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1
2 UNITED STATES BANKRUPTCY COURT
3 SOUTHERN DISTRICT OF NEW YORK
4 Case No. 09-11233-REG
5 - - - - - - - - - - - - - - - - - - - - -x
6 In the Matter of:
7
8 CHEMTURA CORPORATION, et al.,
9
10 Debtors.
11
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13
14 United States Bankruptcy Court
15 One Bowling Green
16 New York, New York
17
18 June 17, 2010
19 9:47 AM
20
21 B E F O R E:
22 HON. ROBERT E. GERBER
23 U.S. BANKRUPTCY JUDGE
24
25
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1
2 HEARING re Debtor's Motion to Extend their Exclusive Periods to
3 File a Plan of Reorganization and Solicit Acceptances Thereof.
4
5 HEARING re: Third Interim Fee Application for DLA Piper, LLP
6
7 HEARING re Twenty-Sixth Tier I Omnibus Objection to Certain
8 Proofs of Claim [docket 2740]
9
10 HEARING re Twenty-Seventh Tier I Omnibus Objection to Certain
11 Proofs of Claim [docket 2741]
12
13 HEARING re Twenty-Eighth Tier I Omnibus Objection to Morris,
14 Sakalarios & Blackwell, PLLCs Proof of Claim No. 1002 [docket
15 2742]
16
17
18
19
20
21
22
23
24 Transcribed by: Dena Page
25
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1 A P P E A R A N C E S :
2 KIRKLAND & ELLIS LLP
3 Attorneys for Chemtura Corp., et al
4 601 Lexington Avenue
5 New York, NY 10022
6
7 BY: NATASHA M. LABOVITZ, ESQ.
8 CRAIG BRUENS, ESQ.
9
10 KIRKLAND & ELLIS, LLP
11 Attorney for Debtor
12 665 Fifteenth Street
13 Washington, D.C. 10022
14
15 BY: BRIAN T. STANSBURY, ESQ.
16
17 AKIN GUMP STRAUSS HAUER & FELD LLP
18 Attorneys for Official Committee of Unsecured Creditors
19 1 Bryant Park
20 New York, NY 10174
21
22 BY: PHILIP C. DUBLIN, ESQ.
23 MEREDITH LAHAIE, ESQ.
24
25
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1 SKADDEN ARPS SLATE MEAGHER & FLOM
2 Attorneys for Official Committee of Equity
3 Security Holders
4 Four Times Square
5 New York, NY 10036
6
7 BY: DAVID M. TURETSKY, ESQ.
8 JAY M. GOFFMAN, ESQ.
9
10 U.S. DEPARTMENT OF JUSTICE
11 Office of the United States Trustee
12 33 Whitehall Street
13 Suite 2100
14 New York, NY 10004
15
16 BY: BRIAN S. MASUMOTO, ESQ.
17
18 JONES DAY
19 Attorneys for Ad Hoc Bondholder Committee
20 222 East 41st Street
21 New York, New York 10017
22
23 BY: RICHARD L. WYNNE, ESQ.
24
25
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1 P R O C E E D I N G S
2 THE COURT: Chemtura. Ms. Labovitz, you're taking the
3 lead today?
4 MS. LABOVITZ: Good morning, Your Honor. I'm Natasha
5 Labovitz from Kirkland & Ellis representing the debtors. Your
6 Honor we have a hearing today in which all of the matters we'll
7 present to the Court are uncontested. That said, I do think
8 some of them will require some explanation or updates to the
9 Court which we're happy to provide. With Your Honor's
10 permission, we'll go in the order in which things are laid out
11 on the agenda.
12 THE COURT: Sure.
13 MS. LABOVITZ: Okay.
14 THE COURT: I will look to you for leadership. I
15 don't have my copy of the agenda with me.
16 MS. LABOVITZ: Okay.
17 THE COURT: I assume it was provided. I don't know
18 where it is.
19 MS. LABOVITZ: Okay. That's fine, Your Honor. The
20 first item on the agenda is the motion to extend.
21 THE COURT: Forgive me. No I am not talking about the
22 calendar. I'm talking about the agenda.
23 MS. LABOVITZ: We understand. I have a copy that I
24 can hand up, if it's helpful.
25 THE COURT: All right. Thank you.
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1 (Handing)
2 THE COURT: Okay.
3 MS. LABOVITZ: The first item on the agenda is the
4 debtor's motion to extend their exclusive periods to file a
5 plan of reorganization and solicit acceptances thereof. Your
6 Honor, the debtors have requested a 99 day extension of the
7 exclusive periods. It's not an even number because we have
8 requested the maximum extension available under the statute.
9 So this is the last time we will be before the Court on
10 exclusivity.
11 At this stage of the case, we have made really what I
12 would consider to be tremendous progress through some very
13 complicated issues due to the very substantial efforts of many
14 of the people in the room and many who are not here today.
15 At the time we filed our exclusivity motion, the
16 company also put out a press release saying that we would file
17 a plan by June 17. They did this because the company has been
18 receiving numerous and escalating questions and concerns from
19 suppliers and customers as the case has extended now into its
20 second year asking when the company will be emerging from
21 bankruptcy and what progress it is making in its case.
