veritext reporting company - kccllc.net€¦ · veritext reporting company 212-267-6868...

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1

2 UNITED STATES BANKRUPTCY COURT

3 SOUTHERN DISTRICT OF NEW YORK

4 Case No. 09-11233-REG

5 - - - - - - - - - - - - - - - - - - - - -x

6 In the Matter of:

7

8 CHEMTURA CORPORATION, et al.,

9

10 Debtors.

11

12 - - - - - - - - - - - - - - - - - - - - -x

13

14 United States Bankruptcy Court

15 One Bowling Green

16 New York, New York

17

18 June 17, 2010

19 9:47 AM

20

21 B E F O R E:

22 HON. ROBERT E. GERBER

23 U.S. BANKRUPTCY JUDGE

24

25

VERITEXT REPORTING COMPANY212-267-6868 www.veritext.com 516-608-2400

¨0¤{,A*&5 $¤«

0911233100621000000000004

Docket #2935 Date Filed: 6/18/2010

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1

2 HEARING re Debtor's Motion to Extend their Exclusive Periods to

3 File a Plan of Reorganization and Solicit Acceptances Thereof.

4

5 HEARING re: Third Interim Fee Application for DLA Piper, LLP

6

7 HEARING re Twenty-Sixth Tier I Omnibus Objection to Certain

8 Proofs of Claim [docket 2740]

9

10 HEARING re Twenty-Seventh Tier I Omnibus Objection to Certain

11 Proofs of Claim [docket 2741]

12

13 HEARING re Twenty-Eighth Tier I Omnibus Objection to Morris,

14 Sakalarios & Blackwell, PLLCs Proof of Claim No. 1002 [docket

15 2742]

16

17

18

19

20

21

22

23

24 Transcribed by: Dena Page

25


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1 A P P E A R A N C E S :

2 KIRKLAND & ELLIS LLP

3 Attorneys for Chemtura Corp., et al

4 601 Lexington Avenue

5 New York, NY 10022

6

7 BY: NATASHA M. LABOVITZ, ESQ.

8 CRAIG BRUENS, ESQ.

9

10 KIRKLAND & ELLIS, LLP

11 Attorney for Debtor

12 665 Fifteenth Street

13 Washington, D.C. 10022

14

15 BY: BRIAN T. STANSBURY, ESQ.

16

17 AKIN GUMP STRAUSS HAUER & FELD LLP

18 Attorneys for Official Committee of Unsecured Creditors

19 1 Bryant Park


21

22 BY: PHILIP C. DUBLIN, ESQ.

23 MEREDITH LAHAIE, ESQ.

24

25


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1 SKADDEN ARPS SLATE MEAGHER & FLOM

2 Attorneys for Official Committee of Equity

3 Security Holders

4 Four Times Square


6

7 BY: DAVID M. TURETSKY, ESQ.

8 JAY M. GOFFMAN, ESQ.

9

10 U.S. DEPARTMENT OF JUSTICE

11 Office of the United States Trustee

12 33 Whitehall Street

13 Suite 2100


15

16 BY: BRIAN S. MASUMOTO, ESQ.

17

18 JONES DAY

19 Attorneys for Ad Hoc Bondholder Committee

20 222 East 41st Street

21 New York, New York 10017

22

23 BY: RICHARD L. WYNNE, ESQ.

24

25


CHEMTURA CORPORATION, et al

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1 P R O C E E D I N G S

2 THE COURT: Chemtura. Ms. Labovitz, you're taking the

3 lead today?

4 MS. LABOVITZ: Good morning, Your Honor. I'm Natasha

5 Labovitz from Kirkland & Ellis representing the debtors. Your

6 Honor we have a hearing today in which all of the matters we'll

7 present to the Court are uncontested. That said, I do think

8 some of them will require some explanation or updates to the

9 Court which we're happy to provide. With Your Honor's

10 permission, we'll go in the order in which things are laid out

11 on the agenda.

12 THE COURT: Sure.

13 MS. LABOVITZ: Okay.

14 THE COURT: I will look to you for leadership. I

15 don't have my copy of the agenda with me.

16 MS. LABOVITZ: Okay.

17 THE COURT: I assume it was provided. I don't know

18 where it is.

19 MS. LABOVITZ: Okay. That's fine, Your Honor. The

20 first item on the agenda is the motion to extend.

21 THE COURT: Forgive me. No I am not talking about the

22 calendar. I'm talking about the agenda.

23 MS. LABOVITZ: We understand. I have a copy that I

24 can hand up, if it's helpful.

25 THE COURT: All right. Thank you.



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1 (Handing)

2 THE COURT: Okay.

3 MS. LABOVITZ: The first item on the agenda is the

4 debtor's motion to extend their exclusive periods to file a

5 plan of reorganization and solicit acceptances thereof. Your

6 Honor, the debtors have requested a 99 day extension of the

7 exclusive periods. It's not an even number because we have

8 requested the maximum extension available under the statute.

9 So this is the last time we will be before the Court on

10 exclusivity.

