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TRANSCRIPT
Hearing Date and Time: July 21, 2010 at 9:00 a.m. (prevailing Eastern time)
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Richard L. Wynne (SBN 1861426) Lance E. Miller (SBN 4827994) (Admission Pending) JONES DAY 222 East 41st Street New York, New York 10017 Telephone: (212) 326-3939 Facsimile: (212) 755-7306
-and-
Erin N. Brady (Admitted Pro Hac Vice) JONES DAY 555 South Flower Street, 50th Floor Los Angeles, California 90071 Telephone: (213) 489-3939 Facsimile: (213) 243-2539
Attorneys for the Ad Hoc Committee of Bondholders
UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK
In re:
CHEMTURA CORPORATION, et al.1,
Debtors.
) ) ) ) ) ) ) )
Chapter 11 Case No. 09-11233 (REG)
Jointly Administered
OBJECTION OF THE AD HOC BONDHOLDER COMMITTEE TO THE MOTION OF THE OFFICIAL COMMITTEE OF EQUITY
SECURITY HOLDERS FOR AN ORDER TERMINATING THE EXCLUSIVE PERIODS DURING WHICH ONLY THE DEBTORS MAY FILE A CHAPTER 11 PLAN AND SOLICIT ACCEPTANCES THEREOF
1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal taxpayer-
identification number, are: Chemtura Corporation (3153); A&M Cleaning Products, LLC (4712); Aqua Clear Industries, LLC (1394); ASCK, Inc. (4489); ASEPSIS, Inc. (6270); BioLab Company Store, LLC (0131); BioLab Franchise Company, LLC (6709); Bio-Lab, Inc. (8754); BioLab Textile Additives, LLC (4348); CNK Chemical Realty Corporation (5340); Crompton Colors Incorporated (3341); Crompton Holding Corporation (3342); Crompton Monochem, Inc. (3574); GLCC Laurel, LLC (5687); Great Lakes Chemical Corporation (5035); Great Lakes Chemical Global, Inc. (4486); GT Seed Treatment, Inc. (5292); HomeCare Labs, Inc. (5038); ISCI, Inc. (7696); Kem Manufacturing Corporation (0603); Laurel Industries Holdings, Inc. (3635); Monochem, Inc. (5612); Naugatuck Treatment Company (2035); Recreational Water Products, Inc. (8754); Uniroyal Chemical Company Limited (Delaware) (9910); Weber City Road LLC (4381); and WRL of Indiana, Inc. (9136).
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TABLE OF CONTENTS PRELIMINARY STATEMENT ................................................................................................. 1
BACKGROUND ........................................................................................................................... 6
OBJECTION ................................................................................................................................. 9
I. THE EQUITY COMMITTEE’S DISPLEASURE WITH THE DEBTORS’ PLAN IS NOT A BASIS FOR THE COURT TO TERMINATE EXCLUSIVITY. ........................................................................................................... 9
II. THE EQUITY COMMITTEE HAS NOT SHOWN CAUSE TO TERMINATE EXCLUSIVITY. ......................................................................................................... 11
III. TERMINATING EXCLUSIVITY WILL RESULT IN UNNECESSARY COST AND DELAY. ............................................................................................................ 12
IV. THE EQUITY COMMITTEE’S HIGHLY LEVERAGED PLAN IS NOT A MARKET TEST. ........................................................................................................ 13
V. THE EQUITY COMMITTEE’S PROPOSED “TERM SHEET” IS NOT A SERIOUS ALTERNATIVE ................................................................................... 15
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TABLE OF AUTHORITIES
Cases
citing In re Dow Corning Corp., 208 B.R. 661, 664 (Bankr. E.D. Mich. 1997) .......................... 11
In re Adelphia Communications Corp., 352 B.R. 578, 582 (Bankr. S.D.N.Y. 2006) .. 9, 10, 11, 13
In re Adelphia, 336 B.R. 610, 676, n.183 (Bankr. S.D.N.Y. 2006).............................................. 10
In re Express One Int’l, Inc., 194 B.R. 98, 101 (Bankr. E.D. Tex. 1996) .................................... 10
In re Geriatrics Nursing Home, Inc., 187 B.R. 128, 134 (D.N.J. 1995)........................... 10, 11, 15
In re Spansion, Inc., 426 B.R. 114, 139-40 (Bankr. D. Del. 2010) .............................................. 10
In re Texaco Inc., 81 B.R. 806, 881 (Bankr. S.D.N.Y. 1988)....................................................... 12
Johns-Manville Corp. v. Equity Security Holders, 66 B.R. 517, 537 (Bankr. S.D.N.Y. 1986).... 12
Statutes
11 U.S.C. § 1121(d). ..................................................................................................................... 11
Other Authorities
2008 Form 10K, Chemtura Corp .................................................................................................. 15
Debtors’ Motion For Entry Of Interim And Final Orders (I) Authorizing Post-Petition Secured Superpriority Financing Pursuant To 11 U.S.C. §§ 105(A), 362, 364(C)(1), 364(C)(2), 364(C)(3) And 364(D), (II) Authorizing The Debtors’ Use Of Cash Collateral Pursuant To 11 U.S.C. § 363, (III) Authorizing The Debtors’ Use Of Proceeds To Repurchase A Receivables Portfolio (IV) Granting Adequate Protection Pursuant To 11 U.S.C. § 361, 363 And 364, And (V) Scheduling A Final Hearing Pursuant To Bankruptcy Rules 4001(B) And 4001(C) [docket #4]. .............................................................................................................................................. 5
Objection Of The Official Committee Of Equity Security Holders To Debtors’ Motion For Entry Of An Order Authorizing The Debtors To Enter Into A Plan Support Agreement With The Creditors' Committee And Certain Holders Of The Debtors’ 2009 Notes, 2016 Notes And 2026 Debentures [docket # 3154]............................................................................................... 3
Verified Statement Of Jones Day Regarding Representation Of An Ad Hoc Committee Of Bondholders Pursuant To Federal Rule Of Bankruptcy Procedure 2019 [docket # 2479] ....... 7
Transcripts
Tr. of Proceedings 19:16-19:25, In re Visteon Corp., Case No. 09-11786 (Bankr. D. Del. July 15, 2010), a copy of which is attached hereto as Exhibit 2. ........................................................... 16
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Tr. of Proceedings, In re Chemtura Corp., Case No. 09-11233 (Bankr. S.D.N.Y. June 17, 2010), a copy of which is attached hereto as Exhibit 1.......................................................................... 4
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TO THE HONORABLE ROBERT E. GERBER UNITED STATES BANKRUPTCY JUDGE:
The Ad Hoc Committee of Bondholders (the “Bondholder Committee”) hereby objects
to the Motion Of The Official Committee Of Equity Security Holders For An Order, Pursuant To
Section 1121(d) Of The Bankruptcy Code, Terminating The Exclusive Periods During Which
Only The Debtors May File A Chapter 11 Plan And Solicit Acceptances Thereof [docket # 3171]
(the “Termination Motion”). In support of this Objection, the Bondholder Committee
respectfully represents as follows:
PRELIMINARY STATEMENT
1. The Debtors have not proposed a perfect plan that satisfies all of the divergent
creditor and interest groups in this case. In fact, a more perfect plan would be the one that the
Bondholder Committee would propose if the Court were to terminate exclusivity and decline to
approve the Plan Support Agreement on August 4, 2010.1 That plan would differ from the
Debtors’ Plan in several important respects. It would be based upon a plan value for Chemtura
which is significantly lower than the $2.050 Billion that the Debtors have proposed. It would
provide for the payment in full, with post-petition interest, of all creditors’ claims, along with full
payment of the Debtors’ no-call and make-whole obligations under the 2026 and 2016
indentures, respectively, to the extent there exists sufficient value, based upon the various claim
priorities. It would provide for a step-up in consideration to the extent that creditors are paid in
the form of new common stock as opposed to cash. And it would provide no recovery to
existing equity-holders, as the Debtors are insolvent. This would be the perfect plan, indeed.
2. But this is not a perfect world. And in this imperfect world, where the Debtors
1 While the vast majority of bondholders in these cases have agreed to the Plan Support Agreement, there are
some that have not. If exclusivity is terminated, those bondholders would be free to file their own plan or plans (independent of the Bondholder Committee) even if the Court approves the Plan Support Agreement.
