Case 18-10122-KG Doc 290 Filed 03/23/18 Page 1 of 100
IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
) In re: ) Chapter 11 ) PES HOLDINGS, LLC, et al.,1 ) Case No. 18-10122 (KG) ) Debtors. ) (Jointly Administered) )
DEBTORS’ MEMORANDUM OF LAW OF IN SUPPORT OF AN ORDER APPROVING THE DEBTORS’ DISCLOSURE STATEMENT FOR AND CONFIRMING THE SECOND AMENDED JOINT PREPACKAGED CHAPTER 11 PLAN OF REORGANIZATION OF PES HOLDINGS, LLC AND ITS DEBTOR AFFILIATES
James H.M. Sprayregen, P.C. Laura Davis Jones (DE Bar No. 2436) Steven N. Serajeddini (admitted pro hac vice) Timothy P. Cairns (DE Bar No. 4228) KIRKLAND & ELLIS LLP Peter J. Keane (DE Bar No. 5503) KIRKLAND & ELLIS INTERNATIONAL LLP PACHULSKI STANG ZIEHL & JONES LLP 300 North LaSalle 919 North Market Street, 17th Floor Chicago, Illinois 60654 P.O. Box 8705 Telephone: (312) 862-2000 Wilmington, Delaware 19899-8705 (Courier 19801) Facsimile: (312) 862-2200 Telephone: (302) 652-4100 Email: [email protected] Facsimile: (302) 652-4400 [email protected] Email: [email protected] [email protected] - and - [email protected]
Edward O. Sassower, P.C. (admitted pro hac vice) Matthew C. Fagen (admitted pro hac vice) KIRKLAND & ELLIS LLP KIRKLAND & ELLIS INTERNATIONAL LLP 601 Lexington Avenue New York, New York 10022 Telephone: (212) 446-4800 Facsimile: (212) 446-4900 Email: [email protected] [email protected]
Co-Counsel to the Debtors and Debtors in Possession
Dated: March 22, 2018
1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, are: PES Holdings, LLC (8157); North Yard Financing, LLC (6284); North Yard GP, LLC (5458); North Yard Logistics, L.P. (5952); PES Administrative Services, LLC (3022); PES Logistics GP, LLC (9202); PES Logistics Partners, L.P. (1288); PESRM Holdings, LLC (2107); and Philadelphia Energy Solutions Refining and Marketing LLC (9574). The Debtors’ service address is: 1735 Market Street, Philadelphia, Pennsylvania 19103.
Case 18-10122-KG Doc 290 Filed 03/23/18 Page 2 of 100
TABLE OF CONTENTS
Page(s)
I. Procedural History...... 3
II. Global Settlement...... 5
III. Confirmation, Solicitation, Notification Process, and Voting Results...... 7
IV. Remaining Confirmation Objections...... 10
ARGUMENT ...... 11
I. Approval of the Disclosure Statement Is Warranted and the Debtors Complied with the Scheduling Order...... 12
A. The Disclosure Statement Satisfies the Requirements of the Bankruptcy Code...... 12
1. The Debtors Complied with Applicable Nonbankruptcy Law...... 13
2. The Disclosure Statement Contains Adequate Information...... 14
B. The Debtors Complied with the Scheduling Order...... 17
1. The Debtors Complied with the Notice Requirements Set Forth in the Scheduling Order...... 17
2. The Ballots Used to Solicit Holders of Claims Entitled to Vote on the Plan Complied with the Scheduling Order...... 18
3. The Debtors’ Solicitation Period Complied with the Scheduling Order and Bankruptcy Rule 3018(b)...... 18
4. The Debtors’ Vote Tabulation Procedures Complied with the Scheduling Order...... 19
5. Solicitation of the Plan Complied with the Bankruptcy Code and Was in Good Faith...... 19
II. The Plan Satisfies the Requirements of Section 1129 of the Bankruptcy Code...... 20
A. The Plan Complies with the Applicable Provisions of the Bankruptcy Code (§ 1129(a)(1))...... 20
1. The Plan Satisfies the Classification Requirements of Section 1122 of the Bankruptcy Code...... 21
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2. The Plan Satisfies the Mandatory Plan Requirements of Section 1123(a) of the Bankruptcy Code...... 23
a. Designation of Classes of Claims and Equity Interests (§ 1123(a)(1)) ...... 24
b. Specification of Unimpaired Classes (§ 1123(a)(2)) ...... 24
c. Treatment of Impaired Classes (§ 1123(a)(3)) ...... 24
d. Equal Treatment within Classes (§ 1123(a)(4)) ...... 24
e. Means for Implementation (§ 1123(a)(5)) ...... 25
f. Issuance of Non-Voting Securities (§ 1123(a)(6)) ...... 26
g. Directors and Officers (§ 1123(a)(7)) ...... 26
3. The Plan Complies with the Discretionary Provisions of Section 1123(b) of the Bankruptcy Code...... 27
a. The Plan Settlement of Claims and Controversies Is Fair and Equitable and Should be Approved...... 28
b. Plan’s Release, Exculpation, and Injunction Provisions Satisfy Section 1123(b) of the Bankruptcy Code ...... 31
4. The Plan Complies with Section 1123(d) of the Bankruptcy Code...... 40
B. The Debtors Complied with the Applicable Provisions of the Bankruptcy Code (§ 1129(a)(2))...... 41
1. The Debtors Complied with Section 1125 of the Bankruptcy Code...... 41
2. The Debtors Complied with Section 1126 of the Bankruptcy Code...... 42
C. The Plan Was Proposed in Good Faith (§ 1129(a)(3))...... 43
D. The Plan Provides that the Debtors’ Payment of Professional Fees and Expenses Are Subject to Court Approval (§ 1129(a)(4))...... 44
E. The Debtors Disclosed All Necessary Information Regarding Directors, Officers, and Insiders (§ 1129(a)(5))...... 45
F. The Plan Does Not Require Governmental Regulatory Approval (§ 1129(a)(6))...... 48
G. The Plan Is in the Best Interests of All the Debtors’ Creditors (§ 1129(a)(7))...... 48
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H. The Plan Is Confirmable Notwithstanding the Requirements of Section 1129(a)(8) of the Bankruptcy Code...... 50
I. The Plan Provides for Payment in Full of All Allowed Priority Claims (§ 1129(a)(9))...... 50
J. At Least One Class of Impaired, Non-Insider Claims Accepted the Plan (§ 1129(a)(10))...... 52
K. The Plan Is Feasible (§ 1129(a)(11))...... 52
L. All Statutory Fees Have Been or Will Be Paid (§ 1129(a)(12))...... 54
M. All Retiree Benefits Will Continue Post-Confirmation (§ 1129(a)(13))...... 55
N. Sections 1129(a)(14) through 1129(a)(16) Do Not Apply to the Plan...... 55
O. The Plan Satisfies the “Cram Down” Requirements of Section 1129(b) of the Bankruptcy Code...... 55
1. The Plan Is Fair and Equitable (§ 1129(b)(2)(B)(ii))...... 56
2. The Plan Does Not Unfairly Discriminate with Respect to the Impaired Classes that Have Not Voted to Accept the Plan (§ 1129(b)(1))...... 59
P. The Debtors Complied with Section 1129(d) of the Bankruptcy Code...... 60
Q. Modifications to the Plan...... 61
R. Good Cause Exists to Waive the Stay of the Confirmation Order...... 62
III. The United States’ Objection Is Not Supported by the Bankruptcy Code and Must Be Overruled...... 63
A. The United States Mischaracterizes the Plan, and the United States’ Proposed Language is Not Necessary to Protect its Interests...... 63
B. The Plan Provides for Proper Treatment Under the Bankruptcy Code and Relevant Law...... 68
1. The Plan Does Not Operate to Usurp the Police and Regulatory Powers of the United States...... 68
2. The Plan Provisions Detailing Assumption Procedures Are Appropriate...... 68
3. The Confirmation Order Preserves Setoff and Recoupment Rights of the United States, States, or Local Authorities...... 69
4. The Third-Party Releases Are Appropriate...... 70
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5. The Debtors’ Reservation of Rights Is Appropriate...... 73
C. All Creditors Received Adequate Notice of the Plan, and the Solicitation Procedures Are Appropriate...... 73
D. All Claims Are Unimpaired and Will Receive Payment in Full Under the Plan...... 74
E. The Facts of This Case are Distinguishable From Those in RAND Logistics...... 76
1. The Key Definitional Terms of the Plan Surrounding Claim Allowance are Clear and Do Not Limit Rights Under Applicable Nonbankruptcy Law...... 77
2. The Plan Has No Administrative Bar Date...... 78
3. Additional Notice Has Been Given to the United States to Determine Possible Federal Interests...... 79
IV. The Objection of the U.S. Trustee Should be Overruled...... 80
A. The General Unsecured Claims are Not Impaired Under the Plan, and are Not Entitled to Vote...... 80
B. The U.S. Trustee Attempts to Draw a Distinction Between a “Pay in Full” Plan, Where Schedules are Filed, and a “Pass Through” Plan...... 83
C. The Third-Party Release Provisions in the Plan are Fair and Necessary...... 84
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TABLE OF AUTHORITIES
Page(s)
Cases
B.D. Int’l Disc. Corp. v. Chase Manhattan Bank, N.A. (In re B.D. Int’l Disc. Corp.), 701 F.2d 1071 (2d Cir. 1983)...... 42
Bank of Am. Nat. Trust & Sav. Ass’n v. 203 N. LaSalle St. P’ship, 526 U.S. 434 (1999) ...... 47, 55
Century Glove, Inc. v. First Am. Bank of N.Y., 860 F.2d 94 (3d Cir. 1988)...... 13
Cosoff v. Rodman (In re W.T. Grant Co.), 699 F.2d 599 (2d Cir. 1983)...... 30
Fin. Sec. Assurance Inc. v. T-H New Orleans Ltd. P’ship (In re T-H New Orleans Ltd. P’ship), 116 F.3d 790 (5th Cir. 1997) ...... 42
First Am. Bank of N.Y. v. Century Glove, Inc., 81 B.R. 274 (D. Del. 1988) ...... 13
Frito-Lay, Inc. v. LTV Steel Co. (In re Chateaugay Corp.), 10 F.3d 944 (2d Cir. 1993)...... 20
In re 203 N. LaSalle St. Ltd. P’ship., 190 B.R. 567 (Bankr. N.D. Ill. 1995), rev’d on other grounds, Bank of Am., 526 U.S. 434 (1999) ...... 57
In re 500 Fifth Ave. Assocs., 148 B.R. 1010 (Bankr. S.D.N.Y. 1993) ...... 20
In re Abbotts Dairies of Pa., Inc., 788 F.2d 143 (3d Cir. 1986)...... 42
In re ACG Holdings, Inc., No. 08-11467 (CSS) (Bankr. D. Del. July 16, 2008) ...... 75
In re Adelphia Commc’ns. Corp., 368 B.R. 140 (Bankr. S.D.N.Y. 2007) ...... 47
In re Aleris Int’l, Inc., No. 09-10478 (BLS), 2010 WL 3492664 (Bankr. D. Del. May 13, 2010) ...... 51, 58
v Case 18-10122-KG Doc 290 Filed 03/23/18 Page 7 of 100 Page(s)
In re Allen Systems (15-10332) (Bankr. D. Del.) ...... 80
In re Ambanc La Mesa L.P., 115 F.3d 650 (9th Cir. 1997) ...... 54, 58
In re Apex Oil Co., 118 B.R. 683 (Bankr. E.D. Mo. 1990) ...... 44
In re Appleseed’s Intermediate Holdings LLC, No. 11-10160 (KG) (Bankr. D. Del. April 14, 2011) ...... 62, 75
In re Armstrong World Indus., Inc., 348 B.R. 111 (D. Del. 2006) ...... passim
In re Aztec Co., 107 B.R. 585 (Bankr. M.D. Tenn. 1989) ...... 57, 58
In re Bally Total Fitness of Greater N.Y., Inc., No. 07-12395 (BRL), 2007 WL 2779438 (Bankr. S.D.N.Y. Sept. 17, 2007) ...... 10
In re Beyond.com Corp., 289 B.R. 138 (Bankr. N.D. Cal. 2003) ...... 45
In re Burns & Roe Enters., Inc., No. 08-4191 (GEB), 2009 WL 438694 (D.N.J. Feb. 23, 2009) ...... 59
In re Capmark Fin. Grp. Inc., No. 09-13684 (CSS), 2011 WL 6013718 (Bankr. D. Del. Oct. 5, 2011) ...... 51
In re Century Glove, Inc. Cir. A. Nos. 90-400 and 90-401, 1993 WL 239489 (D. Del. Feb. 10, 1993) ...... 42, 47
In re Chapel Gate Apartments, Ltd., 64 B.R. 569 (Bankr. N.D. Tex. 1986) ...... 43
In re Chassix Holdings, Inc., 533 B.R. 64 (Bankr. S.D.N.Y. 2015) ...... 69
In re CHL Ltd., No. 12-12437 (KJC) (Bankr. D. Del. Oct. 4, 2012) ...... 13
In re Conseco, Inc., 301 B.R. 525 (Bankr. N.D. Ill. 2003) ...... 68
In re Cont’l Airlines, 203 F.3d 203 (3d Cir. 2000)...... 70
vi Case 18-10122-KG Doc 290 Filed 03/23/18 Page 8 of 100 Page(s)
In re Coram Healthcare Corp., 315 B.R. 321 (Bankr. D. Del. 2004) ...... 29, 30, 58
In re DBSD N. Am., Inc., 419 B.R. 179 (Bankr. S.D.N.Y. 2009) ...... 68
In re Dex Media, Inc., (16-11200) (KG) (Bankr. D. Del. May 16, 2016) ...... 81
In re Dex One Corp., No. 13-10533 (KG) (Bankr. D. Del. Apr. 29, 2013)...... 60, 75
In re Dex One Corporation, (13-10533) (KG) (Bankr. D. Del. Mar. 18, 2013) ...... 81
In re The Dolan Co., No. 14-10614 (BLS) (Bankr. D. Del. June 9, 2014) ...... 75
In re Drexel Burnham Lambert Grp. Inc., 138 B.R. 723 (Bankr. S.D.N.Y. 1992) ...... 20, 44
In re Enron Corp., 326 B.R. 497 (S.D.N.Y. 2005) ...... 36
In re Everyware Global, Inc. (15-10743-LSS) ...... 80
In re Everyware Global, Inc., No. 15-10473 (LSS) (Bankr. D. Del. May 22, 2015) ...... 75, 80
In re EveryWare Global, Inc., No. 15-10743 (LSS) (Bankr. D. Del. Apr. 7, 2015) ...... 13
In re Exaeris, Inc., 380 B.R. 741 (Bankr. D. Del. 2008) ...... 30
In re Exide Techs., 303 B.R. 48 (Bankr. D. Del. 2003) ...... 31
In re Flintkote Co., 486 B.R. 99 (Bankr. D. Del. 2012) ...... 51
In re Freymiller Trucking, Inc., 190 B.R. 913 (Bankr. W.D. Okla. 1996) ...... 57
In re Future Energy Corp., 83 B.R. 470 (Bankr. S.D. Ohio 1988) ...... 43
vii Case 18-10122-KG Doc 290 Filed 03/23/18 Page 9 of 100 Page(s)
In re Gatehouse Media, Inc., No. 13-12503 (MFW) (Bankr. D. Del. Nov. 6, 2013) ...... 60
In re Genesis Health Ventures, Inc., 266 B.R. 591 (Bankr. D. Del. 2001) ...... 70
In re Geokinetics Inc., No. 13-10472 (KJC) (Bankr. D. Del. Apr. 25, 2013) ...... 60
In re Glob. Safety Textiles Holdings LLC, No. 09-12234 (KG), 2009 WL 6825278 (Bankr. D. Del. Nov. 30, 2009) ...... 59
In re GSE Envtl., Inc., No. 13-11126 (MFW) (Bankr. D. Del. July 25, 2014) ...... 60
In re Gulfmark Offshore Inc., (17-11125) (KG) (Bankr. D. Del. May 17, 2017) ...... 81
In re Gulfmark Offshore, Inc., No. 17-11125 (KG) (Bankr. D. Del. Oct. 4, 2017) ...... 80
In re Hercules Offshore, Inc., No. 15-11685 (KJC) (Bankr. D. Del. Aug. 14, 2015)...... 13
In re Heritage Org., L.L.C., 375 B.R. 230 (Bankr. N.D. Tex. 2007) ...... 20
In re Indianapolis Downs, LLC, 486 B.R. 286 (Bankr. D. Del. 2013) ...... passim
In re ION Media Networks, Inc., No. 09-13125 (JMP) (Bankr. S.D.N.Y. Nov. 24, 2009) ...... 57
In re Jersey City Med. Ctr., 817 F.2d 1055 (3d Cir. 1987)...... 20
In re Johns-Manville Corp., 68 B.R. 618 (Bankr. S.D.N.Y. 1986) ...... 58
In re Lapworth, No. 97-34529 (DWS), 1998 WL 767456 (Bankr. E.D. Pa. Nov. 2, 1998) ...... 39
In re Lason, Inc., 300 B.R. 227 (Bankr. D. Del. 2003) ...... 47
In re Lernout & Hauspie Speech Prods., N.V., 301 B.R. 651 (Bankr. D. Del. 2003) ...... 58
viii Case 18-10122-KG Doc 290 Filed 03/23/18 Page 10 of 100 Page(s)
In re Lisanti Foods, Inc., 329 B.R. 491 (D.N.J. 2005) ...... 14, 43
In re Local Insight Media Holdings, Inc., No. 10-13677 (KG) (Bankr. D. Del. Nov. 3, 2011) ...... 36, 80
In re Majestic Star Casino, LLC, No. 09-14136 (KG) (Bankr. D. Del. Mar. 10, 2011) ...... 36, 80
In re Martin, 91 F.3d 389 (3d Cir. 1996)...... 29
In re Masonite Corp., No. 09-10844 (PJW) (Bankr. D. Del. May 29, 2009) ...... 80
In re Master Mortg. Inv. Fund, Inc., 168 B.R. 930 (Bankr. W.D. Mo. 1994)...... 31
In re Metrocraft Publ’g. Servs., Inc., 39 B.R. 567 (Bankr. N.D. Ga. 1984) ...... 15
In re NII Holdings, Inc., 288 B.R. 356 (Bankr. D. Del. 2002) ...... 42
In re Nutritional Sourcing Corp., 398 B.R. 816 (Bankr. D. Del. 2008) ...... 10, 19
In re Nuverra Environmental Solutions, Inc., No. 17-10949 (KJC) (Bankr. D. Del. July 25, 2017) ...... 80
In re Orchard Acquisition Company, LLC, (17-12914) (KG) (Bankr. D. Del. Dec. 12, 2017) ...... 81
In re P.P.I. Enters. (U.S.), 324 F.3d 197 (3d Cir. 2003)...... 73
In re PC Liquidation Corp., 383 B.R. 856 (E.D.N.Y. 2008) ...... 14
In re Peak Broad., LLC, No. 12-10183 (PJW) (Bankr. D. Del. Jan. 12, 2012) ...... 13
In re Phx. Petrol. Co., 278 B.R. 385 (Bankr. E.D. Pa. 2001) ...... 14, 15
In re Physiotherapy Holdings, Inc., No. 13-12965 (KG) (Bankr. D. Del. Dec. 23, 2013) ...... 60, 62, 75, 80
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In re Prussia Assocs., 322 B.R. 572 (Bankr. E.D. Pa. 2005) ...... 51
In re PWS Holding Corp., 228 F.3d 224 (3d Cir. 2000)...... 36, 38, 42
In re RAND Logistics, No. 18-10175 (BLS) (Bankr. D. Del. Feb. 28, 2018) ...... passim
In re River Village Assocs., 181 B.R. 795 (E.D. Pa. 1995) ...... 14
In re Rusty Jones, Inc., 110 B.R. 362 (Bankr. N.D. Ill. 1990) ...... 44
In re S&W Enter., 37 B.R. 153 (Bankr. N.D. Ill. 1984) ...... 19
In re Samson Resources Corp., No. 15-11934 (CSS) (Bankr. D. Del. Feb. 12, 2017) ...... 80
In re Scioto Valley Mortg. Co., 88 B.R. 168 (Bankr. S.D. Ohio 1988) ...... 15
In re Sea Garden Motel & Apartments, 195 B.R. 294 (D. N.J. 1996) ...... 51
In re Sherwood Square Assoc., 107 B.R. 872 (Bankr. D. Md. 1989) ...... 44
In re Sorenson Commc’ns, Inc., No. 14-10454 (BLS) (Bankr. D. Del. Mar. 4, 2014)...... 13, 75
In re Source Home Entm’t, LLC, No. 14-11553 (KG) (Bankr. D. Del, Feb. 20, 2015) ...... 60
In re Source Interlink Cos., No. 09-11424 (KG) (Bankr. D. Del. Apr. 29, 2009)...... 13, 80
In re Spansion, Inc., 426 B.R. 114 (Bankr. D. Del. 2010) ...... 31, 34, 69, 70
In re Specialty Equip. Companies, Inc., 3 F.3d 1043 (7th Cir. 1993) ...... 69
In re Stallion Oilfield Services Ltd., No. 09-13562 (BLS) (Bankr. D. Del. Jan. 12, 2010) ...... 80
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In re Stratford Assocs. Ltd. P’ship, 145 B.R. 689 (Bankr. D. Kan. 1992) ...... 44
In re Sun Country Dev., Inc., 764 F.2d at 406 (5th Cir. 1985) ...... 42
In re TMP Directional Marketing, LLC, No. 11-13835 (MFW) (Bankr. D. Del. Jan. 13, 2012) ...... 75
In re Toy & Sports Warehouse, Inc., 37 B.R. 141 (Bankr. S.D.N.Y. 1984) ...... 44
In re Tribune Co., 464 B.R. 126 (Bankr. D. Del. 2011) ...... 51
In re U.S. Brass Corp., 194 B.R. 420 (Bankr. E.D. Tex. 1996) ...... 15
In re U.S. Truck Co., 47 B.R. 932 (E.D. Mich. 1985), aff’d, 800 F.2d 581 (6th Cir. 1986) ...... 51
In re Verso Corp., No. 16-10163 (KG) June 23, 2016...... 37
In re W.R. Grace & Co., 475 B.R. 34 (D. Del. 2012) ...... 42, 51
In re Wash. Mut., Inc., 442 B.R. 314 (Bankr. D. Del. 2011) ...... 31, 34, 36, 69
In re World Health Alts., Inc., 344 B.R. 291 (Bankr. D. Del. 2006) ...... 30
In re Worldcom, Inc., No. 02-13533 (AJG), 2003 WL 23861928 (Bankr. S.D.N.Y. Oct. 31, 2003) ...... 39
In re Zenith Elecs., 241 B.R. 92 (Bankr. D. Del. 1999) ...... 31, 34, 69
John Hancock Mut. Life Ins. Co. v. Route 37 Bus. Park Assocs., 987 F.2d 154 (3d Cir. 1993)...... 20, 54
Kane v. Johns-Manville Corp., 843 F.2d 636 (2d Cir. 1988)...... 51
Krystal Cadillac-Oldsmobile GMC Truck, Inc. v. Gen. Motors Corp., 337 F.3d 314 (3d Cir. 2003)...... 13
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NLRB v. Bildisco & Bildisco, 465 U.S. 513 (1984) ...... 42
Oneida Motor Freight, Inc. v. United Jersey Bank, 848 F.2d 414 (3d Cir. 1988)...... 13
Pizza of Haw., Inc. v. Shakey’s, Inc. (In re Pizza of Haw., Inc.), 761 F.2d 1374 (9th Cir. 1985) ...... 51
Tex. Extrusion Corp. v. Lockheed Corp. (In re Tex. Extrusion Corp.), 844 F.2d 1142 (5th Cir. 1988) ...... 14
Statutes
11 U.S.C. 507(a)(2) ...... 52
11 U.S.C. § 101 ...... 67
11 U.S.C. § 341 ...... 71
11 U.S.C. § 341(a) ...... 4
11 U.S.C. § 341(b) ...... 81, 82
11 U.S.C. § 365(b) ...... 67
11 U.S.C. § 365(b)(1) ...... 67
11 U.S.C. § 507(a)(1) ...... 49
11 U.S.C. § 1123(b)(1)–(3) ...... 26
11 U.S.C. § 1123(b)(6) ...... 26
11 U.S.C. § 1124 ...... 78, 82
11 U.S.C. § 1124(1) ...... 64, 65, 78
11 U.S.C. § 1125 ...... 1
11 U.S.C. § 1125(a)(1) ...... 13
11 U.S.C. § 1125(b) ...... 13
11 U.S.C. § 1125(g) ...... 11
11 U.S.C. § 1126 ...... 1
11 U.S.C. § 1126(a) ...... 40
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11 U.S.C. § 1126(b) ...... 11
11 U.S.C. § 1126(f) ...... 40
11 U.S.C. § 1129 ...... 1
11 U.S.C. § 1129(a)(5)(A)(ii) ...... 44, 45, 46
11 U.S.C. § 1129(a)(11) ...... 52
11 U.S.C. § 1129(a)(12) ...... 52
11 U.S.C. § 1141(d)(1) ...... 82
11 U.S.C. § 1141(d)(1)(A) ...... 64
28 U.S.C. § 1930 ...... 52
Rules
Fed. R. Bankr. P 3018(b) ...... 17
Other Authorities
7 Collier on Bankruptcy (16th ed. 2012) ...... 45
H.R. Rep. No. 95-595, reprinted in 1978 U.S.C. C.A.N. 5963 (1977) ...... 19
S. Rep. No. 95-989, reprinted in 1978 U.S.C. C.A.N. 5787 (1978) ...... 19
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The above-captioned debtors (collectively, the “Debtors”) submit this memorandum of law
(this “Memorandum”) in support of approval of the Disclosure Statement for the Joint
Prepackaged Chapter 11 Plan of Reorganization of PES Holdings, LLC and its Debtor Affiliates
[Docket No. 10] (the “Disclosure Statement”) and confirmation of the Second Amended Joint
Prepackaged Chapter 11 Plan of Reorganization of PES Holdings, LLC and its Debtor Affiliates
[Docket No. 286] (as modified, amended, or supplemented from time to time, the “Plan”),2 pursuant to sections 1125, 1126, and 1129, respectively, of title 11 of the United States Code,
11 U.S.C. §§ 101–1532 (the “Bankruptcy Code”). In support of Confirmation of the Plan and approval of the Disclosure Statement, and in response to the objections thereto (collectively, the “Objections”), the Debtors respectfully state as follows.
PRELIMINARY STATEMENT
1. The Debtors’ restructuring efforts have been a massive success to date, and they are now on the verge of consummating their Plan and positioning their business to emerge and thrive. The Debtors commenced these chapter 11 cases (these “Chapter 11 Cases”) over two months ago to implement a consensual, prepackaged chapter 11 plan of reorganization. The Plan was the product of many months of extensive, good-faith, arm’s-length negotiations among the
Debtors, the Restructuring Support Parties, the Department of Justice, and the Environmental
Protection Agency (the “EPA”), and the Debtors’ other constituents all working towards a
2 Capitalized terms used but not otherwise defined herein have the meanings ascribed to them in the Plan. A detailed description of the Debtors and their businesses, and the facts and circumstances surrounding the Debtors’ Chapter 11 Cases, are set forth in greater detail in the Declaration of Gregory Gatta, Chief Executive Officer of PES Holdings, LLC, in Support of Chapter 11 Petitions and First Day Motions [Docket No. 16] (the “First Day Declaration”). On January 23, 2018, the United States Bankruptcy Court for the District of Delaware (the “Court”) entered its Order (I) Directing Joint Administration of the Chapter 11 Cases and (II) Granting Related Relief [Docket No. 76]. The Debtors are operating their businesses as debtors in possession under sections 1107(a) and 1108 of the Bankruptcy Code. No request for the appointment of a trustee or examiner has been made in these Chapter 11 Cases, and no committees have been appointed or designated pursuant to section 1102 of the Bankruptcy Code.
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transaction that will provide significant liquidity to the Debtors and maximize the value of the
Debtors’ Estates for the benefit of all stakeholders. This transaction, the Plan, provides for an infusion of approximately $260 million in capital to the Debtors, reduces the Debtors’ anticipated debt service obligations by approximately $35 million per year, and relieves the Debtors of debt maturities through 2022. The Plan also incorporates the product of separate postpetition negotiations with the United States, on behalf of the EPA, that allows for the Debtors to restructure their obligations under the Clean Air Act in a manner that is consistent with their ability to pay.
2. And last but not least, the Plan allows the Debtors to satisfy in full and in cash all
General Unsecured Claims and provides for the consensual treatment of other stakeholders.
Moreover, the Plan has the support of Holders of 100% of Class 7 Term Loan A Claims, 100% of
Class 8 Term Loan B Claims, and the Parent Parties. By any measure, this Plan takes a highly complex and intricate set of legal and regulatory issues, and consensually resolves them in a manner that has the unanimous support of the Debtors’ constituents.
3. To this end, the Debtors worked with many other parties in interest that raised formal and informal Objections and have resolved nearly all of these, with two exceptions, as of the date of this Memorandum: the United States and the U.S. Trustee. The objections of the
United States and the U.S. Trustee are founded on the same concern: that the Plan, which follows the general form and structure of many years’ worth of prepackaged plans that came before, somehow is insufficient to protect the rights of claimants—none of whom, other than potentially the United States, are objecting. The Debtors dispute this notion: the Plan provides claimants other than their funded debt creditors very clear unimpairment status consistent with the
Bankruptcy Code. And for this, the Debtors, the Restructuring Support Parties, and their related parties are entitled to all of the discharges, releases, or other standard, and in some cases statutory,
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protections that are contained in the Plan. There is nothing remarkable about this Plan in this
respect and it is consistent in every way with the text and purpose of the Bankruptcy Code.
Nonetheless, the Debtors have made a host of clarifications in their revised proposed Confirmation
Order to provide the objectors comfort, and remain in discussions with the United States and the
U.S. Trustee and are hopeful that these issues can be resolved in their entirety in advance of the
Confirmation Hearing.
4. The Plan otherwise, and without contest, satisfies the required elements of the
Bankruptcy Code. The Plan is a great result for these Debtors. It took many months of hard work
and support by the Debtors and their stakeholders to get to this point, and the Debtors look forward
to their next chapter. For these reasons, and as set forth more fully in this Memorandum, the Plan
should be confirmed.
BACKGROUND
I. Procedural History.
5. Prior to commencing these Chapter 11 Cases, the Debtors entered into a
Restructuring Support Agreement (the “Restructuring Support Agreement”) regarding the terms
of a value-maximizing restructuring with the Restructuring Support Parties. Pursuant to the
Restructuring Supporting Agreement, the Restructuring Support Parties agreed to fund and support a prepackaged restructuring in order to ensure a viable enterprise and maximize stakeholder recoveries. The prepackaged restructuring embodied in the Restructuring Support Agreement has four key components:
• an equitization of $107 million of the Term Loan B Debt;
• a $120 million new money postpetition financing facility that, rather than being repaid at emergence, will convert into the senior most tranche of an exit facility;
• a $65 million contribution by the Parent; and
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• a $75 million new loan from the Additional Financing Lender.
6. On January 21, 2018 (the “Petition Date”), the Debtors filed their chapter 11
petitions. The Debtors also filed with the Court, among other pleadings, the Plan and the
Disclosure Statement, along with the Scheduling Motion pursuant to which the Debtors sought a
combined hearing on approval of the Disclosure Statement and confirmation of the Plan.
On January 29, 2018, the Court entered the Scheduling Order3 which, in relevant part,
(a) established March 19, 2018, at 5:00 p.m. prevailing Eastern Time, as the deadline to object to the Disclosure Statement, the Plan, or the determination of whether the Debtors’ assets may be sold to the Purchaser “free and clear” of the Debtors’ RIN Liabilities (the “Objection Deadline”),
(b) approved the solicitation procedures set forth in the Disclosure Statement (the “Solicitation
Procedures”), (c) approved the form and manner of the Confirmation Hearing Notice (as defined
in the Scheduling Motion), (d) set the briefing schedule for determination of whether the Debtors’
assets may be sold to the Purchaser “free and clear” of the Debtors’ RIN Liabilities, and
(e) conditionally (i) directed the United States Trustee for the District of Delaware (the “U.S.
Trustee”) not to convene a section 341(a) meeting of creditors and (ii) waive the requirement to
file Schedules and SOFAs (each as defined in the Scheduling Motion). On January 31, 2018, the
Debtors caused Omni to serve the Confirmation Hearing Notice in accordance with the terms of
the Scheduling Order.4 The Debtors caused the Publication Notice (as defined in the Scheduling
3 See Order (I) Shortening Notice of Hearing on Disclosure Statement (II) Scheduling a Combined Disclosure Statement Approval and Plan Confirmation Hearing, (III) Establishing a Plan and Disclosure Statement Objection Deadline and Related Procedures, (IV) Approving the Solicitation Procedures, (V) Approving the Confirmation Hearing Notice, and (VI) Conditionally (A) Directing the United States Trustee Not to Convene Section 341(a) Meeting of Creditors and (B) Waiving Requirement of Filing Statements of Financial Affairs and Schedules of Assets and Liabilities [Docket No. 125] (the “Scheduling Order”).
4 See Affidavit of Service [Docket No. 136].
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Motion) to be published in USA Today (National Edition), the New York Times (National Edition),
and the Wall Street Journal (National Edition), on February 1, 2018.5
7. On March 12, 2018, the Debtors filed with the Court the Plan Supplement
[Docket No. 245], which includes the following exhibits: (a) the Form of New Organizational
Documents; (b) the Exit Facility Documents; (c) the Schedule of Executory Contracts and
Unexpired Leases; (d) the Schedule of Retained Causes of Action (e) a disclosure of the members
of the New Board; (f) Description of the Tax Transaction Steps; and (g) the RINs Settlement
Agreement. The Debtors will file an amended Plan Supplement in advance of the Confirmation
Hearing.
8. The deadline for all Holders of Claims and Interests entitled to vote on the Plan to
cast their ballots was January 19, 2018 at 5:00 p.m., prevailing Eastern Time (the “Voting
Deadline”). The deadline to file objections to the Plan was March 19, 2018 at 5:00 p.m., prevailing
Eastern Time. The hearing to consider Confirmation of the Plan (the “Confirmation Hearing”) is
scheduled for March 26, 2018 at 10:00 a.m., prevailing Eastern Time. Concurrently with the filing
of this Memorandum, the Debtors have submitted a proposed version of the order confirming the
Plan (the “Confirmation Order”).
II. Global Settlement.
9. Further, the Plan incorporates an integrated compromise and settlement
(the “Settlement”) of numerous Claims, Interests, Causes of Action, and controversies designed to
achieve a beneficial and efficient resolution of the Chapter 11 Cases for all parties in interest.6
Through two special committees, formed at Philadelphia Energy Solutions Refining and
5 See Affidavits of Publication [Docket Nos. 137, 138, 139].
6 See Gatta Declaration ¶ 5.
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Marketing LLC and North Yard GP, LLC, respectively (together, the “Special Committees”), each
consisting of two of the Debtors’ independent members of the board of managers, and each of
which was advised by separate counsel, the Debtors thoroughly analyzed those Claims, Interests,
Causes of Action, and controversies.7
10. On March 12, 2018, after months of hard-fought negotiations, the Debtors filed the
Consent Decree and Environmental Settlement Agreement (the “RVO Settlement Agreement”) by
and among the United States on behalf of the EPA and the Debtors, attached as Exhibit G to the
Plan Supplement. At the Confirmation Hearing, the Debtors will seek, among other things, the
Court’s authorization to enter into the RVO Settlement Agreement. Pursuant to the Supplemental
Scheduling Order Regarding Combined Disclosure Statement Approval and Plan Confirmation
Hearing and Approval of the EPA RVO Consent Decree and Settlement Agreement [Docket
No. 274], the Court shall consider the EPA’s entry into the RVO Settlement Agreement on
April 4, 2018.
11. As a result of these extensive prepetition and postpetition negotiations with all of the Debtors’ major creditor constituencies, the Plan embodies a global resolution of all prepetition claims and controversies related to the Debtors and the restructuring. To effectuate this global settlement, the Plan includes mutual, consensual, and customary releases of claims held by the
Debtors and claims held by parties in interest. This global settlement is critical to bring closure to the Debtors and all parties in interest and to permit the Debtors to emerge from these Chapter 11
Cases with a stronger balance sheet and a fresh start.
7 Id.
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12. The Debtors submit that the Plan is in the best interests of the Debtors’ Estates, represents the best available restructuring option, and provides the Debtors with a streamlined capital structure that positions them to execute their post-emergence business plan.
III. Confirmation, Solicitation, Notification Process, and Voting Results.
13. On January 17, 2018, and prior to commencing these Chapter 11 Cases, as more fully described in the Scheduling Motion,8 the Debtors caused their claims and noticing agent,
Rust Consulting / Omni Bankruptcy (“Omni”),9 to distribute solicitation packages
(the “Solicitation Packages”) containing the Disclosure Statement, the Plan, and Ballots10 to
Holders of Term Loan A Claims and Term Loan B Claims, each as of January 16, 2018
(the “Voting Record Date”) in accordance with sections 1125 and 1126 of the Bankruptcy Code.
Omni transmitted the Solicitation Packages to Holders entitled to vote on the Plan by electronic mail. Holders to whom the Solicitation Packages were transmitted were directed in the Disclosure
Statement and Ballots to follow the instructions contained in the Ballots (and described in the
Disclosure Statement) to complete and submit their respective Ballots to cast a vote to accept or reject the Plan.
14. Each Holder was explicitly informed in the Disclosure Statement and Ballot that such Holder needed to submit its Ballot such that it was actually received by Omni by the Voting
8 See Debtors’ Motion for Entry of an Order (I) Shortening Notice of Hearing on Disclosure Statement, (II) Scheduling a Combined Disclosure Statement Approval and Plan Confirmation Hearing, (III) Establishing a Plan and Disclosure Statement Objection Deadline and Related Procedures, (IV) Approving the Solicitation Procedures, (V) Approving the Confirmation Hearing Notice, and (VI) Conditionally (A) Directing the United States Trustee Not to Convene Section 341(a) Meeting of Creditors and (B) Waiving Requirement of Filing Statements of Financial Affairs and Schedules of Assets and Liabilities [Docket No. 37] (the “Scheduling Motion”).
9 See Order (I) Authorizing and Approving the Appointment of Rust Consulting/Omni Bankruptcy as Notice and Claims Agent to the Debtors and (II) Granting Related Relief [Docket No. 77].
10 The form of ballot used in solicitation is included as Exhibits 3-A and 3-B attached to the Scheduling Motion.
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Deadline (as defined in the Disclosure Statement) to be counted. Holders of Claims and Interests
were not provided a Solicitation Package if such Holders are either (a) Unimpaired under and
conclusively presumed to accept the Plan under section 1126(f) of the Bankruptcy Code, or
(b) Impaired, entitled to receive no distribution on account of such Claims or Interests under the
Plan and, therefore, deemed to have rejected the Plan under section 1126(g) of the Bankruptcy
Code.
