Circle Family Healthcare Network Emergency Motion for Use of Cash Collateral

7/29/2019 Circle Family Healthcare Network Emergency Motion for Use of Cash Collateral

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IN THE UNITED STATES BANKRUPTCY COURTFOR THE NORTHERN DISTRICT OF IL LINOIS

EASTERN DIVISION

In re:

CIRCLE FAMILY HEALTHCARENETWORK, an Illinois Not-For-ProfitCorporation

Debtor.

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In Chapter 11

Case No. 13 B 04747

Honorable A. Benjamin Goldgar

Motion Date:Motion Time:

EMERGENCY MOTION FOR ENTRY OF ORDER PERMITTING DEBTORINTERIM USE OF CASH COLLATERAL BELONGING TO

NCB CAPITAL IMPACT AND U.S. BANK NATIONAL ASSOCIATION

Debtor, CIRCLE FAMILY HEALTHCARE NETWORK, an Illinois Not-For-Profit

Corporation, (Debtor),by and through its attorneys, GOLAN & CHRISTIE LLP, moves this

Court to enter an order permitting interim use of cash collateral belonging to NCB CAPITAL

IMPACT f/k/a NCB DEVELOPMENT CORPORATION (hereinafter NCB) and U.S. BANK

NATIONAL ASSOCIATION (hereinafter US Bank) in support thereof represents to the Court

as follows:

BACKGROUND

1. On February 8, 2013, Debtor filed a voluntary case under Chapter 11 of Title 11of the United States Code ("Bankruptcy Code").

2. Debtor is in the business of education services, community development initiativeand providing limited health care.

3. This Court has jurisdiction over this Application pursuant to 28 U.S.C. 157 and1334. Venue is proper pursuant to 28 U.S.C. 1408 and 1409. This matter is a core proceeding

pursuant to 28 U.S.C. 157(b).

4. No creditors committee has been appointed in these cases. No trustee has beenappointed. No patient care Ombudsman has been appointed.

Exhibit 1

Case 13-04747 Doc 4-1 Filed 02/08/13 Entered 02/08/13 19:22:43 Desc Exhibit1- Emergency Motion for Use of Cash Collateral Page 1 of 6


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SECURITY INTEREST OF NCB

5. On or about January 10, 2006, NCB and Debtor entered into a loan and securityagreement (the NCB Loan Agreement), pursuant to which NCB agreed to extend a loan to

refinance an existing line of credit debt with NCB used by the Debtor in the amount of

$485,000.00 (the NCB Loan.). A copy of the Loan is attached hereto as Exhibit A.

6. On or about February 1, 2006, and in connection with the NCB Loan, Debtorexecuted a promissory note in the amount of $485,000.00. A copy of the promissory note is

attached hereto as Exhibit B.

7.

Pursuant to Section 8 of the NCB Loan Agreement, the NCB loan was secured by

Debtors accounts receivable that were less than 90 days old and other instruments, general

intangibles, contract rights and proceeds, chattel paper and proceeds, inventory, equipment,

furniture and fixtures (the Collateral).

8. NCB allegedly holds a lien on the Collateral. It filed an initial UCC-1 financingstatement with the Illinois Secretary of State under Filing No. 12345658 on July 27, 2006

attached hereto as Exhibit C. No continuation statement has been located.

9. NCB alleges a balance due of $86,282.55 as of the date of filing.SECURITY INTEREST OF USBANK

10. On or about November 1, 2008, Park National Bank (hereinafter referred to asPark National) and Debtor entered into a Business Loan and Commercial Security Agreement

(the Park National Loan Agreements), pursuant to which Park National agreed to extend a loan

and refinanced a previous loan for the total sum of $300,000.00 (the Park National Loan.). A

copy of the Loan Agreements are attached hereto as Group Exhibit D.

11. Pursuant to the Park National Loan Agreements, the Park National Loan wassecured by all of Debtors general business assets including all inventory, equipment, accounts

Exhibit 1



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(including but not limited to all health-care-insurance receivables and grants), instruments,

general intangibles, contract rights and proceeds, chattel paper and proceeds, inventory,

equipment, furniture and fixtures (the Collateral).

12. Upon information and belief, the Park National Loan was transferred, sold orassigned and after multiple transfers is currently held with US Bank.

13. On or about December 1, 2011, US Bank and the Debtor entered into anExtension Agreement of the Park National Loan for the principle amount of $298,538.00

(hereinafter known as the US Bank Agreement).

14.

US Bank allegedly holds a valid perfected lien on the Debtors assets to the extent

set forth in the Park National Loan Agreement. The most current UCC-1 financing statement

filed by US Bank with the Illinois Secretary of State under Filing No. 9098825 on March 11,

2011 is attached hereto as Exhibit E.