11 At this stage of the case, we have made really what I

12 would consider to be tremendous progress through some very

13 complicated issues due to the very substantial efforts of many

14 of the people in the room and many who are not here today.

15 At the time we filed our exclusivity motion, the

16 company also put out a press release saying that we would file

17 a plan by June 17. They did this because the company has been

18 receiving numerous and escalating questions and concerns from

19 suppliers and customers as the case has extended now into its

20 second year asking when the company will be emerging from

21 bankruptcy and what progress it is making in its case.

22 I'm happy to report that although we have not filed a

23 plan right now, we are very optimistic that we will file a plan

24 this afternoon. There is a board meeting at noon to consider

25 it and we anticipate filing later in the day. I will not go



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1 into the details of what the plan will provide, Your Honor, in

2 large part because I believe there are press and some

3 securities holders in the courtroom today and I wouldn't want

4 to anticipate the event that people have been looking forward

5 to. But I will say that we are optimistic that the plan we

6 file will have the support of the creditors committee and an ad

7 hoc committee of bondholders.

8 THE COURT: That's the new bunch that Mr. Wynne is

9 acting for?

10 MS. LABOVITZ: That's correct, Your Honor. You may

11 have seen the 2019 statement that was filed.

12 THE COURT: I saw the 2019.

13 MS. LABOVITZ: Thank you.

14 THE COURT: Although it was pretty thick and I haven't

15 reviewed it with the care that I might.

16 MS. LABOVITZ: We understand. Your Honor as I said,

17 although we are still reviewing documents and things are being

18 finalized even now and many of us did not get very much sleep

19 last night as we tried to meet our deadline to file the plan

20 today, our self-imposed deadline, we are very optimistic that

21 we will have the support of both the creditors committee and

22 the ad hoc committee.

23 Your Honor, at this time I think it's fair to say that

24 we do not have support from the equity committee for the plan

25 that will be filed today. However, we would like to thank Mr.



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1 Goffman and his constituents for working very constructively

2 with us even in light of that. We have been engaged in --

3 engaged with the equity committee in a dialogue regarding

4 potential alternate transactions with equity investors who

5 might be able to make equity investments at a higher valuation

6 that would provide greater recovery or improved recovery for

7 both creditors and equity security holders.

8 We have been working with them to support diligent

9 efforts and we intend to continue doing that, even following

10 the filing of the plan. We have had a constructive

11 relationship with the equity committee so far. We hope that

12 continues and although the debtors don't right now anticipate

13 that an alternate transaction is available, they will, of

14 course consider it consistent with their fiduciary duties and

15 be mindful of those duties even after the plan is on file.

16 That said, Your Honor, from our perspective, this is

17 the plan of reorganization that's available to the company

18 today. We believe that the valuation that will be set forth in

19 the plan is a fair valuation, certainly from the perspective of

20 the debtors' experts and we believe that in order to quell the

21 concerns of customers and suppliers that might damage the

22 business, it's important to emerge from Chapter 11 as quickly

23 as we can. Therefore, while we want to continue to facilitate

24 due diligence and will be mindful of fiduciary duties, we also

25 think it's important to take the plan we have, move forward



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1 with it quickly and not delay confirmation. With that, Your

2 Honor --

3 THE COURT: Pause please, Ms. Labovitz.

4 MS. LABOVITZ: Yes, sir.

5 THE COURT: You talked about the upcoming filing of

6 the plan. I didn't hear you say disclosure statement and I

7 assume the disclosure statement is going to have to trail the

8 filing of the plan by some point in time.

9 MS. LABOVITZ: No, Your Honor, I should have made more

10 clear; we'll be filing a plan and a disclosure statement today.

11 Along with that, we will be filing a motion to -- for a brief

12 shortening of the time for objections to the disclosure

13 statement to allow for a disclosure statement hearing on July

14 13 which I believe is the next omnibus date that Chemtura has

15 before Your Honor. Alternately, we could set an omnibus date,

16 something like a week later but we thought we would try to

17 stick to Your Honor's schedule.

18 THE COURT: We have two material gating issues as I

19 understood it, as we talked about the estate's needs and

20 concerns over the last several months, those being getting a

21 resolution of environmental claims and demands and getting our

22 arms around the extent of the Diacetyl claims. I don't want

23 you to have to discuss stuff now prematurely in light of any

24 possible 34 Act concerns but can I assume that the plan would

25 provide a mechanism for emerging from Chapter 11 with some kind



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1 of, I don't know, game plan for dealing with those at whatever

2 level they come in or --

3 MS. LABOVITZ: Yes, Your Honor. The plan does provide

4 what we believe is the mechanism that allows for emergence on

5 the timetable I am laying out at July 13 disclosure statement

6 hearing and a commensurate confirmation hearing.

7 Among other things, the plan built on what we have

8 been doing in this courtroom with respect to setting a date for

9 Diacetyl estimation hearing and if necessary, we would use that

10 hearing to establish necessary reserves for Diacetyl claims.