15. Under section 1126(f) of the Bankruptcy Code, the Debtors were not required to
solicit votes from the Holders of Claims or Interests, as applicable, in the Unimpaired Classes,
each of which is conclusively presumed to have accepted the Plan. Holders of Intercompany
Claims in Class 10 either are Unimpaired and conclusively presumed to have accepted the Plan or
Impaired and conclusively presumed to have rejected the Plan, and, therefore, are not entitled to
vote to accept or reject the Plan. Holders of Interests in Class 12 (Interests in PES Holdings)
(the “Deemed Rejecting Class”) are Impaired under the Plan, are entitled to no recovery
thereunder, and are therefore deemed to have rejected the Plan. Nevertheless, the Debtors served
Holders in the Deemed Rejecting Class with the Plan and Disclosure Statement.
16. The Debtors completed their solicitation of the Voting Classes on January 19, 2018,
or 2 days after the launch of solicitation. The Debtors completed their final tabulation of the
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Ballots on January 19, 2018, following a complete review and audit of all ballots received.11 As shown below, final voting results were unanimously in favor of the Debtors’ restructuring:12
Class Number Voted Amount Voted to Accept to Accept Class 7 (Term Loan A Claims) 100 percent 100 percent Class 8 (Term Loan B Claims) 100 percent 100 percent
17. As a direct result of the Debtors’ efforts to engage their key constituencies, the Plan enjoys the overwhelming support of the Debtors’ primary stakeholders and 100 percent of all voting classes (the “Voting Classes”)—100 percent of holders of Term Loan A Claims and Term
Loan B Claims voted in favor of the Plan.
18. The Plan facilitates the reorganization of the Debtors on terms supported by every major party in interest in these Chapter 11 Cases. More specifically, the Plan details, among other things: (a) the sources of consideration for Plan distributions; (b) the cancellation of notes, instruments, certificates, and other existing securities; (c) the authorization for the Debtors or the
Reorganized Debtors, as applicable, to take corporate actions necessary to effectuate the Plan, including filing any New Organizational Documents of the Reorganized Debtors; (d) the authorization for the Debtors or the Reorganized Debtors, as applicable, to undertake certain
Restructuring Transactions, including those contemplated by or necessary to effectuate the Plan;
(e) the termination of the PES Advisory Agreement and the PES Registration Rights Agreement;
11 For additional discussion about, and certification of, the solicitation and vote tabulation processes, see Declaration of Catherine Nownes-Whitaker on Behalf of Rust Consulting Omni Bankruptcy Regarding Service of Solicitation Packages and Tabulation of Ballots Cast on the Joint Prepackaged Chapter 11 Plan Of Reorganization of PES Holdings, LLC and its Debtor Affiliates [Docket No. 12] and the Declaration of Paul H. Deutch on Behalf of Rust Consulting Omni Bankruptcy Regarding Service of Solicitation Packages and Tabulation of Ballots Cast on the Joint Prepackaged Chapter 11 Plan of Reorganization of PES Holdings, LLC and its Debtor Affiliates, attached hereto as Exhibit D (together, the “Final Voting Reports”).
12 Final Voting Reports Ex. C.
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(f) the preservation of certain Causes of Action; (g) the appointment and selection of officers and directors of the Reorganized Debtors; and (h) the formation of PES Inc.
19. The formulation of the Restructuring Support Agreement and the Plan is a significant achievement for the Debtors. Each of the Debtors strongly believes that the Plan is in the best interests of its estate and represents the best available alternative for all of its stakeholders.
Given the Debtors’ core strengths, including their experienced management team and strategic business plan going forward, the Debtors are confident that they can implement the Plan’s balance sheet restructuring to ensure the Debtors’ long-term viability. The terms of the Restructuring
Support Agreement and the Plan set forth a clear pathway to emergence, and the transactions embodied in the Plan will leave the reorganized enterprise substantially deleveraged and, when combined with the Debtors’ new business plan, well-positioned to implement that plan and successfully compete in the refining industry in the years to come.
IV. Remaining Confirmation Objections.
20. The Debtors received six formal objections and two informal objection with respect to the adequacy of the Disclosure Statement and Confirmation of the Plan. The formal objections were filed by the Commonwealth of Pennsylvania, Department of Revenue (the “Commonwealth of Pennsylvania”) [Docket No. 255], the U.S. Trustee [Docket No. 261] (the “UST Objection”),
Westchester Fire Insurance Company (“Westchester”) [Docket No. 263], Cypress-Fairbanks ISD and Harris County (together, the “Texas Taxing Authorities”) [Docket No. 264], the United States
[Docket No. 272] (the “US Objection”), and American Railcar Industries, Inc. and ARI Leasing
LLC [Docket No. 287] (the “ARI Objection”). Additionally, the City of Philadelphia filed a joinder to the US Objection [Docket No. 277] (the “Joinder”). The Debtors have consensually resolved the Objections of the Commonwealth of Pennsylvania, the Texas Taxing Authorities, and
Westchester, as well as the two informal objections, with certain clarifications set forth in the
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Confirmation Order. Based upon these revisions, the Commonwealth of Pennsylvania, the Texas
Taxing Authorities, and Westchester withdrew their Objections.13 The City of Philadelphia withdrew the Joinder.14 As of the date hereof, only three Objections remain unresolved and the
Debtors request that the Court overrule such Objections, as set forth in section III herein.15
21. The Debtors also received informal requests for clarification from certain of the
Restructuring Support Parties, the EPA, the Securities and Exchange Commission (the “SEC”),
and the United Steelworkers (collectively, the “Requesting Parties”). The Debtors and the
Requesting Parties agreed to certain technical modifications to the Plan and the inclusion of
additional language in the Confirmation Order.
ARGUMENT
22. This brief is divided into two principal parts. First, the Debtors request approval of the Disclosure Statement and a finding that the Debtors complied with the Scheduling Order.
Second, the Debtors present their “case in chief” that the Plan satisfies section 1129 of the
Bankruptcy Code and, accordingly, request that the Court confirm the Plan.16 In support of the
Plan, the Debtors have filed contemporaneously herewith the Declaration of Gregory G. Gatta in
Support of an Order Approving the Debtors’ Disclosure Statement for and Confirming the
13 See [Docket Nos. 278, 275, and 280].
14 See [Docket No. 278].
15 The Debtors believe they will consensually resolve the ARI Objection, which was filed on the date hereof. To the extent the Debtors are unable to consensually resolve the ARI Objection, the Debtors reserve the right to file a supplemental response to the ARI Objection.
16 See In re Armstrong World Indus., Inc., 348 B.R. 111, 119–20 (D. Del. 2006) (stating that a court must determine whether a plan meets the requirements of section 1129 in order to confirm such plan); In re Nutritional Sourcing Corp., 398 B.R. 816, 824 (Bankr. D. Del. 2008) (same); In re Bally Total Fitness of Greater N.Y., Inc., No. 07- 12395 (BRL), 2007 WL 2779438, at *3 (Bankr. S.D.N.Y. Sept. 17, 2007) (“The Debtors, as proponents of the Plan, have the burden of proving the satisfaction of the elements of Sections 1129(a) and (b) of the Bankruptcy Code by a preponderance of the evidence.”).
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Debtors’ First Amended Joint Prepackaged Chapter 11 Plan (the “Gatta Declaration”), the
Declaration of Peter Laurinaitis in Support of an Order Approving the Debtors’ Disclosure
Statement for and Confirming the Debtors’ First Amended Joint Prepackaged Chapter 11 Plan
(the “Laurinaitis Declaration”), and the Declaration of Joseph J. Sciametta in Support of an Order
Approving the Debtors’ Disclosure Statement for and Confirming the Debtors’ First Amended
Joint Prepackaged Chapter 11 Plan (the “Sciametta Declaration”).
I. Approval of the Disclosure Statement Is Warranted and the Debtors Complied with the Scheduling Order.
A. The Disclosure Statement Satisfies the Requirements of the Bankruptcy Code.
23. To determine whether a prepetition solicitation of votes to accept or reject a plan should be approved, the Court must determine whether the solicitation complied with sections 1125 and 1126(b) of the Bankruptcy Code, and Bankruptcy Rules 3017(d), 3017(e),
3018(b), and 3018(c).
24. Section 1125(g) of the Bankruptcy Code provides that:
[A]n acceptance or rejection of the plan may be solicited from a holder of a claim or interest if such solicitation complies with applicable nonbankruptcy law and if such holder was solicited before the commencement of the case in a manner complying with applicable nonbankruptcy law.
25. Section 1126(b) of the Bankruptcy Code provides that:
[A] holder of a claim or interest that has accepted or rejected the plan before the commencement of the case under this title is deemed to have accepted or rejected such plan, as the case may be, if— (1) the solicitation of such acceptance or rejection was in compliance with any applicable nonbankruptcy law, rule, or regulation governing the adequacy of disclosure in connection with such solicitation; or (2) if there is not any such law, rule, or regulation, such acceptance or rejection was solicited after disclosure to such holder of adequate information, as defined in section 1125(a) of this title.
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26. Prepetition solicitations must therefore either comply with applicable federal or state securities laws and regulations (including the registration and disclosure requirements thereof) or, if such laws and regulations do not apply, the solicited holders must receive “adequate information,” as applicable, as defined in section 1125(a) of the Bankruptcy Code. As discussed below, the Debtors satisfied sections 1125(g) and 1126(b), as applicable, of the Bankruptcy Code.
1. The Debtors Complied with Applicable Nonbankruptcy Law.
27. In accordance with section 1126(b)(1) of the Bankruptcy Code, the Debtors’ solicitation of Holders of Claims receiving securities under the Plan was subject to the
United States Securities Act of 1933 (as amended, the “Securities Act”) and the regulatory authority of various states under state securities laws (“Blue Sky Laws”). The offering, issuance, and distribution of any securities, including the New Equity, pursuant to the Plan will be exempt from the registration requirements of section 5 of the Securities Act pursuant to section 1145 of the Bankruptcy Code or, with respect to the offering, issuance, and distribution of the New Equity to the Parent, section 4(a)(2) of the Securities Act, as applicable. Pursuant to section 1145 of the
Bankruptcy Code, the New Equity issued under the Plan (other than the New Equity offered, issued and distributed to Parent) may be sold without registration under the Securities Act by the recipients thereof, subject to: (a) the provisions of section 1145(b)(1) of the Bankruptcy Code relating to the definition of an underwriter in section 2(a)(11) of the Securities Act and compliance with any applicable state or foreign securities laws, if any, and the rules and regulations of the
SEC, if any, applicable at the time of any future transfer of such Securities or instruments; (b) any other applicable regulatory approval; and (c) the transfer restrictions set forth in the New
Organizational Documents. The New Equity offered, issued and distributed to the Parent pursuant to section 4(a)(2) of the Securities Act shall be “restricted securities” within the meaning of rule
144 of the Securities Act and may only be sold in a transaction registered under the Securities Act
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or pursuant to an available exemption from the registration requirements of section 5 of the
Securities Act and subject to (x) compliance with any applicable state or foreign securities laws, if any, and the rules and regulations of the SEC, if any, applicable at the time of any future transfer of such Securities or instruments; (y) any other applicable regulatory approval; and (z) the transfer restrictions set forth in the New Organizational Documents.
28. As a result of the foregoing, there was no general solicitation in connection with the sale of securities under the Plan. As such, the Debtors’ prepetition solicitation did not constitute a public offering because it falls within the exemptions set forth in either section 5 of the Securities Act pursuant to section 1145 of the Bankruptcy Code or section 4(a)(2) of the
Securities Act, as applicable.17 Therefore, the Debtors were not required to seek federal or state
regulatory approval of the Disclosure Statement. Moreover, no party in interest has objected to
the Disclosure Statement on account of noncompliance with applicable nonbankruptcy law.
2. The Disclosure Statement Contains Adequate Information.
29. The primary purpose of a disclosure statement is to provide material information, or “adequate information,” that allows parties entitled to vote on a proposed plan to make an informed decision about whether to vote to accept or reject the plan.18 “Adequate information” is
17 See, e.g., In re Hercules Offshore, Inc., No. 15-11685 (KJC) (Bankr. D. Del. Aug. 14, 2015) (approving solicitation procedures that included section 4(a)(2) exemption); In re EveryWare Global, Inc., No. 15-10743 (LSS) (Bankr. D. Del. Apr. 7, 2015) (same); In re Sorenson Commc’ns, Inc., No. 14-10454 (BLS) (Bankr. D. Del. Mar. 4, 2014) (same); In re CHL Ltd., No. 12-12437 (KJC) (Bankr. D. Del. Oct. 4, 2012) (same); In re Peak Broad., LLC, No. 12-10183 (PJW) (Bankr. D. Del. Jan. 12, 2012) (same); In re Source Interlink Cos., No. 09- 11424 (KG) (Bankr. D. Del. Apr. 29, 2009) (same).
18 See, e.g., Krystal Cadillac-Oldsmobile GMC Truck, Inc. v. Gen. Motors Corp., 337 F.3d 314, 321–22 (3d Cir. 2003) (“Under 11 U.S.C. § 1125(b), a party seeking chapter 11 bankruptcy protection has an affirmative duty to provide creditors with a disclosure statement containing adequate information to enable a creditor to make an informed judgment about the Plan.”) (internal quotations omitted); Century Glove, Inc. v. First Am. Bank of N.Y., 860 F.2d 94, 100 (3d Cir. 1988) (“[S]ection 1125 seeks to guarantee a minimum amount of information to the creditor asked for its vote.”).
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a flexible standard, based on the facts and circumstances of each case.19 Courts within the Third
Circuit and elsewhere acknowledge that determining what constitutes “adequate information” for the purpose of satisfying section 1125 of the Bankruptcy Code resides within the broad discretion of the court.20
30. Courts look for certain information when evaluating the adequacy of the disclosures in a proposed disclosure statement, including:
a. the events which led to the filing of a bankruptcy petition and the relationship of a debtor with the affiliates;
b. a description of the available assets and their and the value the present condition of a debtor while in chapter 11;
c. the anticipated future of the company and the claims asserted against a debtor;
d. the source of information stated in the disclosure statement;
e. the estimated return to creditors under a chapter 7 liquidation;
f. the future management of a debtor;
g. the chapter 11 plan or a summary thereof;
19 11 U.S.C. § 1125(a)(1) (“‘[A]dequate information’ means information of a kind, and in sufficient detail, as far as is reasonably practicable in light of the nature and history of the debtor and the condition of the debtor’s books and records.”); Oneida Motor Freight, Inc. v. United Jersey Bank, 848 F.2d 414, 417 (3d Cir. 1988) (“From the legislative history of § 1125 we discern that adequate information will be determined by the facts and circumstances of each case.”); First Am. Bank of N.Y. v. Century Glove, Inc., 81 B.R. 274, 279 (D. Del. 1988) (noting that adequacy of disclosure for a particular debtor will be determined based on how much information is available from outside sources).
20 See, e.g., Tex. Extrusion Corp. v. Lockheed Corp. (In re Tex. Extrusion Corp.), 844 F.2d 1142, 1157 (5th Cir. 1988) (“The determination of what is adequate information is subjective and made on a case by case basis. This determination is largely within the discretion of the bankruptcy court.”); In re River Village Assocs., 181 B.R. 795, 804 (E.D. Pa. 1995) (same); In re Phx. Petrol. Co., 278 B.R. 385, 393 (Bankr. E.D. Pa. 2001) (same); In re PC Liquidation Corp., 383 B.R. 856, 865 (E.D.N.Y. 2008) (“The standard for disclosure is, thus, flexible and what constitutes adequate information in any particular situation is determined on a case-by-case basis, with the determination being largely within the discretion of the bankruptcy court.”) (internal citations omitted); In re Lisanti Foods, Inc., 329 B.R. 491, 507 (D.N.J. 2005) (same).
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h. the financial information, valuations, and projections relevant to the claimants’ decision to accept or reject the chapter 11 claim;
i. the information relevant to the risks posed to claimants under the plan;
j. the actual or projected realizable value from recovery of preferential or otherwise voidable transfers;
k. the litigation likely to arise in a nonbankruptcy context; and
l. the tax attributes of a debtor.21
31. The Disclosure Statement contains, among other things, descriptions and
summaries of: (a) classification and treatment of Claims and Interests under the Plan, including
who is entitled to vote and how to vote on the Plan; (b) the Debtors’ corporate history and corporate
structure, business operations, and prepetition capital structure and indebtedness; (c) events
leading to these Chapter 11 Cases, including the Debtors’ prepetition restructuring negotiations
and entry into the Restructuring Support Agreement; (d) certain important effects of Confirmation
of the Plan; (e) the releases and exculpations contemplated by the Plan; (f) certain financial
information about the Debtors, including financial projections and liquidation and valuation
analyses; (g) the statutory requirements for confirming the Plan; (h) certain risk factors Holders of
Claims should consider before voting to accept or reject and the Plan and information regarding
alternatives to Confirmation of the Plan; (i) certain important disclosures regarding securities laws; and (j) certain United States federal income tax consequences of the Plan.
21 In re U.S. Brass Corp., 194 B.R. 420, 424–25 (Bankr. E.D. Tex. 1996); In re Scioto Valley Mortg. Co., 88 B.R. 168, 170–71 (Bankr. S.D. Ohio 1988) (listing the factors courts have considered in determining the adequacy of information provided in a disclosure statement); In re Metrocraft Publ’g. Servs., Inc., 39 B.R. 567, 568 (Bankr. N.D. Ga. 1984) (same). Disclosure regarding all topics is not necessary in every case. U.S. Brass, 194 B.R. at 425; Phx. Petrol., 278 B.R. at 393.
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32. In addition, and as noted above, the Disclosure Statement and the Plan were subject
to review and comment by the Restructuring Support Parties, the U.S. Trustee, and the United
States on behalf of the EPA, as well as their respective advisors. For the reasons set forth above,
the Debtors submit that the Disclosure Statement contains adequate information within the
meaning of section 1125(a) of the Bankruptcy Code in satisfaction of section 1126(b)(2) and
should be approved.
B. The Debtors Complied with the Scheduling Order.
33. On January 29, 2018, the Court granted the relief requested in the
Scheduling Motion22 and approved the form and manner of the Publication Notice, Voting Record
Date, Voting Deadline, Solicitation Procedures, form of Ballots, and voting tabulation
procedures.23
1. The Debtors Complied with the Notice Requirements Set Forth in the Scheduling Order.
34. The Debtors satisfied the notice requirements set forth in the Scheduling Order,
Bankruptcy Rule 3017, and Local Rule 3017-1. First, on January 17, 2108, the Debtors caused their claims and noticing agent, Omni, to distribute the Solicitation Packages, which included the
Plan and the Disclosure Statement, to Holders of Claims as of the Voting Record Date entitled to vote to accept or reject the Plan.24 Second, on January 31, 2018, the Debtors mailed the Notice to
all parties on the Debtors’ creditor matrix and all Interest holders of record informing the recipients
22 For the avoidance of doubt, the factual and legal arguments set forth in the Scheduling Motion are incorporated herein by reference in their entirety.
23 See Scheduling Order ¶¶ 6-11.
24 As previously noted, under the Scheduling Order, the Debtors were not required to mail a copy of the Plan or the Disclosure Statement to Holders of Claims or Interests that are: (a) Unimpaired under, and conclusively presumed to accept, the Plan; or (b) Impaired under, and deemed to reject, the Plan. See Scheduling Order ¶ 12.
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of, among other things: (a) the commencement of these Chapter 11 Cases; (b) the date and time
set for the hearing to consider approval of the Disclosure Statement and confirmation of the Plan;
and (c) the deadline for filing objections to the Plan and the Disclosure Statement.25 Third, the
Debtors caused the Publication Notice to be published in USA Today (National Edition), the New
York Times (National Edition), and Wall Street Journal (National Edition) on February 1, 2018.26
Fourth, the Notice and Publication Notice included instructions on how to obtain the Plan and the
Disclosure Statement without a fee through the Debtors’ restructuring website, http://www.omnimgt.com/PhiladelphiaEnergy, or at the Court’s PACER website, www.deb.uscourts.gov.
2. The Ballots Used to Solicit Holders of Claims Entitled to Vote on the Plan Complied with the Scheduling Order.
35. The form of Ballots used comply with the Bankruptcy Rules and were approved by the Court pursuant to the Scheduling Order.27 No party has objected to the sufficiency of the
Ballots. Based on the foregoing, the Debtors submit that they complied with the Scheduling Order
and satisfied the requirements of Bankruptcy Rule 3018(c).
3. The Debtors’ Solicitation Period Complied with the Scheduling Order and Bankruptcy Rule 3018(b).
36. The Debtors’ solicitation period complied with the Scheduling Order and
Bankruptcy Rule 3018(b). First, as demonstrated above and in the Scheduling Motion, the Plan
and Disclosure Statement were transmitted to all Holders of Claims entitled to vote on the Plan.
Second, the solicitation period, which lasted from January 17, 2018, through January 19, 2018,
25 See Affidavit of Service [Docket No. 135].
26 See Affidavits of Publication [Docket Nos. 137, 138, 139].
27 See Scheduling Order ¶ 10.
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complied with the Scheduling Order28 and was adequate under the particular facts and circumstances of these cases and was not unreasonably short. Indeed, 100% of Holders of Term
Loan A Claims and 100% of Holders of Term Loan B Claims submitted Ballots by the Voting
Deadline. Accordingly, the Debtors submit that they complied with the Scheduling Order and satisfied the requirements of Bankruptcy Rule 3018(b).
4. The Debtors’ Vote Tabulation Procedures Complied with the Scheduling Order.
37. The Debtors request that the Court find that the Debtors’ tabulation of votes complied with the Scheduling Order. Omni reviewed all Ballots received, in accordance with the procedures described in the Scheduling Motion and the Disclosure Statement29 and subsequently approved in the Scheduling Order.30 Because Omni complied with all of the Solicitation
Procedures, the Debtors respectfully submit that the Court should approve the Debtors’ tabulation of votes confirming that in Classes 7 and 8 the requisite majorities in amount and number of Claims voted to accept the Plan pursuant to section 1126(c) of the Bankruptcy Code.
5. Solicitation of the Plan Complied with the Bankruptcy Code and Was in Good Faith.
38. Section 1125(e) of the Bankruptcy Code provides that “a person that solicits acceptance or rejection of a plan, in good faith and in compliance with the applicable provisions of this title . . . is not liable” on account of such solicitation for violation of any applicable law, rule, or regulation governing solicitation of acceptance or rejection of a plan.
28 See id. ¶ 8.
29 See generally Final Voting Reports.
30 See Scheduling Order ¶ 11.
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39. As set forth in the First Day Declaration and the Scheduling Motion, and as demonstrated by the Debtors’ compliance with the Scheduling Order, the Debtors at all times engaged in arm’s-length, good-faith negotiations and took appropriate actions in connection with the solicitation of the Plan in compliance with section 1125 of the Bankruptcy Code.31 Therefore, the Debtors respectfully request that the Court grant the parties the protections provided under section 1125(e) of the Bankruptcy Code.
II. The Plan Satisfies the Requirements of Section 1129 of the Bankruptcy Code.
A. The Plan Complies with the Applicable Provisions of the Bankruptcy Code (§ 1129(a)(1)).
40. Under section 1129(a)(1) of the Bankruptcy Code, a plan must “compl[y] with the applicable provisions of [the Bankruptcy Code].” The legislative history of section 1129(a)(1) of the Bankruptcy Code explains that this provision also encompasses the requirements of sections
1122 and 1123 of the Bankruptcy Code, which govern the classification of claims and the contents of a plan of reorganization, respectively.32 As explained below, the Plan complies with the requirements of sections 1122, 1123, and 1129 of the Bankruptcy Code, as well as other applicable provisions.
31 See Gatta Declaration ¶ 20.
32 S. Rep. No. 95-989, at 126, reprinted in 1978 U.S.C. C.A.N. 5787, 5912 (1978); H.R. Rep. No. 95-595, at 412, reprinted in 1978 U.S.C. C.A.N. 5963, 6368 (1977); In re S&W Enter., 37 B.R. 153, 158 (Bankr. N.D. Ill. 1984) (“An examination of the Legislative History of [section 1129(a)(1)] reveals that although its scope is certainly broad, the provisions it was most directly aimed at were [s]ections 1122 and 1123.”); Nutritional Sourcing Corp., 398 B.R. at 824.
20 Case 18-10122-KG Doc 290 Filed 03/23/18 Page 35 of 100
1. The Plan Satisfies the Classification Requirements of Section 1122 of the Bankruptcy Code.
41. The classification requirement of section 1122(a) of the Bankruptcy Code provides, in pertinent part, as follows:
Except as provided in subsection (b) of this section, a plan may place a claim or an interest in a particular class only if such claim or interest is substantially similar to the other claims or interests of such class.
42. For a classification structure to satisfy section 1122 of the Bankruptcy Code, not all substantially similar claims or interests need to be grouped in the same class.33 Instead, claims or interests designated to a particular class must be substantially similar to each other.34 Courts in this jurisdiction and others have recognized that plan proponents have significant flexibility in placing similar claims into different classes, provided there is a rational basis to do so.35
43. The Plan’s classification of Claims and Interests satisfies the requirements of section 1122 of the Bankruptcy Code because the Plan places Claims and Interests into eight separate Classes, with Claims and Interests in each Class differing from the Claims and Interests
33 Armstrong World Indus., Inc., 348 B.R. at 159.
34 Id.
35 Courts have identified grounds justifying separate classification, including: (a) where members of a class possess different legal rights, and (b) where there are good business reasons for separate classification. See John Hancock Mut. Life Ins. Co. v. Route 37 Bus. Park Assocs., 987 F.2d 154, 158–59 (3d Cir. 1993) (as long as each class represents a voting interest that is “sufficiently distinct and weighty to merit a separate voice in the decision whether the proposed reorganization should proceed,” the classification is proper); In re Jersey City Med. Ctr., 817 F.2d 1055, 1061 (3d Cir. 1987) (recognizing that separate classes of claims must be reasonable and allowing a plan proponent to group similar claims in different classes); see also Frito-Lay, Inc. v. LTV Steel Co. (In re Chateaugay Corp.), 10 F.3d 944, 956–57 (2d Cir. 1993) (finding separate classification appropriate because classification scheme had a rational basis on account of the bankruptcy court-approved settlement); In re Heritage Org., L.L.C., 375 B.R. 230, 303 (Bankr. N.D. Tex. 2007) (“the only express prohibition on separate classification is that it may not be done to gerrymander an affirmative vote on a reorganization plan”); In re 500 Fifth Ave. Assocs., 148 B.R. 1010, 1018 (Bankr. S.D.N.Y. 1993) (although discretion is not unlimited, “the proponent of a plan of reorganization has considerable discretion to classify claims and interests according to the facts and circumstances of the case”) (internal quotations omitted); In re Drexel Burnham Lambert Grp. Inc., 138 B.R. 723, 757 (Bankr. S.D.N.Y. 1992) (“Courts have found that the Bankruptcy Code only prohibits the identical classification of dissimilar claims. It does not require that similar classes be grouped together . . . .”).
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in each other Class in a legal or factual way or based on other relevant criteria.36 Specifically, the
Plan provides for the separate classification of Claims and Interests into the following Classes:
a. Class 1: Other Secured Claims;
b. Class 2: Other Priority Claims;
c. Class 3: Refining ABL Claims;
d. Class 4: NGL Facility Claims;
e. Class 7: Term Loan A Claims;
f. Class 8: Term Loan B Claims;
g. Class 9: General Unsecured Claims;
h. Class 10: Intercompany Claims;
i. Class 11: Intercompany Interests; and
j. Class 12: Interests in PES Holdings.
44. Claims and Interests assigned to each particular Class described above are
substantially similar to the other Claims and Interests in such Class.37 In addition, valid business,
legal, and factual reasons justify the separate classification of the particular Claims or Interests
into the Classes created under the Plan, and no unfair discrimination exists between or among
Holders of Claims and Interests.38 Namely, the Plan separately classifies the Claims because each
Holder of such Claims or Interests may hold (or may have held) rights in the estates legally dissimilar to the Claims or Interests in other Classes or because substantial administrative convenience resulted from such classification.
36 See Plan Art. III.
37 See Gatta Declaration ¶ 8.
38 See id. ¶ 8.
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45. For example, the classification scheme distinguishes between Holders of the Term
Loan B Claims (Class 8) from Holders of the DIP Facility Claims (unclassified), because of the
different circumstances of each class. Other Priority Claims (Class 2) are classified separately due
to their required treatment under the Bankruptcy Code.39 In addition, the Plan classifies Interests in PES Holdings (Class 12) separately from Interests that a Debtor holds in another Debtor, because the Debtors’ ownership structure is dependent upon maintaining the Intercompany
Interests and, therefore, the Intercompany Interests may be preserved under the Plan for the administrative convenience of ensuring the preservation of the Debtors’ corporate structure after the Effective Date.40
46. Accordingly, the Claims or Interests assigned to each particular Class described
above are substantially similar to the other Claims or Interests in each such Class and the
distinctions among Classes are based on valid business, factual, and legal distinctions. The
Debtors submit that the Plan fully complies with and satisfies section 1122 of the Bankruptcy Code
2. The Plan Satisfies the Mandatory Plan Requirements of Section 1123(a) of the Bankruptcy Code.
47. Section 1123(a) of the Bankruptcy Code sets forth seven criteria that every
chapter 11 plan must satisfy. The Plan satisfies each of these requirements.
39 See id.
40 See Gatta Declaration ¶ 8.
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a. Designation of Classes of Claims and Equity Interests (§ 1123(a)(1))
48. For the reasons set forth above, Article III of the Plan properly designates classes
of Claims and Interests and thus satisfies the requirement of section 1122 of the
Bankruptcy Code.41
b. Specification of Unimpaired Classes (§ 1123(a)(2))
49. Section 1123(a)(2) of the Bankruptcy Code requires that the Plan “specify any class
of claims or interests that is not impaired under the plan.” The Plan meets this requirement by
identifying each Class in Article III that is Unimpaired.42
c. Treatment of Impaired Classes (§ 1123(a)(3))
50. Section 1123(a)(3) of the Bankruptcy Code requires that the Plan
“specify the treatment of any class of claims or interests that is impaired under the plan.” The Plan
meets this requirement by setting forth the treatment of each Class in Article III that is Impaired.43
d. Equal Treatment within Classes (§ 1123(a)(4))
51. Section 1123(a)(4) of the Bankruptcy Code requires that the Plan “provide the same treatment for each claim or interest of a particular class, unless the holder of a particular claim or interest agrees to a less favorable treatment of such particular claim or interest.” The Plan meets this requirement because holders of Allowed Claims or Interests will receive the same rights and treatment as other holders of Allowed Claims or Interests within such holders’ respective Class.44
41 See id. ¶ 10.
42 See id.
43 See Gatta Declaration ¶ 10.
44 See id. ¶ 11.
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e. Means for Implementation (§ 1123(a)(5))
52. Section 1123(a)(5) of the Bankruptcy Code requires that the Plan provide
“adequate means” for its implementation. The Plan satisfies this requirement because Article IV of the Plan, as well as other provisions thereof, provides for the means by which the Plan will be implemented. Among other things, Article IV of the Plan:
a. the execution and delivery of any appropriate agreements or other documents of merger, consolidation, restructuring, conversion, disposition, transfer, formation, organization, dissolution, or liquidation containing terms that are consistent with the terms of the Plan, and that satisfy the requirements of applicable law and any other terms to which the applicable Entities may agree, including, but not limited to the documents comprising the Plan Supplement and the New Organizational Documents;
b. the execution and delivery of appropriate instruments of transfer, assignment, assumption, or delegation of any asset, property, right, liability, debt, or obligation on terms consistent with the terms of the Plan and having other terms for which the applicable Entities agree;
c. the execution, delivery and filing, if applicable, of appropriate certificates or articles of incorporation, formation, reincorporation, merger, consolidation, conversion, or dissolution pursuant to applicable state law, including any applicable New Organizational Documents;
d. the execution, delivery, and filing, if applicable, of the New First Lien Term Loan Documents, the New Intermediation Facility, the New First Loss Facility (if any), and the Additional Financing Facility;
e. the formation of PES Inc. and, as applicable, the Reorganized Debtors;
f. the issuance and distribution of the New Membership Interests and New Common Stock;
g. any action to effectuate the termination of the Rail Terminaling Services Agreement in accordance with Article V.A of the Plan;
25 Case 18-10122-KG Doc 290 Filed 03/23/18 Page 40 of 100
h. any action to effectuate the termination of the PES Advisory Agreement and PES Registration Rights Agreement;
i. any action to effectuate any necessary assignment of the PES Refining Contribution Agreement to PES Inc. or any direct or indirect subsidiary thereof, if required; and
j. all other actions that the applicable Entities determine to be necessary or appropriate, including making filings or recordings that may be required by applicable law.
53. The precise terms governing the execution of these transactions are set forth in the
applicable definitive documents or forms of agreements included in the Plan Supplement. The
Debtors believe that the Plan satisfies section 1123(a)(5) of the Bankruptcy Code.
f. Issuance of Non-Voting Securities (§ 1123(a)(6))
54. Section 1123(a)(6) of the Bankruptcy Code requires that a debtor’s corporate
constituent documents prohibit the issuance of non-voting equity securities. Article IV.K of the
Plan provides that the New Organizational Documents will prohibit the issuance of non-voting
equity securities.45 The certificate of incorporation for PES Inc. will reflect such prohibition.46
g. Directors and Officers (§ 1123(a)(7))
55. Section 1123(a)(7) of the Bankruptcy Code requires that plan provisions with respect to the manner of selection of any director, officer, or trustee, or any other successor thereto, be “consistent with the interests of creditors and equity security holders and with public policy.”
Article IV.N of the Plan provides that the New Board shall consist of: (a) two persons to be selected by CSAM, which shall be U.S. citizens; (b) two persons to be selected by Halcyon; (c) one person to be selected by the Parent; (d) one person to be selected by a majority-in-interest of the
Consenting Term Loan B Creditors; and (e) the Chief Executive Officer of PES Inc., which
45 See Gatta Declaration ¶ 14.
46 See Plan Supplement Ex. A(i) (form of certificate of incorporation containing such prohibition).
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accords with applicable state law, the Bankruptcy Code, the interests of creditors and equity
security holders, and public policy. Additionally, to the extent reasonably practicable, the Debtors
will disclose in advance of the Confirmation Hearing the identity and affiliations of any Person
proposed to serve on the New Board, as well as those Persons that will serve as officers of the
Reorganized Debtors, as applicable. Accordingly, the Plan satisfies the requirements of section
1123(a)(7) of the Bankruptcy Code.47
3. The Plan Complies with the Discretionary Provisions of Section 1123(b) of the Bankruptcy Code.
56. Section 1123(b) of the Bankruptcy Code sets forth various discretionary provisions
that may be incorporated into a chapter 11 plan. Among other things, section 1123(b) of the
Bankruptcy Code provides that a plan may: (a) impair or leave unimpaired any class of claims or
interests; (b) provide for the assumption or rejection of executory contracts and unexpired leases;
(c) provide for the settlement or adjustment of any claim or interest belonging to the debtor or the estates; and (d) include any other appropriate provision not inconsistent with the applicable provisions of chapter 11.48
57. The Plan is consistent with section 1123(b) of the Bankruptcy Code. Specifically,
under Article III of the Plan, Classes 1, 2, 3, 4, 9, 11 and, potentially, 10 are Unimpaired because
the Plan leaves unaltered the legal, equitable, and contractual rights of the Holders of Claims and
Interests within such Classes.49 On the other hand, Classes 7, 8, and 12 are Impaired since the
47 See Gatta Declaration ¶ 15.
48 See 11 U.S.C. § 1123(b)(1)–(3), (6).
49 See Plan Art. III.
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Plan modifies the rights of the Holders of Claims and Interests within such Classes as contemplated
in section 1123(b)(1) of the Bankruptcy Code.50
58. In addition, and under section 1123(b)(2) of the Bankruptcy Code, Article V of the
Plan provides for the assumption of all Executory Contracts and Unexpired Leases under section 365 of the Bankruptcy Code, except to the extent set forth in the Plan.
a. The Plan Settlement of Claims and Controversies Is Fair and Equitable and Should be Approved.
59. The Plan incorporates the Settlement which provides for the compromise and settlement of numerous Claims, Interests, Causes of Action, and controversies designed to achieve a beneficial and efficient resolution of the Chapter 11 Cases for all parties in interest. Through the
Settlement, the Plan resolves a host of alleged Claims and Causes of Action, which were thoroughly analyzed by the Debtors’ Special Committees, which were advised by separate sets of counsel.51 The Claims and Causes of Action are all highly uncertain to succeed and pursuit thereof
could cause extensive delay, cost, and uncertainty in these Chapter 11 Cases and otherwise.
Accordingly, except as otherwise set forth in the Plan or herein, in consideration for the distribution
and other benefits provided under the Plan, including the release, exculpation, and injunction
provisions and the Parent Cash Contribution, the Plan shall constitute a good faith compromise
and settlement of all Claims and controversies resolved pursuant to the Plan. Each component of
the Settlement is an integral, integrated, and inextricably linked part of the Settlement.52
50 See Id.
51 See Gatta Declaration ¶ 40.
52 Id.
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60. The compromises set forth in the Plan are critical to bringing closure to these and
other matters addressed in the Plan and to permitting the Debtors to emerge from chapter 11 with
a stronger balance sheet and a fresh start.
61. In addition, the Plan embodies the RVO Settlement Agreement, which is attached
as Exhibit G to the Plan Supplement. The RVO Settlement Agreement is the result of months of
hard fought negotiations and is a linchpin of the Debtors’ reorganization efforts.53
62. Absent the relief in the RVO Settlement Agreement, the Debtors would pursue a
sale transaction and would seek to sell all of their assets “free and clear” of any RIN Liabilities,54 and the Debtors would expect the EPA to contest the “free and clear” determination. The RVO
Settlement Agreement, on the other hand, provides critical relief and trades uncertainty, risk, and a contested confirmation process for a restructuring timeline with fixed milestones, clearly articulated secured and unsecured recoveries, and mutual cooperation.55 The fairness and
reasonableness of the RVO Settlement Agreement is underscored by the broad support from all
56 levels of the capital structure.89F The Debtors’ entry into the RVO Settlement Agreement is an
exercise of the Debtors’ sound business judgment, as corroborated by the support of all other major
constituencies, the certainty, swiftness, and consensual nature of the restructuring to be effectuated
pursuant to the RVO Settlement Agreement greatly outweighs any potential additional value
available following a protracted, expensive, and uncertain litigation. Accordingly, the Debtors
53 See Gatta Declaration ¶ 45.
54 See id. ¶ 46.
55 See Gatta Declaration ¶ 46. 56 See generally Voting Reports.
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believe that the RVO Settlement Agreement satisfies the requirements of the Bankruptcy Code
and Third Circuit law.
63. As set forth in the Confirmation Order, at the Confirmation Hearing, the Debtors
seek the Court’s approval of the Debtors’ entry into the RVO Settlement Agreement pursuant to
Bankruptcy Rule 9019.
64. The terms of the RVO Settlement Agreement and the EPA’s entry into such
settlement, were open to public comment after notice was published in the Federal Register on
March 16, 2018 and the public comment period will conclude on March 26, 2018. Upon the
conclusion of the public comment period the EPA will seek approval of its entry into the RVO
Settlement Agreement by filing a motion with this Court, which will be heard on April 4, 2018.
