UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK
)
In re: ) Chapter 11
)
INTERNAP TECHNOLOGY SOLUTIONS INC., ) Case No. 20-22393 (RDD)
et al. )
) (Jointly Administered)
Debtors.1 )
)
AMENDED DECLARATION2 OF MICHAEL T. SICOLI
IN SUPPORT OF AN ORDER APPROVING THE DEBTORS’ DISCLOSURE STATEMENT FOR AND CONFIRMING THE DEBTORS’
FIRST AMENDED JOINT PREPACKAGED CHAPTER 11 PLAN
I, Michael T. Sicoli, hereby declare under penalty of perjury as follows:
Background and Qualifications
1. I am the President and Chief Financial Officer (“CFO”) of Internap Corporation (collectively with each of the above-captioned debtors and debtors in possession, the “Debtors” and, together with their non-Debtor affiliates, “INAP”). I have served as President and CFO of Internap Corporation since October 1, 2019.
2. As President and CFO, I lead all finance and accounting functions, corporate development, investor relations, information technology and global network services group.
3. Prior to joining INAP, I served as the CFO of GTT Communications Inc., a publicly traded provider of cloud networking services to multinational clients. Prior to joining GTT
1 The Debtors in these Chapter 11 Cases, along with the last four digits of each Debtor’s federal tax identification number, as applicable, are: Internap Technology Solutions Inc. (8343); Internap Corporation (5721); Ubersmith, Inc. (7677); SingleHop, LLC (4340); Internap Connectivity LLC (7920); Hosting Intellect, LLC (8435); and DataGram, LLC (3170). The location of the Debtors’ service address for purposes of these Chapter 11 Cases is: 50 Main Street, Suite 1000, White Plains, New York 10606.
2 A redline document showing cumulative changes made to the original declaration of Michael T. Sicoli dated
Communications Inc., I served as principal of MTS Advisors, LLC, a consulting and advisory services firm I founded in 2013. From 2010 to 2013, I served as Chief Executive Officer of Sidera Networks, a fiber optic service provider that was merged with Lightower Fiber Networks in 2013. From 2005 to 2010, I served as CFO of RCN Corporation. Prior to that, I held various positions at Nextel Communications, Deloitte Consulting, and Accenture. I recently served as a director of Lumos Networks, a fiber-based bandwidth infrastructure and service provider in the Mid-Atlantic region.
4. I submit this declaration on behalf of the above-captioned debtors and debtors in possession (the “Debtors”) in support of the approval of the Disclosure Statement for Joint
Prepackaged Chapter 11 Plan of Internap Corporation and Its Affiliated Debtors and Debtors in Possession [Docket No. 18] (the “Disclosure Statement”) and confirmation of the First Amended Joint Prepackaged Chapter 11 Plan of Internap Corporation and Its Affiliated Debtors and Debtors in Possession [Docket No. 122] (as it may be amended, supplemented, restated, or
modified from time to time, the “Plan”).3 Except where specifically noted, the statements in this Declaration are based upon: (a) my personal knowledge of the Debtors’ operations, business affairs, financial performance, and restructuring efforts; (b) information learned from my review of relevant documents; and (c) information I have received from other members of the Debtors’ management or the Debtors’ advisors.
5. I am authorized to submit this declaration on behalf of the Debtors, and, if I were called upon to testify, I could and would testify competently to the facts set forth herein.
The Proposed Restructuring
6. The Debtors’ Plan is the result of extensive good faith negotiations between the Debtors and their key stakeholders and represents a comprehensive and value-maximizing restructuring for the benefit of all creditors as evidenced by the fact that it has been overwhelmingly accepted by the Class of Claims entitled to vote. Among other things, the Plan will (i) pay holders of allowed General Unsecured Claims in full, (ii) provide holders of Existing Loan Claims with 100% of the New Common Equity (subject to dilution) in Reorganized INAP, (iii) roll the DIP Facility into term loans under a new $75 million Priority Exit Facility, and (iv) provide holders of Interests in Internap Corporation with the New Common Equity Warrants or alternative cash consideration in exchange for their consent to certain releases. The de-leveraging transactions contemplated by the Plan will eliminate substantial debt from the Debtors’ balance sheet and thereby improve the Debtors’ financial condition and overall creditworthiness and help ensure their continued operations.
7. Leading up to the Petition Date, the Debtors engaged with their lenders to explore potential value-maximizing restructuring transactions. Ultimately, these hard-fought and arms’-length negotiations led to entry into the Restructuring Support Agreement executed by holders of over two-thirds of the Debtors’ Existing Term Loan Claims. Pursuant to the Restructuring Support Agreement, the Debtors solicited votes on the prepackaged Plan in advance of the Petition Date, resulting in holders of over 98% of the Debtors’ Existing Loan Claims voting to accept the Plan.
8. As described herein, I believe the Plan and Disclosure Statement satisfy each of the confirmation requirements under sections 1129 and 1125 the Bankruptcy Code, respectively, and achieve the objectives of chapter 11. I also believe the Plan is in the best interests of the Debtors and all their stakeholders and that, accordingly, the Court should confirm the Plan.
THE DISCLOSURE STATEMENT SHOULD BE APPROVED ON A FINAL BASIS
9. For the reasons detailed below and with the assistance of the Debtors’ advisors, I believe the Disclosure Statement satisfies the applicable Bankruptcy Code requirements for approval. I have set forth the reasons for such belief below, except where such compliance is apparent on the face of the Disclosure Statement and related documents or where it will be the subject of evidence introduced at the Combined Hearing.
10. In connection with the Plan, it is my understanding that the Debtors prepared the Disclosure Statement, which describes the terms of the Plan and its effects on holders of Claims against and Interests in the Debtors. I reviewed the Disclosure Statement before its distribution and, based on discussion with the Debtors’ advisors, believe it provides an accurate and thorough disclosure of the information required by holders of Impaired Claims to make an informed judgment whether to vote to accept the Plan.
11. Specifically, the Disclosure Statement describes, among other things (a) the Debtors’ reorganization efforts; (b) certain events and relevant negotiations preceding the commencement of these Chapter 11 Cases; (c) the key terms of the Restructuring Support Agreement and the Plan; (d) risk factors affecting consummation of the Plan; (e) a liquidation analysis setting forth the estimated recovery that holders of Claims and Interests would receive in a hypothetical chapter 7 case; (f) financial information that is relevant in determining whether to accept or reject the Plan; (g) a valuation analysis setting forth the value of the Debtors; and (h) federal tax and securities law consequences of the Plan.
12. Based on the foregoing, I believe that the Disclosure Statement contains adequate information within the meaning of sections 1125(a) and (b) of the Bankruptcy Code, and the
Disclosure Statement satisfies the disclosure requirements of applicable non-bankruptcy law, and is appropriate under section 1125(g) of the Bankruptcy Code, as all of those provisions that have been explained to me.
THE PLAN SATISFIES THE REQUIREMENTS OF CONFIRMATION
13. For the reasons detailed below and with the assistance of the Debtors’ advisors, I believe the Plan satisfies the applicable Bankruptcy Code requirements for confirmation of a plan of reorganization. I have set forth the reasons for such belief below, except where such compliance is apparent on the face of the Plan, the Plan Supplement, and the related documents or where it will be the subject of evidence introduced at the Combined Hearing.
