American court hearing recordings and interviews - QVC Group - Listen to the bankruptcy hearing held June 10, 2026 starting 10:30 am

Episode Date: June 11, 2026

Listen to the closing arguments in preferred equity trial and in support of QVC chapter 11 plan confirmation, made to the bankruptcy court before the matter was taken under advisementThe QVC group tax situation sounds terrible, like the court should consider liquidating the companies and ordering an investigation how things go to where they are that a bankruptcy was needed.

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Conference, muted. All right, I've activated the hand-raising feature. If anybody wants to speak, please hit five-star one time. Good morning. It is 10.30 a.m. on Wednesday, June 10th, 2026. We're here in case number 26-90-447, the QBC Group, Inc. on several matters, so why don't we proceed? Good morning, Your Honor.

Mike Esser, Kirkland and Ellis, Council for the Debtors. Your Honor, this morning, we're here for closing arguments on the debtors' plaintiff confirmation, as well as the preferred shareholders' motion to terminate exclusivity. Your Honor, this morning I will be handling exhibits. I'll be doing my best as Mr. Colligan's understudy, so please bear with me. All right. So maybe we should get appearances first, and then we can proceed. Good morning.

Judge Pettis-Janna, We're aware for the U.S. Trustee. Good morning. Good morning, Your Honor. Robert Feinstein, Picholsky, Stang, Zeal, and Jones, proposed counsel to the Official Creditors Committee. Good morning. Good morning. Your Honor.

Nicholas Baker, Simpson, Thatcher, and Bartlett, on behalf of J.P. Morgan Chase Bank, who's acting at the direction of the RCF lender group. Good morning. Good morning. Good morning, Your Honor. Avilaft of Aaken, Gun, Strauss, Howard, and Feld, on behalf of the Linta Adhock Noteholder Group. Good morning. Honor.

Angela Libby, Davis, Pulk, and Wardwell, on behalf of the QBCC Inc. No, hold our group. Good morning. Morning, Your Honor. Andrew Glenn, Glenager, Bergman, and Puentes on behalf of the preferred shareholders. Anyone else wish to make an appearance on the phone? Please hit five star one time. All right, go ahead.

Thank you, Your Honor. For the record, Mike Heser, Kirkland and Ellis, Council for the Debtors again. Your Honor, before argument, we wanted to confirm that pursuant to your request, we were able to confer with the preferred shareholders and the committee on a full list of exhibits that have been or hereby will be admitted into the record. record for purposes of the hearing. We did file at docket 473, a stipulation and agreed order agreeing to the admission of evidence of certain exhibits and attached there to is an exhibit a with a full list of the exhibits that either have been

or shall be admitted. That list also contains certain confidentiality designations and also notes where documents are entered into the record and sealed for purposes of 502 D. We'd asked that before we move on to closing argument your honor admit those exhibits on exhibit a to the extent they weren't already admitted at this time all right does anyone else wish to be heard with respect to the stipulation at exhibit at exhibit ECF 473 all right hearing no objection those exhibits will be admitted let me just print it out so I have it I have copies for for your honor okay good thank you if I may approach

Your Honor, in addition, before we move to closing, I wanted to note that given the speed of this trial, and with Your Honor's permission, the parties have been using a private court reporting service for transcripts. Today's closings will be citing those unofficial transcripts, and we do have copies for Your Honor, if I may approach. And are these all of the days starting on June 4th? Correct. And then finally, I wanted to note that we'd like presenter rights for Mr. Jose Lopez. I think we already have that. We have those already. Okay, with that, Your Honor, I will pass the podium to my partner, Mr. Mark McKay.

Good morning, Your Honor. For today's closing argument, I will be handling the evidence that it came in as it applied to the 1990-standard. You know, as you may sometimes surmise my restructuring partners, sometimes air-quote evidence. We're actually going to use real evidence that's cited, you know, every step along the way. Ms. Janamandra will be addressing all of the – additional legal standards as we move forward. Hard copies of the closing slides. We didn't double-side them, so unfortunately it's substantial.

May I proceed? Yes. Your Honor, first, and I know we do this in every case, but it's still, I don't want it to diminish the amount of gratitude. I want to thank you and your staff. We want to thank the United States Trustees Office. We know how much time it takes for you all beyond the hours that we're in, and we greatly appreciate it.

I do want to start with how we got here, but I think we have to step back for a second. Your Honor, this plan is a great result for the entire capital structure, including the constituents of Topco. In its simplest form, QVC group has $6.3 billion in funded debt on a $2 billion reorganized business. That's the uncontested enterprise valuation from Evercore. The funded debt creditors here are taking significant discounts,

including the Linta creditors taking a discount at 92%. To avoid a long drawn-out bankruptcy, the funded debt creditors have agreed to pay all general unsecured creditors in full, including at Topco. So who's left to complain? Your Honor, we have an ad hoc group of preferred equity holders who are structurally subordinated to all $6.3 billion of their debt. And those claims that we're settling today are for billions of dollars of potential liability that in the absence of a settlement could result in a materially worse outcome to QBC's credit. creditors, including the priority tax creditors and the general unsecured creditors, including whose general secret creditors who include the claim that Inc. has against Topco.

But, Your Honor, if you think back to the opening statement, given the corporate structure and a little passage of time, what we've heard from the preferred holders is they argue that all the cash at QBCG is theirs, the stock at CBG is theirs, and the debtors are using QVCG, Topco, as the ATM, to benefit the debtors funded debt creditors. But the preferred, and what they say, they're the ATM. But Your Honor, they have it absolutely backwards. Because if you look at, if you take my one thing from the testimony you heard today, when you look at all the historical transactions and you follow all the cash,

it's that Inc. was the ATM for this enterprise four years. Let's go through it. You have an $800 million dividend up to QVCG in December of 2022. After that, you have $340 million of additional dividends that go up to Topco in 23. And then you have an additional $512 million in excess payments to QVCG under the TSA. Of that aggregate amount that goes up to Topco, $450 million over the entire duration of the PEPF goes out to the PEPC, And we have a 2020 MSI retirement. This is part of a corporate reorg that hasn't been a lot of focus in this case that was pushed down, you know, to a foreign sub below ink.

But it's the genesis of what gave rise to the $1.8 billion note from Linta, the intercompany note that was subject of testimony in the last few days. So how do we get here? Here are the key events, you know, when you're a restructuring professional, not the historical stuff, when you start to see some indicia, of like this could be leading to her restructuring. First, you have the December 22 cash management plan, where we see the $800 million going up, a movement of cash on the last possible moment before a credit covenant is going to block money

from moving forward for general purposes thereafter. Mr. Wofford comes in on the 23rd and realizes that limitation as he testified. Then the next year, in September, you have a classic liability management transaction in which Inc does an exchange to move out the maturity wall in 27, out to 28 and 29. But to do so, it costs them $352 million of cash to incentivize people to move that wall out. What do you have the next year?

When Mr. Wofford gets elevated to be CFO of group, you know, the board makes the decision we're shutting down the PrEP. We're suspending the PrEP dividend. So after Q1 and finally of 2025, there are no more PrEP dividend. So you're starting to see conservation of cash. And then finally in July of 25, what do you have? They pull the revolver, $975 million pull down of the revolver to ink to give it position today for why we don't need a dip. And Your Honor, how did we get here? What do you see? You see classic enhanced governance. We heard the testimony of this from Mr. Wofford as well. You know, in this, you know, when he arrives, he realizes we have member managed entities. We have

conflicted fiduciaries who owe responsibility to multiple boxes. So what do they put in place? You put in place the two dissension directors up at Topco. They're not just on the special committee. They're on audit and compensation as well in June. You fixed the capital structure so as to create

boards for the first time at Inc. You know, and Linta. You then, you know, after interviews from the general counsel and the CFO, they retain professionals, Mr. Kegovic and Ms. Frisley at Inc. And Mr. Davis and Mr. Walper at Linta as well as Cornerstone. And then once retained in September, each of them retained their own counsel in October. So let's level set in terms of how we got here in stakeholders.