65. With respect to the Debtors’ entry into the RVO Settlement Agreement, the
Bankruptcy Code states that a plan may “provide for . . . the settlement or adjustment of any claim
57 or interest belonging to the debtor or to the estate.”86F Settlements under a plan are generally subject
58 to the same standard applied to settlements under Bankruptcy Rule 9019.87F In particular, the Third
Circuit applies the four-factor Martin test for considering motions to approve settlements under
Bankruptcy Rule 9019, weighing: (1) the probability of success in litigation; (2) the likely
difficulties in collection; (3) the complexity of the litigation involved, and the expense,
59 inconvenience and delay necessarily attending it; and (4) the paramount interests of the creditors. 8
66. The Martin test strongly favors approving the RVO Settlement Agreement
embodied in the Plan and attached as Exhibit G to the Plan Supplement. 8F
57 Id. § 1123(b)(3)(A). 58 See In re Coram Healthcare Corp., 315 B.R. 321, 334–35 (Bankr. D. Del. 2004). 59 See In re Martin, 91 F.3d 389, 393 (3d Cir. 1996).
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• First, the RVO Settlement Agreement resolves complex legal issues, the outcome of which would be uncertain and even if successful, subject to appeal and continued litigation. While the Debtors remain steadfast in their belief that they would prevail in any litigation regarding the merits of issues such as the Debtors’ ability to sell their assets to a purchaser “free and clear” of any RIN Liabilities, there can be no guarantee of such outcome.
• Second, absent the relief in the RVO Settlement Agreement, the Debtors may be unable to meet the financial burden of their RVOs and would instead seek to consummate a sale of their assets “free and clear” of the RIN Liabilities.
• Third, as discussed, the litigation resolved by the RVO Settlement Agreement is highly complex, and litigating the issues would result in great expense, inconvenience, and delay.
• Fourth, the paramount interests of creditors weigh in favor of approving the RVO Settlement Agreement. Substantially all of the Debtors’ Impaired creditors are Restructuring Support Parties who support the Plan, including with respect to the RVO Settlement Agreement.
67. In the Debtors’ sound business judgment, as corroborated by the support of all other major constituencies, the certainty, swiftness, and consensual nature of the restructuring to be effectuated pursuant to the RVO Settlement Agreement greatly outweighs any potential additional value that may be available following expensive and uncertain litigation.60 Accordingly, the
Debtors submit that the RVO Settlement Agreement satisfies all four Martin factors and should be
approved.
b. Plan’s Release, Exculpation, and Injunction Provisions Satisfy Section 1123(b) of the Bankruptcy Code
68. The Plan also includes certain releases, an exculpation provision, and an injunction
provision. These discretionary provisions are proper because, among other things, they are the
product of extensive good-faith, arm’s-length negotiations, were a material inducement for parties
to enter into the Restructuring Support Agreement, are supported by the Debtors and their key
60 See Gatta Declaration ¶ 46.
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constituents, are consistent with applicable precedent, and were universally accepted by Holders of Claims that voted on the Plan, and were otherwise supported by the other parties to the
Restructuring Support Agreement.
(i) The Debtor Release Is Appropriate.
69. Section 1123(b)(3)(A) of the Bankruptcy Code provides that a chapter 11 plan may provide for “the settlement or adjustment of any claim or interest belonging to the debtor or to the estate.”61 Further, a debtor may release claims under section 1123(b)(3)(A) of the Bankruptcy
Code “if the release is a valid exercise of the debtor’s business judgment, is fair, reasonable, and in the best interests of the estate.”62 In determining whether a debtor release is proper, courts in
Delaware and elsewhere generally may consider the following five factors:
a. whether the non-debtor has made a substantial contribution to the debtor’s reorganization;
b. whether the release is essential to the debtor’s reorganization;
c. agreement by a substantial majority of creditors to support the release;
d. identity of interest between the debtor and the third party; and
61 See In re Coram, 315 B.R. at 334–35 (holding that standards for approval of settlement under section 1123 of the Bankruptcy Code are generally the same as those under Bankruptcy Rule 9019). Generally, courts in the Third Circuit approve a settlement by the debtors if the settlement “exceed[s] the lowest point in the range of reasonableness.” E.g., In re Exaeris, Inc., 380 B.R. 741, 746-47 (Bankr. D. Del. 2008) (citation omitted); see Cosoff v. Rodman (In re W.T. Grant Co.), 699 F.2d 599, 608 (2d Cir. 1983) (examining whether settlement “fall[s] below the lowest point in the range of reasonableness”) (alteration in original) (citation omitted); In re World Health Alts., Inc., 344 B.R. 291, 296 (Bankr. D. Del. 2006) (stating that settlement must be within reasonable range of litigation possibilities).
62 In re Spansion, Inc., 426 B.R. 114, 143 (Bankr. D. Del. 2010); see also In re Wash. Mut., Inc., 442 B.R. 314, 327 (Bankr. D. Del. 2011) (“In making its evaluation [whether to approve a settlement], the court must determine whether ‘the compromise is fair, reasonable, and in the best interest of the estate.”) (internal citations omitted).
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e. whether a plan provides for payment of all or substantially all of the claims in the class or classes affected by the release.63
Not all of the above factors need to be satisfied for a court to approve a debtor release.64
70. Article VIII.B of the Plan provides for releases by the Debtors, as of the Effective
Date, of, among other things, certain Claims, rights, and causes of action that the Debtors and the
Reorganized Debtors may have against the Released Parties (the “Debtor Release”),65 which
parties include: (a) the Debtors and Reorganized Debtors; (b) the Parent Parties; (c) the Term
Loan A Lenders; (d) the Term Loan B Lenders; (e) the Term Loan A Agent; (f) the Term Loan B
Agent; (g) the Intermediation Counterparties; (h) the Refining ABL Lenders; (i) the Refining ABL
Agent; (j) the DIP Facility Lenders; (k) the DIP Facility Agent; (l) the DIP Commitment Parties;
(m) the Additional Financing Lender; (n) with respect to each of the foregoing entities in clauses
(a) through (m), each such Entity’s current and former predecessors, successors, Affiliates
(regardless of whether such interests are held directly or indirectly), subsidiaries, direct and
indirect equityholders, funds, portfolio companies, management companies; and (o) with respect
to each of the foregoing Entities in clauses (a) through (n), each of their respective current and
former directors, officers, members, employees, partners, managers, independent contractors,
agents, representatives, principals, professionals, consultants, financial advisors, attorneys,
63 E.g., In re Zenith Elecs., 241 B.R. 92, 110 (Bankr. D. Del. 1999) (citing In re Master Mortg. Inv. Fund, Inc., 168 B.R. 930, 935 (Bankr. W.D. Mo. 1994)); Spansion, 426 B.R. at 143 n.47 (citing the Zenith factors).
64 E.g., Wash. Mut., 442 B.R. at 346 (“These factors are neither exclusive nor conjunctive requirements, but simply provide guidance in the [c]ourt’s determination of fairness.”); In re Exide Techs., 303 B.R. 48, 72 (Bankr. D. Del. 2003) (finding that Zenith factors are not exclusive or conjunctive requirements).
65 See Plan Art. I.A.157 (defining “Released Party”).
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accountants, investment bankers, and other professional advisors (with respect to clause (n), each
solely in their capacity as such).66
71. In return for the Debtor Release, the Debtors received a global settlement, including
global closure, that will decrease the Debtors’ anticipated debt service obligations by
approximately $35 million per year and relieve the Debtors of debt maturities through 2022.67 The
Debtor Release was negotiated by sophisticated entities that were represented by able counsel and financial advisors. Tellingly, all voting Classes voted unanimously in favor of the Plan, including the Debtor Release.
72. The Debtors have satisfied the business judgment standard in granting the
Debtor Release under the Plan. The Debtor Release easily meets the applicable standard because it is fair, reasonable, and in the best interests of the Estates. First, the Debtor Release is essential to the Debtors’ reorganization. The Debtor Release was negotiated prepetition in connection with the Restructuring Support Agreement. That agreement is the foundation for the
Debtors’ restructuring, and thus is in exchange for significant value contributed by such Released
Parties in furtherance of the Restructuring Transactions and is in the best interests of the Estates.
73. For example, the Parent has agreed to contribute $65 million to the Debtors, and the Additional Financing Lender committed to contribute a $75 million new loan. Additionally, the Term Loan B Lenders agreed to an equitization of $107 million of the Debtors’ Term Loan B
Debt and certain of the Term Loan B Lenders agreed to provide a $120 million new money postpetition financing facility that, rather than being repaid at emergence, will convert into the senior most tranche of an exit facility upon emergence, providing the Reorganized Debtors with
66 See Plan § VIII.B.
67 See Gatta Declaration ¶ 48.
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continued access to long-term liquidity going forward. And, the Debtors’ directors, officers, and other agents have been instrumental in negotiating, formulating, and implementing the
Restructuring Transactions contemplated under the Restructuring Support Agreement and the
Plan.
74. Second, a substantial majority of Holders of Claims and Interests support the releases contained in the Plan. The Restructuring Support Parties support the releases contained in the Plan, all Holders of Claims entitled to vote on the Plan voted to accept the Plan (including the Debtor Release), and no Holder of an Impaired Claim or Interest has objected to the Debtor
Release.
75. Third, with respect to certain of the releases—e.g., those releasing the Debtors’ current and former directors, officers, and managers—there is a clear identity of interest supporting the release because the Debtors will assume certain indemnification obligations under the Plan that will be honored by the Reorganized Debtors. Thus, a lawsuit commenced by the Debtors
(or derivatively on behalf of the Debtors) against certain individuals would effectively be a lawsuit against the Reorganized Debtors themselves.
76. And fourth, the releases, including the Debtor Release, were heavily negotiated among the Debtors and their key constituents, including Holders of Term Loan A Claims and Term
Loan B Claims, entitled to vote under the Plan, and the Parent Parties, all of which have made a substantial contribution to the Debtors’ reorganization by funding and otherwise making possible the Restructuring Transactions contemplated under the Plan. For these reasons, the Debtor Release is justified, is in the best interests of creditors, is an integral part of the Plan, and satisfies key factors considered by courts in determining whether a debtor release is proper.
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(ii) The Third-Party Release Is Appropriate.
77. The Plan also provides for the Releasing Parties’68 release of the Released Parties to the extent set forth in the Plan (the “Third Party Release”).69 Courts in this jurisdiction routinely approve such release provisions if, as here, they are consensual.70 The Third-Party Release is a critical negotiated term of the Plan. Without the Third-Party Release, the Plan could not become effective, thus jeopardizing the Debtors’ ability to successfully emerge from bankruptcy as a viable, stand-alone enterprise.71 Moreover, all Voting Classes voted unanimously in favor of the
Plan. And the Released Parties have made substantial contributions to the Debtors’ restructuring and Estates.
78. Each of the Released Parties, as stakeholders and critical participants in the
Debtors’ reorganization process, share a common goal with the Debtors in seeing the Plan succeed.
Further, the Debtors and the Reorganized Debtors are required to indemnify certain of the Released
Parties under, among other agreements, their pre- and postpetition credit facilities and, with respect
68 Art. 1.A.158 of the Plan defines “Releasing Parties” as, collectively: “(a) the Debtors and Reorganized Debtors; (b) the Parent Parties; (c) the Term Loan A Lenders; (d) the Term Loan B Lenders; (e) the Term Loan A Agent; (f) the Term Loan B Agent; (g) the Intermediation Counterparties; (h) the Refining ABL Lenders; (i) the Refining ABL Agent; (j) the DIP Facility Lenders; (k) the DIP Facility Agent; (l) the DIP Commitment Parties; (m) the Additional Financing Lender; (n) with respect to each of the foregoing entities in clauses (a) through (m), each such Entity’s current and former predecessors, successors, Affiliates (regardless of whether such interests are held directly or indirectly), subsidiaries, direct and indirect equityholders, funds, portfolio companies, management companies; (o) with respect to each of the foregoing Entities in clauses (a) through (n), each of their respective current and former directors, officers, members, employees, partners, managers, independent contractors, agents, representatives, principals, professionals, consultants, financial advisors, attorneys, accountants, investment bankers, and other professional advisors (with respect to clause (n), each solely in their capacity as such); and (p) all Holders of Claims and Interests not described in the foregoing clauses (a) through (p).”
69 See Plan § VIII.C.
70 See In re Indianapolis Downs, LLC, 486 B.R. 286, 304-05 (Bankr. D. Del. 2013) (approving third-party release that applied to unimpaired holders of claims deemed to accept the plan as consensual); Spansion, 426 B.R. at 144 (same); Wash. Mut., 442 B.R. at 352 (observing that consensual third-party releases are permissible); Zenith, 241 B.R. at 111 (approving non-debtor releases for creditors that voted in favor of the plan).
71 See Gatta Declaration ¶ 48.
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to officers and members of the boards of managers of the Debtors, certain indemnification agreements.72 Thus, Causes of Action against one of the Debtors’ indemnitees could create an obligation on behalf of the Debtors and could effectively amount to litigation against the Debtors, depleting assets of the Estates. Accordingly, there is an identity of interests between the Debtors and the entities that will benefit from the Third-Party Release.
79. The Released Parties, including the Parent Parties, the other Restructuring Support
Parties, and the Debtors’ officers and members of their boards of managers, played an integral role in the formulation and negotiation of the Plan and the transactions contemplated thereby. The
Released Parties have expended significant time and resources analyzing and negotiating the issues presented by the Debtors’ capital structure and the material barriers to the resolution thereof. In addition to significant concessions under the Plan, certain of the Released Parties have agreed to fund the New First Lien Term Loan, the Parent has agreed to contribute $65 million to the
Reorganized Debtors, and the Additional Financing Lender has committed to contribute the
Additional Financing Facility, in exchange for, among other things, the Third-Party Release. The
Debtors’ restructuring would not have been possible without the Released Parties’ support and contributions.73 Further, the Debtors’ ability to secure the Third-Party Release was one of their most important bargaining chips in the restructuring negotiations.74 Accordingly, each Released
Party has made a substantial contribution to these Chapter 11 Cases, on terms accepted by all
Classes entitled to vote on the Plan.75 Accordingly, the Third-Party Release should be approved.
72 Id. at 49.
73 Id. at 50.
74 Id.
75 See, e.g., In re Local Insight Media Holdings, Inc., No. 10-13677 (KG) (Bankr. D. Del. Nov. 3, 2011) (confirming plan that treated holders of claims and interest that did not vote to reject plan or were not members of a class deemed to reject plan as releasing parties); In re Majestic Star Casino, LLC, No. 09-14136 (KG) (Bankr. D. Del.
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(iii) The Exculpation Provision Is Appropriate.
80. Exculpation provisions (the “Exculpation Provision”) similar to those proposed in the Plan are appropriate where, as here, such provisions do not extend to gross negligence or willful misconduct insofar as the exculpated parties have acted in good faith in negotiating and implementing a plan of reorganization.76 Courts evaluate the appropriateness of exculpation provisions based on a number of factors, including whether the plan was proposed in good faith, whether liability is limited, and whether the exculpation provision was necessary for plan negotiations.77
81. The Exculpation Provision in Article VIII.D of the Plan is appropriate and vital under the circumstances of these Chapter 11 Cases. First, the Exculpated Parties78 played a critical role in negotiating, formulating, and implementing the Restructuring Support Agreement, the
Disclosure Statement, the Plan, and related documents in furtherance of the
Mar. 10, 2011) (confirming plan that treated holders of claims and interests that did not vote to accept plan as releasing parties).
76 See In re PWS Holding Corp., 228 F.3d 224, 246–47 (3d Cir. 2000) (approving plan exculpation provision with willful misconduct and gross negligence exceptions); Indianapolis Downs, LLC, 486 B.R. at 306 (same); Wash. Mut., 442 B.R. at 350 (same).
77 See, e.g., In re Enron Corp., 326 B.R. 497, 503 (S.D.N.Y. 2005) (evaluating the exculpation clause based on the manner in which the clause was made a part of the agreement, the necessity of the limited liability to the plan negotiations, and that those who participated in proposing the plan did so in good faith).
78 Section 1.1.68 of the Plan defines “Exculpated Party” as, each of the following in its capacity as such: “(a) the Debtors; (b) the Reorganized Debtors; (c) the Term Loan Lenders who vote to accept the Plan; (d) the Supporting Lenders; (e) the Backstop Parties; (f) the Credit Agreement Agents; (g) the Supporting Noteholders; (h) with respect to each of the foregoing Entities in clauses (a) through (f), such Entity’s current and former Affiliates, and such Entity’s and such Affiliates’ current and former equity holders (regardless of whether such interests are held directly or indirectly), predecessors, successors and assigns, subsidiaries, managed accounts or funds, and each of their respective current and former equity holders, officers, directors, managers, principals, members, employees, agents, advisory board members, financial advisors, partners, attorneys, accountants, investment bankers, consultants, representatives, management companies, fund advisors, and other professionals, each in their capacity as such; and (i) the DTC.”
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Restructuring Transactions.79 Such negotiations were extensive and the resulting agreements were implemented in good faith with a high degree of transparency, and as a result the Plan enjoys unanimous support from Holders of Claims entitled to vote.80 And the substantial contributions
are noted in detail above. The Exculpation Provision was important to the development of a
feasible, confirmable Plan, and the Exculpated Parties relied upon the protections afforded to the
constituents involved.
82. Second, the scope of the Exculpation Provision is appropriately limited to the
Exculpated Parties’ acts or omissions in connection with, generally speaking, the
Restructuring Transactions, the Restructuring Support Agreement, and these Chapter 11 Cases,
and does not protect the Exculpated Parties from liability resulting from fraud, gross negligence,
or willful misconduct.81
83. Third, the Exculpation Provision is necessary and appropriate to protect parties
which, again as set forth above, have made substantial contributions to the Debtors’ reorganization
from future collateral attacks related to actions taken in good faith in connection with the Debtors’
restructuring.82
84. Fourth, the Plan, including the exculpation provision, is supported by all voting
Classes in these Chapter 11 Cases.
79 See In re Verso Corp., No. 16-10163 (KG) H’ring Tr. 58:18-19, June 23, 2016 (“the debtors did not do this alone; they did it with the help of many others”).
80 See, e.g., Final Voting Reports, Ex. C.
81 See Plan § VIII.G; see also See Gatta Declaration ¶ 55.
82 See Gatta Declaration ¶ 54.
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85. Accordingly, under the circumstances, it is appropriate for the Court to approve the exculpation provision, and to find that the Exculpated Parties have acted in good faith and in compliance with the law.83
(iv) The Injunction Provision Is Appropriate.
86. The injunction provision set forth in Article VIII.E of the Plan implements the
Plan’s release and exculpation provisions, in part, by permanently enjoining all Entities from commencing or maintaining any action against the Debtors, the Reorganized Debtors, the Released
Parties, or the Exculpated Parties on account of or in connection with or with respect to any such
Claims or Interests released, exculpated, or settled to the Plan. Thus, the injunction provision is a key provision of the Plan because it enforces the release and exculpation provisions that are centrally important to the Plan. As such, to the extent the Court finds that the exculpation and release provisions are appropriate, the Debtors respectfully submit that the injunction provision must also be appropriate. Moreover, this injunction provision is narrowly tailored to achieve its purpose.
4. The Plan Complies with Section 1123(d) of the Bankruptcy Code.
87. Section 1123(d) of the Bankruptcy Code provides that “if it is proposed in a plan to cure a default the amount necessary to cure the default shall be determined in accordance with the underlying agreement and nonbankruptcy law.”
88. The Plan complies with section 1123(d) of the Bankruptcy Code.
The Plan provides for the satisfaction of monetary defaults under each Executory Contract and
Unexpired Lease to be assumed under the Plan by payment of the default amount, if any, on the
83 See PWS Holding Corp., 228 F.3d at 246–47 (approving plan exculpation provision with willful misconduct and gross negligence exceptions); Indianapolis Downs, LLC 486 B.R. at 306 (same).
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Effective Date, subject to the limitations described in Article V of the Plan or the
Confirmation Order.84 In accordance with Article V of the Plan and section 365 of the Bankruptcy
Code, the Debtors will satisfy any monetary defaults under each Executory Contract and
Unexpired Lease to be assumed under the Plan on the Effective Date or on such other terms as the parties to such Executory Contracts or Unexpired Leases otherwise agree.
B. The Debtors Complied with the Applicable Provisions of the Bankruptcy Code (§ 1129(a)(2)).
89. The Debtors have satisfied section 1129(a)(2) of the Bankruptcy Code, which requires that the proponent of a plan of reorganization comply with the applicable provisions of the Bankruptcy Code. The legislative history to section 1129(a)(2) of the Bankruptcy Code reflects that this provision is intended to encompass the disclosure and solicitation requirements set forth in sections 1125 and 1126 of the Bankruptcy Code.85 As discussed below, the Debtors have complied with sections 1125 and 1126 of the Bankruptcy Code regarding disclosure and solicitation of the Plan.
1. The Debtors Complied with Section 1125 of the Bankruptcy Code.
90. As discussed in Part I of this memorandum, the Debtors complied with the notice and solicitation requirements of section 1125 of the Bankruptcy Code.
84 See Plan § V.C. The Debtors have performed their obligations under each Executory Contract and Unexpired Lease in the ordinary course of business, consistent with the authority granted under the Order Authorizing the Debtors to Pay Certain Prepetition Claims in the Ordinary Course of Business [Docket No. 79]. As a result, the Debtors are unaware of any such defaults with respect to any Executory Contract or Unexpired Lease.
85 In re Lapworth, No. 97-34529 (DWS), 1998 WL 767456, at *3 (Bankr. E.D. Pa. Nov. 2, 1998) (“The legislative history of § 1129(a)(2) specifically identifies compliance with the disclosure requirements of § 1125 as a requirement of § 1129(a)(2).”); In re Worldcom, Inc., No. 02-13533 (AJG), 2003 WL 23861928, at *49 (Bankr. S.D.N.Y. Oct. 31, 2003) (stating that section 1129(a)(2) requires plan proponents to comply with applicable provisions of the Bankruptcy Code, including “disclosure and solicitation requirements under sections 1125 and 1126 of the Bankruptcy Code”).
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2. The Debtors Complied with Section 1126 of the Bankruptcy Code.
91. Section 1126 of the Bankruptcy Code specifies the requirements for acceptance of
a plan of reorganization. Specifically, under section 1126 of the Bankruptcy Code, only holders
of allowed claims and allowed interests in impaired classes of claims or interests that will receive or retain property under a plan on account of such claims or interests may vote to accept or reject such plan. Section 1126 of the Bankruptcy Code provides, in pertinent part, that:
(a) The holder of a claim or interest allowed under section 502 of [the Bankruptcy Code] may accept or reject a plan. . . .
(f) Notwithstanding any other provision of this section, a class that is not impaired under a plan, and each holder of a claim or interest of such class, are conclusively presumed to have accepted the plan, and solicitation of acceptances with respect to such class from the holders of claims or interests of such class is not required.86
92. As set forth in Part I of this memorandum, in accordance with section 1125 of the
Bankruptcy Code, the Debtors solicited acceptances or rejections of the Plan from the holders of
Allowed Claims in Classes 7 and 8—the only Impaired Classes entitled to vote under the Plan.
The Debtors did not solicit votes from Holders of Claims and Interests in Classes 1, 2, 3, 4, 9, or
11 because Holders of Claims and Interests in these Classes are Unimpaired and, pursuant to
section 1126(f) of the Bankruptcy Code, are conclusively presumed to have accepted the Plan.
Holders of Intercompany Claims in Class 10 either are Unimpaired and conclusively presumed to
have accepted the Plan or Impaired and conclusively presumed to have rejected the Plan, and,
therefore, are not entitled to vote to accept or reject the Plan. Holders of Interests in Class 12
(Interests in PES Holdings), the Deemed Rejecting Class, are Impaired under the Plan, are entitled
86 11 U.S.C. § 1126(a), (f).
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to no recovery thereunder, and are therefore deemed to have rejected the Plan. Nevertheless, the
Debtors served Holders in the Deemed Rejecting Class with the Plan and Disclosure Statement.87
93. Sections 1126(c) and 1126(d) of the Bankruptcy Code specify the requirements for
acceptance of a plan by classes of claims and interests:
(a) A class of claims has accepted a plan if such plan has been accepted by creditors, other than any entity designated under subsection (e) of this section, that hold at least two-thirds in amount and more than one-half in number of the allowed claims of such class held by creditors, other than any entity designated under subsection (e) of this section, that have accepted or rejected such plan.
(b) A class of interests has accepted a plan if such plan has been accepted by holders of such interests, other than any entity designated under subsection (e) or this section, that hold at least two-thirds in amount of the allowed interests of such class held by holders of such interests, other than any entity designated under subsection (e) of this section, that have accepted or rejected such plan.
94. As described above, the Classes of Claims voting to accept the Plan did so in
sufficient number and by sufficient amounts as required by the Bankruptcy Code.88 Based upon the foregoing, the Debtors submit that they satisfy the requirements of section 1129(a)(2) of the
Bankruptcy Code.
C. The Plan Was Proposed in Good Faith (§ 1129(a)(3)).
95. Section 1129(a)(3) of the Bankruptcy Code requires that a chapter 11 plan be
“proposed in good faith and not by any means forbidden by law.” Where a plan satisfies the
purposes of the Bankruptcy Code and has a good chance of succeeding, the good faith requirement
87 See Plan Art. III.A.
88 See Final Voting Reports Ex. C.
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of section 1129(a)(3) of the Bankruptcy Code is satisfied.89 To determine whether a plan seeks
relief consistent with the Bankruptcy Code, courts consider the totality of the circumstances
surrounding the development of the plan.90
96. The Plan satisfies section 1129(a)(3) of the Bankruptcy Code. The Plan satisfies the purposes of the Bankruptcy Code and has a high chance of success; thus, the good faith requirement of section 1129(a)(3) of the Bankruptcy Code is met. The fundamental purpose of chapter 11 is to enable a distressed business to reorganize its affairs to prevent job losses and the adverse economic effects associated with disposing of assets at liquidation value.91 The Plan promotes the rehabilitative objectives and purposes of the Bankruptcy Code by allowing the
Debtors to obtain relief from debt maturities, obtain access to additional capital, and position their business for long-term success.92 The Plan’s unanimous acceptance by Classes 7 and 8—the only
Impaired Classes entitled to vote to accept or reject the Plan—evidences this view. Finally, as set
forth herein, the Plan complies with bankruptcy and applicable nonbankruptcy law.
D. The Plan Provides that the Debtors’ Payment of Professional Fees and Expenses Are Subject to Court Approval (§ 1129(a)(4)).
97. Section 1129(a)(4) of the Bankruptcy Code requires that certain fees and expenses
paid by the plan proponent, by the debtor, or by a person receiving distributions of property under
89 E.g., PWS Holding Corp., 228 F.3d at 242 (quoting In re Abbotts Dairies of Pa., Inc., 788 F.2d 143, 150 n.5 (3d Cir. 1986)); Fin. Sec. Assurance Inc. v. T-H New Orleans Ltd. P’ship (In re T-H New Orleans Ltd. P’ship), 116 F.3d 790, 802 (5th Cir. 1997) (quoting Brite v. Sun Country Dev., Inc. (In re Sun Country Dev., Inc.), 764 F.2d 406, 408 (5th Cir. 1985)); In re Century Glove, Inc., Civ. A. Nos. 90-400 and 90-401, 1993 WL 239489, at *4 (D. Del. Feb. 10, 1993); In re NII Holdings, Inc., 288 B.R. 356, 362 (Bankr. D. Del. 2002).
90 E.g., T-H New Orleans, 116 F.3d at 802 (quoting In re Sun Country Dev., Inc., 764 F.2d at 408); In re W.R. Grace & Co., 475 B.R. 34, 87 (D. Del. 2012); Century Glove, 1993 WL 239489, at *4.
91 NLRB v. Bildisco & Bildisco, 465 U.S. 513, 528 (1984); B.D. Int’l Disc. Corp. v. Chase Manhattan Bank, N.A. (In re B.D. Int’l Disc. Corp.), 701 F.2d 1071, 1075 n.8 (2d Cir. 1983) (stating that “the two major purposes of bankruptcy [are] achieving equality among creditors and giving the debtor a fresh start”).
92 See Gatta Declaration ¶ 22.
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the plan, be subject to approval by the Court as reasonable. Courts have construed this section to
require that all payments of professional fees paid out of estate assets be subject to review and
approval by the Court as to their reasonableness.93
98. The Plan satisfies section 1129(a)(4) of the Bankruptcy Code.94 The Debtors
submit that payment of Professional Fee Claims is the only category of payments that fall within
the ambit of section 1129(a)(4) of the Bankruptcy Code in these Chapter 11 Cases, and the Debtors
may not pay Professional Fee Claims absent Court approval.95 Further, all such Professional Fee
Claims and corresponding payments are subject to prior Court approval and the reasonableness requirements under sections 328 and 330 of the Bankruptcy Code.96 Article II.B.4 of the Plan, moreover, provides that Professionals shall file all final requests for payment of Professional Fee
Claims no later than 45 days after the Effective Date, thereby providing an adequate period of time for interested parties’ to review such Professional Fee Claims.
E. The Debtors Disclosed All Necessary Information Regarding Directors, Officers, and Insiders (§ 1129(a)(5)).
99. Section 1129(a)(5)(A)(i) of the Bankruptcy Code requires that the proponent of a plan disclose the identity and affiliations of the proposed officers and directors of the reorganized debtors. Section 1129(a)(5)(B) of the Bankruptcy Code requires a plan proponent to disclose the
93 Lisanti Foods, 329 B.R. at 503 (“Pursuant to § 1129(a)(4), a [p]lan should not be confirmed unless fees and expenses related to the [p]lan have been approved, or are subject to the approval, of the Bankruptcy Court”), aff’d, 241 F. App’x 1 (3d Cir. 2007); In re Future Energy Corp., 83 B.R. 470, 488 (Bankr. S.D. Ohio 1988); In re Chapel Gate Apartments, Ltd., 64 B.R. 569, 573 (Bankr. N.D. Tex. 1986) (noting that before a plan may be confirmed, “there must be a provision for review by the Court of any professional compensation”).
94 See Gatta Declaration ¶ 23.
95 See, e.g., Order Authorizing the Retention and Employment of Kirkland & Ellis LLP and Kirkland & Ellis International LLP as Attorneys for the Debtors and Debtors in Possession Effective Nunc Pro Tunc to the Petition Date [Docket No. 210].
96 11 U.S.C. §§ 328(a), 330(a)(1)(A).
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identity of an “insider” (as defined by section 101(31) of the Bankruptcy Code) to be employed or
retained by the reorganized debtor and the nature of any compensation for such insider.
Additionally, the Bankruptcy Code provides that the appointment or continuance of such officers
and directors be consistent with the interests of creditors and equity security holders and with
public policy.97 Section 1129(a)(5)(A)(ii) directs the Court to ensure that the post-confirmation
governance of the Reorganized Debtors is in “good hands,” which courts have interpreted to mean:
(a) experience in the reorganized debtors’ business and industry;98 (b) experience in financial and
management matters;99 (c) that the debtors and creditors believe control of the entity by the
proposed individuals will be beneficial;100 and (d) does not “perpetuate[] incompetence, lack of
discretion, inexperience, or affiliations with groups inimical to the best interests of the debtor.”101
The “public policy requirement would enable [the court] to disapprove plans in which demonstrated incompetence or malevolence is a hallmark of the proposed management.”102
100. The Debtors satisfied section 1129(a)(5) of the Bankruptcy Code.103 First, in
accordance with Article IV.N of the Plan, on the Effective Date, the New Board shall consist of
97 11 U.S.C. § 1129(a)(5)(A)(ii).
98 See In re Rusty Jones, Inc., 110 B.R. 362, 372, 375 (Bankr. N.D. Ill. 1990) (stating that 1129(a)(5) not satisfied where management had no experience in the debtor’s line of business); In re Toy & Sports Warehouse, Inc., 37 B.R. 141, 149–50 (Bankr. S.D.N.Y. 1984) (continuation of debtors’ president and founder, who had many years of experience in the debtors’ businesses, satisfied section 1129(a)(5)); Drexel Burnham Lambert Grp., Inc., 138 B.R. at 760 (citing Toy & Sports, 37 B.R. at 149–50).
99 In re Stratford Assocs. Ltd. P’ship, 145 B.R. 689, 696 (Bankr. D. Kan. 1992); In re Sherwood Square Assoc., 107 B.R. 872, 878 (Bankr. D. Md. 1989).
100 In re Apex Oil Co., 118 B.R. 683, 704-05 (Bankr. E.D. Mo. 1990).
101 In re Beyond.com Corp., 289 B.R. 138, 145 (Bankr. N.D. Cal. 2003).
102 7 Collier on Bankruptcy ¶ 1129.02[5][b] (16th ed. 2012).
103 See Gatta Declaration ¶ 24.
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(a) two persons to be selected by CSAM, which shall be U.S. citizens; (b) two persons to be
selected by Halcyon; (c) one person to be selected by the Parent; (d) one person to be selected by
a majority-in-interest of the Consenting Term Loan B Creditors; and (e) the Chief Executive
Officer of PES Inc. The initial officers of the Reorganized Debtors shall be reasonably acceptable
to the Required Consenting Term Loan B Creditors as required by the Restructuring Support
Agreement.104
101. Second, the Debtors will, to the extent reasonably practicable, disclose in advance
of the Confirmation Hearing the identity and affiliations of any Person proposed to serve on the
New Board.105 Third, the Reorganized Debtors’ appointment or continuance of officers, directors, and managers is “consistent with the interests of creditors and equity security holders and with public policy.”106 The proposed directors, managers, and officers of the Reorganized Debtors have
significant knowledge and solid business and industry experience, are competent, and will give the
Reorganized Debtors both continuity and fresh insights into running the business. The Debtors
and their creditors believe control of the Reorganized Debtors by the proposed individuals will be beneficial, and no party in interest has objected to the Plan on these grounds. Therefore, the requirements under section 1129(a)(5)(A)(ii) of the Bankruptcy Code are satisfied. Finally, the
Debtors satisfied section 1129(a)(5)(B) of the Bankruptcy Code because the Debtors will publicly disclose the identity of all insiders that the Reorganized Debtors will employ or retain and the nature of any compensation for such insiders in compliance with the Bankruptcy Code.
104 See Plan § IV.N.
105 See also Armstrong World Indus., 348 B.R. at 165 (finding disclosure of identities and nature of compensation of persons to serve as directors and officers on the effective date sufficient for section 1129(a)(5) of the Bankruptcy Code).
106 11 U.S.C. § 1129(a)(5)(A)(ii).
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F. The Plan Does Not Require Governmental Regulatory Approval (§ 1129(a)(6)).
102. Section 1129(a)(6) of the Bankruptcy Code permits confirmation only if any
regulatory commission that has or will have jurisdiction over a debtor after confirmation has
approved any rate change provided for in the plan. Section 1129(a)(6) of the Bankruptcy Code is
inapplicable to these Chapter 11 Cases.
G. The Plan Is in the Best Interests of All the Debtors’ Creditors (§ 1129(a)(7)).
103. Section 1129(a)(7) of the Bankruptcy Code, commonly known as the “best interests
test,” provides, in relevant part:
With respect to each impaired class of claims or interests—
(A) each holder of a claim or interest of such class—
(i) has accepted the plan; or
(ii) will receive or retain under the plan on account of such claim or interest property of a value, as of the effective date of the plan, that is not less than the amount that such holder would so receive or retain if the debtor were liquidated under chapter 7 of [the Bankruptcy Code] on such date . . . .
104. The best interests test applies to individual dissenting holders of impaired claims
and interests rather than classes, and is generally satisfied through a comparison of the estimated
recoveries for a debtor’s stakeholders in a hypothetical chapter 7 liquidation of that debtor’s estate
against the estimated recoveries under that debtor’s plan of reorganization.107
As section 1129(a)(7) of the Bankruptcy Code makes clear, the best interests test applies only to
107 Bank of Am. Nat. Trust & Sav. Ass’n v. 203 N. LaSalle St. P’ship, 526 U.S. 434, 441 n.13 (1999) (“The ‘best interests’ test applies to individual creditors holding impaired claims, even if the class as a whole votes to accept the plan.”); Century Glove, 1993 WL 239489, at *7; In re Adelphia Commc’ns. Corp., 368 B.R. 140, 251 (Bankr. S.D.N.Y. 2007) (stating that section 1129(a)(7) is satisfied when an impaired holder of claims would receive “no less than such holder would receive in a hypothetical chapter 7 liquidation”).
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holders of non-accepting impaired claims or interests. Classes 7 and 8 have voted unanimously to
accept the Plan. The Deemed Rejecting Class did not vote on the Plan although the sole member
thereof, the Parent, is a signatory to the Restructuring Support Agreement pursuant to which it
committed to support the Plan. Accordingly, to satisfy the best interests test, the Debtors must
demonstrate that each Holder of an Interest in the Deemed Rejecting Class will receive at least as
much under the Plan as that Holder would receive in a chapter 7 liquidation.108
105. The Plan satisfies section 1129(a)(7) of the Bankruptcy Code and the best interests
test. As set forth in the Disclosure Statement,109 the Gatta Declaration,110 and the Sciametta
Declaration,111 the Debtors, with the assistance of A&M, prepared an unaudited liquidation analysis, which is attached to the Disclosure Statement as Exhibit C (the “Liquidation
Analysis”).112 The Liquidation Analysis compares the projected recoveries that would result
from the liquidation of the Debtors in a hypothetical case under chapter 7 of the Bankruptcy Code
with the estimated distributions to Holders of Allowed Claims and Interests under the Plan. The
Liquidation Analysis is based on the value of the Debtors’ assets and liabilities as of a certain date and incorporates various estimates and assumptions, including a hypothetical conversion to a
108 See In re Lason, Inc., 300 B.R. 227, 232 (Bankr. D. Del. 2003) (“Section 1129(a)(7)(A) requires a determination whether ‘a prompt chapter 7 liquidation would provide a better return to particular creditors or interest holders than a chapter 11 reorganization.’”) (internal citations omitted).
109 See Disclosure Statement Ex. D.
110 See Gatta Declaration ¶ 26.
111 See Sciametta Declaration ¶ 7.
112 See Disclosure Statement, Ex. C.
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chapter 7 liquidation as of a certain date. Further, the Liquidation Analysis is subject to potentially
material changes, including with respect to economic and business conditions and legal rulings.113
106. Based on the unaudited Liquidation Analysis, and the assumptions included therein, the value of any distributions if the chapter 11 cases were converted to cases under chapter 7 of the Bankruptcy Code would be no greater than the value of distributions under the Plan.114 As a result, Holders of Claims and Interests in all Impaired Classes will recover at least as much as a result of Confirmation of the Plan as they would recover through a hypothetical chapter 7 liquidation.115 Based on the recoveries set forth above, the Plan satisfies the best interests test as
required by the Bankruptcy Code.
H. The Plan Is Confirmable Notwithstanding the Requirements of Section 1129(a)(8) of the Bankruptcy Code.
107. Section 1129(a)(8) of the Bankruptcy Code requires that each class of claims or
interests must either accept a plan or be unimpaired under a plan. Holders of Interests in the
Deemed Rejecting Class are deemed to have rejected the Plan and, thus, were not entitled to vote.
Consequently, while the Plan does not satisfy section 1129(a)(8) of the Bankruptcy Code with
respect to the Deemed Rejecting Class, the Plan is confirmable nonetheless because it satisfies
sections 1129(a)(10) and 1129(b) of the Bankruptcy Code, as discussed below.
