20-10161-jlg Doc 770 Filed 09/24/20 Entered 09/24/20 18:06 ... · 4 WEIL:\97594189\14\44444.0009...
Transcript of 20-10161-jlg Doc 770 Filed 09/24/20 Entered 09/24/20 18:06 ... · 4 WEIL:\97594189\14\44444.0009...
WEIL:\97594189\14\44444.0009
WEIL, GOTSHAL & MANGES LLP 767 Fifth Avenue New York, New York 10153 Telephone: (212) 310-8000 Facsimile: (212) 310-8007 Ray C. Schrock, P.C. Sunny Singh Attorneys for Debtors and Debtors in Possession UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ---------------------------------------------------------x : In re : Chapter 11 : OLD MARKET GROUP HOLDINGS : CORP., et al., : Case No. 20-10161 (JLG) : Debtors.11 : (Jointly Administered) : ---------------------------------------------------------x
DECLARATION OF MICHAEL NOWLAN IN SUPPORT OF CONFIRMATION OF JOINT CHAPTER 11 PLAN OF OLD MARKET
GROUP HOLDINGS CORP. AND ITS AFFILIATED DEBTORS
I, Michael Nowlan, pursuant to 28 U.S.C. § 1746, hereby declare that the following is
true to the best of my knowledge, information, and belief:
1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, are as follows: Old Market Group Holdings Corp. (2788); Old Market Group Acquisition Company (2860); Old Market Bakery LLC (4129); Old Market Broadway LLC (8591); Old Market Chelsea LLC (0288); Old Market Construction Group, LLC (2741); Old Market Douglaston LLC (2650); Old Market East 86th Street LLC (3822); Old Market eCommerce LLC (3081); Old Market Georgetowne LLC (9609); Old Market Greenwich Street LLC (6422); Old Market Group Central Services LLC (7843); Old Market Group Plainview LLC (8643); Old Market Hudson Yards LLC (9331); Old Market Kips Bay LLC (0791); Old Market Store LLC (9240); Old Market Paramus LLC (3338); Old Market Pelham LLC (3119); Old Market Pelham Wines & Spirits LLC (3141); Old Market Red Hook LLC (8813); Old Market Stamford LLC (0738); Old Market Stamford Wines & Spirits LLC (3021); Old Market Staten Island LLC (1732); Old Market Uptown LLC (8719); Old Market Westbury LLC (6240); and Old Market Woodland Park LLC (9544). The location of the Debtors’ corporate headquarters is 2284 12th Avenue, New York, New York 10027. Old Market Community Foundation Inc., a charitable organization, owned by Old Market Group Holdings Corp., is not a debtor in these proceedings.
20-10161-jlg Doc 770 Filed 09/24/20 Entered 09/24/20 18:06:55 Main Document Pg 1 of 19
2 WEIL:\97594189\14\44444.0009
1. I am the Chief Restructuring Officer (“CRO”) of Old Market Group
Holdings Corp. (f/k/a Fairway Group Holdings Corp.) and its debtor affiliates, as debtors and
debtors in possession in the above captioned chapter 11 cases (collectively, the “Debtors”), and
have served in this role since January 20, 2020. I am also a Senior Managing Director with
Mackinac Partners, LLC (“Mackinac”), the Debtors’ financial advisors. Prior to joining
Mackinac, I served as a Senior Managing Director of FTI Consulting. I have more than
twenty (20) years of financial restructuring, interim management, turnaround, and management
consulting experience. I have been involved in many aspects of the restructuring process,
including the development and evaluation of strategic business plans, the implementation of
liquidity management strategies, and advising on numerous chapter 11 proceedings, including in
the chapter 11 cases In re The Great Atl. & Pac. Tea Co., Inc., Case No. 15-23007 (RDD) (Bankr.
S.D.N.Y. 2015). My CRO assignments include, among other engagements, serving as CRO in the
healthcare and high-tech materials industries, and mid-market life-science companies. I have also
advised numerous private clients in out-of-court workouts and restructurings, which have often
included the divestiture of major assets.
2. I submit this declaration (the “Declaration”) in support of confirmation of
the Joint Chapter 11 Plan of Old Market Group Holdings Corp. and its Affiliated Debtors filed
contemporaneously herewith (as may be amended, modified, supplemented, or restated, the
“Plan”),2 including the Plan Supplement, dated September 8, 2020 (ECF No. 725) (as may be
further amended, modified, restated, or supplemented, the “Plan Supplement”). I have reviewed,
and I am generally familiar with, the provisions of the Plan, the documents comprising the Plan
2 Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Plan or the Disclosure Statement.
