April 2, 2025 Bankruptcy Court Hearing (The Dolphin Company/Leisure Investments Holdings LLC, et al.)

Please rise. Please be seated.

Good afternoon, your honor. I am.

You've had a long day already.

It's been a day. It's been a day.

Well, obviously, your honor, thank the court, for scheduling us today on a very busy day. We'd also like to thank mister Hackman from the office of the United States trustee. We're pleased to report, we've been working with him, and we have largely resolved all of The US Trustees' comments. I think we're down to just one outstanding issue with respect to what we're calling the five forty two e motion. Other than that, your honor, I'll move forward with some introductions.

In the courtroom is Stephen Strom.

Mister Strom.

He's the debtor's independent director, and the declarant today. As you no doubt saw from mister Straum's declaration, he has substantial experience in restructuring generally and in particular dealing with very challenging situations, and this may be one. On Zoom today, your honor, is Robert Wagstaff. He's the debtor's proposed CRO from Riveron. Mister Wagstaff is on the ground in Cancun.

It's where the debtors are headquartered. So he is appearing by Zoom today as a result.

From Young Conaway, your honor, I'm joined by a number of our colleagues,

but I anticipate presenting today will be Sean Greacher, Allison Milke, and Jared Kachenas.

And the first lien lenders are here, your honor,

and there are also our proposed dip lender, Prudential and Cigna, and they're represented by Baker and Mackenzie and mister Cousins. So your honor, the circumstances, we find ourselves in here, very recent governance change, lack of current financial information, reports of severe operational distress, serious concerns over animal health and welfare aren't necessarily the standard set of circumstances that this court typically sees. That said, we think with your honor's help as we get out of the gate here and the use of the tools that are available under chapter 11, we expect and hope that in a relatively short period of time, we will have this case on a more typical path consistent with other restructurings before this court. Your honor, the background, there's a significant amount of detail on mister Straum's declaration. I wanna address just a few key points for the court's consideration.

But, obviously, if your honor has any questions or needs more detail on any specific point, we'd be happy to cover that. I do wanna reiterate, that as mister Straum's declaration makes clear, some of the information in that declaration is dated because the company has not generated audited financial reports since 2022 and has not timely provided reporting to the first team noteholders. The most recent financial information that we've had access to is from the third quarter of twenty twenty three. Your honor, the company is is an international operation, operating more more than 30 attractions in eight countries, primarily US, Mexico, The Caribbean, and Italy. These are recreational attractions focused on dolphins or other live animal encounters under the trade name, the Dolphin Company.

Overall, the company has roughly 2,400 animals, about two ninety five dolphins, residing at these facilities. The company employs more than 2,600 people. And in 2023, had 3,500,000 visitors to their dolphin habitats, marinas, and water parks. The company has an excess of $200,000,000 of funded debt that's in two tranches of first and second. The first lien has been in payment default since January of twenty twenty four, so over one year.

And the second lien has been in payment default since September of twenty twenty three. Additionally, your honor, there are credible reports indicating that the company has been without access to essential liquidity, liquidity necessary to pay vendors, taxing authorities. There's reports that they've delayed or not paid certain wages and have not adequately provided for the health, self, safety, and welfare of the animals in their care. Again, as mister Straub's declaration indicates, the facts of all of these issues will be clarified as mister Straub and the management team gains control over the company's books and records. But given these, serious defaults and concerns for the health and of the business and the health of the animals, I'm really in the absence of prior management having any plan on how to address these matters.

The first lien hold note holders after exhibiting what appears to be significant patients took steps to exercise their control rights and remove the existing members of LIH's board. And they did so and then appointed mister Straum as the sole independent director. At that point, mister Straum caused LIH to retain mister Wagstaff as the CRO and Riveron as restructuring adviser. After that, the first lien noteholders exercise their control rights in the equity interest of the Mexican affiliates to remove those entities boards and appoint mister Straum there as the sole independent director for those entities. And once that was was completed, mister Schram removed the remaining debtors, boards, and appointed himself as the independent director there.

This process is ongoing. I know your honor has the org chart. Right Right now, there's, a total of 15 debtors, the lead debtor and 14 affiliates. We're taking steps now to replace the boards with mister Schram at the other entities, but we're following the proper procedures for the jurisdiction where those entities are incorporated. And some of that is taking more time to go through the process of replacing the board and installing mister Straum.

But it is underway, and we do expect several more debtors to file as we affect that change. Now the court may be wondering, you know, why did the independent director and the CRO determined to file chapter 11 now before they really had an opportunity to get their arms around the business operations of these debtors. There's really four reasons, your honor. By all accounts, the company's in dire financial position. They've been in payment default as I indicated on the First Lien for over a year.

In discussions with the First Lien no holders, they made it clear that they were prepared to lend to this company, but only with a management change, and inside of a chapter 11 where trans where there could be appropriate transparency. They were also clear they would not be primed on their first lien debt. There are animal safety concerns, your honor, reports of dolphin deaths, particularly in the last six months and government action to investigate alleged animal abuse

concerns, have caused a very difficult situation that we wanna try to address immediately.

Difficult situation that we wanna try to address immediately. Legal actions, judgment liens are all starting to pile up, whether it's eviction proceedings, efforts to collect past due amounts or attachments. There are significant legal actions going on. And your honor may have noticed that the prior management commenced the Concurso Mercantile, similar to a bankruptcy in Mexico. That was, again, filed by the prior management.

In our review, your honor, we can't see that the debtor that the company, that filed had the requisite corporate authority mercantile. But really more importantly, mister Straumann has determined that such a proceeding proceeding can't really create the platform for the global restructuring that's required here. It deals with only one entity, in Mexico. I can give you an update on that proceeding, your honor. On March 31, new management did move to withdraw, the concurso Mercantile.

There was a hearing yesterday and continued to today and it recently ended, and we expect the ruling very soon. But the current management has asked to withdraw from that. If, withdrawal is successful, we do intend to file that entity as a sister company, with the current debtors. So really in some, your honor, given the substantial financial uncertainty, the ongoing lack of transparency and responsiveness to animal safety, the legal proceedings, the filing of a Chapter 11 proceeding to invoke the automatic stay and to allow the new deck debtor I'm sorry, the new director and CRO of the breathing spell to do the work necessary to get their arms around this company and put it on a path to maximize value. So what does success look like in this case?