11 That said, Your Honor, we continue to be actively

12 engaged with not just our funded debt constituencies and our

13 equity holders but with all of our constituencies with an

14 effort towards a global settlement of the issues raised in the

15 case. And in that regard, we are in active discussions with a

16 large group of Diacetyl claimants with the insurers who would

17 provide coverage for Diacetyl claims and in separate

18 discussions with numerous regulatory authorities regarding

19 environmental claims. We are hopeful that those efforts will

20 yield settlements that would require less judicial intervention

21 to establish reserves. And in that event, we would update the

22 disclosure statement and the plan to reflect those settlements

23 before the disclosure statement hearing.

24 THE COURT: Okay. Anything else on exclusivity?

25 MS. LABOVITZ: Not from my perspective, Your Honor,



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1 except really just to thank everyone in the room who has worked

2 very hard with us to get us to think point.

3 THE COURT: Okay. I will hear comments from the

4 official committee. Mr. Dublin, unsecureds?

5 MR. DUBLIN: Good morning, Your Honor. Phil Dublin,

6 Akin Gump on behalf of the official creditors committee. Your

7 Honor, the creditors committee supports exclusivity. It is a

8 rather long extension for the last 99 days of the period

9 permitted by the code. However, as Ms. Labovitz mentioned

10 before, subject to the board meeting this afternoon, we believe

11 that a plan and disclosure statement will be filed that has the

12 support of the creditors committee, that has the support of an

13 ad hoc committee that consists of a substantial portion of the

14 unsecured notes issued by the company and believe that the plan

15 that will be filed satisfies all of the applicable provisions

16 of bankruptcy code.

17 The committee, like the debtors, is prepared to

18 continue to engage in discussions with the equity committee to

19 try to get them to support the plan or to reach resolution on

20 any other issues that they may have with respect to the Chapter

21 11 cases and we look forward to a speedy process to get this

22 company out of Chapter 11 now that we're at the point of

23 finally filing a plan.

24 THE COURT: Okay. Thank you. Mr. Goffman, equity?

25 MR. GOFFMAN: Thank you, Your Honor. Jay Goffman from



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1 Skadden Arps on behalf of the official equity committee.

2 Your Honor, if I may, I would like to take a few

3 minutes to explain the position of the equity committee with

4 respect to the exclusivity motion. To understand where we are,

5 we almost have to go back and understand where we started from.

6 When these cases were filed in March of 2009, everybody

7 believed there was no equity value; the debtor said so, the

8 secured creditors said so, the unsecured creditors said so, the

9 U.S. Trustee believed so.

10 It was a low point, one of the low points in U.S.

11 economic history at that time. The world changed since then.

12 By the fall, many people began to believe that there truly was

13 equity value, that these companies might be solvent. And so we

14 began to approach the U.S. Trustee. And after a series of

15 writings and meetings, the U.S. Trustee became convinced and

16 appointed an equity committee.

17 Since that time, we have worked consensually with the

18 debtor and with the creditors committee to try to develop a

19 plan of reorganization that would satisfy everyone. We

20 believed from the beginning and we believe still today that a

21 plan can be done that pays creditors in full preserving the

22 maximum equity value. We believe that's what the law requires

23 if you can do that.

24 And we have worked consensually with the debtors.

25 We've provided them early on with term sheets, with highly



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1 confident letters and with outlines on how we think we can get

2 from where we were to a fully financed plan that pays off all

3 claims in full. And it's been a good dialogue. We have no

4 issue with how we have worked with the debtor and with the

5 various other constituencies. But we had -- there was always a

6 problem. The problem is that different constituencies have

7 different agendas. Ours is very simple. We're the equity.

8 We wanted to maximize the value available for all stakeholders.

9 We wanted to present a plan that would pay claims in full and

10 preserve the equity.

11 The debtors have said they want to maximize value also

12 but it's also been clear that two -- they have had two other

13 high priorities; one is to get this company out of Chapter 11

14 as quickly as possible. The other is to have as little debt on

15 the company as possible when it emerges. We understand that's

16 a natural desire for management to have. Everybody would like

17 to run a company with as little debt as possible, so that your

18 positioned to do remedy activities as you go forward.

19 So we have a had a back and forth on that because

20 obviously to the extent we would lower the amount of doubt that

21 we think we can -- this company can support, we have to raise

22 more money in equity value to make it balanced. So we have had

23 that dialogue.

24 The creditors similarly I think are generally divided

25 into a couple of camps, the way they normally are in Chapter 11



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1 cases. You have those creditors that just want to get paid in

2 full. That's a normal thing. And then you have those

3 investors who bought into the bonds hoping and believe that

4 they would become the fulcrum security they could convert into

5 equity.

We see that all of the time. We see that in many

6 cases. We've seen that here. And that's -- there is a natural

7 tension there between the existing owners and the people that

8 want to become the owners. So we've had this dialogue.

9 And we thought we were getting close, we did. We had

10 many good meetings with the debtor but as of a couple of weeks

11 ago, it became clear that we were still apart from each other

12 in terms of how much debt the company could handle and in terms

13 of what a plan would look like. So we know the debtor is going

14 to file a plan today. As we understand it, it's not a plan

15 that we currently support but we went back to the committee and

16 said should we file an objection to exclusivity? Should we

17 bring in a motion to terminate? Should we tell them we have a

18 different plan in hand? Should we do all of the things --

19 should we say that there's some sort of breach of fiduciary

20 duty? And we came back and said no. We have been working well

21 with everyone up to now. Let's still try to build that

22 consensual plan.

