4.IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION In re:
NEIMAN MARCUS GROUP LTD LLC, et al.,1 Debtors.
Chapter 11
Case No. 20-32519 (DRJ) (Jointly Administered)
TERM LOAN LENDERS’ LIMITED OBJECTION TO DEBTORS’ APPLICATION FOR ENTRY OF AN ORDER AUTHORIZING THE DEBTORS TO
(I) RETAIN AND EMPLOY LAZARD FRÈRES & CO. LLC AS INVESTMENT BANKER EFFECTIVE AS OF THE PETITION DATE, (II) MODIFY CERTAIN TIME-KEEPING REQUIREMENTS, AND (III) GRANTING RELATED RELIEF
The Ad Hoc Group of Term Loan Lenders (the “Term Loan Lenders”)2 respectfully submits this limited objection to Debtors’ Application for Entry of an Order Authorizing the Debtors to (I) Retain and Employ Lazard Frères & Co. LLC as Investment Banker Effective as of the Petition Date, (II) Modify Certain Time-Keeping Requirements, and (III) Granting Related Relief [Dkt. 762] (the “Lazard Application”),3 and states as follows:
1 The Debtors in these chapter 11 cases (the “Chapter 11 Cases”), along with the last four digits of each
debtor’s federal tax identification number, are: Neiman Marcus Group LTD LLC (9435); Bergdorf Goodman Inc. (5530); Bergdorf Graphics, Inc. (9271); BG Productions, Inc. (3650); Mariposa Borrower, Inc. (9015); Mariposa Intermediate Holdings, LLC (5829); NEMA Beverage Corporation (3412); NEMA Beverage Holding Corporation (9264); NEMA Beverage Parent Corporation (9262); NM Bermuda, LLC (2943); NM Financial Services, Inc. (2446); NM Nevada Trust (3700); NMG California Salon LLC (9242); NMG Florida Salon LLC (9269); NMG Global Mobility, Inc. (0664); NMG Notes Propco LLC (1102); NMG Salon Holdings LLC (5236); NMG Salons LLC (1570); NMG Term Loan Propco LLC (0786); NMG Texas Salon LLC (0318); NMGP, LLC (1558); The Neiman Marcus Group LLC (9509); The NMG Subsidiary LLC (6074); and Worth Avenue Leasing Company (5996). The location of the debtors’ service address is: One Marcus Square, 1618 Main Street, Dallas, Texas 75201.
2 The Ad Hoc Group of Term Loan Lenders is composed of Pacific Investment Management Company
LLC, Davidson Kempner Capital Management LP, and Sixth Street Partners, LLC, on behalf of certain entities, funds or accounts managed, advised, or controlled by them or affiliates.
PRELIMINARY STATEMENT
1. The Term Loan Lenders collectively hold more than $1.6 billion in principal amount of Neiman’s approximately $2.25 billion in senior secured term loans. They have also committed to fund the Debtors’ $675 million debtor-in-possession (“DIP”) facility and the $750 million exit term loan contemplated by the Restructuring Support Agreement (“RSA”). The Term Loan Lenders, accordingly, are bearing much of the cost of these chapter 11 cases and have an overriding interest in the cases’ success.
2. The Term Loan Lenders do not object as a general matter to the Debtors’ retention of Lazard Frères & Co. LLC (“Lazard”) to provide investment banking services. However, in the particular circumstances of this case, the terms on which the Debtors have proposed to engage Lazard are not reasonable.
3. Lazard’s work in this case, while valuable, is limited in time and scope.
Following a short period of prepetition negotiations brought on by the COVID-19 pandemic, the Debtors entered these cases with an RSA reflecting broad support across their capital structure. The transactions contemplated by the RSA, including committed financing from the Debtors’ prepetition lenders, do not require Lazard to conduct extensive marketing, sales, or structuring activities post-petition. Yet, under the terms requested in the Lazard Application, Lazard stands to earn more than $28.5 million in fees, consisting of fixed monthly fees, a “Restructuring Fee,” and separate financing fees for the DIP and the anticipated term loan exit financings, as well as a possible separate fee for any third-party revolving exit financing. That amount is significantly higher than the expressly capped maximum of $23 million in fees that Lazard could earn in the J.C. Penney case, even though the J.C. Penney case is much more complex than this one from an investment-banking standpoint.
