UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE ---x : In re : Chapter 11 :
PARAGON OFFSHORE PLC, et al., : Case No. 16–10386 (CSS)
:
: Jointly Administered
Debtors.1 :
---x
DECLARATION OF THOMAS B. OSMUN IN SUPPORT OF
CONFIRMATION OF DEBTORS’ SECOND AMENDED JOINT CHAPTER 11 PLAN OF PARAGON OFFSHORE PLC AND ITS AFFILIATED DEBTORS
I, Thomas B. Osmun, under penalty of perjury, declare as follows:
1. I am a Managing Director at AlixPartners, LLP (“AlixPartners”), which
maintains an office at 909 Third Avenue New York, NY 10022. I have worked as a restructuring and financial consultant for over 20 years serving various industries including the energy
industry working on the Calpine and VeraSun Energy restructurings. I am currently serving as Chief Restructuring Officer at Ryckman Creek Resources LLC, a natural gas storage facility company that filed bankruptcy in Delaware on February 2, 2016. I have substantial knowledge and experience advising large companies and assisting troubled companies with stabilizing their
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The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, as applicable, are: Paragon Offshore plc (6017); Paragon Offshore Finance Company (6632); Paragon International Finance Company (8126); Paragon Offshore Holdings US Inc. (1960); Paragon Offshore Drilling LLC (4541); Paragon FDR Holdings Ltd. (4731); Paragon Duchess Ltd.; Paragon Offshore (Luxembourg) S.à r.l. (5897); PGN Offshore Drilling (Malaysia) Sdn. Bhd. (9238); Paragon Offshore (Labuan) Pte. Ltd. (3505); Paragon Holding SCS 2 Ltd. (4108); Paragon Asset Company Ltd. (2832); Paragon Holding SCS 1 Ltd. (4004); Paragon Offshore Leasing (Luxembourg) S.à r.l. (5936); Paragon Drilling Services 7 LLC (7882); Paragon Offshore Leasing (Switzerland) GmbH (0669); Paragon Offshore do Brasil Ltda.; Paragon Asset (ME) Ltd. (8362); Paragon Asset (UK) Ltd.; Paragon Offshore International Ltd. (6103); Paragon Offshore (North Sea) Ltd.; Paragon (Middle East) Limited (0667); Paragon Holding NCS 2 S.à r.l. (5447); Paragon Leonard Jones LLC (8826); Paragon Offshore (Nederland) B.V.; and Paragon Offshore Contracting GmbH (2832). The Debtors’ mailing address is 3151 Briarpark Drive, Suite 700, Houston, Texas 77042.
financial condition, analyzing their options, and developing appropriate business plans to accomplish restructuring initiatives.
2. On April 4, 2016, AlixPartners was approved as restructuring advisor to Paragon Offshore plc and its affiliated debtors and debtors in possession (collectively, “Paragon” or the “Debtors”) in the above-captioned cases (the “Chapter 11 Cases”), nunc pro tunc to February 14, 2016 (the “Petition Date”).
3. I submit this declaration (the “Declaration”) in support of confirmation of the
Second Amended Joint Chapter 11 Plan of Paragon Offshore plc and its Affiliated Debtors
(Docket No. 318) (as amended, supplemented, restated, or modified from time to time, the “Plan”).2 Except as otherwise indicated, all facts set forth in this Declaration are based on my personal knowledge, my discussions with other members of the Debtors’ management and the Debtors’ advisors, my review of relevant documents, or my opinion based on my experience, knowledge, and information concerning the Debtors’ operations and financial condition. If called to testify, I would testify competently to the facts set forth in this Declaration. I am authorized to submit this Declaration on behalf of the Debtors.