20-10161-jlg Doc 770 Filed 09/24/20 Entered 09/24/20 18:06:55 Main Document Pg 2 of 19
3 WEIL:\97594189\14\44444.0009
Supplement, the Disclosure Statement (defined below) relating to the Plan, and the requirements
for confirmation of the Plan under section 1129 of the Bankruptcy Code. I was personally involved
in the development of and negotiations regarding the Plan and its related documents, and I, along
with the employees of Mackinac who report to me, prepared the liquidation analysis (the
“Liquidation Analysis”) described herein and annexed as Exhibit C to the Disclosure Statement
for Joint Chapter 11 Plan of Fairway Group Holdings Corp. and Its Affiliated Debtors, dated
August 12, 2020 (ECF No. 679) (the “Disclosure Statement”).
3. In my capacity as CRO, I am knowledgeable and familiar with the Debtors’
day-to-day operations, business and financial affairs, books and records, and the circumstances
leading to the commencement of these chapter 11 cases. For a further discussion of my credentials,
see the Declaration of Michael Nowlan Pursuant to Rule 1007-2 of Local Bankruptcy Rules for
Southern District of New York, sworn to and filed on the Commencement Date (ECF No. 5)
(the “Nowlan First Day Declaration,” and together with the Declaration of Abel Porter Pursuant
to Rule 1007-2 of Local Bankruptcy Rules for Southern District of New York, sworn to and filed
on the Commencement Date (ECF No. 25), the “First Day Declarations”).
4. Except as otherwise indicated, all facts set forth herein (or incorporated by
reference herein) are based upon my personal knowledge, my review of relevant documents and
other information as part of my duties and responsibilities as CRO for the Debtors, information
provided to me as part of my duties and responsibilities as CRO by the Debtors’ management and
advisors, including the employees of Mackinac who report to me, or my opinion based upon my
familiarity with the Debtors’ business, operations, and financial condition. If I were called upon
to testify, I could and would testify competently to the facts set forth herein.
20-10161-jlg Doc 770 Filed 09/24/20 Entered 09/24/20 18:06:55 Main Document Pg 3 of 19
4 WEIL:\97594189\14\44444.0009
THE PLAN
5. The Plan represents the final step in the Debtors’ chapter 11 cases. The Plan
is the product of extensive good faith, arm’s-length negotiations between the Debtors and their
major stakeholder constituencies and incorporates a global settlement by and among the Debtors,
the Creditors’ Committee, and the Consenting Creditors (the “Global Settlement”). The Plan
includes a payment of $1.5 million to a recovery trust (the “GUC Recovery Trust”) for the benefit
of holders of General Unsecured Claims, along with $175,000 for the costs of administering the
GUC Recovery Trust. The Plan also provides for the Plan Sponsor’s reorganization around the
Debtors’ liquor licenses, inventory and related wine assets (the “Reorganized Assets”) in
exchange for $2.75 million in value from either the Plan Sponsor’s Allowed First Out Term Loan
Claims or its DIP Claims that will be distributed to the Debtors’ other creditors.3
6. The Debtors commenced these chapter 11 cases to conduct a value
maximizing marketing and sale process to sell as many of their stores on a going concern basis
and preserve as many jobs as possible. The Debtors’ efforts have been successful resulting in five
(5) separate sale transactions involving the sale of twelve (12) of their locations and related assets
(collectively, the “Sale Transactions”).4 The Sale Transactions have all been consummated,
resulting in aggregate sale proceeds of approximately $90 million for the Debtors’ estates and the
preservation of approximately 1,700 jobs for the Debtors’ employees. All of the Sale Transactions
have either been supported by or not opposed by the Debtors’ key stakeholders, including the
3 Pursuant to Sections 5.5 and 5.6 of the Plan, the Plan Sponsor elected to proceed with the Reorganization Transaction pursuant to the Reorganized Equity Plan Election published on September 8, 2020 in the Plan Supplement.
4 On April 20, 2020 the Bankruptcy Court entered orders approving the Village Sale Transaction (ECF No. 449), the Key Food Sale Transaction (ECF No. 448), and the Amazon Transaction (ECF No. 445). On August 5, 2020 the Bankruptcy Court entered an order approving the Bogopa Sale Transaction (ECF No. 664), and on August 25, 2020, the Bankruptcy Court entered an order approving the sale of the Westbury Store to Bogopa (ECF No. 707).
20-10161-jlg Doc 770 Filed 09/24/20 Entered 09/24/20 18:06:55 Main Document Pg 4 of 19
5 WEIL:\97594189\14\44444.0009
Consenting Creditors, the Creditors’ Committee and UFCW Parties. Since closing the Sale
Transactions, the Debtors have continued as debtors in possession to fulfill their obligations in
connection with the Sale Transactions and facilitate an orderly wind-down of the Debtors’
remaining assets. The Plan provides for the distribution of proceeds of the Sale Transactions to
fund the ongoing wind-down costs of these chapter 11 cases and distributions under the Plan.