4. In addition, the Debtors seek approval of an indemnity that could be read to cover not only Lazard’s post-petition work, but also its work on the 2017 MyTheresa transactions. Any indemnity that the Debtors provide to Lazard should be clearly and strictly limited to its work under its current engagement with respect to these chapter 11 cases.
5. Ultimately, while the Term Loan Lenders value Lazard’s work and would have preferred not to object to Lazard’s fees, the simple reality is that fees of $28.5 million (or near that amount) will meaningfully affect their recovery, in a context where lenders have already seen substantial impairment of their position from the present economic crisis and from the burden of funding these cases. The Term Loan Lenders thus respectfully request that the Court limit Lazard’s fees as set forth below by: (i) clarifying that no fees will be payable to Lazard under the terms of its engagement letter in connection with exit financing used to repay the DIP financing (for which Lazard was already paid); (ii) clarifying that any extension of prepetition debt, or refinancing of pre-petition debt by the same lenders, does not constitute a “Financing” that would entitle Lazard to a fee; and (iii) imposing a cap on Lazard’s aggregate fees of no more than $19 million.
BACKGROUND
6. In the Lazard Application, the Debtors seek to retain Lazard as their investment banker pursuant to an engagement letter dated as of March 15, 2020. See Lazard Application, Proposed Order Ex. 1 (the “Lazard Engagement Letter”). On March 18, 2020, in light of the COVID-19 pandemic, the Debtors voluntarily closed all of their stores. Declaration of Mark Weinsten, Chief Restructuring Officer of Neiman Marcus Group LTD LLC, in Support of the Debtors’ Chapter 11 Petitions and First Day Motions [Dkt. 86] (the “Weinsten Declaration”) ¶ 6.
7. In response to the sudden and drastic change to the Debtors’ business, the Debtors’ lenders organized quickly. Following a short period of intensive negotiations, the Debtors entered these chapter 11 cases on May 7, 2020 with a RSA executed on the same date, which reflected “a remarkable level of support” from the Debtors’ first, second, and third lien lenders and their equity holders. Weinsten Declaration ¶¶ 10-11 & Ex. B; May 8, 2020 Tr. at 15 (describing “accelerated negotiations” over a “couple of weeks”). Existing lenders have
committed to provide all of the Debtors’ required financing; specifically, the Term Loan Lenders and certain of the Debtors’ noteholders backstopped the $675 million DIP facility (the “DIP Facility”), and the same group committed to provide a $750 million exit facility (the “Exit Term Loan”). Weinsten Declaration ¶ 90. The creditor parties to the RSA also agreed on a proposed equity split for the reorganized company, resolving any potential dispute regarding valuation as among financial creditor classes by agreeing. See id., at Ex. B (Restructuring Term Sheet).
8. Consistent with the terms of the Lazard Application Letter, the Debtors seek approval of the following compensation for Lazard:
• a Monthly Fee of $225,000, of which 50% of fees in excess of $1,350,000 shall be credited against the Restructuring Fee (defined below), Lazard Engagement Letter ¶ 2(a);
• a Restructuring Fee of $15,000,000, payable upon completion of a Restructuring, id. ¶ 2(b);
• Financing Fees equal to 1% of the value of secured financing, 2% of any unsecured financing, and 3% of any other financing, including equity financing, of which 50% shall be credited against any Restructuring Fee, id. ¶ 2(c); and
• in the event of any asset sales, including sales in connection with a “Restructuring,” Sale Transaction Fees payable based on a schedule which range from the greater of 2.5% of consideration or $1,000,000 for sales of less than $25,000,000 to the greater of 0.52% of consideration or $15,000,000 for sales of the majority of the Debtors’ assets or a controlling interest in the equity securities of the Debtors, id. ¶ 2(d) & Sched. 1.