I. THE PLAN FULLY COMPLIES WITH THE APPLICABLE PROVISIONS OF
THE BANKRUPTCY CODE.
A. Proper Classification of Claims and Interests — § 1122.
14. Each of the Claims and Interests in each particular Class is substantially similar to the other Claims and Interests in such Class. In general, the Plan’s classification scheme follows the Debtors’ capital structure. Debt and equity are classified separately. General Unsecured Claims are classified separately from debt.
15. Valid business, legal, and factual reasons justify the separate classification of the particular Claims or Interests into the Classes created under the Plan, and no unfair discrimination exists between or among holders of claims and interests.
B. Designation of Classes of Claims and Equity Interests — § 1123(a)(1).
16. It is my testimony that Article III of the Plan properly designates Classes of Claims and Interests. The Plan meets this requirement because Claims and Interests assigned to each particular Class are substantially similar to the other Claims and Interests in such Class.
C. Specification of Unimpaired Classes — § 1123(a)(2).
17. It is my testimony that the Plan identifies each Class in Article III that is Unimpaired.
D. Treatment of Impaired Classes — § 1123(a)(3).
18. It is my testimony that the Plan sets forth the treatment of each Class in Article III that is Impaired.
E. Equal Treatment of Similarly Situated Claims and Interests — § 1123(a)(4).
19. It is my understanding that holders of Allowed Claims or Interests will receive the same rights and treatment as other holders of Allowed Claims or Interests within such holders’ respective Class.
F. Means for Implementation — § 1123(a)(5).
20. I believe that the Plan provides adequate means for implementation. The Plan satisfies this requirement because Article V of the Plan, as well as other provisions thereof, provides for the means by which the Plan will be implemented. Among other things, Article V of the Plan:
(i) authorizes the Debtors to take all actions necessary or appropriate to effectuate the Plan;
(ii) authorizes the Reorganized Debtors to fund distributions under the Plan from cash (including borrowings under the DIP Facility), the Priority Exit Facility, and the New Term Loan Facility;
(iii) preserves the Debtors’ corporate existence as of and after the Effective Date unless otherwise specified in the Plan;
(iv) provides for the vesting of all Estate assets in the Reorganized Debtors;
(v) authorizes the Reorganized Debtors to issue and execute certain contracts and engage in other actions contemplated under the Plan;
(vi) authorizes the Reorganized Debtors to adopt their New Organizational Documents; and
(vii) provides for the appointment of the members of the New Board and the officers, directors, and/or managers of each of the Reorganized Debtors.
21. The precise terms governing the execution of these transactions are set forth in the applicable definitive documents or forms of agreements included in the Plan Supplement.
G. Prohibition of Issuance of Non-Voting Stock — § 1123(a)(6).
22. I can confirm that Article V.H of the Plan provides that the New Organizational Documents will prohibit the issuance of any non-voting equity securities under the Plan to the extent required by section 1123(a)(6) of the Bankruptcy Code. Further, the securities being issued pursuant to the Plan (the New Common Equity and New Common Equity Warrants) are not non-voting equity securities.
H. Selection of Officers and Directors — § 1123(a)(7).
23. I believe that the Plan is consistent with the interests of all stakeholders with respect to the manner of selection the officers, directors, and/or managers of the Reorganized Debtors and the ultimate parent company, Reorganized INAP.
24. I can confirm that the Plan Supplement discloses (or will disclose) the 7 members of the Reorganized Company Board and that the officers of the Debtors on the Effective Date will continue in such capacities with the Reorganized Debtors to the extent known.
I. The Debtors Proposed the Plan in Good Faith — § 1129(a)(3).
25. I believe that the Plan was proposed in good faith, with the legitimate and honest purposes of reorganizing the Debtors’ ongoing business, and to enable the Debtors to reorganize and achieve a fresh start. It is my testimony that the Plan is the product of extensive arms’ length negotiations among the Debtors, lenders, and other key stakeholders. The Plan’s overwhelming support by the holders of Existing Loan Claims is strong evidence that the Plan is likely to succeed.
J. Payment of Professional Fees and Expenses Are Subject to Court Approval — § 1129(a)(4).
26. It is my understanding that section 1129(a)(4) of the Bankruptcy Code requires that certain fees and expenses paid by the plan proponent, by a debtor, or by a person receiving distributions of property under the plan, be approved by the Court as reasonable or remain subject to approval by the Court as reasonable. I can confirm that Professional Fees and corresponding payments are subject to prior Court approval and the reasonableness requirements under sections 328 and/or 330 of the Bankruptcy Code. Article II.C of the Plan, moreover, provides that Professionals shall file all final requests for payment of Professional Fees no later than forty-five (45) days after the Effective Date, thereby providing an adequate period of time for interested parties’ to review such Professional Fees.
K. Compliance with Governance Disclosure Requirements — § 1129(a)(5).
27. To the best of my knowledge, the Debtors have satisfied section 1129(a)(5) of the Bankruptcy Code. Through the Plan Supplement, the Debtors have specifically disclosed the persons proposed to serve on the Reorganized INAP Board.
L. Governmental Regulatory Approval of Rate Changes — § 1129(a)(6).
28. It is my understanding that section 1129(a)(6) of the Bankruptcy Code permits confirmation only if any regulatory commission that has or will have jurisdiction over a debtor after confirmation has approved any rate change provided for in the plan. Section 1129(a)(6) is inapplicable to the Plan.
M. Priority Cash Payments — § 1129(a)(9).
29. It is my understanding that the Bankruptcy Code generally requires that claims entitled to administrative priority must be repaid in full in cash or receive certain other specified treatment. I can confirm that the Plan provides that each holder of an Allowed General Administrative
Expense will receive Cash equal to the Allowed amount of such General Administrative Expense on the Effective Date (or, if payment is not then due, then in the applicable Debtor’s ordinary course of business). In addition, no holders of the types of Claims specified by 1129(a)(9)(B) are Impaired under the Plan and such Claims generally have been paid in the ordinary course pursuant to the Court’s orders on various first day motions. Finally, the Plan specifically provides that holders of Allowed Priority Tax Claims shall be treated in accordance with the terms set forth in section 1129(a)(9)(C) of the Bankruptcy Code.
30. With respect to Allowed DIP Facility Claims, the DIP Lenders have consented to having the principal amount of such claims converted on a dollar-for-dollar basis into commitments under the Priority Exit Facility. Accrued interest and other obligations under the DIP Facility will be paid in full in cash.
N. Impaired Accepting Class of Claims — § 1129(a)(10).
31. It is my understanding that the Bankruptcy Code provides that, to the extent there is an impaired class of claims, at least one impaired class of claims must accept the plan “without including any acceptance of the plan by any insider,” as an alternative to the requirement under section 1129(a)(8) of the Bankruptcy Code that each class of claims or interests must either accept the plan or be unimpaired under the plan. It is my understanding that Class 3, which is Impaired, voted overwhelmingly to accept the Plan (independent of any insiders’ votes).