23 UBS is our financial advisor. UBS continues to tell

24 us that they can raise a substantial amount of new money for

25 this company. As we calculate the numbers, we need about a



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1 billion eight-five in total dollars to pay -- to deal with all

2 of the claims that have to be paid under a plan. Some claims

3 would get passed through in the ordinary course but that's what

4 we need. We have from UBS a highly confident letter that

5 indicates that they believe right now they could raise a

6 billion three-five, leaving us about five hundred million in

7 new equity to be raised. A couple of members of the committee

8 have said they would put up over two hundred fifty million

9 dollars. And a couple of new investors have now signed

10 confidentiality agreements and are doing their diligence with

11 the debtor to see whether -- at what level they want to invest.

12 It's our hope that within a couple of weeks we can come back to

13 the debtor and demonstrate a plan that will pay all creditors

14 in full.

15 Now I know there's going to be a tension because

16 that's more debt than the debtor wants and we hope we can work

17 through that tension.

18 THE COURT: Pause please, Mr. Goffman. Most of all of

19 the new money that you would propose to be raised would be in

20 the form of debt as contrasted to equity?

21 MR. GOFFMAN: Well it's a split. There's about a

22 billion three-five of debt and about five hundred to six

23 hundred million of equity -- new equity.

24 THE COURT: Continue please.

25 MR. GOFFMAN: And so we expect -- we hope to come back



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1 to the debtor with that plan within a couple of weeks and we

2 hope at that time that consistent with what everyone said up to

3 now, that if we can show a fully financed plan that preserved

4 -- pays claims in full and preserve equity value, that they'll

5 pull the existing plan and switch to our plan. If not, we may

6 come back to Your Honor and ask at that point to terminate

7 exclusivity.

8 Now it's possible that plan might include reinstating

9 a piece of debt possibly or converting a piece of debt

10 depending upon how the numbers work out. We understand that

11 adds a challenge to Your Honor because it could raise valuation

12 issues. So we would rather do the former to make it simple;

13 just pay the claims, preserve the equity. But either way, we

14 expect to come back to the debtor and if necessary to this

15 court, sometime in the next two to three weeks hopefully with a

16 different plan, a plan that supports -- that pays creditors in

17 full, that satisfies all of the claims and preserves equity

18 value.

19 And I wanted to put this on the record so that there

20 was no misunderstanding about the equity committee's position.

21 Now that just raises one issue. The -- Ms. Labovitz mentioned

22 July 13 as a possible disclosure statement hearing. I think

23 given the fact that we need two to three weeks to try to

24 present an alternative plan, I would hope that that's actually

25 -- I think that's actually premature. I would think you would



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1 -- we would rather schedule a date sometime in August, so that

2 we have time to present a different plan and if not, it can

3 still -- there's still a disclosure statement hearing in August

4 with a potential confirmation hearing in September.

5 I am just afraid that if we move down the road towards

6 a disclosure statement hearing now on a plan that we hope will

7 be withdrawn in the next few weeks, we are wasting time and

8 effort. And it would be better to just get it all done in one

9 schedule. It's still within the extension of exclusivity that

10 the debtors have asked for.

11 THE COURT: Okay. Thank you, Mr. Goffman. Mr. Wynne,

12 do you want to be heard?

13 MR. WYNNE: Yes, Your Honor. Good morning, Your

14 Honor. Your Honor as you noted, we filed a 2019 on Friday.

15 It's fairly extensive. I have another copy, Your Honor, if you

16 wanted to see it.

17 THE COURT: Well certainly you can and should be heard

18 now, Mr. Wynne. My tentative subject to people's rights to be

19 heard is to proceed as if the proposed new 2019 would govern

20 this case and that any party that's in compliance with either

21 the older or the new 2019 would not get a sua sponte complaint

22 from me, assuming that I can understand that it does give me

23 what the new one would require which I think was the thrust of

24 what you were trying to tell me, with a reservation of rights

25 for anybody to be heard on that issue, so long as it's not for



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1 merely tactical reasons. And of course reserving the right

2 that any judge has to require disclosure if it ever becomes

3 relevant enough for some reason other than simply complying

4 with 2019.

5 Now, that's based upon my intermediate thought and

6 also on my belief that if I go through all of those exhibits I

7 will be able to tell the positions of the various members of

8 your committee. It's too soon for me to know whether or not

9 that's the case and certainly I would want to know if anybody's

10 got a short or a derivative that has the equivalent of

11 something like that.

12 But I think you can and should proceed on your

13 existing game plan for now, Mr. Wynne and if we have any issues

14 down the road, I will deal with them then. I do want to say

15 repeating myself that I care about the integrity of the system

16 and I have no patience for people looking for 2019 compliance

17 to advance tactical agendas. I don't want to reprise in my

18 court of what I saw in Six Flags. So just go ahead with

19 whatever you want to talk about but don't consider 2019 to be a

20 problem you've got to deal with now, Mr. Wynne.

