American court hearing recordings and interviews - Season 8. Episode 1. April 2, 2025 Bankruptcy Court Hearing (The Dolphin Company/Leisure Investments Holdings LLC, et al.)

Episode Date: May 23, 2025

This audio recording and other filings in the bankruptcy proceedings are available here: https://www.veritaglobal.net/dolphinco/document/list/6300

We've seen it. Good afternoon, Your Honor. We've had a long day already. It's been a day. It's been a day. Well, obviously, Your Honor, thank the Court for scheduling us today on a very busy day. We'd also like to thank Mr. Hackman from the Office of the United States Trustee. We're pleased to report.

We've been working with him, and we have largely resolved all of the U.S. trustees' comments. I think we're down to just one outstanding issue with respect to what we're calling the 542E. in the 542E motion. Other than that, Your Honor, I move forward with some introductions. In the courtroom is Stephen Strom. He's the debtor's independent director and

the declarant today. As you, no doubt, saw from Mr. Strom's declaration, he has substantial experience in restructuring generally, and in particular, dealing with very challenging situations, and this may be one. On

Zoom today, Your Honor, is Robert Wagtstaff, he's the debtors proposed CRO from Riveron. Mr. Wagstaff is on the ground in Cancun, is where the debtors are headquartered, so he is appearing by Zoom today as a result. From Young Conaway, Your Honor, I'm joined by a number of our colleagues, but I anticipate presenting today will be Sean Greacher, Allison Malkie, and Jared Koshinash. And the first lien lenders are here, Your Honor, and also our proposed dip lender, Prudential, and SIGNA, and they're represented by Baker and McKenzie and Mr. Cousins. So, Your Honor, the circumstances we find ourselves in here, very recent governance change, lack of current financial information, reports of severe operational distress, serious concerns over animal health and welfare, aren't necessarily the standard set of circumstances that this court typically sees. That said, we think with Your Honor's help as we get out of the gate here

and the use of the tools that are available under Chapter 11, we expect and hope that in a relatively short period of time, we will have this case on a more typical path, consistent with other restructurings before this court. Your Honor, the background, there's a significant amount of detail on Mr. Strom, declaration I want to address just a few key points for the court's consideration but obviously if your honor has any questions or needs more detail on any specific point you'd be happy to cover that I do want to reiterate that as

mr. strom's declaration makes clear some of the information in that declaration is dated because the company has not generated audited financial reports since 22 it has not time we provided reporting to the first-themed note holders. The most recent financial information that we've had access to is from the third quarter of 2023. The company is an international operation, operating more than 30 attractions in eight countries, primarily U.S., Mexico, the Caribbean, and Italy.

These are recreational attractions focus on dolphins or other live animal encounters under the trade name the dolphin company. Overall, the company has roughly 2,400 animals, about 295 dolphins residing at these facilities. The company employs more than 2,600 people,

and in 2020, had 3.5 million visitors to their dolphin habitats, marinas. The company has in excess of $200 million of funded debt. That's in two tranches of first and second. The first lien has been in payment default since January of 2024, so over one year.

And the second lien has been in payment default since September of 2023. Additionally, Your Honor, there are credible reports indicating that the company has been without access to essential liquidity. Liquidity necessary to pay vendors, taxing authorities. There's reports that they've delayed or not paid certain wages, and have not adequately provided for the health, safety, and welfare of the animals in their care. Again, as Mr. Strom's declaration indicates, the facts of all of these issues will be clarified as Mr. Strom and the management team gains control over the company. But given these serious defaults and concerns for the health of the business and the health of the animals,

I'm really in the absence of prior management having any plan on how to address these matters. The first lien note holders, after exhibiting what appears to be, significant patients took steps to exercise their control rights and remove the existing members of LIH's board. And they did so and then appointed Mr. Strom as the sole independent. At that point, Mr. Strom caused L.I.H. to retain men. Mr. Wagstaff as the CRO and Riveron as restructuring advisor. After that, the firstly note holders exercise their control rights in the equity interests of the Mexican affiliates to remove those entities' boards and appoint Mr. Strom there as the sole independent director for those entities.

And once that was completed, Mr. Strachan removed the remaining debtors, boards, and appointed himself as the independent director there. This process is ongoing. I know Your Honor has the org chart. Right now there's a total of 15 debtors, the lead debtor and 14 affiliates. We're taking steps now to replace the boards with Mr. Strom at the other entities, but we're following the proper procedures for the jurisdiction where those entities are incorporated. And some of that is taking more time to go through the process of replacing the board and installing Mr. Strom. but it is underway and we do expect several more debtors to file as we affect that change.

