20-10161-jlg Doc 770 Filed 09/24/20 Entered 09/24/20 18:06 ... · 4 WEIL:\97594189\14\44444.0009 THE PLAN 5. The Plan represents the final step in the Debtors’ chapter 11 cases

$Page 1: 20-10161-jlg Doc 770 Filed 09/24/20 Entered 09/24/20 18:06 ... · 4 WEIL:\97594189\14\44444.0009 THE PLAN 5. The Plan represents the final step in the Debtors’ chapter 11 cases$
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WEIL, GOTSHAL & MANGES LLP 767 Fifth Avenue New York, New York 10153 Telephone: (212) 310-8000 Facsimile: (212) 310-8007 Ray C. Schrock, P.C. Sunny Singh Attorneys for Debtors and Debtors in Possession UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ---------------------------------------------------------x : In re : Chapter 11 : OLD MARKET GROUP HOLDINGS : CORP., et al., : Case No. 20-10161 (JLG) : Debtors.11 : (Jointly Administered) : ---------------------------------------------------------x

DECLARATION OF MICHAEL NOWLAN IN SUPPORT OF CONFIRMATION OF JOINT CHAPTER 11 PLAN OF OLD MARKET

GROUP HOLDINGS CORP. AND ITS AFFILIATED DEBTORS

I, Michael Nowlan, pursuant to 28 U.S.C. § 1746, hereby declare that the following is

true to the best of my knowledge, information, and belief:

1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, are as follows: Old Market Group Holdings Corp. (2788); Old Market Group Acquisition Company (2860); Old Market Bakery LLC (4129); Old Market Broadway LLC (8591); Old Market Chelsea LLC (0288); Old Market Construction Group, LLC (2741); Old Market Douglaston LLC (2650); Old Market East 86th Street LLC (3822); Old Market eCommerce LLC (3081); Old Market Georgetowne LLC (9609); Old Market Greenwich Street LLC (6422); Old Market Group Central Services LLC (7843); Old Market Group Plainview LLC (8643); Old Market Hudson Yards LLC (9331); Old Market Kips Bay LLC (0791); Old Market Store LLC (9240); Old Market Paramus LLC (3338); Old Market Pelham LLC (3119); Old Market Pelham Wines & Spirits LLC (3141); Old Market Red Hook LLC (8813); Old Market Stamford LLC (0738); Old Market Stamford Wines & Spirits LLC (3021); Old Market Staten Island LLC (1732); Old Market Uptown LLC (8719); Old Market Westbury LLC (6240); and Old Market Woodland Park LLC (9544). The location of the Debtors’ corporate headquarters is 2284 12th Avenue, New York, New York 10027. Old Market Community Foundation Inc., a charitable organization, owned by Old Market Group Holdings Corp., is not a debtor in these proceedings.

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1. I am the Chief Restructuring Officer (“CRO”) of Old Market Group

Holdings Corp. (f/k/a Fairway Group Holdings Corp.) and its debtor affiliates, as debtors and

debtors in possession in the above captioned chapter 11 cases (collectively, the “Debtors”), and

have served in this role since January 20, 2020. I am also a Senior Managing Director with

Mackinac Partners, LLC (“Mackinac”), the Debtors’ financial advisors. Prior to joining

Mackinac, I served as a Senior Managing Director of FTI Consulting. I have more than

twenty (20) years of financial restructuring, interim management, turnaround, and management

consulting experience. I have been involved in many aspects of the restructuring process,

including the development and evaluation of strategic business plans, the implementation of

liquidity management strategies, and advising on numerous chapter 11 proceedings, including in

the chapter 11 cases In re The Great Atl. & Pac. Tea Co., Inc., Case No. 15-23007 (RDD) (Bankr.

S.D.N.Y. 2015). My CRO assignments include, among other engagements, serving as CRO in the

healthcare and high-tech materials industries, and mid-market life-science companies. I have also

advised numerous private clients in out-of-court workouts and restructurings, which have often

included the divestiture of major assets.

2. I submit this declaration (the “Declaration”) in support of confirmation of

the Joint Chapter 11 Plan of Old Market Group Holdings Corp. and its Affiliated Debtors filed

contemporaneously herewith (as may be amended, modified, supplemented, or restated, the

“Plan”),2 including the Plan Supplement, dated September 8, 2020 (ECF No. 725) (as may be

further amended, modified, restated, or supplemented, the “Plan Supplement”). I have reviewed,

and I am generally familiar with, the provisions of the Plan, the documents comprising the Plan

2 Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Plan or the Disclosure Statement.