15. US Bank alleges a balance due of $$226,311.00 as of the date of filing.DEBTOR REQUIRESUSE OF CASH COLLATERAL

16. The Debtor requires the use of its cash collateral as it is defined in Section 363(a)of the Bankruptcy Code and requests authorization of this Court to utilize the cash collateral

pursuant to the provisions of Section 363(c)(2)(B) of the Bankruptcy Code. A statement showing

Debtors anticipated expenses is attached hereto as Exhibit F.

17. Neither NCB nor US Bank will be harmed by the interim use of cash collateralgenerated from the assets and proceeds thereof. Further, Debtor proposes to grant NCB and US

Bank replacement liens upon the assets Debtor acquires subsequent to the filing of the Chapter 11

petition to the extent of the collateral utilized, subject to verification of the extent and validity of

their liens. In addition, as adequate protection, Debtor proposes to grant NCB and US Bank

replacement liens upon the proceeds from assets Debtor acquires subsequent to the filing of the

Exhibit 1



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Chapter 11 petition to the extent that the collateral is utilized subject to verification of the extent

and validity of the lien.

18. The use of collateral held by the NCB and US Bank will cause little, if any, harmto NCB and US Bank. Conversely, the harm to the Debtor will be substantial because the use of

cash collateral is essential to its status as a going concern. Debtor proposes to make monthly

adequate protection payments to NCB in the amount of $6,015.00 until a hearing on a final order

for use of cash collateral can be heard in order to protect NCB from any erosion of its lien upon

the Debtors assets due to the continuance of the automatic stay pursuant to 362 of the

Bankruptcy Code. In addition, Debtor proposes to make monthly adequate protection payments to

US Bank in the amount of $4,085.00 until a hearing on a final order for use of cash collateral can

be heard in order to protect US Bank from any erosion of its lien upon the Debtors assets due to

the continuance of the automatic stay pursuant to 362 of the Bankruptcy Code. The Debtor

further believes that NCB and US Bank are fully protected for the value of their liens provided by

replacement liens to the extent of collateral utilized. The amounts being offered to NCB and US

Bank are the average sums that they were receiving pre-petition.

NATURE OF EMERGENCY

19. The Debtor has no other non-designated sources of income for its overhead costsincluding but not limited to salaries, benefits, rents, medical supplies, laboratory expenses,

utilities, insurance and other items required to operate its business. If Debtor is not given the use

of cash collateral, it will be unable pay its ongoing expenses as described in Exhibit F. If Debtor

is unable to pay the ongoing expenses, it will be unable to pay its employees, pay rent and acquire

supplies and provide health care services. In turn the Debtor will then be forced into a premature

liquidation.

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20. Pursuant to Rule 4001(b) of the Bankruptcy Rules, Debtor must give 14 daynotice to all creditors and parties in interest of a motion requesting leave to use cash collateral.

However, pursuant to Rule 4001(b)(2), the court may conduct a preliminary hearing before the 14

day period expires as is necessary to avoid immediate and irreparable harm.

NOTICE

21. Notice of this Emergency Motion has been served upon the Trustee, all partiesholding a lien upon the Debtors assets and the twenty largest creditors. Debtor believes that it is

appropriate to reduce the time for notice of this application.

DISCLOSURE PURSUANT TO LR4001-2

22. Debtor represents that none of the provisions of the proposed cash collateralwarrant highlighting as required by LR 4001-2.

WHEREFORE, Debtor, CIRCLE FAMILY HEALTHCARE NETWORK, an Illinois Not-

For-Profit Corporation, prays that an order be entered as follows:

A. Authorizing it to utilize cash collateral to the extent needed pursuant to the

attached budget;

B. Granting NCB and US Bank liens on the proceeds from assets Debtor acquires

subsequent to the filing of the Chapter 11 petition to the extent that the collateral is utilized

subject to verification of the extent and validity of the lien;

C. Authorizing Debtor to make adequate assurance payments to NCB in the amount

of $6,015.00 pending the final hearing on use of cash collateral;

D. Authorizing Debtor to make adequate assurance payments to US Bank in the

amount of $4,085.00 pending the final hearing on use of cash collateral;

E. Reducing the time required for notice to all creditors and parties in interest;

F. Setting the matter down for final hearing on use of cash collateral; and

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G. For such other and further relief as this Court deems just and proper.

CIRCLE FAMILY HEALTHCARE NETWORK,an Illinois Not-For-Profit Corporation,

Debtor,

/s/ Robert R. Benjamin______Robert R. BenjaminOne of its attorneys

Robert R. Benjamin (ARDC #0170429)Beverly A. Berneman (ARDC #06189418)GOLAN & CHRISTIE LLPAttorneys for Debtor

70 West Madison, Suite 1500Chicago, Illinois 60602312-263-2300

Exhibit 1


Circle Family Healthcare Network Emergency Motion for Use of Cash Collateral

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