So I understand the bidders are happy working through Thanksgiving, and they will do that. Okay, the auction date, and I'm looking at the chart, the auction date says it's December 4, which I take it as now definitive because I think of the procedures it said on or before,

but we have a definitive date now? Correct. Okay. And then here's where it gets really tight for people, for the people not in the room, okay? So December 5, or within six hours, following the conclusion of the auction, or as soon as reasonably practicable there ever, they're after, that's the deadline for the debtors to serve via overnight delivery, adequate assurance information. So if the auction's done on the 4th, then it's going out on the 4th by overnight. If it's not done on the fourth to get into FedEx, then it's going out on the fifth. And people are supposed to object by December 6th at 4th.

That's correct. Though Your Honor, I would point out on, I think, three days, assuming you enter the order, the bidding procedures order today, which we'll see, we will file and send an initial assumption and assignment notice. The company doesn't have an extremely voluminous amount of executory contracts. We are hopeful that we have gotten all of the information that is really relevant to contract counterparties to them by the end of this week. Or maybe it's beginning of next. So while I appreciate that it's a really tight turnaround after the auction, outside of a concern with the winner of the auction,

I think that they should have all the information that they need and by this time next week. The day before Thanksgiving. They've already said they would love to work through Thanksgiving. No, you're right, you're right. The counter-contract parties haven't said that. You're right. I think it's three business days after entry of the bidding procedures order. I'll be hopeful that that's tomorrow.

I think that means they should get this information on Monday. Okay, well, I may permit that to happen, but if there's any, issues with notice and people have problems I'll hear them and if they don't have the information they need they don't have it we understand okay in the further on in the bid procedures on page six and seven it talks about the executed agreement and parties have to mark up in form APA the bid procedure should provide the parties can make a bid in any form they want to make a bid we have professionals who get to figure out if

They get a bid that isn't in the form of an APA or a different APA, that's what we pay them to do. They get to figure out apples and oranges. Somebody wants to make their own bid, be a plan sponsor, come in and buy equity. Whatever they want to do, they can do it. I'm not limiting bids to the form of an APA, nor am I approving the form of the APA today. Just to be fulsome, I assume you also don't want us to require clause A there, an offer letter signed by an offer in C1. I think that as opposed to the APA is just to give us assurance that we're looking for something.

Yes, I mean, somebody can make an offer letter, but again, I don't think it's restricted to the APA form. Okay. And actually one of my early cases, I had somebody come in with a better offer on very different terms than I actually had a contest. hearing as to whether I could accept it or not. So the answer I decided was yes. So I don't have that dispute anymore. And if somebody wants to offer a bid that's not all cash, I don't know why the debtors wouldn't consider it.

It may not be better than an all-cash bid. It may not be better than a credit bid. But I don't understand why the debtors versus the pre-petition lenders wouldn't consider consideration and whatever reform it happens to come stock in some other company who knows can live with that again the lender support agreement is not something that should control bid procedures okay when you're talking about credit bidding and when does do the pre-petition lenders have to come in I note that there's no round skipping in

the procedures so it would strike me that if the lenders didn't credit bidding in the first round they don't get to come in or is that not supposed to apply to them so I have a question on that but y'all can talk about that so I know the way we intended it to work was to generally carve the lenders out of the qualified bid requirements again it just strikes me to set a level playing field so that so that others know what they're bidding against we should set a level playing field. And so if in round one we have two bids called 275, you want the pre-position lenders to also have to raise their hands, say, we credit bid 275 of our pre-petition claims, round two begins,

somebody bids 285, they need to choose to go up. Maybe they should have to. You have a no-round skipping in your procedures. It's usually done for a reason and why should a bidder, or, you know, or not. be exempt from it. Point of discussion. Those are my, I think those are my big concerns, is how the pre-petition lenders, how they should participate, and the terms under which they should participate. Does anyone else wish, does anyone wish to be heard before we take a break, which we're going to do, so parties can talk? Okay, the timeline concerns me that I'm relying

on Mr. Sandal and representations of counsel that the bidders can bid in this period of time. And as it has been extended, as I understand it, the request of certain bidders, and I would hope, of course, that if it turns out that bidders come back to you and say they need even more time, that that will be addressed in some fashion. Okay, let's take a break. And I'm amenable, of course, to hearing a discussion on it. hearing a discussion on any of the points I've raised and why I'm wrong, that's fine, but I would like to have some responses because I'm not actually sure if I've had a case exactly on this, in this posture, where I've got a minimum bid set by pre-petition lenders who aren't an official stalking horse bidder, but they're right there.

So, thank you. Thank you, Your Honor. How much time would you like? I'm here in 15 minutes. Okay, we'll start with 15 minutes. And then when you tell me eating more, then we'll give you some more time. Oh, we'll start with 15.

Thank you, we're in recess. A shitty little thing. I'm like some other kind of place. Did that make sense? Do you ever take that? No. Gary is not simply saying it's strictly private there now like freight and private yeah yeah but yeah it was totally it flew in a creep cities right at Merle Beach and Fort Myers

like yeah like a Atlantic City just ain't somebody got fired thanks for you're your honor Dave Grumbling Kirkman and Alice on behalf of the debtors we appreciate that the cash collateral issues and the big procedure issues that you had concerns with are interrelated so we can take them in whatever order you'd prefer whatever you like and how they want to address it okay we'll start with the bidding procedures and I have two updates well one is a request we had talked about the form APA language and I had said that we'd remove the concept but I spoke with mr. Sandall and some others on our side and we would prefer to change the language more modestly and make it

not a requirement, but rather just say that parties may, and we'll include a proviso that says that they don't have to. And we think that's a helpful suggestion, so thank you for making it. We have some, you know. That's fine. Okay. As long as it's not a requirement.