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Supplement, the Disclosure Statement (defined below) relating to the Plan, and the requirements

for confirmation of the Plan under section 1129 of the Bankruptcy Code. I was personally involved

in the development of and negotiations regarding the Plan and its related documents, and I, along

with the employees of Mackinac who report to me, prepared the liquidation analysis (the

“Liquidation Analysis”) described herein and annexed as Exhibit C to the Disclosure Statement

for Joint Chapter 11 Plan of Fairway Group Holdings Corp. and Its Affiliated Debtors, dated

August 12, 2020 (ECF No. 679) (the “Disclosure Statement”).

3. In my capacity as CRO, I am knowledgeable and familiar with the Debtors’

day-to-day operations, business and financial affairs, books and records, and the circumstances

leading to the commencement of these chapter 11 cases. For a further discussion of my credentials,

see the Declaration of Michael Nowlan Pursuant to Rule 1007-2 of Local Bankruptcy Rules for

Southern District of New York, sworn to and filed on the Commencement Date (ECF No. 5)

(the “Nowlan First Day Declaration,” and together with the Declaration of Abel Porter Pursuant

to Rule 1007-2 of Local Bankruptcy Rules for Southern District of New York, sworn to and filed

on the Commencement Date (ECF No. 25), the “First Day Declarations”).

4. Except as otherwise indicated, all facts set forth herein (or incorporated by

reference herein) are based upon my personal knowledge, my review of relevant documents and

other information as part of my duties and responsibilities as CRO for the Debtors, information

provided to me as part of my duties and responsibilities as CRO by the Debtors’ management and

advisors, including the employees of Mackinac who report to me, or my opinion based upon my

familiarity with the Debtors’ business, operations, and financial condition. If I were called upon

to testify, I could and would testify competently to the facts set forth herein.


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THE PLAN

5. The Plan represents the final step in the Debtors’ chapter 11 cases. The Plan

is the product of extensive good faith, arm’s-length negotiations between the Debtors and their

major stakeholder constituencies and incorporates a global settlement by and among the Debtors,

the Creditors’ Committee, and the Consenting Creditors (the “Global Settlement”). The Plan

includes a payment of $1.5 million to a recovery trust (the “GUC Recovery Trust”) for the benefit

of holders of General Unsecured Claims, along with $175,000 for the costs of administering the

GUC Recovery Trust. The Plan also provides for the Plan Sponsor’s reorganization around the

Debtors’ liquor licenses, inventory and related wine assets (the “Reorganized Assets”) in

exchange for $2.75 million in value from either the Plan Sponsor’s Allowed First Out Term Loan

Claims or its DIP Claims that will be distributed to the Debtors’ other creditors.3

6. The Debtors commenced these chapter 11 cases to conduct a value

maximizing marketing and sale process to sell as many of their stores on a going concern basis

and preserve as many jobs as possible. The Debtors’ efforts have been successful resulting in five

(5) separate sale transactions involving the sale of twelve (12) of their locations and related assets

(collectively, the “Sale Transactions”).4 The Sale Transactions have all been consummated,

resulting in aggregate sale proceeds of approximately $90 million for the Debtors’ estates and the

preservation of approximately 1,700 jobs for the Debtors’ employees. All of the Sale Transactions

have either been supported by or not opposed by the Debtors’ key stakeholders, including the

3 Pursuant to Sections 5.5 and 5.6 of the Plan, the Plan Sponsor elected to proceed with the Reorganization Transaction pursuant to the Reorganized Equity Plan Election published on September 8, 2020 in the Plan Supplement.

4 On April 20, 2020 the Bankruptcy Court entered orders approving the Village Sale Transaction (ECF No. 449), the Key Food Sale Transaction (ECF No. 448), and the Amazon Transaction (ECF No. 445). On August 5, 2020 the Bankruptcy Court entered an order approving the Bogopa Sale Transaction (ECF No. 664), and on August 25, 2020, the Bankruptcy Court entered an order approving the sale of the Westbury Store to Bogopa (ECF No. 707).


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Consenting Creditors, the Creditors’ Committee and UFCW Parties. Since closing the Sale

Transactions, the Debtors have continued as debtors in possession to fulfill their obligations in

connection with the Sale Transactions and facilitate an orderly wind-down of the Debtors’

remaining assets. The Plan provides for the distribution of proceeds of the Sale Transactions to

fund the ongoing wind-down costs of these chapter 11 cases and distributions under the Plan.