Now, the court may be wondering, you know, why did the independent director and the CRO determine the file Chapter 11 now before they really had an opportunity to get their arms around the business operations of these debtors? There's really four reasons, Your Honor. By all accounts, the company's in dire financial position. They've been in payment default, as they indicated, on the firstlings for over a year. In discussions with the first-ling know-holders, they made it clear that they were prepared to lend to this company, but only with the management change. And inside of a Chapter 11, where there could be appropriate transparency,

they were also clear they would not be primed on their first-ling debt. There are animal safety concerns around reports of dolphin deaths, particularly in the last six months. and government action to investigate, alleged animal abuse concerns, have caused a very difficult situation that we want to try to address immediately. Legal actions, judgment liens are all starting to pile up, whether it's eviction proceedings,

efforts to collect past due amounts, or attachments. There are significant legal actions going on. And Your Honor may have noticed that the prior management commence the Conquerso mercantile similar to a bankruptcy in Mexico. That was, again, filed by the prior management. In our review, Your Honor, we can't see that the company that filed had the requisite corporate authority to commence a concurso mercantile. But really, more importantly, Mr. Schaum has determined that such a proceeding can't really

create the platform for the global restructuring that's required here. It deals with only one entity in Mexico. I can give you an update on that proceeding, Your Honor. On March 31, new management did move to withdraw, the Concurso mercantile. There was a hearing yesterday and continued to today, and it recently ended, and we expect the ruling very soon. But the current management has to withdraw from that. If withdrawal is successful, we do intend to file that entity as a sister company.

So really, in sum, Your Honor, given the substantial financial uncertainty, the ongoing lack of transparency and responsiveness to animal safety, the legal proceedings, the filing of a Chapter 11 proceeding to invoke the automatic stay and to allow the new director and CRO, the breathing spell to do the work necessary to get their arms around this company and put it on a path to maximize value. So what does success look like in this case? We see it playing out in three phases. First, stabilizing proper management and oversight of the business.

That means what seems like some basic, stuff, Your Honor, getting eyes on the parks, access to bank accounts, access to email, and the servers. Really basic, but critical stuff. Top of mind, animal safety, Your Honor. We can't say it enough. We're very concerned that the lack of liquidity has caused a situation where the animals are not being properly cared for. We want to get in there and find out and do what we can to make sure that's fixed. So success in phase one, Your Honor, is that the animals are safe, they're properly cared for,

employees are paid on time, vendors are paid for their post-petition services, and the company operates in accordance with the obligations of Chapter 11. We're already actively looking for allies in what we call a must-succeed project of animal safety. Hopefully we'll find those people within the company. We're also looking at consultants outside the company. We've begun to reach out to those individuals. And we're looking for people who will share the goal and help us do what's necessary to keep these animals safe.

Must succeed Project 1B is getting our arms around the financial operations of the business. Again, this means fully understanding cash management, where are the bank accounts, emails, server, employee payroll, vendor, services and really other goods and services necessary to avoid a shutdown scenario that would both hurt the value of the business and put the animals in further danger. So we're hopeful that we're going to be able to take the steps necessary to make this happen as quickly as possible. Mr. Wagstaff, as I indicated, is in Cancun with his team from Riveron doing what they can to push this process forward. But the relief that we're seeking today will be very helpful in the first step. in sort of implementing phase one of this plan.

We want to do everything necessary to comply with the bankruptcy code, obviously, and really in turn determine the best path forward from an operational standpoint for this company. So as you're here in connection with the DIP financing motion, the firstly note holders have stepped up with an emergency funding opportunity that the company can use to address the dire needs as they are discovered. We have some buckets, we call them, of where that funding can be used, but we are working on a more comprehensive dip budget, and we have 15 days to do that. We're hopeful that we're going to get access to the information to provide the court creditors

and everyone else involve all the other stakeholders with a budget. That's phase one, Your Honor. We then move to phase two, and that's a state value maximization. The debtors have already contacted investment bankers with appropriate experience for a company of this type, and interviews are scheduled shortly. After we've ensured that the animals are safe and being cared for, and we have our arms around what assets the debtors have, Mr. Strom, his advisors, will determine how best to maximize the value of the business for the stakeholders.

Success here means generating as much value as possible from these company assets. Phase 3, Your Honor, is sort of down the road. It may even be part of a Chapter 11 plan process. That's a full investigation, accounting, and reckoning of the historical issues related to these debtors. Looking at potential state causes of action against third parties. Success there will be to identify those causes of action, Your Honor, and to allow stakeholders to understand what happened here and to seek recovery for the estate, for those state holders.

So in sum, Mr. Strom and his team are beginning to form a strategic plan for the debtors that will not only stabilize but hopefully improve animal welfare and operations, optimize the performance of the core assets, identify non-core assets for disposition, and restructure the debtor's lives, Now, we expect those who are in a position to cooperate with this process will fully and promptly do so.

If they do not, if their actions or inaction jeopardize animal welfare or the safety of employees, will be back in front of this court. Again, the relief we seek today is the first step in that process. As we get better information, Your Honor, we promise we will provide the court updates and other parties, so people understand how things are progressing. Again, depending on the urgency of situations, we may be bothering, Your Honor, for some emergency relief. We apologize in advance for that in position.

We're going to try to organize this as best as possible and try to resolve as many issues as we can out of court, but if we need to come to the court. So hopefully this context helps the court's consideration of the first days we have today. I'm happy to answer any questions your honor has. This is helpful, and I did read the filings. I noticed the situation in which the debt of found itself

and how the lack of institutional knowledge that the current director and the CRO have, understandably, because they weren't involved. And I hear that the CRO, thank you, Mr. Radsaf is in Cancun, which is the headquarters. Correct. And so is that where all of the books and records, such as they are, or the access to computer records is?