I. The Plan Provides for Payment in Full of All Allowed Priority Claims (§ 1129(a)(9)).
108. Section 1129(a)(9) of the Bankruptcy Code requires that certain priority claims be paid in full on the effective date of a plan and that the holders of certain other priority claims
113 See Sciametta Declaration ¶ 7.
114 See id. ¶ 8.
115 See id.
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receive deferred cash payments. In particular, pursuant to section 1129(a)(9)(A) of the Bankruptcy
Code, holders of claims of a kind specified in section 507(a)(2) of the Bankruptcy Code—
administrative claims allowed under section 503(b) of the Bankruptcy Code—must receive on the
effective date cash equal to the allowed amount of such claims. Section 1129(a)(9)(B) of the
Bankruptcy Code requires that each holder of a claim of a kind specified in section 507(a)(1) or
(4) through (7) of the Bankruptcy Code—generally wage, employee benefit, and deposit claims entitled to priority—must receive deferred cash payments of a value, as of the effective date of the plan, equal to the allowed amount of such claim (if such class has accepted the plan), or cash of a
value equal to the allowed amount of such claim on the effective date of the plan (if such class has
not accepted the plan). Finally, section 1129(a)(9)(C) provides that the holder of a claim of a kind
specified in section 507(a)(8) of the Bankruptcy Code—i.e., priority tax claims—must receive cash payments over a period not to exceed five years from the petition date, the present value of which equals the allowed amount of the claim.
109. The Plan satisfies section 1129(a)(9) of the Bankruptcy Code. First, Article II.A of the Plan satisfies section 1129(a)(9)(A) of the Bankruptcy Code because it provides that each holder of an Allowed Administrative Claim will receive Cash equal to the amount of such Allowed
Administrative Claim. Second, the Plan satisfies section 1129(a)(9)(B) of the Bankruptcy Code because no holders of the types of Claims specified by 1129(a)(9)(B) are Impaired under the Plan and such Claims have been paid in the ordinary course. Third, Article II.D of the Plan satisfies section 1129(a)(9)(C) of the Bankruptcy Code because it provides that holders of Allowed Priority
Tax Claims shall be treated in accordance with the terms of Section 1129(a)(9)(C) of the
Bankruptcy Code. The Plan thus satisfies each of the requirements of section 1129(a)(9) of the
Bankruptcy Code.
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J. At Least One Class of Impaired, Non-Insider Claims Accepted the Plan (§ 1129(a)(10)).
110. Section 1129(a)(10) of the Bankruptcy Code provides that, to the extent there is an
impaired class of claims, at least one impaired class of claims must accept the plan,
“without including any acceptance of the plan by any insider,” as an alternative to the requirement
under section 1129(a)(8) of the Bankruptcy Code that each class of claims or interests must either
accept the plan or be unimpaired under the plan.
111. Classes 7 and 8, which are Impaired, voted to accept the Plan independent of any
insiders’ votes. Thus, the Plan satisfies the requirements of section 1129(a)(10) of the Bankruptcy
Code.
K. The Plan Is Feasible (§ 1129(a)(11)).
112. Section 1129(a)(11) of the Bankruptcy Code requires that the Court find that a plan
is feasible as a condition precedent to confirmation. Specifically, the Court must determine that:
Confirmation of the plan is not likely to be followed by the liquidation, or the need for further financial reorganization, of the debtor or any successor to the debtor under the plan, unless such liquidation or reorganization is proposed in the plan.116
To demonstrate that a plan is feasible, it is not necessary for a debtor to guarantee success.117
Rather, a debtor must provide only a reasonable assurance of success.118 There is a relatively low
116 11 U.S.C. § 1129(a)(11).
117 Kane v. Johns-Manville Corp., 843 F.2d 636, 649 (2d Cir. 1988) (“[T]he feasibility standard is whether the plan offers a reasonable assurance of success. Success need not be guaranteed.”); In re Flintkote Co., 486 B.R. 99, 139 (Bankr. D. Del. 2012); W.R. Grace & Co., 475 B.R. at 115; In re U.S. Truck Co., 47 B.R. 932, 944 (E.D. Mich. 1985) (“‘Feasibility’ does not, nor can it, require the certainty that a reorganized company will succeed.”), aff’d, 800 F.2d 581 (6th Cir. 1986).
118 Kane, 843 F.2d at 649; Flintkote Co., 486 B.R. at 139; W.R. Grace & Co., 475 B.R. at 115; see also Pizza of Haw., Inc. v. Shakey’s, Inc. (In re Pizza of Haw., Inc.), 761 F.2d 1374, 1382 (9th Cir. 1985) (citations omitted) (holding that “[t]he purpose of section 1129(a)(11) is to prevent confirmation of visionary schemes which promise creditors and equity security holders more under a proposed plan than the debtor can possibly attain after
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threshold of proof necessary to satisfy the feasibility requirement.119 As demonstrated below, the
Plan is feasible within the meaning of section 1129(a)(11) of the Bankruptcy Code.
113. In determining standards of feasibility, courts have identified the following
probative factors:
a. the adequacy of the capital structure;
b. the earning power of the business;
c. the economic conditions;
d. the ability of management;
e. the probability of the continuation of the same management; and
f. any other related matter which determines the prospects of a sufficiently successful operation to enable performance of the provisions of the plan.120
114. The Plan is feasible. As set forth in the Gatta Declaration,121 the Debtors and their advisors have thoroughly analyzed their ability post-confirmation to meet their obligations under the Plan and continue as a going concern without the need for further financial restructuring. The
Plan will provide the Debtors with a reasonable assurance of commercial viability upon
confirmation”); accord In re Capmark Fin. Grp. Inc., No. 09-13684 (CSS), 2011 WL 6013718, at *61 (Bankr. D. Del. Oct. 5, 2011) (same).
119 E.g., In re Prussia Assocs., 322 B.R. 572, 584 (Bankr. E.D. Pa. 2005) (quoting approvingly that “[t]he Code does not require the debtor to prove that success is inevitable, and a relatively low threshold of proof will satisfy § 1129(a)(11) so long as adequate evidence supports a finding of feasibility”) (internal citations omitted); In re Sea Garden Motel & Apartments, 195 B.R. 294, 305 (D. N.J. 1996); In re Tribune Co., 464 B.R. 126, 185 (Bankr. D. Del. 2011), on reconsideration, 464 B.R. 208 (Bankr. D. Del. 2011).
120 E.g., In re Aleris Int’l, Inc., No. 09-10478 (BLS), 2010 WL 3492664 at *28 (Bankr. D. Del. May 13, 2010).
121 See Gatta Declaration ¶ 32.
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emergence, and will not be followed by liquidation or the need for further financial reorganization of the Debtor or any successor to the Debtor.122
115. Upon the Effective Date, the Debtors expect to have sufficient funds to make all payments contemplated by the Plan. The Debtors, along with their professionals, have closely monitored their cash situation to ensure that they will be able to make all Plan payments required on the Effective Date as well as in the months to come.123 In fact, pursuant to the Court’s order
[Docket No. 79], the Debtors paid substantially all of their existing prepetition General Unsecured
Claims in the ordinary course during the pendency of their Chapter 11 Cases without any cash flow issues. For the reasons set forth above, the Plan satisfies section 1129(a)(11) of the
Bankruptcy Code.
L. All Statutory Fees Have Been or Will Be Paid (§ 1129(a)(12)).
116. Section 1129(a)(12) of the Bankruptcy Code requires the payment of “[a]ll fees payable under section 1930 of title 28 [of the United States Code], as determined by the court at the hearing on confirmation of the plan.” Section 507(a)(2) of the Bankruptcy Code provides that
“any fees and charges assessed against the estate under [section 1930 of] chapter 123 of title 28” are afforded priority as administrative expenses.
117. The Plan satisfies section 1129(a)(12) of the Bankruptcy Code because Article II.E of the Plan provides that all such fees and charges, to the extent not previously paid, will be paid for each quarter (including any fraction thereof) until these Chapter 11 Cases are converted, dismissed, or closed, whichever occurs first.
122 Id.
123 Id.
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M. All Retiree Benefits Will Continue Post-Confirmation (§ 1129(a)(13)).
118. Section 1129(a)(13) of the Bankruptcy Code requires that all retiree benefits continue post-confirmation at any levels established in accordance with section 1114 of the
Bankruptcy Code.
119. The Plan satisfies the requirements of section 1129(a)(13) of the Bankruptcy Code because Article IV.O of the Plan provides that from and after the Effective Date, all retiree benefits, as defined in section 1114 of the Bankruptcy Code, will continue in accordance with applicable law.
N. Sections 1129(a)(14) through 1129(a)(16) Do Not Apply to the Plan.
120. Section 1129(a)(14) of the Bankruptcy Code relates to the payment of domestic support obligations. Since the Debtors are not subject to any domestic support obligations, the requirements of section 1129(a)(14) of the Bankruptcy Code do not apply.
Likewise, section 1129(a)(15) of the Bankruptcy Code applies only in cases in which the debtor is an “individual” as defined in the Bankruptcy Code. Because none of the Debtors is an
“individual,” the requirements of section 1129(a)(15) of the Bankruptcy Code do not apply.
Finally, each of the Debtors are a moneyed, business, or commercial corporation and, therefore, section 1129(a)(16) of the Bankruptcy Code, which provides that property transfers by a corporation or trust that is not a moneyed, business, or commercial corporation or trust be made in accordance with any applicable provisions of nonbankruptcy law, is not applicable to these
Chapter 11 Cases.
O. The Plan Satisfies the “Cram Down” Requirements of Section 1129(b) of the Bankruptcy Code.
121. Section 1129(b)(1) of the Bankruptcy Code provides that, if all applicable requirements of section 1129(a) of the Bankruptcy Code are met other than section 1129(a)(8) of
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the Bankruptcy Code, a plan may be confirmed so long as the requirements set forth in
section 1129(b) of the Bankruptcy Code are satisfied. To confirm a plan that has not been accepted
by all impaired classes (thereby failing to satisfy section 1129(a)(8) of the Bankruptcy Code), the
plan proponent must show that the plan does not “discriminate unfairly” and is “fair and equitable”
with respect to the non-accepting impaired classes.124
122. The Plan satisfies section 1129(b) of the Bankruptcy Code. Notwithstanding the
fact that the Deemed Rejecting Class is deemed to have rejected the Plan, the Plan is confirmable.
Class 12 (Interests in PES Holdings) is comprised of all Interests in PES Holdings. There are no
Claims or Interests in PES Holdings that are junior to the Interests in PES Holdings that are
receiving any recovery under the Plan, nor is any Holder of a Claim or Interest receiving more
than payment in full of its Claim or Interest. Thus, the Plan satisfies the absolute priority rule with
respect to Class 12.
123. In addition, Class 12 is not similarly situated legally or otherwise to any other
Class. Further, all Holders of Class 12 Interests are treated in the same manner under the Plan.
Thus, the Plan does not discriminate unfairly in contravention of section 1129(b)(1) of the
Bankruptcy Code and may be confirmed notwithstanding its deemed rejection by Class 12.
1. The Plan Is Fair and Equitable (§ 1129(b)(2)(B)(ii)).
124. A plan is “fair and equitable” with respect to an impaired class of claims or interests that rejects a plan (or is deemed to reject a plan) if it follows the “absolute priority” rule.125 This
124 John Hancock, 987 F.2d at 157 n.5; In re Ambanc La Mesa L.P., 115 F.3d 650, 653 (9th Cir. 1997) (“the [p]lan satisfies the ‘cramdown’ alternative . . . found in 11 U.S.C. § 1129(b), which requires that the [p]lan ‘does not discriminate unfairly’ against and ‘is fair and equitable’ towards each impaired class that has not accepted the [p]lan.”).
125 Bank of Am., 526 U.S. at 441–42 (“As to a dissenting class of impaired unsecured creditors, such a plan may be found to be ‘fair and equitable’ only if the allowed value of the claim is to be paid in full, § 1129(b)(2)(B)(i), or, in the alternative, if ‘the holder of any claim or interest that is junior to the claims of such [impaired unsecured]
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requires that an impaired rejecting class of claims or interests either be paid in full or that a class
junior to the impaired accepting class not receive any distribution under a plan on account of its
junior claim or interest.126 Under the Plan, no holder of a Claim or Interest junior to an Impaired
Class of Claims or Interests will receive any recovery under the Plan on account of such Claim or
Interest, nor is any Holder of a Claim or Interest receiving more than payment in full of its Claim
or Interest. Thus, the Plan satisfies the absolute priority rule with respect to Class 12.
125. As part of the Disclosure Statement, PJT Partners LP (“PJT”) prepared an estimate
of the total enterprise value (“TEV”) and the equity value (the “Equity Value” and, together with
the TEV, the “Valuation Analysis”) of the Reorganized Debtors. The Valuation Analysis is set
forth in Exhibit B of the Disclosure Statement.127
126. In preparing its estimate of the Reorganized Debtors’ TEV, PJT considered, among
other things, a discounted cash flow of the Debtors’ financial projections and select publicly traded
comparable company information.128 Due to a lack of relevant and directly comparable publicly available precedent transactions, PJT considered, but ultimately determined not to rely upon, the precedent transactions methodology. The underlying information PJT reviewed in preparing its estimate was either publicly available or was provided by the Debtors to the Restructuring Support
Parties for purposes of assisting with the Plan negotiations.129
class will not receive or retain under the plan on account of such junior claim or interest any property,’ § 1129(b)(2)(B)(ii). That latter condition is the core of what is known as the ‘absolute priority rule.’”).
126 Id.
127 See Laurinaitis Declaration ¶ 7.
128 See id.
129 See Laurinaitis Declaration ¶ 7.
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127. Based upon the above methodologies, for the purposes of the Disclosure Statement,
PJT estimated the TEV of the Reorganized Debtors to be approximately $725 million to approximately $975 million. Depending on whether the Debtors implemented their restructuring through a chapter 11 plan or, alternatively, a section 363 sale of the Debtors’ assets to provide relief from historical Renewable Fuel Standards (“RFS”) obligations, the Equity Value of the
Reorganized Debtors immediately after the Effective Date was estimated by PJT to range from approximately $100 million to approximately $700 million.
128. Based upon the current commodity price outlook, trading performance of peers, and the Debtors’ recent financial performance since the date that the Disclosure Statement was filed on January 22, 2018, modifications to PJT’s estimate of the Reorganized Debtors’ TEV set forth in the Disclosure Statement are not necessary as of the date of this Declaration130.
129. Since the date that the Disclosure Statement was filed on January 22, 2018, and as described in the Notice of Lodging of Proposed Settlement Agreement filed by the United States, on behalf of the EPA [Docket. No 244], the Debtors have reached a settlement with the EPA alleviating the need for the Debtors to purchase additional RINs to satisfy their RVOs prior to emergence from Chapter 11. As such, total excess cash and net debt of the Reorganized Debtors immediately after consummation of the Plan are forecasted by the Company to be approximately
$300 million and approximately $450 million, respectively.131 Therefore, the Reorganized
Debtors’ Equity Value at emergence from chapter 11 is estimated by PJT to now range from approximately $275 million to approximately $525 million, which is within the Equity Value range set forth in the Disclosure Statement.
130 See id. ¶ 10.
131 See Laurinaitis Declaration ¶ 11.
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130. Although Intercompany Interests may be reinstated under the Plan and, therefore, are Unimpaired, such treatment is for the purposes of preserving the Debtors’ corporate structure and will have no economic substance.132 Accordingly, the Plan is “fair and equitable” with respect to all Impaired Classes of Claims and Interests and satisfies section 1129(b) of the Bankruptcy
Code.
2. The Plan Does Not Unfairly Discriminate with Respect to the Impaired Classes that Have Not Voted to Accept the Plan (§ 1129(b)(1)).
131. Although the Bankruptcy Code does not provide a standard for determining when
“unfair discrimination” exists, courts typically examine the facts and circumstances of the particular case to make the determination.133 In general, courts have held that a plan unfairly discriminates in violation of section 1129(b) of the Bankruptcy Code only if it provides materially different treatment for creditors and interest holders with similar legal rights without compelling justifications for doing so.134 A threshold inquiry to assessing whether a proposed plan of
132 See In re ION Media Networks, Inc., No. 09-13125 (JMP) (Bankr. S.D.N.Y. Nov. 24, 2009) (“This technical preservation of equity is a means to preserve the corporate structure that does not have any economic substance and that does not enable any junior creditor or interest holder to retain or recover any value under the Plan. The Plan’s retention of intercompany equity interests for holding company purposes constitutes a device utilized to allow the Debtors to maintain their organizational structure and avoid the unnecessary cost of having to reconstitute that structure.”).
133 In re 203 N. LaSalle St. Ltd. P’ship., 190 B.R. 567, 585 (Bankr. N.D. Ill. 1995), rev’d on other grounds, Bank of Am., 526 U.S. 434 (1999) (noting “the lack of any clear standard for determining the fairness of a discrimination in the treatment of classes under a Chapter 11 plan” and that “the limits of fairness in this context have not been established.”); In re Aztec Co., 107 B.R. 585, 589–91 (Bankr. M.D. Tenn. 1989) (“Courts interpreting language elsewhere in the Code, similar in words and function to § 1129(b)(1), have recognized the need to consider the facts and circumstances of each case to give meaning to the proscription against unfair discrimination.”); In re Freymiller Trucking, Inc., 190 B.R. 913, 916 (Bankr. W.D. Okla. 1996) (holding that a determination of unfair discrimination requires a court to “consider all aspects of the case and the totality of all the circumstances”).
134 See Coram, 315 B.R. at 349 (citing cases and noting that separate classification and treatment of claims is acceptable if the separate classification is justified because such claims are essential to a reorganized debtor’s ongoing business); In re Lernout & Hauspie Speech Prods., N.V., 301 B.R. 651, 661 (Bankr. D. Del. 2003) (permitting different treatment of two classes of similarly situated creditors upon a determination that the debtors showed a legitimate basis for such discrimination); Ambanc La Mesa, 115 F.3d at 656–57 (same); Aztec Co., 107 B.R. at 589–91 (stating that plan which preserved assets for insiders at the expense of other creditors unfairly discriminated); In re Johns-Manville Corp., 68 B.R. 618, 636 (Bankr. S.D.N.Y. 1986) (stating that interests of
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reorganization unfairly discriminates against a dissenting class is whether the dissenting class is
equally situated to a class allegedly receiving more favorable treatment.135
132. Here, the Plan’s treatment of the non-accepting Impaired Class (i.e., the Deemed
Rejecting Class) is proper because all similarly situated Holders of Claims and Interests will receive substantially similar treatment and the Plan’s classification scheme rests on a legally acceptable rationale. Claims in the Deemed Rejecting Class are not similarly situated to any other
Classes, given their distinctly different legal character from all other Claims and Interests. The
Plan’s treatment of the Deemed Rejecting Class is proper because no similarly situated class will receive more favorable treatment. Furthermore, where the Plan provides differing treatment for certain Classes of Claims or Interests, the Debtors have a rational basis for doing so.
133. For the reasons set forth above, the Plan does not discriminate unfairly in contravention of section 1129(b)(1) of the Bankruptcy Code and the Plan may be confirmed notwithstanding the deemed rejection by the Deemed Rejecting Class.
P. The Debtors Complied with Section 1129(d) of the Bankruptcy Code.
134. The purpose of the Plan is not to avoid taxes or the application of section 5 of the
Securities Act of 1933. Moreover, no governmental unit or any other party has requested that the
Court decline to confirm the Plan on such grounds. Accordingly, the Plan satisfies the requirements of section 1129(d) of the Bankruptcy Code.
objecting class were not similar or comparable to those of any other class and thus there was no unfair discrimination).
135 See Aleris Int’l, Inc., 2010 WL 3492664, at *31 (citing Armstrong World Indus., 348 B.R. at 121).
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Q. Modifications to the Plan.
135. Section 1127(a) of the Bankruptcy Code provides that a plan proponent may
modify its plan at any time before confirmation as long as such modified plan meets the
requirements of sections 1122 and 1123 of the Bankruptcy Code. Further, when the proponent of a plan files the plan with modifications with the court, the plan as modified becomes the plan. Bankruptcy Rule 3019 provides that modifications after a plan has been accepted will be deemed accepted by all creditors and equity security holders who have previously accepted the plan if the court finds that the proposed modifications do not adversely change the treatment of the claim of any creditor or the interest of any equity security holder. Interpreting Bankruptcy
Rule 3019, courts consistently have held that a proposed modification to a previously accepted plan will be deemed accepted where the proposed modification is not material or does not adversely affect the way creditors and stakeholders are treated.136
136. As previously discussed with the Court, the Debtors previously revised the Plan
with certain technical clarifications designed to clarify the rights of certain stakeholders as well as
account for the RVO Settlement Agreement, and then later made certain modifications to resolve
formal and informal comments to the Plan by parties in interest (collectively,
the “Modifications”).137 The Debtors filed a first amended Plan on March 16, 2018 [Docket
No. 257] [and filed a second amended Plan substantially contemporaneously herewith.]
The Modifications are immaterial and thus comply with section 1127 of the Bankruptcy Code and
136 See, e.g., In re Glob. Safety Textiles Holdings LLC, No. 09-12234 (KG), 2009 WL 6825278, at *4 (Bankr. D. Del. Nov. 30, 2009) (finding that nonmaterial modifications to plan do not require additional disclosure or resolicitation); In re Burns & Roe Enters., Inc., No. 08-4191 (GEB), 2009 WL 438694, at *23 (D.N.J. Feb. 23, 2009) (confirming plan as modified without additional solicitation or disclosure because modifications did “not adversely affect creditors”).
137 See [Docket Nos. 9, 257].
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Bankruptcy Rule 3019. No party has objected to the Plan on account of the Modifications.
Accordingly, the Debtors submit that no additional solicitation or disclosure is required on account of the Modifications, and that such Modifications should be deemed accepted by all creditors that previously accepted the Plan.
R. Good Cause Exists to Waive the Stay of the Confirmation Order.
137. Bankruptcy Rule 3020(e) provides that “[a]n order confirming a plan is stayed until the expiration of 14 days after the entry of the order, unless the Court orders otherwise.”
Bankruptcy Rules 6004(h) and 6006(d) provide similar stays to orders authorizing the use, sale or lease of property (other than cash collateral) and orders authorizing a debtor to assign an executory contract or unexpired lease under section 365(f) of the Bankruptcy Code. Each rule also permits modification of the imposed stay upon court order.
138. The Debtors submit that good cause exists for waiving and eliminating any stay of the Confirmation Order pursuant to Bankruptcy Rules 3020, 6004, and 6006 so that the
Confirmation Order will be effective immediately upon its entry.138 As noted above, these Chapter
11 Cases and the related transactions have been negotiated and implemented in good faith and with a high degree of transparency and public dissemination of information. Additionally, each day the
Debtors remain in chapter 11 they incur significant administrative and professional costs.
Furthermore, no party has objected to a waiver of the stay, and thus no party will be prejudiced by such a waiver.
138 See, e.g., In re Source Home Entm’t, LLC, No. 14-11553 (KG) (Bankr. D. Del, Feb. 20, 2015) (waiving stay of confirmation order and causing it to be effective and enforceable immediately upon its entry by the court); In re GSE Envtl., Inc., No. 13-11126 (MFW) (Bankr. D. Del. July 25, 2014) (same); In re Physiotherapy Holdings, Inc., No. 13-12965 (KG) (Bankr. D. Del. Dec. 23, 2013) (same); In re Gatehouse Media, Inc., No. 13-12503 (MFW) (Bankr. D. Del. Nov. 6, 2013) (same); In re Dex One Corp., No. 13-10533 (KG) (Bankr. D. Del. Apr. 29, 2013) (same); In re Geokinetics Inc., No. 13-10472 (KJC) (Bankr. D. Del. Apr. 25, 2013) (same).
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139. Based on the foregoing, the Debtors request a waiver of any stay imposed by the
Bankruptcy Rules so that the Confirmation Order may be effective immediately upon its entry.
III. The US Objection Is Not Supported by the Bankruptcy Code and Must Be Overruled.
140. The thrust of the US Objection is that the Plan somehow renders the United
States’ Claims Impaired or infringes on the United States’ other rights. But the Plan is clear. Every type of Allowed Claim that the United States might possess is paid in full in cash or otherwise
rendered Unimpaired. With respect to any other rights of the United States, including any rights
against non-debtors or any rights or remedies against the Debtors that do not constitute Claims,
the Plan and Confirmation Order are very precise that such rights are not impaired or infringed
upon.
141. By seeking to deny the Debtors their discharge and an order that the Chapter 11
Cases never happened, the US Objection ignores both the Bankruptcy Code and dozens of
properly-confirmed plans. But there is no basis in law or equity for such a rule. Beyond that, each
of the remaining arguments in the US Objection can be addressed by straightforward clarification
or rebuttal. The US Objection should be overruled.
A. The United States Mischaracterizes the Plan, and the United States’ Proposed Language is Not Necessary to Protect its Interests.
142. For its part, the United States is demanding Confirmation Order language that
puts the United States in the unique position of treating “the chapter 11 cases as if they had not
been commenced.”139 The United States insists that this requested language is necessary to protect
its interests because the Debtors have allegedly provided inadequate notice of the Plan, the Plan
allegedly fails to preserve creditors’ claims, rights and defenses, restricts anti-assignment
139 US Objection, ¶ 6.
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provisions in contracts, alters nonmonetary defaults, and restricts setoff, recoupment, and forum selection rights. This is not the case.
143. Not only does the Plan leave General Unsecured Claims Unimpaired under the
Plan, but the Debtors have agreed to include expansive governmental unit exemption language in
their proposed Confirmation Order that preserves the United States’ rights with respect to many of
the issues raised in the US Objection. This precise form of clarification has previously been
negotiated and agreed to by the United States in countless other cases.140 Specifically, the Debtors
have proposed the following excerpt of the governmental unit language:
Reservation of Rights in Favor of Governmental Units. Nothing in this Plan discharges or releases the Debtors, the Reorganized Debtors or any non-debtor from any claim, liability or cause of action of any Governmental Unit that is not a Claim, or impairs the ability of any Governmental Unit to pursue any claim, liability or cause of action that is not a Claim against any Debtor, Reorganized Debtor, or non- Debtor. Contracts, leases, covenants, guaranties, indemnifications, operating rights agreements, consent decrees, or other interests or agreements (“Government Agreements”) with any Governmental Unit shall be Assumed under the Plan and, subject to any applicable legal or equitable rights or defenses of the Debtors or Reorganized Debtors, paid, treated, determined and administered as required under applicable non-bankruptcy law and the Debtors and Reorganized Debtors shall comply with all applicable non-bankruptcy law with respect to Government Agreements. Any claims, liabilities, causes of action, or defenses of or to the Governmental Unit that are not Claims shall survive the Chapter 11 Cases and be determined in the ordinary course of business, including in the manner and by the administrative or judicial tribunals of competent jurisdiction in which such rights, defenses, claims, liabilities, or causes of action may be adjudicated under applicable non-bankruptcy law; provided, that nothing in the Plan or this Confirmation Order shall alter any legal or equitable rights or defenses of the Debtors or the Reorganized Debtors under nonbankruptcy law with respect to any such claim, liability or cause of action. All claims, liabilities, causes of action, or defenses of or to any Governmental Unit that are Claims shall be treated in accordance with Article III of the Plan, and the amount of any such Claims shall be determined in
140 See, e.g., In re Physiotherapy Holdings, Inc., No. 13-12965 (KG) (Bankr. D. Del. Dec. 23, 2013) (excepting from discharge, release, or preclusion (1) any liability to a Governmental Unit, as defined in section 101(27) of the Bankruptcy Code, that is not a Claim; (2) any Claim of a Governmental Unit arising on or after the Confirmation Date; (3) any liability to a Governmental Unit on the part of any Person or Entity other than the Debtors or Reorganized Debtors; (4) any valid right of setoff or recoupment by a Governmental Unit; or (5) any criminal liability); In re Appleseed’s Intermediate Holdings LLC, No. 11-10160 (KG) (Bankr. D. Del. Dec. 15, 2011) (same).
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the manner and by any administrative or judicial tribunals of competent jurisdiction with respect to such rights, defenses, claims, liabilities, or causes of action that are Claims; provided, further, that nothing in the Plan or this Confirmation Order shall alter any legal or equitable rights or defenses of the Debtors or the Reorganized Debtors under applicable law with respect to any such claim, liability or cause of action, including any rights under the Bankruptcy Code or the Judicial Code. All Claims of any Governmental Unit shall be subject to Article VIII of the Plan as it applies to the Debtors and Reorganized Debtors and treated in accordance with the Plan in all respects and the Bankruptcy Court shall retain jurisdiction (but not exclusive jurisdiction) as provided in Article XI of the Plan in relation to the allowance or disallowance of any such Claim; provided, however, that the Debtors and Reorganized Debtors, as applicable, are and shall remain subject to applicable laws and regulations of Governmental Units and shall continue to comply therewith.141
144. The United States, on the other hand, proposes the following relevant language:
Reservation of Rights in Favor of Governmental Units. Notwithstanding any provision in the Plan, this Confirmation Order or the related Plan Documents, nothing discharges or releases the (x) Debtors, (y) the Reorganized Debtors or (z) any non-debtor, including, without limitation, any purchaser of the Debtors’ assets (“Non-Debtor”) from any claim, liability or cause of action of the United States of America (the “United States”) or any State, or impairs the ability of the United States or any State to pursue any claim, liability or cause of action against any Debtor, Reorganized Debtor or Non-Debtor. Contracts, leases, covenants, guaranties, indemnifications, operating rights agreements or other interests or agreements with the United States or any State shall be, subject to any applicable legal or equitable rights or defenses of the Debtors or Reorganized Debtors under applicable non-bankruptcy law, paid, treated, determined and administered in the ordinary course of business as if the Debtors’ bankruptcy cases were never filed and the Debtors, the Reorganized Debtors and all Non-Debtors shall comply with all applicable non-bankruptcy law. All rights, claims, liabilities, causes of action, or defenses of or to the United States or any State shall survive the Chapter 11 Cases as if they had not been commenced, and be determined in the ordinary course of business, including in the manner and by the administrative or judicial tribunals in which such rights, defenses, claims, liabilities, or causes of action would have been resolved or adjudicated if the Chapter 11 Cases had not been commenced; provided, that nothing in the Plan or this Confirmation Order shall alter any legal or equitable rights or defenses of the Debtors or the Reorganized Debtors under nonbankruptcy law with respect to any such claim, liability or cause of action. Without limiting the foregoing, for the avoidance of doubt: (i) the United States and any State shall not be required to file any proofs of claim in the Chapter 11 Cases for any claim, liability, defense, or cause of action, including, without limitation, rights or defenses of setoff or recoupment; (ii)
141 Confirmation Order, ¶ 95.
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nothing shall affect or impair the exercise of the United States’ or any State’s police and regulatory powers against the Debtors, the Reorganized Debtors or any Non- Debtor; (iii) nothing shall be interpreted to set cure amounts or to require the United States or any State to novate or otherwise consent to the sale, assignment or transfer of any federal or state contracts, leases, guaranties, indemnifications, grants, agreements, consent decrees, or interests; (iv) nothing shall authorize the transfer or assignment of any governmental (a) license, (b) permit, (c) registration, (d) authorization or (e) approval, or the discontinuation of any obligation thereunder, without compliance with all applicable legal requirements and approvals under non-bankruptcy law; (v) nothing shall affect or impair the United States’ or any State’s rights and defenses of setoff and recoupment, or to assert setoff or recoupment against the Debtors or the Reorganized Debtors and such rights and defenses are expressly preserved; and (vi) nothing shall constitute an approval or consent by the United States without compliance with all applicable legal requirements and approvals under non-bankruptcy law. Nothing in this paragraph shall modify the RINs Settlement Agreement; in the event of a conflict between this Confirmation Order or any Plan Document and the RINs Settlement Agreement, the RINs Settlement Agreement shall control. (emphasis added)
145. The United States’ proposed language effectively overrides fundamental rights of
the Debtors under the Bankruptcy Code. Specifically, the United States’ language would eliminate
the discharge under section 1141(d) of the Bankruptcy Code.142 On the other hand, the Debtors’
proposal, which has been accepted to by other Governmental Units, provides that the United States
is (a) only subject to a discharge of the Debtors and not providing a release to any non-debtors,
and (b) only agreeing to a discharge of Claims and not, for example, of any right to injunctive
relief under its police and regulatory powers. In other words, any right of a Governmental Unit that is not a Claim against the Debtors is not subject to the release or discharge provisions contained in Article VIII of the Plan.143 Therefore, the United States has no basis to object on
these grounds.
142 See 11 U.S.C. § 1141(d)(1)(A) (noting that a discharge following confirmation of the plan has the effect of discharging any obligations that arose prior to the date of confirmation, unless the plan or confirmation order provides for different treatment).
143 Bankruptcy Code section 1124(1) states that “a class of claims or interests is impaired under a plan unless, with respect to each claim or interest of such class, the plan . . . leaves unaltered the legal, equitable, and contractual rights to which such claim or interest entitles the holder of such claim or interest[.]” 11 U.S.C. § 1124(1). Pursuant to this definition, Claims in Classes 1, 2, 3, 4, 9, and 11 are Unimpaired because the Plan provides that
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146. With respect to Claims of the United States and other Governmental Units, as with the Claims of any other creditor in these Chapter 11 Cases, the Plan is very clear in the treatment sections applicable to each of the classifications that Claims of the United States could fall under, including Class 1 (Other Secured Claims), Class 2 (Other Priority Claims), and Class 9
(General Unsecured Claims), that such Claims are either paid in full in cash or receive some other treatment that will render them Unimpaired.144
147. To accommodate further the United States’ concerns, the Debtors have gone even further by incorporating changes to Article I.A.10 (definition of “Allowed”) and I.A.58 of the Plan
(definition of “Disputed”).145 These revised provisions allow any court of competent jurisdiction to determine whether a Claim is Allowed or Disputed, allow for the proper forum under nonbankruptcy law to adjudicate Claims when appropriate, and preserve the ability for Unimpaired
Claims to be Allowed just as they would be under nonbankruptcy law, while simultaneously and appropriately respecting the fact that these Chapter 11 Cases did happen and without causing the
Debtors to forego their right to have any Disputed Claims transferred and heard by the Bankruptcy
Court, where circumstances warrant. Together, these provisions harmonize the rights of the
Debtors and the United States (and other Governmental Units), and are consistent with the
Bankruptcy Code.
they are to receive either payment in full in Cash or such other treatment that renders such Claims Unimpaired within the meaning of Bankruptcy Code section 1124. See id. Nothing in the Plan or the Confirmation Order alters or otherwise compromises such Classes’ Unimpaired treatment under the Bankruptcy Code.
144 See, e.g., Plan, Art. III.B.1, Art. III.B.9.
145 Interestingly, the United States objects to their own requested revisions in this case, arguing that their requested revisions to the definitions of “Allowed” and “Disputed” enhanced the Debtors’ control over creditor claims. US Objection ¶ 2. The United States makes additional references to the detriment caused by Plan alterations related to winddown provisions, but provides no explanation as to how these changes impair creditors. Id.
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B. The Plan Provides for Proper Treatment Under the Bankruptcy Code and Relevant Law.
1. The Plan and Proposed Confirmation Order Do Not Usurp the Police and Regulatory Powers of the United States.
148. The US Objection argues that paragraphs 111 (“Applicable Nonbankruptcy
Law”) and 114 (“Governmental Approvals Not Required”) of the proposed Confirmation Order
usurp the police and regulatory powers of the United States. These provisions are only intended to clarify the effectiveness of the proposed Confirmation Order. To the extent there is any confusion as to the Debtors’ intent, paragraph 95 of the proposed Confirmation Order makes clear that, among other things, the Plan and Confirmation Order do not limit the rights of the United
States to pursue any and all nonmonetary remedies.146
2. The Plan’s Assumption Procedures Are Appropriate.
149. The Plan provides that all Executory Contracts and Unexpired Leases shall be
deemed to be assumed as of the Effective Date.147 The United States objects to this language,
citing the impermissibility of an assignment of their contracts under federal law.148 The Debtors have added language to the proposed Confirmation Order clarifying that, in the event any contract with the United States (or any other Governmental Unit) is to be assumed or assigned under the
Plan or the Plan Supplement, the United States (or such other applicable Governmental Unit) must
consent to such assumption or assignment if required by applicable nonbankruptcy law.
146 Confirmation Order ¶ 95 (“Subject to the final two sentences of this paragraph, but otherwise notwithstanding any provision in the Plan, this Confirmation Order, or any related Plan documents, nothing in this Plan discharges or releases the Debtors, the Reorganized Debtors or any non-debtor from any claim, liability or cause of action of any Governmental Unit that is not a Claim, or impairs the ability of any Governmental Unit to pursue any claim, liability or cause of action that is not a Claim against any Debtor, Reorganized Debtor, or non-debtor . . .”).
147 Plan, Art.V.A.
148 US Objection ¶ 11 (citing the Anti-Assignment Act).
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150. Additionally, the United States takes issue with the mechanics of Article V.C of
the Plan, which provides for releases of cure Claims. As a threshold matter, the Debtors do not
believe the United States is a party to any executory contracts or unexpired leases that are being
assumed or assigned under the Plan. This United States’ issue is based on the premise that it is
categorically inappropriate for a cure payment to serve as a cure for a nonmonetary default. This
is not so. Nothing in the Bankruptcy Code or any applicable law supports the United States’ view.
Section 365(b) of the Bankruptcy Code, which establishes the requirement to cure executory
contracts or unexpired leases before they could be assumed by a debtor, does not contain any
language foreclosing a debtor’s ability to cure non-monetary defaults with money.149 Tellingly, the United States does not cite to any authority in support of its argument. Moreover, to preserve the rights of counterparties—and to accommodate the possibility for a nonmonetary cure—Article
V.C of the Plan allows for counterparties to submit Cure proposals that differ from the amounts paid or proposed to be paid. As such, nothing in the Plan or applicable law restricts the ability to receive nonmonetary cure payments where such relief would be appropriate. Moreover, any right to nonmonetary relief is by definition not a “right to payment.” Therefore, such a right falls outside of the Plan and Bankruptcy Code’s definitions of a Claim and is preserved under the Plan.150
3. The Confirmation Order Preserves Setoff and Recoupment Rights of the United States, States, or Local Authorities.
151. Next, the US Objection argues that the Plan impermissibly abridges the United
States’ setoff rights. To support its position, the United States points to: (a) Article VI.F of the
Plan, which requires a holder of a Claim to file a motion with the Bankruptcy Court to effect a
149 11 U.S.C. § 365(b)(1).
150 11 U.S.C. § 101 (“The term ‘claim’ means—right to payment, . . .”).
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setoff; and (b) Article VIII.J of the Plan, which requires a notice in writing to the Debtors regarding recoupment efforts. The proposed Confirmation Order, however, clearly provides that nothing in the Plan or Confirmation Order “shall affect or impair any Governmental Unit’s rights and defenses of setoff and recoupment.”151 The US Objection on this ground is moot.
4. The Third-Party Releases Are Appropriate.
152. The United States argues that the non-debtor limitations of liability, injunction, exculpation, and release in Article VIII of the Plan are objectionable because these provisions provide no opportunity for non-voting creditors to opt out or consent.
153. First, as it pertains to the United States, and as detailed further herein, the
Debtors’ “Reservation of Rights in Favor of Governmental Units” provision limits the United
States’ releases under Article VIII to Claims against the Debtors. In other words, the United States is not providing a third party release.152
154. Second, the Third-Party Release is consensual. The case law is clear that a release is consensual where parties have received sufficient notice of the plan’s release provisions and have had an opportunity to object to or opt out of the release and failed to do so (including where such holder abstains from voting altogether).153 Article VIII.C. of the Plan provides that each
151 Confirmation Order ¶ 95.
152 Id. ¶ 94 (providing that all “Claims” (i.e., causes of action against the Debtors) of the United States, and any State, or local taxing authority arising before the Effective Date shall be subject to the the Plan’s Article VIII release provisions).