We see it playing out in three phases. First, stabilizing proper management and oversight of the business. That means what seems like some basic stuff, your honor, getting eyes on the parks, access to bank accounts, access to email and the servers, really basic but critical stuff. Top of mind, animal safety, your honor. I can't say it enough.

We're very concerned that the lack of liquidity has caused the situation where the animals are not being properly cared for. So we wanna get in there and find out and do what we can to make sure that's fixed. So success in phase one, your honor, is that the animals are safe. They're properly cared for. Employees are paid on time.

Vendors are paid for their post petition services, and the company operates in accordance with the obligations of chapter 11. We're already actively looking for allies in what we call a must succeed project of animal safety. Hopefully, we'll find those people within the company. We're also looking at consultants outside the company. We've begun to reach out to those, individuals.

And we're looking for people who will share the goal and help us do what's necessary to keep these animals safe. So must succeed project 1B is getting our arms around the financial operations of the business. Again, this means fully understanding cash management, where are the bank accounts, emails, server, employee payroll, vendor services, and really other goods and services necessary to avoid a shutdown scenario that would both hurt the value of the business and put the animals in further danger. So we're hopeful that we're gonna be able to take the steps necessary to make this happen as quickly as possible. Mister Wagstaff, as I indicated, is in Cancun with his team from Riveron doing what they can to push this process forward.

But the relief that we're seeking today will be very helpful and a first step in sort of implementing phase one of this plan. We wanna do everything necessary to comply with the bankruptcy code, obviously, and really in turn determine the best path forward from an operational standpoint for this company. So as you're here in connection with the dip financing motion, the first lien note holders have stepped up with an emergency funding opportunity that the company can use to address the dire needs as they are discovered. We have some buckets we call them of where that funding can be used, but we are working on a more comprehensive dip budget, and we have fifteen days, to do that. We're hopeful that we're gonna get access to the information to provide the court creditors, and everyone else involved, all the other stakeholders with a budget that, we can use the dip for.

That's phase one, your honor. We then moved to phase two, and that's a state value maximization. The debtors have already contacted investment bankers with appropriate experience for a company of this type, and interviews are scheduled shortly. After we've ensured that the animals are safe and being cared for and we have our arms around around what assets the debtors have, mister Strum, his advisers will determine how best to maximize the value of of the business for the stakeholders. Success here means generating as much value as possible from these company assets.

Phase three, your honor, is sort of down the road. It may even be part of a chapter 11 plan process. That's a full investigation, accounting, and reckoning of the historical issues related to these debtors, looking at potential state cause of action against third parties. Success there will be to identify those causes of action, your honor, and to allow stakeholders to understand what happened here and to seek recovery for the estate for those stakeholder holders. So in sum, Mr.

Strom and his team are beginning to form a strategic plan for the debtors that will not only stabilize, but hopefully improve animal welfare and operations, optimize the performance of the core assets, identify non core assets for disposition and restructure the debtors' liabilities. Now we expect those who are in a position to cooperate with this process will fully and promptly do so. If they do not, if their actions or inaction jeopardize animal welfare or the safety of employees, we'll be back in front of this court. Again, the relief we seek today is the first step in that process. As we get better information on her, your honor, we promise we will provide the court updates and other parties so people understand how things are progressing.

Again, depending on the urgency of situations, we may be bothering your honor, for some emergency relief. We apologize in advance for that imposition. We're gonna try to organize this as best as possible and and try to resolve as many issues as we can out of court. But if we need to come to the court, we'll be we'll be in contact. So, hopefully, this context helps the court's consideration of the first days we have today.

I'm happy to answer any questions your honor has.

This was this is helpful, and I did read the filings. I noticed the situation in which the debt found itself and how the lack of institutional knowledge that the the current director and, the CRO have, understandably, because they weren't involved. And I hear that that the, CRO whose name? Sir Wagstaff. Thank you.

Mister Wagstaff is, in Cancun, which is the headquarters. Correct. And so is that where all of the books and records such as they are or the access to computer records is?

We we expect that, your honor.

There may be,

you know, there there are US facilities, in Miami and other places in Florida. So there may be books and records in more than one location, but certainly the corporate headquarters is in Cancun, and that's where the Riveron team and mister Wagstaff are focusing their efforts now.

And is there any kind of operational staff that's still in the Florida locations?

Yeah. The Miami Seaquarium is still open as is, the facility in Panama. There may a few others. The Panama, facility has been the subject of of some action by the state attorney general for concerns over animal welfare, but I believe it's still operating, and, we've been in touch already with the attorney general's office in Florida. And I believe we have a call tomorrow morning with them to explain that the company now has access to more liquidity.

We're going to to get in there and make sure that, we make the changes to that property that are necessary.

Well, obviously, you've identified, the paramount importance of the animal welfare, as well as the as paying employees, etcetera. But I assume that there are regulations, in the various states or in various countries with respect to animal welfare.

Yes, your honor. And, the company has a staff that can handle this. We need to get access to them and find out who's going to stay with, the new management team to help implement changes and use this new liquidity, to to make sure that we're properly caring for the animals. Yeah. I would hope that there would be internal and on-site records with respect to the animals.

And I sort of been thinking of this viewed it sort of like,

you know, when you get a nursing home bankruptcy or you get a hospital bankruptcy and there are residents and there are patients that need to be taken care of. And, there are often state regulators who are quite interested in what is happening with, with those debtors.

Yes, your honor. There's there's plenty of news reports to look at to indicate there's reason for concern here. And then again, that's the reason that we filed so quickly to get access to liquidity to be able to make some changes. K. Thank you.

So with that, your honor, unless you

have any other questions, I'd move the admission of the Straub Declaration for purpose of this of this first aid hearing.

To the objection. Hear not. It's admitted.

Alright. Thank you, your honor. I think mister Kachenaj will start off the agenda.

It's your lucky day, mister Kashanosh.

I will just drop all my papers. Good to see you again. For the record, Jared Koshnosh, Young Conway. Sorry.

I'm telling you on behalf of the debtors.

I sympathize with your honor. We'll we'll we'll get through it together. Hopefully, the few motions that I'm presenting are a little bit more straightforward than what we discussed at the previous hearing. But if, obviously, if you have any questions, ask mister Brady because he owes me Okay. Big time.

But, I

think you're right.