And then second, the bigger item that I think maybe will be helpful in getting your honor comfortable with the procedures more generally is that we've connected with the council to the pre-position secured parties, and they are comfortable, and we'll, they get into the procedures, and submit a revised order with a concept where the the CIRCO has to sort of choose a hat,

whether they're going to be a buyer or a seller ahead of the auction, it's appropriate for them to either show up to the auction to credit bid or commit to not credit bid before the auction begins. And we'll put that in the procedures and submit a revised form order to chambers, but that's the concept. Does that resolve your concerns with the order generally? And then maybe as a matter of housekeeping and apologies for getting sort of maybe thematically confused, but I agreed to tackle the two other orders that we've been seeking from Your Honor that we filed,

I believe, a certificate of non-objection and a certificate of counsel with regard to. That is our interim compensation procedures. I think that one is CNAOD. I don't think we heard from anyone. and then our creditor matrix, which we submitted a COC. Nobody objected, but we noticed after filing the original that we had not removed the email notice concept that you wanted on an interim basis. We did remove that and refiled it. Okay, I had a question on that.

I couldn't tell from the COC. Had I entered a final on that or not yet? We believe, I believe you'd only entered it on an interim basis, and you had asked us to remove email notice from that interim order, which we did. then when we filed our original COC, we inadvertently re-included the email concept, took it back out, and refiled it. Okay, so there is not a final order entered. There is not. At all, so this would be the final. Okay, then that one's fine.

Okay. And. Interim compensation procedures. I couldn't look at it, but I can imagine I have any problems with it as long as it conforms to how we do it. Okay. If I have any questions, I'll let me. Okay. Appreciate it.

Thank you, Your Honor. And I will hand the podium back to Ms. Fulgberg on cash collateral. Good afternoon, Whitney Fulteberg on behalf of the debtors. Going back to the paragraph that you had flagged in the credit bid, paragraph it is, we'll wait until you have your third. Paragraph 20C on page 50 of the red line. Yes. We spoke with counsel to the pre-petition secured parties, and they have agreed to remove Romanette 3 from the end of that sentence.

So the options would be to either pay cash or exclude those assets from their credit bid. We would obviously, now with the change to the credit bid, we'll know when their credit bidding in advance of the auction, If for some reason the committee comes back after the auction has passed and the lenders have credit bid, we will sell those assets, whichever are subject, you know, we're subject to the challenge, or, you know, in consultation with the committee and the lenders, resolve some sort of mechanism for, to give, the unsecured creditors value for those assets that would be excluded from the credit bit once the challenge period has passed and I think counsel to the committee is also available to speak on this point as well they were part of the discussion with us

good afternoon your honor Andrew Bellman from Loenstein on behalf of the committee to put a slightly more practical point on the mechanism that miss Vogelberg just described the discussion that we had in the hall when we came to the conclusion with everybody that removing Romanette 3 would help solve this problem was that if we if we get to the end of the challenge period and there's some unencumbered asset that we've found and we've asserted a challenge and either settled with the lenders or you know brought it before your honor and your honor has given us standing and we're proceeding one of two things is going to happen when we get to the end of that challenge we're going to have an asset that's unencumbered we're either going to say okay you know in consultation with the debtors or really the betters in consultation with us because it's their asset are going to say, well, we're going to have Mr. Sandal run this back through the process, and if this is a big, valuable asset, put it out to market. Or the parties are going to sit down with the lenders and say, what's your price? Mr. Siegel has already agreed that if it is a tractor, he'd like the tractor delivered to his house. We'll gladly drop that off for him.

But it's going to depend on the practical reality of what the outcome of that challenge is. If we find 1,500 acres of land that are unencumbered, that's probably a Mr. Sandall thing. If we find some portable assets or some small amount of land or some rights or whatever, you know, that's probably a discussion with the lenders that comes to a practical conclusion where they write a check to the estate. And I think it really is that simple. And so we're actually pretty comfortable with the approach that Ms. Fulberg laid out. Okay, thank you.

I mean an explanation in the support of the committee on that. Thank you, Your Honor. Yes, we'll submit. two revisors one for cash collateral one for the bidding procedures once we've circled them through with everyone and I think that was it for the rest of the agenda okay thank you any anything else looks like maybe Alex Lee's millbank for the the ad hoc group about co-lunders we have a ceiling motion on I think that was technically on the agenda I don't know if your honor wants to

take that up I don't think it's objected to just the context there as we filed a statement reserving rights, which I walked you through before. We redacted some information. It was really to honor confidentiality requests of other parties. It wasn't our own issue. So I'm happy to address it, but it might be up to other parties if there are issues. But I just want to make sure that that was taken care of because that motion is technically on your agenda today. Okay.

I noticed that, and I think it raises the question about whether the – initial filing should be on in a redacted form when nobody has asked for permission to redact anything. So I think we should carry the sealing motion. I understand why the ad hoc group filed the motion to recognize that another document was filed under seal, or in a redacted form, but nobody asked for permission to redact in the first instance. So I think it raises that. That's fine with the debtors. We can carry their motion and try and work this out amongst everybody and then also circle

back on the fact that we filed the LSA with the redactions in the first instance. And within so many days, the debtors with that. Understood, Your Honor. Thank you. Thank you. Okay. Well, thank you very much then. We're adjourned. Thanks, Judge.