Who's not objecting? The RCF lenders and the noteholders here who are allowing $500 million of general insecure creditors to ride through. The Linton note holders are objecting, even with a 92% haircut. The Unsecured Creditors Committee is not objecting. Candidly, I think it's the first time that Mr. Feinstein and I have ever been on the same side of a matter. And then you have the majority of the preferred equity holders. 67% are not objecting. They're not here, and you don't hear the comment as well.

Who's objecting? A minority of preferred equity holders who increase their positions by buying up shares, you know, pennies on dollar post petition. So, what's the legal standard? Your Honor, I'm not going to belabor this. I think you know it all too well. Now, there have been some suggestions. This episode sponsored by Point Me.

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programs. Now, instead of 300,000 points, you're seeing options closer to 65,000. That's because you can move your credit card points into airline programs, where the pricing is usually way lower. Same flight, same seat, for less than half the points. And Point Me doesn't just show you the, the options, it walks you through exactly how to book it. If you want to get more value from your points without becoming a points nerd, visit point.me and see what your points are really worth. Including about whether business judgment rule or entire fairness should apply. Your Honor knows the business judgment rule heightened standards of review like entire fairness. Those are Delaware law standards. Right. And in reviewing transactions, courts like Delaware Chancery,

apply entire fairness in situations where you have the conflict of fiduciaries with the potential self-dealing, where you have the same decision makers on both sides. Like the situation was, as of the spring of 2025, before the professionals came in, fixed the governance, and brought in independent fiduciaries. Now, they also had full delegations of authority, as you would expect, all in evidence that granted the independence, the ability to identify, and resolve all conflicts. So lots of reasons why entire fairness or any heightened standard of review would not apply to this fact pattern.

But if we step back and say, what does a court do when it evaluates entire fairness? It evaluates the fairness of the deal. It gives them the gets and evaluates the fairness of the process to reach in the deal. And Minister Susberg, in response to the arguments from the preferred on entire fairness, said in his own unique way, like we'll meet that we'll play on if we'll play on any playing field you want to play we'll defend our process we'll defend our deal and that's what we will today but as a matter of law 2019 is the standard it we will prove it's fair and equitable and in the best interest of the estate but his sentiments mr susberg's sentiments remain the debtors and their independent directors

ran a fair process in developing this plan and in reaching this intercompany settlement and they reached a fair deal A fair deal for Topco, Linta, Inc, and Cornerstone. So, reminder, something you also know all too well. This is Judge Lopez's decision from like less than two years ago that you don't have to have a mini trial. I think we've done the trial here, let alone a mini trial. But, you know, the responsibility of the court is to apprise itself with the relevant facts in the law and to make an informed and intelligent decision. The same informed intelligent decision that the directors did, you know, when they supported the deal in the first place.

So what does the plan resolve? Let's start with perhaps the most complicated, the deferred tax liability. The deferred tax liability originates with Linta. And Mr. Kearns did a great job explaining it when he testified. These are contingent payment debt instruments that under the IRS rule can be exchanged into stock of a non-issuer. Okay? The interest rate on the notes is approximately 9%. The cash paid to the bondholder by Linta is 4%. That 5% difference is something that the taxpayer can deduct from the group tax return. And ultimately, that tax benefit on the front end is what becomes the deferred tax liability on the back end. Challenges here is well after these notes are issued, right? Linta becomes a different end. disregarded entity, as we've all heard. So the Linta actions, including this deferred tax liability, are reflected on the top code tax return. And when you look at the ink calculations of what its responsibility is, this is never reflected on the ink calculations. It's up at Topco. Now, our view on this has been plain. I think it has been stated ad nauseum. We do not believe it will materialize. When we say that, we use will in the general sense. We are not issuing a tax. opinion to say that, but the risk remains. And I think the amount of risk is articulated in the

SEC filing and in our disclosure statement. It's not just that there can be no guarantees. There are no cases that directly addressed the situation. There is no other guidance than the applicable Treasury regulations that address this situation. We've put that out there since the day before we filed this case, no one has said otherwise. That's when you step back, and say what is the risk of whether the debtors may be wrong here? It's because this is a situation where we have no cases and no guidance. Now, what's the risk? Even with the assurance, you've heard a lot about the assurance,

what's the potential exposure of that we're facing. Even with insurance, we're looking at $6 to $800 million, as articulated by Mr. Kegrin's. This is Mr. Kegovitz's testimony. And that is with the expectation that we have the interest loss carry forwards. forwards. If you lose those, those amounts increase, right? And I think one of the key other points here about this risk is Topco needs to have this risk resolved before there can be a distribution. You'll hear this a couple times, you know, today. The deferred tax liability, if it hits,

is an admin claim, right? It's top of the line and it gets fro, that would give the basis for to freeze all other distributions. The other priority tax claims, the general and secure claims and anything else. That needs to be resolved first. So how do you calculate it? Mr. Kearns, who is the tax expert, the tax director who, you know, at QVC laid it out. You have the base liability. And the base liability depends on what's referred to as the, you know, the, excuse me, the ETR.

I believe that is the effective tax rate. And what that means is what's the tax rate and what your blend of state. states that you sold into? Are you selling into high tax states, state tax states like New York and California? And how does that blend your rate overall? You take the base liability, you subtract your insurance proceeds, you deal with the tax that you have to pay on that, and then you deal with the interest and penalties and all the other costs, including the defense costs. And Mr. Curranston calculated this. And this was out in the discovery process. This was disclosed well, you know, well before the filing. if we are right on the 24% effective tax rate, and we could be wrong.

It could be higher, right? You then apply the duration. This is over a three-year or a six-year look bad at on statute of limitations. Even when you, even using the insurance, you have an initial out-of-pocket, then you work through the additional interest and penalties. This is how you get to, when we talk about a range of $557 to $800 million, assuming we have the carry forwards, this is the calc. It is all substantiated.

It is also uncontroverted. So what's the concern? We may lose those carry forwards. And, you know, as articulated by Mr. Reyesha Keglevick, and why is he concerned about it? Because he hones that risk. Post settlement, it's all him. It's all ink. Now, the other thing that, remember, is ink didn't cause this problem.

This is all above ink at Topco, but ink paid for the insurance. 925 million is acquired. And they paid $35 million for it. That comes into the calculus a little bit later. Inks shouldn't be buying out for other people's problems. In terms of the risk remaining, we've heard much about a should-level opinion. I think Mr. Kearns put it well. A should-level opinion still means there's a lot of potential exposure.

It's not a will-level. It's not more likely than not. What's the range? Some professionals say it's 65%, certainly not 80%. one in three, a one in three chance you're wrong. That's what 65% is. Now, does Inc. have recourse to the other members of the group? Absolutely.

That's the tax indemnification agreement. Each entity of the group, including Inc., can look to others for, like, and this is Romanette 2 of section 10 of the agreement. This is the indemnification section. Any amount that Inc. is required to pay to a governmental authority with respect to a joint return in excess of its amount, that's what they can look to TopCo for just go back one slide I apologize in here the Liberty group is actually Linta and QBCG whereas the QBC group is QBCI yes at the start of this before the assignment okay and I absolutely will walk through that okay yes but you're you're at this stage applying the agreement as of the date of its authorship that's correct okay all right if there's a

change of control as your honor knows you have 3803 two limitations that may prevent the interest loss carry for. That's all Mr. Kearns is flagging. And what we're here to say, Your Honor, is that this is a real issue. It's going to be a real issue that we can't answer right now that we have to work through. And you need to look no further than a preferred holder who acquired their shares post petition that isn't even part of their group. That's the form three from Goldman Sachs. That's why this is in evidence at DX-235. And I know it's hard to read, but if you go back to 335, you know, the key things are the middle of that first column, the date of the event.

That is April 17th. That is the day after the petition date. And then the other key note is what did they acquire? They acquired the preferred stock. 2.966 million shares. This alone, because of the form 3, they thought they tripped the 10% rule where they had to come forward and disclose. That doesn't include other members of their group. So what does that mean to reorganize QVC?