4. AlixPartners and I have been working with the Debtors since January 2016. I have developed a deep understanding of Paragon’s business and operations, and the dynamics of these Chapter 11 Cases. I have been consistently involved in, or am familiar with, the Debtors’ restructuring and the development of the Plan. In addition, I have reviewed, and am familiar with, the terms and conditions of the Plan, as well as the Disclosure Statement and the plan supplement documents filed in connection with the Plan (Docket No. 399) (as may be amended,
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Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Plan or the Disclosure Statement for Second Amended Joint Chapter 11 Plan of Paragon Offshore plc and its Affiliated Debtors (Docket No. 319) (as amended, supplemented, restated, or modified from time to time, the “Disclosure
supplemented, restated or modified from time to time, the “Plan Supplement”). Together with the Debtors’ counsel, I have reviewed the requirements for confirmation of the Plan under section 1129 of the Bankruptcy Code.
I. BACKGROUND
5. On the Petition Date, each of the Debtors commenced with this Court a voluntary case under chapter 11 of the Bankruptcy Code. The Debtors’ Chapter 11 Cases have been consolidated for procedural purposes only and are being jointly administered pursuant to Bankruptcy Rule 1015(b) and Local Rule 1015-1. The Debtors continue to operate their business and manage their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. No trustee, examiner, or statutory committee of creditors has been appointed in these Chapter 11 Cases.
6. On April 19, 2016, the Debtors filed the Plan and the Disclosure Statement. Pursuant to the Plan, only holders of Claims in Class 3 (Revolving Credit Agreement Claims) and Class 5 (Senior Notes Claims) (together, the “Voting Classes”) were entitled to vote on the Plan. Holders of Claims in Class 1 (Priority Non-Tax Claims), Class 2 (Other Secured Claims), Class 4 (Secured Term Loan Claims), Class 6 (General Unsecured Claims), Class 7
(Intercompany Claims), Class 8 (Parent Interests), and Class 9 (Intercompany Interests) are unimpaired and, accordingly, are conclusively presumed to accept the Plan and are not entitled to vote on account of such Claims and Interests.
7. On April 11, 2016, the Court entered an order approving the Disclosure Statement.3 Pursuant to the Disclosure Statement Order, solicitation commenced on
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See Order (I) Approving Proposed Disclosure Statement and Form and Manner of Notice of Disclosure Statement Hearing, (II) Establishing Solicitation and Voting Procedures, (III) Scheduling Confirmation Hearing and (IV)
April 22, 2016. As set forth in the Affidavit of Service (Docket No. 331), Supplemental Affidavit
of Service (Docket No. 381), and Supplemental Affidavit of Service (Docket No. 422) filed by
Kurtzman Carson Consultants LLC (“KCC”) on April 26, 2016, May 10, 2016, and June 1, 2016, respectively, (collectively, the “KCC Affidavits”), KCC caused: (i) a ballot; (ii) a CD-ROM containing copies of the Plan, Disclosure Statement, and Disclosure Statement Order (without exhibits); (iii) the Confirmation Hearing Notice (as defined in the Affidavit of Service (Docket No. 331)); and (iv) the Disclosure Statement Order to be distributed to all holders of Claims in the Voting Classes.
8. The Disclosure Statement Order established Tuesday, May 31, 2016, as the deadline for holders of Claims in the Voting Classes to cast their votes to accept or reject the Plan (the “Voting Deadline”).
9. On June 7, 2016, KCC filed the Certification of James Lee with Respect to the
Tabulation of Votes on Second Amended Joint Chapter 11 Plan of Paragon Offshore plc and its Affiliated Debtors (Docket No. 433) (the “Voting Certification”) containing a tabulation of all
Ballots received. The Voting Certification demonstrates the acceptance of the Plan by the Voting Classes. Nearly 100% of the creditors in each of the Voting Classes voted to accept the Plan.
II. THE PLAN SATISFIES EACH REQUIREMENT FOR CONFIRMATION
10. Based on my knowledge and advice from the other members of the Debtors’ management team and the Debtors’ professional advisors, I believe that the Plan complies with all applicable provisions of the Bankruptcy Code.
502, 1125, 1126, and 1128 of the Bankruptcy Code and Bankruptcy Rules 2002, 3003, 3017, 3018, 3020, and 9006 and Local Rules 2002-1, 3017-1, and 9006-1 (Docket No. 248) (the “Disclosure Statement Order”).