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have used exclusivity and their best fiduciary judgments to negotiate an even-handed plan that
provides for both a fair (albeit never ideal) recovery for its constituents and a prompt exit from
Chapter 11, the Bondholder Committee has agreed to support the Debtors’ proposed Plan. The
Creditors’ Committee, the PBGC,2 and others – each of whom likely also views the Plan as
somewhat imperfect – have agreed to support the Debtors’ Plan as well. And as the Debtors
continue to make progress in negotiating achievable (although not perfect) settlements with other
important creditor constituencies, support for the Debtors’ Plan is likely only to grow.
3. In fact, the Debtors’ Plan already has the support of the majority of the Debtors’
creditor constituencies. It is the product of an extensively negotiated global settlement among
the Debtors, the Bondholder Committee, the PBGC, and the Official Committee of Unsecured
Creditors’ (the “Creditors’ Committee,” and collectively with the foregoing parties, the
“Parties”), resolving a myriad of issues and disputes relating to, among other things, (1) the
Debtors’ enterprise value,3 (2) the allocation of that enterprise value (between creditors with very
different claims, rights and priorities),4 (3) the allowance of the Noteholders claims to Make-
Whole and No-Call damages, (4) the allowance and application of inter-company claims, (5) the
pending litigation between the Creditors’ Committee and the agent for the Debtors’ pre-petition
secured credit facility, (6) the allowance, extent, and treatment of certain environmental 2 Capitalized terms not otherwise defined herein are as defined in the Debtors’ Plan. 3 The significance of the Parties’ compromise over the Debtors’ enterprise value cannot be overstated.
Whereas the enterprise value helps to dictate the Debtors’ potential solvency in these cases, it also dictates the value of the Debtors’ New Common Stock to be distributed under the Plan to creditors, including members of the Bondholder Committee. By agreeing to an enterprise value which is higher than the Bondholder Committee believes is appropriate, the Bondholder Committee essentially agreed to receive New Common Stock with significantly more market risk and at a value which is lower than warranted under the circumstances. This was a significant concession on the part of the Bondholder Committee, underscoring the fragility of the Global Settlement and the benefit of that settlement to the Debtors’ estates.
4 Just one example of the concessions made by individual bondholders is the agreement by the structurally senior holders of the 2016 notes to accept the same treatment as creditors with less priority in the Debtors’ capital structure, without any step-up for that loss of priority. Holders of the 2016 notes were willing to make this concession in order to facilitate the reorganization and provide the Debtors with a more financeable post-emergence capital structure and in the interests of maintaining unity of the Bondholder Committee.
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liabilities, (7) the allowance, extent, and treatment of asserted Diacetyl liabilities, and (8) the
extent and treatment of the Debtors’ allegedly under-funded pension obligations (as described in
the Debtors’ Disclosure Statement and Plan, the “Global Settlement”).
4. The Debtors worked for months to investigate all of the rights, claims, and
obligations of various creditor groups, and began substantial litigation efforts with respect to
Diacetyl and Environmental claims. This was all necessary predicate work in order to negotiate
the Global Settlement, where the Debtors obtained significant concessions from each of the
parties thereto in the process. It is unlikely that all of these parties, including the Bondholder
Committee, would have made any of these concessions had the Debtors’ not maintained
exclusivity throughout the plan negotiation process: the Bondholder Committee and other
parties simply would have filed their own plans and then sought and fought to have their plan
confirmed. Terminating exclusivity now would unravel the Debtors’ carefully negotiated plan,
and could lead to the same result.5
5. Yet that is exactly what the Equity Committee wants to do. The Equity
Committee is unhappy with the Debtors’ Plan. But rather than engage in constructive
negotiations, or simply voting against the Plan and challenging its confirmation, the Equity
Committee has sought to terminate exclusivity – threatening to destroy the Debtors’ fragile
Global Settlement and throw these cases into at least months, and possibly even years, of the
chaos and confusion that would result from competing plans. For what? To give the Equity 5 A majority of the Bondholder Committee members as well as certain other noteholders have committed to
support the Debtors’ Plan, and to that end have entered into a Plan Support Agreement with the Creditors' Committee. The Plan Support Agreement contemplates that the Debtors will become a party to the agreement upon approval and authority from this Court, and a hearing thereon is scheduled for August 4, 2010. The Equity Committee has objected to that motion. See Objection Of The Official Committee Of Equity Security Holders To Debtors’ Motion For Entry Of An Order Authorizing The Debtors To Enter Into A Plan Support Agreement With The Creditors' Committee And Certain Holders Of The Debtors’ 2009 Notes, 2016 Notes And 2026 Debentures [docket # 3154]. If the Court terminates exclusivity and also denies the Debtors the authority to enter into the Plan Support Agreement, the Bondholder Committee will be free to, and likely will, file a competing plan of reorganization based on, among other things, the lower plan value that the Bondholder Committee believes is appropriate.
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Committee the opportunity to solicit a plan that is neither confirmable or feasible, having been
based, among other things, on an overleveraged capital structure and uncommitted and unfunded
financing. Notably, this is based on the exact same fluff that the equity has been proposing for
the past eight months, while it continues to proclaim the Debtors’ “substantial” solvency.” But
the Debtors are not an athanor that can turn base metals into gold (if they were, they would
hardly be in bankruptcy in the first place). And the Equity Committee’s plan proposal is nothing
close to what it touts as a viable plan that can pay all creditors in full while preserving equity
value.
6. In reality, the Equity Committee’s proposal – and, for that matter, its attempt to
terminate exclusivity – is nothing more than an option or a stop-gap delay tactic intended to drag
out the plan confirmation process – and these bankruptcy cases – until the Equity Committee can
somehow (if ever) cobble together viable committed equity and debt financing.6 As proposed,
the Equity Committee’s plan concept would have the company emerge from Chapter 11 with a
funded debt level that is greater than that which saddled the Debtors upon filing for bankruptcy
relief (which heavy debt load in no small part necessitated theses chapter 11 cases), and that is
almost double that which the Debtors’ management and advisors believe is prudent (or even
obtainable in the current markets). Even after all of these months, the Equity Committee’s
proposal is not based on committed equity and debt financing, but is based solely upon a highly
confident letter from UBS (the Equity Committee’s proposed financial advisor) along with
6 The Equity Committee’s timing with respect to its Termination Motion is further evidence of its stopgap
strategy. At the June 17, 2010 hearing on the Debtors’ motion to extend exclusivity, the Equity Committee stated that it “hoped” to procure financing and propose a fully funded plan “within a couple of weeks.” See Tr. of Proceedings, In re Chemtura Corp., Case No. 09-11233 (Bankr. S.D.N.Y. June 17, 2010), a copy of which is attached hereto as Exhibit 1. It is now a month later, and not surprisingly in this market, it has yet to locate any truly committed debt or equity financing. With time now running out (given the Debtors’ impending solicitation), the Equity Committee has apparently decided to seek to terminate exclusivity even without a fully funded deal. But make no mistake, nothing except the Equity Committee’s characterization of its hoped-for commitments has changed since that June 17, 2010 exclusivity hearing. There was no committed funding then, and there is no committed funding now.
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contingent, partial equity funding proposals7 from two Equity Committee members. Other fatal
defects of the Equity Committee’s proffered plan construct include:
• Providing for a capital structure post-emergence with up to $1.3 billion in secured debt, rendering the Debtors overleveraged and not competitive;8
• Seeking to reinstate the 2016 notes (which have the most valuable package of rights and guarantors), while purportedly subordinating them to hundreds of millions in new senior secured debt;
• Ignoring the negative pledge contained in the 2016 notes9 which will result in all $1.3 billion of post-emergence debt being given secured status;10
• Providing a substantial recovery for equity even though senior creditors will not be paid in full;
• Failing to provide any payment – or even reserves for – post-petition interest and the other claims of the bondholders;
• Ignoring the Debtors Diacetyl and Environmental claimants altogether, despite the significant time and resources invested by the Debtors thus far in addressing these claims and the very substantial progress made towards settling those claims;11 and
7 The supposed commitments to provide a partial equity funding by Canyon Capital Advisors, LLC,
Strategic Value Master Fund, Ltd., and Strategic Value Special Situations Master Fund, LP have significant exceptions and contingencies , including (1) an “out” for a Material Adverse Change which is triggered by, among other things, (a) a deviation by more than 10% from EBITDA or net debt in Chemtura’s Long Range Plan (4/2010 version) and (b) termination or modification in any material respect of any material business relationship, including with customers or suppliers, (2) the right to back out if the Equity Committee is unable to raise a sufficient level of secured financing, and (3) a broad “out” for the confirmation of “due diligence” and the provision of “comfort letters.” See Termination Motion, Ex. B.