But anyway, thank you, your honor. And I'd like to reiterate mister Brady's thanks to, mister Hackman. He's been very responsive in getting us his comments. And as always, so I'd like to kick it off with, as usual, the joint administration motion. As your honor saw, we had 15 debtors that are affiliates within the meaning of section one zero one of the bankruptcy code.

For the reason set forth in the motion, joint admin administration is warranted under, local rule ten fifteen dash one. And importantly, we are seeking this relief for procedural purposes only, and procedural consolidation would promote the efficiency of these cases. And so unless you have any questions, we would request that, the court enter the order.

I do not. Does anyone wish to be heard with respect to the joint administration motion? I hear no one. I reviewed it. It's appropriate.

I will grant it.

Thank you, your honor. Next item is number four on the agenda, and that is the debtor's application to retain Kurtzman Carson Consultants doing business as Veritas Global as a claims and noticing agent for these cases. The debtors have over 200, creditors and an excess of a thousand notice parties in these cases, I I believe, we are still running down the notice parties, but it could be potentially over a thousand. But under and under these facts and our local rules, the debtors are required to retain a claims agent. Also, consistent with the court's claims agent retention protocol, the debtors solicited three proposals to serve as claims agent in these cases.

After reviewing these proposals, the debtors selected Veritas based on its competitive pricing pricing structure and expertise. And I should note that there was a notice of revised order that was filed. I believe we have the red lines that I can, hand up to your honor. Please.

I haven't had a chance to look at anything that was revised.

So with respect to the the KCC retention, there was just one chain two changes. One was to attach, the engagement agreement as exhibit a to the order and to change the term verita to indemnified parties through throughout the order, in connection with the indemnification provisions.

It's a broader term, I take it. I believe so. Okay.

Unless your honor has any questions, we we would respectfully ask you to enter the order approving KCC as claims agent.

Do you know how many questions does anyone wish to be heard? I hear no one. I reviewed the application, and, I see the revised form of order. It all looks in order. The debtors follow the protocol, and I will approve this as revised.

Thank you, your honor. The next item for your consideration is the motion confirming the worldwide automatic stay. I believe your honor is familiar with these sorts of orders. They're typical in cases with foreign vendors where we obviously have a lot here who are not necessarily familiar with chapter 11 proceedings. And so a comfort order is typical and we believe necessary and appropriate in these cases.

That was also subject to some US trustee comments that I see your honors reviewing. Happy to answer any questions. There were not too many changes. One One was to strike one paragraph of, one sub paragraph of part paragraph two of the order, and, mister Hackman requested the addition of, what is now paragraph 11 in the order.

I had a question on paragraph. I I see these changes, which were also items I have flagged. And because I view these motions as really just a repetition, if you will, of the code, but not, enlarging provisions of the code, but simply just restating. Or as this paragraph 11, it says, it's declarative and intended to be coterminous. That's a good way to say it.

Yes. Paragraph three. Courts of competent jurisdiction shall take all appropriate measures required to enforce and recognize the chapter 11 cases. Sounds like I'm mandatorily ordering some other court to take some action. And I don't know that I have seen this type of provision in one of these orders.

So I have a concern there. Maybe it's with the shall nature of that sentence.

It's a fair question. I I we can change it to May. Okay.

Thank you. Paragraph seven, I had a somewhat similar concern because it talks about foreign governmental units, but I guess it's qualified by 05/25. So with that qualification, I will, I'm okay with that language.

Understood. Thank you, your honor.

Did I ask if anyone wished to be heard? I don't believe you did. Does anyone wish to be heard? I don't hear anyone. I did as you can tell, I did review this motion.

I do, as I said before, consider it to be a comfort order and coextensive with what's in the code, recognizing as counsel has stated that, foreign parties and interest do not necessarily understand how the code works, with the change that I requested and that's going to be made in paragraph

three. Yes. We are changing courts of competent jurisdiction shall to courts of competent jurisdiction may. Yes. That was my only concern.

And, with that change, I will approve it as revised to reflect the comments from the office of the United States trustee and my request to change.

Thank you very much, your honor. The last item that I will be presenting today is the motion to, authorize Robert Wagstaff as foreign representative. Section 15 o five of the bankruptcy code, allows a debtor in possession to obtain a court order authorizing a trustee or an entity, to, to act in a foreign country on behalf of an estate created under section five forty one. As a CRO in these in these cases, mister Wagstaff is well positioned to represent the debtors in a foreign proceeding and to serve as a, a foreign representative to ensure that any such proceedings are well coordinated with these chapter 11 cases. Also, authorizing mister Wagstaff as former representative will avoid the added expense of retaining a third party to act as such.

I'd also note as mister Brady laid out in his presentation, there are a lot of unknowns in in foreign jurisdictions. So there is a there is a chance of immediate and irreparable harm if mister Wagstaff is not appointed and is able to, you know, act quickly, especially with respect to, the concourse Concourse. So with that, we believe it is a, it it is appropriate to enter this order because there is a, substantial, risk of immediate and irreparable harm to the to these states.

Thank you. Does anyone wish to be heard with respect to the foreign rep motion? I hear no one. I reviewed it. Given the international, nature of this debtor, there certainly may be need and already apparently is a need to have a foreign representative who can represent these debtors in other courts as necessary, and I will find it as necessary to avoid immediate and irreparable harm in the context of these cases, and I will approve this.

Was there any change to this order? I don't believe so. I believe mister Hackman, just had a question that we answered offline, but I believe that this was as is. Okay. Thank you.

And it will be signed as submitted.

Thank you very much, your honor. That is it for me and for for today.

I'll I'll send the podium to miss Milke. Okay. Miss Milke.

Welcome to. Thank you, your honor. Good afternoon. And for the record, Allison Milke for the debtors. As you've heard this afternoon, the debtors are in a period of transition.

By all accounts, they have been running on fumes, desperately in need of financing and leadership. As part of the recent management transition, the debtor CRO has begun to address this issue since mister Brady has identified. They first did that by securing dip financing, which my colleague mister Preacher will speak to shortly. Second, they addressed these issues, by immediately flying to Mexico, to assess the conditions of the debtor's facilities, including the debtor's most sensitive assets, their dolphins, sea lions, manatees, seals, and other animals, to help to transition the operational leadership through meetings with the debtor's workforce, with banks, with accountants, with lawyers, with vendors, and with customers. Mister Wagstaff is a highly experienced individual.