7. Confirmation of the Plan represents the best available path to conclude these
chapter 11 cases and maximize creditor recoveries. As detailed below, I believe the Plan satisfies
the statutory requirements for confirmation and enjoys almost universal support from the Debtors’
stakeholders. Accordingly, I believe that the Plan is in the best interests of the Debtors and all of
their stakeholders and that, accordingly, the Court should confirm the Plan.
BANKRUPTCY CODE REQUIREMENTS FOR CONFIRMATION
9. Based on my understanding of the Plan, the events that have occurred prior
to and during the Debtors’ chapter 11 cases, and discussions I have had with the Debtors’ legal
advisors regarding the requirements of the Bankruptcy Code, I believe that the Plan satisfies all of
the applicable requirements of section 1129 of the Bankruptcy Code and complies with all other
applicable sections of the Bankruptcy Code, the Bankruptcy Rules, the Local Rules, and applicable
non-bankruptcy law and should therefore be confirmed.
10. Section 1129(a)(1). Based on discussions with the Debtors’ legal advisors
it is my understanding that the Plan satisfies section 1129(a)(1) of the Bankruptcy Code because
it complies with sections 1122 and 1123 of the Bankruptcy Code.
11. Section 1122. I understand that the Plan designates the classification of
Claims and Interests in accordance with section 1122 of the Bankruptcy Code. I also understand
that the Plan provides for the separate classification of Claims against and Interests in the Debtors
20-10161-jlg Doc 770 Filed 09/24/20 Entered 09/24/20 18:06:55 Main Document Pg 5 of 19
6 WEIL:\97594189\14\44444.0009
based upon the difference in legal nature and/or priority of such Claims and Interests, except for
Administrative Expense Claims, Fee Claims, and Priority Tax Claims, which I am advised need
not be designated as Classes under the Plan.
12. I believe the Plan’s classification scheme is rational and was not proposed
to create a consenting impaired Class or manipulate voting. Generally, the Plan incorporates a
“waterfall” classification and distribution scheme that strictly follows the statutory priorities
prescribed by the Bankruptcy Code, except as provided by the Global Settlement which has been
accepted by all voting classes and unanimously by all secured creditors. I believe that valid
business, factual, and legal reasons exist for separately classifying the various Classes of Claims
and Interests created under the Plan, and such Classes do not unfairly discriminate between holders
of Claims and Interests.
13. Section 1123(a)(1). The Plan designates the following Classes of Claims
and Interests, as required under section 1123(a)(1) of the Bankruptcy Code:
Class 1 – Priority Non-Tax Claims
Class 2 – Other Secured Claims
Class 3 – Senior First Out Term Loan Claims
Class 4 – Senior Last Out Term Loan Claims
Class 5 – Holdco Loan Claims
Class 6 – General Unsecured Claims
Class 7 – Intercompany Claims
Class 8 – Intercompany Interests
Class 9 – Parent Equity Interests
Class 10 – Subordinated Securities Claims
14. Sections 1123(a)(2) and 1123(a)(3). The Plan specifies whether each Class
of Claims and Interests is Impaired or Unimpaired under the Plan, and sets forth the treatment of
20-10161-jlg Doc 770 Filed 09/24/20 Entered 09/24/20 18:06:55 Main Document Pg 6 of 19
7 WEIL:\97594189\14\44444.0009
Impaired Claims and Interests, which I understand satisfies the requirements of 1123(a)(2) and (3)
of the Bankruptcy Code.
15. Section 1123(a)(4). It is my understanding that the Plan also complies
with section 1123(a)(4) of the Bankruptcy Code, as the treatment of each Claim or Interest in each
particular Class is the same as the treatment of each other Claim or Interest in such Class (except
as otherwise agreed to by a holder of a particular Claim or Interest).
16. Section 1123(a)(5). It is my understanding that the Plan provides
adequate means for implementation of the Plan, as required by section 1123(a)(5), through, among
other things: (a) the Global Settlement, (b) the provisions governing distributions under the Plan,
(c) the DIP Conversion Election, (d) the creation and governance of the GUC Recovery Trust,
(e) the Reorganization Transaction, and (f) the wind down and dissolution of the Debtors in
accordance with Section 5.7 of the Plan, (g) the vesting of all of the Reorganized Assets in the
Reorganized Debtors, the vesting of the Wind Down Co Assets in Wind Down Co, and the vesting
of all remaining property of the Debtors’ Estates in the Wind Down Estates, as applicable, (h) the
appointment of and authority granted to a Plan Administrator, and (i) authorization for all actions
contemplated by the Plan, in each case, in accordance with and subject to the terms of the Plan.
