Klöckner Pentaplast - first bankruptcy hearing in US chapter 11 bankruptcy case in Texas (November 5, 2025)

Good afternoon. This is Judge Lopez. Today is November 5. I'm gonna call the first day hearings in 259-0642. Claire Patra Finko.

I will take appearances virtually. This is a virtual hearing. There's no one in the courtroom. Everyone is on the line. Wish everyone a good day.

Please hit 5, and I will unmute your line. I would also ask if you just jump on the Southern District Of Texas web page, you'll find a place to make an electronic appearance. Just go to my home page. You'll find a place for complex cases and where to make electronic appearances. I'm just going to go in the order in which I see them.

It's a 312 number.

Good morning, your honor. Chad Husnick with Kirkland and Ellis appearing on behalf of the Cleopatra Debtors.

Okay. Good afternoon. Here's a 917 number. There you are.

Good afternoon, Your Honor. Scott Greenberg, Gitchend, Dunning, Crutcher on behalf of the ad hoc First Lien Group and proposed debt lenders.

Good afternoon. A 312 number.

Good afternoon, Your Honor. Jack Lutz of Kirkland and Ellis on behalf of the debtors.

Thank you. Okay. 713 number.

Good afternoon, Your Honor.

John Higgins and Shane Johnson from Board Ordered and Hedges appearing as co counsel for

the debtors with the Car Club team.

Okay. Good afternoon. A 646 number?

Good afternoon, Your Honor. Bob Britton, Paul Weiss on behalf of the SEC parties.

Good afternoon, Mr. Britton. And a 202 number, let's see, a 20 Mr. Jimenez, that must be you.

Good afternoon, Your Honor. Andrew Jimenez for The United States trustee.

Good

afternoon, Your Honor. Sean Scott of Mayer Brown on behalf of Copas Finance, GmbH, one of the factors.

Oh, let me just do one more check. Okay. Who should I turn this over to?

Your honor, Chasco Stank again with Kirkland and Ellis. I will take the lead, if that's okay with your Honor. Okay. Before we jump into the hearing, I just have two housekeeping matters. First, I want to say thank you to your Honor and your staff for taking care of us.

I know you're very busy in other matters, and we dumped a fair amount of paper on you late last night. So thank you for that. I also want to thank Mr. Jimenez and his office for working with us. I believe we are, for the most part, resolved on issues.

We may have one or two issues here and there to work through with your honor. But I think with the Office of State's Trustees' help, we've been able to streamline those issues.

Your Honor, I also and lastly, I want to

thank, not last, but I want to thank the parties and interests around the room. Your Honor, this has been a huge push to get to where we are today. And without them, we wouldn't have been able to reach the agreement that's going to facilitate. But I think it will be a very smooth process overall. And last, and very important to this effort was the debtors management team.

Your Honor, as most management teams do in these Chapter 11 cases, they need to do two jobs. One is running the business and keeping the trains running on time. The two is dealing with all of people around this room and getting ready for a lengthy Chapter 11 process to the extent we're unable to reach a deal. Unfortunately, we're able to pull it together, but the management team here did a fantastic job of working with us us and getting everybody in the right spot. Your Honor, the second piece that I want to chat about is the notice of the first day hearing.

So we filed an affidavit of service at docket number 70 nine. It is an affidavit of Ms. Leticia Sanchez of Strato. I noticed your honor before the hearing entered the order authorizing Strato to serve as the debtor's notice and claims agent as well as the joint administration motion. Miss Sanchez and the Strato firm took care of serving the notice of the first day hearing via electronic mail on as many parties as we possibly could overnight delivery on others where we didn't have email addresses.

That includes, in terms of email service, that includes the lenders who are party to the RSA, the agent lenders, the indentured trustees where applicable, the cash management banks, the attorneys general for the various states around the union that we do business in as well as the internal revenue service, utility providers and ultimately the insurance folks as well and last but not least, the factors which we've already heard from today. With that notice, Your Honor, we believe notice of the first day hearing and the urgency relief we're requesting today is appropriate. Your Honor, unless you have any questions, I'd like to publish a short presentation.

Okay. I think I've given the presenter role. It was a it was a Kirkland presenter. There's someone who says they can't hear me. I just would remind folks to please dial in as well.

Maybe we can

I was gonna do the presentation myself? I don't there's There was someone who that thing.

You wanna give it to you?

Sure. I have it ready. So

sure.

Oh, it's showing the whole thing. Hold

on.

Location. Sorry. Thank you. I think you can see the presentation.

Your Honor, we're here today

for the first day hearing in the cases for Cleopatra Fincosaro and 24 of his debtors' affiliates. Your Honor, I'm going to refer to them as Kloeckner throughout the presentation, which is the most common business for the debtors. Your Honor, as a result of the hard work and efforts of the folks around the room, I'm pleased to present a fully consensual prepackaged Chapter 11 case that eliminates €1,300,000,000 of debt, provides a full recovery to general unsecured trade creditors and positions the company to emerge from Chapter 11 as quickly as possible. Your Honor, as I already indicated and as you're probably well aware, Your Honor, this is a packaging company. And

we are one of

the largest manufacturers of packaging materials around the globe. And Your Honor, as I lay out here on the slide the different areas that we participate in, in terms of how we break down our business between pharma, nutraceutical, medical devices, consumer packaging, etcetera. Now, your Honor, my last attempt at courtroom humor was in response to Judge Perez's invitation to get my ear peers,

like my partner, a

couple of years ago. And, you know, my answer to that question was met with clear derision from a variety of publications, that shall go unnamed. But I got even more derision from here at Kirkland. So I'm resisting the urge, your honor, to make a joke about the nature of a packaging case in a prepackaged case. And in fact, the associates at Kirkland that were working on this case threw it up on a wheel of chance and the wheel said, no, Chad, don't make that joke.

So I'm not going to make that joke today. Instead, I'm going to tell you that as with Mr. Susberg, I think I have significant experience with the types of products that Kloeckner uses and I frankly think everybody on this phone call does. Whether it's the occasionally allergy pill or cold medication that you're popping out of the childproof blisters, the daily use of credit cards, purchasing fresh meat and seafood that are wrapped in packaging produced by Kloeckner. I suspect we've all had many daily interaction with these types of products.

But not to be outdone

by Mr. Susberg, I did do something about a month ago. I went and had surgery just so I could say on this presentation that I was familiar with why they store the scalpels in sterilized packaging and trays along the lines of what Kloeckner manufactures. But joking aside, Your Honor, I think what makes Kloeckner unique is its investment in research and development. And we invest over €15,000,000 every year on research and development to continue to be a leading provider of sustainable specialized packaging.

That includes, for example, Your Honor, some of our more recent packages like tray to tray and KP Elite, which use recyclable materials, produce the packaging and minimize the amount of packaging necessary, which is an attractive trait to our customers who are attempting to reduce costs and reduce the overall packaging volume. KP Infinity is another more recent example of the research and development that our R and D group has done. KP Infinity is a product that is recyclable in that it also retains heat. And so familiar by foodservice providers packaging your meal in one of these. What makes it super unique is it's a multiuse type material moving away from the polyurethane or expanded polyurethane, which is being rejected by regulatory regimes around the world.

It's that type of innovation that has made Kloeckner what it is. It was founded in 1965, and it grew into The United States and Canada in the '70s and ultimately is celebrating its sixtieth anniversary this year in 2025. Over that time, it has grown, Your Honor, to employ approximately 5,000 employees around the world, 27 manufacturing plants in 16 countries. Each year, Your Honor, we produce approximately 500,000 tons of high performance film and packaging solutions. Your Honor, the debtors' efforts are led by the management team that you see here on your screen.

I want to highlight two of the management team who are on the call today. First, the debtors to Claren, Mr. Mark Rotella. He is the first day to Claren, and I can see him on my screen.

Hopefully, you can see on

his. Second is, Ms. Shanae Mitchell. She is the General Counsel for the debtors and has worked closely with us as we have prepared for today's cases. Your Honor, the debtors are managed by a Board of Managers.

You see them here. I want to call special attention to two of those Boards of Managers, Moe Mange and Gary Begeman. They have served as the debtor's special committee throughout these restructurings. The debtor does have other additional independent directors on the board who have assisted along the way, but the special committee was comprised of Mr. Mangee and Mr.

Begum. Your Honor, the capital structure here, while complex with many entities, ultimately is really pretty simple. We have approximately €2,300,000,000 of funded debt that's broken down as you can see on the chart here. All of the shaded boxes on the screen are the 25 debtors that have commenced these Chapter 11 cases. The starred entities, Your Honor, are those that are party to the factoring arrangements that you'll hear about later in the hearing.

We have about $1,800,000,000 of first lien secured debt. We have another 134,000,000 million dollars of first lien bridge loan debt. And then we have some local debt in country. Each of these tranches of secured debt are first lien debt secured by different collateral. That's an important thing to highlight.

And then lastly is the second lien notes, which approximately €317,000,000 Those notes are secured by the same collateral as the one L debt that's highlighted here. Our 1Ls are represented by an ad hoc group that has retained Gibson Dunn and Mr. Greenberg, who you see on the phone as their counsel. They've also retained Houlihan Lokey as their investment banker. The second debt the second lien debt highlighted here in the pink boxes is represented one of the large holders of that second lien debt is CastleKnight.