A. The Plan Satisfies the Requirements of Bankruptcy Code Section 1129(a)(1)
11. I understand that section 1129(a)(1) of the Bankruptcy Code requires the Plan to comply with the applicable provisions of the Bankruptcy Code. As detailed below, I have been advised by the Debtors’ advisors that the Plan satisfies this requirement.
1. The Plan Satisfies the Classification Requirements of Sections 1122 and 1123(a)(1) of the Bankruptcy Code
12. Article III of the Plan provides for the separate classification of all Claims and Interests into the following Classes, other than Administrative Expense Claims, Fee Claims and Priority Tax Claims, which I understand need not be classified under section 1123(a)(1) of the Bankruptcy Code. The Plan classifies Claims and Interests as follows:
Class Type of Claim or Interest Impairment Entitled to Vote
Class 1 Priority Non-Tax Claims Unimpaired No (Deemed to accept)
Class 2 Other Secured Claims Unimpaired No (Deemed to accept)
Class 3 Revolving Credit Agreement Claims Impaired Yes
Class 4 Secured Term Loan Claims Unimpaired No (Deemed to accept)
Class 5 Senior Notes Claims Impaired Yes
Class 6 General Unsecured Claims Unimpaired No (Deemed to accept)
Class 7 Intercompany Claims Unimpaired No (Deemed to accept)
Class 8 Parent Interests Unimpaired No (Deemed to accept)
Class 9 Intercompany Interests Unimpaired No (Deemed to accept)
13. Each of the above nine Classes of Claims and Interests differs from the Claims and Interests in each other Class in a legal or factual way, or based on other applicable criteria. Dissimilar Claims and Interests are not classified together under the Plan. Specifically, the Plan separately classifies Claims (rights to payment) from Interests (representing ownership in the
business). The Plan also classifies secured Claims separately from unsecured Claims because the Debtors’ obligations with respect to the former are secured by collateral.
14. Therefore, based on the advice and guidance provided to me by the Debtors’ professionals, I believe the Plan’s classification scheme satisfies sections 1122 and 1123(a)(1) of the Bankruptcy Code.
2. The Plan Specifies Unimpaired and Impaired Classes and Provides the Same Treatment for Each Holder in a Particular Class as Required by Sections 1123(a)(2)-(4) of the Bankruptcy Code
15. Article IV of the Plan specifies each unimpaired Class (Classes 1, 2, 4, 6, 7, 8, and 9) and each impaired Class (Classes 3 and 5), as well as the treatment of all Claims and Interests that are unimpaired or impaired. The Plan also provides the same treatment for each Claim and Interest within a specific Class, unless the holder of a particular Claim or Interest has agreed to less favorable treatment.
16. I understand that the Term Loan Agent, on behalf of the Term Loan Lenders has objected to the reinstatement of the Secured Term Loan Claims under the Plan and to their classification as unimpaired.4 Contemporaneously herewith, the Debtors have filed the
Memorandum of Law in Support of Confirmation of Debtors’ Second Amended Joint Chapter 11 Plan and Response to Certain Objections (the “Confirmation Brief”), which fully addresses the
Term Loan Agent’s reinstatement objection.
17. It is my understanding that the Debtors will pay to the Term Loan Agent all default interest due under the Secured Term Loan Agreement accrued during the pendency of these Chapter 11 Cases, as required, on the Effective Date, or as soon as practicable thereafter. It is my understanding that on the Effective Date, or as soon as practicable thereafter, the Debtors
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Objection of the Secured Term Loan Agent, on Behalf of the Secured Term Loan Lenders, to Confirmation of the Second Amended Joint Chapter 11 Plan of Paragon Offshore plc and its Affiliated Debtors (Docket No. 438).
will make the following payments to the Term Loan Agent to cure any monetary defaults under the Secured Term Loan Agreement prior to reinstating the Secured Term Loan Claims: (i) first and second quarter amortization payments in the approximate amount of $1,625,000, respectively, for a total of approximately $3,250,000; (ii) an excess cash flow sweep payment in the approximate amount of $16,915,500; (iii) all reasonable out-of-pocket expenses incurred or paid by the Term Loan Agent or Term Loan Lenders, including reasonable attorneys’ fees and court costs, in connection with any Default or Event of Default (as such terms are defined in the Secured Term Loan Agreement) or in connection with the enforcement of any of the Credit Documents (as defined in the Secured Term Loan Agreement); and (iv) any unpaid default interest accrued through the Effective Date.