It means that a out-of-pocket exposure that we just saw from five to eight can go up to a billion. So even if you're able to apply the 925, the insurance, Mr. Walford explains you're looking at a half a billion to a billion of additional exposure. Another thing that the evidence showed with regards to the risks that we're facing here. And, you know, QVC Inc went to the market to get a billion dollars in coverage. They wanted a billion. They only got $9.25. That's the market speaking in terms of folks wanting to take on risk or not take on this risk. And there's a secondary market of additional players beyond the primary market.

And you heard Mr. Wofford on this too. He said incredibly expensive. What does that mean? A premium of over $100 million to cover the additional risk. So from a tax perspective, if the IRS comes calling, where do they look? They're going to look to QVCG to COPCO first, right? On the consolidated return, then look to the lead taxpayer, that's QVCG. And the law on that is plain.

This isn't an intercompany. This is the tax man coming. Members of the group are joint and severally liable. Tax regulation section 1.105-6A says several. The IRS has interpreted that as joint in several, and the case law supports its joint and several, including a bankruptcy decision from the Eastern District of Virginia on that exact point. Now, stepping back, what else does the plan resolve? We have a set of avoidance actions.

How much? The cash transfers exceed $1.5 billion, and we've broken it out into the three components. The tax overpayment, the 2020 cashmashment. management plan, excuse me, and the post-22 dividends that went to Topco. So let's start with Mr. Stafford. He was brought in as a member. He's one of the forensics experts at Alex Partners. Why was he brought in?

QVC as an enterprise didn't just use the intercompany due to do-from account as the sole source to track intercompany activity. They also used the APIC account and an additional paid-in equity accounts as well. So you couldn't just look to the general ledger and say, show me your AR and your AP and feel like you had a full sense of it. So they went back. We brought, Alex Partners came in and they traced the general activity using bank accounts, actual flows of funds. And he detailed his work in this demonstrative when they kicked off in December and their presentations to the decision directors along the way, as well as the creditors. to make certain there was a level playing field as folks appreciated the flows of funds.

What did those flows show? Starting with the excess TSA payments, that this is just the money flow. From Inc to Topco is $512 million greater than what Topco paid out to the IRS for the group. Now, I think Your Honor, I think you're getting to this point. with regards to the TSA. QVCG, the Topco of the Preferreds, was not a party to the TSA until June of 2023. This is the original agreement and the original parties.

DX1, this is the assignment and assumption agreement dated June 8th, where Liberty Interactive assigns, it transfers its interest up to Topco. and Curate Retail Inc is the name change becomes QVC group. So prior to that, Topco is not a party to the TSA. And Mr. Kerns confirmed there weren't any other agreements. He was asked, are there any written agreements between QBC Inc and QVCG or Topco prior to the date of this assignment? Answer. No.

So when we're talking about the overpayments, and you're trying to evaluate periods of time, We calculated the entire amount, but then focus in on, you know, if you're just looking at the year 2021, it's $233 million in overpayments in 21 and an additional $70 million in 22. That's $303 million in overpayments for just those two years. And I think Mr. Kearns, you know, put it plainly about what he thought ink was getting. under the TSI. His words, we got no value. We got nothing of value.

Now, turning to our next avoidance set of awarding's actions, the cash management plan, this is the $800 million. Again, thanks to Mr. Stafford, we traced bank accounts and some, you know, to prove up the 800.

It all went up to Topco first before, you know, some of the money was sent down to Linta. In addition to that 800, right, at a time when they weren't supposed to be moving money other than to pay debt services, there was additional money that went up. After 22 for that period of time that Mr. Stafford was explaining,

there was some confusion about which accounts to use. Three quarters worth of debt service dividends occurred to the tune of $343 million. That is another set of transfers from Inc to Topco that have to be addressed. Now, what is the plan resolve? It resolves all of these. The final thing that we resolve are the dividends to the PEPF. When we're looking, as we know, we know the PEPF origin arising out of the common in 2020, quarterly dividends of a little over $25 million.

If you're just looking at the years, 23, 24, and that first quarter of 25 that went out the door, that's $228 million of dividend payments to preferred holders. So when we're talking about the magnitude of the claims against TopCo, let's fill the wall. QVC has $170 million in cash. They're facing potential claims of over $3 billion. For the fraudulent transfer claims alone, the avoidance claims, you have the three stocks, You have the $800 million in claims from the cash management plan. You have the $340 million in claims for the post-22 dividends,

and you have the excess tax payments of over $500 million. $512 to be exact. In addition to that, we have the tax indemnity claim that we calculated originally $500 to $800 million of additional exposure beyond the insurance that was acquired mid-negotiations, now up to a potential billion with regards to the potential loss of the interest carry forwards. That's even after application of the $925 million insurance, right? Mr. Kegovit highlighted how these cows can go up. So just looking at this stack, the reduced stack, thanks to the insurance,

we have a $2 billion potential amount of claims. As Mr. Sussberg explained in the opening, all it takes is an 8% risk of loss on these. claims and all of the QVC cash is wiped out to satisfy those claims, not including any cost of defense or any cost for experts or any lawyers or anything else. But wait, there's more. You talked about these claims having, you know, the prejudgment interest that would be sought on these days also creates an additional amount. I mean, if we all step back, I mean, numbers we know well.

Delaware statutory prejudgment interest is federal funds rate plus 5%. Right? That's not 5% anymore. That's nine. Nine and a half. These are real numbers of prejudgment interest that are going to be sought. Let's turn to an overview of the deal. First, we'll go big picture, then we'll talk about the gives and gets.

Overview of the deal from the QVC, QVC group settlement claim. We know this well. It resolves all potential claims. you know, against QVCG, it addresses the future task risk, tax risk for QVC group. Known and unknown, any audit by any taxing authority, at any point in time. They come back to the group and they can't look at QVCG again. Eliminates the clawback risk on the PREF who took $450 million of dividends out. And in exchange, QVC receives the remaining assets,

after the distributable cash, you know, including Cornerstone. On the QVC Linta side, QVC will not receive distributions from Linta on account of the intercompany claim. Linta agrees to release all claims against all debtors and QVC contributes to $23 million to Linta. And then broader with regards to global releases and fee burn, each of the four sets grant and receive mutual releases. And all post-petitions shared a statement.

professionals all eight sets of professionals including Kirkland and all the legal team including the accounting team including our crisis and PR folks all eight sets of advisors ink covers all of that and then Cornerstone will be transferred to QVC with all claims within Cornerstone unimpaired now getting to give them gets let's start at QBC group what does QVC group get. They get full and final resolution on tax and other exposure that could be $3 billion. They have no obligation on the shared administrative expenses for the entire case. They have cash to satisfy top-cost administrative and priority and general insurance claims in full.

They get a release on the preff and they avoid fact intensive and expert-intensive litigation on the tax liability and the intercompany claims. What is Inc. Inc. gets fast and final resolution. A global piece that we're looking for. They get a $400 million claim after deducting the admin expenses and general third-party gucks. And they get potential. There's clearly uncertain upside with going to cornerstone.

62% obviously that is owned by Topco. And of course they get the distributable cash. That's available after paying everybody above them. Let's focus in on the process to get there. Start with an October framework proposal. The company puts out there, right? This is the company's proposal, and normally not focusing on disclaimers, but this one is important that we, they stressed,

the company's management team and its advisors were distributing this term sheet as a framework to facilitate the negotiations with the other creditors. You wanted to make absolutely clear the decision directors and managers may retain with the potential conflicts. They handle all conflicts matters. They identify conflicts. They handle conflicts. They're not signing off on this proposal.

They're reserving all rights. So that's in October. The company's trying to engage with the creditors, and they're going to let the DEDs run their process in parallel. And that's what they did. The decision directors relied on the people that were already on the ground, the boots on the ground from Kirkland and Alex partners to facilitate the document review, the diligence, and the management interviews.