17. Section 1123(b)(1). The Plan describes the treatment for the Unimpaired
Classes—Class 1 (Priority Non-Tax Claims), Class 2 (Other Secured Claims), and Class 8
(Intercompany Interests). Additionally, the Plan also describes the treatment for the following
Impaired Classes: Class 3 (Senior First Out Term Loan Claims), Class 4 (Senior Last Out Term
Loan Claims), Class 5 (Holdco Loan Claims), Class 6 (General Unsecured Claims), Class 7
(Intercompany Interests), Class 9 (Parent Equity Interests), and Class 10 (Subordinated Securities
Claims)—which I understand satisfies section 1123(b)(1) of the Bankruptcy Code.
20-10161-jlg Doc 770 Filed 09/24/20 Entered 09/24/20 18:06:55 Main Document Pg 7 of 19
8 WEIL:\97594189\14\44444.0009
18. Section 1123(b)(2); 1123(d). With respect to section 1123(b)(2) of the
Bankruptcy Code, Section 8.1 of the Plan provides that, on the Effective Date, each Executory
Contract and Unexpired Lease (each as defined in the Plan) not previously rejected, assumed, or
assumed and assigned shall be deemed automatically rejected pursuant to sections 365 and 1123
of the Bankruptcy Code, unless such Executory Contract or Unexpired Lease: (i) was previously
assumed or rejected by the Debtors pursuant to an order of the Bankruptcy Court; (ii) previously
expired or terminated pursuant to its own terms or by agreement of the parties thereto; (iii) is the
subject of a motion to assume filed by the Debtors on or before the Confirmation Date; (iv) is
identified in Section 8.4 of the Plan; (v) is a KEIP Agreement or a KERP Agreement; or (v) is
identified for assumption on the Assumption Schedule included in the Plan Supplement.
19. Section 1123(b)(3)(A). As I understand is permitted by section
1123(b)(3)(A) of the Bankruptcy Code based on discussions with the Debtors’ legal advisors and
explained in greater detail below, (a) the Plan incorporates the Global Settlement in Section 5.3 of
the Plan in consideration for the distributions and other benefits provided pursuant to the Plan. I
am familiar with the terms of the Global Settlement and believe it represents a fair and rational
compromise and settlement of Claims among the Debtors, the Creditors’ Committee, and the
Consenting Creditors and is in the best interests of the Debtors, their Estates, and holders of such
Claims and Interests, and is fair, equitable, and reasonable; and (b) Section 10.6(a) of the Plan
provides for a release of Claims and Causes of Action owned by the Debtors estates. As described
in further detail in paragraphs 20 to 24 herein, the Plan also includes certain release and exculpation
provisions in Sections 10.6 and 10.7 that (i) are integral components of the Plan, (ii) are appropriate
and necessary under the circumstances, (iii) being provided in exchange for valuable
consideration, (iv) are consistent with the Bankruptcy Code, and (v) comply with applicable law.
20-10161-jlg Doc 770 Filed 09/24/20 Entered 09/24/20 18:06:55 Main Document Pg 8 of 19
9 WEIL:\97594189\14\44444.0009
20. Section 1123(b)(3)(B). As I understand is permitted by section
1123(b)(3)(B) of the Bankruptcy Code based on discussions with the Debtors’ legal advisors,
Section 10.9 of the Plan preserves for the Debtors any rights, Claims, Causes of Action, rights of
setoff or recoupment, or other legal or equitable defenses that the Debtors had immediately prior
to the Effective Date.
21. Section 1123(b)(4). The Plan does not provide for the sale, transfer, or
assignment of all or substantially all of the Debtors’ property and, therefore, as I understand it,
section 1123(b)(4) of the Bankruptcy Code is inapplicable in these chapter 11 cases.
22. Section 1123(b)(5). As I understand is permitted by section 1123(b)(5) of
the Bankruptcy Code based on discussions with the Debtors’ legal advisors, Article IV of the Plan
modifies the rights of holders of Claims in Classes 3, 4, 5, 6, 7, 9, and 10, and leaves unaffected
the rights of holders of Claims and Interests in Classes 1, 2, and 8.
23. Section 1123(b)(6). As I understand is permitted by section 1123(b)(6) of
the Bankruptcy Code, Article X of the Plan includes certain release and exculpation provisions in
Sections 10.6 and 10.7.