8 The Bondholder Committee believes that the interest costs associated with $1.3 billion of debt may result in negative cash flow post-emergence, even assuming the Debtors meet their aggressive projections for 2011 EBITDA.
9 The extent of the negative pledge contained in the 2016 is described in the Debtors’ Motion For Entry Of Interim And Final Orders (I) Authorizing Post-Petition Secured Superpriority Financing Pursuant To 11 U.S.C. §§ 105(A), 362, 364(C)(1), 364(C)(2), 364(C)(3) And 364(D), (II) Authorizing The Debtors’ Use Of Cash Collateral Pursuant To 11 U.S.C. § 363, (III) Authorizing The Debtors’ Use Of Proceeds To Repurchase A Receivables Portfolio (IV) Granting Adequate Protection Pursuant To 11 U.S.C. § 361, 363 And 364, And (V) Scheduling A Final Hearing Pursuant To Bankruptcy Rules 4001(B) And 4001(C) [docket #4].
10 To the extent the Equity Committee proposes to reinstate the 2016 notes and disregard its associated negative pledge, the proposal to saddle the Debtors with up to $1.3 billion in new financing would create inexcusable and non-curable non-monetary breaches in the 2016 notes and prevent reinstatement altogether. To the extent the Equity Committee proposes to honor the negative pledges and provide ratable liens to the 2016 notes, such liens would result in, among other things, (1) the perverse result that the Debtors will emerge from bankruptcy with more secured debt and less EBITDA than the Debtors had upon filing for bankruptcy relief, and (2) negative cash flow upon emergence, causing a likely successive bankruptcy case
11 As this Court is aware, the Debtors, in the exercise of their reasonable business judgment, have focused their efforts in these cases on addressing and resolving the environmental and diacetyl claims, terming each
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• Ignoring the PBGC and its significant threats to terminate the Debtors’ pension plans.
7. In short, having been unable to devise any other way to obtain a recovery for
equity out of the Debtors’ insolvent estates, the Equity Committee is proposing to finance a
grossly inflated immediate recovery on the backs of the Debtors’ business and its creditors. The
Equity Committee seeks to reinstate the claims held by a significant portion of the Debtors’
creditors, leaving these creditors to litigate their claims against the reorganized Debtors now or
in the future – and to years from now enforce any recoveries they might receive – behind over a
billion dollars of new secured debt, in a highly leveraged and fragile capital structure. It is likely
that these same reinstated creditors would then find themselves creditors in the Debtors next
bankruptcy cases, were the Equity Committee’s proposal put in place. Of course, by then the
current equity would be long since cashed out, having been able to sell their interests.
8. The Equity Committee’s uncommitted proposal is dead before arrival. Its efforts
to terminate exclusivity – and thereby jeopardize the Debtors’ fragile Global Settlement for
nothing more than a “hope” that it can someday get a deal financed and done – should be as well.
Maintaining the Debtors’ exclusivity presents the best and clearest route to emergence in these
cases.
BACKGROUND
9. The Bondholder Committee formed in September, 2009, with the singular
purpose of encouraging and facilitating the Debtors’ prompt exit from chapter 11. This
Bondholder Committee sought to develop consensus among a broad cross-section of creditors
(all of whom had different rights to recovery from the Debtors) as to their preferred treatment
as “key gating issues” in these cases. Now that the Debtors appear to be on the 1-yard-line with respect to reaching settlements of these claims, the Equity Committee proposes to throw away the Debtors’ significant progress and leave the diacetyl and environmental claims unimpaired to be resolved through litigation post-emergence, leaving the company open to the uncertainties, costs, and risks of litigation.
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under a chapter 11 plan, with the aim of encouraging and expediting a consensual confirmation
process in these cases. By forming a unified group which includes holders of not only bonds, but
also the Debtors’ bank debt and some trade debt, the Bondholder Committee believed (and
continues to believe) that it could avoid the quagmire that inevitably results when splintered
groups of creditors champion only their unique individual causes.
10. To achieve the desired consensus, the Bondholder Committee retained Jones Day
and Moelis & Company to advise the committee, conduct extensive diligence, and work with the
Debtors and Creditors’ Committee. The Bondholder Committee then used this diligence to work
towards an internal compromise of the various creditors’ often divergent and conflicting views,
to form and maintain a united group with whom the Debtors could negotiate. With member
holdings of more than $770 million in funded debt claims against the Debtors, including 62% of
the Debtors’ obligations under their three pre-petition indenture agreements, the Bondholder
Committee represents a majority of the Debtors’ funded creditors in these cases.12
11. The Bondholder Committee’s assessment of the company – both upon its
formation and today – is that every day in Chapter 11 inflicts further damage to the Debtors’
business and the prospects for creditor recoveries. The passage of time makes future financing
more difficult. It also perpetuates uncertainty among customers and suppliers, thereby
worsening the effects of the economic recession faced by the company with its worldwide
footprint. With this in mind, the Bondholder Committee decided early on that a quicker plan
process, allowing the Debtors to emerge from Chapter 11 and stem the costs resulting from the
Chapter 11 process, was preferable to an eventual more “perfect” plan.
12 The extent of the holdings controlled by members of the Bondholder Committee is more fully detailed in
that certain Verified Statement Of Jones Day Regarding Representation Of An Ad Hoc Committee Of Bondholders Pursuant To Federal Rule Of Bankruptcy Procedure 2019 [docket # 2479], as updated and amended from time to time.
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12. Thus, shortly after its initial formation, the Bondholder Committee informed the
Debtors and Creditors’ Committee that it sought to negotiate the terms of a plan of
reorganization as soon as possible, and agreed with the Debtors’ analysis that a major reduction
in the future funded debt was necessary for the Debtors future capital structure to enable them to
be competitive on a global scale and maximize value.13 Indeed, the Bondholder Committee was
initially targeting an early 2010 exit from Chapter 11. To the Bondholder Committee’s dismay,
the emergence timeline was substantially delayed while the Debtors engaged in extensive
analysis, litigation and ultimately discussions and negotiations with diacetyl and environmental
creditors, as well as dealing with many other preliminary issues. The Debtors also used this time
to work with the Creditors’ Committee, the PBGC, and the Equity Committee to diligence
various issues of contention and discuss potential resolutions of those issues. While all of this
process was ultimately a necessary prerequisite to the development and negotiation of the Plan,
the corresponding delay was substantial.
13. Notably, the Equity Committee was substantively involved throughout this entire
process, including the plan negotiations. Notwithstanding the Debtors’ insolvency, the Debtors
included the Equity Committee in every step of the plan process – so much so that the
Bondholder Committee at times viewed the Debtors as spending far too much time and effort
catering to the Equity Committee and its demands. To be sure, the Equity Committee had a
literal – not just figurative – seat at the table during both the entire pre-negotiation process and
during the plan negotiations themselves. Unfortunately, despite its significant access to the
negotiation process, the Equity Committee squandered the opportunity to negotiate a plan that
any other constituency would find acceptable. And despite the Parties’ consistent message to the 13 Thus, the Global Settlement, with the Bondholders agreeing to among other key terms, a debt-equity
conversion, albeit at a higher plan value than they considered appropriate, was a major component of the Debtors Plan structure and key aspect of the give and take of the negotiations.
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Equity Committee that its plan construct was not viable, the Equity Committee was insistent that
it would not negotiate outside of anything but its preferred plan structure.
14. Nonetheless, the Debtors and its creditor constituencies pressed on, negotiating
and ultimately agreeing upon a global settlement of issues that laid the framework for a
consensual Chapter 11 plan. The Parties immediately provided the terms of their global
settlement to the Equity Committee, and invited it to sign-on or to engage in constructive
negotiations within the framework of the Global Settlement. The Equity Committee declined
and instead now has sought to terminate exclusivity.