They hold, I believe, approximately $80,000,000 or $90,000,000 of that debt. They are represented by Mr. James Sabin at Aiken Gump. And last but not least, our strategic value partners or SVP, that is the debtor. They own substantially all of the equity, not all, but substantially all of the equity in the debtors.

They also hold significant trunk or chunk of the 1L debt. It's approximately $100,000,000 I'm sorry, approximately $50,000,000 and then they hold approximately $100,000,000 of the second lien debt alongside of Castle Knight. And here's just a summary of that. Your Honor, I've already talked about Kirkland. Of course, Mr.

Higgins at Porter Hedges, you'll hear in our declaration in support of the DIP facility, the declaration from Mr. Brent Herlihy. And then our financial advisors at Alvarez and Marcell, Mr. John Hickman. And finally, we've already talked about Screto.

I'll summarize that as well. Your Honor, the debtors refinanced substantially all their debt in early twenty twenty one because they had debt coming due in 2022. At that time, they were riding a bit of the high coming out of COVID because a lot of the customers around the world increased their purchasing of the goods in order to create back inventory should things go sideways during COVID. The lenders underwrote those numbers and ultimately believed that the company's business would grow into the capital structure over time. Unfortunately, the industry faced headwinds.

There was a drop in demand that was caused as the customers realized that inventory was too much relative to demand, and therefore, demand dropped. Meanwhile, the prices of raw materials that go into the production of the packaging materials increased significantly. Those industry headwinds obviously had a very negative effect on liquidity. And beginning in mid-twenty twenty three, there was a strain on the debtors business. And there was a series of attempts to get additional liquidity, some of which you see in the first lien debt.

But ultimately, it became clear as we headed into the 2024 and through April 2025, as the debtors were attempting to try and refinance their first lien debt, there was a maturity coming up in the 2026. It became clear that we were going to be unable to refinance that debt. So in February 2025, we obtained some additional financing that I just mentioned. And we use that financing to negotiate with our first lien lenders on a potential amend and extend transaction. And that really took place during kind of the 2025 as we headed into the summer.

But in early August twenty twenty five, Your Honor, it became clear that an amend and extend was not going to happen. It's at this point, Your Honor, that we face a critical moment with waning liquidity contrasting with the debtors' obligations to comply with law in all of the jurisdictions around the world, including in Germany, where we know the financial operational restrictions are quite strict. We had faced a conundrum. We could file a free fall Chapter 11 case, which would have likely been what mitigated disaster, because the company was not prepared for a free fall Chapter 11. Or we could work with our stakeholders to try and find another solution.

And it's here where the ad hoc group of first lien lenders stepped up in a major way. Your Honor, in about the August, we reached resolution on a forbearance agreement and a bridge financing agreement, which was in effect in advance on what would be dip financing. They provided us with €135,000,000 additional liquidity that allowed us to satisfy the liquidity, minimum liquidity standards that we needed to maintain to continue operating the business and to give us sufficient time to actually negotiate with all of the stakeholders what was going to happen here today. And it's as a result of those efforts, and I'd be remiss not to mention the efforts of the factors who also played along with us as we were navigating these liquidity issues that we were able to reach agreement on the terms of the prepackage case that we filed last that we launched last night for solicitation and filed today. Your Honor, with that, I'm going to turn the podium over to my partner, Mr.

Jack Lewes, to walk through what the deal looks like what the timeline that we're proposing for these Chapter 11 cases.

Okay.

Thank you. Can your honor hear me okay?

Just fine. Good afternoon.

Good afternoon, Your Honor. Looking ahead on our presentation, we have a couple more slides that just set the table as it relates to the overall restructuring transaction that we negotiated as well as the dip financing that's tied to that transaction. And finally, what we view as the path ahead in these Chapter 11 cases subject to your Honor's approval of our proposed scheduling motion. As it relates to the overall restructuring transaction, Your Honor, it's a relatively straightforward restructuring transaction at the end of the day. We executed the company executed an RSA immediately preceding launch of their prepackaged cases and the filing of these Chapter 11 cases.

That includes the debtors in these Chapter 11 cases, the first lien lenders represented by Gibson Dunn and Houlihan plus certain additional consenting first lien lenders that get this in the neighborhood of 90 of all outstanding first lien claims, plus the Castle Knight funds and SVP, which as Mr. Husnick highlighted, holds the significant majority of the two out claims between Castle Knight, SVP and certain cross holdings held by first lien members that are funds that are part of the first lien ad hoc group, we have well in excess of twothree of all 2L claims party to

the

RSA. The RSA contemplates a prepackaged Chapter 11 process. In accordance with the terms of the RSA, we launched solicitation of a prepackaged plan immediately before the filing and we anticipate, as I'll come on to you, that the solicitation process will continue through early December. In terms of treatment of claims in these Chapter 11 cases, the DIP claims, which I'll describe in a little more detail on the following slide, will convert in their entirety into a new exit facility. The company is not required to raise new financing to repay in cash the DIP claims at emergence.

First lien claims will receive 100% of the new equity in reorganized Klockner. There are some structuring considerations in the RSA as it relates to what type of equity instrument certain funds can hold. But effectively, the first lien lenders will own 100% on a pro rata basis of the equity in Klockner on the other side of the Chapter 11 process. The second lien lenders have negotiated a resolution with the first lien lenders in the company, under which the headline term is that those second lien lenders will receive peripassu with the first lien loans that the DIP is converting into. It will be an incremental €17,500,000 and those loans will be distributed on a pro rata basis to all 2L holders.

And as I've said, we have an excess of twothree of those holders already supporting the plan. Under the terms of this plan and in light of the fact that it is a prepackaged restructuring, holders of unsecured claims and holders of other claims that aren't the first lien claims or second lien claims will be unimpaired. Existing equity interests predominantly held by the SVP funds will be canceled as part of this process. The plan also contains customary release, exclocation and injunction provisions, which are for more detailed consideration when we get to confirmation. Flipping ahead a slide, a brief summary, and we'll get into a little more detail in connection with the dip financing motion, Your Honor.

But to sort of set the table for Your Honor as to the overall structure of the dip financing, the overall quantum of dip financing is €984,000,000 That includes a $349,000,000 new money component and a $635,000,000 roll up of existing first lien obligation. As it relates to the new money portion of the DIP, dollars $264,000,000 of that will be available on the first day following Your Honor's entry of the interim order and finalization of the dip credit agreement. At the final hearing, an incremental $85,000,000 will be made available. As we've noted here, Your Honor, under the initial draw of the dip, the pre petition bridge financing, which with accrued fees equates to approximately €134,000,000 will be fully refinanced in cash. There is a distinction, and it is a distinction with the difference between the refinancing of the bridge facility and the roll up of the existing First Link claims.

That will be a cash refinancing. The existing the DIP lenders are advancing cash to refinance that loan. There is not one to one overlap between the DIP lenders given the growth in the group and the participants in the DIP facility as between the DIP and the bridge. And it was a negotiated part of both the bridge financing and the ultimate DIP financing. That, that financing would be refinanced in full as part of the bridge.

That bridge was put in, in late August with the specific intention of providing a runway for the debtors and their lenders to negotiate consensual restructuring. Obviously, the initial goal was to negotiate a restructuring supported by the company and its first lien lenders. Ultimately, we were able to achieve much more consensus than that, bringing onboard the 2L lenders and SVP as equity sponsor. That bridge was always contemplated to be part of a broader facility that not only funded the negotiation period, but also the debtors' broader restructuring. And the sizing, even contemplated in late August, has always contemplated that there would be a larger facility sized to fund the liquidity need of the debtors during the implementation of the restructuring that was negotiated and fill the liquidity need that the debtors have to satisfy trade claims and other operational obligations.

Under the interim draw, dollars 130,000,000 of cash stays on the debtors' balance sheet and will be available to satisfy operational needs of the debtors over the first portion of the case. The remaining $85,000,000 will enable the debtors to satisfy the balance of the operational obligations and capitalize the debtors sufficiently for emergence. The plan does not contemplate that the debtors will be required to raise additional capital to exit. Unless, Your Honor, has any questions on the DIF structure, I was going to touch briefly on time line and then pause before we go into the agenda.

Okay.

Your Honor, we're here on the first day hearing, November 5. We contemplate a full solicitation process in compliance with the bankruptcy rules and applicable non bankruptcy law, and have noticed a voting and opt out and objection deadline of December 11. And subject to your honors availability, we would request a confirmation hearing on or about December 16. The RSA contemplates a forty five day milestone for the confirmation. December 16 is around about day 42.

When we get there, Your Honor, we would also request we're going to need a second day hearing inside of that date, given the company's cash needs and the interim and final release contemplated by the disclosure.

What dates did you around what dates did you, like around the December area, somewhere around there?

Somewhere around twenty five days. Obviously, we have Thanksgiving at the end of the month. So I think that puts us in the December, your honor.

Okay.

Okay. Okay.