22 I'm happy to report that although we have not filed a
23 plan right now, we are very optimistic that we will file a plan
24 this afternoon. There is a board meeting at noon to consider
25 it and we anticipate filing later in the day. I will not go
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1 into the details of what the plan will provide, Your Honor, in
2 large part because I believe there are press and some
3 securities holders in the courtroom today and I wouldn't want
4 to anticipate the event that people have been looking forward
5 to. But I will say that we are optimistic that the plan we
6 file will have the support of the creditors committee and an ad
7 hoc committee of bondholders.
8 THE COURT: That's the new bunch that Mr. Wynne is
9 acting for?
10 MS. LABOVITZ: That's correct, Your Honor. You may
11 have seen the 2019 statement that was filed.
12 THE COURT: I saw the 2019.
13 MS. LABOVITZ: Thank you.
14 THE COURT: Although it was pretty thick and I haven't
15 reviewed it with the care that I might.
16 MS. LABOVITZ: We understand. Your Honor as I said,
17 although we are still reviewing documents and things are being
18 finalized even now and many of us did not get very much sleep
19 last night as we tried to meet our deadline to file the plan
20 today, our self-imposed deadline, we are very optimistic that
21 we will have the support of both the creditors committee and
22 the ad hoc committee.
23 Your Honor, at this time I think it's fair to say that
24 we do not have support from the equity committee for the plan
25 that will be filed today. However, we would like to thank Mr.
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1 Goffman and his constituents for working very constructively
2 with us even in light of that. We have been engaged in --
3 engaged with the equity committee in a dialogue regarding
4 potential alternate transactions with equity investors who
5 might be able to make equity investments at a higher valuation
6 that would provide greater recovery or improved recovery for
7 both creditors and equity security holders.
8 We have been working with them to support diligent
9 efforts and we intend to continue doing that, even following
10 the filing of the plan. We have had a constructive
11 relationship with the equity committee so far. We hope that
12 continues and although the debtors don't right now anticipate
13 that an alternate transaction is available, they will, of
14 course consider it consistent with their fiduciary duties and
15 be mindful of those duties even after the plan is on file.
16 That said, Your Honor, from our perspective, this is
17 the plan of reorganization that's available to the company
18 today. We believe that the valuation that will be set forth in
19 the plan is a fair valuation, certainly from the perspective of
20 the debtors' experts and we believe that in order to quell the
21 concerns of customers and suppliers that might damage the
22 business, it's important to emerge from Chapter 11 as quickly
23 as we can. Therefore, while we want to continue to facilitate
24 due diligence and will be mindful of fiduciary duties, we also
25 think it's important to take the plan we have, move forward
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1 with it quickly and not delay confirmation. With that, Your
2 Honor --
3 THE COURT: Pause please, Ms. Labovitz.
4 MS. LABOVITZ: Yes, sir.
5 THE COURT: You talked about the upcoming filing of
6 the plan. I didn't hear you say disclosure statement and I
7 assume the disclosure statement is going to have to trail the
8 filing of the plan by some point in time.
9 MS. LABOVITZ: No, Your Honor, I should have made more
10 clear; we'll be filing a plan and a disclosure statement today.
11 Along with that, we will be filing a motion to -- for a brief
12 shortening of the time for objections to the disclosure
13 statement to allow for a disclosure statement hearing on July
14 13 which I believe is the next omnibus date that Chemtura has
15 before Your Honor. Alternately, we could set an omnibus date,
16 something like a week later but we thought we would try to
17 stick to Your Honor's schedule.
18 THE COURT: We have two material gating issues as I
19 understood it, as we talked about the estate's needs and
20 concerns over the last several months, those being getting a
21 resolution of environmental claims and demands and getting our
22 arms around the extent of the Diacetyl claims. I don't want
23 you to have to discuss stuff now prematurely in light of any
24 possible 34 Act concerns but can I assume that the plan would
25 provide a mechanism for emerging from Chapter 11 with some kind
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1 of, I don't know, game plan for dealing with those at whatever
2 level they come in or --
3 MS. LABOVITZ: Yes, Your Honor. The plan does provide
4 what we believe is the mechanism that allows for emergence on
5 the timetable I am laying out at July 13 disclosure statement
6 hearing and a commensurate confirmation hearing.
7 Among other things, the plan built on what we have
8 been doing in this courtroom with respect to setting a date for
9 Diacetyl estimation hearing and if necessary, we would use that
10 hearing to establish necessary reserves for Diacetyl claims.
11 That said, Your Honor, we continue to be actively
12 engaged with not just our funded debt constituencies and our
13 equity holders but with all of our constituencies with an
14 effort towards a global settlement of the issues raised in the
15 case. And in that regard, we are in active discussions with a
16 large group of Diacetyl claimants with the insurers who would
17 provide coverage for Diacetyl claims and in separate
18 discussions with numerous regulatory authorities regarding
19 environmental claims. We are hopeful that those efforts will
20 yield settlements that would require less judicial intervention
21 to establish reserves. And in that event, we would update the
22 disclosure statement and the plan to reflect those settlements
23 before the disclosure statement hearing.