9. In addition, the Lazard Application appends as Exhibit 2 to the Proposed Order an indemnification letter (the “Indemnification Letter”) dated as of March 9, 2017, and the proposed order accompanying the Lazard Application would approve the Indemnification Letter. Lazard Application Proposed Order ¶ 1. As explained in the application, Lazard was first engaged by the Debtors in 2017 “to explore liability management transactions,” and advised the Debtors on a number of transactions in 2018 and 2019, including the distribution of MyTheresa interests to the Debtors’ shareholders in 2018. Lazard Application ¶ 10. The Indemnification letter provides for Mariposa Intermediate Holdings LLC, one of the Debtors in these cases, to indemnify Lazard for any losses “related to, arising out of, or in connection with our engagement,” and thus by its terms would encompass liabilities related to the MyTheresa transactions. Indemnification Letter at 1.
OBJECTION
I. The Debtors have not met their burden under section 328 of the Bankruptcy Code to establish that the terms and conditions of Lazard’s retention are reasonable. 10. Section 327(a) of the Bankruptcy Code authorizes the Debtors to retain
professionals, provided that those professionals “do not hold or represent an interest adverse to the estate” and are “disinterested persons.” 11 U.S.C. § 327(a). Section 328(a) of the
Bankruptcy Code provides that a court may approve employment of a professional person “on any reasonable terms and conditions of employment.” The party filing the application — here, the Debtors — “h[as] the burden to prove that the investment bankers should be retained.” In re Energy Partners, Ltd., 409 B.R. 211, 224 (Bankr. S.D. Tex. 2009).
11. In determining whether the proposed terms and conditions of employment are reasonable, courts consider factor including whether the terms “‘reflect normal business terms in the marketplace,’” “‘whether the retention, as proposed, is in the best interests of the estate,’”
“whether there is creditor opposition to the retention,” and “‘whether, given the size, circumstances and posture of the case, the amount” to be paid is “reasonable.’” Id., at 226 (quoting In re High Voltage Eng’g Corp., 311 B.R. 320, 333 (Bankr. D. Mass. 2004)). To approve a professional fee arrangement, a court must have “a sufficiently strong record” to allow it to “predict whether, and to what extent, a professional will be able to provide a tangible, identifiable, and material benefit to the estate.” In re Energy Partners, Ltd., 409 B.R. at 225, 229-30.
12. Under section 328(a), once a court has approved a fee arrangement for a professional, it may only modify payment at the conclusion of employment “if such terms and conditions prove to have been improvident in light of developments not capable of being anticipated at the time of the fixing of such terms and conditions.” 11 U.S.C. § 328(a); see also In re ASARCO, L.L.C., 702 F.3d 250, 263-67 (5th Cir. 2012). As courts in this Circuit have recognized, fee arrangements under section 328 thus require “particularly close scrutiny,” since money paid to professionals is “difficult, if not virtually impossible, to disgorge once
distributed.” In re Energy Partners, 409 B.R. at 229. As a cautionary example, in In re Mirant Corp., the bankruptcy court granted approval of “success fees” under section 328(a), but later concluded that it had “erred seriously in entering orders which left it so little discretion in
assessing the work of the financial advisors.” 354 B.R. 113, 128 (Bankr. N.D. Tex. 2006). As it turned out, “success” in Mirant was inevitable, and the fees thus essentially guaranteed, even though at least some advisors did not provide a benefit to the estate commensurate with their fees. Id. at 128-29.