OBJECTION
I. THE EQUITY COMMITTEE’S DISPLEASURE WITH THE DEBTORS’ PLAN IS NOT A BASIS FOR THE COURT TO TERMINATE EXCLUSIVITY.
15. The Debtors have appropriately used exclusivity to bring their various
constituents to the negotiating table, thereby preserving and, in fact, enhancing the value of their
estates. The Debtors conducted extensive negotiations with every significant constituency in
these cases, and have proposed a plan that at this point has “very substantial, but not universal,
indications of potential approval.” In re Adelphia Communications Corp., 352 B.R. 578, 582
(Bankr. S.D.N.Y. 2006) (hereinafter “Adelphia II”) (declining to terminate exclusivity when the
Debtors had proposed a viable plan with significant creditor support). And now that the Plan is
on file, the cases are poised to move expeditiously toward a September 16, 2010 confirmation
hearing. The Court should allow the Debtors to solicit and seek confirmation of the Plan without
the interference of competing Plans.
16. The Equity Committee, however, contends that it should be permitted to file a
competing plan simply because it does not like the Plan currently on file. But whether or not
the Equity Committee likes the Debtors’ Plan, or thinks that it has a better alternative, is
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irrelevant to a determination of whether the Court should terminate exclusivity. As this Court
ruled in Adelphia II:
I note that displeasure with a plan on file is not one of the enumerated factors [to terminating exclusivity], and is not a basis for terminating exclusivity. Nor, without more, is creditor constituency unhappiness with a debtor’s plan proposals, with or without a formal plan on file.
Adelphia II at 587 (emphasis added) (citing In re Adelphia, 336 B.R. 610, 676, n.183 (Bankr.
S.D.N.Y. 2006) (“[T]he notion that creditor constituency unhappiness, without more, constitutes
cause to undermine the debtor’s chances of winning final confirmation of its plan during the
exclusivity period has been judicially rejected.”) (citing In re Geriatrics Nursing Home, Inc., 187
B.R. 128, 134 (D.N.J. 1995). This remains true even if the Equity Committee thinks that it has –
or in fact has – devised a “superior” plan structure. See, e.g., Geriatric Nursing Home, Inc., 187
B.R. at 128; In re Express One Int’l, Inc., 194 B.R. 98, 101 (Bankr. E.D. Tex. 1996) (“Kitty
Hawk would have the Court terminate exclusivity because they believe the Kitty Hawk plan is
superior to Express One’s plan. The issue to be determined, however, is not whether some other
plan may exist which provides greater recovery; the issue is whether debtor has been diligent in
its attempts to reorganize.”); In re Spansion, Inc., 426 B.R. 114, 139-40 (Bankr. D. Del. 2010)
(where debtor’s plan was confirmable as is, debtor did not need to consider changes proposed by
the creditors’ committee which would allegedly result in a superior plan (citing Geriatric
Nursing)).
17. The Equity Committee would have the Court believe that its constituents will be
marginalized – and unable to meaningfully oppose the Plan – if the Court denies the Termination
Motion. That, of course, is not true. Indeed, as this Court has pointed out, parties who are
unhappy with the Plan (like the Equity Committee) can “express [their] unhappiness with the
merits of the plan, and the reasons for it, to other creditors.” Adelphia II, at 589-90. They can
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also vote against the Plan, and object to confirmation at the appropriate time. Maintaining
exclusivity does nothing to impair or marginalize that right.
II. THE EQUITY COMMITTEE HAS NOT SHOWN CAUSE TO TERMINATE EXCLUSIVITY.
18. The Equity Committee has failed to meet its burden to show cause to terminate
the Debtors’ exclusivity in this case. Section 1121 of the Bankruptcy Code provides that the
Court may reduce or increase a period of exclusivity for cause. See 11 U.S.C. § 1121(d).
“Cause” is not defined under the Bankruptcy Code, but courts are clear that a party seeking to
terminate exclusivity “bears a heavy burden,” and must carry its burden through the framework
of nine non-exclusive factors, the so-called “Dow Corning Factors.14 Geriatrics Nursing Home,
187 B.R. at 132. The Equity Committee does not even attempt to address them.
19. Instead, the Equity Committee – citing to this Court’s ruling in the Adelphia II
case – suggests that the Court need not consider the objective Dow Corning Factors at all, and
can instead use its discretion to terminate exclusivity where termination would serve the “interest
of justice” and would “move the case forward materially.” Termination Motion at 11. The
Adelphia II case, however, stands for no such thing. In fact, the Adephia II court is clear that the
Dow Corning Factors are not mere “platitudes”, but are rather objective factors “that cannot be
ignored.” Adelphia II at 587 (citing In re Dow Corning Corp., 208 B.R. 661, 664 (Bankr. E.D.
Mich. 1997) (emphasis added). The Equity Committee’s willingness to misrepresent this Court’s
own ruling belies the weakness of its arguments.
14 The Dow Corning Factors are as follows: (a) the size and complexity of the case, (b) the necessity for
sufficient time to permit the debtor to negotiate a plan of reorganization and prepare adequate information, (c) the existence of good faith progress toward reorganization, (d) the fact that the debtor is paying its bills as they become due, (e) whether the debtor has demonstrated reasonable prospects for filing a viable plan, (f) whether the debtor has made progress in negotiations with its creditors, (g) the amount of time which has elapsed in the case, (h) whether the debtor is seeking an extension of exclusivity in order to pressure creditors to submit to the debtors’ reorganization demands, and (i) whether an unresolved contingency exists. Geriatrics Nursing Home, 187 B.R. at 132.
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20. In any event, the Equity Committee has not met its heavy burden of showing
cause to terminate exclusivity. In fact, it has not provided a single reason – other than its
dissatisfaction with the Plan and its desire to propose its own – to terminate exclusivity. That is
not nearly enough. Its Termination Motion must be denied.
III. TERMINATING EXCLUSIVITY WILL RESULT IN UNNECESSARY COST AND DELAY.
21. The Equity Committee also claims that because it is ready to file its competing
plan immediately, there will be no delay in confirmation and emergence if exclusivity is
terminated. Termination Motion at 14. This result is simply inconceivable. Putting aside the
logistical delays intrinsic in allowing the Equity Committee to file and solicit a competing plan,
terminating exclusivity at this point will do nothing more than open the door for other
constituencies – constituencies who might otherwise compromise their claims and sign-on to the
current Plan – to file their own “special interest” plan if the Debtors resist their self-serving
demands. See, e.g., In re Texaco Inc., 81 B.R. 806, 881 (Bankr. S.D.N.Y. 1988) (termination of
debtor’s exclusivity period “could result in [an] avalanche of plans from parties in interest which
would undermine the prospects for prompt resolution [of the cases]”); Johns-Manville Corp. v.
Equity Security Holders, 66 B.R. 517, 537 (Bankr. S.D.N.Y. 1986) (noting that complexities of
maintaining the current consensus would “exploded in the context of competing plans advanced
by parochial interests”).
22. In fact, there are at least two – and possibly more – constituencies that the Court
could expect to file competing plans in this case. The Equity Committee, of course, will file its
competing plan, as might the Diacetyl claimants, who are well organized and represented by
sophisticated counsel. It is also possible that one or more splinter groups of bondholders not part
of the Bondholder Committee or party to the Plan Support Agreement could file competing plans
NYI-4293830v10 13
as well. And if the Court declines to approve the Debtors’ entry into the proposed Plan Support
Agreement, both the Creditors’ Committee and the Bondholder Committee would be free to file
their own competing plans. The confirmation process – now likely to conclude in mid-
September – could drag out for many more months, at the expense of the estates and all of their
constituents. As this Court pointed out in Adephia II:
A competing plans battle now might well jeopardize current fragile agreements between various stakeholders, re-ignite intercreditor disputes, and push this process back to square one. A competing plans battle would also likely drag out the solicitation process, subjecting the estate to substantial extra costs that might otherwise be avoided, . . ..
Adelphia II at 590.
23. This result is not in the best interest of any party, least of all the equity holders,
whose recoveries will be diminished by the administrative costs of a lengthy and litigious
competing plans battle.