153 See, e.g., Indianapolis Downs, 486 B.R. at 306 (“As for those impaired creditors who abstained from voting on the Plan, or who voted to reject the Plan and did not otherwise opt out of the releases, the record reflects these parties were provided detailed instructions on how to opt out, and had the opportunity to do so by marking their ballots. Under these circumstances, the Third Party Releases may be properly characterized as consensual and will be approved”); In re DBSD N. Am., Inc., 419 B.R. 179, 218-19 (Bankr. S.D.N.Y. 2009) (“Except for those who voted against the Plan, or who abstained and then opted out, I find the Third Party Release provision consensual and within the scope of releases permitted in the Second Circuit.”); In re Conseco, Inc., 301 B.R. 525, 528 (Bankr. N.D. Ill. 2003) (“The Article X release now binds only those creditors who agreed to be bound, either
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Releasing Party—including the Debtors and Reorganized Debtors, the Parent Parties, the Term
Loan A Lenders, the Term Loan B Lenders, the Term Loan A Agent, the Term Loan B Agent, the
Intermediation Counterparties, the Refining ABL Lenders, the Refining ABL Agent, the DIP
Facility Lenders, the DIP Facility Agent, the DIP Commitment Parties, and the Additional
Financing Lender, but excluding any Holder of a Claim or Interest that (a) votes to reject the Plan and (b) objects to the releases in the Plan (the “Opt-Out”)—shall release any and all Claims and causes of action such parties could assert against the Debtors, the Reorganized Debtors, and the
Released Parties (the “Third-Party Release”) from any and all causes of action taking place on or before the Effective Date.
155. Since the Third-Party Release applies only to Holders of Claims and or Interests that do not Opt-Out, it is consensual under the weight of authority (in this district and others) of what constitutes consent in the context of a third-party release. Generally, voting in favor of a plan is sufficient to demonstrate consent to any third-party release contained therein.154 Similarly, those
Holders of Claims that have not objected to the releases in the Plan or are paid in full and thus deemed to have accepted the Plan, may generally, and consensually, be bound by third-party release provisions.155
by voting for the Plan or by choosing not to opt out of the release. Therefore, the Article X release is purely consensual and within the scope of releases that Specialty Equipment permits.”).
154 See, e.g., In re Zenith Elecs. Corp., 241 B.R. 92, 111 (Bankr. D. Del. 1999) (finding that a third-party release binds those voting in favor of the plan); In re Washington Mut., Inc., 442 B.R. 314, 355 (Bankr. D. Del. 2011) (same); In re Specialty Equip. Companies, Inc., 3 F.3d 1043, 1047 (7th Cir. 1993) (same); In re Chassix Holdings, Inc., 533 B.R. 64, 82 (Bankr. S.D.N.Y. 2015) (same).
155 See, e.g., Indianapolis Downs, 486 B.R. at 306 (“In this case, the third-party releases in question bind certain unimpaired creditors who are deemed to accept the Plan: these creditors are being paid in full and have therefore received consideration for the releases.”); In re Spansion, Inc., 426 B.R. 114, 144 (Bankr. D. Del. 2010) (“I note that no creditor or interest holder whose rights are affected by the ‘deemed’ acceptance language has objected to the Plan. While I recognize—and fully appreciate—the importance of the UST’s supervision of the administration of bankruptcy cases . . . the silence of the unimpaired classes on this issue is persuasive. This aspect of the Third-
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156. Even if the Court were to find that the Third-Party Release is non-consensual with respect to certain Releasing Parties—which it should not find—the Court should nevertheless approve the Third-Party Release under the circumstances of the Chapter 11 Cases.
157. The Third Circuit has identified the factors necessary to approve nonconsensual third-party releases. Specifically, the Third Circuit has explained that the “hallmarks” of permissible nonconsensual third-party releases are “fairness, necessity to the reorganization, and specific factual findings to support these conclusions.”156 Delaware courts that have subsequently ruled on this issue have considered, among other things, whether (a) the releasee has provided a critical contribution to the debtor’s plan and (b) whether the release is fair to the nonconsenting creditors (i.e., whether the nonconsenting creditor was compensated for their contributions).157
158. Here, the factors identified by the Third Circuit counsel in favor of the Third-Party
Release in the Plan, even on a nonconsensual basis. First, the Third-Party Release was offered in exchange for key pieces of the Plan, such as the Parent Cash Contribution and the equitization of a significant amount of Term Loan B Claims, among others. The support of the Parent Parties and
Term Loan B Lenders was achieved in negotiations surrounding the Restructuring Support
Agreement, and was critical in the strategic development of the Plan. An absence of support of the Parent Parties and Term Loan B Lenders would doom the prospects of this Plan that satisfies all General Unsecured Claims in full, and would threaten the feasibility, or otherwise jeopardize the prospects of reorganization under any alternative Plan. Second, and as noted previously, all
Party Release is not over-reaching. The unimpaired classes are being paid in full and have received adequate consideration for the release.”).
156 In re Cont’l Airlines, 203 F.3d 203, 214 (3d Cir. 2000).
157 See In re Spansion, Inc., 426 B.R. 114, 145 (Bankr. D. Del. 2010) (citing In re Genesis Health Ventures, Inc., 266 B.R. 591, 607-08 (Bankr. D. Del. 2001) (describing the factual conclusions that may support nonconsensual third- party releases).
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General Unsecured Creditors are receiving payment in full of their Allowed Claims and otherwise
are being rendered Unimpaired, and have, therefore, received adequate consideration in exchange
for the Third-Party Release.
159. Accordingly, the Third-Party Release is justified, even on a nonconsensual basis.
5. The Debtors’ Preservation of Causes of Action Is Appropriate.
160. The United States objects to Article IV.P of the Plan, which reserves the Debtors’ and Reorganized Debtors’ rights and causes of action, whether arising before or after the Petition
Date. Of course, there is no requirement in the Bankruptcy Code or otherwise that would require
the Debtors to relinquish these rights, and there is nothing “lopsided” or otherwise objectionable
about a Plan that provides different rights to a debtor as compared to Holders of Claims.
C. All Creditors Received Adequate Notice of the Plan, and the Solicitation Procedures Are Appropriate.
161. Many of the United States’ additional arguments represent an effort to revisit
issues that were resolved at the “first day” hearing of these Chapter 11 Cases, and which were
approved through the entry of the Scheduling Order. Specifically, the United States argues that:
(a) it has not been afforded an adequate opportunity to determine its claims or causes; (b) it does
not consent to waiver of a 341 meeting; (c) the Debtors’ filed list of creditors includes names and
addresses but not information regarding claims; and (d) federal agencies have not been afforded
adequate notice to determine possible federal interests or to gauge the effect of the Plan on those
interests.
162. The Scheduling Order provides for notices, deadlines, and procedures that are
typical in prepackaged bankruptcy cases. These procedures are appropriate in prepackaged plans
where claims are unimpaired and thus deemed to accept the plan. Neither the United States, nor
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the U.S. Trustee, objected to these provisions at the “first day” hearing and it is inappropriate to
reopen these points now.
163. Similarly, revisiting the issue now of whether the waiver of the requirement for
a meeting under section 341 of the Bankruptcy Code or the extension of the filing of schedules
and statement to May 1, 2018 (only to be filed as necessary) would not benefit the United States
or any other creditor in these chapter 11 cases.
164. Under the Plan, Holders of Claims are not required to file a Proof of Claim and are not forced into any Court process with respect to resolution of their Claims. Holders of Claims maintain the ability to seek payment under applicable nonbankruptcy law and are not required to submit a claim by a certain date to preserve their rights to payment. The United States cites section
502(b)(9) of the Bankruptcy Code to argue that a bar date for federal governmental units must be set at least 180 days from the Petition Date. But, there is no bar date here, and the United States has whatever time it is permitted under appropriate nonbankruptcy law (and in any forum of competent jurisdiction) to assert a right to payment on account of any of their Unimpaired Claims under the Plan.
D. All Claims Are Unimpaired and Will Receive Payment in Full Under the Plan.
165. Section 1124(1) of the Bankruptcy Code provides the relevant definition of impairment here and states that a “class of claims or interests” is unimpaired if the “plan . . . leaves unaltered the legal, equitable, and contractual rights to which such claim or interest entitles the holder of such claim or interest.”158 The plain text of section 1124(1) therefore provides that for a claim to be impaired due to a change in “legal, equitable, and contractual rights,” that change must
158 11 U.S.C. § 1124(1) (emphasis added).
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result from the plan itself—and not from some other source of law.159 In other words, where the rights of a creditor are altered not by the plan but, instead, by provisions of the Bankruptcy Code, such alteration does not impair a class of claims under section 1124(1) of the Bankruptcy Code.
166. The Third Circuit accurately illustrated this crucial distinction between “plan
impairment”—that is, when a plan alters the rights owed to a creditor—and “statutory
impairment”—that is, when such alteration occurs by operation of the Bankruptcy Code. In PPI
Enterprises, a landlord argued that his claim was impaired because section 502(6)(b) of the
Bankruptcy Code capped lease payments he was otherwise owed by the debtor.160 The court
explained that the Bankruptcy Code, and not the plan, limited the landlord’s contract rights.161
Accordingly, “a creditor’s claim outside of bankruptcy is not the relevant barometer for impairment,” and a claim is not impaired under section 1124(1) if the Bankruptcy Code limits a creditors’ contract rights.162
167. Pursuant to this definition, Claims in Classes 1, 2, 3, 4, 9, and 11 are Unimpaired
because the Plan provides that they are to receive either payment in full in Cash or such other
treatment that renders such Claims Unimpaired within the meaning of section 1124.163 Nothing in
159 See 11 U.S.C. § 1124(1) (providing that a claim is impaired only if the “plan” alters the “legal, equitable, and contractual rights” owed each creditor) (emphasis added).
160 In re P.P.I. Enters. (U.S.), 324 F.3d 197, 203 (3d Cir. 2003).
161 Id. at 204.
162 Id.; see also 7 Collier on Bankruptcy ¶ 1124.03[6] (16th ed 2015) (titled “Alteration of Rights by the Code Is Not Impairment under Section 1124(1)).
163 See Plan, Art.III.A. Claims in Class 10 (Intercompany Claims) may at the Debtors’ or Reorganized Debtors’ option be Reinstated and therefore considered Unimpaired.
Previous versions of the Plan prescribed the following treatment in Art.III.B.9 for Class 9 (General Unsecured Claims: “In full and final satisfaction of each Allowed General Unsecured Claim, each Holder thereof shall receive Cash in an amount equal to such Allowed General Unsecured Claim on the later of: (i) the Effective Date; or (ii) the date due in the ordinary course of business in accordance with the terms and conditions of the particular transaction or agreement giving rise to such Allowed General Unsecured Claim.” The Debtors, in response to a
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the Plan or the Confirmation Order alters or otherwise compromises such Classes’ Unimpaired
treatment under the Bankruptcy Code.
168. As explained below, any Claims against the Debtors, irrespective of whether they
are held by the United States or any other party, are the subject of numerous other provisions of
this Plan, as with any other plan in chapter 11. The operation of the Plan is clear. General
Unsecured Claims are being paid in full, and the Debtors have proven their ability to satisfy
Allowed General Unsecured Claims after the Effective Date. Thus, there will be no need for
Holders of Unimpaired Claims to seek repayment from any other party. Moreover, the Debtors
have a contractual obligation under the Plan to honor the rights owed to Holders of Unimpaired
Claims. The Debtors are able to meet these obligations under the Plan only because certain of the
Released Parties have made significant economic concessions such that the Plan satisfies the
feasibility requirement of Bankruptcy Code section 1129(a)(11).
E. The Facts of This Case are Distinguishable From Those in RAND Logistics.
169. The United States correctly asserts that following a contested hearing in front of
Judge Shannon in In re RAND Logistics, No. 18-10175 (BLS) (Bankr. D. Del. Feb. 28, 2018)
(“RAND”), this Court approved a confirmation order subject to inclusion of the reservation
language proposed by the United States for inclusion in this Confirmation Order. The United
States’ objection asserts that similarities between RAND and the case at hand—i.e., the presence of notice waivers and releases (which are common features of any prepackaged bankruptcy)— require the inclusion of such language here. As detailed herein, the provisions in the RAND plan
request from the United States Trustee, have revised this language to provide that “as soon as is reasonably practicable” after a Class 9 Claim becomes Allowed, the Holder thereof shall receive either (i) payment in full in cash or (ii) such other treatment rendering such Claim Unimpaired.
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of reorganization are unique and are distinguishable from the provisions of the Debtors’ Plan and plans proposed in other prepackaged bankruptcy cases within this District.164
1. The Key Definitional Terms of the Plan Surrounding Claim Allowance are Clear and Do Not Limit Rights Under Applicable Nonbankruptcy Law.
170. Notably, the Plan’s straightforward definition of “Allowed” includes a Claim or
Interest that is allowed pursuant to a Final Order by a court of competent jurisdiction.165 The
Plan’s definition of “Disputed” is also simple and practical.166 Both of these definitions have been revised to clarify that all Claims do not need to be filed or adjudicated with the Bankruptcy Court.
In fact, the Debtors amended these definitions—at the request of the United States—to include references to a “court of competent jurisdiction” and “nonbankruptcy law.”167 These revisions
164 Many pre-packaged chapter 11 plans this reservation of rights appears narrowly, if at all. See In re Physiotherapy Holdings, Inc., No. 13-12965 (KG) (Bankr. D. Del. Dec. 23, 2013) (providing for a narrower version of rights and liabilities in favor of governmental units); In re Appleseed’s Intermediate Holdings LLC, No. 11-10160 (KG) (Bankr. D. Del. Dec. 15, 2011) (same); In re Everyware Global, Inc., No. 15-10473 (LSS) (Bankr. D. Del. May 22, 2015) (containing no such provision reserving rights or liabilities in favor of any governmental units); In re The Dolan Co., No. 14-10614 (BLS) (Bankr. D. Del. June 9, 2014) (same); In re Sorenson Communications, Inc., No. 14-10454 (BLS) (Bankr. D. Del. April 4, 2014) (same); In re Dex Corp., No. 13-10533 (KG) (Bankr. D. Del. April 29, 2013) (same); In re TMP Directional Marketing, LLC, No. 11-13835 (MFW) (Bankr. D. Del. Jan. 13, 2012) (same); In re ACG Holdings, Inc., No. 08-11467 (CSS) (Bankr. D. Del. July 16, 2008) (same).
165 See Plan, Art. I.A.10 (“‘Allowed’ means, as to a Claim or an Interest, any Claim or Interest that is (a) expressly allowed under the Plan, under the Bankruptcy Code, or by a Final Order of a court of competent jurisdiction including under state law, (b) agreed to by the Debtors or the Reorganized Debtors and the Holder of such Claim or Interest, or (c) not Disputed, as applicable. For the avoidance of doubt, (x) there is no requirement to file a Proof of Claim (or move the Bankruptcy Court for allowance) to be an Allowed Claim under the Plan, and (y) Unimpaired Claims shall be affirmatively determined to be Allowed Claims to the same extent such Claims would be allowed under applicable nonbankruptcy law.”).
166 See Plan, Art. I.A.58 (“‘Disputed’ means, as to a Claim or an Interest, any Claim or Interest: (a) that is not Allowed; (b) that is not disallowed by the Plan, the Bankruptcy Code, or a Final Order, as applicable; (c) as to which a dispute is being adjudicated by a court of competent jurisdiction in accordance with nonbankruptcy law; (d) that is filed in the Bankruptcy Court and not withdrawn, as to which a timely objection or request for estimation has been filed; and (e) with respect to which a party in interest has filed a Proof of Claim or otherwise made a written request to a Debtor for payment, without any further notice to or action, order, or approval of the Bankruptcy Court.”).
167 Specifically, the Debtors revised the definition of “Allowed” to include reference to “court of competent jurisdiction,” and revised the definition of “Disputed” to include reference to both “court of competent jurisdiction” and “nonbankruptcy law.”
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were intended to benefit the United States by clarifying the Bankruptcy Court does not retain exclusive jurisdiction over the allowance or dispute of Claims.
171. By contrast, a critical issue in the RAND dispute was the United States’
“well-founded” concerns related to the Plan, which altered terms such as “Allowed” and
“Disputed” from their standard meanings in bankruptcy parlance.168 For example, the definitions were very lengthy: the definition of “Allowed” comprised 14 lines, and the definition of
“Disputed” comprised 15 lines. Unusual language was included. For example, the definition of
“Disputed” provided in part that publicly stating that a claim was disputed was enough to fall under that definition’s umbrella. Additionally, and critically, the RAND plan did not provide a mechanism for Allowance of claims by alternative courts of competent jurisdiction under applicable nonbankruptcy law.
2. The Plan Has No Administrative Bar Date.
172. There is no Administrative Bar Date under the Plan, so concerns regarding preservation of rights are unfounded. Specifically, Art. VI.A of the Plan provides that:
Allowed Administrative Claims with respect to liabilities incurred by the Debtors in the ordinary course of business shall be paid or performed in the ordinary course of business in accordance with the terms and conditions of any controlling agreements, course of dealing, course of business, or industry practice
173. By contrast, in RAND, the administrative claims bar date required some creditors to file administrative claims within 45 days of confirmation. Further, the administrative bar date was not included in the notice of confirmation hearing sent to the RAND creditors. These two factors combined to contribute to uncertainty around the adequacy of the notices in RAND.
168 RAND, Hr’g Tr. at 22-23, Feb. 28, 2018.
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3. Additional Notice Has Been Given to the United States to Determine Possible Federal Interests.
174. At the RAND confirmation hearing, the United States suggested that short notice
windows leading up to the confirmation hearing supported the inclusion of a robust reservation in
rights in favor of governmental units.169 Here, as compared to RAND, the Debtors have provided
additional time for creditors to determine possible interests or to gauge the effect of the Plan on
those interests. This supports the conclusion that the concerns present in RAND are not at issue here.
175. Specifically, the following notice comparisons are informative:
• In RAND, the confirmation hearing was held only 29 days after the petition date.170 Here, the Confirmation Hearing is scheduled to occur on March 26, 2018, 64 days after the Petition Date (and 63 days from the date the initial Plan was filed). In the context of a prepackaged plan, there is nothing notable about the Debtors’ timeline.
• The RAND plan supplement was filed 11 days prior to the confirmation hearing,171 as opposed to 14 days here.
• In RAND, the notice of plan hearing was served on 21 days prior to the confirmation hearing.172 Here, such notice was served on January 30, 2018, nearly two full months in advance of the Confirmation Hearing.
• In RAND, the order shortening notice of the confirmation hearing was entered on January 31, 2018, less than a month in advance of the confirmation hearing.173 In this case at hand, the Scheduling Order was entered on January 22, 2018, over two months in advance of the Debtors’ Confirmation Hearing.
169 RAND, Hr’g Tr. at 48:18-22; 50:2-3, 20-21; 51:3-4, 11-12, Feb. 27, 2018.
170 RAND, 2/27/18 Hr’g Tr. at 48:18-19.
171 See RAND, 2/27/18 Hr’g Tr. at 51:11-12.
172 See RAND, 2/27/18 Hr’g Tr. at 50:21.
173 See RAND, 2/27/18 Hr’g Tr. at 49:24-25.
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IV. The Objection of the U.S. Trustee Should be Overruled.
A. The General Unsecured Claims are Not Impaired Under the Plan, and are Not Entitled to Vote.
176. Bankruptcy Code section 1124(1) states that “a class of claims or interests is impaired under a plan unless, with respect to each claim or interest of such class, the plan . . . leaves unaltered the legal, equitable, and contractual rights to which such claim or interest entitles the holder of such claim or interest[.]”174 Pursuant to this definition, General Unsecured Claims are Unimpaired because the Plan provides that they are to receive either payment in full in Cash or such other treatment that renders such Claims Unimpaired within the meaning of Bankruptcy
Code section 1124.175 Nothing in the Plan or the Confirmation Order alters or otherwise compromises such Unimpaired treatment under the Bankruptcy Code.
177. Despite this, the U.S. Trustee’s objection argues that the releases under the Plan somehow operate to impair Holders of Unimpaired Claims. Specifically, the U.S. Trustee states that the Plan’s releases, injunctions, discharge, and asset-vesting provisions preclude Holders of
General Unsecured Claims from their right to pursue claims against exculpated or released third parties. This argument responds to language contained in a previous version of the Plan, in Article
B.9, which stated that General Unsecured Claims would be paid “on the later of: (i) the Effective
Date; or (ii) the date due in the ordinary course of business in accordance with the terms and conditions of the particular transaction giving rise to such Allowed General Unsecured Claim.”176
174 11 U.S.C. § 1124(1).
175 See Plan, Art.III.A.9.b. Claims and Interests in Classes 1,2,3,4,10, and 11 are likewise Unimpaired under the Plan.
176 UST Objection ¶ 2.
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In the U.S. Trustee’s view, the fact that these creditors were not to receive payment until it was
actually owed rendered them Impaired.
178. While the Debtors believe the General Unsecured Creditors were unequivocally
Unimpaired in the former iteration of the Plan, in an effort to narrow issues, the Debtors revised
the Plan’s treatment of General Unsecured Claims to clarify that “as soon as reasonably practicable
after a General Unsecured Claim becomes Allowed,” a Holder of such Claim will receive “either
(i) payment in full in cash or (ii) such other treatment rendering such Claim Unimpaired.”177
179. The operation of the Plan is clear. Holders of General Unsecured Claims are either being paid in full, or will receive such other treatment to render them Unimpaired. The Debtors have proven their ability to satisfy such General Unsecured Claims in accordance with the Plan, which no party disputes.178 Thus, there will be no need for Holders of General Unsecured Claims
to seek repayment from any other party. The Debtors are in fact proposing a Plan that pays in full
all General Unsecured Claims, only because the Released Parties have made significant economic
concessions.179
180. The UST Objection requests additional language that would restrict the
effectiveness of the Plan’s releases until General Unsecured Creditors—even those whose payment
have not yet come due—are fully paid.180 This construct would improperly delay the effectiveness
177 Plan, Article III.B.9.b.
178 See Gatta Declaration ¶¶ 31, 32.
179 See id. ¶ 5.
180 The U.S. Trustee cites two cases, In re Everyware Global, Inc. (15-10743-LSS) (Bankr. D. Del.) and In re Allen Systems (15-10332) (Bankr. D. Del.) to support the inclusion of this language. The Debtors’ review of cases suggests this delayed release language rarely appears in pre-packaged chapter 11 cases. Compare In re Everyware Global, Inc., No. 15-10473 (LSS) (Bankr. D. Del. May 22, 2015) (stating that, “until a [general unsecured claim] . . . has been . . . paid in full in accordance with applicable law, or on terms agreed to between the holder of such Claim and the Debtor or Reorganized Debtor,” any releases in the plan “shall not apply or take effect with respect to such Claim”), with In re Nuverra Environmental Solutions, Inc., No. 17-10949 (KJC) (Bankr. D. Del.
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of the Plan’s release provisions, and would potentially threaten the Debtors’ ability to consummate the Plan. The U.S. Trustee relies on the untenable assumption that delaying payment of
Unimpaired Claims until the “date due” will cause problems of “interpretation, negotiation, and dispute.”181
181. But this argument—while mistaken—is now moot given the changes the Debtors made to the Plan. Specifically, Article III.B.9.b of the Plan now provides that General Unsecured
Claims are payable upon their Allowance. And Allowance of Claims is governed by clear language in the Plan that the United States Trustee in fact requested.182
182. Similarly, the Debtors are unaware of any case law that requires payment to a general unsecured creditor to be made prior to the date at which such Claim is Allowed.
Recognizing this fact, the Debtors proposed and their creditors agreed on a routine mechanism that simply provides for payment to Holders of General Unsecured Creditors when such Claim is
Allowed.183 Imposing any other requirement would threaten the delicate negotiations of the Plan
July 25, 2017) (providing that releases in the plan are effective as of the effective date), In re Samson Resources Corp., No. 15-11934 (CSS) (Bankr. D. Del. Feb. 12, 2017) (same), In re Physiotherapy Holdings, Inc., No. 13-12965 (KG) (Bankr. D. Del. Nov. 12, 2013) (same), In re Local Insight Media Holdings, Inc., No. 10-13677 (KG) (Bankr. D. Del. Sept. 21, 2011) (same), In re The Majestic Star Casino, LLC, No. 09-14136 (KG) (Bankr. D. Del. Jan. 12, 2011) (same), In re Stallion Oilfield Services Ltd., No. 09-13562 (BLS) (Bankr. D. Del. Jan. 12, 2010) (same), In re Masonite Corp., No. 09-10844 (PJW) (Bankr. D. Del. May 29, 2009) (same), and In re Source Interlink Companies, Inc., No. 09-11424 (KG) (Bankr. D. Del. May 26, 2009) (same).
181 UST Objection ¶ 9, n.7.
182 See, e.g., In re Rand Logistics, Inc., No. 18-10175 (BLS) (Bankr. D. Del. Feb. 28, 2018) (confirming debtors’ plan, which provided that holders of general unsecured claims would “receive treatment that otherwise renders the holder of such Allowed General Unsecured Claim Unimpaired”) (emphasis added); In re Gulfmark Offshore, Inc., No. 17-11125 (KG) (Bankr. D. Del. Oct. 4, 2017) (granting debtors the choice to pay general unsecured claims in the ordinary course of business or provide treatment so as to render such claims unimpaired) (emphasis added); In re Source Interlink Companies, Inc., No. 09-11424 (KG) (Bankr. D. Del. May 26, 2009) (providing that each holder of a general unsecured claim would receive payment in full in cash or receive other treatment that would render the holder unimpaired) (emphasis added).
183 Other than the United States and one local authority, no purported Holder of a General Unsecured Claim is objecting to the Plan.
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and improperly delay the releases bargained for therein that, as described herein, should be approved under prevailing Third Circuit law. Indeed, this Court has approved similar release provisions in countless other plans that also provided for the payment in full to Holders of General
Unsecured Creditors after the effective date under those plans.184
B. The U.S. Trustee Attempts to Draw a Distinction Between a “Pay in Full” Plan, Where Schedules are Filed, and a “Pass Through” Plan.
183. The U.S. Trustee argues that, because Holders of Allowed General Unsecured
Claims are subject to the discharge, release, and exculpation provisions of the Plan on the Effective
Date without (a) the right to meeting under Bankruptcy Code section 341, (b) the requirements of the Debtors to file schedules of assets and liabilities, and (c) the establishment of a bar date, such
Claims are therefore Impaired. To do so, the U.S. Trustee attempts to distinguish between a “pay in full” plan, where schedules are filed and a bar date is set, and a “pass through” plan where those requirements are waived.185 The U.S. Trustee is concerned that, while the Plan’s releases, injunctions, discharge, and asset-vesting provisions are effective upon the Effective Date, Holders of General Unsecured Claims may not receive payment until after the Effective Date.
184. The fact that (a) the Court waived the requirement for a meeting under Bankruptcy
Code section 341, (b) the filing of schedules and statements if the Plan is confirmed prior to May
184 See e.g., In re Orchard Acquisition Company, LLC, (17-12914) (KG) (Bankr. D. Del. Dec. 12, 2017) (ruling that releases of third-party claims against non-debtor parties can apply on the plan’s effective date when the plan provides that the contractual relationships giving rise to those third-party claims will be reinstated on the effective date); In re Gulfmark Offshore Inc., (17-11125) (KG) (Bankr. D. Del. May 17, 2017) (approving third-party releases applied to non-voting unsecured creditors expected to be paid in full in the ordinary course of business “as if the Chapter 11 Case had never commenced”); In re Dex Media, Inc., (16-11200) (KG) (Bankr. D. Del. May 16, 2016) (approving, and qualifying as “consensual” and “essential to the reorganization,” third-party releases in a plan where general unsecured creditors were a) releasing parties, and b) deemed unimpaired and expected to receive payment in full on the later of the effective date or in the ordinary course of business); In re Dex One Corporation, (13-10533) (KG) (Bankr. D. Del. Mar. 18, 2013) (same, qualifying the approved third-party releases as a “necessary and integral element to the plan,” and as “fair, equitable, reasonable, and in the best interests of the Debtors, the Estates, and all holders of Claims and Interests”
185 See UST Objection ¶ 8.
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1, 2018 and, (c) that the Debtors have not established a bar date in these chapter 11 cases has no impact on whether claims are Unimpaired. Such waivers are entirely typical and appropriate in prepackaged chapter 11 cases. The U.S. Trustee does not argue that the waiver of such requirements alone constitutes impairment, nor could it. Nothing in section 1124 of the
Bankruptcy Code ties these provisions to the discharge under Bankruptcy Code section 1141(d)(1), nor is there any distinction drawn by courts between a “pay in full” plan and a “pass through” plan.186 Moreover, the waiver of the requirement to file schedules and the bar date only benefits
Holders of General Unsecured Claims who, under these circumstances, have no obligation to (i) compare scheduled amounts to their own view of their Claims, (ii) file Proofs of Claim, (iii) assert their Claims against the Debtors by a particular date or (iv) appear in front of the Bankruptcy Court to seek Allowance of, or defend, their Claims.
C. The Third-Party Release Provisions in the Plan are Fair and Necessary.
185. The Debtors' arguments in support of the Third-Party Release are discussed in paragraphs 152-160 herein, and are incorporated by reference in this paragraph as responses to the
Objection of the U.S. Trustee regarding the appropriateness of the Third-Party Release.
[Remainder of page intentionally left blank]
186 See In re RAND Logistics, No. 18-10175 (BLS) (Bankr. D. Del. Feb. 28, 2018), Hr’g Tr. at 15:20 (“I am not satisfied that the distinction between the pass-through and the full-pay structure that’s been described by the parties requires a different result or requires, particularly, the language that has been proposed by the Office of the United States Trustee.”).
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CONCLUSION
186. For all of the reasons set forth herein and in the Gatta Declaration, the Sciametta
Declaration, the Laurinaitis Declaration, and the Deutsch Declaration and as will be further shown at the Confirmation Hearing, the Debtors respectfully request that the Court approve the Disclosure
Statement and confirm the Plan as fully satisfying all of the applicable requirements of the
Bankruptcy Code by entering the Proposed Confirmation Order, overruling any remaining objections, and granting such other and further relief as is just and proper.
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Dated: March 22, 2018 /s/ Laura Davis Jones Wilmington, Delaware Laura Davis Jones (DE Bar No. 2436) Timothy P. Cairns (DE Bar No. 4228) Peter J. Keane (DE Bar No. 5503) PACHULSKI STANG ZIEHL & JONES LLP 919 North Market Street, 17th Floor P.O. Box 8705 Wilmington, Delaware 19899-8705 (Courier 19801) Telephone: (302) 652-4100 Facsimile: (302) 652-4400 Email: [email protected] [email protected] [email protected] - and - James H.M. Sprayregen, P.C. Steven N. Serajeddini (admitted pro hac vice) KIRKLAND & ELLIS LLP KIRKLAND & ELLIS INTERNATIONAL LLP 300 North LaSalle Street Chicago, Illinois 60654 Telephone: (312) 862-2000 Facsimile: (312) 862-2200 Email: [email protected] [email protected] - and - Edward O. Sassower, P.C. (admitted pro hac vice) Matthew C. Fagen (admitted pro hac vice) KIRKLAND & ELLIS LLP KIRKLAND & ELLIS INTERNATIONAL LLP 601 Lexington Avenue New York, New York 10022 Telephone: (212) 446-4800 Facsimile: (212) 446-4900 Email: [email protected] [email protected]
Co-Counsel to the Debtors and Debtors in Possession
86 Case 18-10122-KG Doc 290-1 Filed 03/23/18 Page 1 of 23
Exhibit A
Gatta Declaration
Case 18-10122-KG Doc 290-1 Filed 03/23/18 Page 2 of 23
IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
) In re: ) Chapter 11 ) PES HOLDINGS, LLC, et al.,1 ) Case No. 18-10122 (KG) ) Debtors. ) (Jointly Administered) )
DECLARATION OF GREGORY G. GATTA IN SUPPORT OF CONFIRMATION OF THE SECOND AMENDED JOINT PREPACKAGED CHAPTER 11 PLAN OF REORGANIZATION OF PES HOLDINGS, LLC AND ITS DEBTOR AFFILIATES
Pursuant to 28 U.S.C. § 1746, I, Gregory G. Gatta, hereby declare as follows under penalty of perjury:
Background and Qualifications
1. I am the Chief Executive Officer of PES Holdings, LLC (“PES Holdings”), the above-captioned debtors and debtors in possession (together with PES Holdings, the “Debtors,”) and Philadelphia Energy Solutions LLC, the non-debtor parent (the “Parent” and, together with the Debtors, the “Company”), and have held that position since March 31, 2017.
2. I joined the Company in 2012 as Senior Vice President, Project Finance and currently serve as Chief Executive Officer. I have over 20 years of experience in the investment and private equity industries, including financial analysis and valuation, for a variety of businesses, including large multinational energy companies. I received a B.S. in Biological Sciences and a
Masters of Business Administration (with distinction), both from Cornell University.
1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, are: PES Holdings, LLC (8157); North Yard Financing, LLC (6284); North Yard GP, LLC (5458); North Yard Logistics, L.P. (5952); PES Administrative Services, LLC (3022); PES Logistics GP, LLC (9202); PES Logistics Partners, L.P. (1288); PESRM Holdings, LLC (2107); and Philadelphia Energy Solutions Refining and Marketing LLC (9574). The Debtors’ service address is: 1735 Market Street, Philadelphia, Pennsylvania 19103. Case 18-10122-KG Doc 290-1 Filed 03/23/18 Page 3 of 23
3. I am generally familiar with the Debtors’ day-to-day operations, business and financial affairs, and books and records.
4. Except as otherwise indicated herein, all facts set forth in this declaration are based upon my personal knowledge of the Debtors’ operations and finances and the Debtors’ restructuring activities, information gathered from my review of relevant documents, and information supplied to me by other members of the Debtors’ management and the Debtors’ advisors. I submit this declaration (this “Declaration”) in support of the Second Amended Joint
Prepackaged Chapter 11 Plan of Reorganization of PES Holdings, LLC and its Debtor Affiliates
[Docket No. 286] (as modified, amended, or supplemented from time to time in accordance with its terms, the “Plan”).2 If I were called upon to testify, I could and would testify competently to the facts set forth herein.
The Plan
I. Background.
5. The Plan is the product of many months of extensive, good-faith, arm’s-length negotiations among the Debtors, the Restructuring Support Parties, and the EPA, among others, with all parties working towards an outcome that provides near-term liquidity to the Debtors while maximizing the value of the Debtors’ Estates for the benefit of all stakeholders. The Plan provides for an infusion of approximately $260 million in capital to the Debtors, reduces the Debtors’ anticipated debt service obligations by approximately $35 million per year, and relieves the
Debtors of debt maturities through 2022. Moreover, the Plan allows the Debtors to satisfy in full
2 Capitalized terms used but not otherwise defined herein have the meanings set forth in the Plan or the Debtors’ Memorandum of Law in Support of an Order Approving the Debtors’ Disclosure Statement for and Confirming the First Amended Joint Prepackaged Chapter 11 Plan of Reorganization of PES Holdings, LLC and its Debtor Affiliates, filed contemporaneously herewith.
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and in cash all General Unsecured Claims and otherwise provide consensual treatment to other stakeholders. Further, the Plan incorporates an integrated compromise and settlement
(the “Settlement”) of numerous Claims, Interests, Causes of Action, and controversies designed to achieve a beneficial and efficient resolution of the Chapter 11 Cases for all parties in interest.
Through two special committees, formed at Philadelphia Energy Solutions Refining and
Marketing LLC and North Yard GP, LLC, respectively (together, the “Special Committees”), each consisting of two of the Debtors’ independent managers, and each of which was advised by separate counsel, the Debtors thoroughly analyzed those Claims, Interests, Causes of Action, and controversies. Pursuit thereof would be highly uncertain and would introduce delay, cost, and uncertainty into these Chapter 11 Cases. The compromises set forth in the Plan are critical to these and other matters addressed in the Plan and to permitting the Debtors to emerge from chapter 11 with a fresh start.
II. The Plan Satisfies the Requirements of Confirmation.
6. For the reasons detailed below and with the assistance of the Debtors’ advisors and legal counsel, I believe the Plan satisfies the applicable Bankruptcy Code requirements for confirmation of a plan of reorganization. I have set forth the reasons for such belief below, except where such compliance is apparent on the face of the Plan and related documents or where it will be the subject of other testimony or evidence introduced at the Confirmation Hearing.
A. The Plan Fully Complies with the Applicable Provisions of the Bankruptcy Code — § 1129(a)(1).
1. Proper Classification of Claims and Interests — § 1122.
7. It is my understanding that section 1122 of the Bankruptcy Code requires that “a plan may place a claim or an interest in a particular class only if such claim or interest is substantially similar to the other claims or interests of such class.”
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8. Each of the Claims and Interests in each particular Class is substantially similar to the other Claims and Interests in that Class. In general, the Plan’s classification scheme follows the Debtors’ capital structure, with debt and equity classified separately. Other aspects of the classification scheme reflect the different legal or factual circumstances of each Class. For example, the classification scheme distinguishes between Holders of the Term Loan B Claims
(Class 8) from Holders of the DIP Facility Claims (unclassified), because of the different circumstances of each class. Other Priority Claims (Class 2) are classified separately due to their required treatment under the Bankruptcy Code. In addition, the Plan classifies Interests in PES
Holdings (Class 12) separately from Interests that a Debtor holds in another Debtor, because the
Debtors’ ownership structure is dependent upon maintaining the Intercompany Interests and, therefore, the Intercompany Interests may be preserved under the Plan for the administrative convenience of ensuring the preservation of the Debtors’ corporate structure after the Effective
Date.
9. I believe that the Claims or Interests assigned to each particular Class described above are substantially similar to the other Claims or Interests in each such Class and the distinctions among Classes are based on valid business, factual, and legal distinctions.
Accordingly, it is my opinion that the Plan fully complies with and satisfies section 1122 of the
Bankruptcy Code.
2. Specification of Classes, Impairment, and Treatment — § 1123(a)(1) - (3).
10. It is my testimony that Article III of the Plan specifies in detail the classification of
Claims and Interests, whether such Claims and Interests are Impaired, and the treatment that each
Class of Claims and Interests will receive under the Plan.
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3. Equal Treatment of Similarly Situated Claims and Interests — § 1123(a)(4).
11. It is my understanding that the Plan provides the same treatment for each Claim or
Interest of a particular Class, except where the Holder of such Claim or Interest has agreed to a less favorable treatment. Put simply, each Holder of Allowed Claims or Interests will receive the same rights and treatment as all other Holders of Allowed Claims or Interests within the same
Class.
4. Means for Implementation — § 1123(a)(5).
12. I believe that the Plan provides adequate means for implementation as required under section 1123(a)(5) of the Bankruptcy Code. I can confirm that Article IV and various other provisions of the Plan detail: (a) the sources of consideration for Plan distributions; (b) the cancellation of notes, instruments, certificates, and other existing securities; (c) the authorization for the Debtors or the Reorganized Debtors, as applicable, to take corporate actions necessary to effectuate the Plan, including filing any New Organizational Documents of the Reorganized
Debtors; (d) the authorization for the Debtors or the Reorganized Debtors, as applicable, to undertake certain Restructuring Transactions, including those contemplated by or necessary to effectuate the Plan; (e) the termination of the PES Advisory Agreement and the PES Registration
Rights Agreement; (f) the preservation of certain Causes of Action; (g) the appointment and selection of officers and directors of the Reorganized Debtors; and (h) the formation of PES Inc. and, as applicable, the Reorganized Debtors.
