JOHN Q. HAMMONS FALL 2006, LLC, Et Al., Debtors
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UNITED STATES BANKRUPTCY COURT DISTRICT OF KANSAS AT KANSAS CITY In re: ) ) JOHN Q. HAMMONS FALL 2006, LLC, et al. , ) Case No. 16-21142 ) Debtors. ) (Jointly Administered) ) DISCLOSURE STATEMENT WITH RESPECT TO DEBTORS' JOINT UNIMPAIRMENT PLAN OF REORGANIZATION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE DATED AS OF DECEMBER 20, 2017 Mark Shaiken KS # 11011 Bruce Strauss KS # 70034 Mark Carder KS # 11529 Victor Weber KS # 78308 Nicholas Zluticky KS # 23935 MERRICK BAKER & STRAUSS, P.C. STINSON LEONARD STREET LLP 1044 Main Street, Suite 500 1201 Walnut Street, Suite 2900 Kansas City, MO 64105 Kansas City, MO 64106 Telephone: (816) 221-8855 Telephone: (816) 842-8600 Facsimile: (816) 221-7886 Facsimile: (816) 691-3495 [email protected] [email protected] [email protected] [email protected] [email protected] Dated: December 20, 2017 KANSAS CITY, KANSAS 136549097.1 Case 16-21142 Doc# 1583 Filed 12/20/17 Page 1 of 252 SUMMARY OF JOINT UNIMPAIRMENT PLAN OF REORGANIZATION The Debtors, as debtors and debtors-in-possession (collectively, the "Debtors"), propose their Joint Unimpairment Plan of Reorganization (the "Plan") under section 1121(a) of title 11 of the United States Code (the "Bankruptcy Code"), dated as of December 20, 2017, as proponents pursuant to section 1129(a) of the Bankruptcy Code. This Disclosure Statement contains information relating to the history of the Debtors and their business operations, financial and valuation data relating to the Debtors' operations and their assets and liabilities, events which occurred during these Chapter 11 proceedings, financial projections, and a summary of the Plan and its terms. Pursuant to the Plan, the Debtors will pay in full all allowed claims owed by the Debtors and distribute the net remaining value of their estates to the holders of their equity securities. In order to generate the funds to make such payment, the Debtors intend to sell sufficient assets or refinance sufficient debt to do so. At the present, the Debtors are unable to do so because lenders who would otherwise either refinance the debt owed by the Debtors or finance purchasers of the Debtors' assets will not provide such loans while JD Holdings, L.L.C. ("JDH") continues its appeals of orders of the United States Bankruptcy Court for the District of Kansas (the "Bankruptcy Court") which (a) denied JDH's motion to dismiss these bankruptcy cases, (b) denied a motion by JDH to grant relief from the automatic stay so that pre-petition state court litigation against these Debtors could continue, and (c) approved rejection of a right of first refusal agreement with JDH (collectively, the "JDH Appeals"). Before it became apparent that lenders will not proceed until the JDH Appeals conclude, the Debtors received bids from several qualified bidders to purchase the Debtors' 35-hotel portfolio for a price sufficient to satisfy all allowed claims the Debtors owe. The Debtors have cash and additional assets beyond the hotel portfolio which are worth hundreds of millions of dollars. Accordingly, the Debtors can feasibly pay all debts and distribute the net proceeds to their owners upon completion of the JDH Appeals and sale or refinancing of the Debtors' assets. The Plan therefore proposes to conduct a sale or close a refinancing once the JDH Appeals conclude. Barring JDH's voluntary dismissal of the JDH Appeals, resolution of the appeals is expected to take approximately two years to account for JDH's public statements that it will continue to appeal ultimately to the United States Supreme Court. Within 270 days after the JDH Appeals conclude, the Debtors will then sell or refinance their assets and use the proceeds to pay all allowed claims in full in a lump sum. The Debtors believe that this sequence of transactions is the only viable means available to secure competitive bidding for the Debtors' assets and thereby obtain their highest price for all constituencies. The Plan memorializes this path to resolve the JDH Appeals and generate the cash necessary to pay creditors in full. The Plan would become effective at the end of the 270 days following the conclusion of the JDH Appeals. During the period after entry of a confirmation order approving the Plan and the effective date of the Plan, the Debtors will continue to operate their businesses as they have for decades, pay all priority and tax claims in full, continue to pay all secured debt according to the terms of the adequate protection orders and pending cash collateral orders in these cases, and pay interest on all allowed unsecured claims. i 136549097.1 Case 16-21142 Doc# 1583 Filed 12/20/17 Page 2 of 252 TABLE OF CONTENTS I. INTRODUCTION ..........................................................................................................3 II. THE BANKRUPTCY PLAN INFORMATION AND PROCEDURES .......................4 A. Notice to Holders of Claims .................................................................................4 B. Information Package ............................................................................................5 C. Questions About Information ...............................................................................5 D. Confirmation Hearing and Deadline for Objections to Confirmation ....................5 III. HISTORY OF THE DEBTORS AND EVENTS LEADING TO COMMENCEMENT OF THE CHAPTER 11 CASE..................................................6 A. Overview of Prepetition Business Operations .......................................................6 B. Events Leading to Bankruptcy Protection .............................................................9 C. Commencement of Bankruptcy Protection ......................................................... 12 D. Pending Legal Proceedings as of the Commencement Date ................................ 12 E. Selected Financial Data for Calendar Year 2016 ................................................ 12 F. Appraisal Data for Debtors' Assets ..................................................................... 12 G. Five Year Projections ......................................................................................... 12 IV. DEBTORS' AFFILIATED CORPORATE STRUCTURE ........................................ 13 A. Current Corporate Structure ............................................................................... 13 B. Non-Debtor Subsidiaries .................................................................................... 13 C. Co-Trustees ........................................................................................................ 14 D. Officers and Directors ........................................................................................ 14 V. INSIDER AND RELATED PARTY ISSUES .............................................................. 14 VI. THE CHAPTER 11 CASE........................................................................................... 15 A. Continuation of Business; Stay of Litigation ...................................................... 15 B. Significant Events During the Bankruptcy Case ................................................. 15 VII. PLAN VALUATIONS ................................................................................................. 19 VIII. PLAN DESCRIPTION ................................................................................................ 20 A. Overview ........................................................................................................... 20 B. Claims and Interests ........................................................................................... 22 C. Classification and Treatment of Claims .............................................................. 23 IX. TREATMENT OF DISPUTED CLAIMS .................................................................. 24 ii 136549097.1 Case 16-21142 Doc# 1583 Filed 12/20/17 Page 3 of 252 X. EXECUTORY CONTRACTS AND UNEXPIRED LEASES ................................... 24 XI. CORPORATE GOVERNANCE / PLAN IMPLEMENTATION ............................. 24 A. Continued Corporate Existence .......................................................................... 24 B. Trustees, Directors and Officers ......................................................................... 24 C. Charter, Certificate of Incorporation, Bylaws ..................................................... 24 D. Exclusivity Period .............................................................................................. 25 E. Effectuating Documents; Further Transactions ................................................... 25 F. Means for Making Plan Payments ...................................................................... 25 XII. RETAINED CAUSES OF ACTION ........................................................................... 25 XIII. EFFECT OF CONFIRMATION OF PLAN .............................................................. 26 A. Term of Bankruptcy Injunction or Stays ............................................................. 26 B. Revesting of Assets ............................................................................................ 26 C. Discharge of Debtors ......................................................................................... 26 D. Injunction ........................................................................................................... 26 XIV. EFFECTIVENESS OF THE PLAN ........................................................................... 27 XV. RETENTION