13. Under the proposed fee structure, if the transactions contemplated by the RSA are completed in accordance with the approved DIP Milestones, Lazard could receive:
• $1,462,500 in monthly fees, assuming confirmation of the currently proposed plan and consummation by the end of September 2020, resulting in six months of fees paid in full at $225,000 per month and just one half of one month in which 50% of the fee will be credited against the Restructuring Fee;
• $15,000,000 Restructuring Fee;
• $3,375,000 Financing Fee for the DIP financing, based on 1% of the $675,000,000 DIP Facility with 50% credited against the Restructuring Fee; • $3,750,000 Financing Fee for the already-committed term loan exit
financing, based on 1% of the $750,000,000 Exit Term Loan with 50% credited against the Restructuring Fee;4 and
• an estimated $5,000,000 Financing Fee for the expected revolving exit financing, assuming such financing is obtained from third-party lenders,5 based on 1% of an estimated $1,000,000,000 exit facility with 50% credited against the Restructuring Fee.
14. In the circumstances of these cases, providing Lazard with fixed monthly fees plus four separate fees for each of the Restructuring, the DIP Facility, the Exit Term Loan and the revolving exit financing — just over $28.5 million in fees — is unreasonable and duplicative.
15. First, the record concerning prepetition negotiations does not justify the proposed fee structure. As described in numerous filings submitted to this Court, the approved DIP Facility and the proposed Exit Term Loan are both being provided by the Debtors’ existing prepetition lenders and were negotiated simultaneously, with proceeds of the latter being
primarily used to refinance the former. Both of those financings, as well as the restructuring as a
4 The Term Loan Lenders maintain that only one fee is payable under the terms of Lazard’s engagement
letter in respect of the DIP Financing and the Exit Term Loan, as the two are a “series of transactions” constituting a “Financing” under that letter, insofar as Lazard negotiated them on the Debtors’ behalf jointly and as a package.
5 As discussed below, if the prepetition ABL is extended or refinanced by existing lenders, Lazard should
whole, were negotiated prior to the Petition Date during a short period of work. See, e.g., Weinsten Declaration ¶ 11.
16. Second, unless the plan were renegotiated — in which case Lazard could seek additional compensation — Lazard’s remaining work in this case will be fairly limited. The Debtors have filed a plan consistent with the RSA and have requested that the confirmation hearing commence on August 26, 2020. Dkt. Nos. 771, 773. There is no expectation that Lazard will conduct a sale process, seek to negotiate an alternative restructuring, or obtain additional financing beyond replacement of the existing asset-based lending facility (“ABL”). Indeed, as the Debtors have said, “there is likely only one material issue to resolve in these cases: whether and for what consideration the Debtors’ potential claims and causes of action against certain non-Debtor parties should be released,”6 an issue in which Lazard cannot play a part given its role in those transactions. Moreover, because the Debtors propose to retain Lazard pursuant to section 328(a) of the Bankruptcy Code, parties in interest would be deprived of the ability to revisit Lazard’s compensation later in light of the services actually provided and value added. See ASARCO, 702 F.3d at 265 (“[C]ourts routinely hold that subsequent developments were capable of being anticipated when the engagement agreement explicitly plans for the possibility that such developments might occur.”).
17. The debtors in In re J.C. Penney Company, Inc. have recently proposed to retain Lazard on largely similar economic terms, including a monthly fee of $225,000, a restructuring fee of $16 million, and financing fees based on the same scale proposed here. See Dkt. No. 238
6 Debtors’ Preliminary Objection to the Emergency Motion of the Official Committee of Unsecured Creditors for Entry of an Order (A) Authorizing the Committee to Attach a Proposed Plan and Disclosure Statement to the Committee’s Motion to Terminate Exclusivity and (B) Shortening Time for Hearing on the Committee’s Disclosure Statement, as Necessary, and Statement Regarding Anticipated Exclusivity Termination Motion, Dkt. 960 at ¶ 4 (June 22, 2020).
¶ 19, In re J.C. Penney Company, Inc., No. 20-20182 (DRJ) (Bankr. S.D. Tex. May 22, 2020). But crucially, in that case, Lazard has agreed to an aggregate fee cap of $23 million. Id. ¶ 20.