O. The Plan Is Feasible — § 1129(a)(11).
32. I believe that the Plan will provide the Debtors with a reasonable assurance of commercial viability upon emergence, and will not be followed by liquidation or the need for further financial reorganization of the Debtor or any successor to the Debtor for the foreseeable future. The Plan eliminates significant amounts of the Debtors’ funded debt obligations, thereby
reducing debt service expenses, and provides for the contribution of an additional $75 million of new capital, providing necessary working capital to support the Debtors’ operations upon emergence from these Chapter 11 Cases. Additionally, as set forth in the Disclosure Statement, the Debtors prepared consolidated projected financial results for each of the fiscal years through 2024. I reviewed the Projections while they were being prepared, and I agree with the analysis employed.
33. In connection with proposing the Plan and presenting the Plan to the Court for Confirmation, the Debtors thoroughly analyzed and are satisfied as to their ability post-confirmation to meet their obligations under the Plan and continue as a going concern without the need for further financial restructuring in the foreseeable future. I believe that the financial projections included in the Disclosure Statement demonstrate that the Debtors will be positioned to execute their business plan and to service their debt obligations when they emerge from bankruptcy.
34. While the COVID-19 pandemic’s future effects on the Debtors’ businesses are uncertain and there is downside risk, to date, the Debtors have not experienced any significant disruption to their business, and I anticipate the Debtors will continue to provide their customers with the high level of service that they have come to depend on. Demand for the Debtors’ services has remained strong as companies around the world have relied on IT infrastructure and Internet connectivity more than ever for communications and commerce, and the Debtors’ employees have kept pace with demand while working and collaborating from remote locations. Absent a significant impact from the COVID-19 pandemic, I believe that confirmation of the Plan is not likely to be followed by liquidation, or the need for further financial reorganization, of the Reorganized Debtors.
P. The Plan Provides for Payment of All Fees — § 1129(a)(12).
35. It is my testimony that Article XII.C of the Plan provides that that all fees and charges, to the extent not previously paid, will be paid for each quarter until these Chapter 11 Cases are closed, dismissed or converted to a case under Chapter 7 of the Bankruptcy Code.
Q. The Plan Satisfies The “Cram Down” Standard — § 1129(b).
36. It is my understanding that, pursuant to 1129(b) of the Bankruptcy Code, a plan may be confirmed notwithstanding the rejection or deemed rejection by a class of claims or equity interests so long as the plan is fair and equitable and does not discriminate unfairly as to such non-accepting class.
37. Based upon my understanding of section 1129(b) of the Bankruptcy Code as explained to me by the Debtors’ legal advisors, the Plan does not discriminate unfairly and is fair and equitable with respect to the Class 5 (Intercompany Claims), Class 6 (Intercompany Interests), Class 7 (Subordinated Claims) and Class 8 (Existing Equity Interests) which are (or may be) deemed to reject the Plan, because each such Classes are legally distinct in nature from all other Classes — no other Classes have similar legal rights.
38. In addition, the “fair and equitable” rule is satisfied as to the holders of Claims and Interests in each such Classes as no Claims or Interests junior to each such class, as applicable, will receive or retain any property under the Plan on account of such junior Claims or Interests. Moreover, based on the Valuation Analysis, no senior creditor will receive in excess of the full value of its claim under the Plan. Accordingly, the Plan satisfies the requirements of section 1129(b) of the Bankruptcy Code as to each Class deemed to reject the Plan.
R. The Principal Purpose Of The Plan Is Not The Avoidance Of Taxes — § 1129(d).
39. The purpose of the Plan is not to avoid taxes or the application of section 5 of the Securities Act of 1933. Moreover, no party that is a governmental unit, or any other entity, has requested that the Bankruptcy Court decline to confirm the Plan on the grounds that the principal purpose of the Plan is the avoidance of taxes or the avoidance of the application of section 5 of the Securities Act of 1933. Rather, I believe the Debtors filed the Plan to accomplish their objective of efficiently and responsibly reorganizing their capital structure, preserving the going concern of their business, and providing recoveries to their stakeholders. Accordingly, the Plan satisfies the requirements of section 1129(d) of Bankruptcy Code.
II. THE PLAN APPROPRIATELY INCORPORATES SETTLEMENT OF
CLAIMS AND CAUSES OF ACTION.
40. The Plan embodies a global settlement between the Debtors and all major parties in interest. The Plan resolves a host of potential claims and causes of action which were thoroughly analyzed by the Debtors and their advisors, all of which are highly uncertain to succeed and could cause extensive delay, cost, and uncertainty in these chapter 11 cases and otherwise.
A. The Debtor Releases and Consensual Third-Party Releases Are Appropriate.
41. I believe that the Debtors’ releases are appropriate, justified, in the best interests of the stakeholders, and an integral part of the Plan. Article VIII.D.1 of the Plan provides for releases by the Debtors (the “Debtors’ Releases”), as of the Effective Date, of, among other things, certain claims, rights, and Causes of Action that the Debtors and the Reorganized Debtors may have against the Released Parties. I believe that prosecution of the claims and Causes of Action released under the Debtors’ Releases would be complex and time consuming and could mire parties in interest in litigation rather than effectuation of a consensual restructuring. I further believe that the Debtors do not have material causes of action against any of the Released Parties that would
justify the risk, expense, and delay of pursuing any such causes of action as compared to the results and benefits achieved under the Plan. Moreover, I understand that the Debtors’ creditors have overwhelmingly voted in favor of the Plan, including the Debtors’ Releases.
42. Moreover, the Plan, including the Debtors’ Releases, was vigorously negotiated prepetition and postpetition by sophisticated entities that were represented by able counsel and financial advisors. The result is a compromise that reflects the give-and-take of a true arm’s-length negotiation process. The Released Parties that benefit from the Debtors’ Releases are providing (directly or through related parties) the consideration discussed above and are consenting to the releases, which were a necessary component of the overall bargain that has put the Debtors on the path to a value-maximizing restructuring.
43. Further, the Debtors’ Releases are justified because holders of Existing Loan Claims have agreed to support a plan of reorganization that provides for junior creditors, primarily holders of General Unsecured Claims, to be paid in full or otherwise rendered unimpaired. Such unimpairment is possible due the Consenting Lenders’ agreement to equitize their senior secured claims and thus effectively subordinate those claims to the General Unsecured Claims on the Effective Date. Moreover, holders of Existing Loan Claims and DIP Facility Claims funded the Debtors’ operations and certain payments to the Debtors’ general unsecured creditors (including employees, vendors, suppliers, service providers, etc.) during these Chapter 11 Cases and certain of those lenders will continue to fund the Debtors post-bankruptcy pursuant to the proposed Priority Exit Facility.
44. I believe the Debtors’ Releases provide the Debtors and the Released Parties with a level of finality that will allow the Debtors to emerge successfully from the Chapter 11 Cases without the potential burden of value-destructive litigation. Moreover, the Debtors’ Releases are
a central component of the Restructuring and are key to bringing the core parties to the deal that has provided the Debtors with $75 million in new-money financing and will eliminate substantial funded debt from the Debtors’ balance sheet. I believe this result would be impossible without the contributions and concessions of the Released Parties embodied in the Plan, which will facilitate the Debtors’ emergence from these Chapter 11 Cases and avoid potentially costly and time-consuming litigation. Accordingly, the Debtors’ Releases are in the best interest of the Debtors and their estates.