He has a unique set of skills for this assignment. He is bilingual. He has previously lived and worked in Mexico, and he has contacts in the region. However, notwithstanding these exceptional characteristics and circumstances, mister Wagstaff will most certainly face circumstances, mister Wagstaff will most certainly face and already has faced significant challenges in taking control of an operation that has been run by the debtor's former CEO since its inception and has by all counts a very small closely held leadership team or closely held organization with a small leadership team. While the debtors and mister Wagstaff will be commercial and respectful in their efforts, employees may not welcome this transition and they may not be cooperative.

Former management may attempt to thwart the process, and employees may not want to speak with the new management for whatever reason. It is critical that mister Wagstaff and his team have access to the books and records of the company to information related to the debtor's properties and facilities and to the debtor's financing. As you heard, we are at a deficit in terms of information, and the lenders in this case have not received finance financing information for a long time. And it's, imperative that mister Wagstaff and his team have full access to the decks debtor's books and records and any other information whether that's maybe not the debtors books and records but still related to the debtors books and records like credential information or, other other types of access. This will provide mister Wegstaff with additional an additional tool in his arsenal, to help him importantly feed and manage the animals, to maintain the facilities, to construct a budget, and ultimately to run these chapter 11 processes, which as we all know requires a substantial amount of diligence in reporting, which is onerous even in the best of cases.

And that is why the debtors filed their motion at docket docket number seven, for an order requiring that the debtor's former and current and information relating to the debtor's property and finances, to specifically mister Wagstaff and the debtors, and particularly for use in discharging, mister Wagstaff and the debtors responsibilities in these cases. Cases. Now I will acknowledge this is not routine relief, certainly not on a first day. And five forty two e is a lesser known code provision. And, you know, this is not something you've probably seen before, particularly in a first day setting.

However, the function of five forty two e is befitting of the current circumstances. And I would say, your honor, that these are exceptional circumstances, and it's not really relief that you'll see us come back to you, trying to achieve, in a run of the mill case. As we know, five forty two e is directed to persons that hold record information, specifically books, records, papers, and documents relating to the debtor's property or financial information. It requires that a person disclose or turn over such information to a debtor in possession. It's unlike rule 2,004 in that it's significantly more narrow.

The records are disclosed the records that are disclosed relates only to the debtor's property or financial affairs. And the debtors here, as I mentioned, are not seeking information as a fishing expedition to garner documents in support of claims or causes of action or other matters which might impact third party economic rights or claims or a this case, it's a matter of imminent importance. There are approximately 2,400 animals in the debtors, responsibility. They require food. They require care.

And they the debtors need this information in order to be able to ascertain what food requirements are necessary, what care requirements are necessary to put in place the individuals, that will be necessary to continue to manage them and to respond to things like the attorney general's investigation or, you know, frankly just to run the business. Because if it's a it's a critical matter of importance for those animals, but not just the animals, also the payroll, ensuring that, employees have the information that they need to come to to work every day and to continue to, create, in an atmosphere that the debtors can continue to run their businesses and preserve value. All of these things are

are critical. And it's not a matter for two weeks from now.

It's a matter of, yes, And it's not a matter for two weeks from now. It's a matter for yesterday and for today and for tomorrow. Mister Weidstaff is on-site currently trying to get access to the company's email systems, to their books and records, to the pass code, to the front door. All of these things are critical information that that is needs to happen right now. And we require the tools that, any tool that is available to us, understanding that this is a really important, endeavor for preservation of the estates and administration of the estates.

So while we would note that this is not typical relief and certainly five forty two does require notice and a hearing, we would, submit that the standard for, irreparable harm has been satisfied here, and then it's appropriate to enter a relief on an interim basis now. Parties will have an opportunity to come back and object, and, we are happy to set this for a final hearing and and parties will have plenty of time, to, you know, determine whether there's an issue with the release that we're seeking. But again, because the information that we're seeking is limited, it's it's directed towards, you know, former officers, cases. I'm sure you have questions for me, your honor.

I actually don't. Having had to look at five forty two e recently in another context. So you get the benefit of, that. I see the changes are that this is now an interim order.

Yes, your honor. Okay.

Does anyone wish to be heard with respect to the request under five forty two e?

Good afternoon, your honor.

May it please the court, Ben Hackney for the US trustee. As counsel noted, we have one open issue, and it's on this motion. I thank counsel for the debtors and lenders in working with us to resolve our comments on the first date pleadings. One of our initial comments on this motion was to request that the form of order be made interim, which counsel graciously accepted. The US trustee's position is that, the relief requested should be served out on notice.

Section five forty two e uses the phrase after notice and the hearing. You know, we're sensitive to the animal welfare concerns that are are present in the case and that needs access information. We're struggling to square an order directing people to turn over information within five business days in more or less an ex parte setting when the code requires says after notice and hearing. We're not sure if failure to produce the information would expose, employees to contempt proceedings.

The US

as as I read the pleadings that have been filed, there's no top 30 list that's been filed yet. I'm not sure the extent to which the creditor body has received notice of the cases themselves. As I read the motion, I did not see previous cases cited where this type of relief was granted. The US Trustee is prepared not to oppose short notice, if your honor were, amenable to, this relief being served out on notice. But with that, unless your honor has any questions for me, I would rest.

Thank you. Thank you.

I can respond briefly to that, your honor. Please. We grant interim relief on first days all the time for things that require notice in a hearing. The standard is irreparable harm, and I would submit that that's satisfied here. With respect to notice the employees, this is gonna come these requests are gonna come probably in person.

That, of course, will provide notice to the extent that we absolutely can. If the concern is that somebody is gonna, you know, be, you know, held in contempt as a result of failure to abide by the order, first of all, that's within your honor's control. And, certainly, your honor can address that as a remedy to the extent somebody comes in and we have a fight about whether something should or shouldn't have been turned over. Moreover, I the the, statute requires that, obviously, privileged information is not to be turned over. So, really, there's there's no reason here to think that information related to the debtor's property so if there's a, you know, an issue with that, somebody will have an opportunity to come back and be heard, and your honor can determine what the appropriate remedy is.

Thank you. Thank you.

So as I said, I've had the opportunity to deal with section five forty two e recently, though we haven't issued an opinion yet on it. It isn't a statute that's often used. Although I will say that I see it more in my chapter seven, trustee cases. They seem to know that provision is here. And, it is, I think, being used appropriately here with the request, because it it what the information sought is the books, documents, records, and papers relating to the debtor's property or financial affairs, which is what this debtor needs.