18. A comparison between J.C. Penney and these cases shows that it is not reasonable for Lazard to receive significantly more here than in J.C. Penney. As described above, the RSA embodies a restructuring supported by greater than two-thirds of the Debtors’ four classes of secured debt, with fully committed financing and no need to shop for alternative financing or conduct a sale process. By contrast, according to filings in J.C. Penney, the restructuring support agreement there has only the support of that company’s first lien creditors and contemplates, among other things, a complex transaction in which the debtors will be divided into a real estate investment trust (“REIT”) and an operating company with asset splits yet to be determined, a need to raise new financing for each entity, a “market test” process for new debt and equity financing, and a “lease optimization plan” to “modif[y] or monetiz[e]” a number of existing real estate leases. Declaration of Bill Wafford, Dkt. No. 25 ¶¶ 25, 103, Ex. A § 1.01, In re J.C. Penney Co., No. 20-20182 (DRJ) (Bankr. S.D. Tex. May 15, 2020). J.C. Penney did not even file with a business plan; rather, if J.C. Penney’s DIP lenders are not satisfied with the debtors’ in-process business plan by July 15, then the case will “toggle” to a sale pursuant to section 363 of substantially all of the debtors’ assets. Id. Annex 1 at 21. Thus, on the J.C. Penney debtors’ behalf, Lazard is expected to conduct significant marketing, financing and related post-petition activities, and possibly an auction of the company as an entirety.
19. In this case, by contrast, Lazard’s ongoing work is limited, and yet the fee structure is quite similar — except that, in stark contrast to the $23 million cap in J.C. Penney, there is no cap here on Lazard’s overall fees, creating extra risk of duplication and unforeseen increases. In recent retail cases beyond just J.C. Penney, Lazard, like other investment banking
firms, has repeatedly agreed to overall fee caps well below the total fees contemplated here. See In re Chinos Holdings, Inc., Dkt. 216, Ex. 1 ¶ 3(d), No. 20-32181 (KLP) (Bankr. E.D. Va. May 14, 2020) (the “J. Crew Lazard Application”) (agreeing to $12.5 million overall fee cap for Lazard’s services); In re Nine West Holdings, Inc., Dkt. 382 ¶ 4(a), No. 18-10947 (SCC) (Bankr. S.D.N.Y. June 14, 2018) (the “Nine West Lazard Order”) (ordering overall fee cap of $13 million to be paid to Lazard); see also, e.g., In re Pier 1 Imports, Inc., Dkt. 525 ¶ 9(d), No. 20-30805 (KRH) (Bankr. E.D. Va. Apr. 8, 2020) (ordering overall fee cap of $8.25 million to be paid to Guggenheim Securities, LLC); In re Forever 21, Inc., Dkt. 189 ¶ 21, No. 19-12122 (KG) (Bankr. D. Del. October 10, 2019) (agreeing to $10 million aggregate fee cap to be paid to Lazard); In re Sears Holdings Corporation, Dkt. 345 ¶ 13, No. 18-23538 (RDD) (Bankr. S.D.N.Y. October 26, 2018) (agreeing to $12.5 million aggregate fee cap to be paid to Lazard, later increased to a total of $19.5 million to reflect additional asset sale services provided by Lazard). The lack of any such basic safeguard in this case calls into question whether the Debtors attempted to negotiate Lazard’s fees in any meaningful way.
20. The recent J. Crew bankruptcy (captioned In re Chinos Holdings, Inc.) also provides an instructive comparison. As in these cases, the J. Crew debtors filed with a
restructuring support agreement supported by a significant majority of certain secured creditors; obtained committed DIP and exit financing from existing lenders; and have already filed a plan with a projected exit from chapter 11 in September 2020. See Declaration of Michael J.