We expect that, Your Honor. There may be, you know, there are U.S. facilities in Miami and other places in Florida. So there may be books and records in more than one location, but certainly the corporate headquarters is in Cancun, And that's where the Riveron team and Mr. Waxstaff are focusing their efforts now. And is there any kind of operational staff that's still in the Florida locations? Yeah, the Miami Sea Aquarium is still open, as is the facility in Panama.

There may be a few others. The Panama facility has been the subject of some action by the State Attorney General for concerns over animal welfare. but I believe it's still operating, and we've been in touch already with the Attorney General's office in Florida, and I believe we have a call tomorrow morning with them to explain that the company now has access to more liquidity. Well, obviously you've identified the paramount importance of the animal welfare,

as well as the... But I assume that there are regulations. various states or in various countries with respect to animal welfare. Yes, Your Honor, and the company has a staff that can handle this. We need to get access to them and find out who's going to stay with the new management team to help implement changes and use this new liquidity to make sure that we're properly caring for the animals. Yeah, I would hope that there would be internal and on-site records with respect to the animals. bankruptcy and there are residents and there are patients that need to be taken care of

and state regulators who are quite interested in what is happening with... Yes, Your Honor, there's plenty of news reports to look at to indicate there's reason for concern here, and then again, that's a reason that we filed so quickly to get access to liquidity to be able to make some changes. Okay, thank you. So with that, Your Honor, unless you have any other questions, as I move the admission of the Strom Declaration for purposes of this first day hearing. It's an objection. Hear not, it's admitted.

All right, thank you, Your Honor. I think Mr. Kosh and I will start off the agenda. It's your lucky day, Mr. Koshosh. Good to see you again. For the record, Jared Koshnosh, young Conaway, sorry I'm going to tell it on behalf. I sympathize with your honor. We'll get through it together. Hopefully the few motions that I'm presenting are a little bit more.

more straightforward than what we discussed at the previous hearing. But obviously if you have any questions, ask Mr. Brady because he owes me, big time. I think you're right. But anyway, thank you, Your Honor. And I'd like to reiterate Mr. Brady's thanks to Mr. Hackman. He's been very responsive in getting us his comments. And as always, so I'd like to kick it off with, as usual, the joint administration motion. As Your Honor saw, we had 15 debtors that are affiliates within the meeting of Section 101 of the Bankruptcy Code.

For the reason, set forth in the motion, joint administration is warranted under local rule 1015-1. And importantly, we are seeking this relief for procedural purposes only, and procedural consolidation would promote the efficiency of these cases. And so, unless you have any questions, we would request that the court enter the order. I do not. Does anyone wish to be heard with respect to the joint administration motion? I hear no one I reviewed it. It's appropriate. I will grant it. Thank you, Your Honor. The next item is number four on the agenda, and that is the debtor's application to retain Kurtzman-Carsson consultants doing business as Verita Global as the claims and noticing agent for these cases. The debtors have over 200 creditors and in excess of 1,000 of notice parties in these cases, I believe.

We are still running down the notice parties, but it could be potentially over 1,000. And under these facts and our local rules, the debtors are required to retain a claims agent. Also consistent with the court's claims agent retention protocol, the debtors solicited three proposals to serve as claims agent in these cases. After reviewing these proposals, the debtors selected Verita based on its competitive pricing structure and expertise. And I should note that there was a notice of revocation. order that was filed I believe we have the red lines that I can hand up to your honor please chance to look at any so with respect to the the KCC retention there was

just one change two changes one was to attach the engagement agreement as exhibit a to the order and to change the term verita to indemnified parties throughout the order in connection with the indemnification provisions it's a broader term I take it I believe so. Okay. Unless your honor has any questions, we would respectfully ask you enter the order, approving KCC as claims agent. Order. It all looks in order.

The next item for your consideration is the motion confirming the worldwide automatic stay. I believe your honor is familiar with these sorts of orders. They're typical in cases with foreign vendors where we obviously have a lot here who are not necessarily familiar with. chapter 11 proceedings and so a comfort order is typical and we believe necessary and appropriate in these cases that was also subject to some US trustee comments that I see your honors reviewing one sub paragraph of part of paragraph two of the order to the addition of what is now paragraph 11 I see these changes which were also items I have flagged and

Because I view these motions is really just a repetition, if you will, of the code, but not enlarging provisions of the code, but simply just restating, or as this paragraph 11, it says, it's declarative and intended to be code terminus. That's a good way to say it. Yes. Paragraph three, courts of competent jurisdiction shall take all appropriate measures required to enforce and recognize the Chapter 11 cases. Sounds like I'm mandatorily ordering some other court to take some action.

And I don't know that I have seen this type of provision in one of these. I have a concern there. Maybe it's with the shall nature of that sentence. It's a fair question. We can change it to make. I guess it's qualified by. I did, as you can tell, I did review this motion. I do, as I said before, consider it to be a comfort order

and co-extensive with what's in the code, recognizing as counsel has stated that, understand, requested and that's going to be made. The motion shall to courts of competent jurisdictions. To reflect the comments from the Office of the United States trustee and my request of change. Thank you very much, Your Honor. The last item that I will be presenting today is the motion to authorize Robert Wagstaff as foreign representative.