Your Honor, as to any questions from Your Honor, that concludes our initial presentation. We would pause there if any other parties and interests have opening statements to make. Otherwise, we would jump into the agenda starting with the scheduling motion.

Let me just ask if anyone wishes to make a statement.

Your Honor, can you hear me okay?

Yes, just fine.

Your Honor, if I may, just very briefly, Scott Greenberg, Ditch and Dutta Crocker on behalf of the lenders. Your Honor, and I will be brief, Mr. Husnick warned me to be very brief, where he threatened me with more jokes to the court. But in all seriousness, Your Honor, there is a lot of history here and it's and look, we are at a really good place, obviously, coming before Your Honor with a prepackaged case. So I am not going to go all the way down memory lane.

But I do want to just hit on a couple of points. Your Honor, the members of our ad hoc group are part of a broader group that are the existing bridge lenders and the 1L creditors and obviously the proposed DIP lenders in these prepackaged cases. We are also parties to the RSA, which the debtors have mentioned that supported, I think, the numbers shook out right around 92% of the existing first lien creditors. And if it's ultimately approved, the transaction contemplated by the RSA embodied in the plan results in a deleveraging of approximately $1,300,000,000 of this debtors' balance sheet. Your Honor, just quickly in terms of a little bit of background because we've actually been involved in this case for quite some time, dating all the way back to April 2024 when this ad hoc group first came together.

The ad hoc group, I know we've thrown around a couple of different numbers, but the ad hoc group is approximately 82% of the company is approximately $2,000,000,000 of first lien debt. We filed the 2019, that's at ECS, statement 75 that has the detail. But it's a combination effectively of first lien term loans, U. S. And euro denominated given what the business is, first lien bonds, and I think the group owns actually about 46%, 47% of the RCF as well.

I agree with Mr. Husnick. It's not the world's most complicated capital structure per se, but just given the global footprint of the company, it is challenging and that issue came up in connection with the bridge facility we put in over the summer, which was referenced. Just by way of background, we've probably been in active discussions on again off again with the company since the 2024. The company did effectively an exchange offer in April where they converted some of the unsecured notes into two Ls.

After they finished that exchange offer in the spring, they really turned to our group, which was more 1L oriented because as you heard from the debtors, you had maturities approaching and they were having some issues recognizing they probably couldn't tap capital markets to refinance this out. They also had some issues with liquidity. I will say without going too far down memory lane, we spent a significant portion of time in the spring of last year leading into the summer negotiating A and E transaction, which is where this originally started. That transaction literally got to a point where all documentation was done. I think I actually had started to restrict other lenders in the syndicate to get support for the A and E before we launched.

And unfortunately, at the end, for reasons obviously in their own business determination, the company and the sponsors decided not to move forward with the A and E transaction. And that transaction, just to provide a little context of how we got to the bridge since it's part of the dip refinancing today, That transaction was effectively $275,000,000 of fresh capital coming in to support the A and E, some of that for balance sheet cash, some of that to pay down our lenders in connection with rolling their maturities. And that fell apart in late July. And then in mid August, as Mr. Husnick said, shortly after the AME failed, which I think all of our folks were probably still licking their chops a little bit, having gotten to the finish line, we did get a call from the debtors advisors letting us know that not only was the A and E dead and the equity injection dead, but they needed approximately $100,000,000 of liquidity and relief on our first lien debt payments that were coming due that month.

Obviously, that was a bit of a 180 for us, given we were going from a par exchange into A and E and the sponsor staying in place to comparing to write a check to prevent the company from, as Mr. Husnick outlined and I agree with, what would have been a pretty catastrophic collapse into Chapter 11, particularly if you think about some of the foreign jurisdictions, Germany and the like, which would have been implicated and are obviously a lot less forgiving than our processes here in The U. S. So against that backdrop, our lenders stepped up. They provided the incremental bridge.

That was about €112,000,000 at the time. Obviously, some fees have accreted on that since. All I would say, and this just goes to the capital structure point, it was actually a pretty complicated bridge to put in place just because of where the assets are located and trying to take leans in foreign jurisdictions. It was a little bit of a hodgepodge of our Kirkland and Gibson finance lawyers to really get comfortable that we came up with a collateral package that worked for the bridge. But I agree with the debtors commentary, the thought process was always that we would get to this point in time where the bridge would be taken out by a debt facility.

And just by way of background, that bridge was put in place. It's fantastic timing for all of us on the phone. It was late August. We put it in place. We backstopped it and then Houlihan and company went out and did a post close syndication.

And eventually, we got, I think, about 84%, 85% of folks into that bridge over the summer. And just to fast forward, that's kind of Labor Day from Labor Day to today or the last couple of weeks. We've effectively been spending a lot of time with the debtors. They redid their business plan. As you saw at the outset, they brought in independent directors who got deeply involved and came up to speed.

And the goal was to get to a soft landing into bankruptcy. And then the good news obviously is just in the last weekend, we were able to cut a deal with the second lien, mainly Castle Knight represented by Aiken, with Mr. Britton's clients, SVP and the sponsor, both in their sponsor capacity and lender capacity, where we, I think, since Friday to today pivoted from what was going to be a prearranged in front of your honor to a pre pack, so a good result. So just to say it, I mean, it's been a long road. It's gone from a consensual A and E to no deal to a liquidity crisis to a free fall to a free arrange to a free cash.

I would say the last ending has been very good. And I won't get into the dip. We'll hit that as Mr. Lou fits it opening presentation. But I think from our perspective, it's been a long ride.

We've gotten to a good place. I think our hope, probably our clients' hope is that they never have to talk to any of us again, make a focus on the business and get this company in and out of bankruptcy as quickly as possible. So I appreciate the time, Your Honor. And with that, I'll Mr. Luz, I sorry to steal your thunder, I'll hand it back to you.

Perfect. Thank you very much. Anyone else? Let me just check. Okay.

Who do I turn it over to?

All right. Jack Lewes again from Kirkland and Ellis on behalf of the debtors. I will be taking us through the first two motions that are up on the agenda. Before we jump into those, Your Honor, we'd like to move into the record the support for the first day motions and get financing. Those are the declarations of Mr.

Mark Rotella, the CFO of Cloughner docket number four. And then in support of the DIP financing and use of cash collateral, the declaration of Brent Herlihy of PJT at docket number 25 and declaration of Jonathan Hickman from A and M at Dock 26. All witnesses, I think, are available in the virtual courtroom for Cross.

Okay. They're admitted. Subject to Cross.

Thank you, Your Honor. Moving on to the first motion on the agenda, at Docket Number seven is the debtor scheduling motion. Your Honor, I hit the high points of scheduling in the intro. We are seeking to advance these cases to confirmation by mid December, subject to Your Honor's availability. We have requested a hearing date of December 16, which we would expect to be a fairly streamlined confirmation hearing.

We have noticed an objection deadline and voting deadline of December 11. I wasn't planning to go into much more detail, Your Honor, unless Your Honor has any questions about the orders or forms of exhibit. It's all relatively standard straightforward solicitation procedures, ballot, etcetera. We launched, as I said, immediately before the filing yesterday afternoon.

Okay. Let me just see if anyone wishes to be heard in connection with this motion.

Your honor, Andrew Jimenez for the US Trustee, no issues with this motion. I just want to just expand a little bit for for the quarter for everyone, listening in that this this this order also includes deals with the 03:41 meeting and schedules. If the debtors are able to confirm a plan within sixty two days, then the 03:41 meeting will be waived and the filing of schedules. However, if the debtors do not meet that deadline of confirming by day 62, the USRC will schedule, a 03:41 meeting, and the debtors will be required to file, schedules.

That makes perfect sense to me. Thank you very much. Anyone else? Okay. Here what we have is just a scheduling motion.

I've reviewed the proposed timeline. It's appropriate where solicitors has already started. I'm going to give you a combined hearing date on December 16 at 1PM. And as soon as I will review the again, everybody's rights are preserved in connection with plan confirmation related issues. This is literally just a scheduling motion, but I'm also approving the forms of notices.

So I do note and everybody's rights are reserved with respect to have what I would call more substantive matters related to plan confirmation, but the forms are appropriate. I've had an opportunity to review those. They're customary in our district and quite frankly around the country. Everybody's, we're really just establishing dates. The dates are satisfy the bankruptcy rules, and provisions of the bankruptcy code.

So I will just it looks like, mister Luz, I'm just gonna fill in December 16 at one, your objection deadline works, and then we'll take those up. The forms of publication are obviously appropriate. And again, everybody's rights are preserved and I'll get that signed in on the docket.

All right. Yes. Thank you, Your Honor. I think, yes, the only spot is in paragraph two there, the order.

Yes. I put it in the kind of the mini box too where it kind of just talked about December 16 or at any time, I just added the at 1PM prevailing central.

Understood. Thank you, Your Honor. With that, Your Honor, we would move on to the debtors financing motion, which is a document of '24. In the introduction, we went through the overall structure of the dip, you're on it, but just to hit on the numbers. What we're seeking relief for today is for $264,000,000 of refinancing.