45. Article VIII.D.2 of the Plan also contains the releases by third parties (the “Third-Party Releases”). The Third-Party Releases provide that each Releasing Party shall release any and all claims and Causes of Action such parties could assert against the Debtors and the Released Parties.
46. As described above, the Restructuring contemplated in the Plan is value maximizing and would not be possible absent the support of the Released Parties. Certain of the Released Parties also contributed $75 million in new-money loans to fund the Debtors’ operations through the chapter 11 process during a time of exceptional stress in the U.S. and global credit markets. Moreover, the DIP Lenders have consented to having the principal amount of Allowed DIP Facility Claims converted on a dollar-for-dollar basis into commitments under the Priority Exit Facility. Accrued interest and other obligations under the DIP Facility will be paid in full in cash. Thus, the Third-Party Releases allow the Debtors’ to obtain the fresh start they need by minimizing the potential for distracting post-emergence litigation or other disputes.
47. Moreover, the Third-Party Releases are fully consensual, as the Releasing Parties are limited to (i) all Released Parties, (ii) all holders of Claims that vote to accept the Plan, and (iii) all
holders of Existing Equity Interests that execute the Existing Equity Release.4 Moreover, the Debtors provided adequate disclosure of the Third Party Releases and an opportunity to object.
48. I believe the Third-Party Releases are integral to the Plan and a condition of the settlement embodied therein. The provisions of the Plan were heavily negotiated by sophisticated parties, each of whom are represented by competent counsel. The consensual Third-Party Releases (together with the Debtors’ Releases) are key components of the Debtors’ Restructuring and are a critical inducement to bringing stakeholder groups to the bargaining table. I further believe the Debtors’ key stakeholders are unwilling to support the Plan without assurances that they and their collateral would not be subject to post-emergence litigation or other disputes related to the restructuring. The Third-Party Releases therefore not only benefit the non-Debtor Released Parties, but also the Debtors’ post-emergence enterprise as a whole.
49. Further, the Third-Party Releases are given for consideration. All parties in interest benefit from the Restructuring Transactions contemplated by the Plan, which proposes to substantially deleverage the Debtors’ capital structure and position the Debtors for future success. The Released Parties have made substantial contributions to these Chapter 11 Cases, as set forth above, that will result in the payment in full payment or unimpairment for all holders of General Unsecured Claims. By contrast, as shown in the liquidation analysis contained in the Disclosure Statement, holders of General Unsecured Claims and other creditors would likely receive no recovery in a liquidation scenario. As such, I believe the Third-Party Releases should be approved.
4 The foregoing description is meant as a summary of the operative plan provisions only. To the extent there is any conflict between the foregoing summary and the definition of “Releasing Party” contained in Article I of the Plan, the Plan shall control.
B. The Exculpation Provisions Are Appropriate.
50. Article VIII.E of the Plan provides exculpation from any claim or Cause of Action in connection with or arising out of the administration of the Chapter 11 Cases and certain related transactions, except for acts or omissions that are a criminal act or constitute intentional fraud or willful misconduct. The “Exculpated Parties” include (i) the Debtors, (ii) the Reorganized Debtors, (iii) any statutory committee appointed in the Chapter 11 Cases, (iv) the parties to the Restructuring Support Agreement, (v) the DIP Facility Agent and the DIP Facility Lenders under the DIP Facility Agreement, (vi) the Existing Credit Facility Agent and Existing Lenders under the Existing Credit Facility Documents; (vii) the Priority Exit Facility Agent and the Priority Exit Facility Lenders under the Priority Exit Facility Agreement, (viii) the New Term Loan Facility Agent and the New Term Loan Facility Lenders under the New Term Loan Facility Agreement, (ix) the Consenting Lenders, and (x) with respect to each of the foregoing Entities in clauses (i) through (ix), each of such Entity’s current and former affiliates, and each such Entity’s predecessors, successors, assigns, subsidiaries, affiliates, managed accounts and funds, and all of their respective current and former officers and directors, principals, equity holders, members, partners, managers, employees, agents, advisory board members, financial advisors, attorneys, accountants, investment bankers, consultants, representatives, investment managers, investment advisors, management companies, fund advisors, and other professionals, and such Persons’ respective heirs, executors, estates, and nominees, in each case in their capacity as such.5
51. The Exculpation Provision was the product of extensive negotiations with third parties, many of whom played a critical role in formulating the Restructuring Support Agreement, the Plan,
5 The foregoing description is a summary of the operative plan provisions only. To the extent there is any conflict between the foregoing summary and the definition of “Exculpated Party” contained in Article I of the Plan, the Plan shall control.
and related documents in furtherance of the reorganization efforts, which negotiations were extensive and conducted at arms’ length and in good faith with a high degree of transparency. The Exculpation Provision was important to the development of a feasible, confirmable Plan, and many of the Exculpated Parties are participating in the Chapter 11 Cases in reliance upon the protections afforded to the constituents involved by the Exculpation Provision. The Exculpation Provision is necessary and appropriate to protect parties who made substantial contributions to the Debtors’ reorganization from future collateral attacks related to actions taken in good faith in connection with the Debtors’ restructuring.
52. I can confirm that the Exculpation Provision represents an integral piece of the overall settlements embodied by the Plan and is the product of good faith, arm’s-length negotiations. As such, I believe the Exculpation Provision should be approved.
C. The Injunction Provision Is Appropriate.
53. The injunction provision set forth in Article VIII.F of the Plan implements the Plan’s release and exculpation provisions. I believe the injunction provision is thus a key provision of the Plan because it enforces the release and exculpation provisions that are centrally important to the Plan. As such, I believe the injunction provision should be approved.
III. CAUSE EXISTS TO WAIVE ANY STAY OF PROPOSED CONFIRMATION
ORDER.
54. I am advised that, generally, Bankruptcy Rules 3020(e) and 6004(h) impose a 14-day stay of the effectiveness of an order confirming a chapter 11 plan of reorganization, unless the bankruptcy court orders otherwise. I believe that a waiver of the stay would permit the Debtors to consummate the Plan and commence their implementation without delay after the entry of the proposed Confirmation Order. It is my understanding that the Restructuring contemplated by the Plan, along with all transactions connected thereto, were extensively negotiated among
sophisticated parties and have been accepted by a majority of the voting creditors. Further, I believe that each day the Debtors remain in chapter 11, they incur significant administrative and professional costs—expenses that are unnecessary in light of the support for the Plan. Accordingly, I believe the requested waiver of the stay will allow the Debtors to finalize the processes required for their Restructuring in a timely manner and will reduce disruption and incremental costs to the Debtors’ business caused by these cases, and is therefore in the best interests of the Debtors’ estates and creditors and will not prejudice any parties in interest.
Pursuant to 28 U.S.C. § 1746, I declare under penalty of perjury that the foregoing statements are true and correct to the best of my knowledge, information, and belief.