18. For the reasons set forth in the Confirmation Brief, I have been advised by the Debtors’ advisors that the reinstatement of the Secured Term Loan Claims complies with section 1124 of the Bankruptcy Code and the Plan properly classifies the Secured Term Loan Claims as unimpaired.
19. For all of the foregoing reasons, I believe that the Plan satisfies sections 1123(a)(2)-(4) of the Bankruptcy Code.
3. The Plan Provides for Adequate Means of Implementation as Required by Section 1123(a)(5) of the Bankruptcy Code
20. I believe that the provisions of the Plan provide adequate means for the Plan’s implementation. Specifically, Article V of the Plan provides for, among other things, (i) the Debtors’ continued corporate existence (Section 5.1); (ii) an Amended and Restated Credit Agreement and the issuance and distribution of the Parent Ordinary Shares (Section 5.2); (iii) cancellation of the 6.75% Notes, the 7.25% Notes, and the Senior Notes Indenture on the Effective Date except for the purpose of evidencing a right to a Plan Distribution and permitting
the Senior Notes Indenture Trustee to take certain actions (Section 5.3); (iv) the release of certain liens (Section 5.4); (v) the continued service of the members of the existing board of directors of each Debtor and the appointment of any new members as required (Section 5.5); and (vi) the consummation of the Noble Settlement Agreement (Section 5.10). Accordingly, I believe the Plan provides for adequate means of implementation as is required by section 1123(a)(5) of the Bankruptcy Code.
4. Paragon’s Amended Certificates of Incorporation Prohibit the Issuance of Non-Voting Securities as Required by Section 1123(a)(6) of the Bankruptcy Code
21. As fully set forth in Exhibit A to the Plan Supplement, where not already prohibited by applicable law or by their existing organizational documents, the Debtors, with the exception of Paragon Parent, will amend on or prior to the Effective Date the organizational documents of each of the Debtors to include a provision conforming to the requirements of section 1123(a)(6) of the Bankruptcy Code. Exhibit A to the Plan Supplement attaches forms of the amended organizational documents of the applicable Debtors.
22. Further, Paragon Parent shall seek amendment of its Articles of Association to include a prohibition on the issuance of non-voting equity, subject to approval by Paragon Parent’s shareholders as required under U.K. law. Prior to such amendment becoming effective, the Debtors are seeking approval of a provision in their Confirmation Order enjoining and prohibiting Paragon Parent and its officers and directors from issuing non-voting equity of Paragon Parent until such time as the Articles of Association are further amended.
23. Accordingly, I believe that the Plan satisfies section 1123(a)(6) of the Bankruptcy Code.
5. The Plan Provides for the Selection of Directors and Officers as Required by Section 1123(a)(7) of the Bankruptcy Code
24. The identities of the initial officers and directors of the Reorganized Debtors are disclosed in Exhibit B to the Plan Supplement. I believe that the appointment or continuance in office of these directors and officers is consistent with the interests of creditors, equity security holders, and public policy. Accordingly, I believe that the Plan satisfies section 1123(a)(7) of the Bankruptcy Code.
6. The Plan Complies with the Discretionary Provisions of Section 1123(b) of the Bankruptcy Code
25. I understand that the Plan employs various provisions in accordance with the discretionary authority provided to the Debtors by section 1123(b) of the Bankruptcy Code. For example, the Plan leaves certain Classes of Claims and Interests unimpaired, while others are impaired (Article IV). I understand that the Plan also proposes appropriate treatment for executory contracts and unexpired leases pursuant to section 365 of the Bankruptcy Code (Sections 8.1 and 8.2).