Dollars 134,000,000 of that new financing will be used to refinance the bridge facility in full. In addition, we are seeking on an interim basis $480,000,000 approvals roll up $480,000,000 of existing first lien claims, with the remaining $85,000,000 of new money and 100 and and $55,000,000 of roll up being on the final order. Those ratios of roll up remain consistent from interim to final. It's just that the company is in more need of liquidity upfront. Your Honor, speaking to the overall liquidity need, the company was running very low on cash in late August, which is why we required a new bridge financing facility.

That bridge financing facility was sized for basically a six week negotiation process, wherein we would get to the terms of an RSA and launch implementation from there. We are now on week 10. The company has been required for several weeks now to manage liquidity very closely and has had to bear the additional burden of the costs of the various professionals that are in the virtual courtroom today that it takes to get to a prepackaged plan. The company is in dire need of an additional liquidity infusion, the liquidity that's contemplated by the RSA to begin to normalize terms with its vendors and ensure that it's sort of hitting its operational targets business as usual, which is what this facility is sized for and what the company is intending to do after the funding comes in the door. As we sit here today, the company has less than $50,000,000 global cash, a portion of which is restricted in an aggregate amount that's well below the company's normal minimum operating cash requirement.

It set forth in more detail and especially the declarations of Mr. Rotella and Mr. Hickman, but an interim draw is sized to allow the debtors to sort of normalize terms over the interim period and in some ways catch up from the stretch that's occurred over the past several years. I touched on it before, Your Honor, the refi at the bridge, it just takes from the roll up. That bridge facility was a very specific facility, as Mr.

Greenberg mentioned, with very specific position collateral that differs from the broader collateral base of the one out refinanced that sort of one to one basis lenders that is being refinanced since the overall DIP facility. The lenders really the debtors really think of this as one financing facility, money that was extended in late August and the money that's being extended pursuant to the DIP facility, size to to accomplish one restructuring. And we're fortunate that the second phase of restructuring will be more truncated now that we've had an opportunity to negotiate the terms of the RSA. And so we submit that that is an appropriate use of funds on an interim basis and it's the protection that the lenders bargained for when they advance the funds initially and that the company believes that they're entitled to now, given the extraordinary result that the provision ultimately in these cases. The remaining roll up is a more typical roll up of things that you 1L obligations.

The dip obligations will be against all of debtors, your Honor, which substantially overlaps with the petition obligors and the DIP obligations as your Honor might expect for all assets of the debtors subject to various sort of local law perfection requirements. That's just referenced in the intro. The company has entities all over the world and so intend to comply with the various obligations. Your Honor, the order otherwise contains a fairly standard suite of protections for the lenders with certain provisions being subject to the final order of your honor. We have certain provisions that are subject to challenge period.

The challenge period runs sixty days for how we the later, I should say, of sixty days from entry of the interim order or for a committee appointment. We're not, of course, anticipating appointment of a committee in these cases, if something changes. Hunter, we did file a revised form of order. We might have hit the actually, after we started that is the

Yeah. In line. It's the one that takes out the marshalling. The echo It's the one with the marshalling language. Right?

Yeah. That is a resolution reached with Mr. Jimenez. Preserving the right of

preserving the right, right? Right? Nothing in the interim preserving the right in connection with the final to come in and still request it and wiping around. I did get a chance to see that. Makes sense to me.

And other language in there is there's some cleanup, I would call it, language related to our factoring arrangements. There's some very specifically negotiated language in here as it relates to relative collateral and relative priority of our factors and our dip lenders. And we appreciate both sides engaged reaching a resolution. But that is a resolution that all parties are happy with, including the company. So just the last point, Your Honor, on fees and costs.

As set forth in more detail in Mr. Herlihy's declaration, this was an extensive arm's length negotiation between the company and its lenders, led by the Special Committee of the Board. Ultimately, we landed at a suite of fees that we believe is reasonable under the circumstances and when taken in context of the broader transaction, where ultimately, it's the lenders who will be owning the company. We believe that the overall leverage levels as a result of the size of the debt financing are sustainable. That's more of an issue for six weeks from now.

But the interest rate of ES plus 3% cash, 2% pick, 5% commitment fee, 7% backstop fee, 3.5% steer co work fee, all specifically negotiated for this facility and supported by the vast majority of secured lenders in this case. And for the reasons that we have to hold this declaration, we believe are reasonable under the circumstances. I'll pause there, Your Honor. I'm happy to answer any questions Your Honor has about the order. We've uploaded a full clean of the order that also attaches the credit agreement.

We will have a bit of work to finalize and take and tie the terms of the debt credit agreement, but the economic terms match what has been disclosed in the papers. As your Honor might expect, there's some complexities around collateral and aligning covenants and things of that nature. They're not a particular economic impact. So we would expect to finalize that shortly after hearing and get closed.

So there's one at '81, one at '82. I know some of them didn't file. Which one should I'm assuming '82 is more recent than '81, but maybe just such a red line. But how does it which one should I be looking at and which one attaches the credit agreement?

So the document filed at number 82 includes the red line and clean of the order. That was to ensure that your honor saw all the changes that were made.

Got it.

We also wanted to file a single compiled order that includes the credit agreement, which is the docket number 81.

Okay. Let me just ask, does anyone wish to be heard in connection with the financing motion? I appreciate the clarification, mister Lewin. Mr. Cohen, if you could hit five star, I will unmute your line and there you

are. Yep.

Go for it.

Yes. Your Honor, you hear me?

Yes, just fine. Good afternoon.

Okay. Perfect. Good afternoon, Your Honor. Michael Cohen, Gibson Dunn and Crutcher on behalf of the Ad Hoc Group, first lien creditors and proposed debt lenders. I believe Mr.

Vu has covered the landscape pretty extensively on the dip. We naturally support entry of the interim dip order. But I'd like to take a moment and echo how critical it is to the lenders to see this business continue to get stabilized and find the right landing here and continue to flourish as we hopefully get through these cases, especially given the extensive footprint in Europe and in other countries where maintaining the relationships with vendors in those jurisdictions is absolutely critical. To that end, I'll just highlight that DIP will fund over $170,000,000 of vendor payments pursuant to first day orders here, given that a vast majority of those vendors are in non U. S.

Locations as well, nearly $80,000,000 of payroll over the budget period. These are the types of this is the main focus for the lenders just to get this business in the right place and move through these cases. And with that,

those are my remarks.

If you have any questions, your Honor, on the order, happy to take any of this.

No. I did get a chance to review the changes while we're here. I do see the comments from that you tell me with respect to the marshalling, I think that makes perfect sense. I did see kind of the preservation of rights language for the factors. And I think all that makes sense to me.

It's clear based upon the declarations that the debtor needs money. It's clear that there's been a year of negotiation. It was a bridge loan, and now you got another loan. First aid dips are always coming in different shapes and forms. But when there are you have a prepack that's proposed to unimpere the trade, and on the first day, you're seeking authority.

And a lot of the money that is going to be used is to really take care of trade creditors in connection with motions. I think things get a lot easier on my end because it's really one of the things you look out for in dip motions at the beginning is to make sure that there's some protection for unsecured creditors in this process. And so especially in an international case, if the goal is to take care of creditors around the world, who may not have had access and to some information, and then certainly due process went out. But just I feel a lot more comfortable today doing what we're doing, knowing that we're gonna that you you that the company is intending on taking care of its trade, keeping the business going. There's a business there and there's agreement here.

So, three sixty four is satisfied. The proposed, financing, the terms of the financings are appropriate and reasonable under the circumstances. And I'm comfortable granting the relief requested. And I also know that there's large agreement from a really large creditor group here. And so, I will get this signed, and on the docket.

Mister Luz, I need to give you a final hearing date on this, and I thought, December 3 at 9AM is when I can do it, to just, make that one work. I know there's a bullet in here that I've got to add for just a blank on the to identify the factoring motion itself. It's like somewhere in there and I'm just going to I'll add that in as well. I think it's your footnote for the interim factoring order. But maybe I just what I'm going to do for to make my life a little easier is, I'm just going to delete the docket number reference.

If there's an interim order, it'll be clear what it is, but it'll just make me in other words, I'm going to forget to go back and do this. And so this will make your life a little easier that we can get this done. So I'll get this signed and on the docket. Where do we go next?

With that, Your Honor, I would hand it over to Mr. Gremling from the Kirkland team, who will take the next couple of agenda items.

All right. Mr. Gremling, if there's any thunder on the motion to seal, I'm going to sign that order. So no grand presentation on the motion to seal the factoring. I'll take care of that one, but I'll let you proceed as you wish.

Mr. Graham, good afternoon. I need to unmute your line so you can speak. Good afternoon.

Good afternoon, your honor. Jay Brembling of Kirkland and Ellis on behalf of the debtors. Can you hear me okay?

Just fine. Good afternoon.

Okay.

Well, I didn't prepare extensive marks on the ceiling motion, so that's great news. And I'll just jump right into the factoring motion itself that is document number 27.

Yes. Alrighty. And, see that. And Husnick would have tried to make a joke on the ceiling in the factory. And I'm just we're just we're just gonna keep it moving on these jokes, I guess.

We'll keep it moving.

I think

for the packaging probably has a ceiling component.

I know it. That's why I had to take that one off the docket. I signed that one and it will get on the docket. Okay. Where do we go next?

