Case 20-10343-LSS Doc 206 Filed 03/17/20 Page 1 of 15 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: Chapter 11 BOY SCOUTS OF AMERICA AND Case No. 20-10343 (LSS) DELAWARE BSA, LLC,1 (Jointly Administered) Debtors. Hearing Date: April 15, 2020 at 10:00 a.m. (ET) Objection Deadline: March 31, 2020 at 4:00 p.m. (ET) DEBTORS’ APPLICATION FOR ENTRY OF AN ORDER AUTHORIZING THE RETENTION AND EMPLOYMENT OF ALVAREZ & MARSAL NORTH AMERICA, LLC AS FINANCIAL ADVISOR FOR THE DEBTORS AND DEBTORS IN POSSESSION, NUNC PRO TUNC TO THE PETITION DATE The Boy Scouts of America (the “BSA”) and Delaware BSA, LLC, the non-profit corporations that are debtors and debtors in possession in the above-captioned chapter 11 cases (together, the “Debtors”), submit this application (this “Application”), pursuant to section 327(a) of title 11 of the United States Code, 11 U.S.C. §§ 101–1532 (the “Bankruptcy Code”), rules 2014 and 2016 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”), and rules 2014-1 and 2016-2 of the Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the District of Delaware (the “Local Rules”), for entry of an order, substantially in the form attached hereto as Exhibit A (the “Proposed Order”), (i) authorizing the Debtors to retain and employ Alvarez & Marsal North America, LLC, together with employees of its affiliates (all of which are wholly-owned by its parent company and employees), its wholly owned subsidiaries, and independent contractors (collectively, “A&M”), as their financial advisor nunc pro tunc to February 18, 2020 (the “Petition Date”) pursuant to the terms of the 1 The Debtors in these chapter 11 cases, together with the last four digits of each Debtor’s federal tax identification number, are as follows: Boy Scouts of America (6300) and Delaware BSA, LLC (4311). The Debtors’ mailing address is 1325 West Walnut Hill Lane, Irving, Texas 75038. Case 20-10343-LSS Doc 206 Filed 03/17/20 Page 2 of 15 engagement letter by and between the Debtors, Sidley Austin LLP (“Sidley”), and Alvarez & Marsal Public Sector Services, LLC, an affiliate of A&M, dated and signed as of October 12, 2018 (the “Engagement Letter”),2 a copy of which is attached hereto as Exhibit B, as modified by this Application and the Proposed Order, (ii) approving the terms of A&M’s retention and employment, including fee and expense structure and the indemnification, contribution, reimbursement, and related provisions set forth in the Engagement Letter, as modified by this Application and the Proposed Order, and (iii) granting related relief. In support of this Application, the Debtors submit the Declaration of Brian Whittman in Support of the Debtors’ Application for Entry of an Order Authorizing the Retention and Employment of Alvarez & Marsal North America, LLC as Financial Advisor for the Debtors and Debtors in Possession, Nunc Pro Tunc to the Petition Date, (the “Whittman Declaration”), attached hereto as Exhibit C, which is incorporated herein by reference. In further support of this Application, the Debtors respectfully state as follows: STATUS OF THE CASES AND JURISDICTION 1. On the Petition Date, each of the Debtors filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the “Court”). The Debtors continue to operate and maintain their non-profit organization and manage their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. On February 19, 2020, the Court entered an order [Docket No. 61] authorizing the joint administration and procedural consolidation of the chapter 11 cases pursuant to Bankruptcy Rule 1015(b). 2 The Debtors seek the retention of Alvarez & Marsal North America, LLC (“A&M NA”) pursuant to this Application notwithstanding that the Engagement Letter is between A&M NA’s affiliate, Alvarez & Marsal Public Sector Services, LLC (“A&M PS”), Sidley, and the Debtors. A&M NA and the Debtors have agreed that with respect to the retention of A&M NA in these chapter 11 cases, the Engagement Letter shall be deemed to be between A&M NA and the Debtors as if A&M NA were the signatory thereto rather than A&M PS. 2 Case 20-10343-LSS Doc 206 Filed 03/17/20 Page 3 of 15 2. On March 5, 2020, the United States Trustee for the District of Delaware (the “U.S. Trustee”) appointed an official committee of unsecured creditors (the “UCC”) and an official committee of tort claimants (the “Tort Claimants Committee” and, together with the UCC, the “Committees”) pursuant to section 1102 of the Bankruptcy Code [Docket Nos. 141 and 142]. No party has requested the appointment of a trustee or examiner in these chapter 11 cases. 