24 THE COURT: Okay. Anything else on exclusivity?
25 MS. LABOVITZ: Not from my perspective, Your Honor,
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1 except really just to thank everyone in the room who has worked
2 very hard with us to get us to think point.
3 THE COURT: Okay. I will hear comments from the
4 official committee. Mr. Dublin, unsecureds?
5 MR. DUBLIN: Good morning, Your Honor. Phil Dublin,
6 Akin Gump on behalf of the official creditors committee. Your
7 Honor, the creditors committee supports exclusivity. It is a
8 rather long extension for the last 99 days of the period
9 permitted by the code. However, as Ms. Labovitz mentioned
10 before, subject to the board meeting this afternoon, we believe
11 that a plan and disclosure statement will be filed that has the
12 support of the creditors committee, that has the support of an
13 ad hoc committee that consists of a substantial portion of the
14 unsecured notes issued by the company and believe that the plan
15 that will be filed satisfies all of the applicable provisions
16 of bankruptcy code.
17 The committee, like the debtors, is prepared to
18 continue to engage in discussions with the equity committee to
19 try to get them to support the plan or to reach resolution on
20 any other issues that they may have with respect to the Chapter
21 11 cases and we look forward to a speedy process to get this
22 company out of Chapter 11 now that we're at the point of
23 finally filing a plan.
24 THE COURT: Okay. Thank you. Mr. Goffman, equity?
25 MR. GOFFMAN: Thank you, Your Honor. Jay Goffman from
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1 Skadden Arps on behalf of the official equity committee.
2 Your Honor, if I may, I would like to take a few
3 minutes to explain the position of the equity committee with
4 respect to the exclusivity motion. To understand where we are,
5 we almost have to go back and understand where we started from.
6 When these cases were filed in March of 2009, everybody
7 believed there was no equity value; the debtor said so, the
8 secured creditors said so, the unsecured creditors said so, the
9 U.S. Trustee believed so.
10 It was a low point, one of the low points in U.S.
11 economic history at that time. The world changed since then.
12 By the fall, many people began to believe that there truly was
13 equity value, that these companies might be solvent. And so we
14 began to approach the U.S. Trustee. And after a series of
15 writings and meetings, the U.S. Trustee became convinced and
16 appointed an equity committee.
17 Since that time, we have worked consensually with the
18 debtor and with the creditors committee to try to develop a
19 plan of reorganization that would satisfy everyone. We
20 believed from the beginning and we believe still today that a
21 plan can be done that pays creditors in full preserving the
22 maximum equity value. We believe that's what the law requires
23 if you can do that.
24 And we have worked consensually with the debtors.
25 We've provided them early on with term sheets, with highly
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1 confident letters and with outlines on how we think we can get
2 from where we were to a fully financed plan that pays off all
3 claims in full. And it's been a good dialogue. We have no
4 issue with how we have worked with the debtor and with the
5 various other constituencies. But we had -- there was always a
6 problem. The problem is that different constituencies have
7 different agendas. Ours is very simple. We're the equity.
8 We wanted to maximize the value available for all stakeholders.
9 We wanted to present a plan that would pay claims in full and
10 preserve the equity.
11 The debtors have said they want to maximize value also
12 but it's also been clear that two -- they have had two other
13 high priorities; one is to get this company out of Chapter 11
14 as quickly as possible. The other is to have as little debt on
15 the company as possible when it emerges. We understand that's
16 a natural desire for management to have. Everybody would like
17 to run a company with as little debt as possible, so that your
18 positioned to do remedy activities as you go forward.
19 So we have a had a back and forth on that because
20 obviously to the extent we would lower the amount of doubt that
21 we think we can -- this company can support, we have to raise
22 more money in equity value to make it balanced. So we have had
23 that dialogue.
24 The creditors similarly I think are generally divided
25 into a couple of camps, the way they normally are in Chapter 11
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1 cases. You have those creditors that just want to get paid in
2 full. That's a normal thing. And then you have those
3 investors who bought into the bonds hoping and believe that
4 they would become the fulcrum security they could convert into
5 equity.
We see that all of the time. We see that in many
6 cases. We've seen that here. And that's -- there is a natural
7 tension there between the existing owners and the people that
8 want to become the owners. So we've had this dialogue.
9 And we thought we were getting close, we did. We had
10 many good meetings with the debtor but as of a couple of weeks
11 ago, it became clear that we were still apart from each other
12 in terms of how much debt the company could handle and in terms
13 of what a plan would look like. So we know the debtor is going
14 to file a plan today. As we understand it, it's not a plan
15 that we currently support but we went back to the committee and
16 said should we file an objection to exclusivity? Should we
17 bring in a motion to terminate? Should we tell them we have a
18 different plan in hand? Should we do all of the things --
19 should we say that there's some sort of breach of fiduciary
20 duty? And we came back and said no. We have been working well
21 with everyone up to now. Let's still try to build that
22 consensual plan.