IV. THE EQUITY COMMITTEE’S HIGHLY LEVERAGED PLAN IS NOT A MARKET TEST.
24. Based solely on the offer of two Equity Committee members to partially fund an
equity contribution, the Equity Committee argues that the “market has spoken,” and that it
supports the Equity Committee’s plan proposal. Based on this perceived market support, the
Equity Committee contends that the Court should allow it to solicit its competing plan. The
partial funding offer, however, is far from indicative of a “market test” of the Equity
Committee’s plan proposal. For its eight long months of trying, the Equity Committee has
secured no more than a highly contingent “commitment” by the two hedge funds that dominate
the Equity Committee – more of a commitment to protect their own investment interests (and
create the illusion of market interest) than an indication of actual market sentiment. And, of
course, the commitment is all but illusory as it is mired by numerous significant conditions
NYI-4293830v10 14
which essentially render the funding offer a mere option.
25. As a preliminary matter, the Equity Committee has spent the last eight months
attempting to obtain firm commitments for both equity investments and debt financing. It has
yet to obtain either, having secured only conditional indications of potential support. And given
the current and volatile state of the markets, it is getting more and more unlikely that it will ever
be able to do so. The market has spoken, and on this point it is wishy-washy at best.
26. Perhaps more telling, however, is the sheer amount and extent of caveats
underlying the supposed “commitment” to provide an equity contribution. As discussed, Supra
at fn. 7, the commitment by two of the Equity Committee members to fund an equity
contribution would fall away if, among other things, there is a Material Adverse Change
triggered by a deviation of more than 10% from EBITDA or net debt in Chemtura’s Long Range
Plan (4/2010 version) or by termination or modification in any material respect of any material
business relationship, including with customers or suppliers, if the Equity Committee is unable to
raise a sufficient level of secured financing, or if the Equity Committee is unhappy with its “due
diligence.” Given the breadth of these contingencies – which basically give the Equity
Committee members an out under almost any circumstances imaginable – it is inappropriate to
even label the equity funding offer as a true “commitment.”
27. Finally, despite all of these caveats, the two Equity Committee members
apparently require “enhanced” incentives to motivate their “commitment” to the Equity
Committee’s plan proposal. Specifically, under the Equity Committee’s proposal its two leading
members will receive, among other things, $14 million commitment fees, free warrants to
purchase additional stock, and new common stock with preferred treatment including a
liquidation preference. Far from indicating a “market test,” the terms and conditions of the
NYI-4293830v10 15
equity “commitment” reveal the Equity Committee members’ own perceptions as to the
weakness of the Equity Committee proposals.
V. THE EQUITY COMMITTEE’S PROPOSED “TERM SHEET” IS NOT A SERIOUS ALTERNATIVE
28. Finally, although it is not necessary for this Court to assess the viability of the
Equity Committee’s proposal in deciding the Termination Motion, it merits noting that the
Equity Committee’s term sheet, on its face, is not a viable alternative to the Debtors’ Plan. See
Geriatrics Nursing Home, 187 B.R. at 134 (“This Court is not satisfied that statements made by
creditors and parties in interest that they were prepared to offer more favorable plans if the court
were to terminate the exclusivity period constitutes sufficient cause to cut short the debtor's
window of opportunity opened by Congress 11 U.S.C. § 1121(b) and (c).”). In fact, the Equity
Committee’s proposal – a proposal that it contends is strong enough to justify the termination of
exclusivity – is based on nothing more than a series of unsupported and unjustified assumptions.
29. The proposal assumes, for example, that the Equity Committee can raise $470
million in cash equity, an amount for which it still (after eight months of trying) has no firm
commitment. It assumes that the Equity Committee can secure up to $1.3 billion in secured debt
financing in this difficult market, even though it has yet to raise even one penny of debt. It
assumes that it is at all rational for a company, in this economic climate, to emerge from
bankruptcy relief with more total debt than when they filed (while also resinstating a substantial
portion of its pre-bankruptcy debt).15 It assumes, without any legal authority, that the Equity
Committee will prevail in the inevitable litigation regarding the noteholders’ no-call and make-
whole claims, despite the abundance of precedent supporting the enforceability of these claims.
It assumes that the Debtors will somehow find funding to satisfy reinstated diacetyl and 15 See 2008 Form 10K, Chemtura Corp. (listing total debt of approx. $1.204 billion and EBITDA of $351
million).
NYI-4293830v10 16
environmental claims, which it proposes to put behind more than a billion dollars in new secured
debt. It assumes, again without legal authority, that the Debtors can reinstate certain of their
indenture obligations, putting them behind more than $800 million in new senior secured debt. It
assumes that the PBGC will not seek to terminate the Debtors’ pension plans, even in the face of
a grossly overleveraged capital structure. And it assumes that the Debtors will not be required to
pay postpetition interest on their unsecured claims, even while equity holders receive a
substantial recovery. The Equity Committee’s proposal utterly fails to satisfy the feasibility
requirements for confirmation and is nothing more than a wish and a prayer, intended to buy the
Equity Committee the time to do what it has not been able to do in eight long months – find
anyone to commit to its proposal.
30. The Equity Committee’s proposal is not feasible, nor is it confirmable. And it
certainly is not a basis upon which to terminate the Debtors’ exclusivity, and subject the estates
to a protracted fight over several competing plans. Now is hardly the appropriate time to destroy
the Debtors’ hard-fought, viable global settlement on nothing more than a series of hopeful
assumptions.16
WHEREFORE, the Bondholder Committee respectfully requests that the Court deny the
Termination Motion and grant such other relief as the Court deems appropriate in the interests of
justice.
16 Significantly, just this past week Judge Carey for the Bankruptcy Court for the District of Delaware
rejected similar attempts by equity-holders to interfere with the Debtors’ exclusivity in an attempt to propose a competing plan. As Judge Carey stated:
[T]here’s a strong public policy in bankruptcy code preference or -- not preference but advantage to debtors to have at least a first shot at a plan of reorganization. And I think that’s appropriate here. The plan may or may not be confirmable. I’m not going to deny exclusivity based on a factual and legal argument that the plan that’s on the table that is being solicited is facially unconfirmable. . . . We’re going to go to a plan; we’re going to see what happens.
Tr. of Proceedings 19:16-19:25, In re Visteon Corp., Case No. 09-11786 (Bankr. D. Del. July 15, 2010), a copy of which is attached hereto as Exhibit 2.
NYI-4293830v10 17
Dated: July 18, 2010 New York, New York
JONES DAY /s/ Richard L. Wynne Richard L. Wynne Lance E. Miller JONES DAY 222 East 41st Street New York, New York 10017 Telephone: (212) 326-3939 Facsimile: (212) 755-7306 -and- Erin N. Brady 555 South Flower Street, 50th Floor Los Angeles, California 90071 Telephone: (213) 489-3939 Facsimile: (213) 243-2539 Counsel to the Ad Hoc Committee of Bondholders
EXHIBIT 1
- 1 -
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
12 - - - - - - - - - - - - - - - - - - - - -x
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
17
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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'