So the factoring motion is at docket number 27. Yes. And you've heard a little bit about the cooperation that we've received from the factors today that are represented. There are two that we work primarily with, one named Coface, they're represented by Mayer Brown, another called Facto France, I believe is how they pronounce their name, represented by Dentons. They worked with us on the dip motion and order, and they've also worked with us on the factoring motion and order.

And we really, really appreciate their cooperation to this date. And in addition to the financing that Mr. Luz walked you through, the debtors will support their liquidity during these Chapter 11 cases by continuing their pre petition factoring arrangements. Now the factoring arrangements are a significant part of the debtors' liquidity. They take in on average more than $5,000,000 a day through the sale of receivables.

And the debtors forecast that if they weren't able to continue the facility, they would need an incremental $2.02 $80,000,000 to fund these Chapter 11 cases. And simply put, Your Honor, the debtors sometimes have lengthy trade terms and the factoring facilities allow them to bring them essentially down to zero, bringing cash in instantly and allowing them a liquidity pickup. We think that they are ordinary course transactions. The debtors do them every day and they've done them for years. But to the extent that your Honor disagrees, we also believe that for the purpose of helping mitigate the liquidity flow, They also represent a good use of the debtors' business judgment, and they should be approved for that reason.

I understand that Mr. Jimenez has an issue with our requested release. He and I have been on the phone, several times today. Today. I'm sure he's tired of hearing me, but I do appreciate that he's willing to have a constructive dialogue on these points with me.

But I do want to address the issue that he has, if that's okay with you. So Mr. Jimenez reached out to us and said that the main issue that he has is with an interim order paragraph eight. We provide a conditional grant of super priority claims to the factors. And the reason that I say it's a conditional grant is because it only kicks in if the sale of the receivables, which, Your Honor, we do believe is a true sale of receivables, is recharacterized as a financing transaction or some other transaction.

In that case, what we have requested is that the factors receive super priority claims to the extent of any amounts that they are owed. First, Your Honor, we did push back on this provision being included, including after we learned that Mr. Jimenez was considering an objection, which we flagged for the factors to their counsel, and they've included that it stays in for the integral role that the factoring facility plays in the debtors liquidity.

Where is the paragraph?

It's paragraph eight of the interim order. If you're looking at the PDF that we filed, let's see what's on page six.

Oh, I see it. Yeah. Yeah. Yeah. Yeah.

No. That's not gonna happen today. It's an interim order. Nothing's gonna happen in the next thirty days. You're not gonna we're not gonna there will be no this is an this is a ship that will never reach its destination because there there's no way in the world I'm considering recharacterization of anything in the next thirty days.

So it this is kind of an impossibility. You're well you're more than welcome to ask for it in the final. I just just keep it moving, folks. Let's just let's just let the ship sail into the night. I don't see me granting this, but go ahead.

You can try to convince me otherwise.

I appreciate the opportunity, Your Honor. Frankly, it's not you recharacterizing the transaction that we are concerned about. It's the international nature of the debtors business. These factors are based outside The U. S.

But I'm not going to hold another hearing till December 4. So what are we talking about?

So what we're talking about is in the event that another court perhaps one outside of The United States that may not recognize chapter 11, that may not feel itself within the review of your own disorder.

Come file an emergency motion, and you'll get a hearing within twenty four hours. I I can't give you anything more than that. If if but but if if that's the concern, I can alleviate the concern within twenty four hours, and there'll be notice as to what's going on. You've highlighted the concern. You can just file a two pager.

I need a hearing on this very issue. I'm getting international issues. Somebody comes in, you got it. But there's gotta be a little bit more notice. I can't do it on twenty four hours notice.

And and before we move off it,

you gotta read you gotta read the room, mister Grimley. It gets worse from here. Okay. That's what I'm saying. So

Alright. Alright. Under understood, your honor. I'll see the podium on on this point.

No. You can come in within twenty four hours if if that's the concern. Just come in within twenty four hours, but I cannot without more knowledge about what's going on and whether this is truly gonna be an issue. It this all looks like it's academic, but I get the protection that they're seeking. I can just give it to you within twenty four hours.

You can get a hearing on it in twenty four hours, and then we can talk about what's happening and what's going on. And if the factors have provided this protection and if they need it, I mean, the debtor can come I promise you, you'll get a hearing real fast. Twenty four, forty eight hours at the most.

Okay. Okay. Your honor. Understood. It takes feedback, and I I'm hopeful that the factors will take comfort in your willingness to hear us quickly on this point in case we need to ask for that protection at that time.

You got it. Just upload a revised order and I'll get it on the docket.

Okay. I I didn't actually have anything else on my presentation. I don't know if anybody else

If if I

do it, I'm gonna if I do it, I'm gonna mess something up. You know what I mean?

If I

do it, mister Grambling, I'm gonna mess something up and but but you can put something in there saying to the extent that any issues, the court will, you know, will conduct an emergency in my hearing within, you know, within forty eight business within, you know, forty eight hours. You know? Because

Absolutely. And we'll we'll work

Or within or within one to two business days, the court will conduct an emergency hearing. You know? You can put it in there. They're gonna have the guarantee that I'll give them the hearing within twenty four to forty eight hours to resolve it, but you can put the language in there. I've got no issues with it.

But I think Mr. Jimenez is right on this one.

Okay. Understood, Your Honor.

All right. Where do we go next?

Next up on the agenda is the debtors cash management motion that's at Docket Number 29. Your Honor, this motion is pretty standard cash management motion. We're just seeking the authority to continue operating the debtors cash management system to continue to move money between the debtors accounts to continue credit card programs to pay bank fees. We are asking for a sixty day extension of the $3.45 waiver. Just wanted to flag that for you and otherwise it's a pretty down the middle cash management motion in order and if nobody has any questions, I'd ask you to enter the interim order attached to the motion.

Your honor, if I may?

Yes, sir. Mr. Jimenez, good afternoon.

Good afternoon, your honor. Andrew Jimenez for the United States Trustee. Your honor, I want to start by apologizing to debtors proposed counsel because this is one of the issues that, we discussed earlier. Earlier today, they reached out to see if we had any issues, and I told them the only issue I have pending is pertains with, the, the factory in motion. Just shortly before we started the hearing, I spotted, an issue here.

It it's something that we discussed before, but it's just that on on paragraph number seven, it provides for the sixty days. I'm only authorized by my client, to agree to forty five days, your honor. And my apologies to debtor's counsel for not not bringing it earlier when we were having conversations. It's something that slipped. I tried send them an email before I did send them an email before the the start of the hearing, your honor.

If you're done in order

oh, sorry.

That's my only that's my only update that I'm requesting that instead of sixty, it'd be forty five.

Your honor, we can do forty five days.

What paragraph are we looking at?

At 20 nine-one, paragraph seven, Your Honor.

Got it. And we're going to set the final hearing for the same December 3, right, date? So essentially, this will kind of Yeah. Without prejudice, the right to seek further extensions of the period. Where do where does it request the no.

Final hearings at the top.

Let's see.

Alright. I'm gonna grant the cash management motion. This is just to preserve cash flow without disruption. I just need to set an objection deadline. Have I said December?

I'm gonna put November 26 as the objection deadline. Just kind of a week before. It is the day before Thanksgiving. It is cruel, but I hopefully, I used to have to draft stuff during Thanksgiving, and I'm trying to make sure that the objection gets filed. I'm gonna put noon on December 26 so that some poor associate who if anyone has an objection, I put the deadline at noon to make sure they can get out the office at a nice time.

Okay. I have signed the cash management order. Mister Luz, I'm not taking a no for an answer on the noon deadline for the objections. That's what you're coming in to tell me. Alright.

Where do we go next?

That's all for me, your honor. I'll turn the podium over to my colleague, Mr. Cremer. Mr.

Gremlin, it's been a pleasure talking.

Thank you, your honor.

Your honor, if I could just jump in. I don't know if mister Scott was trying to get off mute.

If you can hit five star unless I've unmuted your line already. Mister Scott, can you hit five star one more time for me?

Yes, I'm raising my hand.

I can hear you.

Okay. Sorry, Your Honor. I was raising my hand during the factoring motion. I did want to understand to give you a little bit of the background of what we were trying to accomplish and then make sure that we understand what protection is available for the factoring parties. I do think this is an unusual case, and we did spend a lot of time negotiating the super priority claim here for what I think is a pretty nuanced situation.

So apologies for taking us back in time. I will try to find out more.

It's okay. No, no, it's completely fine. What's going on?

So I did want to echo what Mr. Huznick said, and there have been robust negotiations around the factoring arrangement. But I think one of the nuances here as you heard during both Mr. He's next remarks and Mr. Greenberg's, is the fact that the transactions here take place in a host of different jurisdictions.

So for our clients, we have Germany, UK, Spain and France, and I think for one of the other factors, Italy. And I did want to highlight that despite their multiversitational nature, we do think these are very normal course and straightforward factoring transactions. But the one big concern that our clients have is that there are not going to be ancillary proceedings in other jurisdictions. If this were only a U. S.