7. Confirmation of the Plan represents the best available path to conclude these

chapter 11 cases and maximize creditor recoveries. As detailed below, I believe the Plan satisfies

the statutory requirements for confirmation and enjoys almost universal support from the Debtors’

stakeholders. Accordingly, I believe that the Plan is in the best interests of the Debtors and all of

their stakeholders and that, accordingly, the Court should confirm the Plan.

BANKRUPTCY CODE REQUIREMENTS FOR CONFIRMATION

9. Based on my understanding of the Plan, the events that have occurred prior

to and during the Debtors’ chapter 11 cases, and discussions I have had with the Debtors’ legal

advisors regarding the requirements of the Bankruptcy Code, I believe that the Plan satisfies all of

the applicable requirements of section 1129 of the Bankruptcy Code and complies with all other

applicable sections of the Bankruptcy Code, the Bankruptcy Rules, the Local Rules, and applicable

non-bankruptcy law and should therefore be confirmed.

10. Section 1129(a)(1). Based on discussions with the Debtors’ legal advisors

it is my understanding that the Plan satisfies section 1129(a)(1) of the Bankruptcy Code because

it complies with sections 1122 and 1123 of the Bankruptcy Code.

11. Section 1122. I understand that the Plan designates the classification of

Claims and Interests in accordance with section 1122 of the Bankruptcy Code. I also understand

that the Plan provides for the separate classification of Claims against and Interests in the Debtors


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based upon the difference in legal nature and/or priority of such Claims and Interests, except for

Administrative Expense Claims, Fee Claims, and Priority Tax Claims, which I am advised need

not be designated as Classes under the Plan.

12. I believe the Plan’s classification scheme is rational and was not proposed

to create a consenting impaired Class or manipulate voting. Generally, the Plan incorporates a

“waterfall” classification and distribution scheme that strictly follows the statutory priorities

prescribed by the Bankruptcy Code, except as provided by the Global Settlement which has been

accepted by all voting classes and unanimously by all secured creditors. I believe that valid

business, factual, and legal reasons exist for separately classifying the various Classes of Claims

and Interests created under the Plan, and such Classes do not unfairly discriminate between holders

of Claims and Interests.

13. Section 1123(a)(1). The Plan designates the following Classes of Claims

and Interests, as required under section 1123(a)(1) of the Bankruptcy Code:

Class 1 – Priority Non-Tax Claims

Class 2 – Other Secured Claims

Class 3 – Senior First Out Term Loan Claims

Class 4 – Senior Last Out Term Loan Claims

Class 5 – Holdco Loan Claims

Class 6 – General Unsecured Claims

Class 7 – Intercompany Claims

Class 8 – Intercompany Interests

Class 9 – Parent Equity Interests

Class 10 – Subordinated Securities Claims

14. Sections 1123(a)(2) and 1123(a)(3). The Plan specifies whether each Class

of Claims and Interests is Impaired or Unimpaired under the Plan, and sets forth the treatment of


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Impaired Claims and Interests, which I understand satisfies the requirements of 1123(a)(2) and (3)

of the Bankruptcy Code.

15. Section 1123(a)(4). It is my understanding that the Plan also complies

with section 1123(a)(4) of the Bankruptcy Code, as the treatment of each Claim or Interest in each

particular Class is the same as the treatment of each other Claim or Interest in such Class (except

as otherwise agreed to by a holder of a particular Claim or Interest).

16. Section 1123(a)(5). It is my understanding that the Plan provides

adequate means for implementation of the Plan, as required by section 1123(a)(5), through, among

other things: (a) the Global Settlement, (b) the provisions governing distributions under the Plan,

(c) the DIP Conversion Election, (d) the creation and governance of the GUC Recovery Trust,

(e) the Reorganization Transaction, and (f) the wind down and dissolution of the Debtors in

accordance with Section 5.7 of the Plan, (g) the vesting of all of the Reorganized Assets in the

Reorganized Debtors, the vesting of the Wind Down Co Assets in Wind Down Co, and the vesting

of all remaining property of the Debtors’ Estates in the Wind Down Estates, as applicable, (h) the

appointment of and authority granted to a Plan Administrator, and (i) authorization for all actions

contemplated by the Plan, in each case, in accordance with and subject to the terms of the Plan.