21 MR. WYNNE: Okay. Thank you, Your Honor. Your Honor

22 actually we were -- we did attempt clearly to be in compliance

23 with the rule and in fact, it was very interesting that while

24 we were preparing to get this filed, the advisory committee

25 actually issued the new rules which were very much in line,



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1 Your Honor, with the comments that you had submitted to the

2 committee. And what we had suggested and we left that

3 suggestion in because obviously the biggest sensitivity among

4 the bondholder group is the pricing information, was that if

5 required -- if Your Honor required or wanted to see it, we

6 would submit that under seal under Section 107(b).

7 So I think that we were intending clearly to comply.

8 I'm well aware, Your Honor, of the -- your concerns about short

9 positions. Those are listed. There's I think a very few minor

10 short positions that some of the people we do have in the group

11 but I will just briefly give you a little background about the

12 group and then obviously we did not have an objection to

13 exclusivity. In fact, we support the debtor's motion.

14 This group is an interesting group of ad hoc

15 bondholders because they formed actually back I think around

16 August and September actually to try to encourage the debtors

17 to as quickly as possible emerge from Chapter 11 and to move

18 forward towards a plan. And that has really been the group's

19 agenda.

20 Obviously there have been a lot of intervening things

21 over the fall. Clearly there are different views with respect

22 to value. We, in fact, our group -- the group did retain

23 Mollis as their financial advisors. They've been engaged since

24 October, I think. And clearly we have a view of value that

25 this company is still insolvent and that there really is not a



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1 place for an equity recovery. There's a dispute over that with

2 the equity committee and this is not the time to hash that out.

3 I just wanted to let Your Honor know that we have a different

4 view with respect to that.

5 But our main goal and purpose in forming and in what

6 we have done, and we have not appeared before Your Honor before

7 because frankly we didn't -- there wasn't a need to. What we

8 did was we very closely monitored what was going on. The

9 debtors gave us access. We did sign confidentiality agreements

10 early with them and we had access. And effectively, we wanted

11 a due diligence on some of the major issues; Diacetyl

12 environmental claims and there's a whole range of other issues

13 that the bondholders were very concerned about.

14 The group is quite large. We have about just under

15 eight hundred million dollars of the funded debt in the case.

16 That's broken out and I can give -- the numbers change because

17 of trading although there has not been extensive trading of

18 late but with the 2019 that we had filed with respect to the

19 2016 Chemtura Corp. debt, our clients held about three hundred

20 fifty million of it. We had in the 2009s, about two hundred

21 and forty-five million. We also had in the 2026s, about a

22 hundred and eight million, and as well as the members hold a

23 significant portion of the bank debt. So all together it's

24 about seventy percent of the funded debt.

25 We proceeded and through the fall obviously the



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1 impetus was to try to get a plan on file; other things

2 intervened. And there's been a series of negotiations of late

3 that we're obviously very hopeful are going to result in a plan

4 filed today. The term sheets and various proposals have been

5 accepted in concept. There's some filed documentation that

6 needs to happen and the debtors need to obtain court approval

7 -- excuse me, board approval.

8 Once they obtain the board approval, Your Honor, we

9 intend to enter into and have drafted plan support agreements

10 that we believe will be entered into by most of our clients, so

11 we think we'll be above fifty percent in the debt for each

12 bondholder class. And then we would be -- the debtor would

13 file a motion to have the plan support agreement approved by

14 Your Honor and reviewed by Your Honor. That's the process that

15 we think makes the most sense.

16 With respect to Mr. Goffman and obviously I respect

17 Mr. Goffman and his position and know him for a long time, but

18 the equity has really had a very long time to come up with a

19 proposal to pay creditors. My clients have waited -- this case

20 -- this company has been in bankruptcy for a very long time.

21 My clients have, you know -- there has not been a secret

22 through the fall of the equity committee, was trying to

23 organize, was trying to raise money. And frankly, they simply

24 have not come up with it.

25 They haven't come up with a sufficient amount. They



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1 haven't come up with a capital structure that if the debtors or

2 the creditors committee or our financial advisors have thought

3 made sense in terms of paying creditors in full if they want to

4 preserve some recovery for equity.

5 And I am not going to argue the valuation here, Your

6 Honor, I just wanted to let you know that there's a very strong

7 difference of opinion. We believe the company is still

8 insolvent. We, in fact, think that the debtors valuation was

9 higher than we would otherwise have come up with. The plan is

10 a compromise in terms of their -- the plan is a compromise

11 among many different parties of many different issues.

12 If the equity committee can, you know, come up with

13 something that's different, people will consider it. I mean

14 you know people are not going to not consider something but

15 there are different views about value and what the company

16 could support. I don't want to go into any of the specifics of

17 the plan because it's not been filed yet. We will have that

18 opportunity. But the one thing that I would ask the Court is

19 we would actually urge that the debtors timetable be adhered

20 to, that we not further delay this. We think this company has

21 been in bankruptcy long enough and it's time to move forward.

