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Debtor-In-Possession Financing Case 18-12839-CSS Doc 7 Filed 12/19/18 Page 1 of 70 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x : In re: : Chapter 11 : Alcor Energy, LLC,1 : Case No. 18-12839 (___) : Debtor. : : - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x MOTION FOR INTERIM AND FINAL ORDERS (A) AUTHORIZING THE DEBTOR TO USE CASH COLLATERAL, (B) AUTHORIZING THE DEBTOR TO OBTAIN POST-PETITION FINANCING, (C) GRANTING SUPERPRIORITY SECURITY INTERESTS AND SUPERPRIORITY ADMINISTRATIVE EXPENSE STATUS TO EXISTING LENDER, (D) GRANTING ADEQUATE PROTECTION TO FIRST LIEN LENDER, (E) SCHEDULING A FINAL HEARING, AND (F) GRANTING RELATED RELIEF Alcor Energy, LLC (the “Debtor”) hereby moves (this “Motion”) the Court, pursuant to sections 105, 361, 362(d), 363(c), 364(c)(1), 364(c)(2), 364(c)(3), 364(d)(1), 364(e), 503(b), and 507 of title 11 of the United States Code, 11 U.S.C. §§ 101–1532 (the “Bankruptcy Code”), Rules 2002, 4001, 6004, and 9014 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”), and Rule 4001-2 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 “Interim DIP Order”), and a final order (the “Final DIP Order”), (a) authorizing the Debtor to obtain super-priority, debtor- in-possession financing (the “DIP Facility”) pursuant to the terms set forth in that certain Alcor Energy, LLC Debtor-In-Possession (DIP) Financing Term Sheet (the “Term Sheet”),2 a copy of which is attached as Exhibit 1 to the Interim DIP Order, (b) granting liens and superpriority 1 The last four digits of the Debtor’s taxpayer identification number are 0924. The Debtor’s address is 7754 East Velocity Way, Mesa, Arizona 85212. 2 Capitalized terms used herein, but not otherwise defined, have the meanings given to them in the Term Sheet. 01:23981219.4 Case 18-12839-CSS Doc 7 Filed 12/19/18 Page 2 of 70 administrative claims; (c) scheduling a final hearing with respect to the relief requested herein; and (d) granting related relief. In support of this Motion, the Debtor relies upon and incorporates by reference the Declaration of Don Pitts, Chief Financial Officer, in Support of Chapter 11 Petition and First Day Motions (the “First Day Declaration”) and the Declaration of David Payne in Support of Motion for Interim and Final Orders (A) Authorizing the Debtor to Use Cash Collateral, (B) Authorizing the Debtor to Obtain Post-Petition Financing, (C) Granting Superpriority Security Interests and Superpriority Administrative Expense Status to Existing Lender, (D) Granting Adequate Protection to First Lien Lender, (E) Scheduling a Final Hearing, and (F) Granting Related Relief (the “DIP Declaration”), each filed concurrently herewith. In further support of this Motion, the Debtor respectfully represents as follows: JURISDICTION AND VENUE 1. The Court has jurisdiction to consider this Motion under 28 U.S.C. §§ 157 and 1334 and the Amended Standing Order of Reference from the United States District Court for the District of Delaware dated as of February 29, 2012. This is a core proceeding under 28 U.S.C. § 157(b). Venue of this case and this Motion in this District is proper under 28 U.S.C. §§ 1408 and 1409. 2. The statutory predicates for the relief requested herein are sections 105, 361, 362(d), 363(c), 364(c)(1), 364(c)(2), 364(c)(3), 364(d)(1), 364(e), 503(b), and 507 of the Bankruptcy Code, Bankruptcy Rules 2002, 4001, 6004, and 9014, and Local Rule 4001-2. 3. Under Rule 9013-1(f) of the Local Rules, the Debtor consents to the entry of a final judgment or order with respect to this Motion if it is determined that the Court would lack Article III jurisdiction to enter such final order or judgment absent the consent of the parties. 01:23981219.4 2 Case 18-12839-CSS Doc 7 Filed 12/19/18 Page 3 of 70 BACKGROUND 4. On the date hereof (the “Petition Date”), the Debtor commenced a case by filing a petition for relief under chapter 11 of the Bankruptcy Code (the “Chapter 11 Case”) as a “small business debtor” as that term is defined in the Bankruptcy Code. 5. The Debtor continues to operate its business and manage its properties as a debtor and debtor in possession under sections 1107(a) and 1108 of the Bankruptcy Code. 6. To date, no creditors’ committee has been appointed in the Chapter 11 Case by the Office of the United States Trustee for the District of Delaware (the “United States Trustee”). No trustee or examiner has been appointed in the Chapter 11 Case. 7. Additional factual background information regarding the Debtor, including its business operations, its corporate and capital structure, and the events leading to the Chapter 11 Case, is set forth in detail in the First Day Declaration, which is incorporated herein by reference. THE DEBTOR’S SECURED DEBT 8. The Debtor is indebted to the Lender pursuant to certain documents executed and delivered to the Lender or the Lender’s predecessor-in-interest by the Debtor, including, without limitation, (a) that certain Amended and Restated Loan and Security Agreement dated May 8, 2014 (as heretofore amended and supplemented from time to time, the “Credit Agreement”), and (b) that certain Promissory Note of the Debtor in the original principal amount of $700,000 dated May 23, 2017 in favor of Maxus Capital Group, LLC, Lender’s predecessor-in-interest (the “Maxus Note”) and related security agreement. 