Section 1505 of the Bankruptcy Code allows a debtor in possession to obtain a court order authorizing a trustee or an entity to act in a foreign country on behalf of an estate created under Section 541. As a CRO in these cases, Mr. Wagstaff is well positioned to represent the debtors in a foreign proceeding. and to serve as a foreign representative to ensure that any such proceedings are well coordinated with these Chapter 11 cases. Also, authorizing Mr. Wagstaff as a foreign representative will avoid the added expense of retaining a third party to act as such. I'd also note, as Mr. Brady laid out in his presentation, there are a lot of unknown in foreign jurisdictions, so there is a chance of immediate and irreparable harm if Mr. Wagstaff is not appointed, and is able to act quickly, especially with respect to the concourse. So with that, we believe it is appropriate to enter this order

because there is a substantial risk of immediate and irreparable harm to these states. Thank you. Does anyone wish to be heard with respect to the foreign rep motion? I hear no one. There certainly may be need, and already apparently is a need, to have a foreign representative who can represent debtors in other courts as necessary, and I will find it as necessary to avoid immediate and irreparable harm in the context of these cases, and I will approve this. Was there any change to this order? I don't believe so. I believe Mr. Hackman just had a question that we answered offline, but I believe that this was as is.

Okay, thank you, and it will be signed as submitted. Thank you very much, Your Honor. That is it for me for today. I'll see the podium to Ms. Milkey. I'm at allison Milkey for the debtors. As you've heard this afternoon, the debtors are in a period of transition. By all accounts, they have been running on fumes, desperately in need of financing and leadership. As part of the recent management transition, the debtor CRO has begun to address this issues as Mr. Brady has identified. They first did that by securing dip financing, which my colleague Mr. Groucher will speak to shortly.

Second, they addressed these issues by immediately flying to Mexico to assess the conditions of the debtor's facilities, including the debtor's most sensitive assets. There are dolphins, sea lions, manatees, seals, and other animals to help to transition the operational leadership through meetings with the debtor's workforce, with banks, with accountants, with lawyers, with vendors, and with customers. Mr. Wagstaff is a highly experienced individual. He has a unique set of skills for this assignment. He is bilingual. He has previously lived and worked in...

Notwithstanding these exceptional characteristics and circumstances, Mr. Wagstaff will most certainly face and already has faced significant challenges in taking control of an operation that has been run by the debtor's former C-Wagstaff. since its inception and has by all accounts a very small, closely held leadership team, or closely held organization with a small leadership team. While the debtors and Mr. Wagstaff would be commercial and respectful in their efforts, employees may not welcome this transition and they may not be cooperative.

Former management may attempt toward the process, and employees may not want to speak with the new management for whatever reason. It is critical that Mr. Wagstaff and his team have access to the books and records of the company to information related to the debtors' properties and facilities and to the debtors' financing. As you've heard, we are at a deficit in terms of information, and the lenders in this case have not received financing information for a long time. And it's imperative that Mr. Wagstaff and his team have full access to the debtors' books and records and any other information, whether that's maybe not the debtor's books and records,

but still related to the debtor's books and records like credential information or other types of access. This will provide Mr. Wagsaff with an additional tool in his arsenal to help him importantly feed and manage the animals, to maintain the facilities, to construct a budget, and ultimately to run these Chapter 11 processes, which, as we all know, requires a substantial amount of diligence and reporting, which is onerous even in the best of cases. And that is why the debtors filed their motion at docket number seven, for an order requiring that the debtor's former and current management and workforce provide records and information relating to the debtor's property and finances, to specifically Mr. Wagg's staff and the debtors,

and particularly for use in discharging Mr. Wagstaff and the debtors' responsibilities in these cases. Now, I will acknowledge this is not routine relief, certainly not on a first day. And 542E is a lesser-known code provision, and, you know, this is not something you've probably seen before, particularly in a first-day setting. Not in the first day. The function of 542E is big-fitting of the current circumstances. And I would say, Your Honor, that these are exceptional circumstances, and it's not really that you'll see us come back to you trying to achieve in a run-of-the-mill case. As we know, 542E is directed to persons that hold record information, specifically books, records,

papers, and documents relating to the debtor's property or financial information. It requires that a person disclose or turnover such information to a debtor and possession. It's unlike Rule 2004, in that it's significantly more narrow. The records that are disclosed relates only to the debtor's property or financial affairs. And the debtors here, as I mentioned, are not seeking information as a fishing expedition to garner documents in support of claims or causes of action or other matters, which might impact third-party economic rights or claims or defenses. Rather, this is to obtain information to run the cases.

to operate the business. It's to administer the cases, which is the standard under 542E. And in this case, approximately 2,400 animals and the debtors require food. The debtors need this information in order to be able to ascertain what food requirements are necessary,

what care requirements are necessary to put in place the individuals that will be necessary to continue to manage them and to respond to things like the Attorney General's investigation or, you know, frankly, just to run the business. It's a critical. It's also the payroll information that they need to come to work.