24. I believe that the Third Party Releases (defined below) and the Exculpation
Provision are fair and appropriate, given for valuable consideration, and in the best interests of the
Debtors and all parties in interest. Section 10.6 of the Plan only releases Claims or Causes of
Action owned by the Debtors (the “Estate Releases”) and does not release claims or causes of
action owned by third parties. I believe that the Estate Releases constitute a sound exercise of the
Debtors’ business judgment and meet the applicable legal standard: the Estate Releases are fair,
reasonable, and in the best interests of the Debtors. During the course of negotiations regarding
the Plan, it was clear that the Estate Releases would be a necessary condition to consummation of
20-10161-jlg Doc 770 Filed 09/24/20 Entered 09/24/20 18:06:55 Main Document Pg 9 of 19
10 WEIL:\97594189\14\44444.0009
the Plan. Without the Estate Releases, the Debtors and their stakeholders may not have been able
to secure the substantial benefits provided by the Plan, including, without limitation, full payment
of the Administrative Expense Claims and the guaranteed distribution to holders of General
Unsecured Claims. Similarly, the Released Parties (defined below) provided integral support
through the chapter 11 process. Had the Estate Releases not been provided, it would have
significantly diminished (and potentially eliminated) the Debtors’ chances of securing the valuable
consideration provided by the Plan. In addition to the substantial consideration provided by the
Released Parties, the Estate Releases are also appropriate because I do not believe that the released
claims or Causes of Action represent material value to the Debtors and the Debtors’ estates; the de
minimis value of any such claims certainly is not greater than (or even close to) the significant
value and benefits provided by the Plan and related transactions. I also believe that the justification
for providing the Estate Releases is reflected by the Creditors’ Committee’s support. The members
of the Creditors’ Committee, who represent the creditors that likely stand to gain the most from
any proceeds of the released causes of action, are sophisticated parties who consented to inclusion
of the Estate Releases in the Plan. Accordingly, I believe that the Estate Releases are justified, in
the best interests of creditors, and should be approved.
25. In addition to the Estate Releases, Section 10.7 of the Plan contains releases
by certain non-debtor holders of claims (collectively, the “Releasing Parties”) against the
Released Parties for liability relating to the Debtors, the Plan, or these chapter 11 cases
(collectively, the “Third Party Releases” and, together with the Estate Releases, the “Plan
Releases”). As with the Estate Releases, I believe that the Third Party Releases were a material
inducement for the support of the Plan and the concessions it contains. Each holder of a Claim or
Interest in the Voting Classes was provided with the opportunity to opt out of the Third Party
20-10161-jlg Doc 770 Filed 09/24/20 Entered 09/24/20 18:06:55 Main Document Pg 10 of 19
11 WEIL:\97594189\14\44444.0009
Release, and parties who vote to reject the Plan are not bound by the Third Party Release. The
Third Party Releases are an integral part of the compromises and settlements embodied in the Plan
culminating in the Plan being fully consensual, avoiding protracted litigation, and maximizing
value for all of the Debtors’ economic stakeholders. It is my belief that if the Third Party Releases
were eliminated from the Plan, a key foundation of the Plan would be undermined, jeopardizing
the success of the Debtors’ entire reorganization effort, to the detriment and prejudice of all parties
in interest.
26. I also believe that the Third Party Releases are substantively warranted.
Prior to and throughout the pendency of these chapter 11 cases, the Released Parties worked
constructively with the Debtors to negotiate and implement value-maximizing transactions that
were instrumental in supporting the Debtors’ confirmation of a chapter 11 plan. As noted above,
the Released Parties have been instrumental in supporting these chapter 11 cases and have made
significant concessions in consideration for the releases provided under the Plan. Further, pursuant
to the Global Settlement the Debtors have agreed to waive their rights to prosecute any Avoidance
Actions against the Released Avoidance Parties, which include holders of General Unsecured
Claims who (i) vote to accept the Plan or abstain from voting but do not opt out of the Third Party
Releases and (ii) who do not object to confirmation of the Plan or assert any Claims against the
Released Parties. For all of these reasons, I believe that the Third Party Releases are appropriate
and should be approved.
27. Section 1129(a)(2). To the best of my knowledge and belief, based on
discussions with the Debtors’ legal advisors, and as evidenced by the Disclosure Statement Order
and prior orders of the Bankruptcy Court entered in the Debtors’ chapter 11 cases, the Voting
Certification, and the filings submitted by the Debtors, I believe that the Debtors have complied
20-10161-jlg Doc 770 Filed 09/24/20 Entered 09/24/20 18:06:55 Main Document Pg 11 of 19
12 WEIL:\97594189\14\44444.0009
with the applicable provisions of the Bankruptcy Code, including the provisions of sections 1125
and 1126 regarding disclosure and solicitation of the Plan.
28. Section 1129(a)(3). I understand that 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. Throughout these cases, the Debtors, together with the Board, the Special Committee and the
Debtors’ senior management team, have upheld their fiduciary duties to stakeholders and protected
the interests of all constituents. In satisfaction of their fiduciary duties, the Debtors developed the
Plan in close consultation with their primary stakeholders following diligence and negotiation.