23 UBS is our financial advisor. UBS continues to tell
24 us that they can raise a substantial amount of new money for
25 this company. As we calculate the numbers, we need about a
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1 billion eight-five in total dollars to pay -- to deal with all
2 of the claims that have to be paid under a plan. Some claims
3 would get passed through in the ordinary course but that's what
4 we need. We have from UBS a highly confident letter that
5 indicates that they believe right now they could raise a
6 billion three-five, leaving us about five hundred million in
7 new equity to be raised. A couple of members of the committee
8 have said they would put up over two hundred fifty million
9 dollars. And a couple of new investors have now signed
10 confidentiality agreements and are doing their diligence with
11 the debtor to see whether -- at what level they want to invest.
12 It's our hope that within a couple of weeks we can come back to
13 the debtor and demonstrate a plan that will pay all creditors
14 in full.
15 Now I know there's going to be a tension because
16 that's more debt than the debtor wants and we hope we can work
17 through that tension.
18 THE COURT: Pause please, Mr. Goffman. Most of all of
19 the new money that you would propose to be raised would be in
20 the form of debt as contrasted to equity?
21 MR. GOFFMAN: Well it's a split. There's about a
22 billion three-five of debt and about five hundred to six
23 hundred million of equity -- new equity.
24 THE COURT: Continue please.
25 MR. GOFFMAN: And so we expect -- we hope to come back
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1 to the debtor with that plan within a couple of weeks and we
2 hope at that time that consistent with what everyone said up to
3 now, that if we can show a fully financed plan that preserved
4 -- pays claims in full and preserve equity value, that they'll
5 pull the existing plan and switch to our plan. If not, we may
6 come back to Your Honor and ask at that point to terminate
7 exclusivity.
8 Now it's possible that plan might include reinstating
9 a piece of debt possibly or converting a piece of debt
10 depending upon how the numbers work out. We understand that
11 adds a challenge to Your Honor because it could raise valuation
12 issues. So we would rather do the former to make it simple;
13 just pay the claims, preserve the equity. But either way, we
14 expect to come back to the debtor and if necessary to this
15 court, sometime in the next two to three weeks hopefully with a
16 different plan, a plan that supports -- that pays creditors in
17 full, that satisfies all of the claims and preserves equity
18 value.
19 And I wanted to put this on the record so that there
20 was no misunderstanding about the equity committee's position.
21 Now that just raises one issue. The -- Ms. Labovitz mentioned
22 July 13 as a possible disclosure statement hearing. I think
23 given the fact that we need two to three weeks to try to
24 present an alternative plan, I would hope that that's actually
25 -- I think that's actually premature. I would think you would
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1 -- we would rather schedule a date sometime in August, so that
2 we have time to present a different plan and if not, it can
3 still -- there's still a disclosure statement hearing in August
4 with a potential confirmation hearing in September.
5 I am just afraid that if we move down the road towards
6 a disclosure statement hearing now on a plan that we hope will
7 be withdrawn in the next few weeks, we are wasting time and
8 effort. And it would be better to just get it all done in one
9 schedule. It's still within the extension of exclusivity that
10 the debtors have asked for.
11 THE COURT: Okay. Thank you, Mr. Goffman. Mr. Wynne,
12 do you want to be heard?
13 MR. WYNNE: Yes, Your Honor. Good morning, Your
14 Honor. Your Honor as you noted, we filed a 2019 on Friday.
15 It's fairly extensive. I have another copy, Your Honor, if you
16 wanted to see it.
17 THE COURT: Well certainly you can and should be heard
18 now, Mr. Wynne. My tentative subject to people's rights to be
19 heard is to proceed as if the proposed new 2019 would govern
20 this case and that any party that's in compliance with either
21 the older or the new 2019 would not get a sua sponte complaint
22 from me, assuming that I can understand that it does give me
23 what the new one would require which I think was the thrust of
24 what you were trying to tell me, with a reservation of rights
25 for anybody to be heard on that issue, so long as it's not for
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1 merely tactical reasons. And of course reserving the right
2 that any judge has to require disclosure if it ever becomes
3 relevant enough for some reason other than simply complying
4 with 2019.
5 Now, that's based upon my intermediate thought and
6 also on my belief that if I go through all of those exhibits I
7 will be able to tell the positions of the various members of
8 your committee. It's too soon for me to know whether or not
9 that's the case and certainly I would want to know if anybody's
10 got a short or a derivative that has the equivalent of
11 something like that.
12 But I think you can and should proceed on your
13 existing game plan for now, Mr. Wynne and if we have any issues
14 down the road, I will deal with them then. I do want to say
15 repeating myself that I care about the integrity of the system
16 and I have no patience for people looking for 2019 compliance
17 to advance tactical agendas. I don't want to reprise in my
18 court of what I saw in Six Flags. So just go ahead with
19 whatever you want to talk about but don't consider 2019 to be a
20 problem you've got to deal with now, Mr. Wynne.