It does provide that, this section, this application, this relief can be brought by motion. And it does say after notice in a hearing. And after notice in a hearing is addressed in section one zero two. And section one zero two of the code says that that phrase means, after such notice as is appropriate in the particular circumstances and such opportunity for a hearing as is appropriate in the particular circumstances, and there's a but, it authorizes an act without an hear without an actual hearing if such notice is given properly and if, skipping a little, there is insufficient time for a hearing to be commenced before such act must be done, and the court authorizes such act. So I think it is up to the court to take a look at the particular circumstances here.

And I'm, I would hope, as much of a due process person as anyone. But I think under the the circumstances of this case, it is appropriate to issue this order on an interim basis. I will hear anyone who has an issue on an expedited basis if they come in front of me to argue that whatever it is the debtor is trying to obtain from them somehow is not, records, documents that they hold, that relate to the property of this debt or somehow personal and unrelated to the doc documents of this debt. But I agree what we're really addressing here is an irreparable harm issue, in that sense, almost a TRO standard. And I think under the circumstances here where the welfare of the animals in particular well, I'll say based on the lack of cooperation with the pre petition lenders in terms of, providing necessary and required information as well as the need to immediately access, the debtor's books and records, under these circumstances, I'm gonna grant, I'm gonna grant this motion.

And I do think it's appropriate to do it on an interim basis, and we'll set up a final hearing. But, again, I will also hear any concern anyone has on an expedited basis. I do also expect the debtors recognizing the unique nature of this relief are not going to be pressing in front of me contempt motions, in the first instance or at the first moment they don't receive cooperation, but will, in fact, work, with particularly the employees to get their cooperation. And I would hope that these employees, particularly cover

in

terms of, working with the CRO and our new director. So it hopefully will give them some cover to be able to do that on a cooperative basis rather than on a compelled basis. So for all those reasons, I will enter this order as revised.

Thank you, your honor. Good afternoon. Sean Greacher from Young Conaway for the debtors. We're now at number eight on the agenda, which is the hearing to consider interim approval of the debtors' motion for use of cash collateral granting adequate protection to secured note holders after interim approval of the debtors' post petition, debtor impossession financing. Mister Brady said motion supported by mister Straum's declaration.

We also heard from mister Brady and read from mister Straum's declaration the acute challenges the debtors are facing, financial defaults, significant uncertainty around critical operational issues, particularly in the areas of animal safety and welfare. Debtors have worked hard with first lien noteholders. Unfortunately, noteholders have stepped up to provide for the consensual use of cash collateral and access to emergency dip funding under these extremely challenging set of circumstances, funding that will, in our view, be necessary to protect the animals, preserve value in the estates, and help shape the next acts of these cases. There is, to put it plainly, a substantial and immediate need for use of cash collateral and debt financing. Mister Straub's declaration establishes unequivocally that the debtors have an immediate need for that need for that money.

I won't rehash the history here. But suffice it to say, there's a history here. The Riveron team is in the process of getting access to the books, the records, the accounts. That process is ongoing this week. That process will be bolstered by, the orders that your honor has entered, and we appreciate that.

The business, as we said, involves various parks where living animals are located. While it's critical to get our arms around the business for a variety of reasons, it's absolutely essential to ensure that the health of the animals do not be compromised. So without having any time timely financials to rely upon, nonetheless, the note holders have stepped up to provide emergency funding. Given the urgency surrounding these challenges, the lack of available information, and the unwillingness of the first lien holders to be primed, it was clear that first lien, though, holders were the only likely source of funding today and under these circumstances. As mentioned, the debtors in the process of interviewing potential investment banking candidates.

Part of the investment bankers mandate will certainly to be, a a standard market analysis of the terms. We'll present, the results and the conclusions of that analysis in connection with the final hearing to be sure. There's one unique component of the proposed interim dip structure here. In order to prepare a typical thirteen week cash flow budget. One needs access to the data supporting such cash flow.

So mister Wagstaff's team will obviously work toward that. We're working with Mexican council, and we will use every available, avenue to obtain that. So the interim dip loan is is a two phase loan. The first phase is a borrowing of $1,500,000 prior to preparation of that initial approved cash flow budget. And the balance of the interim borrowing of the $4,000,000, would be available after delivery of initial approved budget.

And the dip order calls for that more, traditional thirteen week cash flow budget to be delivered within fifteen days or such longer time as the required lenders will agree. We will, of course, file that budget with the court. So the first uses of the first one point five million dollars will be to fund essential obligations as needed, including first and foremost, cost related to the care and health of animals, costs related to providing transportation services for visitors to the company's facilities, costs related to the operational planning for efforts in Mexico. Cost related to obtaining access to books and records, estimating fees and costs of the professionals and of the claims notating agents, and other operating expenses. For example, I think as mister Brady indicated, potential cost of an independent veterinary consultant to assist the company, assist the, independent director and the CRO on appropriate measures, with respect to animal health, cost of maintenance services, or other customers facing services and the like.

As for terms, the dip calls for a payment of various customary $70,000 of fees to the agent, as well as an upfront closing fee of $200,000 which will be paid. Dip loan accrues interest at 11%. Debtors are seeking approval of first priority liens on all property of the debtor's estates, including upon entry of an order of a final order proceeds of the avoidance actions, subordinate to the carve out and permitted prior Closed dip order offers what we believe to be reasonable customary methods of adequate protection to the first liens and second liens, out of protection second lien lenders, adequate protection liens, and super priority claims. There are a small set of milestones related to entry of this of an interim order, selection of an investment banker, and ultimate entry of a final order, a standard set of covenants. The interim order provides a carve out for professional fees and disbursements for both the debtors and any committees appointed in the cases as well as the US Trustees fees.

There is a request, subject to a final order for section five to six c and five fifty two b waivers, and limitation of the, the scope of the ability of the marshalling doctrine. There's a standard challenge period respect to the pre petition, liens and clans. So your honor, as you were having fun at your prior hearing, we did file a black line. I don't know if your honor has it. If not, I believe it should be.

To the

to the folder. To the folder. And

subject to your honor's preference, I am happy to step through that black line. We did speak significantly with, mister Pacman, and addressed all of the comments that he has raised. So there are a number to go through, and I'm happy to go line by line with you, but, obviously,

to further your preference. Let me ask a couple questions. Of course. Please. First, I noted in the, probably, in the declaration that there's a reference to 12 bilateral debt instruments.