Dated: May 4, 2020
/s/ Michael T. Sicoli Michael T. Sicoli
President and Chief Financial Officer Internap Corporation
Exhibit A Redline
UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK
INTERNAP TECHNOLOGY SOLUTIONS INC., ) Case No. 20-22393 (RDD)
et al. ) In re: ) ) (Jointly Administered) Chapter 11 Debtors.1 ) )
AMENDED DECLARATION2 OF MICHAEL T. SICOLI
IN SUPPORT OF AN ORDER APPROVING THE DEBTORS’ DISCLOSURE STATEMENT FOR AND CONFIRMING THE DEBTORS’
FIRST AMENDED JOINT PREPACKAGED CHAPTER 11 PLAN
I, Michael T. Sicoli, hereby declare under penalty of perjury as follows:
Background and Qualifications
1. I am the President and Chief Financial Officer (“CFO”) of Internap Corporation (collectively with each of the above-captioned debtors and debtors in possession, the “Debtors” and, together with their non-Debtor affiliates, “INAP”). I have served as President and CFO of Internap Corporation since October 1, 2019.
2. As President and CFO, I lead all finance and accounting functions, corporate development, investor relations, information technology and global network services group.
3. Prior to joining INAP, I served as the CFO of GTT Communications Inc., a publicly traded provider of cloud networking services to multinational clients. Prior to joining GTT Communications Inc., I served as principal of MTS Advisors, LLC, a consulting and advisory
) )
1 The Debtors in these Chapter 11 Cases, along with the last four digits of each Debtor’s federal tax
identification number, as applicable, are: Internap Technology Solutions Inc. (8343); Internap Corporation (5721); Ubersmith, Inc. (7677); SingleHop, LLC (4340); Internap Connectivity LLC (7920); Hosting Intellect, LLC (8435); and DataGram, LLC (3170). The location of the Debtors’ service address for purposes of these Chapter 11 Cases is: 50 Main Street, Suite 1000, White Plains, New York 10606.
2 A redline document showing cumulative changes made to the original declaration of Michael T. Sicoli dated May 1, 2020 [Docket No. 170] is attached as Exhibit A hereto.
services firm I founded in 2013. From 2010 to 2013, I served as Chief Executive Officer of Sidera Networks, a fiber optic service provider that was merged with Lightower Fiber Networks in 2013. From 2005 to 2010, I served as CFO of RCN Corporation. Prior to that, I held various positions at Nextel Communications, Deloitte Consulting, and Accenture. I recently served as a director of Lumos Networks, a fiber-based bandwidth infrastructure and service provider in the Mid-Atlantic region.
4. I submit this declaration on behalf of the above-captioned debtors and debtors in possession (the “Debtors”) in support of the approval of the Disclosure Statement for Joint
Prepackaged Chapter 11 Plan of Internap Corporation and Its Affiliated Debtors and Debtors in Possession [Docket No. 18] (the “Disclosure Statement”) and confirmation of the First Amended Joint Prepackaged Chapter 11 Plan of Internap Corporation and Its Affiliated Debtors and Debtors in Possession [Docket No. 122] (as it may be amended, supplemented, restated, or
modified from time to time, the “Plan”).23 Except where specifically noted, the statements in this
Declaration are based upon: (a) my personal knowledge of the Debtors’ operations, business affairs, financial performance, and restructuring efforts; (b) information learned from my review of relevant documents; and (c) information I have received from other members of the Debtors’ management or the Debtors’ advisors.
5. I am authorized to submit this declaration on behalf of the Debtors, and, if I were called upon to testify, I could and would testify competently to the facts set forth herein.
The Proposed Restructuring
6. The Debtors’ Plan is the result of extensive good faith negotiations between the Debtors and their key stakeholders and represents a comprehensive and value-maximizing
restructuring for the benefit of all creditors as evidenced by the fact that it has been overwhelmingly accepted by the Class of Claims entitled to vote. Among other things, the Plan will (i) pay holders of allowed General Unsecured Claims in full, (ii) provide holders of Existing Loan Claims with 100% of the New Common Equity (subject to dilution) in Reorganized INAP, (iii) roll the DIP Facility into term loans under a new $75 million Priority Exit Facility, and (iv) provide holders of Interests in Internap Corporation with the New Common Equity Warrants or alternative cash consideration in exchange for their consent to certain releases. The de-leveraging transactions contemplated by the Plan will eliminate substantial debt from the Debtors’ balance sheet and thereby improve the Debtors’ financial condition and overall creditworthiness and help ensure their continued operations.
7. Leading up to the Petition Date, the Debtors engaged with their lenders to explore potential value-maximizing restructuring transactions. Ultimately, these hard-fought and arms’-length negotiations led to entry into the Restructuring Support Agreement executed by holders of over two-thirds of the Debtors’ Existing Term Loan Claims. Pursuant to the Restructuring Support Agreement, the Debtors solicited votes on the prepackaged Plan in advance of the Petition Date, resulting in holders of over 98% of the Debtors’ Existing Loan Claims voting to accept the Plan.
8. As described herein, I believe the Plan and Disclosure Statement satisfy each of the confirmation requirements under sections 1129 and 1125 the Bankruptcy Code, respectively, and achieve the objectives of chapter 11. I also believe the Plan is in the best interests of the Debtors and all their stakeholders and that, accordingly, the Court should confirm the Plan.
THE DISCLOSURE STATEMENT SHOULD BE APPROVED ON A FINAL BASIS
9. For the reasons detailed below and with the assistance of the Debtors’ advisors, I believe the Disclosure Statement satisfies the applicable Bankruptcy Code requirements for approval. I have set forth the reasons for such belief below, except where such compliance is apparent on the face of the Disclosure Statement and related documents or where it will be the subject of evidence introduced at the Combined Hearing.
10. In connection with the Plan, it is my understanding that the Debtors prepared the Disclosure Statement, which describes the terms of the Plan and its effects on holders of Claims against and Interests in the Debtors. I reviewed the Disclosure Statement before its distribution and, based on discussion with the Debtors’ advisors, believe it provides an accurate and thorough disclosure of the information required by holders of Impaired Claims to make an informed judgment whether to vote to accept the Plan.
11. Specifically, the Disclosure Statement describes, among other things (a) the Debtors’ reorganization efforts; (b) certain events and relevant negotiations preceding the commencement of these Chapter 11 Cases; (c) the key terms of the Restructuring Support Agreement and the Plan; (d) risk factors affecting consummation of the Plan; (e) a liquidation analysis setting forth the estimated recovery that holders of Claims and Interests would receive in a hypothetical chapter 7 case; (f) financial information that is relevant in determining whether to accept or reject the Plan; (g) a valuation analysis setting forth the value of the Debtors; and (h) federal tax and securities law consequences of the Plan.
12. Based on the foregoing, I believe that the Disclosure Statement contains adequate information within the meaning of sections 1125(a) and (b) of the Bankruptcy Code, and the Disclosure Statement satisfies the disclosure requirements of applicable non-bankruptcy law, and
is appropriate under section 1125(g) of the Bankruptcy Code, as all of those provisions that have been explained to me.
THE PLAN SATISFIES THE REQUIREMENTS OF CONFIRMATION
13. For the reasons detailed below and with the assistance of the Debtors’ advisors, I believe the Plan satisfies the applicable Bankruptcy Code requirements for confirmation of a plan of reorganization. I have set forth the reasons for such belief below, except where such compliance is apparent on the face of the Plan, the Plan Supplement, and the related documents or where it will be the subject of evidence introduced at the Combined Hearing.
I. THE PLAN FULLY COMPLIES WITH THE APPLICABLE PROVISIONS OF
THE BANKRUPTCY CODE.