They got a kickoff. factual summary of the material transactions and all of the support. Here's what we know, go forth and do. That starts in November. And from October to February, each special committee performs their own investigation with their own counsel, evaluating potential and actual intercompany claims. They review and analyze 60,000 documents. They participate in over 25 meetings with other disingen directors and or through their council,

and they conducted seven interviews with key members of management. And then Topco brought in additional independent tax advice to bolster Cobre and Kim. And that's the firm we heard about before the former IRS lawyers, including the former prosecutor. All of this is in the record. All of this is supported not just by the documents themselves, but the meeting minutes and the statements by each of the groups. Your Honor, when I first saw this slide as a litigator, I hated it. There are so many words. right but you know I was prevailed I hated because it's so little it is so little it is so little you may need a

magnifying glass on this one but this covers the negotiation and you know follow-on process not from October to the February but from February to filing there's been a suggestion that somehow that we addition to directors got together Kirkland and cut a deal in four hours and that is not true and it's 100% rebutted by this in this page. Every statement in here is documented and cited with supports and you trace the negotiations every step along the way. All of this is in evidence and explains the evolution and the efforts from mid-February up until the day of filing. This deal doesn't get finalized until literally the eve of the filing and it is the necessary step to get to the RSA. RSA counterparties are not signing on until they know that they have

this is resolved as well. So in the negotiations, right, you have disinterested evaluations of the facts. Mr. Meltzer, of course, brought in Cobrey and Kim and leaned in and relied on their investigative skills to evaluate it. He's not trying away privilege, but he has access to inform, you know, and evaluates these folks. They evaluated. the strengths and weaknesses of the claim. They evaluated the strengths and weaknesses of the deferred liability. They evaluated the strengths and weaknesses of all the fraudulent conveyance arguments. And with that, the special committee formed a view, a view going in. As did the Inc. The district directors, excuse me.

Chikovic knew what he had in terms of potentially $3 billion in claims. He also knew what he was looking at. How much, you know, what were the assets of a top code? He says 180, it was actually 170, 170 in cash, right? And he's basically saying himself like, I could ask for a billion, or I can ask for the lowest number that as a fiduciary, I could accept. That's how they got to the 400 number. After knowing they could ask for $2 billion, they could ask for a billion dollars, they could ask for a billion dollars. They're still going to get the same recovery. They landed on 400.

but it was undeniably a substantial reduction from the gross amount. Now, again, there's been a suggestion that Topco just rolled over, right? In the meeting, both Mr. Kegovic and Mr. Meltzer confirmed they pushed for an additional quarterly distribution to the PEPF, an additional $25 million. That was the demand from Topco. And I think the response wasn't, did you fight hard enough? I think at some very basic level from an ink perspective, you heard Mr. Keglevick, that was my money. That was ink money that leaked out of this system for years, $225 million in 23 and 24. And that's why, you know, from the ink perspective, it was an impossible line to cross, right?

That money had already come from ink in the first place. And the last thing that ink was going to say was, I'm going to allow you to have more. That's the red line. Now, also we heard in testimony, the original demands, the original proposals did not include a release for the preferred shareholders. The Caton original term sheet didn't include a release. That was an open issue. And so from Meltzer's perspective, that was important. For Topco's perspective, that was important.

And so when asked, what did Topco get? it's that they were able to get things that you couldn't get if you won the litigation. You win the litigation, you go to war, you might win on the litigation, obviously consuming resources. But if you can get in a settlement additional things that even if you ran the table on litigation, you wouldn't have that also create massive billion dollar plus exposure, that's a win. So from the Meltzer perspective, from the Topco perspective, he's highlighting, We took the principal risks off the table. We got a release for the preferreds,

but we took the liabilities, the tax liabilities off the table. And so when he's saying the tax liabilities, that's the IRS. You also took the tax indemnity liabilities off the table. That's Inc. And we allowed for the Gucks to be paid in full. And I resolved that I'm not going to be responsible for advisory fees on a go-forward basis post-petition. What's the alternative?

Right? Topco evaluated that as well. Meltzer testified it, even if I was successful in defending the claims, his testimony here highlights, Topco is not going to be able to distribute the cash, right? Even if they win the claims, they're not done. That DTL issue, if it's being audited or litigated, is going to freeze any distributions. So the money is just going to sit. It's not as if it's going to be handed out to the PEP. even if they won on all of the inner companies. And why is a settlement sometimes better?

Because litigation has costs and indirect costs. And some of those indirect costs are disruptions on a business. That's far more important for Inc. The only operating business that's going to be on the, that is part of this business. You have cornerstone in Inc. TopCo doesn't have that concern. But because Mr. Kegovic is thinking about the interest of the operating company, that matters to him.

But I want to be absolutely clear. The other alternative is pursuing the PEPF as a potential source of value. There's no doubt if there wasn't a settlement, Inc is going after the PEP as subsequent transferees. And when pressed, well, litigating with the PEP doesn't lead to full and final. I think Mr. Kegovit made absolutely clear. If this settlement blows up, it's not about fast and final anymore. It's about maximizing returns all in, and that includes litigation with the PEP. They're willing to compromise to a point.

So, Your Honor, we've heard a lot, you know, I believe on Monday. And even before then a little bit, attempting to draw comparisons between the settlement with Topco, the Inc. Settlement with Topcoe and Inc. Settlement with Linta. But Topco and Linta are materially different in terms of some of the risk exposure. And it starts with the basics. Lent is a disregard of an entity for tax purposes. They have no tax exposure from an IRS perspective. They don't exist.

So that takes the DTL completely off the table for that entity. In addition to that, the liability management program, the liability management exercise in the fall of 2020, the money that was used, the vast majority of the money that was used to incentivize ink creditors to move out the maturity wall to 28 and 29. That came from Linta. It was... 24 or 2020?

I apologize. It's 2024. What did I say? Okay. I apologize if I only spoke. No, no problem. So the 24 liability management exercise, that's a pushback down of $277 million. Depending on what perspective you have, Inc says, well, thank you for returning my money, because that, you know, that arose from the cash management program.

From the Linta perspective, it certainly is a discussion point for the negotiations. Certainly differentiate yourself from Topco. in many ways. The other key component, and I see Ms. Janamondra will address the A-10 issues, but there's no question

about whether you can confirm a plan or not at Linta without the consent of the funded debt. It's a non-starter. The debtors need Linta creditors on board to confirm a plan at Linta. That's a material difference in terms

of getting through. Inking can get through these cases. We'll talk about how Topco can't. Inc. can get through because it has a deal with Linta. In addition, not discussed as much, but the Linta disposition of assets could give rise to certain tax issues along the way. That was an additional factor in the Inc. perspective, because if they're the last remaining entity, all of these audit issues, when the positions are taken, all the activity for 26, if the plan's implemented, Linta's gone and Topco is gone. on, Inc. files a new return in October of 27, and that starts the process. So in many ways, regardless of who caused the issues or whose activity might trigger an audit,

it's Inc.'s problem. And then finally, this last point, which is really, I think, important as we evaluate, it's how Mr. Keglevik thought about the entire process. When you're looking at Linta, it already has a large claims pool. 1.8 billion in debt. As he thinks about it, at most I have is my inner company note. So I already have a very large claim pool and I have very little, there's not that much cash up there. There's only 70 million in cash at the Linta. So you already have a large claims pool that will dilute recoveries and a much smaller portion of cash relative to Topco. And that's

exactly how Mr. Peggick thought about it as he was evaluating these deals, right? As he thought about these deals, as he says, even if I got the entire value of the promissory note, I hit a home run. I have 1.8 in funded debt. I have 1.74 in a promissory note. I have 70 million in cash. I'm looking at a 50% recovery or $35 million max recovery in that process. And that drove his thinking about how you engage with Lent. Now, why these terms?

why land on these terms? What are the issues? The first is solvency is the litigatable issue. Your Honor, we called this out in part because Mr. Kegovik, as he's wanted to do, sometimes gives a longer answer. And I say that because that's a page and a half of testimony, but every point he hits, you know, is here. When he looks at the litigatable issues, what is Inc.