26. The Plan also incorporates the Noble Settlement Agreement. Prior to the Petition Date, Paragon Parent negotiated the Noble Settlement Agreement by which it will release Noble with respect to certain claims, in exchange for Noble’s agreement to provide direct bonding necessary for Paragon Parent to challenge certain Mexican tax assessments. The terms of such agreement are set forth in the Noble Term Sheet, attached to the Plan as Exhibit B. For the reasons set forth in the Confirmation Brief, I have been advised by counsel that the Noble Settlement Agreement satisfies the Third Circuit’s requirements for approval of a settlement.
27. The Plan contains certain discharge, release, exculpation, and injunction
11 Cases. For the reasons set forth below, I have been advised that these discharge, release, exculpation, and injunction provisions satisfy the applicable Third Circuit standard.
a. Debtor Releases
28. Section 10.6(a) of the Plan provides for releases by the Debtors (the “Debtor
Releases”), as of the Effective Date, of certain claims, rights, and causes of actions that the
Debtors may have against each of the Released Parties, including, among others, the Plan
Support Parties. These releases are overwhelmingly supported by the creditors who voted on the Plan, with nearly all of the creditors in the Voting Classes (in claim amount and in number) voting to accept the Plan. No party has objected to the Debtor Releases in the Plan.
29. The Debtors have proposed the Debtor Releases based on their business
judgment, and I am advised that such releases satisfy the standard—to the extent applicable—for court-approved releases. The Debtors propose to release those parties, including the Plan
Support Parties, that have participated in good faith negotiations that led to the comprehensive restructuring contemplated by the Plan. It is my belief that without the support of the Released Parties, the Debtors would not have been able to formulate the restructuring contemplated by the Plan, which preserves the Debtors’ going concern value and maximizes recoveries to creditors and interest holders.
30. Further, as a result of the various concessions provided by the Plan Support Parties, the Plan provides for meaningful recoveries to the holders of Secured Term Loan Claims, General Unsecured Claims, and Parent Interests. These concessions also enabled the Debtors to propose the Plan under which all Classes are either unimpaired or have voted to accept the Plan.
31. For the reasons set forth herein, and based upon advice that I have received from the Debtors’ professionals, I believe that the Debtor Releases are appropriate.
b. Third-Party Releases
32. Section 10.6(b) of the Plan provides for the release of certain claims, rights, and causes of actions that certain parties may have against the Released Parties (the “Third-Party
Releases”). I believe that the Third-Party Releases are fair to holders of Claims and Interests
and are necessary to the proposed restructuring, for all the reasons the Debtor Releases are appropriate, as discussed above.
33. In addition, the Third-Party Releases are consensual, as they are only being provided by: (i) the holders of Claims and Interests who voted to accept the Plan; (ii) the holders of Claims or Interests whose vote to accept or reject the Plan was solicited but who did not vote either to accept or to reject the Plan; (iii) the holders of Revolving Credit Agreement Claims and Senior Notes Claims who voted to reject the Plan but did not opt out of granting the releases set forth in the Plan; (iv) the Revolving Credit Facility Agent and (v) the Senior Notes Indenture Trustee. Each ballot transmitted to holders of Revolving Credit Agreement Claims and Senior Notes Claims specifically included the release provisions set forth in Section 10.6 of the Plan, and provided each such holder with the ability to opt out of the Party Releases. The Third-Party Releases are not being provided by the holders of Claims or Interests that are unimpaired under the Plan. No party has objected to the Third-Party Releases in the Plan.
c. Exculpation
34. I believe the exculpation provision described in Section 10.7 of the Plan (the “Exculpation”) is appropriate under applicable law and should be approved by the Court because it was proposed in good faith, was formulated following extensive arm’s length
negotiations with key stakeholders, and is appropriately limited in scope, as it will have no effect on the liability of any act or omission that is a result of willful misconduct or gross negligence.
35. I believe that the Exculpation is necessary and appropriate to protect parties who have made substantial contributions to the Debtors’ reorganization from future collateral attacks related to actions taken in good faith in connection with the Debtors’ restructuring. Moreover, the Exculpation is supported by the Voting Classes, which have voted to accept the Plan (including the Exculpation). No party has objected to the Exculpation in the Plan.
d. Injunction
36. Finally, I understand that the injunction provision set forth in Section 10.8 of the Plan is necessary to enforce the discharge under the Plan, the Debtor Releases, the Third-Party Releases, and the Exculpation.