What are those?

I I I think if if I I don't know if the council lenders have a view, but there are certain debt instruments with respect to a number of the foreign entities. One moment, please. Just wanna make sure. Alright. Thank you.

I just wanted to make sure that that we were clear. And and then if I bungle it, please, hopefully, folks will correct me. There are, we believe, and, again, given sort of the dearth of books and records, you know, we have reference to this in certain documents, but it appears local transfers, in and out of those entities. Again, this will be a a a subject of, significant inquiry. We're we're not sure, you know, what those documents look like.

We have reference to them, but we've not had the opportunity to study those documents. We don't have them yet. It will clearly be something that we that is on our list of of materials to to obtain and access so that we can understand that, more thoroughly. Is the order doing anything to those documents? Well, I I I I believe, your honor, to the extent that those are prior perfected liens.

No. So the the we're not we're not priming to the extent that those are prior perfected. Okay. But, again, certainly don't wanna make any broad proclamations on documents that, unfortunately, we've not had the opportunity to see. Okay.

Normally, I don't look at the debtor stipulations because they're just stipulations. But, it seemed to me an an e romanette one that we're making that the debtors making stipulations about a nondeter and the lenders.

Yeah. So, your honor, I think that we are clarifying that that was one of the one of the the the clarifications that we've made in connection with discussions with mister Hackman. If you have the red line, I I think what we're saying is that each prepetition first lien grantor other than Dolphin, which is the nondebtor, joint and severally guaranteed as a primary lab obligor with pre petition firstly secured obligations. Again, this is consistent with, I believe, it's section 15.1 of the note purchase agreement. Obviously, that's a stipulation subject to challenge.

But but but, again, the the the note the the notion here is that this order, you know, is a stipulation of the debtors. The debtors are making this stipulation, and so the debtor is stipulating to their obligations here. There is no from my perspective, and again, the proposal stipulator will correct at me, but there's no no intent to stipulate on behalf of a party who's not before you.

Okay. I see some additional clarifications in Romanet three.

Yes, your honor. This is of of the same piece. Again, this is this is to clarify, exactly, you know, know, what the debtor's position, the debtors who are before you, believe are their, joint and several primary obligations under

this facility. Okay. Paragraph f, and I'm now on 14. Mhmm. Cash collateral.

That to me needs to be a debtor stipulation more properly in e.

I'll let the, white counsel cash collateral. I'll let the cat let the debtor or the debt lenders counsel respond to that, certainly understood the point that we defer to the lenders on whether that's acceptable. And I'm getting a nodding head for the record. It's a yes. I was looking down.

Thank you, ma'am. Okay.

Miss Khan agreed with me. Okay. As she is want to do. We will make that change, your

honor. Okay. Paragraph. Now I'm on page 15. It's 16 on the red line.

Roll up, romanette three. So today, as I understand it, we're not, approving any portion of the roll up. But this provision, there are several places where it talks about including the roll up. Is there somewhere that says, I hate these things. Notwithstanding anything else, I'm not doing anything with the roll up.

I don't believe that we put such a provision in the document. I certainly represent and, would ask that the note holder counsel, the DIP lender counsel, similarly represent is clearly the intention to have issues of the roll up considered at the same time.

I think we should at least say subject to the final or something of that sort. Because otherwise, I would just take it out. But

in the lead in to Roman at three, you'd like to to say subject to the final order?

Okay. So

it can't read the final order?

Yeah. Which I mean, it's talking about how it's being authorized. I understand what what the lenders want here, but I don't think there's a place in the interim order. But if there's gonna be something

in the interim, we need some qualification. I saw head nods, and I'm going to take them, your honor. Okay. We will we'll make that change.

Okay. A a somewhat global comment, I first see it in paragraph I on page, it's like 16. The entry to this says, pursuant to the direction of all of the pre petition first lien note holders, the pre petition first lien agent has consented. There are other provisions in this order that talk about required lenders or majority of lenders or whatever. I I don't know because I don't have those documents in front of me whether the agent has the requisite authority or not, and I don't get into whether the agent has a requisite authority.

I assume it does or, otherwise, it wouldn't enter into. But I've got those kinds of, otherwise, it wouldn't enter into. But I've got those kinds of, provisions all over here, all over this. And even more so in this provision toward the I guess it's second to last sentence. Oh, no.

That's a little different. Oh, the language at the end of the first sentence talking about consent is binding on all pre petition firstly and secured parties. I don't get into the inter workings of the lenders. So I would like those references to come out. I assume that again, I assume the agent has the authority it needs, but I don't know that, and I can't confirm that.

So that's a sort of a global comment to look for.

Okay. So just to recap, at the beginning of paragraph I, you would have a strike pursuant to the direction of all of the pre petition first lien note holders, and then just start that sentence with the pre petition first lien agent has consented. Right. And then similar And then there's the language here. Each of the pre petition first lien note holders have expressly consented.

I would strike that whole sentence. Probably should be.

And then it was interesting because it says each of them has consented, and then it says none of the remaining. Well, who would the remaining be if each of them have consented? So there's some internal inconsistency in there too, so I don't wanna get in the middle of that. Okay.

So, would your honor be willing to say none of the pre petition first lien note holders has filed an objection?

Well, they haven't, so

that's So it will be true. This is why I did so well in logic in college. There you go. Very good. So I believe that those were the offensive.

Yeah. But you'll need to come through this and just

take a look at it. Course. We will, of course. Okay. Yes.

Similar. I I see, you know, similarly, pursuant to the direction in her acting world. We'll make the we'll make the the the accompanying changes there. In

k, romanette three. Ah, it's been changed. Thank you. Okay. In paragraph two b, with obligations, the last sentence, or, again, we're talking about the roll up.

It may need just something, some notwithstanding sentence. But the way I'm reading this, I just wanna see if I'm correct, is that if there's something in the order that's contrary to the dip loan documents, the dip loan documents prevail. And that's not usually the default provision that we go with. But maybe I'm reading it wrong.

So you're gonna write I read this as saying that the relative rights and priorities in the collateral is addressed by the loan documents. So your point is taken, but I believe it's limited to any dispute regarding relative rights and priorities of the roll up doc roll of the roll up dip and the other dip to secure parties. Again, we will we will, of course, make that subject to the entry of a final order. But

the entry of a

final order, but but I I believe that all we're asking your honor to say is if there's a dispute between roll up dip secured parties and other dip secured parties, your honor would look to the terms of the credit agreement to resolve that limited dispute.