17. Section 1123(b)(1). The Plan describes the treatment for the Unimpaired

Classes—Class 1 (Priority Non-Tax Claims), Class 2 (Other Secured Claims), and Class 8

(Intercompany Interests). Additionally, the Plan also describes the treatment for the following

Impaired Classes: Class 3 (Senior First Out Term Loan Claims), Class 4 (Senior Last Out Term

Loan Claims), Class 5 (Holdco Loan Claims), Class 6 (General Unsecured Claims), Class 7

(Intercompany Interests), Class 9 (Parent Equity Interests), and Class 10 (Subordinated Securities

Claims)—which I understand satisfies section 1123(b)(1) of the Bankruptcy Code.


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18. Section 1123(b)(2); 1123(d). With respect to section 1123(b)(2) of the

Bankruptcy Code, Section 8.1 of the Plan provides that, on the Effective Date, each Executory

Contract and Unexpired Lease (each as defined in the Plan) not previously rejected, assumed, or

assumed and assigned shall be deemed automatically rejected pursuant to sections 365 and 1123

of the Bankruptcy Code, unless such Executory Contract or Unexpired Lease: (i) was previously

assumed or rejected by the Debtors pursuant to an order of the Bankruptcy Court; (ii) previously

expired or terminated pursuant to its own terms or by agreement of the parties thereto; (iii) is the

subject of a motion to assume filed by the Debtors on or before the Confirmation Date; (iv) is

identified in Section 8.4 of the Plan; (v) is a KEIP Agreement or a KERP Agreement; or (v) is

identified for assumption on the Assumption Schedule included in the Plan Supplement.

19. Section 1123(b)(3)(A). As I understand is permitted by section

1123(b)(3)(A) of the Bankruptcy Code based on discussions with the Debtors’ legal advisors and

explained in greater detail below, (a) the Plan incorporates the Global Settlement in Section 5.3 of

the Plan in consideration for the distributions and other benefits provided pursuant to the Plan. I

am familiar with the terms of the Global Settlement and believe it represents a fair and rational

compromise and settlement of Claims among the Debtors, the Creditors’ Committee, and the

Consenting Creditors and is in the best interests of the Debtors, their Estates, and holders of such

Claims and Interests, and is fair, equitable, and reasonable; and (b) Section 10.6(a) of the Plan

provides for a release of Claims and Causes of Action owned by the Debtors estates. As described

in further detail in paragraphs 20 to 24 herein, the Plan also includes certain release and exculpation

provisions in Sections 10.6 and 10.7 that (i) are integral components of the Plan, (ii) are appropriate

and necessary under the circumstances, (iii) being provided in exchange for valuable

consideration, (iv) are consistent with the Bankruptcy Code, and (v) comply with applicable law.


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20. Section 1123(b)(3)(B). As I understand is permitted by section

1123(b)(3)(B) of the Bankruptcy Code based on discussions with the Debtors’ legal advisors,

Section 10.9 of the Plan preserves for the Debtors any rights, Claims, Causes of Action, rights of

setoff or recoupment, or other legal or equitable defenses that the Debtors had immediately prior

to the Effective Date.

21. Section 1123(b)(4). The Plan does not provide for the sale, transfer, or

assignment of all or substantially all of the Debtors’ property and, therefore, as I understand it,

section 1123(b)(4) of the Bankruptcy Code is inapplicable in these chapter 11 cases.

22. Section 1123(b)(5). As I understand is permitted by section 1123(b)(5) of

the Bankruptcy Code based on discussions with the Debtors’ legal advisors, Article IV of the Plan

modifies the rights of holders of Claims in Classes 3, 4, 5, 6, 7, 9, and 10, and leaves unaffected

the rights of holders of Claims and Interests in Classes 1, 2, and 8.

23. Section 1123(b)(6). As I understand is permitted by section 1123(b)(6) of

the Bankruptcy Code, Article X of the Plan includes certain release and exculpation provisions in

Sections 10.6 and 10.7.