21 MR. WYNNE: Okay. Thank you, Your Honor. Your Honor
22 actually we were -- we did attempt clearly to be in compliance
23 with the rule and in fact, it was very interesting that while
24 we were preparing to get this filed, the advisory committee
25 actually issued the new rules which were very much in line,
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1 Your Honor, with the comments that you had submitted to the
2 committee. And what we had suggested and we left that
3 suggestion in because obviously the biggest sensitivity among
4 the bondholder group is the pricing information, was that if
5 required -- if Your Honor required or wanted to see it, we
6 would submit that under seal under Section 107(b).
7 So I think that we were intending clearly to comply.
8 I'm well aware, Your Honor, of the -- your concerns about short
9 positions. Those are listed. There's I think a very few minor
10 short positions that some of the people we do have in the group
11 but I will just briefly give you a little background about the
12 group and then obviously we did not have an objection to
13 exclusivity. In fact, we support the debtor's motion.
14 This group is an interesting group of ad hoc
15 bondholders because they formed actually back I think around
16 August and September actually to try to encourage the debtors
17 to as quickly as possible emerge from Chapter 11 and to move
18 forward towards a plan. And that has really been the group's
19 agenda.
20 Obviously there have been a lot of intervening things
21 over the fall. Clearly there are different views with respect
22 to value. We, in fact, our group -- the group did retain
23 Mollis as their financial advisors. They've been engaged since
24 October, I think. And clearly we have a view of value that
25 this company is still insolvent and that there really is not a
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1 place for an equity recovery. There's a dispute over that with
2 the equity committee and this is not the time to hash that out.
3 I just wanted to let Your Honor know that we have a different
4 view with respect to that.
5 But our main goal and purpose in forming and in what
6 we have done, and we have not appeared before Your Honor before
7 because frankly we didn't -- there wasn't a need to. What we
8 did was we very closely monitored what was going on. The
9 debtors gave us access. We did sign confidentiality agreements
10 early with them and we had access. And effectively, we wanted
11 a due diligence on some of the major issues; Diacetyl
12 environmental claims and there's a whole range of other issues
13 that the bondholders were very concerned about.
14 The group is quite large. We have about just under
15 eight hundred million dollars of the funded debt in the case.
16 That's broken out and I can give -- the numbers change because
17 of trading although there has not been extensive trading of
18 late but with the 2019 that we had filed with respect to the
19 2016 Chemtura Corp. debt, our clients held about three hundred
20 fifty million of it. We had in the 2009s, about two hundred
21 and forty-five million. We also had in the 2026s, about a
22 hundred and eight million, and as well as the members hold a
23 significant portion of the bank debt. So all together it's
24 about seventy percent of the funded debt.
25 We proceeded and through the fall obviously the
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1 impetus was to try to get a plan on file; other things
2 intervened. And there's been a series of negotiations of late
3 that we're obviously very hopeful are going to result in a plan
4 filed today. The term sheets and various proposals have been
5 accepted in concept. There's some filed documentation that
6 needs to happen and the debtors need to obtain court approval
7 -- excuse me, board approval.
8 Once they obtain the board approval, Your Honor, we
9 intend to enter into and have drafted plan support agreements
10 that we believe will be entered into by most of our clients, so
11 we think we'll be above fifty percent in the debt for each
12 bondholder class. And then we would be -- the debtor would
13 file a motion to have the plan support agreement approved by
14 Your Honor and reviewed by Your Honor. That's the process that
15 we think makes the most sense.
16 With respect to Mr. Goffman and obviously I respect
17 Mr. Goffman and his position and know him for a long time, but
18 the equity has really had a very long time to come up with a
19 proposal to pay creditors. My clients have waited -- this case
20 -- this company has been in bankruptcy for a very long time.
21 My clients have, you know -- there has not been a secret
22 through the fall of the equity committee, was trying to
23 organize, was trying to raise money. And frankly, they simply
24 have not come up with it.
25 They haven't come up with a sufficient amount. They
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1 haven't come up with a capital structure that if the debtors or
2 the creditors committee or our financial advisors have thought
3 made sense in terms of paying creditors in full if they want to
4 preserve some recovery for equity.
5 And I am not going to argue the valuation here, Your
6 Honor, I just wanted to let you know that there's a very strong
7 difference of opinion. We believe the company is still
8 insolvent. We, in fact, think that the debtors valuation was
9 higher than we would otherwise have come up with. The plan is
10 a compromise in terms of their -- the plan is a compromise
11 among many different parties of many different issues.
12 If the equity committee can, you know, come up with
13 something that's different, people will consider it. I mean
14 you know people are not going to not consider something but
15 there are different views about value and what the company
16 could support. I don't want to go into any of the specifics of
17 the plan because it's not been filed yet. We will have that
18 opportunity. But the one thing that I would ask the Court is
19 we would actually urge that the debtors timetable be adhered
20 to, that we not further delay this. We think this company has
21 been in bankruptcy long enough and it's time to move forward.