Okay. I'm I guess I would hope that what's ever in the dip documents is not, has the same priority as what I'm granting here in this order because I'm granting rights in collateral in this order. So,

Your honor, we will strike it. Okay. Strike the final sentence.

In, in paragraph c, it has the $8,000,000 figure in here, and we're at the I thought we were under the interim borrowing of up to four.

That is correct. I think that we can modify that to just say $4,000,000, for purposes of the interim order. So so perhaps we could say the aggregate outstanding amount for all such borrowings authorized pursuant to this order shall not exceed $4,000,000.

And I just also wanna make sure I'm correct that all of the current debtors are guarantors under the pretestician facility. Okay. Question on again, I'm still in that paragraph. It's the let's see. Because it's one sentence.

It's the last sentence. And the way I'm reading it is it says that the pre petition first liens are gonna turn over to the dip agent, the cash collateral, so that the cash collateral can be applied to the dip obligations. But I thought the debtor was using cash collateral.

They are, your honor. Could Can I have one moment? Yeah. Just to

take a look. And, again, you know, these are I haven't dealt with these documents like you guys have, so I could be wrong.

Your honor, perhaps we could put this one to the side and keep moving Yes.

And we'll yeah. We'll Yes. That's fine. It's in paragraph g now. The pre petition, in particular, the second sentence.

No. Three third sentence, also to these costs, indemnities, etcetera. I'll authorize the debtor to pay them, but I don't affirm or ratify expenses, pre petition, or post petition. It's on page 29 of what I'm looking at it is. Yeah.

So is is the concern with the word Affirmed and ratified. Affirmed and ratified? Yeah. Alright. So I can do this, your honor.

Yeah.

Question Question on, there's been some changes to

paragraph j. Yes, your honor. The the clarification here at the request of the US Trustee is that the dip liens are on the equity interest that the debtors directly own. We wanted to avoid any confusion with respect to Yeah. Not %.

It is it is the equity interests as they are, as they are held. Okay.

And are those currently collateral of the the lenders? I assume so. They are. They've been exercising rights. Okay.

Okay. We don't have any unions, do we?

The best of our information, the answer is no.

Provision in the Agua protection three, a Rowanet two. What I'm looking at is the bottom of page 37. After the bowl paid in full, we paid in full. Provided, however, is all of this consensual about planned treatment? It's a little unusual to have this in a yeah.

With respect to the statements that the adequate protection claims may be impaired pursuant to any chapter 11 plan? Yeah. I

mean, if it's consensual, I don't

I don't have a problem. I know that we've we're trying to make this consensual, so I'm looking for a head nod, and I just received it. Yes. This is consensual.

I noticed that there are references to the first day orders. We don't obviously have operational first day orders yet. I would just caution that the operational first day orders should be consistent so that that there is no inconsistency between priorities given and this. So if we need to make adjustments to first date orders, we need to do that.

Understood, your honor. And we will resist the urge to state that the relief granted in those orders is consistent with the this order.

I don't know what paragraph we're in. I'm at Roman at seven. The next time you see a Roman at seven, which I think is in

Titled consent to priming and adequate protection? Yes. On there.

Okay. The proviso. What does that mean?

Happy to give you my read on it, your honor, but, defer to the dip lenders who've requested this. My understanding is that the consent, here, given the the circumstances of these cases, is being granted under the totality of the circumstances here. That's being granted to these debtors that are subject to, the the possession and custody, management, if you will, of mister Strom and the oversight of mister Wagstaff.

And I don't have any issue with that. But provided further that such consent shall be of no force and effect if this interim order is not entered, I I guess, that this would assume it was entered, or is entered and subsequently reverse modified, that that means they gave their consent now, but if this gets reversed, they didn't give their consent? I just don't understand what that means. I mean, I get that we're not gonna consent anymore if it gets if it if it gets reversed on appeal. We don't consent.

And if the judge doesn't enter the order today, whatever consent we've been working among is is ended. But if but I guess I don't understand what how this would work, what this means.

I guess, your honor, imagining a parade of horribles, that for whatever reason, mister Straum, we're not here, and the debtor, we're we're here seeking to, to to ask for entry of a similar order. Again, I I don't wanna put words in in in the diplender's mouths, but this process was carefully orchestrated. The transition of the board and the management was carefully, orchestrated and is an essential component to getting us here today and the the dip lenders stepping up here today. So I'll grant you. Perhaps this is an awkward paragraph, but I think under circumstances regarding the management of the company, it it is perhaps appropriate here.

I just don't know what it means, but what I would be comfortable with is saying that such provided further that such consent shall be of no further force and effect in the event that the interim order isn't entered or it's reversed on appeal. That's fine. Your honor will make that change. Okay. Thank you.

Okay. In, the next paragraph, sub eight, under the circumstances and given that the above described adequate protection is consistent with the bankruptcy code, including five zero six b, that seems to be an implicit ruling that the pre petition lenders are entitled to interest, attorney's fees, etcetera, that they haven't allowed secured claim. And I'm not prepared to do that today. So if that reference can just come out

Your honor will start that provision with this court fines that the out of protection right here is reasonable. Yeah. That works. Because it then says without prejudice to objections. Okay.

Thank you. We'll make that change.

Just a note in paragraph the next Roman at five. I've got it on page 44. We've got a similar issue on the consent that we just talked about. So we need to add consent shall be of no further force and effect.

No further force and effect. Thank you. We'll make that change.

Paragraph four, automatic It doesn't look like it was caught on page 46. Might be 47 here. Anyway, there's somewhere in here on that it says that, recording officer shall be authorized and hereby is directed to file. And I'm okay with authorized, but not directing.

Now, but I believe you that I missed it. We will I see it now, and hereby is directed. We will strike that.

So I know that this letter is an LLC, and I'm looking at the challenge language now. And I don't think I see well, I see a change.

The the change, your honor, is to to make clear that the the additional line bestows party status on a chapter seven or 11 trustee in connection with any

process. Okay. And I like to have in my orders, although I think it will be an issue here given the change in management, that the language that addresses the Delaware Supreme Court fax issue.