24. I believe that the Third Party Releases (defined below) and the Exculpation

Provision are fair and appropriate, given for valuable consideration, and in the best interests of the

Debtors and all parties in interest. Section 10.6 of the Plan only releases Claims or Causes of

Action owned by the Debtors (the “Estate Releases”) and does not release claims or causes of

action owned by third parties. I believe that the Estate Releases constitute a sound exercise of the

Debtors’ business judgment and meet the applicable legal standard: the Estate Releases are fair,

reasonable, and in the best interests of the Debtors. During the course of negotiations regarding

the Plan, it was clear that the Estate Releases would be a necessary condition to consummation of


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the Plan. Without the Estate Releases, the Debtors and their stakeholders may not have been able

to secure the substantial benefits provided by the Plan, including, without limitation, full payment

of the Administrative Expense Claims and the guaranteed distribution to holders of General

Unsecured Claims. Similarly, the Released Parties (defined below) provided integral support

through the chapter 11 process. Had the Estate Releases not been provided, it would have

significantly diminished (and potentially eliminated) the Debtors’ chances of securing the valuable

consideration provided by the Plan. In addition to the substantial consideration provided by the

Released Parties, the Estate Releases are also appropriate because I do not believe that the released

claims or Causes of Action represent material value to the Debtors and the Debtors’ estates; the de

minimis value of any such claims certainly is not greater than (or even close to) the significant

value and benefits provided by the Plan and related transactions. I also believe that the justification

for providing the Estate Releases is reflected by the Creditors’ Committee’s support. The members

of the Creditors’ Committee, who represent the creditors that likely stand to gain the most from

any proceeds of the released causes of action, are sophisticated parties who consented to inclusion

of the Estate Releases in the Plan. Accordingly, I believe that the Estate Releases are justified, in

the best interests of creditors, and should be approved.

25. In addition to the Estate Releases, Section 10.7 of the Plan contains releases

by certain non-debtor holders of claims (collectively, the “Releasing Parties”) against the

Released Parties for liability relating to the Debtors, the Plan, or these chapter 11 cases

(collectively, the “Third Party Releases” and, together with the Estate Releases, the “Plan

Releases”). As with the Estate Releases, I believe that the Third Party Releases were a material

inducement for the support of the Plan and the concessions it contains. Each holder of a Claim or

Interest in the Voting Classes was provided with the opportunity to opt out of the Third Party


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Release, and parties who vote to reject the Plan are not bound by the Third Party Release. The

Third Party Releases are an integral part of the compromises and settlements embodied in the Plan

culminating in the Plan being fully consensual, avoiding protracted litigation, and maximizing

value for all of the Debtors’ economic stakeholders. It is my belief that if the Third Party Releases

were eliminated from the Plan, a key foundation of the Plan would be undermined, jeopardizing

the success of the Debtors’ entire reorganization effort, to the detriment and prejudice of all parties

in interest.

26. I also believe that the Third Party Releases are substantively warranted.

Prior to and throughout the pendency of these chapter 11 cases, the Released Parties worked

constructively with the Debtors to negotiate and implement value-maximizing transactions that

were instrumental in supporting the Debtors’ confirmation of a chapter 11 plan. As noted above,

the Released Parties have been instrumental in supporting these chapter 11 cases and have made

significant concessions in consideration for the releases provided under the Plan. Further, pursuant

to the Global Settlement the Debtors have agreed to waive their rights to prosecute any Avoidance

Actions against the Released Avoidance Parties, which include holders of General Unsecured

Claims who (i) vote to accept the Plan or abstain from voting but do not opt out of the Third Party

Releases and (ii) who do not object to confirmation of the Plan or assert any Claims against the

Released Parties. For all of these reasons, I believe that the Third Party Releases are appropriate

and should be approved.

27. Section 1129(a)(2). To the best of my knowledge and belief, based on

discussions with the Debtors’ legal advisors, and as evidenced by the Disclosure Statement Order

and prior orders of the Bankruptcy Court entered in the Debtors’ chapter 11 cases, the Voting

Certification, and the filings submitted by the Debtors, I believe that the Debtors have complied


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with the applicable provisions of the Bankruptcy Code, including the provisions of sections 1125

and 1126 regarding disclosure and solicitation of the Plan.

28. Section 1129(a)(3). I understand that section 1129(a)(3) of the Bankruptcy

Code requires that a chapter 11 plan be proposed in good faith and not by any means forbidden by

law. Throughout these cases, the Debtors, together with the Board, the Special Committee and the

Debtors’ senior management team, have upheld their fiduciary duties to stakeholders and protected

the interests of all constituents. In satisfaction of their fiduciary duties, the Debtors developed the

Plan in close consultation with their primary stakeholders following diligence and negotiation.