The Plan framework was negotiated in connection with the Global Settlement in order to pave the
way for a swift confirmation process and resolution of these chapter 11 cases. The Global
Settlement was achieved through extensive and hard-fought negotiations by and among the
Debtors, the UFCW Parties, the Creditors’ Committee, and the Consenting Creditors, and provides
a guaranteed recovery for the holders of General Unsecured Claims that was otherwise uncertain
and which avoids litigation costs and delay. I believe that the overwhelming acceptance of the
Plan and the Creditors’ Committee’s support of the Plan reflects the Plan’s fairness and the good
faith efforts of the parties to achieve the objectives of chapter 11. Accordingly, I believe the
Debtors have acted in good faith and with the best intentions for creditors in proposing the Plan,
in accordance with section 1129(a)(3) of the Bankruptcy Code.
29. Section 1129(a)(4). Section 2.2. of the Plan provides that all Fee Claims
must be approved by the Court pursuant to final fee applications as reasonable in accordance with
section 1129(a)(4) of the Bankruptcy Code. Further, Section 2.2 of the Plan provides that all final
requests for allowance of compensation for services rendered and reimbursement of expenses
incurred from the Commencement Date through the Effective Date must be filed no later than
20-10161-jlg Doc 770 Filed 09/24/20 Entered 09/24/20 18:06:55 Main Document Pg 12 of 19
13 WEIL:\97594189\14\44444.0009
forty-five (45) days after the Effective Date. Moreover, the Plan provides that the Court shall
retain jurisdiction to hear and determine all such claims. Therefore, it is my understanding that the
Plan complies with the requirements of section 1129(a)(4) of the Bankruptcy Code with respect to
the Debtor’s professionals.
30. Section 1129(a)(5). I believe that Section 5.6(c) of the Plan satisfies the
requirements of section 1129(a)(5) of the Bankruptcy Code. On September 8, 2020, the Debtors
disclosed the identity of the New Board of Reorganized Debtors (ECF No. 725). The Debtors
intend to disclose the identity, compensation, and affiliations of the Plan Administrator at or prior
to the Confirmation Hearing.
31. Section 1129(a)(6). I understand that the Plan does not provide for any rate
changes by the Debtors.
32. Section 1129(a)(7). It is my understanding, based on discussions with the
Debtors’ legal advisors, that the Bankruptcy Code requires that, with respect to each impaired
Class of Claims and Interests, each holder of such Claim or Interest must either (a) accept the Plan
or (b) receive or retain under the Plan on account of such Claim or Interest property of a value, as
of the Effective Date, that is not less than the amount that such holder would receive or retain if
the Debtors were liquidated under chapter 7 of the Bankruptcy Code.
33. In consultation with the Debtors’ management and legal advisors, I directly
supervised Mackinac’s preparation of the Liquidation Analysis annexed as Exhibit C to the
Disclosure Statement. I am familiar with the Liquidation Analysis, the underlying financial and
asset data, and the assumptions upon which the Liquidation Analysis is based. As set forth more
fully below, the Liquidation Analysis demonstrates that each holder of an Allowed Claim and
Allowed Interest will receive or retain under the Plan on account of such Claim or Interest property
20-10161-jlg Doc 770 Filed 09/24/20 Entered 09/24/20 18:06:55 Main Document Pg 13 of 19
14 WEIL:\97594189\14\44444.0009
of a value, as of the Effective Date, that is not less than the amount that such holder would receive
or retain if the Debtors were liquidated under chapter 7 of the Bankruptcy Code. Accordingly, I
believe that the Plan satisfies section 1129(a)(7) of the Bankruptcy Code.
34. Section 1129(a)(8). As set forth above, holders of Claims in Class 1
(Priority Non-Tax Claims), Class 2 (Other Secured Claims), Class 7 (Intercompany Claims), and
Class 8 (Intercompany Interests) are not impaired under the Plan and, therefore, conclusively
presumed to have accepted the Plan pursuant to section 1126(f) of the Bankruptcy Code.
Additionally, as evidenced by the Voting Certification, the Plan has been accepted by all voting
classes as described in para 29, above. Further, holders of Claims in Class 7 (Intercompany
Claims), Class 9 (Parent Equity Interest), and Class 10 (Subordinated Securities Claims) are
deemed to have rejected the plan pursuant to section 1126(g) of the Bankruptcy Code. As to these
Classes, it is my understanding, based on discussions with the Debtors’ legal advisors, that the
Plan may be confirmed over their dissent under the “cram down” provisions of section 1129(b) of
the Bankruptcy Code.
35. Section 1129(a)(9). Section 2.1 of the Plan provides that, unless a holder
agrees to less favorable treatment, holders of allowed Administrative Expense Claims under
section 503(b) of the Bankruptcy Code will be paid in full, in Cash, on the later of the Effective
Date and the first business day after the date that is thirty (30) calendar days after the date such
Administrative Expense Claim becomes Allowed. Moreover, the Plan provides that, unless a
holder agrees to less favorable treatment, holders of Allowed Priority Non-Tax Claims under
section 507(a) of the Bankruptcy Code (excluding Priority Tax Claims under section 507(a)(8), as
described herein) will either be paid in full in Cash or otherwise receive treatment consistent with
the provisions of section 1129(a)(9) of the Bankruptcy Code, except to the extent that a holder of
20-10161-jlg Doc 770 Filed 09/24/20 Entered 09/24/20 18:06:55 Main Document Pg 14 of 19
15 WEIL:\97594189\14\44444.0009
an Allowed Priority Non-Tax Claim agrees to less favorable treatment. Therefore, it is my
understanding that the Plan satisfies the requirements of section 1129(a)(9)(A) and (B).