Nicholson in Support of Debtors’ Chapter 11 Petitions and First Day Relief, Dkt. No. 6 ¶ 6, In re Chinos Holdings, Inc., No. 20-32181 (KLP) (Bankr. E.D. Va. May 4, 2020) (the “Nicholson Declaration”); see also Proposed Disclosure Statement, Dkt. No. 469 at 10-11, In re Chinos Holdings, Inc., No. 20-32181 (KLP) (Bankr. E.D. Va. June 11, 2020) (describing creditor
support and proposed schedule). In J. Crew, however — despite having begun its work in April 2019, more than a year before the petition was filed (Nicholson Declaration ¶ 62) — Lazard agreed to compensation of: (i) a monthly fee of $150,000, 50% of which is credited against the Restructuring Fee; (ii) a $9 million Restructuring Fee; and (iii) Financing Fees of 1%-2% of secured financing, 2% of unsecured financing, and 3% of equity financing, 50% of which is credited against the Restructuring Fee. The fees are subject to an aggregate cap of $12.5 million. J. Crew Lazard Application ¶ 13.
21. Similarly, in the Nine West case, Lazard earned (i) a monthly fee of $150,000, 50% of which was credited against the Restructuring Fee; (ii) a $7.25 million Restructuring Fee; and (iii) Financing Fees of 1.5% of secured financing, 3-3.5% of unsecured financing, and 6% of equity financing, 50% of which were credited against the Restructuring Fee, and all subject to an aggregate $13 million cap. Nine West Lazard Order ¶ 4; Lazard Application, Dkt. No. 206 ¶ 18, In re Nine West Holdings, Inc. (Bankr. S.D.N.Y. May 6, 2018). Although the Debtors in these cases have more debt than J. Crew or Nine West, Lazard’s work here does not merit
approximately double the compensation earned for their work on behalf of those debtors. 22. In sum, in the circumstances presented, it is not reasonable to lock in payment to Lazard of three separate transaction fees exceeding $22 million in the aggregate (on top of an expected $1.4 million of monthly fees and up to $5 million more if Lazard advises the Debtors on a third-party exit revolver commitment) for work that was concentrated in a short, sustained period of negotiations with existing creditors that resulted in pre-negotiated deals for an overall restructuring and “two” financings, one of which (the Exit Term Loan) refinances the other (the DIP) to provide capital on a permanent rather than DIP basis. In at least two recent cases, Lazard agreed that it was not entitled to similarly duplicative fees. See In re Claire’s Stores, Inc., No.
18-10584 (MFW) (Bankr. D. Del. 2018) (“[N]o Financing Fee shall be payable to Lazard on account of any exit financing for the Company if it is an exit financing into which substantially all lenders and the agent of a DIP Financing facility previously approved by the Bankruptcy Court have rolled.”) In re The Gymboree Corp., Dkt. 190 ¶ 12(c), No. 17-32986 (KLP) (Bankr. E.D. Va. June 23, 2017) (same). Likewise, it should be made clear that Lazard would not be entitled to a Financing Fee if the necessary exit revolver financing comes from the existing prepetition ABL lenders refinancing their own debt.7 And in addition to the duplication of fees, the absence of an overall fee cap creates problematic incentives: For example, if the necessary exit revolver financing could be provided through either extension of the existing facility or a new third-party financing, only the latter would generate an additional Financing Fee for Lazard.
23. In order to bring Lazard’s fees more into line with the circumstances of the case, the Court should: (i) be clear that it allows Lazard to be paid only one Financing Fee for the DIP Facility, and not a separate one for the Exit Term Loan; (ii) make clear that any extension of prepetition debt, or refinancing of pre-petition debt by the same lenders, does not constitute a “Financing” that would entitle Lazard to a fee; and (iii) impose an overall cap of $19 million, still a robust fee, which recognizes both that Lazard has added value and that this case is less complex for Lazard than a case such as J.C. Penney (where Lazard is subject to an overall fee cap of $23 million).
7 The Term Loan Lenders do not believe that rolling prepetition debt in this manner would entitle Lazard
to a Financing Fee under the letter as currently drafted; however, to avoid any doubt the order should be clarified accordingly. See Lazard Engagement Letter ¶ 19 (defining “Financing” as any transaction involving “newly-issued” equity or debt).