The Plan framework was negotiated in connection with the Global Settlement in order to pave the

way for a swift confirmation process and resolution of these chapter 11 cases. The Global

Settlement was achieved through extensive and hard-fought negotiations by and among the

Debtors, the UFCW Parties, the Creditors’ Committee, and the Consenting Creditors, and provides

a guaranteed recovery for the holders of General Unsecured Claims that was otherwise uncertain

and which avoids litigation costs and delay. I believe that the overwhelming acceptance of the

Plan and the Creditors’ Committee’s support of the Plan reflects the Plan’s fairness and the good

faith efforts of the parties to achieve the objectives of chapter 11. Accordingly, I believe the

Debtors have acted in good faith and with the best intentions for creditors in proposing the Plan,

in accordance with section 1129(a)(3) of the Bankruptcy Code.

29. Section 1129(a)(4). Section 2.2. of the Plan provides that all Fee Claims

must be approved by the Court pursuant to final fee applications as reasonable in accordance with

section 1129(a)(4) of the Bankruptcy Code. Further, Section 2.2 of the Plan provides that all final

requests for allowance of compensation for services rendered and reimbursement of expenses

incurred from the Commencement Date through the Effective Date must be filed no later than


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forty-five (45) days after the Effective Date. Moreover, the Plan provides that the Court shall

retain jurisdiction to hear and determine all such claims. Therefore, it is my understanding that the

Plan complies with the requirements of section 1129(a)(4) of the Bankruptcy Code with respect to

the Debtor’s professionals.

30. Section 1129(a)(5). I believe that Section 5.6(c) of the Plan satisfies the

requirements of section 1129(a)(5) of the Bankruptcy Code. On September 8, 2020, the Debtors

disclosed the identity of the New Board of Reorganized Debtors (ECF No. 725). The Debtors

intend to disclose the identity, compensation, and affiliations of the Plan Administrator at or prior

to the Confirmation Hearing.

31. Section 1129(a)(6). I understand that the Plan does not provide for any rate

changes by the Debtors.

32. Section 1129(a)(7). It is my understanding, based on discussions with the

Debtors’ legal advisors, that the Bankruptcy Code requires that, with respect to each impaired

Class of Claims and Interests, each holder of such Claim or Interest must either (a) accept the Plan

or (b) receive or retain under the Plan on account of such Claim or Interest property of a value, as

of the Effective Date, that is not less than the amount that such holder would receive or retain if

the Debtors were liquidated under chapter 7 of the Bankruptcy Code.

33. In consultation with the Debtors’ management and legal advisors, I directly

supervised Mackinac’s preparation of the Liquidation Analysis annexed as Exhibit C to the

Disclosure Statement. I am familiar with the Liquidation Analysis, the underlying financial and

asset data, and the assumptions upon which the Liquidation Analysis is based. As set forth more

fully below, the Liquidation Analysis demonstrates that each holder of an Allowed Claim and

Allowed Interest will receive or retain under the Plan on account of such Claim or Interest property


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of a value, as of the Effective Date, that is not less than the amount that such holder would receive

or retain if the Debtors were liquidated under chapter 7 of the Bankruptcy Code. Accordingly, I

believe that the Plan satisfies section 1129(a)(7) of the Bankruptcy Code.

34. Section 1129(a)(8). As set forth above, holders of Claims in Class 1

(Priority Non-Tax Claims), Class 2 (Other Secured Claims), Class 7 (Intercompany Claims), and

Class 8 (Intercompany Interests) are not impaired under the Plan and, therefore, conclusively

presumed to have accepted the Plan pursuant to section 1126(f) of the Bankruptcy Code.

Additionally, as evidenced by the Voting Certification, the Plan has been accepted by all voting

classes as described in para 29, above. Further, holders of Claims in Class 7 (Intercompany

Claims), Class 9 (Parent Equity Interest), and Class 10 (Subordinated Securities Claims) are

deemed to have rejected the plan pursuant to section 1126(g) of the Bankruptcy Code. As to these

Classes, it is my understanding, based on discussions with the Debtors’ legal advisors, that the

Plan may be confirmed over their dissent under the “cram down” provisions of section 1129(b) of

the Bankruptcy Code.

35. Section 1129(a)(9). Section 2.1 of the Plan provides that, unless a holder

agrees to less favorable treatment, holders of allowed Administrative Expense Claims under

section 503(b) of the Bankruptcy Code will be paid in full, in Cash, on the later of the Effective

Date and the first business day after the date that is thirty (30) calendar days after the date such

Administrative Expense Claim becomes Allowed. Moreover, the Plan provides that, unless a

holder agrees to less favorable treatment, holders of Allowed Priority Non-Tax Claims under

section 507(a) of the Bankruptcy Code (excluding Priority Tax Claims under section 507(a)(8), as

described herein) will either be paid in full in Cash or otherwise receive treatment consistent with

the provisions of section 1129(a)(9) of the Bankruptcy Code, except to the extent that a holder of


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an Allowed Priority Non-Tax Claim agrees to less favorable treatment. Therefore, it is my

understanding that the Plan satisfies the requirements of section 1129(a)(9)(A) and (B).