And it's not a matter for two weeks from now. It's a matter for yesterday. Mr. Weifestaff is on site currently trying to get access to the company's email systems, to their books and records, to the pass code, to the front door. All of these things are critical information that needs to happen. Any tool that is available to us, and that this is a really important preservation of the estates and administration of the estates.

So while we would know that this is not typical relief, and certainly 542 does require notice and a hearing, we would submit that the standard for irreparable harm has been satisfied here, and then it's appropriate to enter a relief on an interim basis now. Parties will have an opportunity to come back and object, and we are happy to set this for a final hearing, and parties will have plenty of time to determine whether there's an issue with the relief that we're seeking. But again, because the information that we're seeking is limited,

it's directed towards former officers, insiders, employees, and it's specifically with respect to information related to the debtor's property and finances for purposes of administering these states, submit that this relief is abundantly proper and appropriate. I'm sure you have questions for me. I see that changes are that this is now an interim. order yes to be heard with respect to the request under 542e council noted on this motion I thank counsel for the debtors and lenders in working with us

to resolve our comments on the first date pleadings one of our initial comments on this motion was to request that the form of order be made interim which council graciously accepted the US trustees position is that section 542 e after notice and the hearing. We're sensitive to the animal welfare concerns that are present in the case and the needs to access information. We're struggling to square five business days. This part a setting says after notice in the hearing. Failure to produce the information would expose proceedings.

As I read the pleadings that have been filed, there's no top 30 list that's been filed yet. I'm not sure the extent to which the creditor. body has received notice of the cases themselves. As I read the motion, I did not see the previous cases cited where this type of relief was granted. The U.S. trustee is prepared not to oppose short notice. This relief being served out on notice. Your Honor has any questions for me.

I would submit that that's satisfied here. With respect to notice the employees, this is going to come, these requests are going to come probably in person. Of course, we'll provide notice to the extent that we absolutely can. If the concern is that somebody is going to be held in contempt as a result of failure to abide by the order, first of all, that's within your honor's control. And certainly, Your Honor can address that as a remedy

to the extent somebody comes in and we have a fight about whether something should or shouldn't have been turned over. Moreover, the statute requires that. obviously privilege information is not to be turned over. So really there's no reason here to think that information related to this shouldn't be turned over. So if there's an issue with that. Opportunity to deal with Section 542E recently, though we haven't issued an opinion yet on it, it isn't a statute that's often used, although I will say that I see it more in my Chapter 7 trustee cases.

They seem to know that provision is here. And it is, I think, being used appropriately here with the request, because the information sought is the books, documents, records, and papers relating to the debtor's property or financial affairs, which is what this debtor needs. It does provide that this section, this application, this relief, can be brought up motion. And it does say after notice in a hearing. And after notice in a hearing is addressed in section 102.

And section 102 of the code says that that phrase means after such notice as is appropriate in the particular circumstances and such opportunity for a hearing as is appropriate in the particular circumstances. And there's a but. It authorizes an act without an actual hearing, if such notice is given properly, and if, skipping a little, there is insufficient time for a hearing to be commenced before such act must be done, and the court authorizes such act. So I think it is up to the court to take a look at the particular circumstances here,

and I would hope as much of a due process person as anyone, but I think under the circumstances of this, case it is appropriate to issue this order on an interim basis I will hear anyone who has an issue on an expedited basis if they come in front of me to argue that whatever it is the debtor is trying to obtain from them somehow is not records documents that they hold that relate to the property of this debtor are somehow personal and unrelated to the documents of this debtor but I agree what we're really addressing here is an irreparable harm issue in that sense almost a TRO standard and I think under the circumstances here with the welfare of the

animals in particular is that issue and where there is a concern expressed based on, I'll say, based on the lack of cooperation with the pre-petition lenders in terms of providing necessary and required information, as well as the need to immediately access the debtors books and records. Under these circumstances, I'm going to grant this motion. And I do think it's appropriate to do it on an interim basis, and we'll set up a final hearing, but again, I will also hear any concern anyone has on an expedited basis. I do also expect the debtors recognizing the unique nature of this relief are not going to be pressing in front of me contempt motions. In the first instance, or at the first moment they don't receive cooperation, but will in fact

work with particularly the employees to get their cooperation. And I would hope that these employees, particularly the ones that work with animals, welfare of the animal most at heart. But this may also give those employees some cover in terms of working with the CRO and our new director. So it hopefully will give them some cover to be able to do that on a cooperative basis rather than on a compelled basis. So for all those reasons, I will enter this order as revised. Thank you, Your Honor.

I'm Sean Greecher from Young Conaway for the lead on the agenda, which is the hearing to consider interim approval of the debtors. Motion for use of cash collateral granting adequate protection to secure note holders. As Mr. Brady said, motion supported by Mr. Strong's declaration. We also heard from Mr. Brady. and read from Mr. Strong's declaration be acute challenges the debtors are facing financial defaults, significant uncertainty around critical operational issues, particularly in the areas of animal safety and welfare. Debtors have worked hard with firstly note holders. Unfortunately, note holders have stepped up to provide for the consensual use of cash collateral and access to emergency dip funding under these extremely challenging set of circumstances.

funding that will in our view be necessary to protect the animals to preserve value in the estates and to help shape the next acts of these cases. There is, to put a plainly, a substantial and immediate need. Mr. Estrom's declaration establishes unequivocally that the debtors have an immediate need for that money. I won't rehash the history here. But suffice to say, there's a history here. The Riveron team is in the process of getting access to the books, the records, the accounts. That process is ongoing this week.