3. The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334 and the Amended Standing Order of Reference from the United States District Court for the District of Delaware, dated February 29, 2012. This matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2), and the Debtors confirm their consent, pursuant to Local Rule 9013-1(f), to the entry of a final order or judgment by the Court in connection with this Application if it is determined that the Court, absent consent of the parties, cannot enter final orders or judgments in connection herewith consistent with Article III of the United States Constitution. 4. Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409. 5. The statutory and other bases for the relief requested in this Application are section 327(a) of the Bankruptcy Code, Bankruptcy Rules 2014 and 2016, and Local Rules 2014-1 and 2016-2. BACKGROUND OF THE DEBTORS 6. The BSA is a federally chartered non-profit corporation under title 36 of the United States Code. The BSA is exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code. Founded in 1910 and chartered by an act of Congress in 1916, the BSA is one of the largest youth organizations in the United States and one of the largest Scouting organizations in the world, with approximately 2.2 million registered youth participants and approximately 800,000 adult volunteers. As a non-profit corporation, the BSA is required to 3 Case 20-10343-LSS Doc 206 Filed 03/17/20 Page 4 of 15 adopt and carry out a charitable, religious, educational, or other philanthropic mission. The BSA’s mission is to prepare young people for life by instilling in them the values of the Scout Oath and Law,3 encouraging them to be trustworthy, kind, friendly and helpful, while also training youth in responsible citizenship, skills development and self-reliance through participation in a wide range of outdoor activities, educational programs, and, at older ages, career-oriented programs in partnership with community organizations. Delaware BSA, LLC (“Delaware BSA”) is a non-profit limited liability company incorporated under the laws of Delaware and exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code. BSA is the sole member of Delaware BSA. 7. Additional information regarding the Debtors’ non-profit operations, capital structure and the circumstances preceding the Petition Date may be found in the Declaration of Brian Whittman in Support of the Debtors’ Chapter 11 Petitions and First Day Pleadings [Docket No. 16] and the Debtors’ Informational Brief [Docket No. 4]. RELIEF REQUESTED 8. By this Application, the Debtors request entry of the Proposed Order, substantially in the form attached hereto as Exhibit A, (i) authorizing the Debtors to retain and employ A&M as their financial advisor, nunc pro tunc to the Petition Date, pursuant to section 327(a) of the Bankruptcy Code, as modified by section 1107(b) of the Bankruptcy Code, Bankruptcy Rules 2014 and 2016, and Local Rules 2014-1 and 2016-2, in accordance with the terms of the Engagement Letter, (ii) approving the terms of A&M’s retention and employment, including fee and expense structure and the indemnification, contribution, reimbursement, and 3 Scout Oath: “On my honor I will do my best to do my duty to God and my country and to obey the Scout Law; to help other people at all times; to keep myself physically strong, mentally awake, and morally straight.” Scout Law: “A Scout is trustworthy, loyal, helpful, friendly, courteous, kind, obedient, cheerful, thrifty, brave, clean, and reverent.” 4 Case 20-10343-LSS Doc 206 Filed 03/17/20 Page 5 of 15 related provisions set forth in the Engagement Letter, as modified by this Application and the Proposed Order, and (iii) granting related relief. A&M’S QUALIFICATIONS 9. In consideration of the size and complexity of their organization, as well as the exigencies of the circumstances, the Debtors have determined that the services of experienced financial advisors will substantially enhance their attempts to maximize the value of their estates. A&M is well qualified to provide these services in light of their extensive knowledge and expertise with respect to chapter 11 proceedings. 10. A&M specializes in interim management, crisis management, turnaround consulting, operational due diligence, creditor advisory services, and financial and operational restructuring. A&M also has a large public sector practice that specializes in advising non-profit and public sector organizations on performance improvement and financial and operational restructuring. A&M’s debtor advisory services have included a wide range of activities targeted at stabilizing and improving a company’s financial position, including developing or validating forecasts, business plans and related assessments of a business’s strategic position; monitoring and managing cash, cash flow and supplier relationships; assessing and recommending cost reduction strategies; and designing and negotiating financial restructuring packages.