Related proceeding, I told Mr. Grambling and I think I would agree with U. S. Trustee that probably the protections that we are seeking right now are not likely to be implicated. But and I agree that the most significant protection for the factors is we have recognition of the true sale nature of the sales of receivables, the grant of a fallback lien.

But what we one of the complexity here is that we have other jurisdictions where at least as contemplated, it's not clear that local law would recognize this court's orders as binding on them. For example, under German law, to the extent that one of the participants in our arrangement has its coming or its center of main interest in Germany, it's quite possible and actually we think likely that a German court, if there were subsequent insolvency proceedings there, might not recognize either the interim order or the final factoring order. So while the primary source of, I would say, coverage for our payments is for our clients is the receivables themselves, What we negotiated and the reason why we were seeking this super priority claim is there are scenarios where there could be local law insolvency proceedings, for instance, in The UK where we deal with Lindpack or in Germany where we deal with KP Europe where sales of receivables or means granted even by this court might subsequently be deemed to be void or voidable under local law. And at that point in time, my clients and Mr. Robert's client, Doctor.

France, are taking the risk that at that point in time, they've effectively paid the purchase price, have given consideration to the debtors. And as you heard from Mr. Gremling and as you saw in the first day declaration, creates significant additional liquidity for the debtors. And yet we are left after the fact with a claim that that sale is void or voidable under local law. So I understand Your Honor's reaction.

This does it is an unusual case, but I do think we have seen other circumstances including you know, the Odyssey case in front of your honor at case number 24, 900004.

Mister Scott, here's my concern. Here's my concern is that I'm doing it I'm doing it on, like, ten hour. I'm doing it on short notice. What if you that's the concern.

I I I understand the concern, your honor. And and

And I don't and I don't I don't know why it's gonna happen in the next, you know, what what court is not gonna recognize my order in in ten days or fifteen days? You know, in other words, if if what you're telling me is in other words, you I mean, if you and mister Houston want to come together and and say, your honor, you know, can we pitch this portion of it, come back in, you know, ten days or so? You know, I probably feel better about granting it even if I stuck it. But I just I'm not comfortable doing it today. But maybe a hearing on short notice, you know, if if your if your clients are that uncomfortable with with what it is, and I and I got it.

They're running a risk. But I think with a little bit more notice, I could probably get more comfortable. But maybe seven to ten days notice out. I don't wanna get too close to Thanksgiving holidays, but something where someone who who who's not here today may have an issue with it, and I'd I'd I'd feel more comfortable if it went out. So I'm I'm happy to work that into an order if that's what y'all wanna do.

Just something to give a little bit more notice, but get the factoring order in, and then this piece can, you know, can can tie in at a at a slightly later date with with some additional notice. That gets me more comfortable. I I understand the trustee's concern here on this one. I think he's right. But but I could get a little bit more comfortable.

Mister Jimenez?

Thank you, your honor. If interest is caught, it's it's it's done, then I'll I'll I'll make a short remark.

Your Honor, all I was going to say is I will have to speak to our clients. As I said, I think the concern is that there could be commencement of claims or proceedings elsewhere. And at that point in time, I think one of the things you heard is in Germany, for instance, there is a risk and The UK is another one where if there were commencement of proceedings, at that moment, we could have risk over purchases of receivables. What I think is our client's position is it's going to be difficult to see the purchase with yes.

So if I give you a hearing within twenty four to forty eight hours of you even getting a notice of a commencement, what's the risk? What's the concern?

I think as long as it's clear that we can stop purchasing receivables, I'll have to speak to my client. That may work, Your Honor. I do think it creates concern over whether they'll be willing to continue to purchase in those jurisdictions without those protections. And so we are relying on it's not only the debtors' commencement. The concern actually is over a local creditor potentially commencing, for instance, a winding up proceeding in The UK or a creditor in Germany deciding getting wind of this proceeding and commencing proceedings in Germany.

At that point in time, in both those jurisdictions, as I understand it, and I don't purport to be a UK or German law expert, but we have spent many, many hours on the phone with Kirkland and Gibson Dunn, including lawyers across jurisdictions on that. There is a risk that no matter what happens, a purchase after that is void or voidable regardless of the good faith of our clients as a purchaser, the consideration paid to the debtors. That's what this is meant. This is narrowly meant to cover that risk off. And so again, part of the reason I think the DIP lenders were comfortable on this is this is not meant to open the door to a lot of claims.

We think in most scenarios, we will be well covered. It is meant to cover admittedly a corner case, but my client is very concerned about taking part of these transactions given the multi jurisdictional nature here. So I'll pause there and

Mr. Jimenez, let me hear from you and then Mr. Houston, I'll turn to you.

Thank you, your honor. Andrew Jimenez for the U. S. Trustee. Your honor, I just want to take a brief moment to explain why this paragraph eight is just inconsistent with the order and it's not justified under bankruptcy law.

So, your honor, the the the debtors are asking the court to to authorize, authorize the the debtors' continued participation in the factoring programs. That is a legitimate request on the on the first day. And the proposed order, your honor, takes several steps to ensure this goal that I think are appropriate. For example, your honor, the Internet order provides that, that the transfers that the transfers of receivables, constitute nonrecourse sales under applicable non bankruptcy law and are deemed through sales. Now these are part of the stipulations.

The order also provides for better releases to each of the factors and their affiliates. The interim order also provides the binding effect of the stipulation of the admissions and releases contained in paragraph two and three of the order and also provide for assurance for a challenge period. The order provides that, the interim order shall constitute and I'm reading specifically from the order. This interim order shall constitute findings of facts and conclusions of law shall take effect and be fully enforceable nil per ton to the petition date immediately upon entry thereof. These steps, Your Honor, conform with bankruptcy law and are, in my view, legitimate, concerns to us on a first day basis.

But, Your Honor, I don't think they can have it both ways. If this are if this is a true transaction and this court is entering an order with stipulations to that effect, then this is what we have. We have a true sale transaction of receivables. To say that it and also, it provides for a challenge for you, your honor. If someone can later if the effect of pursuing a challenge is that then they're gonna have a the factors are going to have a super priority, then this is not a meaningful challenge, your honor, because the factors will end up in a better position than before.

Now to the concerns that a foreign jurisdiction might not recognize this court's order, well, Johanna, if that is the case, it doesn't matter if it includes paragraph eight or not because they're not recognizing this court's order. So so I'm I'm not following how that provides an additional protection. I think the protection is is is embedded and it's clear in the order by characterizing this transaction as true sales, your honor. I think that's where they get the protection. They are continuing the same, they they want to continue post petition with the same pre petition practices, your honor, and that is okay.

They they they should be allowed to do that, your honor. But there's there's simply no justification for this super priority in paragraph eight, which, your honor, I think it also has the effect of nullifying any any possibility of anyone making a challenge. They provide a challenge period, but this will render that challenge period, ineffective, your honor. So I think that the way to fix it, it's just to take out paragraph eight and any reference to a superferiority claim. Mr.

Husnick?

Your Honor, may I respond to that briefly just because I do want to make sure that the order is clear. Again, for the record, Sean Scott, there is no intent to have the super priority claim cover pre petition purchases. That is the challenge period applies to that. The debtors have their stipulation, but we are not trying to cover that. What this is meant to cover is continuing the programs going forward.

I agree, if we were only in The U. S, I would be very comfortable telling my client, you have a court order, it is the law of the land, it says these are true sales, you can rely on that, you can be comfortable that you have that as a binding order. The concern again that we are trying to address is going forward tomorrow when we purchase when my client purchases receivables in Germany, there is a scenario under which next week someone commences an insolvency proceeding in Germany. There is a whole host of laws that none of us are expert on, Your Honor, more so probably than the rest of us. But Germany has a very different regime for insolvency proceedings.

And there is liability for engaging in transactions potentially with debtors in Germany that can result in transactions that you undertake being void or voidable determined to be in bad faith. I use The UK example. This is only meant to cover the scenario under which and I guess one option that we had thought about, can we have this subject to further notice? I view this as a little bit akin to lending in good faith during an interim period. My client does not want to take risk over the next, call it, ten days, fourteen days of and in this case, it's purchasing, but it is akin to granting or extending credit for this period of time if there is a risk that over that time, not only can that be voided or called back, but then we're fighting to say this order is binding on you.

I got it. I got it.

Yes, I understand.

Okay, sorry, Your Honor. I will see the podium. Mr. Houston?

Thank you, your honor. I think I'm a little confused because the this is a form of financing. And in most cases

I got it, mister Husnick. I'm just not granting releases on day one. And what I'm saying is folks can wait four or five days and they can get a hearing on this. And I'm like, if there's a scenario, I can come back in forty eight hours and give you one, and no one is, like, taking me up on any of these offers. But I can assure you, I can't grant releases on ten day note to to a deal in which someone is telling me is intended to cover a scenario that we don't that currently doesn't exist.

I'm willing to do it on short notice. I'm willing to do it. You have forty eight hours note hearing on it fast. Just pick the one that makes the most sense, and let's give people some notice. Come back in a few days, and I'm I'm gonna feel a lot better about it.

That's what I'm I'm just telling folks, and I I get it. If there's a real risk that somehow, there's a concern about some insolvency proceeding that's gonna start that I can't handle in twenty four hours, I don't see how that would exist. What I am saying is then we have a then we have a real problem, and it's it's gonna get a lot easier. Mister Richards

Your honor, I'm at

Go ahead.