B. The Plan Satisfies the Requirements of Section 1129(a)(2) of the Bankruptcy Code
37. I understand that section 1129(a)(2) of the Bankruptcy Code requires the Plan’s proponents to comply with the applicable provisions of the Bankruptcy Code, including the disclosure and solicitation requirements of sections 1125 and 1126 of the Bankruptcy Code. Based on my understanding of those provisions, and advice I have received from the Debtors’ advisors, I believe the Debtors have complied with those requirements. Specifically, Plan solicitation occurred only after all creditors entitled to vote thereon were provided with a copy of the Plan and court-approved Disclosure Statement. See KCC Affidavits (Docket Nos. 331, 381, 422). In addition, I believe that the Debtors and their professionals have acted in good faith in all respects in connection with the solicitation of votes on the Plan and the tabulation of such votes.
C. The Plan Satisfies the Requirements of Section 1129(a)(3) of the Bankruptcy Code
38. I understand that section 1129(a)(3) of the Bankruptcy Code requires the Debtors to have proposed the Plan in good faith and not by any means forbidden by law.
39. I believe that the Debtors proposed the Plan in good faith and the Plan: (i) fosters a result consistent with the objectives of the Bankruptcy Code; (ii) has been proposed with honesty and good intentions and with a basis for expecting that reorganization can be effected; and (iii) exhibits a fundamental fairness in dealing with the creditors. Moreover, the Plan (including all related documents necessary to effectuate the Plan) was negotiated at arm’s length among the Debtors and the Plan Support Parties (and each of their respective professionals). It is my belief that both leading up to, and during the pendency of, the Chapter 11 Cases, the Debtors’ officers and directors have upheld their fiduciary duties to their stakeholders and protected the interests of all constituents, and I am not aware of any law that would prohibit the Debtors from proposing the Plan.
40. Finally, I believe that the Debtors’ good faith is confirmed by the support for the Plan among the Voting Classes, each of which overwhelmingly voted to accept the Plan. All other Classes were unimpaired under the Plan. Accordingly, for the reasons set forth herein and in the Confirmation Brief, I believe that the Debtors proposed the Plan in good faith and that the Plan will achieve a result consistent with what I understand to be the objectives and purposes of the Bankruptcy Code.
D. The Plan Satisfies the Requirements of Section 1129(a)(4) of the Bankruptcy Code
41. I understand that section 1129(a)(4) of the Bankruptcy Code prohibits the Debtors from paying professional fees that have not been approved by, or are subject to the approval of, the Court as reasonable.
42. Section 2.2 of the Plan provides that all professionals shall file their respective final applications for allowance of compensation for services rendered and reimbursement of expenses incurred on or before the date that is sixty (60) days after the Confirmation Date. I
understand that the Court’s approval of the fee applications is subject to such professional fees complying with the applicable provisions of the Bankruptcy Code, including the reasonableness requirements of section 328 of the Bankruptcy Code.
43. Section 5.11 of the Plan provides that, on the Effective Date, the Debtors or Reorganized Debtors will pay the Restructuring Expenses, including the reasonable and documented fees and expenses incurred by the Plan Support Parties in connection with the Restructuring, as provided in the Plan Support Agreement and the reasonable and documented fees and expenses of the Senior Notes Indenture Trustee, as required under the Senior Notes Indenture. Based on my understanding of section 1129(a)(4) of the Bankruptcy Code, and the advice I have received from the Debtor’s professionals, I believe that the Debtors’ payment of the Restructuring Expenses is reasonable.