36. Pursuant to Section 2.3 of the Plan, unless holders agree to less favorable
treatment, holders of Allowed Priority Tax Claims (i) will be paid Cash in an amount equal to such
Claim on, or as soon thereafter as is reasonably practicable, the later of (a) the Effective Date, to
the extent such Claim is Allowed on the Effective Date, (b) the first business day after the date
that is forty-five (45) calendar days after the date such Claim becomes Allowed, and (c) the date
such Claim is due and payable in the ordinary course as such obligation becomes due; or (ii) will
receive equal annual Cash payments in an aggregate amount equal to the amount of such Claim,
together with interest at the applicable rate under section 511 of the Bankruptcy Code, over a
period not exceeding five (5) years from and after the Commencement Date. Accordingly, it is
my understanding that the Plan satisfies the requirements of section 1129(a)(9)(C) of the
Bankruptcy Code with respect to the treatment of Priority Tax Claims under section 507(a)(8).
37. Section 1129(a)(10). The Classes entitled to vote on the Plan— Claims in
Class 3 (Senior First Out Term Loan Claims), Class 4 (Senior Last Out Term Loan Claims), Class
5 (Holdco Loan Claims), and Class 6 (General Unsecured Claims) are impaired and have each
accepted the Plan, without including the acceptance of the Plan by any insiders in such Class.
Accordingly, it is my understanding that the Plan satisfies section 1129(a)(10) of the Bankruptcy
Code.
38. Section 1129(a)(11). I understand, based on discussions with the Debtors’
legal advisors, that Section 1129(a)(11) of the Bankruptcy Code permits a plan to be confirmed if
it is feasible, i.e., it is not likely to be followed by liquidation or the need for further financial
reorganization—and in the case of a liquidating plan—that the Debtors can timely perform all
20-10161-jlg Doc 770 Filed 09/24/20 Entered 09/24/20 18:06:55 Main Document Pg 15 of 19
16 WEIL:\97594189\14\44444.0009
obligations described in such plan. I believe that the Debtors can timely perform all obligations
described in the Plan and the Plan is not a visionary scheme. I believe the Plan embodies a rational
plan for the orderly wind down of the Debtors’ estates and the delivery of distributions to holders
of Allowed Claims following the Effective Date. Specifically, the Plan sets forth certain Cash
payments that the Debtors and/or the Plan Administrator will make on or after the Effective Date.
Such payments include, among others, payments to holders of Allowed Administrative Expense
Claims, Allowed Priority Tax Claims, Allowed Priority Non-Tax Claims, and Allowed Other
Secured Claims. In accordance with the Global Settlement and the GUC Recovery Trust
Agreement, the Plan also provides for the establishment of the GUC Recovery Trust for the benefit
of holders of Allowed General Unsecured Claims, to which the Debtors will transfer the GUC
Recovery Trust Assets. Further, as described in further detail herein, I believe that the Debtors
have sufficient cash to fund all payments required under the Plan, including all valid
Administrative Expense Claims.
A. Estimated Sources of Funds
39. As set forth below, the Debtors expect to have sufficient funds to administer
and consummate the Plan, including funding all payments required under the Plan, and proceeding
with an orderly winddown of these chapter 11 cases.
(a) Estimated Remaining Assets
40. As of September 21, 2020, the value of the Debtors’ assets is approximately
$30.5 million, including $19.2 million in current cash on hand, and $4.7 million on account of
insurance proceeds related to the cyber security claim anticipated to be collected prior to the
Confirmation Hearing.
20-10161-jlg Doc 770 Filed 09/24/20 Entered 09/24/20 18:06:55 Main Document Pg 16 of 19
17 WEIL:\97594189\14\44444.0009
Estimated Sources ($) Amount
Cash Balance as of 9/20/20 $13.5 million
503(b)(9) Segregated Account $5.7 million5
Cyber Security Insurance Claim $4.7 million
Other L/C or Deposit Receivables $6.6 million
TOTAL SOURCES: $30.5 million
B. Estimated Uses of Funds
(a) Other Uses of Funds
41. The Debtors project wind down expenses of approximately $7.9 million,
inclusive of remaining projected professional fees and US Trustee fees, and corporate wind-down
expenses including post-petition accounts payable and other estimated wind-down expenses to
satisfy the Debtors’ obligations under the Plan. In addition, $3.4 million dollars would first need
to be used to satisfy the remaining DIP Claims, leaving the Debtors with $19.2 million to satisfy
other Claims under the Plan.