C, it sees discounted dead, but looking more at the performance of the company, substantial reductions in revenue in 22, substantial reductions in EBDA or EBITDA, right? A very difficult environment for retail companies. He sees the borrowing of money to pay for the dividends, and he knows about covenant issues. This is someone who's been a CFO, who's dealt with some of the most complicated cap structures known. He sees these issues, and he knows there's problems. And yes, Inc. has one sole opinion, the Kroll, Duffin-Felps' Solomency opinion from that time period,

December 19th of 2020. But I think Mr. Kegovic also articulated some of the major concerns with that well. You start with, obviously, the building block for any valuation or Solomency is management productions. And they relied on management projections when, you know, if you look at the performance, they, you know, He notes they routinely missed those forecasts. Order of magnitude in 23 and 24, Mr. Kegwick testified the miss was a total of $2 billion from the target. So he was concerned about the sensitivities and the downside analysis that Kroll did on those

projections given the historical miss and historical performance of that management team. But he goes on. At the time, the yields on the debt were clipping up to 20 and 40 percent depending on the tranche. He also noted that the cruel opinion had no mention of retail stress and that the selected company multiples that were used as comps were higher than what ink was and how it was performing in the process. He certainly thought there was risk that the company was insolvent.

What did we hear in response? We heard promises, promises in the objection about FTI coming in and how that the they were going to bolster the Kroll. They will present expert testimony. They will confirm Kroll's conclusion. But Your Honor, they pulled them. There's no evidence supporting the Kroll support. None of the FDI witnesses chose to testify.

But we do have contemporaneous evidence of what FTI thought because we have their presentation from the fall, from October, where they came to curate retail, otherwise known as Topco, to flag the companies experience significant cash flow challenges. There's an urgent need to reposition the overall business strategy. This is two months before the cash management plan. They went on. Let's look at the first quarter of 22 performance. Revenue dropped year over year by 14.7%. EBITA dropped by 51.4%. Operating cash flow down 760 million to a negative $58 million. FTI is warning global macro economic shifts will drive near to intermediate term pressure on sales and margin.

This is happening and it's going to continue. FGI goes on. You're experiencing top line pressures. Sales have failed to materialize post-pandemic. You need to revisit target segment and positioning to turn around its double-digit declining sales. And to put a finer point on it, decline in sales and margins. In the first half of 22 have dropped operating cash flows by $760 million. That's the perspective in 22 right before the cash management plan.

By the time Mr. Wofford arise, he has an inability to move cash upstream under compliance with certain covenant ratios in his credit agreement. He never has to make a solvency rep to pull down money, but he can't move it up to help Topco any forward. And I think Mr. Keckler highlighted this too, that $800 million dividend, most public companies don't pull a revolver to do it. That was his perspective,

but they definitely did to make the $800 million work. It wasn't cash off of operations. It was increasing, the draw on the revolver by $600 million. So solvency, it's going to be a litigatable issue. It's going to be litigated. It would be a battle of the experts, as Mr. Meltzer acknowledged. It would be a long duration and an uncertain outcome.

So what are we hearing here? They haven't said it definitively, but they sure have leaned in. Their argument is you must hire a solvency expert to settle a fraudulent transfer case. You must hire one. That can't be the law. That is a terrible policy decision. You can be informed, but they're suggesting you're not informed, regardless of your experience, regardless of the information, regardless of the legal teams, unless you hire a solvency expert. What do we know if Topo gets one, Inc. gets one, Linta gets one.

Everybody's getting a solvency expert, and all you've done is take the litigation battle of the experts, and pulled it forward into the settlement negotiations. That settling is to avoid those costs. That's the goal is to avoid those costs. It can't be that you have to incur some of the major costs of bringing in professionals to do full on solvency analysis pre-litigation to settle these numbers. Why did they settle in the terms that they did?

Let's talk about Cornerstone for a minute. Cornerstone, and I mean no disrespect to the people who work there. It's not a great business. It has large revenues, a billion dollar plus, but the orbital margins have been single below low single digits. One, six, three, two, three percent since the COVID peak in 21. It's a low margin business.

It is. And the turnaround is they're trying to implement it. It's a struggle. You know, the performance to date on the, the 4x8 of the 26 business plan, they're off. They're off on revenue and they're off on orbita. Now there is one valuation in the evidence of Cornerstone. It's the Evercore valuation. Now this is not, this is the valuation with the QVC synergies, $85 million with all the synergies of being part of QVCI. You didn't hear a competing

evaluation from FTI. What we also hear? We heard that there were serious concerns over the last year about whether Cornerstone would need an injection of liquidity. This is Mr. Kuyck. He flagged that if you're below $40 million, you start to get when you get liquidity that low, that's his testimony, you're going to have to stop paying vendors. You could lead some operational disruption. And the forecast running different scenarios is you're going to trip that scenario in July, August, and depending on the forecast September.

Now, some of the tariff rulings from the Supreme Court may have aided that, but it's not as if that money's going out the door. It's being put back into the system and has already been baked into that business plan. So what are the other options? with cornerstone. The incremental costs of trying on the on the balance sheet of trying to separate out cornerstone

what would have had to stand alone on its own would add an additional $25 million in costs to leave the mothership and that starts with the UPS agreement that very valuable agreement given the amount of volume that QVCI ships with UPS but it's also new

employees, other outside services the back you know the the infrastructure that you need with IT and audit, and obviously you get some savings for the management fee, but it's not dollar for dollar. That management fee is an asset of cornerstone. Now, you don't have to take my word for it. You don't have to take Evercores word for it. You need to look at how informed players react about the idea of owning cornerstone. Linta owns 38% of cornerstone. The bondholders in their term sheet in January made their views clear. No linta cash shall be used to help CBI.

They want to know. This is a call out of the term sheet that they sent over in January. They want to know what are our options. Can it be sold? Should we liquidate it? But their position on the bottom is absolutely clear. No L-I-L-CASC, no L-L-C-Cash, no Linta-Cash should be used for CBI funding, But we should have looked at others if CBI is going to remain a going concern.

That is an open question in the negotiations at this point in time. Is CBI going to stand up? What do we hear in response to all this? What do we hear? Oh, I didn't realize he did that. Your Honor, these are the five FTI experts that were going to come testify. This is the witness list. Mr. Modi is the one who created his own projections for CBI,

and Mr. Henn was going to come in and tell you what the valuation was. They never showed up. They're not here. The $85 million valuation for MEPA Corps is the only one you have. Topco has a 62% interest in that. That's $52 million. That's the value that's with the transfer. And if you look at the projections and the performance, that's all back-end dated. It's all about the back-end.

Maybe that comes to materials. Now, as to costs. You have both perspectives here from Inc and Topco. Mr. Meltzer said he was flagging, I think, here you've got very expensive claims that could be in very different jurisdictions. The IRS can sue you in one form and we could be battling out intercompany claims in another. And I think this is where Mr. Fegovic leans in a little bit more about him operating, running an operating company.

If you thought about litigating, all that did is hurt the estate, not just because of the time, but because of the, as you see on the bottom there, disruption to the operating company, right? He has to think about costs direct and indirect. And as to professional fees in terms of how we settled this and how we resolve this, let's look at what happened, you know, on both sides of ledger, not just one. Pre-petition QVCG, Topco, paid $90 million to cover all the shared professional fees for the entire period of time leading up to the petition date. They were reimbursed once for approximately $15 million. This is all Mr. Wofford's testimony, right?

That's $75 million out of pocket, right? What has and will QVCI or ink pay? They paid all of the insurance premium of $35 million for a potential liability they didn't create, right? And we heard the number from Mr. Wofford for the $3 million. first six weeks of this case, right? From mid-April through March through May 31st, $41 million accrued and I'm pretty confident the last 10 days haven't helped, right? So we're now they take on all that risk, all that amount of money. So if we're just doing, are we talking about apples to apples between what QVC paid out and what QVCI is paying out? You're already

QVCI is on the wrong side of that ledger and it's accrual. And they own all. the tax risk, known and unknown, and all the tax costs associated with defending it. So what have we heard from the preferred shareholders? We tried to distill down their points from their opening presentation and, you know, down to these five points. First, the process was a sham. The fix was in from day one. I think I've already covered the process and showed voluminously the work that was done.

In rebuttal, if I have to, I'll address more. Let's turn to QVCG capitulated. That's not good. This is from their opening. Can't be a settlement, it's a capitulation. QVCI is getting more than 100 cents on the dollar for their litigation. And that was kind of the tone and tenor of their cross. I think if you look at what was settled, it's more than just the intercompany claims.