That process will be bolstered by the orders that Your Honor has entered. This, as we said, involves various parks where living animals are located. While it's critical to get arms around the business for a variety of reasons, it's absolutely essential to ensure that the health of the end, so without having any timely financials to rely upon, nonetheless, the note holders have stepped up to provide. Given the urgency surrounding these challenges, the lack of available information, and the unwillingness of the first lien holders to be primed,

It was clear that first we know holders were the only likely source of funding today and under these circumstances. As mentioned, the debtors in the process of interviewing potential investment banking candidates. Part of the investment banker's mandate will certainly be analysis of dip terms will present the results in the conclusions of that analysis in connection with them. There's one unique component of the proposed interim dip structure here in order to prepare a typical 13-week cash flow budget. one needs access to the data supporting such cash flow. So Mr. Rwaixtap's team will obviously work toward that. We're working with Mexican Council, and we'll use every... So the interim dip loan is a two-phase loan.

The first phase is a borrowing of $1,500,000 prior to preparation of that initial approved cash flow budget, and the balance of the interim borrowing of the $4 million, A traditional 13-week cash flow budget to be delivered within 15 days or such longer time as the required lenders will agree. We will, of course, file that budget. So the first uses of the first $1.5 million will be to fund essential obligations as needed, including first and foremost costs related to the caring health of animals, costs related to providing transportation services for visitors to the company's facilities, costs related to the operational planning for security and logistics of Ribran's efforts in Mexico. Costs related to obtaining access to books and records, estimating fees and costs of the

professionals and of the claims and noticing agents, and other operating expenses. For example, I think as Mr. Brady indicated, potential costs of an independent veteran and any consultant to assist the company, to assist the independent... As for terms, the DIP calls for payment of various customer fees, $70,000 of fees to the agent accrues interest at 11%. Debtors are seeking approval of first priority liens on all property of the debtors' estates, including upon entry of an order of a final order proceeds of the avoidance actions subordinate to the carve-out and offers what we believe to be reasonable and customary methods

of adequate protection to the first liens and second liens. A small set of milestones, an investment banker, a carve-out for professional fees and disbursements for both the debtors and any committees appointed in the cases, as well as the U.S. trustees fees. There is a request subject to a final order for Section 5 to 6C and 552B waivers and limitation of the... So, Your Honor, as you were having fun at your prior hearing, we did file a black line. I don't know if Your Honor has it.

If not, it's subject to Your Honor's preference. I am happy to step through that black line. We did speak significantly with Mr. Hackman, all of the comments that he has raised. So there are a number to go through, and I'm happy to go line by line with you. But obviously... First, I note that there's a reference to 12 bilateral debt instruments. What are those? I think if, I don't know if the council of the lenders have a view, but there are certain debt instruments with respect to a number of the foreign entities. One moment, please. I just wanted to make sure that we were fully, folks will correct me. There are, we believe, and again, given the dearth of books and records, you know, we have reference to this in certain documents, but it appears that there are approximately a dozen agreements, jurisdictions, foreign jurisdictions. Acts relate to local payments. As far as it is a subject of look like. We have reference to them, but we've not had the opportunity to study those.

Is the dip order doing anything? I believe, Your Honor, to the extent that those are prior perfected liens. So, but again, certainly don't want to make any broad proclamations on documents that, unfortunately, we've not had the opportunity to see. Okay. It seemed to me an E. Romanette 1 that we're making, that the debtors making stipulations about a non-debtor and the lenders. So, Your Honor, I think that we are clarifying. that that was one of the clarifications that we've made in connection with discussions with Mr. Hackman. If you have the red line, I think what we're saying is that each pre-petitioned first-lead in Grantor,

other than Dolphin, which is the non-debtor, joint and severally guaranteed. It's consistent with the no purchase agreement. Obviously, that's a stipulation subject to. The notion here is that this order is a stipulation of the debtors. The debtors are making this stipulation, and so the debtor is stipulating to their obligations here. There is no, from my perspective, and again, the proposed interpillar will correct at me,

but there's no intent to stipulate on behalf of a party who's not before you. Clarifications in Romanette. Yes, Your Honor. This is of the same piece. again this is to clarify exactly what the debtors position the debtors who are before you believe are there joint in several primary obligations under cash collateral needs to be a debtor stipulation in what constitutes cash collateral i'll let the debtor the debtor the debt lenders council respond to that certainly understood i was looking down Thank you.

Okay. Ms. Conn agreed with me, as she is wont to do. Now I'm on page 15. It's 16 on. So today, as I understand it, we're not approving any portion of the roll-up. But this provision, there are several places where it talks about including the roll-up. Is there somewhere that says, I hate these things, notwithstanding anything else. I'm not doing anything with the roll-up.