II. The proposed indemnity in favor of Lazard appears inappropriately broad. 24. Although is not unusual for a debtor to provide its investment banker with an indemnity for the work performed pursuant to the engagement, the Debtors may be requesting the Court’s approval of a far broader indemnity. The Indemnification Letter is dated as of March 9, 2017 and would appear, by its terms, to cover Lazard’s work on the disputed MyTheresa transactions that are the subject of ongoing investigation by the Creditors’ Committee and the Disinterested Manager. See Indemnification Letter at 2; Engagement Letter at ¶ 2(g) (“As part of the compensation payable to Lazard hereunder, the Company and Lazard agree to the
indemnification, reimbursement, contribution, and other provisions attached as Addendum A to the letter agreement among Lazard, Proskauer, and the Company dated as of March 9, 2017 (the “Indemnification Letter”), which remains in full force and effect. Such provisions are
incorporated herein in their entirety and shall apply to Lazard’s engagement hereunder.”). 25. The proposed order is ambiguous as to whether it covers the indemnities contained in the Indemnification Agreement. The proposed order states that the Debtors are authorized to retain Lazard under “the terms and conditions set forth in the Engagement Letter and the Indemnification Letter” (Lazard Application, Proposed Order ¶ 2), and the compensation payable under the Engagement Letter (which includes the indemnification obligations) is being approved in its entirety. Id. ¶ 3. The proposed order also states that “the indemnification and other provisions set forth in the Indemnification Letter are approved,” id. ¶ 9, although it goes on to state that the approval is “subject during the pendency of these chapter 11 cases to the
following,” including that the Debtors “are authorized to indemnify, and to provide contribution and reimbursement to, and shall indemnify, and provide contribution and reimbursement to, the Indemnified Persons (as defined in the Indemnification Letter) in accordance with the
provided for in the Engagement Letter.” Id. ¶ 9(a). Thus, although the proposed order could be read to limit the application of the 2017 Indemnification Letter to matters related to the 2020 Engagement Letter, the scope of the “related to” qualifier is itself unclear, in part because the Engagement Letter identifies the Debtors’ commitments under the Indemnification Letter as part of Lazard’s compensation for its present services. Engagement Letter ¶ 2(g) (stating that the Indemnification Letter is “part of the compensation payable to Lazard” under the Engagement Letter and “remains in full force and effect”).
26. Accordingly, the proposed order should be clarified so that there is no doubt that Lazard’s claim to indemnity, if any, from the Debtors and their non-debtor affiliates for work done in 2017 and 2018 is not being approved, assumed, or subject to administrative expense treatment. At a minimum, language should be added to the proposed order stating: “For the avoidance of doubt, the Debtors are not authorized pursuant to this Order to indemnify the Indemnified Persons for any claim arising from, related to, or in connection with services
provided to the Debtors or their non-debtor affiliates prior to March 15, 2020, or for any services provided to the Debtors or any of their non-debtor affiliates in connection with the MyTheresa Distribution or the 2019 Recapitalization Transaction.”
CONCLUSION
27. For the foregoing reasons, the Term Loan Lenders respectfully request that the Court deny the Lazard Application in its current form.
Dated: June 25, 2020 Respectfully submitted, /s/ Barrett H. Reasoner GIBBS & BRUNS LLP Barrett H. Reasoner David Sheeren Caitlin Halpern 1100 Louisiana Suite 5300 Houston, Texas 77002 Telephone: 713-650-8805 [email protected] [email protected] [email protected]
CONFLICTS COUNSEL TO THE AD HOC GROUP OF TERM LOAN LENDERS
CERTIFICATE OF SERVICE
I certify that on June 25, 2020, I caused a copy of the foregoing document to be served by the Electronic Case Filing System for the United States Bankruptcy Court for the Southern District of Texas.