The entire examination of Mr. Keglevik and Mr. Meltzer, they wanted to focus on the cost of litigating the intercompany claims and what they received in response. But the settlement is broader in the gives and gets than just the fraudulent transfer claims. And I think this is where Meltz are really reinforced about taking those risks off the table, right? And what was they able to obtain? They resolved the tax liabilities and they got to a point where they could have a plan with general and secured claims being paid in full and no longer paying the advisory fees. From Kegovik's perspective, it's not that he did better than 100%. He views litigation as a lose-lose, right?

That's, it isn't always have to be the case that one person wins and one person loses. Here, I think, Shikkevik reminds all of us that sometimes settling is the best for both sides. And both sides can win, and litigation here is a lose-lose for both of states. So we also heard from the preferred creditors that this settlement is the worst possible outcome for QVCG. That's from their opening. We can assure you, Your Honor, that is not the worst possible outcome. Here, you actually have a confirmable plan. Without a settlement, there's no path.

There's no clear path for Topco getting out. That's not my words. That's Mr. Meltzer's words, right? Because the DCL is an admin claim, it's top in priority. How can we pay out administrative claims or priority claims or general insurer claims until that issue's resolved? An issue that may take years. And I think Mr. Kegovik being a little more pithy, basically called it the way he saw it.

It's ugly, right? The solution here, if we're not resolving this in a consensual way, it's bad. it's bad for everybody. So what else do we hear? The preferred's alleged they were cut out of the process. They weren't considered. This is their slide highlighting, you know, they didn't have a seat at the table. That's not because of efforts of the debtors, Your Honor. As Mr. Wofford explained, I think others have as well, based because of how the PREF originated as a distribution from the common, it was very disparately held. and held by a lot of retail shareholders. The company knew that when they were trying to engage.

And then there was an attempted engagement. Hulahan Loki made an approach. Didn't identify exactly what the percentage was, didn't suggest who their holders were, but there was an engagement in the fall reaching out through Evercore. And Mr. Wofford, his CFO weighs back. Like, we want to engage with these holders. Right?

His understanding is the advisors replied back, and then they never returned. Hula hand never resurface. And then we get to February. Right. And the Cleary letter, right? Mr. Meltzer discussed this. He did evaluate it.

It was discussed at a special committee meeting, but more. He also wanted to know what does Mr. Brody represent? And he confirmed one to two percent. Very hard to engage in a way that resolves for a large class, one to two percent, even 10. Today, this group, after buying in post-petition, isn't at 35%. And what else do we hear? On the risk exposure to the DTL, that somehow we're supposed to equate the premium that you

pay for insurance with the risk associated of the liability arising. This is straight from the preferred objection page paragraph 37. And we didn't just see it in the objection. We heard it in the questioning of Mr. Kearns by Mr. Glenn. And I think Mr. Kearns, who knows a healthy amount about tax, given all of his experience, puts it straight. I don't think you can equate a dollar amount you pay for insurance coverage to what a tax professional opines on on a level of opinion. I just don't think you can take that, basically do that math and try to equate it with the level of confidence of a tax opinion. You may remember how that colloquy ended.

Mr. Kern said, I don't think you can. Mr. Glenn says, I think you can. I think we're going to take the sworn testimony of Mr. Kearns, you know, over, over Mr. Glenn on this one. It's not that simple. And then finally, Your Honor, I highlight this. This is also from their opening in terms of like just evidence of kind of how they stretch, right? The requirements for a 1990 stand on month. We know these factors.

We all know these factors. And when you see paramount interests of stakeholders, it makes you pause because that's not what the courts say. They say the paramount interest of creditors, right? That's what the foster decision from the Fifth Circuit. The magicians of the majority of creditors is what, you know, and that's including what Judge Lopez said just a year and a half ago, right? It's the best interest of the creditors. So finally, Your Honor, the settlement is fair, it's equitable, it's in the best interest of the asses. states and it brings us back to the wall of claims here. Ultimately what's being resolved

here in evaluation is all from a risk exposure it would take is for 8% risk of loss to occur. 8% on this wall of claims and all of their cash is wiped out. That's not the only reason. I think we've covered ad nauseum the reasons. But, Your Honor, we believe we've satisfied the 9019 standards we asked for the motion we asked for the settlement to be approved I will vow defer to Ms. Yanamandra for the remainder okay thank you good morning your honor morning your honor lamented that sometimes it's hard to see little things from the bench I fear as a tenure victim of the of the height of these podiums I may be one of those little things but I'm gonna I'm gonna try my

hardest to hope you see me and at the very least hear me your honor for the record of partner Yanamandra from Kirkland and Ellis proposed counsel to the debtors. I'm going to pick up where Mr. McCain left off and do my very best to not be duplicative. Your Honor has heard three days of testimony and an hour plus of closing on the intercompany settlement, but I would be remiss if I didn't take at least a minute to talk about all of the other things the plan does. The intercompany settlement is obviously a cornerstone, no pun intended, of the plan. But the plan does a number of other things. First and foremost, the plan effectuates not one but two going concern transactions, one for QVC Inc and one for Cornerstone.

As Your Honor heard from a number of witnesses, the restructuring outcome for Cornerstone was a question mark for most of the restructuring process. You heard about its uncertain funding needs. You heard about its uneven historical performance. You heard on an unrebutted basis, its valuation on a go-forward basis with the QVC Center, G's attached. The fact that against that backdrop, Cornerstone has achieved a going concern in which all of its claims are unimpaired is a monumental achievement. And between Cornerstone and CBC Inc. that translates to nearly 16,000 jobs saves. Two, the plan effectuates a massive balance sheet, de-leveraging, eliminating over $5 billion in funded debt obligations. Three, the plan

ensures that the operating companies are well capitalized at emergence. Your Honor heard at the first day presentation that we had an exit take-backed that facility locked up, but that we were in the market for an exit ABL. We a few weeks ago at this point secured a commitment and filed the commitment papers on a $600 million exit ABL facility that will ensure that reorganized QVC is well capitalized. Cornerstone will continue to get access to QVC and synergies at no cost and under the exit ABL facility cornerstone will have the flexibility to either participate in the facility or raise its own facility so it'll have access to those

funds if it needs it and finally the plan ensures that general and secured claims across the capital structure are paid in full this is particularly particularly notable here as mr. McCain noted and as no doubt you'll hear from the RSA parties at QVC Inc where the QVC Inc. notes and the QVC bank debt are taking a massive haircut while allowing almost half a billion in general and secured claims to be unimpaired. And finally, the plan resolves sprawling interdebtor litigation, which I won't belabor. Your Honor, over these next three slides, we wanted to just give you a snapshot of the 1129

elements. We've identified which ones are disputed and which ones are not disputed, and I will focus my presentation on the ones that are disputed. So the first disputed 1129 element is 1129A1. The preferred group as well as certain of the pro se objectors argue that the plan does not provide for equal treatment. And the basis for this objection is that the plan provides that holders of PEPE equity will receive releases, including in connection with the $450 million in dividend. they historically received. And of course, certain of the PEPH holders didn't hold PREF at the time of those dividends,

so they don't value the release. And in support of this objection, they primarily cite SIRDA. And in SIRDA, as no doubt Your Honor knows, there was a settlement indemnity in play that was valuable to some lenders and not other lenders. Your Honor, SIRDA is inapplicable here for a variety of reasons. Just to name a few. The court begins its ruling in CERDA by noting that lenders who lend under a credit agreement negotiate for sacred rights. And one of those sacred rights is often ratable treatment.