22 The equity committee could have come up with a more
23 concrete proposal before this. If they come up with one in two
24 or three or four weeks, they will present it to the Court and
25 try to proceed on it and we'll deal with it then based on what
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1 it is. But to delay this process any further now, we just
2 think that it would be a mistake.
3 THE COURT: Okay. Anybody else with a financial stake
4 in the case want to be heard? Any comments by the U.S.
5 Trustees Office at this point? I thought I saw Mr. Matsumoto.
6 MR. MATSUMOTO: Not at this point.
7 THE COURT: Okay. All right. Folks at this point, I
8 have an unopposed motion for an extension of exclusivity that
9 extends the exclusive period under which the debtors can file a
10 reorganization plan for a little more than three months. The
11 requested extension is within the limits prescribed under the
12 code. And as the colloquy before me indicated, there are
13 differences in perspective as the best way for the case to go
14 forward which are natural, in large Chapter 11s and even
15 smaller ones. And they arise both from different visions as to
16 the best way to pay off the unsecured creditor community which,
17 of course, has got to be accomplished if we're going to be
18 talking about a distribution to equity, as well as the
19 appropriate level of capitalization for the company or debt
20 associated with its capitalization.
21 Since the motion isn't opposed, I don't need to nor
22 will I make extension factual findings. It's obvious that
23 dealing with uncertainties of the type that I just articulated,
24 coupled with the issues that have been with me for a while --
25 with me and Judge Berman up in the district court, dealing with
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1 satisfying environmental claims and ensuring that we have
2 satisfactory environmental compliance and dealing with any
3 ultimate amount necessary to deal with Diaceytl issues, these
4 are paradigmatic examples of the reasons for which we give
5 debtors exclusivity; to try to balance the competing
6 perspectives and to see if a confirmable plan can be put
7 forward and accepted.
8 At this point, all of the considerations tilt in the
9 same direction which is for a grant of exclusivity and
10 accordingly, the requested extension will be granted. Ms.
11 Labovitz, I will look to you to give me a plain vanilla order
12 that provides in substance that for the reasons set forth by
13 the Court, the motion is granted.
14 MS. LABOVITZ: Will do that, Your Honor. Thank you
15 very much.
16 Your Honor, Mr. Goffman had raised some questions and
17 concerns regarding our proposed timing with respect to a
18 disclosure statement hearing. That matter is not before the
19 Court today and as I mentioned at the outset of my remarks, I
20 am somewhat constrained in terms of how I can describe the plan
21 and what we intended to do until its filed. My suggestion
22 would be that to the extent that after the plan is filed and
23 Mr. Goffman has had a chance to review it, he continues to
24 object to the motion that we'll file at the same time seeking
25 to set the timing for our disclosure statement hearing, that we
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1 have a telephonic hearing to resolve those issues.
2 I would echo Mr. Wynne's sentiments that we have
3 waited quite some time and have tried very hard to engage
4 constructively with the equity committee to facilitate the
5 process that we know they need to go through and that we think
6 is appropriate but there does come a point at which we need to
7 move forward towards emergence from Chapter 11. I don't want
8 to preargue those issues now but we would emphasize for the
9 Court the urgency of setting the timing for our disclosure
10 statement hearing because if we're going forward on July 13 as
11 we fervently hope we will do, we need to get a notice of that
12 out to all of the impacted parties as quickly as we can. So
13 perhaps that's an issue to pick up very soon after the plan is
14 filed.
15 With that, Your Honor, I don't think there's more I
16 need to say about exclusivity or about the plan and I would
17 hope to turn the hearing over to my partner, Craig Bruens who
18 would walk through the rest of the uncontested agenda.
19 THE COURT: I will give Mr. Bruens a chance to do that
20 but before he does, does anybody want to be heard on anything
21 related to what Mr. Labovitz just said before we deal with the
22 more meat and potatoes issues that are on Mr. Bruens' plate?
23 Mr. Dublin?
24 MR. DUBLIN: Your Honor, I would just like to echo the
25 comments with respect to timing. The equity committee has been
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1 around since January. Skadden filed its retention application
2 in February. UBS filed its retention application yesterday.
3 The equity committee has had ample time to try to come up with
4 alternative structures and if they are able to propose a plan
5 that contemplates unsecured creditors being paid in full in the
6 allowed amount of their claims in cash, the creditors committee
7 supports that. We look forward to that. That's the goal in
8 every case is for unsecured creditors to be paid in full in
9 cash, get the benefit of their bargains.
10 That has not happened here. We don't believe that Mr.
11 Goffman and UBS and the rest of the equity committee will be
12 able to achieve that goal. To the extent they are able to at
13 any time prior to confirmation, not with a highly confident
14 letter but with fully committed equity financing, and with a
15 feasible plan of reorganization on a debt structure that the
16 company can support and that other constituencies do not -- are
17 on board with as appropriate, the committee will have no
18 objection to that. This is not -- you mentioned Six Flags
19 earlier, the 2019 issue. We're not looking to have any type of
20 alternative Six Flags arguments about whether people are being
21 paid in full or not. If we can get paid in full in cash, we
22 look forward to that opportunity. We just don't think it's
23 going to happen in this case.