So your honor, I guess a couple of thoughts being there are a number of corporations here. So, again, in our experience, the issue the backs issue is where we are solely dealing And as leisure company, golf world marine park,

entities. That said I'll look into respect sort of corporate separateness, right, as to who has what cause of action. Perhaps. Perhaps not because I don't know how this these debtors were run pre bankruptcy.

Understood. Just one moment on

this.

So your honor, if we could include the language with respect to the LLCs specifically, perhaps that's a Sure. Reasonable middle ground here. Yes. We'll include that language and we will say with respect to limited liability debt companies that that that constitute limited liability debtors. Yes.

Okay. Very good.

Okay. I do see that we have a a provisional cash management, I assume, because we don't have a cash management order.

Yes, your honor. And and the addition there was to to make it clear, we're not trying to sneak one by the US Trustee or anybody not not seeking a permanent waiver, or or obtaining a permanent waiver of section three forty five, as and when we have dominion and control over all the bank accounts. We expect you'll see the standard cash management motion, and it will provide for an appropriate request as we determine appropriate and necessary.

Okay. I see in paragraph 14 that you've made some changes with respect to what happens on a termination event and access to the court. I think I had noted in the very beginning of that paragraph, Oh, I'm missing page. Okay. So I don't know if there were changes made.

I'm missing sixty five and sixty six. Were there changes made to in the red line?

No. There's nothing on the red line on those pages. Okay. And

then 67, is that part of 14? What is that part of?

It is. That's part of 14. And, again, your honor, I must have been sleeping at the meal, but we did strike the provision indicating that there's a limitation on what can what what may or may not be argued Okay.

Okay. In paragraph b of that provision provides that once relief from stay is occurs, to enforce and realize on its stipulations, it's fine, on all of any portion of the dip collateral, including collecting accounts receivable, applying the proceeds thereof, and by occupying the debtor's premises to sell or otherwise dispose of the dip collateral. I guess they can do that consistent with state law, but I have no you know, there's some landlord out there who isn't here and may have an issue with that. So as long as it's consistent with state law. Okay.

Can we

say consistent with applicable law? Yes. Thank you. We'll make that change.

There's a lot of that in EIC, but it's all subject to the next e. It's all subject to entry of a final work on the unit. I have a question, and I've been getting more of these provisions. Survival of interim order. And they all read a little differently, but they don't seem to contemplate what happens on the final order.

Like, how does this interim order survive if I have a final order? To me, and the reason I take care with these interim orders to the extent I can, is because I've had a couple cases where I never get to a final order, and then it really matters what the interim order says. Most of the time, we get to a final order, and that's negotiated, and like, it governs in the interim. But once I have a final, at least I think the final order should govern.

That's fine, your honor. We'll we'll add language indicating that withstanding before going on entry of the final order. The final order shall govern.

Okay. Paragraph h, inconsistency, which is page 83 of the red line. This is I don't want there to be any inconsistencies in any orders, and those first day orders need to be complete. So so I really don't like this language, but I just want you to put consistent orders in front of me. Okay?

You accept your admission. Okay. That's all the comments I have. I'm not gonna take the blame for this many comments because when you give me an 80 page tip order, then you get what you did.

Your honor, I was ready to I was ready to challenge Cory Booker's time to hear.

From the bench. I think I just did.

Your honor, I was ready for for for far far worse, but my

Oh, well, that

my filibuster time is is is certainly short of of Okay. What what I was ready for. So thank you, your honor, for all the attention to this. We appreciate the time and effort.

Let me ask. I didn't does anyone else wanna be heard? There we go, mister Hackman.

It it was. Your honor, I know let me note. There was a change, and and it may not have showed up in your your black line. There's language in paragraph 20 a that we are taking out, and and it will it it will appear in the black line that you receive with your other changes. Paragraph 20 a had language, stating that the proposed final order shall be substantially the same as the interim order, except that provisions that are interim shall be final.

US trustee had concerns with that. That.

Why it's good to have a second set of eyes on these things.

Your honor, you could be assured that, mister Hackman did Yeoman's work

I have no doubt.

In in in fairness. But we are we are striking that language. You'll see that stricken in the Thank you. In the final order or in in the in the final interim order.

Thank you. Okay. I will approve borrowing, on an interim basis in the amount of $4,000,000 as it's set forth a million and a half and then a budget and the other 2 and a half million based on the uncontested testimony that I received, through the declaration. Clearly, there's a need for financing. There's a need basis without a budget, without fully knowing, the finances of the debtor.

But under the circumstances of this case, there's no option. And I find that it is necessary, to enter this order to avoid immediate and irreparable harm.

Thank you, your honor. We appreciate that. We'll work with, debt lenders to revise the order and submit it under certification with counsel. Very good. Just let Chambers know when that's done.

We'll get it signed. We will,

your honor. Thank you. That's all for today, or do we have anything else? Oh, we need a second day, don't we? We do need to talk schedule.

Okay. Let's talk schedule. I know that's painful to view.

I have experienced it myself, so apologies in advance. Yeah.

Yeah. So

if you are maybe I'll just lay it out. So my understanding is that with the milestones under the order, our our deadline to have an entry of a final order would be May 5. I understand that that is not convenient for your honor, and I understand why. And I also understand that the next week is the you will get to see lots of me after that. So, let us know what works for you.

I'll take you on the on May 5 at 10:00, and I'm hoping it won't be super contested. But if it

is, I'll deal with it. Thank you, your honor. I guess another request, and and we can certainly work through, your honor's chambers. We're hopeful that we will have a set of operational first are fluid here. Facts are incoming.

So I guess if your if your honor has any guidance as to when the court may be available that we could help to sort of shoot at a date certain. We that that would probably be helpful guidance for us.

For for an interim traditional first day? For for

for a traditional first day hearing.

And you're thinking next week? Looks like Tuesday is the best day. Is that possible? Well, the the alternative is just reach out. Just reach out when you when you know you have the set that you want, and I'll find somewhere to put you in.

I tell you you in April and May, I'm gonna be squeezing people in and some of it may be at nine in the morning and some of it may be at six in the evening, but we'll get people in that need

to be in. Fortunately, your honor, mister Brady is a morning a morning riser, and I'm a night owl. So we'll work it out. Thank you. We appreciate your, cooperation and assistance with today's hearing and, what's anticipated to be, future hearings that may be challenging.

But, well, we we look forward to the challenge, and we and we hope to do right by this company and by its its, its house. Very good.

That's it then for today. We're adjourned. Thank you,