E. The Plan Satisfies the Requirements of Section 1129(a)(5) of the Bankruptcy Code
44. I understand that section 1129(a)(5) of the Bankruptcy Code requires the
disclosure of information pertaining to directors, officers, and insiders. In Exhibit B to the Plan Supplement, the Debtors have disclosed information regarding the individuals to serve as the initial officers and directors of the Reorganized Debtors, as well as any insider (as defined in the Bankruptcy Code) to be employed or retained by the Reorganized Debtors, and the nature of such insiders’ compensation.5 In addition, at or prior to the Confirmation Hearing, the Debtors shall disclose information regarding the director to be designated by the Requisite Noteholders. Based on my understanding of section 1129(a)(5) of the Bankruptcy Code, and the advice I have
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Compensation information for Paragon Parent’s directors and Named Executive Officers (as such term is defined in the proxy referenced below) may be found in the company’s filings with the Securities and Exchange
Commission, including in the company’s proxy statement filed pursuant to the proxy rules of the SEC on April 8, 2016.
received from the Debtor’s professionals, I believe the Debtors have satisfied the disclosure requirements therein.
45. In addition, as set forth above, I believe that appointment of the individuals proposed to serve as the initial directors and officers of the Reorganized Debtors is consistent with the interests of creditors, equity holders, and public policy, because, among other things, the proposed individuals are competent and have relevant business and industry experience.
Accordingly, I believe that the Plan satisfies section 1129(a)(5) of the Bankruptcy Code.
F. The Plan Satisfies the Requirements of Section 1129(a)(6) of the Bankruptcy Code
46. The Plan does not provide for any rate changes by the Debtors that would be subject to approval by a governmental regulatory commission. Accordingly, I have been advised that the requirements of section 1129(a)(6) of the Bankruptcy Code are therefore inapplicable to the Plan.
G. The Plan Satisfies the Requirements of Section 1129(a)(7) of the Bankruptcy Code
47. I understand that Section 1129(a)(7) of the Bankruptcy Code requires that, with respect to each impaired class, each holder of a claim or interest either has accepted the plan or will receive or retain under the plan on account of such claim or interest, property of a value, as of the effective date, that is not less than the amount that such holder would have received or retained had the Debtors been liquidated under chapter 7 of the Bankruptcy Code (often referred to as the “Best Interests Test”).
48. The Debtors filed a liquidation analysis as Exhibit E to the Disclosure Statement (the “Liquidation Analysis”). The Liquidation Analysis demonstrates that the Plan provides each holder of an Allowed Claim in each impaired Class with a recovery greater than or equal to
the value of any distributions that would be made if these Chapter 11 Cases were converted to cases under chapter 7 of the Bankruptcy Code.
49. Accordingly, I believe that the Plan satisfies the Best Interests Test of section 1129(a)(7) of the Bankruptcy Code.
H. The Plan Satisfies the Requirements of Section 1129(a)(8) of the Bankruptcy Code
50. I understand that section 1129(a)(8) of the Bankruptcy Code requires that each class of claims or interests either accept the Plan or be unimpaired under the Plan. As discussed above, although the Voting Classes (Classes 3 and 5) are impaired, they have voted to accept the Plan. The remaining Classes (Classes 1, 2, 4, 6, 7, 8, and 9) are unimpaired under the Plan. Therefore, it is my understanding that the Plan satisfies the requirements of section 1129(a)(8) of the Bankruptcy Code.
I. The Plan Satisfies the Requirements of Section 1129(a)(9) of the Bankruptcy Code
51. I understand that section 1129(a)(9) of the Bankruptcy Code requires the Plan to provide holders of Administrative Expense Claims, Fee Claims, and Priority Tax Claims with payment(s) in cash equal to the allowed amount of such Claims, except to the extent that the holder of a particular Claim has agreed to different treatment.
52. Sections 2.1, 2.2, and 2.3 of the Plan provide that Allowed Administrative Expense Claims, Allowed Fee Claims, and Allowed Priority Tax Claims, respectively, will be paid in cash equal to the allowed amount of such Claims, except to the extent that the holders of such Claims have agreed to different treatment. With respect to Fee Claims, Section 2.2 of the Plan provides that all professionals shall file their respective final applications for allowance of compensation for services rendered and reimbursement of expenses incurred by the date that is
sixty (60) days after the Confirmation Date. Accordingly, I believe that the Plan complies with section 1129(a)(9) of the Bankruptcy Code.