24 Therefore, we think that we need to keep with the
25 timetable that the debtors are proposing and we look to get
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1 this company out of bankruptcy as soon as possible. A July 13
2 the disclosure statement hearing date will achieve that goal.
3 THE COURT: Okay. Now Mr. Goffman, I am just going to
4 assume that you have a different view of the world than Mr.
5 Dublin does but I am not sure if I need you to repeat it again.
6 I am just going to say for the avoidance of doubt that today I
7 am not asked to nor am I ruling on anything other than
8 extension of exclusivity. Whether we can or should proceed on
9 the 13th of July is something that I am not going to decide
10 today. And that I think does require consideration of the
11 proposed plan and draft disclosure statement. And all of your
12 rights with respect to anything you can imagine and anything I
13 can't imagine are reserved. Okay?
14 Mr. Bruens?
15 MR. BRUENS: Thank you, Your Honor. Craig Bruens from
16 Kirkland and Ellis on behalf of the debtors. I will try to go
17 through the meat and potatoes of the rest of the matters very
18 quickly. The next matter that's listed on the agenda is the
19 third interim fee application for DLA Piper, LLP. You may
20 recall, Your Honor, that at the previous hearing we had the
21 third interim fee applications for the professionals for
22 hearing and they were approved by Your Honor. DLA Piper's
23 application had been adjourned in order to accommodate
24 additional time to review some invoices that had been
25 inadvertently not attached to the application. The application
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1 is for one hundred sixty-four thousand dollars in fees. I am
2 rounding off approximately, and about four thousand dollars in
3 expenses. I believe that the U.S. Trustee and all of the
4 parties in interest have had time to review the application and
5 that there are no objections to it.
6 THE COURT: Okay. Mr. Matsumoto, do you want to be
7 heard?
8 MR. MATSUMOTO: That's correct, Your Honor. No
9 objection.
10 THE COURT: Very well. It's approved.
11 MR. BRUENS: Thank you, Your Honor. Excuse me. The
12 next three items on the agenda are uncontested omnibus claims
13 objections. The first is the twenty-sixth omnibus claims
14 objection which applied to amended claims, duplicate claims,
15 late filed claims, insufficient documentation claims, no
16 liability claims and paid in full claims. The debtors received
17 no formal responses to the objection and a handful of informal
18 responses. With respect to the informal responses, that they
19 have not been able to resolve at this point. We have adjourned
20 the objection as to those claims as reflected on the agenda and
21 the notice of adjournment last night. The objection is
22 currently going forward today unopposed with respect to thirty-
23 three claims and we would ask that the order be entered.
24 THE COURT: Okay. That order will be entered.
25 MR. BRUENS: Thank you, Your Honor. Similarly, the
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1 twenty-seventh omnibus objection, we have the same
2 circumstances; no formal responses, several informal responses.
3 We have adjourned the objection with respect to claims as we
4 try to work them out. Today it is going forward with respect
5 to seventy-one claims on an unopposed basis.
6 THE COURT: Okay. None of those seventy-one being the
7 subject of the typical telephone calls or informal
8 communications.
9 MR. BRUENS: I am not sure if I understood that. No,
10 that's correct. The seventy-one claims are not --
11 THE COURT: Okay. In other words, I expect as I
12 thought you told me you were already doing, that when a
13 creditor calls you up after when these omnibuses and says
14 listen, I want to bring these facts to your attention, you have
15 the usual back and forth and you kick those. And when you ask
16 me to blow away claims, you ask me to blow away the claims only
17 for those who haven't either filed a formal objection or called
18 you up.
19 MR. BRUENS: That's absolutely correct, Your Honor.
20 THE COURT: And if that is -- if I correctly
21 understood you for those seventy-one, then it's no problem.
22 MR. BRUENS: That's correct, Your Honor. I am sorry
23 if I was not clear.
24 THE COURT: Okay.
25 MR. BRUENS: With respect to the remaining omnibus
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1 claims objection is the twenty-seventh (sic) claims objection,
2 that objection applied to one singular proof of claim filed by
3 the law firm of Morris, Sakalarios & Blackwell, purportedly on
4 behalf of approximately eight hundred and nine asbestos
5 plaintiffs. The objection was based upon insufficient
6 documentation, lack of power of attorney, and improper form of
7 the proof of claim. We received no contact whatsoever from the
8 claimant and we would ask that that objection be granted on an
9 unopposed basis.
10 THE COURT: It is granted.
11 MR. BRUENS: Thank you.
12 THE COURT: Or any objection is sustained.
13 MR. BRUENS: Thank you, Your Honor. The last thing I
14 would like to mention with respect to the claims objections is
15 a carry-over from the -- it's not listed on the agenda but it
16 is a carry-over from one of the claims objections. Previously
17 we have entered into a stipulation with Xerox Corporation
18 whereby they've agreed to reduce their claim from twenty-nine
19 thousand dollars to approximately seven thousand dollars. It's
20 been approved by both committees and we would like to submit
21 that at the end of the hearing.