22 The equity committee could have come up with a more

23 concrete proposal before this. If they come up with one in two

24 or three or four weeks, they will present it to the Court and

25 try to proceed on it and we'll deal with it then based on what



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1 it is. But to delay this process any further now, we just

2 think that it would be a mistake.

3 THE COURT: Okay. Anybody else with a financial stake

4 in the case want to be heard? Any comments by the U.S.

5 Trustees Office at this point? I thought I saw Mr. Matsumoto.

6 MR. MATSUMOTO: Not at this point.

7 THE COURT: Okay. All right. Folks at this point, I

8 have an unopposed motion for an extension of exclusivity that

9 extends the exclusive period under which the debtors can file a

10 reorganization plan for a little more than three months. The

11 requested extension is within the limits prescribed under the

12 code. And as the colloquy before me indicated, there are

13 differences in perspective as the best way for the case to go

14 forward which are natural, in large Chapter 11s and even

15 smaller ones. And they arise both from different visions as to

16 the best way to pay off the unsecured creditor community which,

17 of course, has got to be accomplished if we're going to be

18 talking about a distribution to equity, as well as the

19 appropriate level of capitalization for the company or debt

20 associated with its capitalization.

21 Since the motion isn't opposed, I don't need to nor

22 will I make extension factual findings. It's obvious that

23 dealing with uncertainties of the type that I just articulated,

24 coupled with the issues that have been with me for a while --

25 with me and Judge Berman up in the district court, dealing with



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1 satisfying environmental claims and ensuring that we have

2 satisfactory environmental compliance and dealing with any

3 ultimate amount necessary to deal with Diaceytl issues, these

4 are paradigmatic examples of the reasons for which we give

5 debtors exclusivity; to try to balance the competing

6 perspectives and to see if a confirmable plan can be put

7 forward and accepted.

8 At this point, all of the considerations tilt in the

9 same direction which is for a grant of exclusivity and

10 accordingly, the requested extension will be granted. Ms.

11 Labovitz, I will look to you to give me a plain vanilla order

12 that provides in substance that for the reasons set forth by

13 the Court, the motion is granted.

14 MS. LABOVITZ: Will do that, Your Honor. Thank you

15 very much.

16 Your Honor, Mr. Goffman had raised some questions and

17 concerns regarding our proposed timing with respect to a

18 disclosure statement hearing. That matter is not before the

19 Court today and as I mentioned at the outset of my remarks, I

20 am somewhat constrained in terms of how I can describe the plan

21 and what we intended to do until its filed. My suggestion

22 would be that to the extent that after the plan is filed and

23 Mr. Goffman has had a chance to review it, he continues to

24 object to the motion that we'll file at the same time seeking

25 to set the timing for our disclosure statement hearing, that we



- 25 -

1 have a telephonic hearing to resolve those issues.

2 I would echo Mr. Wynne's sentiments that we have

3 waited quite some time and have tried very hard to engage

4 constructively with the equity committee to facilitate the

5 process that we know they need to go through and that we think

6 is appropriate but there does come a point at which we need to

7 move forward towards emergence from Chapter 11. I don't want

8 to preargue those issues now but we would emphasize for the

9 Court the urgency of setting the timing for our disclosure

10 statement hearing because if we're going forward on July 13 as

11 we fervently hope we will do, we need to get a notice of that

12 out to all of the impacted parties as quickly as we can. So

13 perhaps that's an issue to pick up very soon after the plan is

14 filed.

15 With that, Your Honor, I don't think there's more I

16 need to say about exclusivity or about the plan and I would

17 hope to turn the hearing over to my partner, Craig Bruens who

18 would walk through the rest of the uncontested agenda.

19 THE COURT: I will give Mr. Bruens a chance to do that

20 but before he does, does anybody want to be heard on anything

21 related to what Mr. Labovitz just said before we deal with the

22 more meat and potatoes issues that are on Mr. Bruens' plate?

23 Mr. Dublin?

24 MR. DUBLIN: Your Honor, I would just like to echo the

25 comments with respect to timing. The equity committee has been



- 26 -

1 around since January. Skadden filed its retention application

2 in February. UBS filed its retention application yesterday.

3 The equity committee has had ample time to try to come up with

4 alternative structures and if they are able to propose a plan

5 that contemplates unsecured creditors being paid in full in the

6 allowed amount of their claims in cash, the creditors committee

7 supports that. We look forward to that. That's the goal in

8 every case is for unsecured creditors to be paid in full in

9 cash, get the benefit of their bargains.

10 That has not happened here. We don't believe that Mr.

11 Goffman and UBS and the rest of the equity committee will be

12 able to achieve that goal. To the extent they are able to at

13 any time prior to confirmation, not with a highly confident

14 letter but with fully committed equity financing, and with a

15 feasible plan of reorganization on a debt structure that the

16 company can support and that other constituencies do not -- are

17 on board with as appropriate, the committee will have no

18 objection to that. This is not -- you mentioned Six Flags

19 earlier, the 2019 issue. We're not looking to have any type of

20 alternative Six Flags arguments about whether people are being

21 paid in full or not. If we can get paid in full in cash, we

22 look forward to that opportunity. We just don't think it's

23 going to happen in this case.