13. The precise terms governing the execution of these transactions are set forth in the applicable definitive documents or forms of agreements included in the Plan Supplement. As a result, it is my belief that the Plan satisfies section 1123(a)(5) of the Bankruptcy Code.
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5. Prohibition of Issuance of Non-Voting Stock — § 1123(a)(6).
14. I am advised that section 1123(a)(6) of the Bankruptcy Code requires that a corporate debtor’s chapter 11 plan provide for the inclusion in the reorganized debtor’s charter of a prohibition against the issuance of non-voting equity securities and related protections for holders of preferred shares. I can confirm that the Plan provides that the New Organizational Documents for PES, Inc. will prohibit the issuance of non-voting stock and will provide related protections for
Holders of preferred shares. Accordingly, I believe that the Plan satisfies the requirements of section 1123(a)(6) of the Bankruptcy Code.
6. Selection of Officers and Directors — § 1123(a)(7).
15. I believe that the Plan is consistent with the interests of all stakeholders with respect to the manner of selection of directors to the New Board. Article IV.N of the Plan provides that the New Board shall consist of: (a) two persons to be selected by CSAM, which shall be U.S. citizens; (b) two persons to be selected by Halcyon; (c) one person to be selected by the Parent;
(d) one person to be selected by a majority-in-interest of the Consenting Term Loan B Creditors; and (e) the Chief Executive Officer of PES Inc., which accords with applicable state law, the
Bankruptcy Code, the interests of creditors and equity security holders, and public policy.
Additionally, to the extent reasonably practicable, the Debtors will disclose in advance of the
Confirmation Hearing the identity and affiliations of any Person proposed to serve on the New
Boards, as well as those Persons that will serve as officers of the Reorganized Debtors. Thus, the
Plan satisfies the requirements of section 1123(a)(7) of the Bankruptcy Code.
B. The Debtors Have Complied Fully with the Applicable Provisions of the Bankruptcy Code — § 1129(a)(2)
16. I believe that the Plan satisfies section 1129(a)(2) of the Bankruptcy Code, which requires the plan proponent to comply with the applicable provisions of the Bankruptcy Code.
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Section 1129(a)(2) encompasses the disclosure and solicitation requirements set forth in section 1125 and the plan acceptance requirements set forth in section 1126 of the Bankruptcy
Code. I believe that the Debtors have satisfied sections 1125(g) and 1126(b) of the Bankruptcy
Code, as applicable.
1. The Debtors Complied with Applicable Nonbankruptcy Law.
17. I believe that the Debtors have complied with applicable nonbankruptcy law. Here, in accordance with section 1136(b)(1) of the Bankruptcy Code, the Debtors solicitation of Holders of Claims receiving securities under the Plan was subject to the United States Securities Act of
1933 (as amended, the “Securities Act”) and the regulatory authority of various states under state securities laws (“Blue Sky Laws”). There was no general solicitation in connection with the sale of securities under the Plan. As such, the Debtors’ prepetition solicitation did not constitute a public offering because it falls within the exemptions set forth in either section 5 of the Securities
Act pursuant to section 1145 of the Bankruptcy Code or section 4(a)(2) of the Securities Act, as applicable. Therefore, the Debtors were not required to seek federal or state regulatory approval of the Disclosure Statement. I believe that the Debtors have complied with section 1126 of the
Bankruptcy Code.
2. The Disclosure Statement Contains Adequate Information.
18. I believe that the Disclosure Statement contains adequate information. The
Disclosure Statement contains, among other things, descriptions and summaries of:
(a) classification and treatment of Claims and Interests under the Plan, including who is entitled to vote and how to vote on the Plan; (b) the Debtors’ corporate history and corporate structure, business operations, and prepetition capital structure and indebtedness; (c) events leading to these
Chapter 11 Cases, including the Debtors’ prepetition restructuring negotiations and entry into the
Restructuring Support Agreement; (d) certain important effects of Confirmation of the Plan; (e) the
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releases and exculpations contemplated by the Plan; (f) certain financial information about the
Debtors, including financial projections and liquidation and valuation analyses; (g) the statutory requirements for confirming the Plan; (h) certain risk factors Holders of Claims and Interests should consider before voting to accept or reject and the Plan and information regarding alternatives to Confirmation of the Plan; (i) certain important disclosures regarding securities laws; and (j) certain United States federal income tax consequences of the Plan.
19. In addition, the Disclosure Statement and the Plan were subject to review and/or comment by the Restructuring Support Parties, the U.S. Trustee, and the United States on behalf of the EPA, as well as their respective advisors. For the reasons set forth above, I believe that the
Disclosure Statement contains adequate information within the meaning of section 1125(a) of the
Bankruptcy Code in satisfaction of section 1126(b)(2) and should be approved.
3. Solicitation of the Plan Complied with the Bankruptcy Code and Was in Good Faith.
20. I believe that the Debtors, at all times engaged in arm’s-length, good-faith negotiations and took appropriate actions in connection with the solicitation of the Plan in compliance with section 1125 of the Bankruptcy Code. I believe that the Court should grant the
Debtors the protections provided under section 1125(e) of the Bankruptcy Code.
C. The Debtors Proposed the Plan in Good Faith — § 1129(a)(3).
21. I believe that the Plan was proposed in good faith, with the legitimate and honest purposes of reorganizing the Debtors’ ongoing business, and to enable the Debtors to reorganize and achieve a fresh start.
22. It is my testimony that the Plan is the result of extensive collaborative efforts between the Debtors and their stakeholders. The Plan promotes the rehabilitative objectives and purposes of the Bankruptcy Code by allowing the Debtors to obtain relief from debt maturities,
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obtain access to additional capital, and position their business for long-term success. As such, I understand that the Plan will achieve a result consistent with the objectives and purposes of section
1129(a)(3) of the Bankruptcy Code.
D. Payment of Professional Fees and Expenses Are Subject to Court Approval — § 1129(a)(4).
23. It is my understanding that section 1129(a)(4) of the Bankruptcy Code requires that certain fees and expenses paid by the plan proponent, by a debtor, or by a person receiving distributions of property under the plan, be approved by the Court as reasonable or remain subject to approval by the Court as reasonable. I can confirm that the Plan provides that Professional Fee
Claims and corresponding payments are subject to prior Court approval and the reasonableness requirements under sections 328 or 330 of the Bankruptcy Code. Article II.C of the Plan provides that Professionals shall file all final requests for payment of Professional Fee Claims no later than
45 days after the Effective Date, thereby providing an adequate period of time for interested parties to review such Professional Fee Claims.
E. Compliance with Governance Disclosure Requirements — § 1129(a)(5).
24. To the best of my knowledge, the Debtors, to the extent reasonably practicable, will make all appropriate disclosures regarding the identities and affiliations of all persons proposed to serve on the New Board as well as those Persons that will serve as officers of the Reorganized
Debtors, in advance of the Confirmation Hearing.
F. The Debtors’ Liquidation Analysis Satisfies the Best Interests Test — § 1129(a)(7).
25. It is my understanding that the Plan satisfies the “best interests of creditors” test of section 1129(a)(7) of the Bankruptcy Code. The Debtors, with the assistance of A&M, prepared an unaudited liquidation analysis, which is attached to the Disclosure Statement as Exhibit C
(the “Liquidation Analysis”). The Liquidation Analysis compares the projected recoveries that
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would result from the liquidation of the Debtors in a hypothetical case under chapter 7 of the
Bankruptcy Code with the estimated distributions to Holders of Allowed Claims and Interests under the Plan. The Liquidation Analysis is based on the value of the Debtors’ assets and liabilities as of a certain date and incorporates various estimates and assumptions, including a hypothetical conversion to a chapter 7 liquidation as of a certain date. Further, the Liquidation Analysis is subject to potentially material changes, including with respect to economic and business conditions and legal rulings.
26. I believe, based on this analysis, that a liquidation of the Debtors’ assets would not result in any greater value to non-consenting Holders of Claims and Interests in Impaired Classes as compared to the contemplated Plan distributions. I believe that these estimates are reliable and that the Plan satisfies the best interest tests as required under the Bankruptcy Code.
G. Voting Requirements — § 1129(a)(8).
27. I understand that the Bankruptcy Code generally requires that each class of claims or interests must either accept the plan or be unimpaired under the plan. If not, the plan must satisfy the “cramdown” requirements with respect to the claims or interests in that class.
28. Here, the Plan satisfies either the voting requirements or the cramdown requirements with respect to all eight Classes.
H. Priority Cash Payments — § 1129(a)(9).
29. I understand that the Bankruptcy Code generally requires that claims entitled to administrative priority must be repaid in full in cash or receive certain other specified treatment. I can confirm that the Plan contemplates that Allowed Administrative Claims will be repaid in full in cash or receive other treatment rendering them unimpaired. In addition, Allowed Priority Tax
Claims will be paid in accordance with the terms set forth in section 1129(a)(9)(C) of the
Bankruptcy Code.
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I. At Least One Impaired Class of Claims Accepted the Plan — § 1129(a)(10).
30. I understand that the Bankruptcy Code requires that if a class of claims is impaired under the plan, then at least one class of impaired claims must accept the plan, determined without including any acceptance of the plan by any insider. Class 7 and Class 8 are Impaired under the
Plan and voted to accept the Plan independent of any insiders’ votes. Accordingly, the Plan satisfies section 1129(a)(10) of the Bankruptcy Code.
J. The Plan Is Feasible — § 1129(a)(11).
31. I believe that the Plan will provide the Debtors with a reasonable assurance of commercial viability upon emergence, and will not be followed by liquidation or the need for further financial reorganization of the Debtor or any successor to the Debtor. Pursuant to the
Financial Projections, attached to the Disclosure Statement as Exhibit E, I believe that the Debtors will be able to make all payments under the Plan while conducting ongoing business operations.
32. I believe that the Financial Projections included in the Disclosure Statement demonstrate that the Debtors will be well-positioned when they emerge from bankruptcy to operate their business and to service their debt obligations.
K. The Plan Provides for Payment of All Fees — § 1129(a)(12).
33. It is my testimony that the Plan includes an express provision requiring payment of all fees in compliance with the Bankruptcy Code.
L. The Plan Satisfies Cram-Down Requirements — § 1129(b).
34. As part of the Disclosure Statement, PJT Partners LP (“PJT”) prepared an estimate of the total enterprise value (“TEV”) and the equity value (the “Equity Value” and, together with the TEV, the “Valuation Analysis”) of the Reorganized Debtors. The Valuation Analysis is set forth in Exhibit B of the Disclosure Statement.
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35. PJT estimated the TEV of the Reorganized Debtors to be approximately
$725 million to approximately $975 million. Depending on whether the Debtors implemented their restructuring through a chapter 11 plan or, alternatively, a section 363 sale of the Debtors’ assets to provide relief from their RVOs, the Equity Value of the Reorganized Debtors immediately after the Effective Date was estimated by PJT to range from approximately $100 million to approximately $700 million.
36. Since the date that the Disclosure Statement was filed on January 22, 2018, and as described in the Notice of Lodging of Proposed Settlement Agreement filed by the United States of America, on behalf of the United States Environmental Protection Agency [Docket. No 244], the Debtors have reached a settlement with the EPA alleviating the need for the Debtors to purchase additional RINs to satisfy their RVOs prior to emergence from chapter 11. As such, total excess cash and net debt of the Reorganized Debtors immediately after consummation of the Plan are forecasted by the Debtors to be approximately $300 million and approximately $450 million, respectively. Therefore, the Reorganized Debtors’ Equity Value at emergence from chapter 11 is estimated by PJT to now range from approximately $275 million to approximately $525 million, which is within the Equity Value range set forth in the Disclosure Statement.
37. It is my testimony that the Plan’s treatment of the non-accepting impaired class deemed to reject the Plan—Class 12—is proper. Class 12 (Interests in PES Holdings) is comprised of all Interests in PES Holdings. There are no Claims or Interests in PES Holdings that are junior to the Interests in PES Holdings that are receiving any recovery under the Plan, nor is any Holder of a Claim or Interest receiving more than payment in full of its Claim or Interest. Thus, the Plan satisfies the absolute priority rule with respect to Class 12.
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38. In addition, Class 12 is not similarly situated legally or otherwise to any other
Class. Further, all Holders of Class 12 Interests are treated in the same manner under the Plan.
Thus, the Plan does not discriminate unfairly in contravention of section 1129(b)(1) of the
Bankruptcy Code and may be confirmed notwithstanding the deemed rejection by the impaired class.
III. The Principal Purpose of the Plan is not the Avoidance of Taxes as Required under Section 1129(d) of the Bankruptcy Code.
39. The Plan has not been filed for the purpose of avoidance of taxes or the application of section 5 of the Securities Act. Moreover, no party that is a governmental unit, or any other entity, has requested that the Bankruptcy Court decline to confirm the Plan on the grounds that the principal purpose of the Plan is the avoidance of taxes or the avoidance of the application of section
5 of the Securities Act. Rather, I believe the Debtors filed the Plan to accomplish their objective of efficiently and responsibly reorganizing their capital structure, preserving the going concern of their business, and providing recoveries to their stakeholders. Accordingly, I believe that the
Debtors have satisfied the requirements of section 1129(d) of the Bankruptcy Code.
IV. The Plan Appropriately Incorporates Settlement of Claims and Causes of Action.
40. The Plan incorporates the Settlement which provides for the compromise and settlement of numerous Claims, Interests, Causes of Action, and controversies designed to achieve a beneficial and efficient resolution of the Chapter 11 Cases for all parties in interest. Through the
Settlement, the Plan resolves a host of alleged Claims and Causes of Action, which were thoroughly analyzed by the Debtors’ Special Committees, which were advised by separate sets of counsel. The Claims and Causes of Action are all highly uncertain to succeed and pursuit thereof could cause extensive delay, cost, and uncertainty in these Chapter 11 Cases and otherwise.
Accordingly, except as otherwise set forth in the Plan or herein, in consideration for the distribution
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and other benefits provided under the Plan, including the release, exculpation, and injunction provisions and the Parent Cash Contribution, the Plan shall constitute a good faith compromise and settlement of all Claims and controversies resolved pursuant to the Plan. I believe each component of the Settlement is an integral, integrated, and inextricably linked part of the
Settlement.
41. The compromises and releases set forth in the Plan are critical to bringing closure to these and other matters addressed in the Plan and to permitting the Debtors to emerge from chapter 11 with a stronger balance sheet and a fresh start. Without the compromises and releases set forth in the Plan, the various stakeholders (including the Parent Parties, Term Loan A Lenders and Agent, Term Loan B Lenders and Agent, the Intermediation Counterparties, the Refining ABL
Lenders and Agent, the DIP Lenders and Agent, and the DIP Commitment Parties (all as defined in the Plan and Confirmation Order) would not have agreed to provide the consideration that they agreed to provide, and is integral, to the Plan.
42. The releases of the Debtors’ officers and members of their boards of managers are an integral component of the negotiated settlement. The Debtors’ officers and members of their boards of managers made substantial and valuable contributions to the Debtors’ restructuring and the Estates. The Debtors’ officers invested significant time and effort to make the restructuring a success and preserve the value of the Debtors’ Estates in a challenging environment. Similarly, the and members of their boards of managers spent significant time and meaningfully contributed to the restructuring negotiations that led to the Plan and the RVO Settlement Agreement. Even if any colorable Claims against the Debtors’ officers and members of their boards of managers existed, the Debtors’ officers and members of their boards of managers are indemnified under state law, organizational documents, and agreements—meaning that any liability would likely flow
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back to the Reorganized Debtors. In addition, litigation against officers and members of their boards of managers would be a significant distraction to the Debtors’ business and the restructuring.
43. The release of the Parent Parties was integrally tied to the provision of the Parent
Cash Contribution of $65 million. In return for the Parent Cash Contribution, the Parent shall receive 25% of the New Equity, in accordance with the Restructuring Transactions, in the form of
New Class B Common Stock and New Membership Interests and a settlement of any Claims,
Interests and Causes of Action that may be asserted against the Parent. In addition, the Parent and the other Restructuring Support Parties, invested time and energy, working alongside the Debtors to structure a reorganization process that provided the Debtors with the greatest chance of emerging from chapter 11 successfully. The Parent Cash Contribution would not be made absent the release of the Parent Parties.
44. In addition, the Plan embodies a settlement by and among the Debtors and the
United States, on behalf of the EPA (the “RVO Settlement Agreement”), which is attached as
Exhibit G to the Plan Supplement. The RVO Settlement Agreement is the result of months of hard fought negotiations and is a linchpin of the Debtors’ reorganization efforts.
45. Absent the relief in the RVO Settlement Agreement, the Debtors would pursue a sale transaction and would seek to sell all of their assets “free and clear” of any RIN Liabilities.
The RVO Settlement Agreement, on the other hand, provides critical relief and trades uncertainty, risk, and a highly-contested confirmation process for a restructuring timeline with fixed milestones, clearly articulated secured and unsecured recoveries, and mutual cooperation. The fairness and reasonableness of the RVO Settlement Agreement is underscored by the broad support
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3 from all levels of the capital structure.89F I believe, that the Debtors’ entry into the RVO Settlement
Agreement is an exercise of the Debtors’ sound business judgment, as corroborated by the support of all other major constituencies, and that the certainty, swiftness, and consensual nature of the restructuring to be effectuated pursuant to the RVO Settlement Agreement greatly outweighs any potential additional value available following a protracted, expensive, and uncertain litigation.
Accordingly, I believe that the RVO Settlement Agreement satisfies the requirements of the
Bankruptcy Code and Third Circuit law.
V. The Releases and Exculpations in the Plan Are Appropriate.
46. I believe that the Debtors’ Releases are appropriate, justified, in the best interests of the stakeholders, and an integral part of the Plan. Prosecuting the Claims and Causes of Action would have been enormously complex and expensive, would have represented an enormous inconvenience and distraction to the Debtors, and would have entailed significant delay, which would have been value destructive.
47. In return for the Debtor Releases, the Debtors received a global settlement, including global closure, that will decrease the Debtors’ anticipated debt service obligations by approximately $35 million per year and relieve the Debtors of debt maturities through 2022. The
Debtor Releases were negotiated by sophisticated entities that were represented by able counsel and financial advisors. Tellingly, all voting Classes voted unanimously in favor of the Plan, including the Debtor Releases. It is my belief that the Debtor Releases are in the best interests of the Debtors.
48. The third-party releases are a critical negotiated term of the Plan. Without the third- party releases, the Plan could not become effective, thus jeopardizing the Debtors’ ability to
3 See generally Voting Reports.
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successfully emerge from bankruptcy as a viable, stand-alone enterprise. Moreover, all voting
Classes voted unanimously in favor of the Plan. And the Released Parties have made substantial contributions to the Debtors’ restructuring and Estates.
49. Each of the Released Parties, as stakeholders and critical participants in the
Debtors’ reorganization process, share a common goal with the Debtors in seeing the Plan succeed.
Further, I am advised by counsel that the Debtors and the Reorganized Debtors are required to indemnify certain of the Released Parties under, among other agreements, their pre- and postpetition credit facilities and, with respect to officers and members of the boards of managers of the Debtors, certain indemnification agreements. Thus, any Cause of Action against one of the
Debtors’ indemnitees could create an obligation on behalf of the Debtors and would effectively amount to litigation against the Debtors, depleting assets of the Estates. Accordingly, I believe there is an identity of interests between the Debtors and the entities that will benefit from the Third-
Party Release.
50. I believe the Released Parties, including the Parent Parties, the other Restructuring
Support Parties, and the Debtors’ officers and members of their boards of managers, played an integral role in the formulation and negotiation of the Plan and the transactions contemplated thereby. The Released Parties have expended significant time and resources analyzing and negotiating the issues presented by the Debtors’ capital structure and the material barriers to the resolution thereof. In addition to significant concessions under the Plan, certain of the Released
Parties have agreed to fund the New First Lien Term Loan, the Parent Cash Contribution, and the
Additional Financing Facility. I do not believe that the Debtors’ restructuring would have been possible without the Released Parties’ support and contributions. I also believe that the Debtors’ ability to secure the Third-Party Release was one of their most important bargaining chips in the
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restructuring negotiations. Accordingly, I believe the Released Parties have made a substantial contribution to the Debtors’ reorganization and that the Third-Party Release is necessary to the restructuring.
51. Among other things, the Parent Parties made a $65 million cash contribution and agreed to the terms of the Restructuring Support Agreement. The Term Loan A Lenders and Agent agreed to the terms of the Restructuring Support Agreement and provided tranche B of the New first Lien Term Loan Facility. The Term Loan B Lenders and Agent agreed to equitize $107 million of their pre-petition debt, agreed to the terms of the Restructuring Support Agreement, and agreed to provide tranche C of the New First Lien Term Loan Facility. The Intermediation
Counterparties agreed to provide the post-petition intermediation facility. The Refining ABL
Lenders and Agent allowed the Debtors to use their cash collateral pursuant to the terms of the
DIP/Cash Collateral Order previously entered by the Bankruptcy Court. The DIP Lenders (all of whom are also Term Loan B Lenders) and DIP Agent provided a $120 million debtor-in- possession financing facility. And the DIP Commitment Parties agreed to backstop the DIP. These were all valuable contributions to the restructuring that would not have occurred absent the
Debtors’ agreement to include these entities as Released Parties in the Plan.
52. I believe that the Released Parties have expended significant time and resources analyzing and negotiating the issues presented by the Debtors’ capital structure and the material barriers to the resolution thereof. In addition to significant concessions under the Plan, certain of the Released Parties have agreed to fund the New First Lien Term Loan, the Parent Cash
Contribution, and the Additional Financing Facility. The Released Parties that have not done so have made significant concessions under the Plan and facilitated an overwhelmingly consensual
Confirmation—allowing for the preservation of substantial assets in the process that I believe will
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help to ensure a smooth emergence from chapter 11. In short, the Debtors’ restructuring would not have been possible without the Released Parties’ support and contributions.
53. The Exculpation Provision similarly is an integral piece of the overall settlement embodied by the Plan and is the product of good faith, arm’s-length negotiations. Here, the
Exculpation Provision is appropriate and vital because it provides protection to those parties who served as fiduciaries during the restructuring process. Exculpation provisions appropriately prevent future collateral attacks against fiduciaries of the Debtors’ Estates. The Exculpation
Provision is also “narrowly tailored” to cover only to those worked on behalf of the Debtors and on behalf of the best interests of the Estates. Finally, the Exculpation Provision “complies with applicable standards” including the “good faith” requirements of the Bankruptcy Code and other applicable law.
54. The Exculpation Provision exculpates the Exculpated Parties from any Cause of
Action arising out of acts or omissions in connection with these chapter 11 cases and certain related transactions, except for acts or omissions that are found in a final order to have constituted fraud, willful misconduct, or gross negligence. I believe that each of the Exculpated Parties was instrumental to the success of the Debtors’ efforts to reach an entirely consensual Plan and that the successful administration of the Chapter 11 Cases would not have been possible without, among others, the Restructuring Support Parties and the Parent, and their respective advisors’ support and affirmative efforts over the course of the Debtors’ restructuring. The Restructuring Support Parties and the Parent, among others, undoubtedly “performed necessary and valuable duties in connection with the case,” including significant concessions both in the lead-up to the Petition
Date and in subsequent negotiations and settlements, and are responsible for funding the critical sources of pre- and post-emergence liquidity that will form the cornerstone of the Debtors’ go-
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forward business plan. The Exculpation Provision is an integral part of the Plan. This provision provides necessary protections to those parties in interest whose efforts were and continue to be vital to formulating and implementing the Plan, which has garnered universal support from all of the Debtors’ voting creditors.
55. The Exculpation Provision, together with the Plan’s release provisions, was a material inducement to convince the Restructuring Support Parties to help facilitate the Debtors’ restructuring both prior to and after the Petition Date.
56. The injunction sought is necessary to enforce the releases and exculpations contained in the Plan. The Plan includes an injunction that implements the Plan’s discharge, release, and exculpation provisions, in part, by permanently enjoining all entities from commencing or maintaining any action against the Debtors, the Reorganized Debtors, the Released
Parties, or the Exculpated Parties on account of or in connection with or with respect to any Claims or Interests that are being discharged, released, exculpated, or settled under the Plan. The
Injunction Provision is a key provision of the Plan because it enforces the discharge, release, and exculpation provisions that are centrally important to the Plan, i.e., it only enjoins Claims or
Interests that are otherwise already being discharged, released, exculpated, or settled under the
Plan. As such, I believe the Injunction Provision should be approved.
VI. The Modifications to the Plan Do Not Require Resolicitation and Should Be Approved.
57. I understand that the Bankruptcy Code provides that a plan proponent may modify a plan any time before Confirmation. Here, to address and settle various formal and informal objections, the Debtors filed a first amended Plan on March 16, 2018 [Docket No. 257] and filed a second amended Plan on March 22, 2018 [Docket No. 286]. I believe that the changes are permissible modifications to the Plan and are supported by the Debtors, and either improve or do
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not reflect material differences to recoveries of each affected class—i.e., no holder is “likely” to reconsider its acceptance.
VII. Good Cause Exists to Waive the Stay of the Confirmation Order.
58. I understand that certain Bankruptcy Rules provide for the stay of an order confirming a chapter 11 plan, but that such a stay may be waived upon court order after a showing a good cause.
59. The Debtors’ prompt emergence from chapter 11 is an important component of their restructuring. Given the complexity of substantially consummating the Restructuring
Transactions, the Debtors may take certain steps to effectuate the Plan in anticipation of and to facilitate the occurrence of the Effective Date so that the Effective Date can occur promptly and in accordance with the milestones in the Restructuring Support Agreement. Based on the foregoing, I believe that good cause exists to waive any stay imposed by the Bankruptcy Rules so that the proposed Confirmation Order may be effective immediately upon its entry.
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Pursuant to 28 U.S.C. § 1746, I declare under penalty of perjury that the foregoing is true and correct to the best of my knowledge and belief.
Dated: March 22, 2018 /s/ Gregory G. Gatta Gregory G. Gatta Chief Executive Officer PES HOLDINGS, LLC
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Exhibit B
Laurinaitis Declaration
Case 18-10122-KG Doc 290-2 Filed 03/23/18 Page 2 of 5
IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
§ In re: § Chapter 11 § PES HOLDINGS, LLC, et al.,1 § Case No. 18-10122 (KG) § Debtors. § (Jointly Administered) §
DECLARATION OF PETER LAURINAITIS IN SUPPORT OF CONFIRMATION OF THE SECOND AMENDED JOINT CHAPTER 11 PLAN OF REORGANIZATION OF PES HOLDINGS, LLC AND ITS DEBTOR AFFILIATES
I, Peter Laurinaitis, declare as follows:
1. I submit this declaration in support of the Second Amended Joint Prepackaged
Chapter 11 Plan of Reorganization of PES Holdings, LLC and Its Debtor Affiliates [Docket
No. 286] (the “Plan”). Capitalized terms used but not otherwise defined herein have the meanings ascribed to them in the Plan.
I. Introduction and Assignment.
2. I have been asked by Kirkland & Ellis LLP as counsel to the Debtors to provide an estimated valuation of the Reorganized Debtors on a consolidated going-concern basis pro forma for the transactions contemplated by the Plan.
3. The statements in this declaration are, except where specifically noted, based on my personal knowledge or opinion, on information that I have received from the Debtors’ employees or advisors, or employees of PJT Partners LP (“PJT”) working directly with me or
1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, are: PES Holdings, LLC (8157); North Yard Financing, LLC (6284); North Yard GP, LLC (5458); North Yard Logistics, L.P. (5952); PES Administrative Services, LLC (3022); PES Logistics GP, LLC (9202); PES Logistics Partners, L.P. (1288); PESRM Holdings, LLC (2107); and Philadelphia Energy Solutions Refining and Marketing LLC (9574). The Debtors’ service address is: 1735 Market Street, Philadelphia, Pennsylvania 19103. Case 18-10122-KG Doc 290-2 Filed 03/23/18 Page 3 of 5
under my supervision, direction, or control, or from the Debtors’ books and records maintained in the ordinary course of their businesses.
4. Neither PJT nor I are being specifically compensated for this testimony, other than compensation to PJT as a professional retained by the Debtors pursuant to an order of this
Court [Docket. No 195]. I am over the age of 18 years and authorized to submit this declaration on behalf of PJT. If I were called upon to testify, I could and would competently testify to the facts set forth herein.
II. Background and Qualifications.
5. I am a Partner in the Restructuring and Special Situations Group at PJT, an investment banking firm listed on the New York Stock Exchange with its principal offices at
280 Park Avenue, New York, New York 10017. PJT was spun off from The Blackstone Group
L.P. (“Blackstone”) effective October 1, 2015. Upon the consummation of the spin-off,
Blackstone’s Restructuring and Reorganization advisory group became a part of PJT, and
Blackstone’s restructuring professionals became employees of PJT. PJT and its senior professionals have extensive experience in the reorganization and restructuring of distressed companies, both out-of-court and in chapter 11 proceedings. PJT has over 500 employees located in New York, San Francisco, Boston, Chicago, London, Sydney, Hong Kong, and
Madrid. PJT is a registered broker-dealer with the United States Securities and Exchange
Commission and is a member of the Securities Investor Protection Corporation and is regulated by the Financial Industry Regulatory Authority.
6. I received a BS and MSA in accounting from the University of Central Florida and a MBA from the Wharton School of the University of Pennsylvania. I have more than 20 years of restructuring experience. Since joining Blackstone (and subsequently PJT), I have
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provided restructuring advice to companies, creditors, shareholders, and other interested parties on restructuring transactions both in chapter 11 and on an out-of-court basis. I began my career in the Audit and Corporate Restructuring groups of Arthur Andersen LLP.
III. Valuation of Debtors.
7. As part of the Disclosure Statement for the Joint Prepackaged Chapter 11 Plan of
Reorganization of PES Holdings, LLC and Its Debtor Affiliates, dated January 22, 2018 [Docket
No. 10] (the “Disclosure Statement”), PJT prepared an estimate of the total enterprise value
(“TEV”) and the equity value (the “Equity Value” and, together with the TEV, the “Valuation
Analysis”) of the Reorganized Debtors. The Valuation Analysis is set forth in Exhibit B of the
Disclosure Statement.
8. In preparing its estimate of the Reorganized Debtors’ TEV, PJT considered, among other things, a discounted cash flow of the Debtors’ financial projections and select publicly traded comparable company information. Due to a lack of relevant and directly comparable publicly available precedent transactions, PJT considered, but ultimately determined not to rely upon, the precedent transactions methodology. The underlying information PJT reviewed in preparing its estimate was either publicly available or was provided by the Debtors to the Restructuring Support Parties for purposes of assisting with the Plan negotiations.
9. Based upon the above methodologies, for the purposes of the Disclosure
Statement, PJT estimated the TEV of the Reorganized Debtors to be approximately $725 million to approximately $975 million. Depending on whether the Debtors implemented their restructuring through a chapter 11 plan or, alternatively, a section 363 sale of the Debtors’ assets to provide relief from historical Renewable Fuel Standards (“RFS”) obligations, the Equity Value of the
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Reorganized Debtors immediately after the Effective Date was estimated by PJT to range from approximately $100 million to approximately $700 million.
10. Based upon the current commodity price outlook, trading performance of peers, and the Debtors’ recent financial performance since the date that the Disclosure Statement was filed on January 22, 2018, I do not believe that modifications to PJT’s estimate of the Reorganized
Debtors’ TEV set forth in the Disclosure Statement are necessary as of the date of this Declaration.
11. Since the date that the Disclosure Statement was filed on January 22, 2018, and as described in the Notice of Lodging of Proposed Settlement Agreement filed by the United States of America, on behalf of the United States Environmental Protection Agency [Docket. No 244], the Debtors have reached a settlement with the U.S. Environmental Protection Agency alleviating the need for the Debtors to purchase additional Renewable Identification Numbers to satisfy their
RFS obligations prior to emergence from Chapter 11. As such, total excess cash and net debt of the Reorganized Debtors immediately after consummation of the Plan are forecasted by the
Company to be approximately $300 million and approximately $450 million, respectively.
Therefore, the Reorganized Debtors’ Equity Value at emergence from chapter 11 is estimated by
PJT to now range from approximately $275 million to approximately $525 million, which is within the Equity Value range set forth in the Disclosure Statement.
Dated: March 22, 2018 /s/ Wilmington, Delaware Peter Laurinaitis
4 Case 18-10122-KG Doc 290-3 Filed 03/23/18 Page 1 of 6
Exhibit C
Sciametta Declaration
Case 18-10122-KG Doc 290-3 Filed 03/23/18 Page 2 of 6
IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
) In re: ) Chapter 11 ) PES HOLDINGS, LLC, et al.,1 ) Case No. 18-10122 (KG) ) Debtors. ) (Jointly Administered) )
DECLARATION OF JOSEPH J. SCIAMETTA IN SUPPORT OF AN ORDER APPROVING THE DEBTORS’ DISCLOSURE STATEMENT FOR AND CONFIRMING THE DEBTORS’ SECOND AMENDED JOINT PREPACKAGED CHAPTER 11 PLAN OF REORGANIZATION OF PES HOLDINGS, LLC AND ITS DEBTOR AFFILIATES
I, Joseph J. Sciametta, hereby declare under penalty of perjury as follows:
1. I am a Managing Director at Alvarez & Marsal North America, LLC (“A&M”).
My business address is 600 Madison Avenue, 8th Floor, New York, New York 10022. I am familiar with the above-captioned debtors and debtors in possession’s (collectively, the “Debtors”) business affairs, financial performance, restructuring efforts, and operations. A&M is a leading independent provider of restructuring, financial, and corporate advisory solutions and has been retained by the Debtors in these chapter 11 cases.
2. Except as otherwise indicated herein, all facts set forth in this declaration are based upon my personal knowledge of the Debtors’ operations and finances and the Debtors’ restructuring activities, information gathered from my review of relevant documents, and information supplied to me by other members of the Debtors’ management and the Debtors’
1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, are: PES Holdings, LLC (8157); North Yard Financing, LLC (6284); North Yard GP, LLC (5458); North Yard Logistics, L.P. (5952); PES Administrative Services, LLC (3022); PES Logistics GP, LLC (9202); PES Logistics Partners, L.P. (1288); PESRM Holdings, LLC (2107); and Philadelphia Energy Solutions Refining and Marketing LLC (9574). The Debtors’ service address is: 1735 Market Street, Philadelphia, Pennsylvania 19103. Case 18-10122-KG Doc 290-3 Filed 03/23/18 Page 3 of 6
advisors. I submit this declaration (this “Declaration”) in support of the Second Amended Joint
Prepackaged Chapter 11 Plan of Reorganization of PES Holdings, LLC and its Debtor Affiliates
[Docket No. 286] (as modified, amended, or supplemented from time to time in accordance with its terms, the “Plan”).2 I am authorized to submit this declaration on behalf of the Debtors, and, if
I were called upon to testify, I could and would testify competently to the facts set forth herein.
Qualifications
3. A&M is a leading restructuring consulting firm with extensive experience and an excellent reputation for providing high quality, specialized management and restructuring advisory services to debtors and distressed companies. Specifically, A&M’s core services include turnaround advisory services, interim and crisis management, claims management, and creditor advisory services. A&M provides a wide range of debtor advisory services targeted at stabilizing and improving a company’s financial position, including: developing or validating forecasts, business plans and related assessments of strategic position; monitoring and managing cash, cash flow and supplier relationships; assessing and recommending cost reduction strategies; and designing and negotiating financial restructuring packages. Additionally, A&M provides advice on specific aspects of the turnaround process and helps manage complex constituency relations and communications. A&M is known for its ability to work alongside company management and key constituents during chapter 11 restructurings to develop a feasible and executable plan of reorganization.
2 Capitalized terms used but not otherwise defined herein have the meanings set forth in the Plan or the Debtors’ Memorandum of Law in Support of an Order Approving the Debtors’ Disclosure Statement for and Confirming the First Amended Prepackaged Chapter 11 Plan of Reorganization of PES Holdings, LLC and its Debtor Affiliates, filed contemporaneously herewith.
2 Case 18-10122-KG Doc 290-3 Filed 03/23/18 Page 4 of 6
4. I graduated from Fairfield University with a Bachelor’s degree and a Master’s degree in business administration. I have over 18 years of restructuring experience, specializing in business plan development and review, liquidity and working capital management forecasting, and chapter 11 planning.
Preliminary Statement
5. In July 2017, the Debtors retained A&M to provide assistance in connection with the Debtors’ evaluation of their cash management system, financial forecasting, and contingency planning. From early in A&M’s retention, I worked closely with the Debtors’ management and other advisors to evaluate the Debtors’ liquidity and cash needs, including in the event of a chapter 11 filing.
6. On February 23, 2018, the Court entered the Order Authorizing the Retention of
Alvarez & Marsal North America, LLC as Restructuring Advisors to the Debtors and Debtors in
Possession Effective Nunc Pro Tunc to the Petition Date [Docket No. 194].
Best Interests Test
7. Section 1129(a)(7) of the Bankruptcy Code requires that each Holder of an
Impaired Claim or Interest either (a) accept the Plan or (b) receive or retain under the Plan property of a value, as of the Effective Date, that is not less than the value such Holder would receive if the
Debtors were liquidated under chapter 7 of the Bankruptcy Code. In order to determine whether the Plan satisfied the best interests test, the Debtors, with the assistance of A&M, prepared an unaudited liquidation analysis, which is attached to the Disclosure Statement as Exhibit C
(the “Liquidation Analysis”). The Liquidation Analysis compares the projected recoveries that would result from the liquidation of the Debtors in a hypothetical case under chapter 7 of the
Bankruptcy Code with the estimated distributions to Holders of Allowed Claims and Interests under the Plan. The Liquidation Analysis is based on the value of the Debtors’ assets and liabilities
3 Case 18-10122-KG Doc 290-3 Filed 03/23/18 Page 5 of 6
as of a certain date and incorporates various estimates and assumptions, including a hypothetical conversion to a chapter 7 liquidation as of a certain date. Further, the Liquidation Analysis is subject to potentially material changes, including with respect to economic and business conditions and legal rulings.
8. Based on the unaudited Liquidation Analysis, and the assumptions included therein,
I believe that the value of any distributions if the chapter 11 cases were converted to cases under chapter 7 of the Bankruptcy Code would be no greater than the value of distributions under the
Plan. As a result, I believe Holders of Claims and Interests in all Impaired Classes will recover at least as much as a result of Confirmation of the Plan as they would recover through a hypothetical chapter 7 liquidation.
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4 Case 18-10122-KG Doc 290-3 Filed 03/23/18 Page 6 of 6 Case 18-10122-KG Doc 290-4 Filed 03/23/18 Page 1 of 31
Exhibit D
Deutch Declaration
Case 18-10122-KG Doc 290-4 Filed 03/23/18 Page 2 of 31
IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
§ In re: § Chapter 11 § PES HOLDINGS, LLC, et al.,1 § Case No. 18-10122 (KG) § Debtors. § (Jointly Administered) §
DECLARATION OF PAUL H. DEUTCH ON BEHALF OF RUST CONSULTING OMNI BANKRUPTCY REGARDING SERVICE OF SOLICITATION PACKAGES AND TABULATION OF BALLOTS CAST ON THE JOINT PREPACKAGED CHAPTER 11 PLAN OF REORGANIZATION OF PES HOLDINGS, LLC AND ITS DEBTOR AFFILIATES ______
PAUL H. DEUTCH, hereby declares, under penalty of perjury, as follows:
1. I am the Executive Managing Director of Rust Consulting Omni Bankruptcy
(“Omni”), located at 1120 Avenue of the Americas, 4th Floor, New York, NY 10036. I am over the age of 18 years and do not have a direct interest in this chapter 11 case and should be considered an impartial party.