EXHIBIT 2
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1
2 UNITED STATES BANKRUPTCY COURT
3 DISTRICT OF DELAWARE
4 Case No. 09-11786-CSS
5 - - - - - - - - - - - - - - - - - - - - -x
6 In the Matter of:
7
8 VISTEON CORPORATION, et al.
9
10 Debtors.
11
12 - - - - - - - - - - - - - - - - - - - - -x
13
14 United States Bankruptcy Court
15 824 North Market Street
16 5th Floor
17 Wilmington, Delaware
18
19 July 15, 2010
20 11:08 AM
21
22 B E F O R E:
23 HON. CHRISTOPHER S. SONTCHI
24 U.S. BANKRUPTCY JUDGE
25 ECR OPERATOR: LESLIE MURIN
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1 PEWA Motion to Compel: Motion of Panasonic Electric Works
2 Corporation of America for an Order Compelling Debtors to
3 Assume or Reject Its Pre-Petition Contract
4
5 USF Holland Inc.'s Administrative Claims Motion: USF Holland
6 Inc.'s Motion for Allowance and Payment of Administrative
7 Claims Pursuant to 11 U.S.C. Section 503(b)(9)
8
9 YRC Inc. Administrative Claims Motion: YRC Inc.'s Motion for
10 Allowance and Payment of Administrative Claim Pursuant to 11
11 U.S.C. Section 503(b)(9)
12
13 OCUC Prosecution Motion: Motion of the Official Committee of
14 Unsecured Creditors Requesting Authorization to Prosecute
15 Certain Claims on Behalf of the Debtors' Estates
16
17 OCUC Motion for 2004 Discovery of PwC: Emergency Motion of the
18 Official Committee of Unsecured Creditors for Leave to Conduct
19 Discovery Pursuant to Fed.R.Bankr.P.2004
20
21 OCUC Seal Motion re Motion for 2004 Discovery of PwC: Motion
22 for Order Authorizing the Official Committee of Unsecured
23 Creditors to File Emergency Motion of the Official Committee of
24 Unsecured Creditors to Leave to Conduct Discovery Pursuant to
25 Fed.R.Bankr.P.2004 Under Seal
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1 OCUC Motion for 2004 Discovery of Debtors: Motion of the
2 Official Committee of Unsecured Creditors for Leave to Conduct
3 Discovery of the Debtors Pursuant to Fed.R.Bankr.R.2004
4
5 OCUC Seal Motion re Motion for 2004 Discovery of Debtors:
6 Motion for Order Authorizing the Official Committee of
7 Unsecured Creditors to File Motion for Leave to Conduct
8 Discovery of the Debtors Pursuant to Fed.R.Bankr.P.2004 Under
9 Seal
10
11 OCUC Motion for 2004 Discovery of Ford: Emergency Motion of
12 the Official Committee of Unsecured Creditors for Leave to
13 Conduct Discovery Pursuant to Fed.R.Bankr.P.2004
14
15 OCUC Seal Motion re Motion for 2004 Discovery of Ford: Motion
16 for Order Authorizing the Official Committee of Unsecured
17 Creditors to File Emergency Motion of the Official Committee of
18 Unsecured Creditors for Leave to Conduct Discovery Pursuant to
19 Fed.R.Bankr.P.2004 Under Seal
20
21 Committee Exclusivity Motion: Motion of the Official Creditors
22 Committee to Terminate Debtors' Exclusive Periods to File and
23 Solicit Votes for Their Chapter 11 Plan
24
25
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1 E&Y Retention: Debtors' Motion for Entry of and Order (a)
2 Authorizing the Debtors to Expand the Scope of Employment and
3 Retention of Ernst & Young LLP to Provide Certain Valuation
4 Services Nunc Pro Tunc to April 1, 2010 and (b) Approving and
5 Amendment to the Debtors' Statement of Work with Ernst & Young
6 LLP
7
8 PwC Retention: Debtors' Motion for Entry of and Order
9 Authorizing the Debtors to Expand the Scope of Employment and
10 Retention of PricewaterhouseCoopers LLP as Independent Auditor
11 and Accountant for the Debtors Nunc Pro Tunc to May 27, 2010
12
13 TMD Sale Motion: Debtors' Motion for Entry of an Order (I)
14 Authorizing the Sale of Debtors' Equity Interest In Toledo
15 Molding & Die, Inc. Free and Clear of Liens, Claims,
16 Encumbrances, and Other Interests; (II) Authorizing and
17 Approving Stock Purchase Agreement Related Thereto; and (III)
18 Granting Related Relief
19
20 TMD Sale Seal Motion: Debtors' Motion to File Under Seal the
21 Purchase Order Schedule Annexed to the Debtors' Motion for
22 Entry of an Order (I) Authorizing the Sale of Debtors' Equity
23 Interest in Toledo Molding & Die, Inc. Free and Clear of Liens,
24 Claims, Encumbrances, and Other Interests; (II) Authorizing and
25 Approving Stock Purchase Agreement Related Thereto; and (III)
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1 Granting Related Relief
2
3 Thirteenth Omnibus Claim Objection: Thirteenth Omnibus
4 Objection of Visteon Corporation and Its Affiliated Debtors to
5 Proofs of Claim
6
7 Fourteenth Omnibus Claim Objection: Fourteenth Omnibus
8 Objection of Visteon Corporation and Its Affiliated Debtors to
9 Proofs of Claim
10
11 Cash Collateral Motion: Motion of the Debtors for Entry of an
12 Interim Order (A) Authorizing Use of Cash Collateral, (B)
13 Granting Adequate Protection to Prepetition Secured Lenders,
14 and (C) Scheduling Final Hearing
15
16 Debtors' Exclusivity Motion: Debtors' Fourth Motion to Extend
17 Their Exclusive Periods to File and Solicit Votes for Their
18 Chapter 11 Plan
19
20
21
22
23
24
25 Transcribed by: Ellen S. Kolman
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1
2 A P P E A R A N C E S :
3 KIRKLAND & ELLIS LLP
4 Attorneys for Debtors and Affiliated Debtors
5 300 North LaSalle
6 Chicago, IL 60654
7
8 BY: JAMES J. MAZZA, JR., ESQ.
9 ERIN BRODERICK, ESQ.
10 PHILLIP W. NELSON, ESQ.
11
12 PACHULSKI STANG ZIEHL & JONES LLP
13 Attorneys for Debtors and Affiliated Debtors
14 919 North Market Street
15 17th Floor
16 Wilmington, DE 19899
17
18 BY: JAMES E. O'NEILL, ESQ.
19
20 ASHBY & GEDDES, P.A.
21 Co-counsel to the Official Committee of Unsecured
22 Creditors
23 500 Delaware Avenue
24 Wilmington, DE 19899
25
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- 7 -
1 BY: GREGORY A. TAYLOR, ESQ.
2
3 BROWN RUDNICK LLP
4 Co-Counsel to the Official Committee of Unsecured
5 Creditors
6 Seven Times Square
7 New York, NY 10036
8
9 BY: HOWARD STEEL, ESQ.
10
11 BROWN RUDNICK LLP
12 Co-Counsel to the Official Committee of Unsecured
13 Creditors
14 City Place 1
15 185 Asylum Street
16 Hartford, CT 06103
17
18 BY: HOWARD L. SIEGEL, ESQ.
19
20
21
22
23
24
25
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1 MORRIS, NICHOLS, ARSHT & TUNNELL LLP
2 Attorneys for Prepetition Term Agent
3 1201 North Market Street
4 Wilmington, DE 19899
5
6 BY: DANIEL B. BUTZ, ESQ.
7
8
9 SAUL EWING, LLP
10 Attorneys for Toledo Molding & Die, Inc.
11 222 Delaware Avenue
12 Suite 1200
13 Wilmington, DE 19899
14
15 BY: LUCIAN MURLEY, ESQ.
16
17
18 U.S. DEPARTMENT OF JUSTICE
19 Office of the United States Trustee
20 J. Caleb Cobbs Federal Building
21 844 King Street
22 Suite 2207
23 Wilmington, DE 19899
24
25 BY: JANE M. LEAMY, ESQ.
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1 AKIN, GUMP, STRAUSS, HAUER & FELD, LLP
2 Attorneys for Informal Group of Noteholders
3 One Bryant Park
4 New York, NY 10036
5
6 BY: ARIK PREIS, ESQ.
7 ROBERT J. TENNENBAUM, ESQ. (TELEPHONICALLY)
8
9 ANDREWS KURTH LLP
10 Attorneys for Ad Hoc Trade Committee
11 450 Lexington Avenue
12 New York, NY 10017
13
14 BY: PAUL N. SILVERSTEIN, ESQ. (TELEPHONICALLY)
15 ABHISHEK MATHUR, ESQ. (TELEPHONICALLY)
16 JONATHAN I. LEVINE, ESQ. (TELEPHONICALLY)
17
18
19 BINGHAM MCCUTCHEN LLP
20 Attorneys for Wilmington Trust FSB, as Administrative
21 Agent for Pre-Petition Term Lenders
22 One Federal Street
23 Boston, MA 02110
24
25 BY: SAMUEL R. ROWLEY, ESQ. (TELEPHONICALLY)
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1
2 BLANK ROME LLP
3 Attorneys for the Informal Committee of Noteholders
4 1201 Market Street
5 Suite 800
6 Wilmington, DE 19801
7
8 BY: ALAN M. ROOT, ESQ.
9
10
11 CARSON FISCHER, PLC
12 Attorneys for Toledo Mold & Die
13 4111 Andover Road West
14 Bloomfield Hills, MI 48302
15
16 BY: JOSEPH M. FISCHER, ESQ. (TELPHONICALLY)
17
18
19 DAVIDSON KEMPER CAPITAL MANAGEMENT
20 Attorney for Davidson Kemper Capital Management
21 64 East 55th Street
22 New York, NY 10022
23
24 BY: EPHRAIM DIAMOND, ESQ. (TELEPHONICALLY)
25
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1 DECHERT LLP
2 Attorneys for Law Debenture Trust Company of New York
3 1095 Avenue of the Americas
4 New York, NY 10036
5
6 BY: STEVEN B. SMITH, ESQ. (TELEPHONICALLY)
7
8
9 DEWEY & LEBOEUF LLP
10 Attorneys for the Ad Hoc Committee of Equity Holders
11 1301 Avenue of the Americas
12 New York, NY 10019
13
14 BY: MARTIN J. BIENENSTOCK, ESQ. (TELEPHONICALLY)
15
16
17 FOX ROTHSCHILD LLP
18 Attorneys for Lead Investors
19 Citizens Bank Center
20 919 North Market Street
21 Suite 1300
22 Wilmington, DE 19899
23
24 BY: ERIC M. SUTTY, ESQ.
25
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1 GOLDBERG, KOHN, BELL, BLACK, ROSENBLOOM & MORITZ, LTD.