24 Therefore, we think that we need to keep with the

25 timetable that the debtors are proposing and we look to get



- 27 -

1 this company out of bankruptcy as soon as possible. A July 13

2 the disclosure statement hearing date will achieve that goal.

3 THE COURT: Okay. Now Mr. Goffman, I am just going to

4 assume that you have a different view of the world than Mr.

5 Dublin does but I am not sure if I need you to repeat it again.

6 I am just going to say for the avoidance of doubt that today I

7 am not asked to nor am I ruling on anything other than

8 extension of exclusivity. Whether we can or should proceed on

9 the 13th of July is something that I am not going to decide

10 today. And that I think does require consideration of the

11 proposed plan and draft disclosure statement. And all of your

12 rights with respect to anything you can imagine and anything I

13 can't imagine are reserved. Okay?

14 Mr. Bruens?

15 MR. BRUENS: Thank you, Your Honor. Craig Bruens from

16 Kirkland and Ellis on behalf of the debtors. I will try to go

17 through the meat and potatoes of the rest of the matters very

18 quickly. The next matter that's listed on the agenda is the

19 third interim fee application for DLA Piper, LLP. You may

20 recall, Your Honor, that at the previous hearing we had the

21 third interim fee applications for the professionals for

22 hearing and they were approved by Your Honor. DLA Piper's

23 application had been adjourned in order to accommodate

24 additional time to review some invoices that had been

25 inadvertently not attached to the application. The application



- 28 -

1 is for one hundred sixty-four thousand dollars in fees. I am

2 rounding off approximately, and about four thousand dollars in

3 expenses. I believe that the U.S. Trustee and all of the

4 parties in interest have had time to review the application and

5 that there are no objections to it.

6 THE COURT: Okay. Mr. Matsumoto, do you want to be

7 heard?

8 MR. MATSUMOTO: That's correct, Your Honor. No

9 objection.

10 THE COURT: Very well. It's approved.

11 MR. BRUENS: Thank you, Your Honor. Excuse me. The

12 next three items on the agenda are uncontested omnibus claims

13 objections. The first is the twenty-sixth omnibus claims

14 objection which applied to amended claims, duplicate claims,

15 late filed claims, insufficient documentation claims, no

16 liability claims and paid in full claims. The debtors received

17 no formal responses to the objection and a handful of informal

18 responses. With respect to the informal responses, that they

19 have not been able to resolve at this point. We have adjourned

20 the objection as to those claims as reflected on the agenda and

21 the notice of adjournment last night. The objection is

22 currently going forward today unopposed with respect to thirty-

23 three claims and we would ask that the order be entered.

24 THE COURT: Okay. That order will be entered.

25 MR. BRUENS: Thank you, Your Honor. Similarly, the



- 29 -

1 twenty-seventh omnibus objection, we have the same

2 circumstances; no formal responses, several informal responses.

3 We have adjourned the objection with respect to claims as we

4 try to work them out. Today it is going forward with respect

5 to seventy-one claims on an unopposed basis.

6 THE COURT: Okay. None of those seventy-one being the

7 subject of the typical telephone calls or informal

8 communications.

9 MR. BRUENS: I am not sure if I understood that. No,

10 that's correct. The seventy-one claims are not --

11 THE COURT: Okay. In other words, I expect as I

12 thought you told me you were already doing, that when a

13 creditor calls you up after when these omnibuses and says

14 listen, I want to bring these facts to your attention, you have

15 the usual back and forth and you kick those. And when you ask

16 me to blow away claims, you ask me to blow away the claims only

17 for those who haven't either filed a formal objection or called

18 you up.

19 MR. BRUENS: That's absolutely correct, Your Honor.

20 THE COURT: And if that is -- if I correctly

21 understood you for those seventy-one, then it's no problem.

22 MR. BRUENS: That's correct, Your Honor. I am sorry

23 if I was not clear.

24 THE COURT: Okay.

25 MR. BRUENS: With respect to the remaining omnibus



- 30 -

1 claims objection is the twenty-seventh (sic) claims objection,

2 that objection applied to one singular proof of claim filed by

3 the law firm of Morris, Sakalarios & Blackwell, purportedly on

4 behalf of approximately eight hundred and nine asbestos

5 plaintiffs. The objection was based upon insufficient

6 documentation, lack of power of attorney, and improper form of

7 the proof of claim. We received no contact whatsoever from the

8 claimant and we would ask that that objection be granted on an

9 unopposed basis.

10 THE COURT: It is granted.

11 MR. BRUENS: Thank you.

12 THE COURT: Or any objection is sustained.

13 MR. BRUENS: Thank you, Your Honor. The last thing I

14 would like to mention with respect to the claims objections is

15 a carry-over from the -- it's not listed on the agenda but it

16 is a carry-over from one of the claims objections. Previously

17 we have entered into a stipulation with Xerox Corporation

18 whereby they've agreed to reduce their claim from twenty-nine

19 thousand dollars to approximately seven thousand dollars. It's

20 been approved by both committees and we would like to submit

21 that at the end of the hearing.