2. I submit this declaration with respect to the Joint Prepackaged Chapter 11 Plan of Reorganization of PES Holdings, LLC and its Debtor Affiliates dated January 11, 2018
(as amended, supplemented, or modified from time to time, the “Plan”).2 Except as otherwise indicated herein, all facts set forth herein are based upon my personal knowledge or my review
1 The Debtors in these chapter 11 cases, along with the last four digits of each debtor’s federal tax identification number, are: PES Holdings, LLC (8157); North Yard Financing, LLC (6284); North Yard GP, LLC (5458); North Yard Logistics, L.P. (5952); PES Administrative Services, LLC (3022); PES Logistics GP, LLC (9202); PES Logistics Partners, L.P. (1288); PESRM Holdings, LLC (2107); and Philadelphia Energy Solutions Refining and Marketing LLC (9574). The Debtors’ service address is: 1735 Market Street, Philadelphia, Pennsylvania 19103.
2 Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Plan. Case 18-10122-KG Doc 290-4 Filed 03/23/18 Page 3 of 31
of relevant documents. I am authorized to submit this Declaration on behalf of Omni. If I were called upon to testify, I could and would testify competently as to the facts set forth herein.
3. Prior to the commencement of their chapter 11 cases, PES Holdings, LLC and certain of its affiliates, as debtors and debtors in possession in the above-captioned chapter 11 cases (collectively, the “Debtors”), designated Omni as their voting agent to assist the Debtors with, among other things, (a) the balloting process and service of solicitation materials to the parties entitled to vote to accept or reject the Prepackaged Plan, and (b) the tabulation of votes cast with respect thereto. Rust Omni and its employees have considerable experience in soliciting and tabulating votes to accept or reject proposed prepackaged chapter 11 plans.
Service of Solicitation Packages
4. Under my direction and supervision, Rust Omni served the following materials:
a. Disclosure Statement for Joint Prepackaged Chapter 11 Plan of Reorganization of PES Holdings, LLC. and its Debtor Affiliates, dated January 17, 2018 with all exhibits thereto, including:
Exhibit A: Joint Prepackaged Chapter 11 Plan of Reorganization of PES Holdings, LLC and its Debtor Affiliates, Exhibit B: Restructuring Support Agreement, Exhibit C: Financial Projections, Exhibit D: Liquidation Analysis, Exhibit E: Valuation Analysis, Exhibit F: Corporate Organizational Chart, together, (the “Disclosure Statement”);
b. Class 7 Ballot for Voting on the Joint Prepackaged Chapter 11 Plan of Reorganization of PES Holdings, LLC and its Debtor Affiliates (the “Class 7 Ballot”) a copy of which is attached as Exhibit A hereto; and
c. Class 8 Ballot for Voting on the Joint Prepackaged Chapter 11 Plan of Reorganization of PES Holdings, LLC and its Debtor Affiliates (the “Class 8 Ballot”) a copy of which is attached as Exhibit B hereto.
2 Case 18-10122-KG Doc 290-4 Filed 03/23/18 Page 4 of 31
5. Unless otherwise noted below, on January 17, 2018, under my direction and supervision, Rust Omni caused true and correct copies of the above documents to be served via electronic mail.
Vote Declaration
6. Under the Plan, only Holders of claims (“Claims”) in the following classes (the
“Voting Classes”) were designated as being entitled to vote to accept or reject the Prepackaged
Plan:
Class Class Description Class 7 Term Loan A Claims Class 8 Term Loan B Claims
7. The Debtors established January 16, 2018, as the record date (the “Voting
Record Date”) for determining which Holders of Claims in the Voting Classes were entitled to vote on the Prepackaged Plan.
8. The procedures for the solicitation and tabulation of votes on the Prepackaged
Plan (the “Solicitation Procedures”) are outlined in the Disclosure Statement and Ballots. Omni was instructed to solicit, review, determine the validity of, and tabulate Ballots submitted with respect to the Plan by the Holders of Claims in the Voting Classes in accordance with the
Solicitation Procedures.
9. The lists of lenders holding Class 7 Term Loan A Claims as of the Voting Record
Date were provided by Stephen Vollmer from PNC Capital Markets LLC, one of the joint lead arrangers for this facility.
10. The lists of lenders holding Class 8 Term Loan B Claims as of the Voting Record
Date were provided by Julien Castello from JPMorgan Chase Bank N.A., the administrative agent, sole lead arranger, and sole bookrunner for this facility.
3 Case 18-10122-KG Doc 290-4 Filed 03/23/18 Page 5 of 31
11. In accordance with the Solicitation Procedures, Omni solicited the holders of
Claims in the Voting Classes as of the Voting Record Date. Ballots returned by email, hand delivery, or overnight courier were, and continue to be, received by personnel of Omni at the offices of Omni in Woodland Hills, CA . All Ballots received by Omni were, and continue to be, processed in accordance with the Solicitation Procedures.
12. In order for a Ballot to be counted as valid, the Ballot must (a) be properly completed in accordance with the Solicitation Procedures, (b) contain sufficient information to permit the identification of the Holder, be signed, and indicate an acceptance or rejection of the
Plan, and (c) be received by Omni by the relevant deadline. The deadline with respect to the
Voting Classes was 5:00 p.m. (Prevailing Eastern Time) on January 19, 2018 (the “Voting
Deadline”). All validly completed and executed Ballots cast by holders in the Voting Classes that were received by Omni on or before the Voting Deadline were tabulated as outlined in the
Solicitation Procedures.
13. The final tabulation of the votes cast through timely and properly completed
Ballots in the Voting Classes received by Omni by the Voting Deadline (the “Tabulation
Report”) is attached as Exhibit C hereto.
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4 Case 18-10122-KG Doc 290-4 Filed 03/23/18 Page 6 of 31
Pursuant to 28 U.S.C. § 1746, I declare under penalty of perjury that the foregoing is true and correct to the best of my knowledge, information and belief.
Executed on March 20, 2018
RUST CONSULTING/OMNI BANKRUPTCY
/s/ Paul H. Deutch______Paul H. Deutch Executive Managing Director Case 18-10122-KG Doc 290-4 Filed 03/23/18 Page 7 of 31
Exhibit A
Class 7 Ballot Case 18-10122-KG Doc 290-4 Filed 03/23/18 Page 8 of 31 PES Holdings, LLC, et al. Class 7 Ballot
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR ADVICE, OR TO MAKE ANY REPRESENTATION, OTHER THAN WHAT IS INCLUDED IN THE MATERIALS MAILED WITH THIS BALLOT. IMPORTANT: NO CHAPTER 11 CASES HAVE BEEN COMMENCED AS OF THE DATE OF THE DISTRIBUTION OF THIS BALLOT. THE DEBTORS (AS DEFINED HEREIN) INTEND TO FILE CHAPTER 11 CASES AND SEEK CONFIRMATION OF THE PLAN (AS DEFINED HEREIN) BY THE BANKRUPTCY COURT SHORTLY THEREAFTER AS DESCRIBED IN GREATER DETAIL IN THE ACCOMPANYING DISCLOSURE STATEMENT. § In re: § Chapter 11 § PES HOLDINGS, LLC, et al.,1 § Case No. 18-_____ (___) § Debtors. § (Joint Administration Pending) §
CLASS 7 BALLOT FOR ACCEPTING OR REJECTING THE JOINT PREPACKAGED CHAPTER 11 PLAN OF REORGANIZATION FOR PES HOLDINGS, LLC AND ITS DEBTOR AFFILIATES
If you are the holder of a Term Loan A Claim (Class 7) as of January 17, 2018 (the “Voting Record Date”), please use this “Ballot” to cast your vote to accept or reject the Joint Prepackaged Plan of Reorganization for PES Holdings, LLC and its Debtor Affiliates (as may be amended, modified or supplemented in accordance with the “Plan”),2 which is being proposed by PES Holdings, LLC and its affiliates that also intend to commence chapter 11 cases (the “Debtors”). The Plan is included as Exhibit A to the accompanying Disclosure Statement, dated January 17, 2018 (as may be amended, modified or supplemented in accordance with the Restructuring Support Agreement, the “Disclosure Statement”). The Plan can be confirmed by the Bankruptcy Court and thereby made binding upon you if the Plan (a) is accepted by the holders of two-thirds in amount and more than one-half in number of Claims in each Class that vote on the Plan, and (b) otherwise satisfies the requirements of section 1129(a) of the Bankruptcy Code. If the requisite acceptances are not obtained, the Bankruptcy Court may nonetheless confirm the Plan if the Plan (a) provides fair and equitable treatment to, and does not discriminate unfairly against, the class(es) of claims that rejected the Plan, in accordance with section 1129(b) of the Bankruptcy Code, and (b) otherwise satisfies the requirements of sections 1129(a) and 1129(b) of the Bankruptcy Code.
Please carefully read the enclosed Disclosure Statement and Plan and follow the enclosed instructions for completing this Ballot. If you believe you have received this Ballot in error, if you believe that you have received the wrong Ballot, or if you believe you are a holder of a Claim in more than one Class entitled to vote to accept or reject the Plan and have not received a Ballot for each such Class, please contact the Solicitation Agent immediately. If you have any questions regarding this Ballot, the enclosed voting instructions, the procedures for voting, or need to obtain additional solicitation materials, please contact the Solicitation Agent by (1) emailing [email protected] and referencing “PES Holdings, LLC” in the subject line, (2) calling (844) 459-0695 or (818) 906-8300 (international calls), and asking for the Solicitation Group, or (3) writing to the following address: PES Holdings, LLC, et al. c/o Rust Consulting/Omni Bankruptcy, 5955 DeSoto Ave., Suite 100, Woodland Hills, C.A. 91367. You may wish to seek legal or other professional advice concerning the proposals related to the Plan.
IMPORTANT VOTING DEADLINE: 5:00 P.M. PREVAILING EASTERN TIME ON JANUARY 19, 2018 REVIEW THE ACCOMPANYING DISCLOSURE STATEMENT FOR THE PLAN. BALLOTS MAY BE SUBMITTED VIA EMAIL BUT WILL NOT BE ACCEPTED BY FACSIMILE TRANSMISSION.
1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, are: PES Holdings, LLC (8157); North Yard Financing, LLC (6284); North Yard GP, LLC (5458); North Yard Logistics, L.P. (5952); PES Administrative Services, LLC (3022); PES Logistics GP, LLC (9202); PES Logistics Partners, L.P. (1288); PESRM Holdings, LLC (2107); and Philadelphia Energy Solutions Refining and Marketing LLC (9574). The Debtors’ service address is 1735 Market Street, Philadelphia, Pennsylvania 19103. 2 All capitalized terms used but otherwise not defined herein shall have the meanings set forth in the Plan.
Case 18-10122-KG Doc 290-4 Filed 03/23/18 Page 9 of 31 PES Holdings, LLC, et al. Class 7 Ballot
DO NOT RETURN ANY SECURITIES WITH THIS BALLOT. This Ballot is not a letter of transmittal and may not be used for any purpose other than to (i) cast votes to accept or reject the Plan and (ii) as provided in Item 3 of this Ballot, elect to opt out of the Third-Party Release (as defined below).
HOW TO VOTE 1. COMPLETE ITEM 1, ITEM 2, AND ITEM 3 (OPTIONAL).
2. REVIEW THE CERTIFICATIONS CONTAINED IN ITEM 4.
3. SIGN AND DATE YOUR BALLOT. Please provide your name and mailing address in the space provided on this Ballot.3
4. RETURN THE BALLOT (i) in the enclosed pre-paid, pre-addressed return envelope, (ii) via first class mail, overnight courier, or hand delivery to the address set forth in Item 4 of this Ballot, or (iii) via email (attaching a scanned PDF of the fully executed Ballot) to [email protected] and reference “PES Holdings, LLC” in the subject line, in each case by 5:00 p.m. prevailing Eastern Time on January 19, 2018 (the “Voting Deadline”), as discussed below. Ballots returned by facsimile will not be accepted.
5. IF YOUR CLAIM IS HELD IN MULTIPLE ACCOUNTS, YOU MAY RECEIVE MORE THAN ONE BALLOT CODED FOR EACH SUCH ACCOUNT FOR WHICH YOUR CLAIMS ARE HELD. SIMILARLY, IF YOU HOLD A CLAIM IN MORE THAN ONE CLASS ENTITLED TO VOTE YOU MAY RECEIVE MORE THAN ONE BALLOT FOR EACH SUCH CLAIM. EACH BALLOT VOTES ONLY YOUR CLAIMS INDICATED ON THAT BALLOT. ACCORDINGLY, YOU MUST COMPLETE AND RETURN EACH BALLOT YOU RECEIVE TO VOTE MULTIPLE CLAIMS.
6. YOU MUST VOTE ALL OF YOUR CLASS 7 TERM LOAN A CLAIMS EITHER TO ACCEPT OR REJECT THE PLAN, AND MAY NOT SPLIT YOUR VOTE.
OTHER IMPORTANT INFORMATION 1. Any Ballot submitted that is incomplete or illegible, indicates unclear or inconsistent votes with respect to the Plan or is improperly signed and returned will NOT be counted unless the Debtors otherwise determine.
2. To vote, you MUST deliver your completed Ballot so that it is ACTUALLY RECEIVED by the Solicitation Agent on or before the Voting Deadline by one of the methods described above. The “Voting Deadline” is 5:00 p.m. prevailing Eastern Time on January 19, 2018.
3. Any Ballot received by the Solicitation Agent after the Voting Deadline will not be counted with respect to acceptance or rejection of the Plan, as applicable, unless the Debtors otherwise determine. Subject to the Restructuring Support Agreement, no Ballot may be withdrawn or modified after the Voting Deadline without the Debtors’ prior consent and/or permission of the Bankruptcy Court.
4. Delivery to the Solicitation Agent of a Ballot reflecting your vote will be deemed to have occurred only when the Solicitation Agent actually receives the originally executed Ballot or, in the case of an emailed Ballot, when the Solicitation Agent actually receives the email attaching a scanned PDF copy of your executed Ballot. In all cases, you should allow sufficient time to assure timely delivery of your Ballot by the Voting Deadline.
5. If, as of the Voting Record Date, you held Claims in more than one voting Class under the Plan, you should receive a separate Ballot for each Class of Claims, coded by Class number, and a set of solicitation materials. You may also receive more than one Ballot if, as of the Voting Record Date, you held Claims through one or more affiliated funds, in which case the vote cast by each such affiliated fund will be counted separately.
3 If you are signing this Ballot in your capacity as a trustee, executor, administrator, guardian, attorney-in-fact, or officer of a corporation or otherwise acting in a fiduciary or representative capacity, you must indicate such capacity when signing and, if required or requested by the Solicitation Agent, the Debtors, the Debtors’ proposed counsel, or the Bankruptcy Court, you must submit proper evidence to the requesting party of authority to so act on behalf of such holder.
2
Case 18-10122-KG Doc 290-4 Filed 03/23/18 Page 10 of 31 PES Holdings, LLC, et al. Class 7 Ballot
Separate Claims held by affiliated funds in a particular Class shall not be aggregated, and the vote of each such affiliated fund related to its Claims shall be treated as a separate vote to accept or reject the Plan (as applicable). If you hold any portion of a single Claim, you and all other holders of any portion of such Claim will be (a) treated as a single creditor for voting purposes and (b) required to vote every portion of such Claim collectively to either accept or reject the Plan. The Debtors reserve the right to challenge the validity of any vote that has been improperly split for voting purposes.
6. If you deliver multiple Ballots to the Solicitation Agent with respect to the same Claim, ONLY the last properly executed Ballot timely received will be deemed to reflect your intent and will supersede and revoke any prior Ballot(s). For the avoidance of doubt, all prior Ballots submitted by you prior to the Ballot last received by the Solicitation Agent will be deemed null and void.
VOTING — COMPLETE THIS SECTION
Item 1. Principal Amount of Class 7 Term Loan A Claims. The undersigned hereby certifies that, as of the Voting Record Date, the undersigned was the holder of Class 7 Term Loan A Claims (or authorized signatory for an entity that is a holder of such Claims) in the following aggregate principal amount, excluding, for the avoidance of doubt, accrued but unpaid interest and other amounts that may be owed to the undersigned (or the entity for whom the undersigned is signatory) (please fill in the amount if not otherwise completed):
Amount of Term Loan A Claims: $______
Item 2. Vote. You may vote to accept or reject the Plan. You must check one of the boxes below in order to have your vote counted.
The holder of the Class 7 Term Loan A Claims set forth in Item 1 above votes to (please check one and only one):
ACCEPT (VOTE FOR) THE PLAN
REJECT (VOTE AGAINST) THE PLAN
The Plan, though proposed jointly, constitutes a separate Plan proposed by each Debtor. Accordingly, your vote cast above will be applied in the same manner and in the same amount in Class 7 against each applicable Debtor.
Item 3. Important information regarding the Third Party Releases.
The Plan contains a series of releases that are part of the overall restructuring set forth in the Plan and described in greater detail in the Disclosure Statement. In that respect, parties should be aware that, if the Plan is confirmed and the Effective Date occurs, certain parties will be getting releases and certain parties will be giving releases as set forth in Article VIII.C of the Plan and as further described in Article VI.S of the Disclosure Statement. For your convenience, excerpts of the release provisions from the Plan are set forth below, however, you should carefully read the enclosed Disclosure Statement and Plan with respect to the releases.
If you do not consent to the releases contained in the Plan and the related injunction, you may elect not to grant such releases but only if you (1) vote to reject the Plan in Item 1 above and (2) file an objection to the third party releases with the Court. IF YOU (A) VOTE TO ACCEPT THE PLAN, (B) FAIL TO SUBMIT A BALLOT BY THE VOTING DEADLINE, (C) SUBMIT THIS BALLOT BUT ABSTAIN FROM VOTING, OR (D) VOTE TO 3
Case 18-10122-KG Doc 290-4 Filed 03/23/18 Page 11 of 31 PES Holdings, LLC, et al. Class 7 Ballot
REJECT THE PLAN BUT DO NOT FILE AN OBJECTION TO THE THIRD PARTY RELEASES WITH THE COURT, THEN YOU WILL BE DEEMED TO CONSENT TO THE THIRD-PARTY RELEASES SET FORTH IN ARTICLE VIII.C OF THE PLAN.
ARTICLE VIII.C OF THE PLAN PROVIDES FOR THE THIRD-PARTY RELEASE:
AS OF THE EFFECTIVE DATE, EACH RELEASING PARTY IS DEEMED TO HAVE RELEASED AND DISCHARGED EACH DEBTOR, REORGANIZED DEBTOR, AND RELEASED PARTY FROM ANY AND ALL CAUSES OF ACTION, INCLUDING ANY DERIVATIVE CLAIMS ASSERTED ON BEHALF OF THE DEBTORS, THAT SUCH ENTITY WOULD HAVE BEEN LEGALLY ENTITLED TO ASSERT (WHETHER INDIVIDUALLY OR COLLECTIVELY), BASED ON OR RELATING TO, OR IN ANY MANNER ARISING FROM, IN WHOLE OR IN PART:
(A) THE DEBTORS, THE DEBTORS’ IN- OR OUT-OF-COURT RESTRUCTURING EFFORTS, INTERCOMPANY TRANSACTIONS, OR THE FORMULATION, PREPARATION, DISSEMINATION, NEGOTIATION, OR FILING OF THE RESTRUCTURING SUPPORT AGREEMENT;
(B) ANY RESTRUCTURING TRANSACTION, CONTRACT, INSTRUMENT, RELEASE, OR OTHER AGREEMENT OR DOCUMENT CREATED OR ENTERED INTO IN CONNECTION WITH THE RESTRUCTURING SUPPORT AGREEMENT, THE DISCLOSURE STATEMENT, OR THE PLAN;
(C) THE CHAPTER 11 CASES, THE DISCLOSURE STATEMENT, THE PLAN, THE FILING OF THE CHAPTER 11 CASES, THE PURSUIT OF CONFIRMATION, THE PURSUIT OF CONSUMMATION, THE ADMINISTRATION AND IMPLEMENTATION OF THE PLAN, INCLUDING THE ISSUANCE OR DISTRIBUTION OF SECURITIES PURSUANT TO THE PLAN, OR THE DISTRIBUTION OF PROPERTY UNDER THE PLAN OR ANY OTHER RELATED AGREEMENT; OR
(D) ANY OTHER ACT OR OMISSION, TRANSACTION, AGREEMENT, EVENT, OR OTHER OCCURRENCE TAKING PLACE ON OR BEFORE THE EFFECTIVE DATE.
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THE FOREGOING, THE RELEASES SET FORTH ABOVE DO NOT RELEASE ANY POST- EFFECTIVE DATE OBLIGATIONS OF ANY PARTY OR ENTITY UNDER THE PLAN, ANY RESTRUCTURING TRANSACTION, OR ANY DOCUMENT, INSTRUMENT, OR AGREEMENT (INCLUDING THOSE SET FORTH IN THE PLAN SUPPLEMENT) EXECUTED TO IMPLEMENT THE PLAN.
ENTRY OF THE CONFIRMATION ORDER SHALL CONSTITUTE THE BANKRUPTCY COURT’S APPROVAL, PURSUANT TO BANKRUPTCY RULE 9019, OF THE THIRD-PARTY RELEASE, WHICH INCLUDES BY REFERENCE EACH OF THE RELATED PROVISIONS AND DEFINITIONS CONTAINED HEREIN, AND, FURTHER, SHALL CONSTITUTE THE BANKRUPTCY COURT’S FINDING THAT THE THIRD PARTY RELEASE IS: (1) CONSENSUAL; (2) ESSENTIAL TO THE CONFIRMATION OF THE PLAN; (3) GIVEN IN EXCHANGE FOR THE GOOD AND VALUABLE CONSIDERATION PROVIDED BY THE RELEASED PARTIES; (4) A GOOD FAITH SETTLEMENT AND COMPROMISE OF THE CLAIMS RELEASED BY THE THIRD-PARTY RELEASE; (5) IN THE BEST INTERESTS OF THE DEBTORS AND THEIR ESTATES; (6) FAIR, EQUITABLE, AND REASONABLE; (7) GIVEN AND MADE AFTER DUE NOTICE AND OPPORTUNITY FOR HEARING; AND (8) A BAR TO 4
Case 18-10122-KG Doc 290-4 Filed 03/23/18 Page 12 of 31 PES Holdings, LLC, et al. Class 7 Ballot
ANY OF THE RELEASING PARTIES ASSERTING ANY CLAIM OR CAUSE OF ACTION RELEASED PURSUANT TO THE THIRD-PARTY RELEASE.
IMPORTANT INFORMATION REGARDING THE THIRD-PARTY RELEASE:
UNDER THE PLAN, “RELEASING PARTIES” MEANS COLLECTIVELY, AND IN EACH CASE SOLELY IN ITS CAPACITY AS SUCH: (A) THE DEBTORS AND REORGANIZED DEBTORS; (B) THE PARENT PARTIES; (C) THE TERM LOAN A LENDERS; (D) THE TERM LOAN B LENDERS; (E) THE TERM LOAN A AGENT; (F) THE TERM LOAN B AGENT; (G) THE INTERMEDIATION LENDERS; (H) THE FIRST LOSS LENDERS; (I) THE REFINING ABL LENDERS; (J) THE REFINING ABL AGENT; (K) THE DIP FACILITY LENDERS; (L) THE DIP FACILITY AGENT; (M) THE DIP COMMITMENT PARTIES; (N) THE ADDITIONAL FINANCING LENDER; (O) THE PURCHASER; (P) WITH RESPECT TO EACH OF THE FOREGOING ENTITIES IN CLAUSES (A) THROUGH (O), EACH SUCH ENTITY’S CURRENT AND FORMER PREDECESSORS, SUCCESSORS, AFFILIATES (REGARDLESS OF WHETHER SUCH INTERESTS ARE HELD DIRECTLY OR INDIRECTLY), SUBSIDIARIES, DIRECT AND INDIRECT EQUITYHOLDERS, FUNDS, PORTFOLIO COMPANIES, MANAGEMENT COMPANIES; (Q) WITH RESPECT TO EACH OF THE FOREGOING ENTITIES IN CLAUSES (A) THROUGH (P), EACH OF THEIR RESPECTIVE CURRENT AND FORMER DIRECTORS, OFFICERS, MEMBERS, EMPLOYEES, PARTNERS, MANAGERS, INDEPENDENT CONTRACTORS, AGENTS, REPRESENTATIVES, PRINCIPALS, PROFESSIONALS, CONSULTANTS, FINANCIAL ADVISORS, ATTORNEYS, ACCOUNTANTS, INVESTMENT BANKERS, AND OTHER PROFESSIONAL ADVISORS (WITH RESPECT TO CLAUSE (P), EACH SOLELY IN THEIR CAPACITY AS SUCH); AND (R) ALL HOLDERS OF CLAIMS AND INTERESTS NOT DESCRIBED IN THE FOREGOING CLAUSES (A) THROUGH (Q); PROVIDED, HOWEVER, THAT ANY HOLDER OF A CLAIM OR INTEREST THAT (I) VOTES TO REJECT THE PLAN AND (II) OBJECTS TO THE RELEASES IN THE PLAN SHALL NOT BE A “RELEASING PARTY.”
AS A “RELEASING PARTY” UNDER THE PLAN, YOU ARE DEEMED TO PROVIDE THE RELEASES CONTAINED IN ARTICLE VIII.C OF THE PLAN, AS SET FORTH ABOVE. YOU MAY ELECT NOT TO GRANT THE RELEASES CONTAINED IN ARTICLE VIII.C OF THE PLAN ONLY IF THE COURT DETERMINES THAT YOU HAVE THE RIGHT TO OPT-OUT OF THE RELEASES AND ONLY IF YOU (A) VOTE TO REJECT THE PLAN AND (B) FILE AN OBJECTION TO THE THIRD PARTY RELEASES WITH THE COURT. SUBJECT TO ANY FINAL ORDER OF THE BANKRUPTCY COURT TO THE CONTRARY, REGARDLESS OF WHETHER THE COURT DETERMINES THAT YOU HAVE A RIGHT TO OPT-OUT OF THE RELEASES, IF YOU (A) VOTE TO ACCEPT THE PLAN, (B) FAIL TO SUBMIT A BALLOT BY THE VOTING DEADLINE, (C) SUBMIT THE BALLOT BUT ABSTAIN FROM VOTING TO ACCEPT OR REJECT THE PLAN, OR (D) VOTE TO REJECT THE PLAN AND FAIL TO FILE AN OBJECTION TO THE THIRD PARTY RELEASES WITH THE COURT, IN EACH CASE YOU WILL BE DEEMED TO CONSENT TO THE RELEASES SET FORTH IN ARTICLE VIII.C OF THE PLAN.
5
Case 18-10122-KG Doc 290-4 Filed 03/23/18 Page 13 of 31 PES Holdings, LLC, et al. Class 7 Ballot
Item 4. Authorization. By signing and returning this Ballot, the undersigned certifies to the Debtors and the Bankruptcy Court that:
1. the undersigned is (a) the holder of the Term Loan A Claims (Class 7) being voted, or (b) the authorized signatory for an entity that is a holder of such Term Loan A Claims;
2. the undersigned has received a copy of the solicitation materials, including the Plan and the Disclosure Statement, and acknowledges that the undersigned’s vote as set forth on this Ballot is subject to the terms and conditions set forth therein and herein;
3. the undersigned has cast the same vote with respect to all of its Term Loan A Claims (Class 7) in connection with the Plan; and
4. (a) no other Ballot with respect to the same Term Loan A Claims (Class 7) identified in Item 1 has been cast or (b) if any other Ballot has been cast with respect to such Term Loan A Claims, then any such earlier Ballots are hereby revoked and deemed to be null and void.
Name of Holder:
Signature: Signatory Name (if other than the holder) and Capacity of Signatory: Title: Address: Email Address: Telephone Number: Date Completed:
No fees, commissions, or other remuneration will be payable to any broker, dealer, or other person for soliciting votes on the Plan. This Ballot shall not constitute or be deemed a proof of claim or interest or an assertion of a claim or interest.
PLEASE COMPLETE, SIGN, AND DATE THIS BALLOT AND RETURN IT PROMPTLY. THIS BALLOT MUST BE COMPLETED, EXECUTED, AND RETURNED BY ONE OF THE FOLLOWING RETURN METHODS SO THAT IT IS ACTUALLY RECEIVED BY THE SOLICITATION AGENT PRIOR TO JANUARY 19, 2018, AT 5:00 P.M. PREVAILING EASTERN TIME OR YOUR VOTE WILL NOT BE COUNTED: (I) IN THE ENCLOSED PRE-PAID, PRE-ADDRESSED RETURN ENVELOPE, (II) VIA FIRST CLASS MAIL, OVERNIGHT COURIER, OR HAND DELIVERY TO THE ADDRESS SET FORTH BELOW, OR (III) VIA EMAIL (ATTACHING A SCANNED PDF OF THE FULLY EXECUTED BALLOT) TO [email protected] AND REFERENCE “PES HOLDINGS, LLC” IN THE SUBJECT LINE. PLEASE CHOOSE ONLY ONE METHOD TO RETURN YOUR BALLOT. PES Holdings, LLC, et al. c/o Rust Consulting/Omni Bankruptcy 5955 DeSoto Ave., Suite 100, Woodlands, C.A. 91367 Telephone: (844) 459-0695 or (818) 906-8300 (international calls), and ask for the Solicitation Group 6
Case 18-10122-KG Doc 290-4 Filed 03/23/18 Page 14 of 31 PES Holdings, LLC, et al. Class 7 Ballot
EMAIL: [email protected] and reference “PES Holdings” in the subject line
IF YOU HAVE ANY QUESTIONS REGARDING THIS BALLOT OR THE VOTING PROCEDURES, PLEASE CONTACT THE SOLICITATION AGENT BY EMAILING [email protected] AND REFERENCING “PES HOLDINGS, LLC” IN THE SUBJECT LINE, OR BY CALLING (844) 459-0695 OR (818) 906-8300 (INTERNATIONAL CALLS), AND ASK FOR THE SOLICITATION GROUP.
7
Case 18-10122-KG Doc 290-4 Filed 03/23/18 Page 15 of 31
Exhibit B
Class 8 Ballot Case 18-10122-KG Doc 290-4 Filed 03/23/18 Page 16 of 31 PES Holdings, LLC, et al. Class 8 Ballot
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR ADVICE, OR TO MAKE ANY REPRESENTATION, OTHER THAN WHAT IS INCLUDED IN THE MATERIALS MAILED WITH THIS BALLOT. IMPORTANT: NO CHAPTER 11 CASES HAVE BEEN COMMENCED AS OF THE DATE OF THE DISTRIBUTION OF THIS BALLOT. THE DEBTORS (AS DEFINED HEREIN) INTEND TO FILE CHAPTER 11 CASES AND SEEK CONFIRMATION OF THE PLAN (AS DEFINED HEREIN) BY THE BANKRUPTCY COURT SHORTLY THEREAFTER AS DESCRIBED IN GREATER DETAIL IN THE ACCOMPANYING DISCLOSURE STATEMENT. § In re: § Chapter 11 § PES HOLDINGS, LLC, et al.,1 § Case No. 18-_____ (___) § Debtors. § (Joint Administration Pending) §
CLASS 8 BALLOT FOR ACCEPTING OR REJECTING JOINT PREPACKAGED CHAPTER 11 PLAN OF REORGANIZATION FOR PES HOLDINGS, LLC AND ITS DEBTOR AFFILIATES
If you are the holder of a Term Loan B Claim (Class 8) as of January 17, 2018 (the “Voting Record Date”), please use this “Ballot” to cast your vote to accept or reject the Joint Prepackaged Plan of Reorganization for PES Holdings, LLC and its Debtor Affiliates (as may be amended, modified or supplemented in accordance with the Restructuring Support Agreement, the “Plan”),2 which is being proposed by PES Holdings, LLC and its affiliates that also intend to commence chapter 11 cases (the “Debtors”). The Plan is included as Exhibit A to the accompanying Disclosure Statement, dated January 17, 2018 (as may be amended, modified or supplemented in accordance with the Restructuring Support Agreement, the “Disclosure Statement”). The Plan can be confirmed by the Bankruptcy Court and thereby made binding upon you if the Plan (a) is accepted by the holders of two-thirds in amount and more than one-half in number of Claims in each Class that vote on the Plan, and (b) otherwise satisfies the requirements of section 1129(a) of the Bankruptcy Code. If the requisite acceptances are not obtained, the Bankruptcy Court may nonetheless confirm the Plan if the Plan (a) provides fair and equitable treatment to, and does not discriminate unfairly against, the class(es) of claims that rejected the Plan, in accordance with section 1129(b) of the Bankruptcy Code, and (b) otherwise satisfies the requirements of sections 1129(a) and 1129(b) of the Bankruptcy Code. Please carefully read the enclosed Disclosure Statement and Plan and follow the enclosed instructions for completing this Ballot. If you believe you have received this Ballot in error, if you believe that you have received the wrong Ballot, or if you believe you are a holder of a Claim in more than one Class entitled to vote to accept or reject the Plan and have not received a Ballot for each such Class, please contact the Solicitation Agent immediately. If you have any questions regarding this Ballot, the enclosed voting instructions, the procedures for voting, or need to obtain additional solicitation materials, please contact the Solicitation Agent by (1) emailing [email protected] and referencing “PES Holdings, LLC” in the subject line, (2) calling (844) 459-0695 or (818) 906-8300 (international calls), and asking for the Solicitation Group, or (3) writing to the following address: PES Holdings, LLC, et al. c/o Rust Consulting/Omni Bankruptcy, 5955 DeSoto Ave., Suite 100, Woodland Hills, C.A. 91367. You may wish to seek legal or other professional advice concerning the proposals related to the Plan. IMPORTANT VOTING DEADLINE: 5:00 P.M. PREVAILING EASTERN TIME ON JANUARY 19, 2018 REVIEW THE ACCOMPANYING DISCLOSURE STATEMENT FOR THE PLAN. BALLOTS MAY BE SUBMITTED VIA EMAIL BUT WILL NOT BE ACCEPTED BY FACSIMILE TRANSMISSION.
1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, are: PES Holdings, LLC (8157); North Yard Financing, LLC (6284); North Yard GP, LLC (5458); North Yard Logistics, L.P. (5952); PES Administrative Services, LLC (3022); PES Logistics GP, LLC (9202); PES Logistics Partners, L.P. (1288); PESRM Holdings, LLC (2107); and Philadelphia Energy Solutions Refining and Marketing LLC (9574). The Debtors’ service address is: 1735 Market Street, Philadelphia, Pennsylvania 19103. 2 All capitalized terms used but otherwise not defined herein shall have the meanings set forth in the Plan.
Case 18-10122-KG Doc 290-4 Filed 03/23/18 Page 17 of 31 PES Holdings, LLC, et al. Class 8 Ballot
DO NOT RETURN ANY SECURITIES WITH THIS BALLOT. This Ballot is not a letter of transmittal and may not be used for any purpose other than to (i) cast votes to accept or reject the Plan and (ii) as provided in Item 3 of this Ballot, elect to opt out of the Third-Party Release (as defined below).
HOW TO VOTE 1. COMPLETE ITEM 1, ITEM 2, AND ITEM 3 (OPTIONAL).
2. REVIEW THE CERTIFICATIONS CONTAINED IN ITEM 4.
3. SIGN AND DATE YOUR BALLOT. Please provide your name and mailing address in the space provided on this Ballot.3
4. RETURN THE BALLOT (i) in the enclosed pre-paid, pre-addressed return envelope, (ii) via first class mail, overnight courier, or hand delivery to the address set forth in Item 4 of this Ballot, or (iii) via email (attaching a scanned PDF of the fully executed Ballot) to [email protected] and reference “PES Holdings, LLC” in the subject line, in each case by 5:00 p.m. prevailing Eastern Time on January 19, 2018 (the “Voting Deadline”), as discussed below. Ballots returned by facsimile will not be accepted.
5. IF YOUR CLAIM IS HELD IN MULTIPLE ACCOUNTS, YOU MAY RECEIVE MORE THAN ONE BALLOT CODED FOR EACH SUCH ACCOUNT FOR WHICH YOUR CLAIMS ARE HELD. SIMILARLY, IF YOU HOLD A CLAIM IN MORE THAN ONE CLASS ENTITLED TO VOTE YOU MAY RECEIVE MORE THAN ONE BALLOT FOR EACH SUCH CLAIM. EACH BALLOT VOTES ONLY YOUR CLAIMS INDICATED ON THAT BALLOT. ACCORDINGLY, YOU MUST COMPLETE AND RETURN EACH BALLOT YOU RECEIVE TO VOTE MULTIPLE CLAIMS.
6. YOU MUST VOTE ALL OF YOUR CLASS 8 TERM LOAN B CLAIMS EITHER TO ACCEPT OR REJECT THE PLAN, AND MAY NOT SPLIT YOUR VOTE.
OTHER IMPORTANT INFORMATION 1. Any Ballot submitted that is incomplete or illegible, indicates unclear or inconsistent votes with respect to the Plan or is improperly signed and returned will NOT be counted unless the Debtors otherwise determine.
2. To vote, you MUST deliver your completed Ballot so that it is ACTUALLY RECEIVED by the Solicitation Agent on or before the Voting Deadline by one of the methods described above. The “Voting Deadline” is 5:00 p.m. prevailing Eastern Time on January 19, 2018.
3. Any Ballot received by the Solicitation Agent after the Voting Deadline will not be counted with respect to acceptance or rejection of the Plan, as applicable, unless the Debtors otherwise determine. Subject to the Restructuring Support Agreement, no Ballot may be withdrawn or modified after the Voting Deadline without the Debtors’ prior consent and/or permission of the Bankruptcy Court.
4. Delivery to the Solicitation Agent of a Ballot reflecting your vote will be deemed to have occurred only when the Solicitation Agent actually receives the originally executed Ballot or, in the case of an emailed Ballot, when the Solicitation Agent actually receives the email attaching a scanned PDF copy of your executed Ballot. In all cases, you should allow sufficient time to assure timely delivery of your Ballot by the Voting Deadline.
5. If, as of the Voting Record Date, you held Claims in more than one voting Class under the Plan, you should receive a separate Ballot for each Class of Claims, coded by Class number, and a set of solicitation materials. You may also receive more than one Ballot if, as of the Voting Record Date, you held Claims through one or more affiliated funds, in which case the vote cast by each such affiliated fund will be counted separately.
3 If you are signing this Ballot in your capacity as a trustee, executor, administrator, guardian, attorney-in-fact, or officer of a corporation or otherwise acting in a fiduciary or representative capacity, you must indicate such capacity when signing and, if required or requested by the Solicitation Agent, the Debtors, the Debtors’ proposed counsel, or the Bankruptcy Court, you must submit proper evidence to the requesting party of authority to so act on behalf of such holder.
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Separate Claims held by affiliated funds in a particular Class shall not be aggregated, and the vote of each such affiliated fund related to its Claims shall be treated as a separate vote to accept or reject the Plan (as applicable). If you hold any portion of a single Claim, you and all other holders of any portion of such Claim will be (a) treated as a single creditor for voting purposes and (b) required to vote every portion of such Claim collectively to either accept or reject the Plan. The Debtors reserve the right to challenge the validity of any vote that has been improperly split for voting purposes.