Totally agree

with your honor that

so I'm confused about

Mister Houston, I I there was a point where you cut off a little bit. I I couldn't hear you.

Totally understand your honor on releases and get that point. What I'm confused about is Mr. Jimenez is objecting to this provision because of the super priority claim aspect. And I just want to tease this out because, frankly, if if I walk out away from your honor, and the reason I'm doing this on the record, is if I walk away from this hearing and the factors pull, which I have no ability to stop them from doing that because this is a financial combination, then I have a gigantic liquidity hole overnight. And so I want to tease it out on the record so that Mr.

Scott can go talk to the client and get them to say, yes.

Yes. I can tell you, I'm okay with it. I under this is a financing and this is a financing deal. And so I get the $3.64 component to it, and and I I get it. I get it.

This is gonna continue, and this is only covering post petition stuff. No one's granting releases on the pre stuff. This is just a post petition component, and and this is intended to cover. This is happening in multiple jurisdictions to the extent that there's an issue that this that there's comfort that there's gonna be coverage or still that they're still gonna get the benefit the economic benefit of the deal even if, you know, a court doesn't recognize my order. There's still something in this order where this court where I can enforce something and give them the economic benefit of the deal.

I get it. Right? I got it. I'm just saying let's just do it on a little bit of notice, which is what I am I am really focusing on. And I'm I'm telling you, I I'm I'm I get it.

I get it. Right? Because there are what you what mister Scott's clients don't want is to go out there and then kind of have an order where I'm not enforcing something and then another court isn't enforcing something either. There's gotta be something that where they can get the economic benefit of the deal, which is the factoring and providing the liquidity. I I I get it.

I really do. I just I feel a lot more comfortable if we didn't do it today, if we did it on short notice. I'd feel a lot more comfortable. But I understand the economics. I understand the deal.

I just know we're holding a first day hearing really fast, and I feel a lot more comfortable. I don't know what's today, Wednesday. If we did it Monday, I feel a lot better.

And

it's that that that's what I'm saying. Because people would know and there'd be a notice and people could wake up and see the docket and see what was going on and see that we thought about this a little bit and came back on Monday and and and got this all done. But maybe and I suspect it could be I don't know. Depending on who shows up, it could be a long hearing. It would be a really short hearing.

But I'm willing to give you one. Or hearing on twenty four and forty eight hours notice. You all tell me, I'm just giving you optionality because I don't know I'm giving you options because I don't know what folks are gonna with their clients, what they're gonna feel comfortable doing.

Thank you, Your Honor. Sean Scott again for the record. I think obviously we'll have to confer with our client and it's probably a discussion with the debtors as well in terms of can there be a pause on purchases at least in those jurisdictions during that time period. And I'm guessing Mr. Hughes Inc is going to tell me no.

I just I know that's the difficult question that we're going to face I will face for my client tomorrow is we this was carefully constructed and crafted. This is meant to be you hear the terminology of corner case, but this was also a big part of the protection. The initial response is bankruptcy, particularly U. S. Bankruptcy, we should shut down the program for lack of better term, right?

We shouldn't continue to purchase. They're not a client that has done this type of structure before in The U. S. I would say this is very novel. And again, I credit the team here, Kirkland, Gibson, Dunn, everyone has worked incredibly hard to make this happen just given the various jurisdictions

No, I just thought of something else, Mrs. Scott. And I think I feel more comfortable doing this because I really I think a lot of this is academic, but I got it. It's going to give your clients some comfort. Let me run something by you.

Sure. Yep.

Well, I'm just thinking out this out loud. No. It's not gonna no. I was thinking about something. I'm not gonna it's not gonna work.

I I let's go back to this one. Let me why don't why don't we all think about this for for the next couple of days? Because essentially, what we're talking about is an academic exercise, and we're not really I was gonna between now and Monday, so the tense of someone starting a proceeding where there's enforceability is just really odd to me, as a risk. But if you want releases, I think that's also real.

No, the releases are not an issue, Your Honor. I think that is subject to the challenge period. I'm happy to

But who's there to in other words, who's there to challenge is the real question, right?

But I think that's isn't that true with the dip lender? I mean, essentially, I guess the way I look at this, Your Honor, is everyone else rides through the 1Ls and the 2Ls are the ones that are essentially agreeing that they are equitizing, they're taking some impairment. I think because they recognize, as I said, this is a far cry from some other cases in front of Your Honor. These are arrangements that I think people understand debtors have acted properly. These are well documented.

This is a continuation of a program that is of immense value to all parties here, including the trades that we'll run through unimpaired, the 1Ls and the 2Ls. So we've worked very hard to get to a construct that works for everyone. On the releases, I mean, again, someone can challenge them. We're not seeking that. I'm not worried about the releases.

My big concern as I come back to is, is there a scenario under which again, another jurisdiction outside The U. S, someone says the sales were voidable because and I come back to the two, these are what my clients have raised, U. K. And Germany, it could be raised by local law creditors. Yes, they shouldn't do that, right?

Trade is riding through unimpaired. There's no reason they should commence those proceedings. But on the flip side, I need to be able to tell them, you're not taking incremental risk by purchasing when they from their again, I would call it perhaps the Eurocentric viewpoint, view this as we are taking those risks. We shouldn't be doing business with an insolvent entity. It's kind of the framework.

Let me throw one out there to you and see. I think I can get comfortable around this too. What if hold on. What if you got interim approval today subject to a further hearing on the entire like, we we we in other words, you get protection for the next seven days on this scenario, which I don't think is, like, what happened. And in seven days, you you you kinda get a further interim that'll take you to the final.

So at least you know you're covered for this period, and then we show up in another seven days, and then we we we everybody's right to preserve it. But but, yeah, at least you would know if something was gonna happen over the next few days, you're covered. But then we could

That's in your But

but it's limited through that period. But I in other words, whatever's gonna whatever y'all were gonna do in the ordinary course, you can continue to do. Everybody's covered. We show up on the twelfth maybe at, I don't know, 11AM, on the twelfth. I've gotta fly out.

I've gotta be somewhere on the oh, I gotta be in DC on the thirteenth. I have to fly so I'm what if we did that? So you're covered during that one week period. Right? And just whatever was there, and then it's just another hearing, I feel more comfortable that we had a further hearing, and then it's good.

It's almost like a kind of a an interim to another interim, and that will take us to the final. And then if if if but I'd feel a lot more comfortable if we did that.

Your Honor, I certainly think that would be acceptable of my clients. Obviously, I'd have to talk to them. But again, you are solving for the concern that we have is just that GAAP period risk. And so I agree this is I think we're all talking most likely as lawyers do about theoretical risk. But I also with a client that is mining 200 well, purchasing €280,000,000 of euros receivable, they need to

know that there's not risk there.

Why don't we do that? I feel more comfortable doing that. Let's just kind of a kind of an interim to another interim to another interim, and and and apologies to mister Gremlin. I told him that I shut him down and, but he was on it, man. He he was persistent.

I gotta give him he was on his game. I, did a fantastic job, Gremlin. I, so, thank you. No. I'm just thinking out loud.

I I I get the concern. I get the concern, but I think that way, we don't have to kinda come back on Monday. You you've got the protection that you would need, and it's probably an academic protection. But but we'll then come back, and we'll have a little bit more notice, and everybody can get more comfortable. Mister Richards, I don't know if I've unmuted your line, and maybe you can hit five star.

Mr. Richards?

Bob Richards for Facto France. We're in the same boat as Coalface. In fact, we're a joint lender on one of the facilities. I was going to suggest the solution your honor came up with and I think my clients in France, so I need to reach them in the market.

You are not taking credit, Mr. Richards. I'm not giving it.

Okay. No. Understood. But I I I think that's a much better approach that'll get my client more comfortable.

Okay. No. Let's do that. Someone drafted up. I don't I don't wanna mess with the words, and then let miss Aldania know, and then we'll we'll get it there.

Let's turn to wage.

Your Honor, if I may, just to be sure we get the drafting correct, we are drafting the order as proposed on a solely interim basis with the next hearing

Yes. Which will

be Interim hearing to the final date that we set previously.

Yeah. Yeah. That that's the way it would that's the way it would work. And then, mister Luis, it it'll be a virtual no one needs to come in for that. Just another a virtual hearing.

We'll log in, we'll we'll meet, and then we'll we'll go from there.

Understood, your honor. We appreciate that, and we will work to get a revised file

Okay.

Shortly.

Thank you. Okay. Sukuna, good afternoon or good evening or good something, wherever we are.

Good good. Right in between, I think. Can you hear me okay?

Yes. Just fine. Good afternoon.

Great. Good afternoon, Your Honor. Olivia Acuna Kirklandinella, Proposed Counsel to the Debtors. Up next is the Debtors' Wages Motion filed at Docket Number eight, Agenda Item Number nine. Pursuant to this motion, the debtors that are seeking to pay and honor pre petition wages, salaries, benefits and other compensation, including certain non insider severance payments to employees across the world, and they're seeking to continue their compensation and benefits program in the ordinary course on a position basis.