A. Proper Classification of Claims and Interests — § 1122.
14. Each of the Claims and Interests in each particular Class is substantially similar to the other Claims and Interests in such Class. In general, the Plan’s classification scheme follows the Debtors’ capital structure. Debt and equity are classified separately. General Unsecured Claims are classified separately from debt.
15. Valid business, legal, and factual reasons justify the separate classification of the particular Claims or Interests into the Classes created under the Plan, and no unfair discrimination exists between or among holders of claims and interests.
B. Designation of Classes of Claims and Equity Interests — § 1123(a)(1).
16. It is my testimony that Article III of the Plan properly designates Classes of Claims and Interests. The Plan meets this requirement because Claims and Interests assigned to each particular Class are substantially similar to the other Claims and Interests in such Class.
C. Specification of Unimpaired Classes — § 1123(a)(2).
17. It is my testimony that the Plan identifies each Class in Article III that is Unimpaired.
D. Treatment of Impaired Classes — § 1123(a)(3).
18. It is my testimony that the Plan sets forth the treatment of each Class in Article III that is Impaired.
E. Equal Treatment of Similarly Situated Claims and Interests — § 1123(a)(4).
19. It is my understanding that holders of Allowed Claims or Interests will receive the same rights and treatment as other holders of Allowed Claims or Interests within such holders’ respective Class.
F. Means for Implementation — § 1123(a)(5).
20. I believe that the Plan provides adequate means for implementation. The Plan satisfies this requirement because Article V of the Plan, as well as other provisions thereof, provides for the means by which the Plan will be implemented. Among other things, Article V of the Plan:
(i) authorizes the Debtors to take all actions necessary or appropriate to effectuate the Plan;
(ii) authorizes the Reorganized Debtors to fund distributions under the Plan from cash (including borrowings under the DIP Facility), the Priority Exit Facility, and the New Term Loan Facility;
(iii) preserves the Debtors’ corporate existence as of and after the Effective Date unless otherwise specified in the Plan; (iv) provides for the vesting of all Estate assets in the
(v) authorizes the Reorganized Debtors to issue and execute certain contracts and engage in other actions contemplated under the Plan;
(vi) authorizes the Reorganized Debtors to adopt their New Organizational Documents; and
(vii) provides for the appointment of the members of the New Board and the officers, directors, and/or managers of each of the Reorganized Debtors.
21. The precise terms governing the execution of these transactions are set forth in the applicable definitive documents or forms of agreements included in the Plan Supplement.
G. Prohibition of Issuance of Non-Voting Stock — § 1123(a)(6).
22. I can confirm that Article V.H of the Plan provides that the New Organizational Documents will prohibit the issuance of any non-voting equity securities under the Plan to the extent required by section 1123(a)(6) of the Bankruptcy Code. Further, the securities being issued pursuant to the Plan (the New Common Equity and New Common Equity Warrants) are not non-voting equity securities.
H. Selection of Officers and Directors — § 1123(a)(7).
23. I believe that the Plan is consistent with the interests of all stakeholders with respect to the manner of selection the officers, directors, and/or managers of the Reorganized Debtors and the ultimate parent company, Reorganized INAP.
24. I can confirm that the Plan Supplement discloses (or will disclose) the 7 members of the Reorganized Company Board and that the officers of the Debtors on the Effective Date will continue in such capacities with the Reorganized Debtors to the extent known.
I. The Debtors Proposed the Plan in Good Faith — § 1129(a)(3).
25. I believe that the Plan was proposed in good faith, with the legitimate and honest purposes of reorganizing the Debtors’ ongoing business, and to enable the Debtors to reorganize
and achieve a fresh start. It is my testimony that the Plan is the product of extensive arms’ length negotiations among the Debtors, lenders, and other key stakeholders. The Plan’s overwhelming support by the holders of Existing Loan Claims is strong evidence that the Plan is likely to succeed.
J. Payment of Professional Fees and Expenses Are Subject to Court Approval — § 1129(a)(4).
26. It is my understanding that section 1129(a)(4) of the Bankruptcy Code requires that certain fees and expenses paid by the plan proponent, by a debtor, or by a person receiving distributions of property under the plan, be approved by the Court as reasonable or remain subject to approval by the Court as reasonable. I can confirm that Professional Fees and corresponding payments are subject to prior Court approval and the reasonableness requirements under sections 328 and/or 330 of the Bankruptcy Code. Article II.C of the Plan, moreover, provides that Professionals shall file all final requests for payment of Professional Fees no later than forty-five (45) days after the Effective Date, thereby providing an adequate period of time for interested parties’ to review such Professional Fees.
K. Compliance with Governance Disclosure Requirements — § 1129(a)(5).
27. To the best of my knowledge, the Debtors have satisfied section 1129(a)(5) of the Bankruptcy Code. Through the Plan Supplement, the Debtors have specifically disclosed the persons proposed to serve on the Reorganized INAP Board.
L. Governmental Regulatory Approval of Rate Changes — § 1129(a)(6).
28. It is my understanding that section 1129(a)(6) of the Bankruptcy Code permits confirmation only if any regulatory commission that has or will have jurisdiction over a debtor after confirmation has approved any rate change provided for in the plan. Section 1129(a)(6) is inapplicable to the Plan.
M. Priority Cash Payments — § 1129(a)(9).
29. It is my understanding that the Bankruptcy Code generally requires that claims entitled to administrative priority must be repaid in full in cash or receive certain other specified treatment. I can confirm that the Plan provides that each holder of an Allowed General Administrative Expense will receive Cash equal to the Allowed amount of such General Administrative Expense on the Effective Date (or, if payment is not then due, then in the applicable Debtor’s ordinary course of business). In addition, no holders of the types of Claims specified by 1129(a)(9)(B) are Impaired under the Plan and such Claims generally have been paid in the ordinary course pursuant to the Court’s orders on various first day motions. Finally, the Plan specifically provides that holders of Allowed Priority Tax Claims shall be treated in accordance with the terms set forth in section 1129(a)(9)(C) of the Bankruptcy Code.
30. With respect to Allowed DIP Facility Claims, the DIP Lenders have consented to having the principal amount of such claims converted on a dollar-for-dollar basis into commitments under the Priority Exit Facility. Accrued interest and other obligations under the DIP Facility will be paid in full in cash.
N. Impaired Accepting Class of Claims — § 1129(a)(10).
31. It is my understanding that the Bankruptcy Code provides that, to the extent there is an impaired class of claims, at least one impaired class of claims must accept the plan “without including any acceptance of the plan by any insider,” as an alternative to the requirement under section 1129(a)(8) of the Bankruptcy Code that each class of claims or interests must either accept the plan or be unimpaired under the plan. It is my understanding that Class 3, which is Impaired, voted overwhelmingly to accept the Plan (independent of any insiders’ votes).
O. The Plan Is Feasible — § 1129(a)(11).
32. I believe that the Plan will provide the Debtors with a reasonable assurance of commercial viability upon emergence, and will not be followed by liquidation or the need for further financial reorganization of the Debtor or any successor to the Debtor for the foreseeable future. The Plan eliminates significant amounts of the Debtors’ funded debt obligations, thereby reducing debt service expenses, and provides for the contribution of an additional $75 million of new capital, providing necessary working capital to support the Debtors’ operations upon emergence from these Chapter 11 Cases. Additionally, as set forth in the Disclosure Statement, the Debtors prepared consolidated projected financial results for each of the fiscal years through 2024. I reviewed the Projections while they were being prepared, and I agree with the analysis employed.