And so lenders negotiating for sacred rights when making loans to a company could not be more different than preferred equity holders receiving dividends pursuant to a PREF equity instrument. Number two, there was no massive up-tier transaction here as a precursor to a Chapter 11 filing. Number three, the court in SIRDA was very focused on the fact that the lenders who were not benefiting from the indemnity were the lenders that did not participate in the up tier, meaning those lenders who made an affirmative decision to participate in an aggressive transaction that elevated them over other lenders, we're now also getting the benefit of an indemnity versus those lenders who sat by and didn't participate and were fine to just comply with the existing credit agreement. We're not receiving the benefit. of that indemnity and the court was focused on the protection of that latter group. That is exactly what the debtors are focused on here. For the 37% ish in Mr. Glens group, the vast majority of whom either bought their positions in the weeks leading up to the bankruptcy when there were leaks upon leaks about a potential bankruptcy

or after the bankruptcy, after the debtors had filed and launched solicitation on a plan that contemplated no recovery to PRAF, those folks may not valid the release but the thousands of retail holders who sat quietly and who have not shown up over three days of testimony and who have not filed objections to the plan and who have not sent the debtors and formal objections those are the folks that the Serta Court was most focused on protecting and those are the folks that are protected under our plan your honor with respect to the disclosure statement their disclosure statement objection arises in connection

with 1129-82 which is why I'm dressing it here the focus of the objection is that the disclosure statement doesn't adequately disclose the intercompany claims that are the heart of the settlement, or more precisely, it doesn't disclose the relative strengths and merits of those claims, the probability of success on litigation, et cetera. Your Honor, we have a few responses to this. One, we've had three days of testimony on the intercompany claim, so I think suffice to say there's been a material amount of disclosure on them. Two, it is black letter law that when you are settling those claims as part of a 1919 you are not having a mini trial on the claims as you heard mr. McCain say and as you saw the

flash from the operative case law to then have to disclose in the disclosure statement the merits and costs of litigating the exact claims that you're trying to settle is to invite a mini trial so the fact that we didn't include that level of detail in the disclosure statement but instead had nearly 10 pages of single space detail on the claims themselves more than satisfies the disclosure statement standards. And finally, many courts, including many in this district, have found that the purpose of the disclosure statement is to ensure that there is adequate information so that those creditors who are entitled to vote on the plan can make an informed decision. That's what's happened here. And as Your Honor knows, the preferred equity is not

entitled to vote on the plan. That takes us to their 1129A3 objection that the plan was not proposed in good faith. Your Honor has heard a lot of a lot about good faith over the last several days. We wanted to sort of reset on good faith in the context of 1129 a3 where courts have said that to determine whether 1129 a3 has been satisfied, you need to look at whether there's a legitimate and honest purpose to reorganize, whether the plan is a reasonable hope of success, and whether the plan will fairly achieve a result consistent with the objectives and purposes of the bankruptcy code. And as Your Honor heard over three days of testimony, as summarized again by Mr. McCain,

all of these elements were satisfied here. Your Honor heard from all of the disinterested directors on the process they ran. Your Honor heard from Mr. Wofford as to the need to deliver QVC, Inc. Your Honor heard from Mr. Kise, Mr. Griffin, and Mr. Wofford as to the uncertain future for Cornerstone based on its uneven historical performance. Your Honor heard from all of the disinterested directors and Mr. Stafford from the Alex Partners team as to the uncontroverted evidence

that billions of dollars in actual cash transferred from QVC Inc. to QVCG and those claims are all resolved by the plan. And Your Honor heard in phrase in slightly different ways that from each of their perspectives, it is a lose-lose if the settlement is not approved and the estates descend into litigation. And I wanted to focus on this last point in particular within the context of what a director's fiduciary duties are.

From the perspective of the preferred group, what has become clear over three days of testimony is that they believe the Top Coast Special Committee had a fiduciary duty to litigate into perpetuity in defending the arsenal of claims that Mr. Kegovik was prepared to bring absent a settlement. And if in litigating those claims, that meant that,

and it's primarily defending those claims, as you heard, they believe they have few to none offensive claims. If in the process of defending those claims, Topco loses all of its cash, it risks administrative solvency, it risks not paying priority unsecured claims or general unsecured claims, it risks being stranded in Chapter 11 until it gets to a final

non-appealable order on every single one of the claims in Mr. Keglovak's arsenal. If it means it exposes thousands of retail holders to clawback actions where they will have to affirmatively defend themselves under 546E, if it means that they are susceptible to open-ended uncertain tax risk to the tune of nine figures plus, that's okay because that's what they should do instead of bringing certainty on tax, certainty to preff, certainty on a confirmable plan out of Chapter 11 as long as it means they don't have to give the cash back to the entity they took it from in the first place and there is nothing in the case law that supports that as a fiduciary's position rather we thought these were the two best sound bites on how to think of fiduciary duties that it is not a process that requires raw maximization at the expense of all other considerations and instead requires an estate representative to perpetually balance potential value maximization against any countervailing costs, risks, and delays, including considerations related to finality, stability, and expeditious resolution. And that is exactly what each of the disinterested

directors did in reaching the intercompany settlement. They maximize value and they minimized risk. That takes us to 1129.87. The preferred group argues that the plan as to QDCC does not satisfy the best interest tests. Your Honor, taking a step back, just a level set, the liquidation analysis that the debtors filed makes a number of assumptions, as we always do. One of those assumptions is about the sequence of events that would occur before there was a hypothetical Chapter 7 liquidation. So what we've assumed and what we disclosed as an assumption is that Your Honor would deny confirmation of the plan. The debtors would then take the intercompany settlement, pull it into a standalone 9019 motion presented to the court the court would approve it and then the estates would convert to a chapter 7

So under those sets of assumptions our liquidation analysis Locks in the intercompany claim at QVCG and then says once that claim is left in there's no recovery left for for equity and so first and foremost as we highlight on this slide that is a Accepted way to do a liquidation analysis when you have meaningful intercompany claims that would otherwise drive value one way or the other even in a liquidation this part of the liquidation analysis was also not rebutted and so even if you assume even if you assume the heart of the

pref argument is that if there's no intercompany settlements then in a liquidation all of the value of QVCG flows to the preferred And embedded in that assumption is the belief that if there's no intercompany settlement, the 400 becomes zero. And as you heard Mr. Keglovik testify extensively, and as you just heard from Mr. McLean, that is the exact opposite of what's going to happen. If there's no intercompany settlement, Mr. Kegovic is launching his full arsenal of claims of up to $3 billion. And so in a world without the settlement, the likelihood is that the $400 million is meaningfully higher. than 400 million not that the 400 million magically reduces to zero and under those circumstances as we've laid out here every stakeholder at QVCG does worse that takes us to 1129 a 10

which we believe does not apply as to QVCG your honor less than a year ago this court in container store issued a ruling echoing the rulings that other courts had already reached, which is that when parties agree to a settlement, and as part of that settlement, a party agrees to a treatment or recovery or both of less than what it is legally entitled to, that creditor is contractually agreeing that it's unimpaired. And so you see the quote from container store, which could not be more unequivocal. Parties who agree to a settlement under this provision are considered unimpaired. echoing the K. Lund Court saying that when a creditor has agreed or consented to less favorable

treatment, evidence through some form of stipulation or agreement, then the claim of this creditor is unimpaired, echoing the sentiments of the Spirit Airlines Court last year in the Southern District of New York, that the Code expressly contemplates the possibility of the creditor consenting to specific treatment that is less than its full legal and equitable rights, and if it does that, then that agreed treatment does not constitute impairment. And so, Your Honor, if you take that and you apply it to the debtor's plan at QVCG, we have two classes of unscured claims. We have third-party general unsecured claims, and we have the intercompany claim. Third-party general insecure claims are being paid in full in cash, and no one is arguing that they are impaired.

Pursuant to the RSA, QVC, the entity, contractually agreed to settle all of its claims against QVCG. And this is key. It's not just the creditors who sign the RSA. It's each of the entities and each of the special committees for each of these entities are the ones who ultimately approved entry into the RSA. So from our perspective, the RSA is a contractual settlement agreement between QVC Inc. and QVCG in which QVC Inc. has contractually agreed to settle all of its claims and receive the treatment and recovery set forth under the plan. As a result, that claim is unimpaired. That exact same result could have been achieved if we had just put the intercompany claim in the same class as the general and secured claims and declared the whole class unimpaired. We chose to break out the claims candidly to be transparent and open, so it was abundantly clear that one of the claims against Topco was this intercompany settlement claim. In response to this, the preferreds have a few arguments. all of which should be overruled. The first is that somehow the drafting history and the plan is relevant.