2 Attorneys for Johnson Controls Interiors, LLC
3 55 East Monroe Street
4 Suite 3300
5 Chicago, IL 60603
6
7 BY: DANIELLE WILDERN JUHLE, ESQ. (TELEPHONICALLY)
8
9
10 MCGUIREWOODS, LLP
11 Attorneys for Ford Motor Company
12 625 Liberty Avenue
13 23rd Floor, EQT Plaza
14 Pittsburgh, PA 15222
15
16 BY: MARK E. FREEDLANDER, ESQ. (TELEPHONICALLY)
17
18
19 MILLER CANFIELD PADDOCK & STONE, P.L.C.
20 Attorneys for Ford Motor Company
21 150 West Jefferson
22 Suite 2500
23 Detroit, MI 48226
24
25 BY: STEPHEN S. LAPLANTE, ESQ. (TELEPHONICALLY)
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1 MORRIS JAMES LLP
2 Attorneys for Nissan Trading Corp.
3 500 Delaware Avenue
4 Suite 1500
5 Wilmington, DE 19899
6
7 BY: CARL N. KUNZ III, ESQ. (TELEPHONICALLY)
8
9
10 PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP
11 Attorneys for Mason Capital Management LLC
12 1285 Avenue of the Americas
13 New York, NY 10019
14
15 BY: SARAH HARNETT, ESQ. (TELEPHONICALLY)
16
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1 WHITE & CASE LLP
2 Attorneys for Lead Investors, Working Group of the
3 Informal Noteholder Committee
4 1155 Avenue of the Americas
5 New York, NY 10036
6
7 BY: ANDREW C. AMBRUOSO, ESQ. (TELEPHONICALLY)
8 GERARD UZZI, ESQ. (TELEPHONICALLY)
9 J. CHRISTOPHER SHORE, ESQ. (TELEPHONICALLY)
10 LYDIA E. LIN, ESQ. (TELEPHONICALLY)
11 THOMAS E. LAURIA, ESQ. (TELEPHONICALLY)(
12
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VISTEON CORPORATION, et al.
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1 P R O C E E D I N G S
2 THE CLERK: All rise.
3 THE COURT: Please be seated. Good morning.
4 MR. MAZZA: Good morning, Your Honor. James Mazza
5 for Visteon Corporation and its affiliated debtors. Your
6 Honor, just on the agenda today, I believe, every -- all the
7 orders that we've submitted have been now entered. The first
8 matters, 1 through 11, are all continued through -- to the
9 August 17th omnibus and it would bring us to matter 19 as the
10 only item that's left open and that's our exclusivity extension
11 motion.
12 THE COURT: Yes, let me hear from the objector. I
13 think I've decided this about three times unless you've reached
14 a resolution?
15 MR. MAZZA: We haven't reached a resolution with the
16 objector, Your Honor, so, I'm happy to cede the podium.
17 THE COURT: Why am I hearing this again?
18 MR. BIENENSTOCK: Your Honor, this is Martin
19 Bienenstock. May I speak to that?
20 THE COURT: Of course.
21 MR. BIENENSTOCK: Thank you, Your Honor. Good
22 morning. I'm with Dewey & LeBoeuf representing the ad hoc
23 equity committee. We filed the opposition to extending
24 exclusivity, obviously, cognizant of Your Honor's prior
25 rulings. But for very important reasons, and, basically, they
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1 are as follows.
2 The issue teed up in the case now is -- there are a
3 lot of legal issues but the factual issue is the value of the
4 reorganized debtor. The playing field is badly slanted and
5 unfairly slanted against the equity because -- for many
6 reasons. But one reason is that one way to show the Court that
7 the company has mass insolvency and the plan wrongfully
8 deprives equity of their solvency in the company is to bring to
9 the Court an offer that pays off all of the debt and leaves
10 money for equity. It is very hard to obtain offers if you're
11 not allowed to propose a plan. The confirmation hearing is not
12 a sale hearing; it's not an auction where people are invited to
13 attend. So, when you ask multi-billion dollar corporations to
14 make offers and to do the due diligence that that requires, it
15 is very helpful to have the ability to put those offers into a
16 plan that you're allowed to propose so the Court can see it.
17 So, the inability to propose a plan chills the
18 ability to get an offer. As an alternative, Your Honor, as a
19 lesser relief if the Court is going to deny -- or not sustain
20 our objection, would be at least to order the debtors to
21 provide Johnson Controls, Inc. and my clients access to the
22 data room at least for the one week that Johnson Controls, Inc.
23 requested in the letter that's in evidence at the prior
24 hearings, so that at least an offer, a firm offer, can be
25 fashioned. The debtor well knows that by having exclusivity,
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1 by not allowing Johnson Controls into the data room, the estate
2 is sending every signal to the world that if you try to make an
3 offer you won't even get to first base so don't even bother.
4 Now, additionally, Your Honor, there's another
5 important reason to terminate exclusivity. The debtor has
6 testified and the Court has observed that the time in Chapter
7 11 is detrimental to the debtor because they -- it chills new
8 business and new business may be heading to other parts
9 suppliers as long as the auto manufacturers are not certain
10 that Visteon will emerge from Chapter 11.
11 If we take that as the truth, one would think that
12 Visteon would be interested in making sure that there's a plan
13 on file that can be confirmed at the earliest possible date.
14 The current plan is not confirmable if the debtor is solvent
15 which we think it is. What we're asking for is consistent with
16 the Court's observations and the debtors' testimony that there
17 ought to be another plan on file which has the opposite
18 valuation so that at least one of them is confirmable and the
19 company can come out of bankruptcy.
20 And I know Your Honor recalls it so I won't take a
21 long time on this, but there are already many indicia in the
22 record. In fact, there in our objection to extending
23 exclusivity, showing that the debtor -- debtors' valuation is
24 way off base whether we talk about the par trading value of the
25 debt, whether we talk about Johnson Controls, Inc. offering a
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1 billion and a quarter for a thirty to fifty percent of the
2 revenues and all of the other evidence we have there is much
3 indicia indicating that there is solvency here. And while I'm
4 on that topic, Your Honor, there is a very deceptive footnote,
5 footnote 3, I think -- there's a footnote in the debtors' reply
6 to our opposition. It's footnote 3, I believe, on page 4,
7 attempting to give the Court the impression that another
8 shareholder, Aurelius, has -- now supports the plan as a
9 shareholder because it signed the plan support agreement.
10 As the debtor knows, because it's received a letter
11 from Aurelius, after the last hearing where the Court did not
12 sustain Aurelius' position or my client's position, Aurelius
13 sold its share position and under the plan support agreement
14 anyone who sells bonds has to get the purchaser to sign the
15 plan support agreement. So, that's how Aurelius came to sign
16 the plan support agreement. If it couldn't make a profit as a
17 shareholder, it thought the odds -- you know, the winds were
18 not blowing in the right direction it figured it would make the
19 profit we've been saying is inherent in the bonds and so it
20 bought bonds and had to sign the PSA because that was the only
21 way bonds were available. I say that to make two points.