22 THE COURT: Sure.

23 MR. BRUENS: Thank you, Your Honor. There are several

24 additional substantive claims objections that are on the agenda

25 today. I am going to turn over the hearing to my partner,



- 31 -

1 Brian Stansbury. They are all unopposed but he will further

2 describe them.

3 THE COURT: You said they were unopposed?

4 MR. BRUENS: That's correct.

5 THE COURT: Okay. Mr. Stansbury?

6 MR. STANSBURY: Good morning, Your Honor.

7 THE COURT: Good morning.

8 MR. STANSBURY: Brian Stansbury with Kirkland & Ellis

9 on behalf of the debtors. Your Honor on May 27 the debtors

10 filed fifty-five objections to claims alleging -- excuse me,

11 seeking to disallow those claims under Rule 502(e). Of those

12 fifty-five objections, thirty-six of them are adjourned when we

13 received requests to -- for an extension on the response. And

14 seven of them were immediately adjourned as well because we

15 received a response and then we adjourned another one as well.

16 So of the initial fifty-five, claims a total of forty-

17 four of them have been adjourned and they will be -- have been

18 moved to the July 13 hearing. Today we are dealing with the

19 ^eleven claims for which we have received no response. These

20 are claims again that we believe are disallowable under Rule

21 502(e).

22 THE COURT: You said Rule a couple of time. I assume

23 you mean either a different number or section.

24 MR. STANSBURY: 502(e)(1)(B). Yes, Your Honor.

25 MS. LABOVITZ: That is the section.



- 32 -

1 MR. STANSBURY: Excuse me; section. Yes, Your Honor,

2 section.

3 Again, these are uncontested claims for which we have

4 received no response, no request for an extension and no

5 response has been filed and we would ask Your Honor to disallow

6 those eleven claims.

7 THE COURT: Granted.^

8 MR. STANSBURY: Okay. Thank you, Your Honor.

9 THE COURT: Sure. Anything else?

10 MS. LABOVITZ: Your Honor, the remaining item is

11 Skadden's retention. Mr. Goffman will present that.

12 THE COURT: Yes, I figured Mr. Goffman might have some

13 interest in that.

14 MR. GOFFMAN: Thank you. Again for the record, Your

15 Honor, I am Jay Goffman of Skadden Arps on behalf of the

16 official equity committee.

17 Your Honor, as Your Honor is aware, the official

18 equity committee was formed in January of this year. We filed

19 our retention application in early February. It drew two

20 objections; one from the U.S. Trustee and one from the

21 creditors committee. We were able to fairly quickly resolve

22 the objection of the U.S. Trustee and so it's consensual with

23 the U.S. Trustee and we're happy to report that either late

24 last week or early this week, the creditors committee withdrew

25 its objection. So I believe our ^motion to be retained is



- 33 -

1 unopposed.

2 THE COURT: Okay. And as part of the understandings

3 you've reached, you're waiving the prepetition claim?

4 MR. GOFFMAN: Yes, we are, Your Honor.

5 THE COURT: Okay. With that variation, the retention

6 is going to be approved. I am not going to say a lot about

7 this. When I read the draft papers thinking they were going to

8 be argued before me before, I was troubled by the retention of

9 the claim. And frankly, if that hadn't been satisfactorily

10 resolved, it probably would have been a show stopper. But for

11 this and other cases going forward, I do think that I need for

12 people to understand that you don't deal with people with

13 different views of the world by preventing their counsel from

14 being retained. And I am glad the objection on the ladder

15 basis was withdrawn.

16 In any event, welcome to the family, Mr. Goffman.

17 ^You're retained. I assume your waiver of the claim is going

18 to be satisfactorily papered and so long as it is, you will be

19 acting as counsel going forward.

20 MR. GOFFMAN: Thank you very much, Your Honor.

21 THE COURT: Okay. Anything else anybody? Okay.

22 We're adjourned. Thank you very much.

23 MS. LABOVITZ: Thank you, Your Honor.

24 (Proceedings concluded at 10:30 AM)

25


- 34 -

1

2 I N D E X

3

4 RULINGS

5 Page Line

6 Debtor's motion to extend

7 exclusive periods unopposed 9 23

8

9 Third interim fee application

10 for DLA Piper, LLP approved 28 11

11

12 Twenty-sixth omnibus objection

13 to certain claims entered 28 23

14

15 Twenty-seventh omnibus objection

16 to certain claims entered 29 23

17

18 Twenty-eighth omnibus objection

19 to Morris, Sakalarios &

20 Blackwell claim 30 9

21

22

23

24

25


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1

2 C E R T I F I C A T I O N

3

4 I, Dena Page, certify that the foregoing transcript is a true

5 and accurate record of the proceedings.

6

7 ___________________________________

8 Dena Page

9

10

11 Veritext

12 200 Old Country Road

13 Suite 580

14 Mineola, NY 11501

15

16 Date: June 18, 2010

17

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