6. If you deliver multiple Ballots to the Solicitation Agent with respect to the same Claim, ONLY the last properly executed Ballot timely received will be deemed to reflect your intent and will supersede and revoke any prior Ballot(s). For the avoidance of doubt, all prior Ballots submitted by you prior to the Ballot last received by the Solicitation Agent will be deemed null and void.
VOTING — COMPLETE THIS SECTION
Item 1. Principal Amount of Class 8 Term Loan B Claims. The undersigned hereby certifies that, as of the Voting Record Date, the undersigned was the holder of Class 8 Term Loan B Claims (or authorized signatory for an entity that is a holder of such Claims) in the following aggregate principal amount, excluding, for the avoidance of doubt, accrued but unpaid interest and other amounts that may be owed to the undersigned (or the entity for whom the undersigned is signatory) (please fill in the amount if not otherwise completed):
Amount of Term Loan B Claims: $______
Item 2. Vote. You may vote to accept or reject the Plan. You must check one of the boxes below in order to have your vote counted.
The holder of the Class 8 Term Loan B Claims set forth in Item 1 above votes to (please check one and only one):
ACCEPT (VOTE FOR) THE PLAN
REJECT (VOTE AGAINST) THE PLAN
The Plan, though proposed jointly, constitutes a separate Plan proposed by each Debtor. Accordingly, your vote cast above will be applied in the same manner and in the same amount in Class 8 against each applicable Debtor.
Item 3. Important information regarding the Third Party Releases.
The Plan contains a series of releases that are part of the overall restructuring set forth in the Plan and described in greater detail in the Disclosure Statement. In that respect, parties should be aware that, if the Plan is confirmed and the Effective Date occurs, certain parties will be getting releases and certain parties will be giving releases as set forth in Article VIII.C of the Plan and as further described in Article VI.S of the Disclosure Statement. For your convenience, excerpts of the release provisions from the Plan are set forth below, however, you should carefully read the enclosed Disclosure Statement and Plan with respect to the releases.
If you do not consent to the releases contained in the Plan and the related injunction, you may elect not to grant such releases but only if you (1) vote to reject the Plan in Item 1 above and (2) file an objection to the third party releases with the Court. IF YOU (A) VOTE TO ACCEPT THE PLAN, (B) FAIL TO SUBMIT A BALLOT BY THE VOTING DEADLINE, (C) SUBMIT THIS BALLOT BUT ABSTAIN FROM VOTING, OR (D) VOTE TO REJECT 3
Case 18-10122-KG Doc 290-4 Filed 03/23/18 Page 19 of 31 PES Holdings, LLC, et al. Class 8 Ballot
THE PLAN BUT DO NOT FILE AN OBJECTION TO THE THIRD PARTY RELEASES WITH THE COURT, THEN YOU WILL BE DEEMED TO CONSENT TO THE THIRD- PARTY RELEASES SET FORTH IN ARTICLE VIII.C OF THE PLAN.
ARTICLE VIII.C OF THE PLAN PROVIDES FOR THE THIRD-PARTY RELEASE:
AS OF THE EFFECTIVE DATE, EACH RELEASING PARTY IS DEEMED TO HAVE RELEASED AND DISCHARGED EACH DEBTOR, REORGANIZED DEBTOR, AND RELEASED PARTY FROM ANY AND ALL CAUSES OF ACTION, INCLUDING ANY DERIVATIVE CLAIMS ASSERTED ON BEHALF OF THE DEBTORS, THAT SUCH ENTITY WOULD HAVE BEEN LEGALLY ENTITLED TO ASSERT (WHETHER INDIVIDUALLY OR COLLECTIVELY), BASED ON OR RELATING TO, OR IN ANY MANNER ARISING FROM, IN WHOLE OR IN PART:
(A) THE DEBTORS, THE DEBTORS’ IN- OR OUT-OF-COURT RESTRUCTURING EFFORTS, INTERCOMPANY TRANSACTIONS, OR THE FORMULATION, PREPARATION, DISSEMINATION, NEGOTIATION, OR FILING OF THE RESTRUCTURING SUPPORT AGREEMENT;
(B) ANY RESTRUCTURING TRANSACTION, CONTRACT, INSTRUMENT, RELEASE, OR OTHER AGREEMENT OR DOCUMENT CREATED OR ENTERED INTO IN CONNECTION WITH THE RESTRUCTURING SUPPORT AGREEMENT, THE DISCLOSURE STATEMENT, OR THE PLAN;
(C) THE CHAPTER 11 CASES, THE DISCLOSURE STATEMENT, THE PLAN, THE FILING OF THE CHAPTER 11 CASES, THE PURSUIT OF CONFIRMATION, THE PURSUIT OF CONSUMMATION, THE ADMINISTRATION AND IMPLEMENTATION OF THE PLAN, INCLUDING THE ISSUANCE OR DISTRIBUTION OF SECURITIES PURSUANT TO THE PLAN, OR THE DISTRIBUTION OF PROPERTY UNDER THE PLAN OR ANY OTHER RELATED AGREEMENT; OR
(D) ANY OTHER ACT OR OMISSION, TRANSACTION, AGREEMENT, EVENT, OR OTHER OCCURRENCE TAKING PLACE ON OR BEFORE THE EFFECTIVE DATE.
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THE FOREGOING, THE RELEASES SET FORTH ABOVE DO NOT RELEASE ANY POST-EFFECTIVE DATE OBLIGATIONS OF ANY PARTY OR ENTITY UNDER THE PLAN, ANY RESTRUCTURING TRANSACTION, OR ANY DOCUMENT, INSTRUMENT, OR AGREEMENT (INCLUDING THOSE SET FORTH IN THE PLAN SUPPLEMENT) EXECUTED TO IMPLEMENT THE PLAN.
ENTRY OF THE CONFIRMATION ORDER SHALL CONSTITUTE THE BANKRUPTCY COURT’S APPROVAL, PURSUANT TO BANKRUPTCY RULE 9019, OF THE THIRD-PARTY RELEASE, WHICH INCLUDES BY REFERENCE EACH OF THE RELATED PROVISIONS AND DEFINITIONS CONTAINED HEREIN, AND, FURTHER, SHALL CONSTITUTE THE BANKRUPTCY COURT’S FINDING THAT THE THIRD PARTY RELEASE IS: (1) CONSENSUAL; (2) ESSENTIAL TO THE CONFIRMATION OF THE PLAN; (3) GIVEN IN EXCHANGE FOR THE GOOD AND VALUABLE CONSIDERATION PROVIDED BY THE RELEASED PARTIES; (4) A GOOD FAITH SETTLEMENT AND COMPROMISE OF THE CLAIMS RELEASED BY THE THIRD-PARTY RELEASE; (5) IN THE BEST INTERESTS OF THE DEBTORS AND THEIR ESTATES; (6) FAIR, EQUITABLE, AND REASONABLE; (7) GIVEN AND MADE AFTER DUE NOTICE AND OPPORTUNITY FOR HEARING; AND (8) A BAR TO ANY OF THE RELEASING PARTIES ASSERTING ANY CLAIM OR CAUSE OF ACTION
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Case 18-10122-KG Doc 290-4 Filed 03/23/18 Page 20 of 31 PES Holdings, LLC, et al. Class 8 Ballot
RELEASED PURSUANT TO THE THIRD-PARTY RELEASE.
IMPORTANT INFORMATION REGARDING THE THIRD-PARTY RELEASE:
UNDER THE PLAN, “RELEASING PARTIES” MEANS COLLECTIVELY, AND IN EACH CASE SOLELY IN ITS CAPACITY AS SUCH: (A) THE DEBTORS AND REORGANIZED DEBTORS; (B) THE PARENT PARTIES; (C) THE TERM LOAN A LENDERS; (D) THE TERM LOAN B LENDERS; (E) THE TERM LOAN A AGENT; (F) THE TERM LOAN B AGENT; (G) THE INTERMEDIATION LENDERS; (H) THE FIRST LOSS LENDERS; (I) THE REFINING ABL LENDERS; (J) THE REFINING ABL AGENT; (K) THE DIP FACILITY LENDERS; (L) THE DIP FACILITY AGENT; (M) THE DIP COMMITMENT PARTIES; (N) THE ADDITIONAL FINANCING LENDER; (O) THE PURCHASER; (P) WITH RESPECT TO EACH OF THE FOREGOING ENTITIES IN CLAUSES (A) THROUGH (O), EACH SUCH ENTITY’S CURRENT AND FORMER PREDECESSORS, SUCCESSORS, AFFILIATES (REGARDLESS OF WHETHER SUCH INTERESTS ARE HELD DIRECTLY OR INDIRECTLY), SUBSIDIARIES, DIRECT AND INDIRECT EQUITYHOLDERS, FUNDS, PORTFOLIO COMPANIES, MANAGEMENT COMPANIES; (Q) WITH RESPECT TO EACH OF THE FOREGOING ENTITIES IN CLAUSES (A) THROUGH (P), EACH OF THEIR RESPECTIVE CURRENT AND FORMER DIRECTORS, OFFICERS, MEMBERS, EMPLOYEES, PARTNERS, MANAGERS, INDEPENDENT CONTRACTORS, AGENTS, REPRESENTATIVES, PRINCIPALS, PROFESSIONALS, CONSULTANTS, FINANCIAL ADVISORS, ATTORNEYS, ACCOUNTANTS, INVESTMENT BANKERS, AND OTHER PROFESSIONAL ADVISORS (WITH RESPECT TO CLAUSE (P), EACH SOLELY IN THEIR CAPACITY AS SUCH); AND (R) ALL HOLDERS OF CLAIMS AND INTERESTS NOT DESCRIBED IN THE FOREGOING CLAUSES (A) THROUGH (Q); PROVIDED, HOWEVER, THAT ANY HOLDER OF A CLAIM OR INTEREST THAT (I) VOTES TO REJECT THE PLAN AND (II) OBJECTS TO THE RELEASES IN THE PLAN SHALL NOT BE A “RELEASING PARTY.”
AS A “RELEASING PARTY” UNDER THE PLAN, YOU ARE DEEMED TO PROVIDE THE RELEASES CONTAINED IN ARTICLE VIII.C OF THE PLAN, AS SET FORTH ABOVE. YOU MAY ELECT NOT TO GRANT THE RELEASES CONTAINED IN ARTICLE VIII.C OF THE PLAN ONLY IF THE COURT DETERMINES THAT YOU HAVE THE RIGHT TO OPT-OUT OF THE RELEASES AND ONLY IF YOU (A) VOTE TO REJECT THE PLAN AND (B) FILE AN OBJECTION TO THE THIRD PARTY RELEASES WITH THE COURT. SUBJECT TO ANY FINAL ORDER OF THE BANKRUPTCY COURT TO THE CONTRARY, REGARDLESS OF WHETHER THE COURT DETERMINES THAT YOU HAVE A RIGHT TO OPT-OUT OF THE RELEASES, IF YOU (A) VOTE TO ACCEPT THE PLAN, (B) FAIL TO SUBMIT A BALLOT BY THE VOTING DEADLINE, (C) SUBMIT THE BALLOT BUT ABSTAIN FROM VOTING TO ACCEPT OR REJECT THE PLAN, OR (D) VOTE TO REJECT THE PLAN AND FAIL TO FILE AN OBJECTION TO THE THIRD PARTY RELEASES WITH THE COURT, IN EACH CASE YOU WILL BE DEEMED TO CONSENT TO THE RELEASES SET FORTH IN ARTICLE VIII.C OF THE PLAN.
Item 4. Authorization. By signing and returning this Ballot, the undersigned certifies to the Debtors and the Bankruptcy Court that:
1. the undersigned is (a) the holder of the Term Loan B Claims (Class 8) being voted, or (b) the authorized signatory for an entity that is a holder of such Term Loan B Claims;
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Case 18-10122-KG Doc 290-4 Filed 03/23/18 Page 21 of 31 PES Holdings, LLC, et al. Class 8 Ballot
2. the undersigned has received a copy of the solicitation materials, including the Plan and the Disclosure Statement, and acknowledges that the undersigned’s vote as set forth on this Ballot is subject to the terms and conditions set forth therein and herein;
3. the undersigned has cast the same vote with respect to all of its Term Loan B Claims (Class 8) in connection with the Plan; and
4. (a) no other Ballot with respect to the same Term Loan B Claims (Class 8) identified in Item 1 has been cast or (b) if any other Ballot has been cast with respect to such Term Loan B Claims, then any such earlier Ballots are hereby revoked and deemed to be null and void.
Name of Holder:
Signature: Signatory Name (if other than the holder) and Capacity of Signatory: Title: Address: Email Address: Telephone Number: Date Completed:
No fees, commissions, or other remuneration will be payable to any broker, dealer, or other person for soliciting votes on the Plan. This Ballot shall not constitute or be deemed a proof of claim or interest or an assertion of a claim or interest.
PLEASE COMPLETE, SIGN, AND DATE THIS BALLOT AND RETURN IT PROMPTLY. THIS BALLOT MUST BE COMPLETED, EXECUTED, AND RETURNED BY ONE OF THE FOLLOWING RETURN METHODS SO THAT IT IS ACTUALLY RECEIVED BY THE SOLICITATION AGENT PRIOR TO JANUARY 19, 2018, AT 5:00 P.M. PREVAILING EASTERN TIME OR YOUR VOTE WILL NOT BE COUNTED: (I) IN THE ENCLOSED PRE-PAID, PRE-ADDRESSED RETURN ENVELOPE, (II) VIA FIRST CLASS MAIL, OVERNIGHT COURIER, OR HAND DELIVERY TO THE ADDRESS SET FORTH BELOW, OR (III) VIA EMAIL (ATTACHING A SCANNED PDF OF THE FULLY EXECUTED BALLOT) TO [email protected] AND REFERENCE “PES HOLDINGS, LLC” IN THE SUBJECT LINE. PLEASE CHOOSE ONLY ONE METHOD TO RETURN YOUR BALLOT. PES Holdings, LLC, et al. c/o Rust Consulting/Omni Bankruptcy 5955 DeSoto Ave., Suite 100, Woodlands, C.A. 91367 Telephone: (844) 459-0695 or (818) 906-8300 (international calls), and ask for the Solicitation Group EMAIL: [email protected] and reference “PES Holdings” in the subject line
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Case 18-10122-KG Doc 290-4 Filed 03/23/18 Page 22 of 31 PES Holdings, LLC, et al. Class 8 Ballot
IF YOU HAVE ANY QUESTIONS REGARDING THIS BALLOT OR THE VOTING PROCEDURES, PLEASE CONTACT THE SOLICITATION AGENT BY EMAILING [email protected] AND REFERENCING “PES HOLDINGS, LLC” IN THE SUBJECT LINE, OR BY CALLING (844) 459-0695 OR (818) 906-8300 (INTERNATIONAL CALLS), AND ASK FOR THE SOLICITATION GROUP.
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Exhibit C
Tabulation Report Case 18-10122-KG Doc 290-4 Filed 03/23/18 Page 24 of 31 Debtor: Philadelphia Energy Solutions Refining and Marketing LLC Case No. Pending Claims Ballot Detail Results Class 7 - Term A Lenders
Class Summary Voting Outcome: Accepted
Total Received Total Valid Accepted Rejected Invalid # Votes: 11 11 11 0 0 Vote %: 100.00% 0.00% Amt: $97,500,000.00 $97,500,000.00 $0.00 Amt %: 100.00% 0.00%
Date Printed Ballot Tabulated Creditor Ballot # Clm Sch Received Amount Vote Amount Vote Comment BANK OF AMERICA, N.A. 9 M9 1/19/2018 $9,471,428.58 $9,471,428.58 Accept BENEFICIAL BANK 6 M6 1/19/2018 $8,357,142.83 $8,357,142.83 Accept BRANCH BANKING & TRUST COMPANY 1 M1 1/18/2018 $2,785,714.26 $2,785,714.26 Accept CITIZENS BANK, NA 8 M8 1/19/2018 $11,142,857.17 $11,142,857.17 Accept CREDIT SUISSE AG, CAYMAN ISLANDS 10 M10 1/18/2018 $9,471,428.58 $9,471,428.58 Accept BRANCH GOLDMAN SACHS LENDING PARTNERS, LLC 7 M7 1/19/2018 $12,257,142.84 $12,257,142.84 Accept PNC BANK NATIONAL ASSOCIATION 2 M2 1/18/2018 $12,257,142.90 $12,257,142.90 Accept REPUBLIC FIRST BANK D/B/A REPUBLIC 5 M5 1/18/2018 $2,785,714.26 $2,785,714.26 Accept BANK THE HUNTINGTON NATIONAL BANK 4 M4 1/19/2018 $11,142,857.17 $11,142,857.17 Accept WEBSTERBANK 11 M11 1/19/2018 $9,471,428.58 $9,471,428.58 Accept WILMINGTON SAVINGS FUND SOCIETY, FSB 3 M3 1/18/2018 $8,357,142.83 $8,357,142.83 Accept
Friday, January 19, 2018 Pending - Page 1 of 1
RUST CONSULTING | OMNI BANKRUPTCY Visit us on the Web at www.omnimgt.com PHONE: (818) 906-8300 5955 DE SOTO AVENUE, SUITE 100 E-Mail: [email protected] FAX: (818) 704-0415 WOODLAND HILLS, CA 91367 Case 18-10122-KG Doc 290-4 Filed 03/23/18 Page 25 of 31 Debtor: Philadelphia Energy Solutions Refining and Marketing LLC Case No. Pending Claims Ballot Detail Results Class 8 - Term B Lenders
Class Summary Voting Outcome: Accepted
Total Received Total Valid Accepted Rejected Invalid # Votes: 121 121 121 0 0 Vote %: 100.00% 0.00% Amt: $486,143,886.92 $486,143,886.92 $0.00 Amt %: 100.00% 0.00%
Date Printed Ballot Tabulated Creditor Ballot # Clm Sch Received Amount Vote Amount Vote Comment AMMC CLO 21, LIMITED 27 M27 1/19/2018 $2,144,322.00 $2,144,322.00 Accept AMMC CLO XI, LIMITED 28 M28 1/19/2018 $2,069,082.00 $2,069,082.00 Accept AMMC CLO XII, LIMITED 29 M29 1/19/2018 $2,622,965.00 $2,622,965.00 Accept AMMC CLO XIII, LIMITED 30 M30 1/19/2018 $1,914,573.00 $1,914,573.00 Accept AMMC CLO XIV, LIMITED 31 M31 1/19/2018 $962,121.00 $962,121.00 Accept ATRIUM IX 32 M32 1/18/2018 $5,556,274.00 $5,556,274.00 Accept ATRIUM X 33 M33 1/18/2018 $5,000,625.00 $5,000,625.00 Accept BENTHAM WHOLESALE SYNDICATED LOAN 34 M34 1/18/2018 $11,519,330.00 $11,519,330.00 Accept FUND BOWERY FUNDING ULC 35 M35 1/18/2018 $974,425.00 $974,425.00 Accept CREDIT SUISSE ASSET MANAGEMENT, LLC - 36 M36 1/18/2018 $944,808.00 $944,808.00 Accept SENIOR SECURED FLOATING RATE LOAN FUND CREDIT SUISSE ASSET MGMT LLC-CREDIT 37 M37 1/18/2018 $962,121.00 $962,121.00 Accept SUISSE OPPOR FDS-CREDIT SUISSE STRTGC INC FD CREDIT SUISSE FLOATING RATE HIGH 38 M38 1/18/2018 $16,856,596.00 $16,856,596.00 Accept INCOME FUND CREDIT SUISSE NOVA (LUX) GLOBAL 39 M39 1/18/2018 $22,890,808.00 $22,890,808.00 Accept SENIOR LOAN FUND
Friday, January 19, 2018 Pending - Page 1 of 7
RUST CONSULTING | OMNI BANKRUPTCY Visit us on the Web at www.omnimgt.com PHONE: (818) 906-8300 5955 DE SOTO AVENUE, SUITE 100 E-Mail: [email protected] FAX: (818) 704-0415 WOODLAND HILLS, CA 91367 Case 18-10122-KG Doc 290-4 Filed 03/23/18 Page 26 of 31 Debtor: Philadelphia Energy Solutions Refining and Marketing LLC Case No. Pending Claims Ballot Detail Results Class 8 - Term B Lenders
Date Printed Ballot Tabulated Creditor Ballot # Clm Sch Received Amount Vote Amount Vote Comment CSAM - ATRIUM VIII 40 M40 1/18/2018 $4,004,558.00 $4,004,558.00 Accept CSAM - ATRIUM XI 41 M41 1/18/2018 $6,770,373.00 $6,770,373.00 Accept CSAM - CLOCKTOWER US SENIOR LOAN 42 M42 1/18/2018 $733,320.00 $733,320.00 Accept FUND A SERIES TRUST OF MYL GLOBAL INVST TRUST CSAM - COPPERHILL LOAN FUND I, LLC 43 M43 1/18/2018 $966,450.00 $966,450.00 Accept CSAM - CREDIT SUISSE FLOATING RATE 44 M44 1/18/2018 $2,410,187.00 $2,410,187.00 Accept TRUST CSAM - CREDIT SUISSE SENIOR LOAN 45 M45 1/18/2018 $2,937,061.00 $2,937,061.00 Accept INVESTMENT UNIT TRUST CSAM - ERIE INDEMNITY COMPANY 46 M46 1/18/2018 $441,700.00 $441,700.00 Accept CSAM - ERIE INSURANCE EXCHANGE 47 M47 1/18/2018 $2,502,966.00 $2,502,966.00 Accept CSAM - HYFI LOAN FUND 48 M48 1/18/2018 $4,918,915.00 $4,918,915.00 Accept CSAM - KP FIXED INCOME FUND 49 M49 1/18/2018 $688,389.00 $688,389.00 Accept CSAM - MADISON PARK FUNDING IX, LTD. 50 M50 1/18/2018 $3,353,690.00 $3,353,690.00 Accept CSAM - MADISON PARK FUNDING X LTD. 51 M51 1/18/2018 $4,764,887.00 $4,764,887.00 Accept CSAM - MADISON PARK FUNDING XII LTD 12 M12 1/18/2018 $4,111,617.00 $4,111,617.00 Accept CSAM - MADISON PARK FUNDING XV, LTD. 13 M13 1/18/2018 $4,351,523.00 $4,351,523.00 Accept CSAM - MADISON PARK FUNDING XVI, LTD. 14 M14 1/18/2018 $3,887,780.00 $3,887,780.00 Accept CSAM - MADISON PARK FUNDING XVII, LTD 15 M15 1/18/2018 $4,874,621.00 $4,874,621.00 Accept CSAM - MADISON PARK FUNDING XVIII, LTD. 16 M16 1/18/2018 $4,872,123.00 $4,872,123.00 Accept CSAM - MADISON PARK FUNDING XXI, LTD. 17 M17 1/18/2018 $4,105,813.00 $4,105,813.00 Accept CSAM - MADISON PARK FUNDING XXIV, LTD. 18 M18 1/18/2018 $2,961,140.00 $2,961,140.00 Accept CSAM - PK-SSL INVESTMENT FUND LIMITED 19 M19 1/19/2018 $4,738,717.00 $4,738,717.00 Accept PARTNERSHIP CSAM - STATE OF NEW MEXICO STATE 20 M20 1/18/2018 $958,532.00 $958,532.00 Accept INVESTMENT COUNCIL CSAM - THE CITY OF NEW YORK GROUP 21 M21 1/18/2018 $6,028,685.00 $6,028,685.00 Accept TRUST
Friday, January 19, 2018 Pending - Page 2 of 7
RUST CONSULTING | OMNI BANKRUPTCY Visit us on the Web at www.omnimgt.com PHONE: (818) 906-8300 5955 DE SOTO AVENUE, SUITE 100 E-Mail: [email protected] FAX: (818) 704-0415 WOODLAND HILLS, CA 91367 Case 18-10122-KG Doc 290-4 Filed 03/23/18 Page 27 of 31 Debtor: Philadelphia Energy Solutions Refining and Marketing LLC Case No. Pending Claims Ballot Detail Results Class 8 - Term B Lenders
Date Printed Ballot Tabulated Creditor Ballot # Clm Sch Received Amount Vote Amount Vote Comment CSAM - THE EATON CORPORATION MASTER 22 M22 1/18/2018 $972,589.00 $972,589.00 Accept RETIREMENT TRUST CSAM - WESPATH FUNDS TRUST 23 M23 1/18/2018 $2,148,560.00 $2,148,560.00 Accept CSAM US1L009318 - ATRIUM XII 24 M24 1/18/2018 $3,963,201.00 $3,963,201.00 Accept CSAM-AUSTRALIANSUPER 25 M25 1/18/2018 $11,495,126.00 $11,495,126.00 Accept CSAM-BELL ATLANTIC MASTER TRUST 26 M26 1/18/2018 $954,887.00 $954,887.00 Accept CSAM-COMMONWEALTH OF PA - TREASURY 52 M52 1/18/2018 $952,500.00 $952,500.00 Accept CSAM-CREDIT SUISSE HIGH YIELD BOND 53 M53 1/18/2018 $2,886,364.00 $2,886,364.00 Accept FUND CSAM-MADISON PARK FUNDING XIV, LTD. 54 M54 1/18/2018 $5,145,129.00 $5,145,129.00 Accept CSFB-CALIFORNIA STATE TEACHERS 55 M55 1/18/2018 $3,370,429.00 $3,370,429.00 Accept RETIREMENT SYSTEM DOLLAR SENIOR LOAN FUND LTD 56 M56 1/18/2018 $5,232,655.00 $5,232,655.00 Accept GREAT AMERICAN INSURANCE COMPANY 61 M61 1/19/2018 $713,221.00 $713,221.00 Accept GREAT AMERICAN LIFE INSURANCE 62 M62 1/19/2018 $2,139,662.00 $2,139,662.00 Accept COMPANY HALCYON - ASCENSION ALPHA FUND, LLC 63 M63 1/19/2018 $14,362,095.00 $14,362,095.00 Accept HALCYON - ASCENSION HEALTH MASTER 64 M64 1/19/2018 $4,151,813.00 $4,151,813.00 Accept PENSION TRUST HALCYON - FRANCISCAN ALLIANCE INC 65 M65 1/19/2018 $1,535,345.00 $1,535,345.00 Accept HALCYON - NORTHEAST UTILITIES SERVICE 66 M66 1/19/2018 $8,876,056.00 $8,876,056.00 Accept CO. RETIREMENT PLAN MASTER TRUST HALCYON - PARTNERS CAPITAL PHOENIX 67 M67 1/19/2018 $3,722,539.00 $3,722,539.00 Accept FUND II LTD. - DIVERSIFIED INCOME FUND HALCYON - ROCK BLUFF STRATEGIC FIXED 68 M68 1/19/2018 $15,103,885.00 $15,103,885.00 Accept INCOME PARTNERSHIP LP HALCYON LOAN ADVISORS FUNDING 2012-1 69 M69 1/19/2018 $7,359,725.00 $7,359,725.00 Accept LTD HALCYON LOAN ADVISORS FUNDING 2012-2 70 M70 1/19/2018 $10,292,938.00 $10,292,938.00 Accept LTD.
Friday, January 19, 2018 Pending - Page 3 of 7
RUST CONSULTING | OMNI BANKRUPTCY Visit us on the Web at www.omnimgt.com PHONE: (818) 906-8300 5955 DE SOTO AVENUE, SUITE 100 E-Mail: [email protected] FAX: (818) 704-0415 WOODLAND HILLS, CA 91367 Case 18-10122-KG Doc 290-4 Filed 03/23/18 Page 28 of 31 Debtor: Philadelphia Energy Solutions Refining and Marketing LLC Case No. Pending Claims Ballot Detail Results Class 8 - Term B Lenders
Date Printed Ballot Tabulated Creditor Ballot # Clm Sch Received Amount Vote Amount Vote Comment HALCYON LOAN ADVISORS FUNDING 2013-1 71 M71 1/19/2018 $12,081,658.00 $12,081,658.00 Accept LTD HALCYON LOAN ADVISORS FUNDING 2013-2 72 M72 1/19/2018 $9,317,569.00 $9,317,569.00 Accept LTD. HALCYON LOAN ADVISORS FUNDING 2014-1 73 M73 1/19/2018 $7,523,319.00 $7,523,319.00 Accept LTD. HALCYON LOAN ADVISORS FUNDING 2014-2 74 M74 1/19/2018 $13,347,387.00 $13,347,387.00 Accept LTD. HALCYON LOAN ADVISORS FUNDING 2014-3 75 M75 1/19/2018 $10,841,614.00 $10,841,614.00 Accept LTD. HALCYON LOAN ADVISORS FUNDING 2015-1 76 M76 1/19/2018 $4,952,934.00 $4,952,934.00 Accept LTD. HALCYON LOAN ADVISORS FUNDING 2015-2 77 M77 1/19/2018 $4,971,322.00 $4,971,322.00 Accept LTD. HALCYON LOAN ADVISORS FUNDING 2015-3 78 M78 1/19/2018 $4,971,427.00 $4,971,427.00 Accept LTD. HALCYON LOAN ADVISORS FUNDING 2017-1 79 M79 1/19/2018 $1,984,375.00 $1,984,375.00 Accept LTD. HALCYON LOAN TRADING FUND LLC 80 M80 1/19/2018 $13,781,530.00 $13,781,530.00 Accept HALCYON SENIOR LOAN FUND I MASTER LP 81 M81 1/19/2018 $5,831,633.00 $5,831,633.00 Accept HCN LP 82 M82 1/19/2018 $12,007,307.00 $12,007,307.00 Accept MADISON PARK FUNDING III, LTD 96 M96 1/18/2018 $3,810,000.00 $3,810,000.00 Accept MADISON PARK FUNDING V LTD 97 M97 1/18/2018 $4,531,591.00 $4,531,591.00 Accept MADISON PARK FUNDING VI LTD 98 M98 1/18/2018 $3,593,820.00 $3,593,820.00 Accept MADISON PARK FUNDING XI, LTD 99 M99 1/18/2018 $3,855,811.00 $3,855,811.00 Accept MADISON PARK FUNDING XIII LTD 100 M100 1/18/2018 $4,707,545.00 $4,707,545.00 Accept MADISON PARK FUNDING XIX LTD 101 M101 1/18/2018 $4,641,263.00 $4,641,263.00 Accept MADISON PARK FUNDING XX, LTD. 102 M102 1/18/2018 $3,574,936.00 $3,574,936.00 Accept MADISON PARK FUNDING XXII, LTD 103 M103 1/18/2018 $4,354,710.00 $4,354,710.00 Accept MADISON PARK FUNDING XXVI, LTD. 104 M104 1/18/2018 $3,102,841.00 $3,102,841.00 Accept
Friday, January 19, 2018 Pending - Page 4 of 7
RUST CONSULTING | OMNI BANKRUPTCY Visit us on the Web at www.omnimgt.com PHONE: (818) 906-8300 5955 DE SOTO AVENUE, SUITE 100 E-Mail: [email protected] FAX: (818) 704-0415 WOODLAND HILLS, CA 91367 Case 18-10122-KG Doc 290-4 Filed 03/23/18 Page 29 of 31 Debtor: Philadelphia Energy Solutions Refining and Marketing LLC Case No. Pending Claims Ballot Detail Results Class 8 - Term B Lenders
Date Printed Ballot Tabulated Creditor Ballot # Clm Sch Received Amount Vote Amount Vote Comment MARATHON AM LP - QUAMVIS SCA, SICAV- 107 M107 1/18/2018 $1,722,320.00 $1,722,320.00 Accept FIS - CMAB - SIF - CREDIT MULTI ASSET POOL B MARATHON CLO IV LTD 108 M108 1/18/2018 $3,836,821.00 $3,836,821.00 Accept MARATHON CLO V LTD. 109 M109 1/18/2018 $3,821,373.00 $3,821,373.00 Accept MARATHON CLO VI LTD. 110 M110 1/18/2018 $2,392,551.00 $2,392,551.00 Accept MARATHON CLO VII LTD 111 M111 1/18/2018 $1,963,918.00 $1,963,918.00 Accept MARATHON CLO VIII LTD 112 M112 1/18/2018 $1,956,383.00 $1,956,383.00 Accept MJX - VENTURE X CLO, LIMITED 113 M113 1/19/2018 $1,921,966.00 $1,921,966.00 Accept MJX AM - VENTURE XIX CLO, LIMITED 114 M114 1/19/2018 $289,348.00 $289,348.00 Accept MJX AM - VENTURE XXI CLO LIMITED 115 M115 1/19/2018 $2,429,847.00 $2,429,847.00 Accept MJX AM - VENTURE XXIII CLO LIMITED 116 M116 1/19/2018 $394,819.00 $394,819.00 Accept MJX AM - VENTURE XXV CLO, LIMITED 117 M117 1/19/2018 $514,554.00 $514,554.00 Accept MOUNTAIN VIEW CLO 2013-1 LTD. 118 M118 1/18/2018 $4,762,500.00 $4,762,500.00 Accept MOUNTAIN VIEW CLO 2014-1 LTD. 119 M119 1/18/2018 $2,890,017.00 $2,890,017.00 Accept MOUNTAIN VIEW CLO III LTD 120 M120 1/18/2018 $3,034,295.00 $3,034,295.00 Accept SEIX - BLUE CROSS OF IDAHO HEALTH 123 M123 1/18/2018 $459,463.00 $459,463.00 Accept SERVICES INC. SEIX - MOUNTAIN VIEW CLO IX LTD. 124 M124 1/18/2018 $2,915,816.00 $2,915,816.00 Accept SEIX - MOUNTAIN VIEW CLO X LTD. 125 M125 1/18/2018 $2,915,816.00 $2,915,816.00 Accept SEIX INVESTMENT ADVISORS LLC - SEIX 126 M126 1/18/2018 $349,271.00 $349,271.00 Accept MULTI-SECTOR ABSOLUTE RETURN FUND L.P. SEIX INVESTMENT ADVISORS LLC-VIRTUS 127 M127 1/18/2018 $11,734,436.00 $11,734,436.00 Accept ASSET TRUST-VRTS SEIX FLTNG RTE HGH INCOM FD SEIX-CITY NATIONAL ROCHDALE FUNDS- 128 M128 1/18/2018 $283,827.00 $283,827.00 Accept CITY NATIONAL ROCHDALE FIXED INC OPPORT FUND
Friday, January 19, 2018 Pending - Page 5 of 7
RUST CONSULTING | OMNI BANKRUPTCY Visit us on the Web at www.omnimgt.com PHONE: (818) 906-8300 5955 DE SOTO AVENUE, SUITE 100 E-Mail: [email protected] FAX: (818) 704-0415 WOODLAND HILLS, CA 91367 Case 18-10122-KG Doc 290-4 Filed 03/23/18 Page 30 of 31 Debtor: Philadelphia Energy Solutions Refining and Marketing LLC Case No. Pending Claims Ballot Detail Results Class 8 - Term B Lenders
Date Printed Ballot Tabulated Creditor Ballot # Clm Sch Received Amount Vote Amount Vote Comment VENTURE VII CDO LIMITED 129 M129 1/19/2018 $5,999,383.00 $5,999,383.00 Accept VENTURE VIII CDO LIMITED 130 M130 1/19/2018 $3,819,621.00 $3,819,621.00 Accept VENTURE XII CLO, LIMITED 131 M131 1/19/2018 $2,308,203.00 $2,308,203.00 Accept VENTURE XIII CLO, LIMITED 132 M132 1/19/2018 $951,263.00 $951,263.00 Accept VENTURE XIV CLO, LIMITED 133 M133 1/19/2018 $1,299,407.00 $1,299,407.00 Accept VENTURE XV CLO, LIMITED 134 M134 1/19/2018 $1,577,112.00 $1,577,112.00 Accept VENTURE XVI CLO, LIMITED 135 M135 1/19/2018 $775,419.00 $775,419.00 Accept VENTURE XVII CLO, LIMITED 136 M136 1/19/2018 $1,238,724.00 $1,238,724.00 Accept VENTURE XVIII CLO, LIMITED 137 M137 1/19/2018 $1,672,265.00 $1,672,265.00 Accept VENTURE XX CLO LIMITED 138 M138 1/19/2018 $394,819.00 $394,819.00 Accept VENTURE XXII CLO, LIMITED 139 M139 1/19/2018 $394,819.00 $394,819.00 Accept VENTURE XXIV CLO LTD 140 M140 1/19/2018 $394,819.00 $394,819.00 Accept VENTURE XXVI CLO, LIMITED 141 M141 1/19/2018 $508,682.00 $508,682.00 Accept VENTURE XXVII CLO, LIMITED 142 M142 1/19/2018 $508,682.00 $508,682.00 Accept VENTURE XXVIII CLO LIMITED 143 M143 1/19/2018 $2,596,043.00 $2,596,043.00 Accept WMC 37T7 - WESPATH FUNDS TRUST 150 M150 1/18/2018 $271,463.00 $271,462.50 Accept WMC 3C75-WTC-CTF OPPORTUNISTIC FIXED 151 M151 1/18/2018 $504,825.00 $504,825.00 Accept INCOME ALLOCATION PORTFOLIO WMC 3G67-SUNAMERICA SENIOR FLOATING 144 M144 1/18/2018 $909,638.00 $909,637.50 Accept RATE FUND INC-AIG SENIOR FLOATING RATE FUND WMC 46Y9-HARTFORD TOTAL RETURN 145 M145 1/18/2018 $790,575.00 $790,575.00 Accept BOND HLS FUND WMC 46Z2-THE HARTFORD TOTAL RETURN 146 M146 1/18/2018 $352,425.00 $352,425.00 Accept BOND FUND WMC 47R3-SAFETY INSURANCE COMPANY 147 M147 1/18/2018 $204,788.00 $204,787.50 Accept WMC 47V6- THE HARTFORD STRATEGIC 148 M148 1/18/2018 $95,250.00 $95,250.00 Accept INCOME FUND
Friday, January 19, 2018 Pending - Page 6 of 7
RUST CONSULTING | OMNI BANKRUPTCY Visit us on the Web at www.omnimgt.com PHONE: (818) 906-8300 5955 DE SOTO AVENUE, SUITE 100 E-Mail: [email protected] FAX: (818) 704-0415 WOODLAND HILLS, CA 91367 Case 18-10122-KG Doc 290-4 Filed 03/23/18 Page 31 of 31 Debtor: Philadelphia Energy Solutions Refining and Marketing LLC Case No. Pending Claims Ballot Detail Results Class 8 - Term B Lenders
Date Printed Ballot Tabulated Creditor Ballot # Clm Sch Received Amount Vote Amount Vote Comment WMC 48A6-THE HARTFORD FLOATING RATE 149 M149 1/18/2018 $14,097,989.00 $14,097,989.42 Accept FUND WTC 3182-WTC, NAT ASOC MULT COMMON 152 M152 1/18/2018 $95,250.00 $95,250.00 Accept TR FD TR-CORE BD PLUS/HIGH YD BD PORT WTC 5825-WTC, NAT ASOC MULT COLL 153 M153 1/18/2018 $828,675.00 $828,675.00 Accept INVEST FD TR II-CORE BD PLUA/HY BD PORT
Friday, January 19, 2018 Pending - Page 7 of 7
RUST CONSULTING | OMNI BANKRUPTCY Visit us on the Web at www.omnimgt.com PHONE: (818) 906-8300 5955 DE SOTO AVENUE, SUITE 100 E-Mail: [email protected] FAX: (818) 704-0415 WOODLAND HILLS, CA 91367