36. Pursuant to Section 2.3 of the Plan, unless holders agree to less favorable

treatment, holders of Allowed Priority Tax Claims (i) will be paid Cash in an amount equal to such

Claim on, or as soon thereafter as is reasonably practicable, the later of (a) the Effective Date, to

the extent such Claim is Allowed on the Effective Date, (b) the first business day after the date

that is forty-five (45) calendar days after the date such Claim becomes Allowed, and (c) the date

such Claim is due and payable in the ordinary course as such obligation becomes due; or (ii) will

receive equal annual Cash payments in an aggregate amount equal to the amount of such Claim,

together with interest at the applicable rate under section 511 of the Bankruptcy Code, over a

period not exceeding five (5) years from and after the Commencement Date. Accordingly, it is

my understanding that the Plan satisfies the requirements of section 1129(a)(9)(C) of the

Bankruptcy Code with respect to the treatment of Priority Tax Claims under section 507(a)(8).

37. Section 1129(a)(10). The Classes entitled to vote on the Plan— Claims in

Class 3 (Senior First Out Term Loan Claims), Class 4 (Senior Last Out Term Loan Claims), Class

5 (Holdco Loan Claims), and Class 6 (General Unsecured Claims) are impaired and have each

accepted the Plan, without including the acceptance of the Plan by any insiders in such Class.

Accordingly, it is my understanding that the Plan satisfies section 1129(a)(10) of the Bankruptcy

Code.

38. Section 1129(a)(11). I understand, based on discussions with the Debtors’

legal advisors, that Section 1129(a)(11) of the Bankruptcy Code permits a plan to be confirmed if

it is feasible, i.e., it is not likely to be followed by liquidation or the need for further financial

reorganization—and in the case of a liquidating plan—that the Debtors can timely perform all


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obligations described in such plan. I believe that the Debtors can timely perform all obligations

described in the Plan and the Plan is not a visionary scheme. I believe the Plan embodies a rational

plan for the orderly wind down of the Debtors’ estates and the delivery of distributions to holders

of Allowed Claims following the Effective Date. Specifically, the Plan sets forth certain Cash

payments that the Debtors and/or the Plan Administrator will make on or after the Effective Date.

Such payments include, among others, payments to holders of Allowed Administrative Expense

Claims, Allowed Priority Tax Claims, Allowed Priority Non-Tax Claims, and Allowed Other

Secured Claims. In accordance with the Global Settlement and the GUC Recovery Trust

Agreement, the Plan also provides for the establishment of the GUC Recovery Trust for the benefit

of holders of Allowed General Unsecured Claims, to which the Debtors will transfer the GUC

Recovery Trust Assets. Further, as described in further detail herein, I believe that the Debtors

have sufficient cash to fund all payments required under the Plan, including all valid

Administrative Expense Claims.

A. Estimated Sources of Funds

39. As set forth below, the Debtors expect to have sufficient funds to administer

and consummate the Plan, including funding all payments required under the Plan, and proceeding

with an orderly winddown of these chapter 11 cases.

(a) Estimated Remaining Assets

40. As of September 21, 2020, the value of the Debtors’ assets is approximately

$30.5 million, including $19.2 million in current cash on hand, and $4.7 million on account of

insurance proceeds related to the cyber security claim anticipated to be collected prior to the

Confirmation Hearing.


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Estimated Sources ($) Amount

Cash Balance as of 9/20/20 $13.5 million

503(b)(9) Segregated Account $5.7 million5

Cyber Security Insurance Claim $4.7 million

Other L/C or Deposit Receivables $6.6 million

TOTAL SOURCES: $30.5 million

B. Estimated Uses of Funds

(a) Other Uses of Funds

41. The Debtors project wind down expenses of approximately $7.9 million,

inclusive of remaining projected professional fees and US Trustee fees, and corporate wind-down

expenses including post-petition accounts payable and other estimated wind-down expenses to

satisfy the Debtors’ obligations under the Plan. In addition, $3.4 million dollars would first need

to be used to satisfy the remaining DIP Claims, leaving the Debtors with $19.2 million to satisfy

other Claims under the Plan.