22 One is the debtors' implication that shareholders
23 support this plan is completely wrong. And two, why are people
24 paying par in that neighborhood for the bonds? It's -- you
25 only pay that money if you think the return will be twenty-
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1 five, fifty, a hundred percent greater than what you're paying
2 in a Chapter 11 case.
3 So, to summarize, Your Honor, I think we -- there are
4 valid reasons consistent with the debtors' interest in emerging
5 quickly to enable us to file a plan. And if the Court is not
6 disposed to do that, and even if it is, I would ask as lesser
7 relief at least direct the debtors to let Johnson Controls,
8 Inc. and my client into the data room so that we can formulate
9 offers that can disprove the debtors' notion that the estate is
10 insolvent.
11 THE COURT: Anyone else objecting? All right. I'm
12 going to overrule the objection. With all due respect, we are
13 retreading the ground that has been gone over time and time
14 again. I haven't heard anything new today that would, in the
15 context of extending exclusivity to allow the debtor to go
16 forward with its plan, and again, there's a strong public
17 policy in bankruptcy code preference or -- not preference but
18 advantage to debtors to have at least a first shot at a plan of
19 reorganization. And I think that's appropriate here.
20 The plan may or may not be confirmable. I'm not
21 going to deny exclusivity based on a factual and legal argument
22 that the plan that's on the table that is being solicited is
23 facially unconfirmable. I dealt with that at the disclosure
24 statement hearing. We're going to go to a plan; we're going to
25 see what happens. I'm not going to make a decision whether or
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1 not to confirm an unconfirmable plan based on the fact that it
2 would hurt the debtors' business if I didn't confirm the plan.
3 If the standards are met, the plan will be confirmed. If the
4 standards are not met, the plan won't be confirmed.
5 The factual issue of whether or not there is value
6 here is fully preserved, however, I leave it to the debtors'
7 business judgment and their fiduciary duties to respond to
8 request for information. I'm certainly not going to order in
9 the context of this motion that the debtors provide access to
10 your client, Mr. Bienenstock, or to Johnson Controls. I fully
11 expect the debtors to operate in the context and consistent
12 with the fiduciary duties and if they don't they will not be
13 happy with the result.
14 So, I'm going to overrule the objection. This is
15 basically a bridge to where we're already going which is a
16 contested confirmation hearing. We'll see what happens there
17 and we'll see how it plays out then. At that time, I may very
18 well lift exclusivity. Parties always have a right to seek to
19 terminate exclusivity even if I filed an extension motion.
20 That may be appropriate if the plan is not confirmed. We'll
21 decide that then. But at this point, we're on this path, we're
22 going to continue on this path for better or for worse, and all
23 rights to present whatever evidence is appropriate at the
24 confirmation hearing are, of course, fully preserved. I'll
25 overrule the objection and grant the motion. You have form of
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1 order?
2 MR. MAZZA: Yes, Your Honor. There's one change, if
3 I may approach?
4 THE COURT: Yes. And then I'm going to have two
5 housekeeping matters at the end of the hearing.
6 MR. MAZZA: Okay, Your Honor.
7 The change is with respect to the solicitation
8 period. It's exclusivity -- the exclusivity period with
9 respect to solicitation is November 15th as opposed to our
10 original motions ask of December 15th after discussions with
11 the creditors' committee on that point.
12 THE COURT: I'll sign the order as modified.
13 MR. MAZZA: Okay. Thank you.
14 One other item I'd like to mention with respect to
15 where we are on an issue with the so-called Ad Hoc Trade
16 Committee in the case that has objected previously to the
17 disclosure statement in connection with the rights offering not
18 applying to the general unsecured class. We've been in
19 discussions with them regarding a potential 15.75 million
20 dollar rights offering of reorganized Visteon common stock on
21 top of the current rights offering under toggle A of our plan.
22 We're still working through some of the details but if we can
23 solve the open issues and reach a deal, this will provide what
24 we think will be an insurance policy that will enhance what we
25 believe are the already strong prospects of the general
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1 unsecured class voting in favor of the plan.
2 THE COURT: Okay.
3 MR. MAZZA: If we reach a deal on this, Your Honor,
4 we'd anticipate filing a motion to approve of a -- a material
5 plan modification to implement this rights offering and we'd
6 like to do so by the July 30th voting deadline depending on the
7 Court's schedule. So, we don't have a motion at this point or
8 deal but we're getting close. And to the extent we can get a
9 hearing date in that respect, we'd appreciate that.
10 THE COURT: File your motion to shorten and I'll
11 decide at that time.
12 MR. MAZZA: Okay. Very well.
13 THE COURT: I have two housekeeping matters, if I
14 may?
15 MR. MAZZA: Okay.
16 THE COURT: One, I received earlier today a
17 certification of counsel regarding the stipulation resolving
18 the debtors' potential objection to purchase a common stock by
19 Aurelius and I've reviewed it; it's a little strange in that
20 there's not a pending motion.
21 MR. MAZZA: Right.
22 THE COURT: And it's a little strange that it's,
23 basically, a reservation of rights without the debtor agreeing
24 to anything. I think -- and it's been noticed on a very short
25 time frame, what I'd like do is send this out on full notice --
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1 MR. MAZZA: Okay.
2 THE COURT: -- and schedule it for a hearing and if
3 there's no objections we can do a C&O but given it's sort of
4 strange procedural posture, I'm really not comfortable signing
5 it.
6 MR. MAZZA: Yes, I don't think that affects our view
7 of the certification, putting it out on notice. I don't know
8 if it has any --
9 THE COURT: I don't know if Aurelius has --
10 MR. MAZZA: -- any bearing on Aurelius. But we can
11 check with them and --
12 THE COURT: Well, it's just -- you know, that's the
13 standard.
14 MR. MAZZA: I understand.
15 THE COURT: There's no matter in controversy at this
16 point. And often, the Court approves stipulations resolving
17 issues that are in controversy without requiring a 9019 but
18 there's no dispute, really, and there's certainly nothing
19 before the Court.
20 MR. MAZZA: Well, I think that --
21 THE COURT: I mean there's an order in place and
22 perhaps you're clarifying an order but I think given the fact
23 that it's really not -- it wasn't raised in the context of the
24 motion. It wasn't raised in the context of the order that's on
25 file with the Court. I think it needs to go out on notice.
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1 MR. MAZZA: Okay. We're happy to do that.
2 THE COURT: I read a very interesting opinion a
3 couple days ago.
4 MR. MAZZA: Referring to the Third Circuit?
5 THE COURT: Yes. I just -- I didn't know -- the
6 opinion calls for remand.
7 MR. MAZZA: Right.
8 THE COURT: I just didn't know if there was anything
9 the parties could offer as to whether how they intend to
10 proceed. If they can't, that's fine. I just wanted to
11 inquire.
12 MR. MAZZA: Yes, I think from the debtors'
13 perspective, we're still evaluating what our options are based
14 on that ruling having come down. I think it has to go back
15 down to the district court and back down here before any
16 activity would happen in front of Your Honor.
17 THE COURT: Right.
18 MR. MAZZA: So, whether we ask for a re-hearing or
19 proceed further in the Third Circuit remains to be seen and if
20 that would have an effect on that process.
21 THE COURT: Okay. So, basically, you haven't decided
22 how to proceed at this point?
23 MR. MAZZA: No, because we're also evaluating, you
24 know, the effects of what that ruling would be from an
25 implementation standpoint.
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1 THE COURT: Right. Okay. Just --
2 MR. MAZZA: And that's where we are.
3 THE COURT: All right. Anything further?
4 MR. MAZZA: That's all we have. Thank you, Your
5 Honor.
6 THE COURT: Hearing adjourned.
7 (Proceedings concluded at 11:25 AM)
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1
2 I N D E X
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4 R U L I N G S
5 DESCRIPTION PAGE LINE
6 Debtors' exclusivity motion approved 20 25
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8 Exclusivity period with respect to solicitation 21 8
9 change to November 15th approved as modified
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1
2 C E R T I F I C A T I O N
3
4 I, Ellen S. Kolman, certify that the foregoing transcript is a
5 true and accurate record of the proceedings.
6
7 ___________________________________
8 ELLEN S. KOLMAN
9
10 Veritext
11 200 Old Country Road
12 Suite 580
13 Mineola, NY 11501
14
15 Date: July 18, 2010
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