I don't believe that we put such a provision in the document. I can certainly represent and would ask that the note holder council, the Diplander Council similarly represent is clearly the intention to have issues of the roll-up considered at the final hearing. I think we should at least say subject to the final or something of that sort. because otherwise I would just take it out. In the lead-in to Romanette 3, you'd like it to say subject to the final order? So entry to the final order?

Yeah, which, I mean, it's talking about how it's being authorized. I understand what the lenders want here, but I don't think there's a place in the interim order, but if there's going to be something in the interim, we need some qualification. I saw head nods, and I'm going to take them, Your Honor. Entry to this says pursuant to the direction of the... all of the pre-petition first lien note holders, the pre-petition first-leaning agent has consented. There are other provisions in this order

that talk about required lenders or majority of lenders or whatever. I don't know, because I don't have those documents in front of me, whether the agent has the requisite authority or not, and I don't get into whether the agent has a requisite authority. I assume it does, or otherwise it wouldn't enter into, but I've got those kinds of provisions all over here, all over this, and even more so in this provision toward the, I guess it's second to last sentence, language at the end of the first

sentence talking about consent is binding on all pre-petition first-land secured parties. I don't get into the inter workings of, I would like those references to come out I assume the agent has the authority it needs but I don't know that and I can't confirm that so that's a sort of a global okay so start that sentence with the pre-petition first-le agent has consented right and then similar and then there's the language here each of the pre-petition firstly note holders have expressly consented I would strike that whole sentence probably should be and then it was interesting because it says each of them has consented and then it says none of them

remaining well who would the remaining be if each of them have consented so there's some internal inconsistency in there too so I don't want to get in the middle of that okay so would your honor be willing to say none of the pre-petition firstly note holders has filed an objection well they haven't so that would be true this is why I did so well in logic in college there you go very good that those for the offensive yeah but you'll need to comb through this and just take a We will, of course. See, you know, similarly pursuant to the direction in paragraph.

Yeah. We'll make the, we'll make the... I just want to see if I'm correct. Is that if there's something in the order that's contrary to the dip loan documents, the dip loan documents prevail, and that's not usually the default provision that we go with. I read this as saying that the relative rights and private rights and private, priorities to say is if there's a dispute between roll-up dip secured parties and other dip secured parties whatsoever in the dip documents is not, has the same priority as what I'm granting here in this order,

because I'm granting rights in collateral in this order. Your Honor, we will strike it. In paragraph C, it has the $8 million figure in here. and I thought we were under the interim borrowing of up to four. That is correct. I think that we can modify that to just say $4 million. Perhaps we could say the aggregate outstanding amount for all such borrowings as pursuant to this order shall not exceed $4 million.

I just also want to make sure I'm correct, that all of the current debtors are guarantors under the pre-petitioned. facility. Last sentence, reading it is, it says that the pre-petition first liens are going to turn over to the dip agent, the cash collateral, so that the cash collateral can be applied to the dip obligations. But I thought the debtor was using cash collateral so I could be wrong. Just went to the side and keep moving. And we'll, yeah, we'll. The pre-petition, second sentence, no. Third sentence, all such use, cost, indemnities, etc. I'll authorize the debtor to pay them, but I don't affirm or ratify expenses pre-petition or post-petition. So, affirmed and ratified. I say I can this, Your Honor.

Dip lien interests that the debtors directly own. Confusion, 100%. It is the equity interests as they are, as they are held. Okay. And are those currently collateral of the dip lenders? I assume so. They are. They've been exercising rights.

Okay. full, paid in full, repaid and full. Is all of this consensual? Respect to the statements that adequate protection claims may be impaired pursuant to any Chapter 11 plan? Yeah. If it's consensual, I don't... It's hard to make this consensual, so I'm looking for a hand-on,

and I just received it, yes, it's consensual. I notice that there are references to first-day orders. We don't obviously have operational first-day orders yet. I would just caution that the operational first-state orders should be consistent so that there is no inconsistency between priorities given and this. So if we need to make adjustments to first-day orders, we need to do that. Understood, Your Honor. I should state that consent-depriving and adequate. The lender who've requested this, my understanding is that the consent here, the circumstance of these cases, is being granted

under the totality of the circumstances here. It's being granted to these debtors that are subject to in custody, Mr. Strom, and the oversight of Mr. Wagstead. And I don't have any issue with that. Provided further that such consent shall be of no force and effect

if this interim order is not entered, I guess, but this would assume it was entered, or is entered and subsequently reverse-modified that that means they gave their consent now, but if this gets reversed, they didn't give their consent? I just don't understand what that. I mean, I get that we're not going to consent anymore. If it gets reversed on appeal, we don't consent.