J. The Plan Satisfies the Requirements of Section 1129(a)(10) of the Bankruptcy Code
53. I understand that section 1129(a)(10) of the Bankruptcy Code requires at least one impaired class of claims to have accepted the Plan without including any acceptance by an insider. As previously noted, the Plan designates two Impaired Classes of Claims entitled to vote on the Plan (Classes 3 and 5). As set forth in the Voting Certification, each of these Voting Classes has accepted the Plan. Accordingly, I believe the Plan satisfies section 1129(a)(10) of the Bankruptcy Code.
K. The Plan Satisfies the Feasibility Requirement of Section 1129(a)(11) of the Bankruptcy Code
54. The Term Loan Agent has objected to confirmation of the Plan on the grounds that it fails to satisfy section 1129(a)(11)’s feasibility requirement. For the reasons fully set forth in the Confirmation Brief, and as the Debtors will demonstrate with expert and other testimony at the Confirmation Hearing, I believe that the Plan satisfies the feasibility requirement of section 1129(a)(11) of the Bankruptcy Code.
L. The Plan Satisfies the Requirements of Section 1129(a)(12) of the Bankruptcy Code
55. I understand that section 1129(a)(12) of the Bankruptcy Code requires that all fees payable under section 1930 of title 28 of the United States Code have been paid or that the Plan provides for payment of all such fees on the Effective Date.
56. Section 12.4 of the Plan provides for the payment of all applicable fees on a per-Debtor basis on the Effective Date, or as soon as practicable thereafter, until the applicable
Debtor’s case has been closed, dismissed, or converted to a case under Chapter 7 of the Bankruptcy Code.
M. The Plan Satisfies the Requirements of Section 1129(a)(13) of the Bankruptcy Code
57. I have been advised that section 1129(a)(13) of the Bankruptcy Code requires that the Plan provide for the continuation after the Effective Date of payment of all retiree benefits at the level established under section 1114 of the Bankruptcy Code. Section 8.4 of the Plan
provides that all employment and severance policies, and all compensation and benefits plans, policies, and programs of the Debtors applicable to their respective employees, retirees, and non-employee directors, including, without limitation, all savings plans, retirement plans, healthcare plans, disability plans, severance benefit plans, incentive plans, and life and accidental death and dismemberment insurance plans, are deemed to be, and shall be treated as, executory contracts, and, on the Effective Date, will be assumed pursuant to sections 365 and 1123 of the Bankruptcy Code. Accordingly, I believe the Plan satisfies section 1129(a)(13) of the Bankruptcy Code.
N. Section 1129(b) of the Bankruptcy Code is Inapplicable to the Plan
58. It is my understanding that section 1129(b) of the Bankruptcy Code is
inapplicable because, as discussed above, the Plan satisfies section 1129(a)(8) of the Bankruptcy Code.
O. Certain Other Requirements Are Inapplicable
59. I understand that the Bankruptcy Code contains certain requirements for confirmation that are inapplicable to the Plan. In particular, (i) no Debtor is an individual; (ii) the Debtors are not required to pay any domestic support obligations; (iii) each Debtor is a moneyed, business, or commercial corporation; (iv) the Plan is the only plan filed in the Chapter 11 Cases; (v) the principal purpose of the Plan is not the avoidance of taxes or the avoidance of
the application of section 5 of the Securities Act; and (vi) no Debtor is a small business debtor. As a result, I understand that sections 1123(a)(8), 1129(a)(14)–(16), and 1129(c)–(e) of the Bankruptcy Code are inapplicable to the Plan.
P. Good Cause Exists to Waive Any Stay of the Confirmation Order
60. I believe that good cause exists for waiving and eliminating any stay of entry of the Confirmation Order so that the Confirmation Order will be effective immediately upon its entry. As noted above, the Chapter 11 Cases and the related restructuring transactions have been negotiated and implemented in good faith and with a high degree of cooperation among the Debtors and their stakeholders. In addition, each day the Debtors remain in chapter 11 they incur significant administrative and professional expenses. Based on the foregoing, I believe that good cause exists to waive any stay imposed by Bankruptcy Rule 3020(e) so that the Confirmation Order may be effective immediately upon its entry.