(b) Estimated Outstanding Claims
42. Throughout these chapter 11 cases, the Debtors, with the assistance of their
financial advisors, have been tracking and estimating unpaid Outstanding Claims (defined below).
The Outstanding Claims amounts are estimated based on Claims received by the General Bar Date
(including 503(b)(9) Claims),6 the Debtors’ books and records, Mackinac’s analysis of the
5 As provided in the Stipulation and Order With Respect to DIP Paydown And Related Matters (ECF No. 520) (the “DIP Stipulation”), the Debtors established a segregated account (the “503(b)(9) Segregated Account”) reserved for the payment of 503(b)(9) Claims, which to date has been fully funded with $5.7 million.
6 Pursuant to the Order Establishing Deadline for Filing Proofs of Claim and Approving the Form and Manner of Notice Thereof (ECF No. 204) (the “Bar Date Order”) the deadline to file claims asserted under section 503(b)(9) of
20-10161-jlg Doc 770 Filed 09/24/20 Entered 09/24/20 18:06:55 Main Document Pg 17 of 19
18 WEIL:\97594189\14\44444.0009
estimated Claims as of the Effective Date, and discussions with members of the Debtors’
management team and its advisors. 7
43. The Debtors estimate that the total amount of Outstanding Claims (as
defined below) that must be paid prior to any distributions to the First Out Term Loan Lenders
will be approximately $10.6 million, consisting of the following:
Estimated Outstanding Claims ($) Amount
Administrative Expense Claims $7.4 million (of which approximately $5.7 million are 503(b)(9) Claims)
Priority Tax Claims and Priority Non-Tax Claims $1.3 million
Other Secured Claims $0.2 million
Unsecured Claims $1.7 million settlement payment8
TOTAL CLAIMS: $10.6 million
44. This leaves the Debtors’ estates with approximately $8.6 million, which is
more than sufficient to satisfy Village’s maximum claim of approximately $2.3 million, and any
other contingencies that may arise.
45. Section 1129(a)(12). I understand that the Debtors have paid all chapter 11
statutory and operating fees required to be paid during these Chapter 11 Cases and filed all fee
statements required to be filed. Further, pursuant to Section 12.1 of the Plan, all fees payable
the Bankruptcy Code was April 27, 2020 at 5:00 p.m. (as extended from March 27, 2020 by Order Extending General Bar Date (ECF No. 411)) (the “General Bar Date”).
7 As provided in the Proposed Confirmation Order, following entry of the Proposed Confirmation Order, all other Administrative Expense Claimants will have thirty-five (35) days to submit their Administrative Expense Claims (the “Administrative Expense Claims Bar Date”). Following the Administrative Expense Claims Bar Date, the Debtors and their advisors will continue to reconcile and make determinations as to allowance of requests for payment of Administrative Expense Claims. 8 See Section 5.18 of the Plan.
20-10161-jlg Doc 770 Filed 09/24/20 Entered 09/24/20 18:06:55 Main Document Pg 18 of 19
19 WEIL:\97594189\14\44444.0009
pursuant to section 1930 of title 28 of the United States Code shall be paid on the Effective Date,
and thereafter as may be required. Accordingly, it is my understanding that the Plan satisfies
section 1129(a)(12) of the Bankruptcy Code.
46. Section 1129(b). It is my understanding that, pursuant to section 1129(b)
of the Bankruptcy Code, a plan may be confirmed notwithstanding the rejection or deemed
rejection by a class of claims or interests so long as the plan is “fair and equitable” and it does not
discriminate unfairly as to such non-accepting class. Based on my review of the Voting
Certification, the Classes of Claims entitled to vote have accepted the Plan by the required
threshold under the Bankruptcy Code. Accordingly, the “cram down” provisions extant in section
1129(b) of the Bankruptcy Code are only applicable to holders of Claims in Class 7 (Intercompany
Claims), Class 9 (Parent Equity Interests), and Class 10 (Subordinated Securities Claims). The
Plan’s treatment of these Classes is proper because all similarly situated holders of Claims or
Interests will receive substantially equivalent treatment and the Plan’s classification scheme rests
on a legally acceptable rationale. Further, to the extent any impaired rejecting class of claims or
interests is not paid in full, no class junior to the impaired rejecting class will receive any
distribution under the Plan on account of its junior claim or interest.
47. 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: September 24, 2020
/s/ Michael Nowlan Name: Michael Nowlan Title: Chief Restructuring Officer
20-10161-jlg Doc 770 Filed 09/24/20 Entered 09/24/20 18:06:55 Main Document Pg 19 of 19