And if the judge doesn't enter the order today, whatever consent we've been working among is ended. But I guess I don't understand how this would work, what this means. I guess, Your Honor, imagining a parade of horribles. that, for whatever reason, Mr. Strom, we're not here. We have a similar order. Process was carefully orchestrated. The transition of the board and the management was carefully orchestrated

and is an essential component to getting us here today and stepping up here today. So paragraph. Circumstances regarding the management of the company. Provided further that such consent shall be. of no further force in effect in the event that the interim order isn't entered for its reversed on appeal. Under the circumstances and given that the above described adequate protection is consistent with the bankruptcy code, including 506B, that seems to be an implicit ruling that pre-petition

lenders are entitled to interests, attorneys fees, et cetera, that they haven't allowed, secured claim. And I'm not prepared to do that today. So if that reference can just come out, got a similar issue on the consent that we just talked about. Consent shall be of no further force and effect. There's somewhere in here that it says that recording officers shall be authorized and hereby is directed to file,

and I'm okay with authorized but not directing some recording officer. I think that's consistent with where the court's been for a long time. time. Of course and I can't see it now. I see it now. I see a change. The change, Your Honor, is to, the additional language bestows party status on a Chapter 7 or 11 trustee in connection with any timely challenge that. An issue here given the change in management that addresses the Delaware Supreme Court facts issue. So, Your Honor, there are corporations here, So, again, in our experience, the issue, the BACS issue is where we are solely dealing with LLCs, but we plainly have corporate entities suggest that entities.

Respect corporate separateness, right, as to who has what cause of action, how these debtors were run free bankruptcy? Understood. It's one moment on this. So, Your Honor, if we could include the language with respect. to the LLCs specifically. Perhaps that's a reasonable middle ground here. Yes.

We'll include that language and we will say with respect to limited liability companies that constantly. I do see that we have a cash management. I assume because we don't have a cash management order. Yes, Your Honor. And the addition there was to make it clear we're not trying to sneak one by the U.S. trustee or anybody not seeking a permanent waiver or obtaining a permanent waiver section 345 as and when we have

issues with respect to what happens on a termination event and access to the court noted in the very beginning of that paragraph 66 were there changes made to in the red line 67 is that part of 14 What is that part of? It is. That's part of 14. And again, Your Honor, you did strike the provision. ...enforce and realize on its dip lanes, it's fine, on all of any portion of the dip collateral,

including collecting accounts receivable, applying the proceeds thereof, and by occupying the debtor's premises to sell or otherwise dispose of the dip collateral. I guess they can do that consistent with state law, but I have no, you know, there's some landlord out there who isn't here. What is it consistent with state law?

Okay. Who is it consistent with applicable? There's a lot of that in EIC, but it's all subject to the next E. It's all subject to entry of a final order. Survival of interim. They don't seem to contemplate what happens on a final order. Like, how does this interim order survive if I have a final order? This is where I'm just what the interim order says.

Most of the time we get to a final order and that's negotiated. And so that should supersede. the interim order but I'm not sure this says that it might but like it governs in the interim at least I think the final order should govern this is I don't want there to be any inconsistencies in any orders and those first-day orders need to be complete so we accept your admonition comments I have I'm not gonna take the blame for this many comments because when you give me an 80-page dip order than you get what you get.

Your Honor, I was ready to challenge Cory Booker's time to hear. Did I say that from the bench? I think I just did. Your Honor, I was ready for far worse. But my filibuster time is certainly short of what I was ready for. So thank you, Your Honor, for all the attention to this. We appreciate the time and effort.

Let me ask. Does anyone else want to be heard? There we go, Mr. Hackman. It was. Your Honor, let me note there was a change, and it may not have showed up in your black line. There's language in paragraph 20A that we are taking out. It will appear in the black line that you receive with your other changes. Paragraph 20A had language stating that the proposed final order shall be substantially the same as the interim order, except that provisions that are interim shall be final.

U.S. trustee had concerns with that. I miss that. Why, it's good to have a second set of eyes on these things. Your Honor, you can be assured that Mr. Hackman did Yeoman's work. No doubt. In fairness, but we are striking that language. You'll see that stricken in the final order. In the final interim order.

Thank you. Okay. I will approve borrowing on an interim basis in the amount of four million. as it's set forth a million and a half and then a budget and the other two and a half a million based on the uncontested testimony that I received through the declaration. Clearly there's a need for financing. There's a need to do it on this unusual basis without a budget, without fully knowing the finances of the debtor, but under the circumstances of this case, there's no option.

and I find that is necessary to enter this order to avoid immediate interim. Thank you, Your Honor. We appreciate that. We'll work with the dip lenders to revise the order and submit it under certification of counsel. Very good. Just let chambers know when that's done. We'll get it signed. We will, Your Honor. Thank you. That's all for today, or do we have anything else? Oh, we need a second day, don't we? We do need to talk schedule. Okay. Let's talk to schedule. I know that's milestones under the order. Our deadline to have an entry of it, that is not convenient. So let us know what works for you. We can certainly work.

So fluid here. So any guidance as to when the court may be available, shoot at a date, certain. We, that would probably be helpful guidance for us. For an interim traditional first day? For a traditional first day hearing. And you're thinking next week, like Tuesday's the best day. The alternative is just reach out.

Just reach out when you know you have the set that you want. And I'll find somewhere to put you in. I tell you, in April and May I'm going to be squeezing people in, and some of it may be at 9 in the morning, and some of it may be at 6 in the evening, but we'll get people in that need to be in. Fortunately, Your Honor, Mr. Brady's a morning-rider, and I'm a night-house.

We'll work it out. Thank you. We appreciate your cooperation and assistance with today's hearing and what's anticipated to be future hearings that may be challenging, but we look forward to the challenge. And we hope today we're adjourned.