In their objection, they point to the fact that as the debtors were exchanging drafts of the plan with their creditors, the creditors at one point, maybe two points, maybe three points, it doesn't really matter, sent to draft back to the debtors that classified this claim as an impaired claim. Again, we don't think the history of the drafting has any legal import, but from the debtor's drafts' perspective,

we always viewed it as unimpaired assuming a settlement ultimately got struck and as you heard over the course of testimony for mr melzer and mr keblovick the settlement was not done until it was fully done and so that was you know the day we signed the rSA ahead of a filing their second argument is that the parade of horribles that will ensue if you take if if if a debtor does what these debtors have done and they say that any plan proponent could evade the impaired accepts in class requirement by drafting a settlement entitling a creditor to quote whatever is left over guaranteeing 100% recovery by definition while paying pennies on the dollar and your honor this argument just doesn't work for two reasons the first is that a

settlement by definition requires the consent of both parties to the settlement or it's not a settlement a debtor saying to a creditor here's a contract i've drafted where i I demand that you take less than what you are legally entitled to is not a settlement, and that creditor is not contractually agreeing to take less than what it is entitled to. Second, and perhaps more importantly, even in their scenario, 1129-810 would still apply if there was another class of claims being impaired. This is, in fact, exactly what happened at Linta. Linta and Inc. resolved their intercompany claim, but we,

would not have had an impaired accepting class and thus a confirmable plan at Linta absent the absent carrying the class on the funded debt claims and ultimately this is what 1129 a 10 is combined with 1123 is intended to do it is a path for creditors who consensually agree to lesser treatment to consensually agree that they're unimpaired this is what container store provides but only if all other claims are also impaired exactly what happened at Linta What you're really hearing from the preferred shareholders is that 1129A10 should apply to impaired classes of equity. And that's not what 1129A10 says, and the bankruptcy code says in about 100 different places that claims in equity are not the same.

In pursuit of these arguments, the PEPF also make the argument that the debtors are improperly seeking approval of the plan on a per-plan basis instead of a per-debtor basis. Your Honor, let me be clear. We are seeking approval of the plan on a per-debtor basis. The fact is 1129-8-10 does not apply to QVCG, for all the reasons I've walked through, but every element that does apply is satisfied. And so all of the paper and arguments around why the per-plan approach doesn't work are not relevant because we're not seeking approval of our plan on a per-plan basis. Turning to 1129B, they argue that the plan.

is not fair and equitable because QVC is receiving a greater than 100% recovery on account of the intercompany claim. Your Honor, as Mr. McCain summarized, and as you've heard from Mr. Griffin, the unrebutted evidence is that Cornerstone's midpoint valuation is $85 million with the benefit of QVC synergies. You also heard from Mr. Griffin that Cornerstone's balance sheet cash is not excess cash, and thus that $75 million is not additive to the $85 million. You may have heard other testimony from FTI had they testified, but without their testimony, this is unequivocally the unrebutted evidence. QVCG owns 62% of the potential $85 million in value, or approximately $53.2 million.

And so for QVC to be receiving more than 100% recovery on account of the intercompany claim, QVCG cash would need to be double what it is now. It would need to be at least $347 million. in. There is no testimony and no scenario in which QVCG's cash is multiplying 2x in order to achieve that result. And so for that reason, we think this objection should also be overruled. Finally, Your Honor, that takes us to the U.S. trustee's remaining objection. First, I'll convey my thanks to Ms. Whitworth and the Office of the United States Trustee that we were able to resolve all of the other objections, so this is the only remaining one as to the third.

third-party releases. Let me start by saying the plan as we filed it and as we launched solicitation on already complied with container store insofar as it provided that any classes of claims or interests that are deemed to reject me to opt in. So that's already in the plan. And so the remaining objection is just on on whether the opt-out is consensual for all of the other classes of claims and interests. We see no reason to deviate from well-established precedent in this district and this circuit and in courts across the country that a failure to opt out is consensual, and we would ask the court to overrule that objection as well. And so with that, Your Honor, we believe we satisfy all the 1129 elements.

We think that the objections to the 1129 elements should be overruled for all the reasons. we walked through and as a result of the in recognition of the presentation of evidence. Our final piece here is just on the PREC shareholders motion to terminate exclusivity given it's a joint record. Your Honor, we start by simply noting that we are less than two months into the case. Next week will be our official two-month anniversary. And so if ever there was a time to not – not terminate exclusivity, it's when you are well within the initial exclusivity period and when there is – when there is no question that

the debtor has been diligent in its attempt to reorganize, as is clear by the plan that we launched solicitation on and as is clear by the wealth of evidence you've heard over the last couple days. I did want to spend a minute on the Adelphia factors. that we further detailed in our objection to the exclusivity motion, starting with the size and complexity of the case. As we laid out in the First Day Declaration, this is a global enterprise with $6 billion of funded debt

and nearly 16,000 employees worldwide. As you heard from Mr. Wofford, there were four separate sets of independent fiduciaries very intentionally put in place almost a year ago for the precise occasion that brings us here today. As it relates to good faith progress, we think the RSA speaks for itself, although you will hear from the RSA parties momentarily, as does the fact that nearly 60% of the PEPF has not objected formally or informally in recognition of the value of the release they're getting. Regarding the need for time to prepare adequate information, we've discussed the disclosure statement,

But in addition to that, you've heard from four independent directors as well as the statements and declarations they filed detailing the work they've done. There is no evidence that we're not paying our debts as they come due at all of our boxes. Regarding the reasonable prospects for filing a viable plan, obviously we've filed a plan and our while underway prosecuting it to the extent your honor denies confirmation your honor will no doubt provide rulings in connection with the denial and we think the right answer as I'll touch on more in a moment in that scenario is for the debtor and all of their stakeholders to evaluate those rulings and determine where we go from here versus immediately launching into chaotic litigation again with respect to the

progress negotiating with creditors we the RSA speaks for itself as does the fact that we've been in bankruptcy for less than two months. And, Your Honor, the last thing we want to touch on before we officially close the closing is it touches on what happens if the plan is not confirmed, but it also touches upon what happens if exclusivity as a QVCG is terminated. And you've heard a lot of testimony about Mr. Keglovak and his arsenal of claims. you for testimony from Mr. Meltzer on, you know, his, his boxes inability to really emerge from bankruptcy absent either a settlement with QVC Inc. or litigation all the way through to a final

non-appealable order on claims that are going to be brought in multiple courts and multiple jurisdictions involving multiple experts. And the sort of Armageddon they describe is really the same thing as the alternative that the preff laid out the alternative plan the preff laid out in their exclusivity motion where everybody else reorganizes and emerges other than qvcg which stays in chapter 11 spending its uh cash in time defending itself against mr keglovick's arsenal and so as we think about what that alternative looks like we wanted to walk through at a high level and give your honor a closing snapshot of what our plan resolves versus what the alternative opens up to our plan resolves intercompany claims the

alternative plan reopens all of the intercompany claims the RSA becomes terminable as to all of the creditors but also all of the estates so the Linta settlement also comes back into play cornerstones existential crisis comes back into play as to the tax liability risk I won't belabor the point you've heard testimony as to the nine-figure plus uncertain risk let alone the unknown tax risk that continues to become a live issue for QVCG without any certainty. You've heard about the thousands of retail holders that will now potentially be defending themselves against avoidance actions by QVC Inc. General and secured claim recoveries at the

very least that QVCG and Cornerstone become a question mark. And this litigation will cost whatever it ends up costing to prosecute three billion of claims in the way they need to to be prosecuted to get to a final non-appealable order so at the end of the day your honor we believe our plan satisfies 1129 it satisfies 1919 and the alternative is chaotic litigation that will be a lose-lose for not only all of the estates but for all of the stakeholders that will be the states with that your honor almost your honor has any questions um i believe next up will be the the RSA parties. All right.

Why don't we, should we take a break now or should we finish the RSA parties? Okay, why don't we take a break now? How long do you think you all need for lunch? And by the way, this exercise has once against proved that Mr. McCain's prediction that lawyers can predict time is not correct. Your Honor, with 30 minutes work? 30 minutes works. It's easier for me, but if 30 minutes works for you all, that's fine. Okay.

Yeah. Oh, yeah, that's fine. Yes, that's fine. Okay, so why we come back at quarter to one? Thank you, Your Honor.