As I know, your honor appreciates the company's approximately 3,000 employees are the lifeblood of this company, and many of these employees would experience this significant hardship if their compensation and benefits were not paid. This proposed form of order does incorporate comments from the U. S. Trustee and the debt lenders, and we do not believe there are any outstanding issues. So unless your honor has any additional questions, we request entry the proposed order filed at docket number eight.

Yes. Anyone wish to be heard here? Is anyone over the cap counsel?

I'm sorry.

Is anyone over the

Say that

one more time?

Is anyone over the cap, the priority cap?

So under the, non insider severance program, there are nine payments contemplated. There is one that would potentially be over the cap. And I will add that in paragraph three of the proposed order, we did negotiate language with the DIP lenders and the United States Trustee's Office. So we contemplate if there are going to be payments made over the past that we provide the notice Those with the court and then provide 14 notice with the need of the employee being paid, the amount and the proposed date of payment.

Okay. So you're gonna provide an okay. Good. So so the US trustee gets notice, any committee gets appointed, and the court gets notice as well. Okay.

I'm comfortable with it. Yep. I am thank you. I will again, I'm gonna note that there's been proper notice and service, relief requested as appropriate under the bankruptcy code. I do know that, this is gonna take care of employees and make sure that it's a sensitive issue for us around here.

And so I appreciate those, making sure people get paid. It's really important and incredibly important people can maintain their health benefits and have some assurance about that. So I'll grant the motion.

Thank you, Your Honor. Up next is the debtors all trade motion filed at Docket Number nine, Agenda Item Number 10. So pursuant to this motion, the debtors are seeking to continue paying all trade claims in the ordinary course of business, confirming the administrative expense priority of outstanding orders and authorizing the debtors to satisfy the outstanding orders. So due to the consensual nature of this case and the substantial international footprint of the debtor's operation, All trade claims will be unimpaired, which is consistent with the RSA and the plan. And the relief we're seeking allows for uninterrupted operations of the debtors business, both domestically and abroad.

The proposed form of order does incorporate comments from the United States Trustee's Office and debt lenders, and we don't believe that there are any outstanding issues. So unless anyone else has questions or your honor has any additional questions, we respectfully request entry of the proposed form of order on docket number nine. Okay.

For the court to consider, the, what I would call, the all trade motion. And again, this is going to take care of creditors in the ordinary course of business. It's sound exercise of the debtor's business judgment. It has approval of its DIP lender. I'm going to grant the relief requested.

I'm going to, again, just change the objection deadline to twelve noon on November 26, but I will set the final hearing day for December 3 at 1PM. And I'll sign that order and it will get hit the docket shortly.

Great. Thank you, Your Honor. And I will cede the podium to Mr. Black to take us through the rest of the agenda.

Thank you, Mr. Black. Can you hit five star, Mr. Black?

For the balance of the motion, I believe that we have resolved any outstanding issues or questions with the U. S. Trustee Trustee and that there are no more objections on the docket. So with your permission, I'll try to go through them a little bit quickly. Let's find out.

All right. I wanted to start with the utilities motion that we filed asking if we could continue receiving utility services related relief. We did discuss with the U. S. Trustee Incorporated comments.

We have received no other objections. Unless your Honor has any questions about the utilities motion, we would request you enter the order as filed.

No. And I got a chance to review the utilities motion, and it provides for adequate assurance within the meaning of the code. Also allows parties if they wish to believe utilities if they believe that they're entitled to additional adequate assurance, their procedures there. They're not locked in. They could negotiate or they could ask for more from the court.

And so there's a procedure here just to make sure, especially in a business like this, that the lights stay on, which is incredibly important. So I'll grant the motion.

Thank you, Your Honor. The next motion is the insurance motion at Docket Number 11. And this motion asks for release allowing us to maintain insurance and related programs. Insurance is important for the debtors. It's required by the code.

And unless there's any objections, we'd ask you to enter this.

Alright. Does anyone wish to be heard in connection with the insurance motion? Certainly, insurance is incredibly important. Required by The U. S.

Trusting guidelines as well to maintain adequate insurance. So I'll grant the motion.

Thank you, Your Honor. The debtors maintain two types of customer programs. And at Docket Number 12, we filed a motion requesting release to continue these programs. We have warranty programs and rebate programs that we offer. We don't believe that there are any cash dollar amounts outstanding, but if they come due, we want to honor them.

And so the motion request relief that allows us to do that going forward. This is necessary to help us retain and attract customers and we have discussed with the US S. Trustee and unless they're and we have seen no objections on the docket. So unless Your Honor has any questions, we request the order be entered as filed.

Okay. Anyone wish to be heard with respect to the customer programs motion. Is this so you're just going to maintain the programs just to kind of keep the business going, keep goodwill. You're going to take care of trade creditors already, and you're going to keep customer programs going so that the customers stay happy. And the lenders are okay with that and consistent with the overall package of relief requested.

So I will had a chance to review this. It's all publicly noted. It's going to benefit the estate. The debtors are exercising their business judgment here. I will grant the relief requested.

Thank you, Yaron. Moving to Docket Number 13, the taxes motion request relief allowing us to pay taxes and other related relief. This is a motion that we need. We need to pay taxes even in bankruptcy. And we talked with the U.

S. Trustee. We've seen no other objections on the docket. And unless there are questions that your honor has that I can answer after you enter the order of file. No.

You've got to

pay your taxes. Especially in this case, it's going to be incredibly important that you take care of all tax outstanding tax liabilities, which could be in multiple jurisdictions and the ability just to have the ability to pay it and to take every care of that. There could be liability issues that arise. And I've actually seen a case in which the government has come back and asserted claims against someone, because the tax returns were not timely filed and, on payroll taxes. And so these are real issues, and they affect people individually.

So, in dealing with foreign jurisdictions as well, there could be similar liability. So I'm going to take I'll sign the order and authorize the payment of taxes, and I would note that it's consistent with the overall package of satisfying these types of claims as well in connection with the prepack. So I'll grant the

The next motion is the we call it the NOL motion filed at Docket Number 14. It allows the debtors to have the opportunity to preserve tax attributes. We have about $200,000,000 worth of 163 carry forward and we'd like to preserve those and other NOLs and other positive tax attributes. We did share this with the U. S.

Trustee and we don't believe that there are any outstanding comments or questions on this. And unless your honor has any questions, we'd request the order be granted as filed.

I took a look at this. Obviously, you want to preserve NOLs in connection with especially a case like this. It's going to be incredibly important. This is really just providing notice to parties and providing procedures for them to kind of understand and to make sure that valuable tax attributes are preserved throughout the Chapter 11 cases. It's customary to approve this type of relief on a first day basis because they're really important, especially in a case like this.

So I'll sign the order and allow Strato to get to work and notifying folks about their rights.

Thank you, Jana. The next motion is Docket Number 15, the creditor matrix. It is a procedural motion that allows us to file a consolidated credit report and some other related relief. We think it's important. It's going to reduce the deburring in the case to be able to administrator and send notice on one consolidated creditor matrix.

And unless your honor has any other questions, we don't believe there are outstanding objections or questions or comments from the U. S. Trustee on this.

Anyone wish to be heard in connection with the creditor matrix motion? Okay. The motion is granted.

The last motion, Your Honor, is that Docket Number 17. You heard a little bit about the foreign complexities of the case. The automatic stay order is requesting basically that we can send notice of the bankruptcy code protections and provisions for the benefit of our foreign vendor base customers, others who do not understand the bankruptcy code and what it means for us to be in chapter. We believe it's necessary especially given multinational business. So and once your honor has any questions, we request you to ensure as

we enter the border

as well.

I think it's important and I understand why you're doing this. And the trick is you've actually cited the code, which is what's really important here, and you're not trying to extend interpretations of the code, but more just informing people about what the code says. So it's I'm comfortable with this type of relief, and I understand that it's important. So I'll grant the relief requested.

Thank you, gentlemen. I think that brings us to the conclusion of our arrangement today.

Okay. Anything else we need to take care of today? You've got dates. Mister Husnick, you'll upload some orders and then get them to my folks, and we'll we'll get them on file. I've you just give me one second.

Yeah. If if it's not just to give everyone kind of a heads up, I know that you're gonna get me a revised of that order. If if you can get it tonight, and I can probably enter it tonight or first thing in the morning. But at at 9AM, I've got a hearing that's probably gonna be a while, and so I probably couldn't get to it till, like, lunch hour. So I just if you can get it tonight, I'll do it first thing in the morning.

If not, it might be noon hour. If not, you're on your own, whenever that hearing ends. So I will, just wanted to give you a heads up about that. So just from the timing, so if my case manager, you kind of know what it is. But if you can get it, I can yes, I guess you're just adding just kind of this further hearing concept in the order.

So maybe if you can get it to me tonight, I can I'll sign. I promise you before either tonight or first thing in the morning, before I step out on the bench on on the other one, and then we'll we'll see where things go. I really appreciate everyone's time. I really wanna thank Mr. Jimenez and court staff as well for all their efforts here.

And I thank everyone who participated today. Thank you very much. Have a good day.

Thank you, Your Honor. Thank you, Your Honor.