33. In connection with proposing the Plan and presenting the Plan to the Court for Confirmation, the Debtors thoroughly analyzed and are satisfied as to their ability post-confirmation to meet their obligations under the Plan and continue as a going concern without the need for further financial restructuring in the foreseeable future. I believe that the financial projections included in the Disclosure Statement demonstrate that the Debtors will be positioned to execute their business plan and to service their debt obligations when they emerge from bankruptcy.
34. I further believe that the Plan remains feasible and the Debtors’ financial projections remain reasonable in light ofWhile the COVID-19 pandemic. Topandemic’s future effects on the Debtors’ businesses are uncertain and there is downside risk, to date, the Debtors have not experienced any significant disruption to their business, and I anticipate the Debtors will continue to provide their customers with the high level of service that they have come to depend
on. Demand for the Debtors’ services has remained strong as companies around the world have relied on IT infrastructure and Internet connectivity more than ever for communications and commerce, and the Debtors’ employees have kept pace with demand while working and collaborating from remote locations. Absent a significant impact from the COVID-19 pandemic, I believe that confirmation of the Plan is not likely to be followed by liquidation, or the need for further financial reorganization, of the Reorganized Debtors.
35. Furthermore, to the extent that future macro-economic effects of COVID-19 degrade the Debtors’ financial performance, I believe that the Plan and forthcoming credit documents will contain a reasonable amount of downside protection, including the ability to pay interest in kind as well as the ability to retain some cash proceeds from asset sales, including the recently signed sale of the Houston colocation business.
P. The Plan Provides for Payment of All Fees — § 1129(a)(12).
35. 36. It is my testimony that Article XII.C of the Plan provides that that all fees and charges, to the extent not previously paid, will be paid for each quarter until these Chapter 11 Cases are closed, dismissed or converted to a case under Chapter 7 of the Bankruptcy Code.
Q. The Plan Satisfies The “Cram Down” Standard — § 1129(b).
36. 37. It is my understanding that, pursuant to 1129(b) of the Bankruptcy Code, a plan may be confirmed notwithstanding the rejection or deemed rejection by a class of claims or equity interests so long as the plan is fair and equitable and does not discriminate unfairly as to such non-accepting class.
37. 38. Based upon my understanding of section 1129(b) of the Bankruptcy Code as explained to me by the Debtors’ legal advisors, the Plan does not discriminate unfairly and is fair and equitable with respect to the Class 5 (Intercompany Claims), Class 6 (Intercompany
Interests), Class 7 (Subordinated Claims) and Class 8 (Existing Equity Interests) which are (or may be) deemed to reject the Plan, because each such Classes are legally distinct in nature from all other Classes — no other Classes have similar legal rights.
38. 39. In addition, the “fair and equitable” rule is satisfied as to the holders of Claims and Interests in each such Classes as no Claims or Interests junior to each such class, as applicable, will receive or retain any property under the Plan on account of such junior Claims or Interests. Moreover, based on the Valuation Analysis, no senior creditor will receive in excess of the full value of its claim under the Plan. Accordingly, the Plan satisfies the requirements of section 1129(b) of the Bankruptcy Code as to each Class deemed to reject the Plan.
R. The Principal Purpose Of The Plan Is Not The Avoidance Of Taxes — § 1129(d).
39. 40. The purpose of the Plan is not to avoid taxes or the application of section 5 of the Securities Act of 1933. Moreover, no party that is a governmental unit, or any other entity, has requested that the Bankruptcy Court decline to confirm the Plan on the grounds that the principal purpose of the Plan is the avoidance of taxes or the avoidance of the application of section 5 of the Securities Act of 1933. Rather, I believe the Debtors filed the Plan to accomplish their objective of efficiently and responsibly reorganizing their capital structure, preserving the going concern of their business, and providing recoveries to their stakeholders. Accordingly, the Plan satisfies the requirements of section 1129(d) of Bankruptcy Code.
II.THE PLAN APPROPRIATELY INCORPORATES SETTLEMENT OF CLAIMS
AND CAUSES OF ACTION.
40. 41. The Plan embodies a global settlement between the Debtors and all major parties in interest. The Plan resolves a host of potential claims and causes of action which were thoroughly analyzed by the Debtors and their advisors, all of which are highly uncertain to
succeed and could cause extensive delay, cost, and uncertainty in these chapter 11 cases and otherwise.
A. The Debtor Releases and Consensual Third-Party Releases Are Appropriate.
41. 42. I believe that the Debtors’ releases are appropriate, justified, in the best interests of the stakeholders, and an integral part of the Plan. Article VIII.D.1 of the Plan provides for releases by the Debtors (the “Debtors’ Releases”), as of the Effective Date, of, among other things, certain claims, rights, and Causes of Action that the Debtors and the Reorganized Debtors may have against the Released Parties. I believe that prosecution of the claims and Causes of Action released under the Debtors’ Releases would be complex and time consuming and could mire parties in interest in litigation rather than effectuation of a consensual restructuring. I further believe that the Debtors do not have material causes of action against any of the Released Parties that would justify the risk, expense, and delay of pursuing any such causes of action as compared to the results and benefits achieved under the Plan. Moreover, I understand that the Debtors’ creditors have overwhelmingly voted in favor of the Plan, including the Debtors’ Releases.
42. 43. Moreover, the Plan, including the Debtors’ Releases, was vigorously negotiated prepetition and postpetition by sophisticated entities that were represented by able counsel and financial advisors. The result is a compromise that reflects the give-and-take of a true arm’s-length negotiation process. The Released Parties that benefit from the Debtors’ Releases are providing (directly or through related parties) the consideration discussed above and are consenting to the releases, which were a necessary component of the overall bargain that has put the Debtors on the path to a value-maximizing restructuring.
43. 44. Further, the Debtors’ Releases are justified because holders of Existing Loan Claims have agreed to support a plan of reorganization that provides for junior creditors, primarily holders of General Unsecured Claims, to be paid in full or otherwise rendered unimpaired. Such unimpairment is possible due the Consenting Lenders’ agreement to equitize their senior secured claims and thus effectively subordinate those claims to the General Unsecured Claims on the Effective Date. Moreover, holders of Existing Loan Claims and DIP Facility Claims funded the Debtors’ operations and certain payments to the Debtors’ general unsecured creditors (including employees, vendors, suppliers, service providers, etc.) during these Chapter 11 Cases and certain of those lenders will continue to fund the Debtors post-bankruptcy pursuant to the proposed Priority Exit Facility.
44. 45. I believe the Debtors’ Releases provide the Debtors and the Released Parties with a level of finality that will allow the Debtors to emerge successfully from the Chapter 11 Cases without the potential burden of value-destructive litigation. Moreover, the Debtors’ Releases are a central component of the Restructuring and are key to bringing the core parties to the deal that has provided the Debtors with $75 million in new-money financing and will eliminate substantial funded debt from the Debtors’ balance sheet. I believe this result would be impossible without the contributions and concessions of the Released Parties embodied in the Plan, which will facilitate the Debtors’ emergence from these Chapter 11 Cases and avoid potentially costly and time-consuming litigation. Accordingly, the Debtors’ Releases are in the best interest of the Debtors and their estates.