(b) Estimated Outstanding Claims

42. Throughout these chapter 11 cases, the Debtors, with the assistance of their

financial advisors, have been tracking and estimating unpaid Outstanding Claims (defined below).

The Outstanding Claims amounts are estimated based on Claims received by the General Bar Date

(including 503(b)(9) Claims),6 the Debtors’ books and records, Mackinac’s analysis of the

5 As provided in the Stipulation and Order With Respect to DIP Paydown And Related Matters (ECF No. 520) (the “DIP Stipulation”), the Debtors established a segregated account (the “503(b)(9) Segregated Account”) reserved for the payment of 503(b)(9) Claims, which to date has been fully funded with $5.7 million.

6 Pursuant to the Order Establishing Deadline for Filing Proofs of Claim and Approving the Form and Manner of Notice Thereof (ECF No. 204) (the “Bar Date Order”) the deadline to file claims asserted under section 503(b)(9) of


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estimated Claims as of the Effective Date, and discussions with members of the Debtors’

management team and its advisors. 7

43. The Debtors estimate that the total amount of Outstanding Claims (as

defined below) that must be paid prior to any distributions to the First Out Term Loan Lenders

will be approximately $10.6 million, consisting of the following:

Estimated Outstanding Claims ($) Amount

Administrative Expense Claims $7.4 million (of which approximately $5.7 million are 503(b)(9) Claims)

Priority Tax Claims and Priority Non-Tax Claims $1.3 million

Other Secured Claims $0.2 million

Unsecured Claims $1.7 million settlement payment8

TOTAL CLAIMS: $10.6 million

44. This leaves the Debtors’ estates with approximately $8.6 million, which is

more than sufficient to satisfy Village’s maximum claim of approximately $2.3 million, and any

other contingencies that may arise.

45. Section 1129(a)(12). I understand that the Debtors have paid all chapter 11

statutory and operating fees required to be paid during these Chapter 11 Cases and filed all fee

statements required to be filed. Further, pursuant to Section 12.1 of the Plan, all fees payable

the Bankruptcy Code was April 27, 2020 at 5:00 p.m. (as extended from March 27, 2020 by Order Extending General Bar Date (ECF No. 411)) (the “General Bar Date”).

7 As provided in the Proposed Confirmation Order, following entry of the Proposed Confirmation Order, all other Administrative Expense Claimants will have thirty-five (35) days to submit their Administrative Expense Claims (the “Administrative Expense Claims Bar Date”). Following the Administrative Expense Claims Bar Date, the Debtors and their advisors will continue to reconcile and make determinations as to allowance of requests for payment of Administrative Expense Claims. 8 See Section 5.18 of the Plan.


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pursuant to section 1930 of title 28 of the United States Code shall be paid on the Effective Date,

and thereafter as may be required. Accordingly, it is my understanding that the Plan satisfies

section 1129(a)(12) of the Bankruptcy Code.

46. Section 1129(b). It is my understanding that, pursuant to section 1129(b)

of the Bankruptcy Code, a plan may be confirmed notwithstanding the rejection or deemed

rejection by a class of claims or interests so long as the plan is “fair and equitable” and it does not

discriminate unfairly as to such non-accepting class. Based on my review of the Voting

Certification, the Classes of Claims entitled to vote have accepted the Plan by the required

threshold under the Bankruptcy Code. Accordingly, the “cram down” provisions extant in section

1129(b) of the Bankruptcy Code are only applicable to holders of Claims in Class 7 (Intercompany

Claims), Class 9 (Parent Equity Interests), and Class 10 (Subordinated Securities Claims). The

Plan’s treatment of these Classes is proper because all similarly situated holders of Claims or

Interests will receive substantially equivalent treatment and the Plan’s classification scheme rests

on a legally acceptable rationale. Further, to the extent any impaired rejecting class of claims or

interests is not paid in full, no class junior to the impaired rejecting class will receive any

distribution under the Plan on account of its junior claim or interest.

47. Pursuant to 28 U.S.C. §1746, I declare under penalty of perjury that the

foregoing is true and correct to the best of my knowledge and belief.

Dated: September 24, 2020

/s/ Michael Nowlan Name: Michael Nowlan Title: Chief Restructuring Officer


Documents

20-10161-jlg Doc 770 Filed 09/24/20 Entered 09/24/20 18:06 ... · 4 WEIL:\97594189\14\44444.0009 THE PLAN 5. The Plan represents the final step in the Debtors’ chapter 11 cases