9. The Credit Agreement, the Maxus Note, and all notes, security agreements, assignments, pledges, mortgages, deeds of trust, guaranties, forbearance agreements, letters of 01:23981219.4 3 Case 18-12839-CSS Doc 7 Filed 12/19/18 Page 4 of 70 credit, and other instruments or documents executed in connection therewith or related thereto are referred to herein collectively as the “Pre-Petition Claim Documents.” 10. Pursuant to the Pre-Petition Claim Documents and applicable law, the Lender holds a valid, enforceable, and allowable claim against the Debtor, as of the Petition Date, in an aggregate amount of at least $3,775,000 of unpaid principal, plus any and all accrued and unpaid interest, fees, costs, expenses, charges, and other claims, debts, or obligations of the Debtor to the Lender that have accrued as of the Petition Date under the Pre-Petition Claim Documents and applicable law. The Lender’s claim, as described in the preceding sentence, together with all post-Petition Date interest, fees, costs, and charges allowed to the Lender on such claim pursuant to section 506(b) of the Bankruptcy Code shall collectively be referred to hereunder as the “Pre- Petition Claim”. 11. The Pre-Petition Claim constitutes an allowed, legal, valid, binding, enforceable, and non-avoidable obligation of and claim against the Debtor, and is not subject to any offset, defense, counterclaim, avoidance, recharacterization, or subordination pursuant to the Bankruptcy Code or any other applicable law, and the Debtor does not possess and cannot assert any claim, counterclaim, setoff, or defense of any kind, nature, or description that would in any way affect the validity, enforceability, allowance, and non-avoidability of the Pre-Petition Claim. 12. The Pre-Petition Claim is secured by properly perfected, first priority liens and security interests in, inter alia, any and all assets and property of the Debtor, now owned or hereafter acquired, real and personal, and the proceeds and products thereof (collectively, and as defined in the Interim DIP Order, the “Pre-Petition Collateral”). 13. Additionally, all cash of the Debtor’s bankruptcy estate, wherever located, and all cash equivalents, whether in the form of negotiable instruments, documents of title, securities, 01:23981219.4 4 Case 18-12839-CSS Doc 7 Filed 12/19/18 Page 5 of 70 deposit accounts, investment accounts, or in any other form, that were on the Petition Date in the Debtor’s possession, custody, or control (or the possession, custody, or control of any persons in privity with the Debtor), or in which the Debtor will obtain an interest during the pendency of the Chapter 11 Case whether via advances under the DIP Facility or otherwise, or which represent income, proceeds, products, rents, or profits of any of the Collateral, as defined below, is the cash collateral of Lender (collectively, the “Cash Collateral”). The Lender has a first priority perfected lien and security interest in the Cash Collateral pursuant to the applicable provisions of the Pre-Petition Claim Documents and sections 363(a) and 552(b) of the Bankruptcy Code. SUMMARY OF PRINCIPAL TERMS OF DIP FACILITY 14. In accordance with the disclosure required by Bankruptcy Rule 4001(b), the principal terms of the DIP Facility are as follows: Required Disclosure Material Terms DIP Facility A senior secured, multiple draw, superpriority, debtor-in-possession credit facility. Facility Size $695,000 is the maximum commitment to be funded in accordance with the DIP Facility Documents and Budget. Amounts repaid may not be reborrowed. Until the entry of the Final DIP Order, a maximum of $140,000 will be available under the DIP Facility. The Budget will include a schedule of timing and amount of projected drawings under the DIP Facility (the “DIP Loans”). Borrower & Debtor Alcor Energy, LLC Effective Date of DIP The date of the entry of Interim DIP Order Facility Priority The DIP Lender shall have a super-priority, administrative claim against the Borrower pursuant to section 364(c) of the Bankruptcy Code (the “Super-Priority Claim”). In addition, the DIP Lender shall have a super-priority, senior lien (the “DIP Liens” and, with the Super-Priority Claim, the “DIP Protections”) pursuant to section 364(d) of the Bankruptcy Code against all assets of Borrower, whether real or personal, including postpetition assets (including Avoidance Actions), subject only to (i) the Carve-Out Expenses, and 01:23981219.4 5 Case 18-12839-CSS Doc 7 Filed 12/19/18 Page 6 of 70 Required Disclosure Material Terms (ii) budgeted ordinary course post-petition expenses (“Budgeted Expenses”).
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