45. 46. Article VIII.D.2 of the Plan also contains the releases by third parties (the “Third-Party Releases”). The Third-Party Releases provide that each Releasing Party shall
release any and all claims and Causes of Action such parties could assert against the Debtors and the Released Parties.
46. 47. As described above, the Restructuring contemplated in the Plan is value maximizing and would not be possible absent the support of the Released Parties. Certain of the Released Parties also contributed $75 million in new-money loans to fund the Debtors’ operations through the chapter 11 process during a time of exceptional stress in the U.S. and global credit markets. Moreover, the DIP Lenders have consented to having the principal amount of Allowed DIP Facility Claims converted on a dollar-for-dollar basis into commitments under the Priority Exit Facility. Accrued interest and other obligations under the DIP Facility will be paid in full in cash. Thus, the Third-Party Releases allow the Debtors’ to obtain the fresh start they need by minimizing the potential for distracting post-emergence litigation or other disputes.
47. 48. Moreover, the Third-Party Releases are fully consensual, as the Releasing Parties are limited to (i) all Released Parties, (ii) all holders of Claims that vote to accept the Plan, and (iii) all holders of Existing Equity Interests that execute the Existing Equity Release.34
Moreover, the Debtors provided adequate disclosure of the Third Party Releases and an opportunity to object.
48. 49. I believe the Third-Party Releases are integral to the Plan and a condition of the settlement embodied therein. The provisions of the Plan were heavily negotiated by sophisticated parties, each of whom are represented by competent counsel. The consensual Third-Party Releases (together with the Debtors’ Releases) are key components of the Debtors’
34 The foregoing description is meant as a summary of the operative plan provisions only. To the extent there is any conflict between the foregoing summary and the definition of “Releasing Party” contained in Article I of the Plan, the Plan shall control.
Restructuring and are a critical inducement to bringing stakeholder groups to the bargaining table. I further believe the Debtors’ key stakeholders are unwilling to support the Plan without assurances that they and their collateral would not be subject to post-emergence litigation or other disputes related to the restructuring. The Third-Party Releases therefore not only benefit the non-Debtor Released Parties, but also the Debtors’ post-emergence enterprise as a whole.
49. 50. Further, the Third-Party Releases are given for consideration. All parties in interest benefit from the Restructuring Transactions contemplated by the Plan, which proposes to substantially deleverage the Debtors’ capital structure and position the Debtors for future success. The Released Parties have made substantial contributions to these Chapter 11 Cases, as set forth above, that will result in the payment in full payment or unimpairment for all holders of General Unsecured Claims. By contrast, as shown in the liquidation analysis contained in the Disclosure Statement, holders of General Unsecured Claims and other creditors would likely receive no recovery in a liquidation scenario. As such, I believe the Third-Party Releases should be approved.
B. The Exculpation Provisions Are Appropriate.
50. 51. Article VIII.E of the Plan provides exculpation from any claim or Cause of Action in connection with or arising out of the administration of the Chapter 11 Cases and certain related transactions, except for acts or omissions that are a criminal act or constitute intentional fraud or willful misconduct. The “Exculpated Parties” include (i) the Debtors, (ii) the Reorganized Debtors, (iii) any statutory committee appointed in the Chapter 11 Cases, (iv) the parties to the Restructuring Support Agreement, (v) the DIP Facility Agent and the DIP Facility Lenders under the DIP Facility Agreement, (vi) the Existing Credit Facility Agent and Existing Lenders under the Existing Credit Facility Documents; (vii) the Priority Exit Facility Agent and
the Priority Exit Facility Lenders under the Priority Exit Facility Agreement, (viii) the New Term Loan Facility Agent and the New Term Loan Facility Lenders under the New Term Loan Facility Agreement, (ix) the Consenting Lenders, and (x) with respect to each of the foregoing Entities in clauses (i) through (ix), each of such Entity’s current and former affiliates, and each such Entity’s predecessors, successors, assigns, subsidiaries, affiliates, managed accounts and funds, and all of their respective current and former officers and directors, principals, equity holders, members, partners, managers, employees, agents, advisory board members, financial advisors, attorneys, accountants, investment bankers, consultants, representatives, investment managers, investment advisors, management companies, fund advisors, and other professionals, and such Persons’ respective heirs, executors, estates, and nominees, in each case in their capacity as such.45
51. 52. The Exculpation Provision was the product of extensive negotiations with third parties, many of whom played a critical role in formulating the Restructuring Support Agreement, the Plan, and related documents in furtherance of the reorganization efforts, which negotiations were extensive and conducted at arms’ length and in good faith with a high degree of transparency. The Exculpation Provision was important to the development of a feasible, confirmable Plan, and many of the Exculpated Parties are participating in the Chapter 11 Cases in reliance upon the protections afforded to the constituents involved by the Exculpation Provision. The Exculpation Provision is necessary and appropriate to protect parties who made substantial contributions to the Debtors’ reorganization from future collateral attacks related to actions taken in good faith in connection with the Debtors’ restructuring.
45 The foregoing description is a summary of the operative plan provisions only. To the extent there is any conflict between the foregoing summary and the definition of “Exculpated Party” contained in Article I of the Plan, the Plan shall control.
52. 53. I can confirm that the Exculpation Provision represents an integral piece of the overall settlements embodied by the Plan and is the product of good faith, arm’s-length negotiations. As such, I believe the Exculpation Provision should be approved.
C. The Injunction Provision Is Appropriate.
53. 54. The injunction provision set forth in Article VIII.F of the Plan implements the Plan’s release and exculpation provisions. I believe the injunction provision is thus a key provision of the Plan because it enforces the release and exculpation provisions that are centrally important to the Plan. As such, I believe the injunction provision should be approved.
III. CAUSE EXISTS TO WAIVE ANY STAY OF PROPOSED CONFIRMATION
ORDER.
54. 55. I am advised that, generally, Bankruptcy Rules 3020(e) and 6004(h) impose a 14-day stay of the effectiveness of an order confirming a chapter 11 plan of reorganization, unless the bankruptcy court orders otherwise. I believe that a waiver of the stay would permit the Debtors to consummate the Plan and commence their implementation without delay after the entry of the proposed Confirmation Order. It is my understanding that the Restructuring contemplated by the Plan, along with all transactions connected thereto, were extensively negotiated among sophisticated parties and have been accepted by a majority of the voting creditors. Further, I believe that each day the Debtors remain in chapter 11, they incur significant administrative and professional costs—expenses that are unnecessary in light of the support for the Plan. Accordingly, I believe the requested waiver of the stay will allow the Debtors to finalize the processes required for their Restructuring in a timely manner and will reduce disruption and incremental costs to the Debtors’ business caused by these cases, and is therefore in the best interests of the Debtors’ estates and creditors and will not prejudice any parties in interest.
Pursuant to 28 U.S.C. § 1746, I declare under penalty of perjury that the foregoing statements are true and correct to the best of my knowledge, information, and belief.
Dated: May 14, 2020
/s/ Michael T. Sicoli Michael T. Sicoli
President and Chief Financial Officer Internap Corporation