22 THE COURT: Sure.
23 MR. BRUENS: Thank you, Your Honor. There are several
24 additional substantive claims objections that are on the agenda
25 today. I am going to turn over the hearing to my partner,
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1 Brian Stansbury. They are all unopposed but he will further
2 describe them.
3 THE COURT: You said they were unopposed?
4 MR. BRUENS: That's correct.
5 THE COURT: Okay. Mr. Stansbury?
6 MR. STANSBURY: Good morning, Your Honor.
7 THE COURT: Good morning.
8 MR. STANSBURY: Brian Stansbury with Kirkland & Ellis
9 on behalf of the debtors. Your Honor on May 27 the debtors
10 filed fifty-five objections to claims alleging -- excuse me,
11 seeking to disallow those claims under Rule 502(e). Of those
12 fifty-five objections, thirty-six of them are adjourned when we
13 received requests to -- for an extension on the response. And
14 seven of them were immediately adjourned as well because we
15 received a response and then we adjourned another one as well.
16 So of the initial fifty-five, claims a total of forty-
17 four of them have been adjourned and they will be -- have been
18 moved to the July 13 hearing. Today we are dealing with the
19 ^eleven claims for which we have received no response. These
20 are claims again that we believe are disallowable under Rule
21 502(e).
22 THE COURT: You said Rule a couple of time. I assume
23 you mean either a different number or section.
24 MR. STANSBURY: 502(e)(1)(B). Yes, Your Honor.
25 MS. LABOVITZ: That is the section.
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1 MR. STANSBURY: Excuse me; section. Yes, Your Honor,
2 section.
3 Again, these are uncontested claims for which we have
4 received no response, no request for an extension and no
5 response has been filed and we would ask Your Honor to disallow
6 those eleven claims.
7 THE COURT: Granted.^
8 MR. STANSBURY: Okay. Thank you, Your Honor.
9 THE COURT: Sure. Anything else?
10 MS. LABOVITZ: Your Honor, the remaining item is
11 Skadden's retention. Mr. Goffman will present that.
12 THE COURT: Yes, I figured Mr. Goffman might have some
13 interest in that.
14 MR. GOFFMAN: Thank you. Again for the record, Your
15 Honor, I am Jay Goffman of Skadden Arps on behalf of the
16 official equity committee.
17 Your Honor, as Your Honor is aware, the official
18 equity committee was formed in January of this year. We filed
19 our retention application in early February. It drew two
20 objections; one from the U.S. Trustee and one from the
21 creditors committee. We were able to fairly quickly resolve
22 the objection of the U.S. Trustee and so it's consensual with
23 the U.S. Trustee and we're happy to report that either late
24 last week or early this week, the creditors committee withdrew
25 its objection. So I believe our ^motion to be retained is
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1 unopposed.
2 THE COURT: Okay. And as part of the understandings
3 you've reached, you're waiving the prepetition claim?
4 MR. GOFFMAN: Yes, we are, Your Honor.
5 THE COURT: Okay. With that variation, the retention
6 is going to be approved. I am not going to say a lot about
7 this. When I read the draft papers thinking they were going to
8 be argued before me before, I was troubled by the retention of
9 the claim. And frankly, if that hadn't been satisfactorily
10 resolved, it probably would have been a show stopper. But for
11 this and other cases going forward, I do think that I need for
12 people to understand that you don't deal with people with
13 different views of the world by preventing their counsel from
14 being retained. And I am glad the objection on the ladder
15 basis was withdrawn.
16 In any event, welcome to the family, Mr. Goffman.
17 ^You're retained. I assume your waiver of the claim is going
18 to be satisfactorily papered and so long as it is, you will be
19 acting as counsel going forward.
20 MR. GOFFMAN: Thank you very much, Your Honor.
21 THE COURT: Okay. Anything else anybody? Okay.
22 We're adjourned. Thank you very much.
23 MS. LABOVITZ: Thank you, Your Honor.
24 (Proceedings concluded at 10:30 AM)
25
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1
2 I N D E X
3
4 RULINGS
5 Page Line
6 Debtor's motion to extend
7 exclusive periods unopposed 9 23
8
9 Third interim fee application
10 for DLA Piper, LLP approved 28 11
11
12 Twenty-sixth omnibus objection
13 to certain claims entered 28 23
14
15 Twenty-seventh omnibus objection
16 to certain claims entered 29 23
17
18 Twenty-eighth omnibus objection
19 to Morris, Sakalarios &
20 Blackwell claim 30 9
21
22
23
24
25
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1
2 C E R T I F I C A T I O N
3
4 I, Dena Page, certify that the foregoing transcript is a true
5 and accurate record of the proceedings.
6
7 ___________________________________
8 Dena Page
9
10
11 Veritext
12 200 Old Country Road
13 Suite 580
14 Mineola, NY 11501
15
16 Date: June 18, 2010
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Dena PageDigitally signed by Dena PageDN: cn=Dena Page, c=USReason: I am the author of thisdocumentDate: 2010.06.18 11:20:26 -04'00'