Admitted Pro Hac Vice JONES DAY Los Angeles, California ... · 555 South Flower Street, 50th Floor Los Angeles, California 90071 Telephone: (213) 489-3939 Facsimile: (213) 243-2539

Hearing Date and Time: July 21, 2010 at 9:00 a.m. (prevailing Eastern time)

NYI-4293830v10

Richard L. Wynne (SBN 1861426) Lance E. Miller (SBN 4827994) (Admission Pending) JONES DAY 222 East 41st Street New York, New York 10017 Telephone: (212) 326-3939 Facsimile: (212) 755-7306

-and-

Erin N. Brady (Admitted Pro Hac Vice) JONES DAY 555 South Flower Street, 50th Floor Los Angeles, California 90071 Telephone: (213) 489-3939 Facsimile: (213) 243-2539

Attorneys for the Ad Hoc Committee of Bondholders

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK

In re:

CHEMTURA CORPORATION, et al.1,

Debtors.

) ) ) ) ) ) ) )

Chapter 11 Case No. 09-11233 (REG)

Jointly Administered

OBJECTION OF THE AD HOC BONDHOLDER COMMITTEE TO THE MOTION OF THE OFFICIAL COMMITTEE OF EQUITY

SECURITY HOLDERS FOR AN ORDER TERMINATING THE EXCLUSIVE PERIODS DURING WHICH ONLY THE DEBTORS MAY FILE A CHAPTER 11 PLAN AND SOLICIT ACCEPTANCES THEREOF

1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal taxpayer-

identification number, are: Chemtura Corporation (3153); A&M Cleaning Products, LLC (4712); Aqua Clear Industries, LLC (1394); ASCK, Inc. (4489); ASEPSIS, Inc. (6270); BioLab Company Store, LLC (0131); BioLab Franchise Company, LLC (6709); Bio-Lab, Inc. (8754); BioLab Textile Additives, LLC (4348); CNK Chemical Realty Corporation (5340); Crompton Colors Incorporated (3341); Crompton Holding Corporation (3342); Crompton Monochem, Inc. (3574); GLCC Laurel, LLC (5687); Great Lakes Chemical Corporation (5035); Great Lakes Chemical Global, Inc. (4486); GT Seed Treatment, Inc. (5292); HomeCare Labs, Inc. (5038); ISCI, Inc. (7696); Kem Manufacturing Corporation (0603); Laurel Industries Holdings, Inc. (3635); Monochem, Inc. (5612); Naugatuck Treatment Company (2035); Recreational Water Products, Inc. (8754); Uniroyal Chemical Company Limited (Delaware) (9910); Weber City Road LLC (4381); and WRL of Indiana, Inc. (9136).

¨0¤{,A*'3 &/«

0911233100719000000000006

Docket #3305 Date Filed: 7/18/2010

NYI-4293830v10

TABLE OF CONTENTS PRELIMINARY STATEMENT ................................................................................................. 1

BACKGROUND ........................................................................................................................... 6

OBJECTION ................................................................................................................................. 9

I. THE EQUITY COMMITTEE’S DISPLEASURE WITH THE DEBTORS’ PLAN IS NOT A BASIS FOR THE COURT TO TERMINATE EXCLUSIVITY. ........................................................................................................... 9

II. THE EQUITY COMMITTEE HAS NOT SHOWN CAUSE TO TERMINATE EXCLUSIVITY. ......................................................................................................... 11

III. TERMINATING EXCLUSIVITY WILL RESULT IN UNNECESSARY COST AND DELAY. ............................................................................................................ 12

IV. THE EQUITY COMMITTEE’S HIGHLY LEVERAGED PLAN IS NOT A MARKET TEST. ........................................................................................................ 13

V. THE EQUITY COMMITTEE’S PROPOSED “TERM SHEET” IS NOT A SERIOUS ALTERNATIVE ................................................................................... 15

NYI-4293830v10

TABLE OF AUTHORITIES

Cases

citing In re Dow Corning Corp., 208 B.R. 661, 664 (Bankr. E.D. Mich. 1997) .......................... 11

In re Adelphia Communications Corp., 352 B.R. 578, 582 (Bankr. S.D.N.Y. 2006) .. 9, 10, 11, 13

In re Adelphia, 336 B.R. 610, 676, n.183 (Bankr. S.D.N.Y. 2006).............................................. 10

In re Express One Int’l, Inc., 194 B.R. 98, 101 (Bankr. E.D. Tex. 1996) .................................... 10

In re Geriatrics Nursing Home, Inc., 187 B.R. 128, 134 (D.N.J. 1995)........................... 10, 11, 15

In re Spansion, Inc., 426 B.R. 114, 139-40 (Bankr. D. Del. 2010) .............................................. 10

In re Texaco Inc., 81 B.R. 806, 881 (Bankr. S.D.N.Y. 1988)....................................................... 12

Johns-Manville Corp. v. Equity Security Holders, 66 B.R. 517, 537 (Bankr. S.D.N.Y. 1986).... 12

Statutes

11 U.S.C. § 1121(d). ..................................................................................................................... 11

Other Authorities

2008 Form 10K, Chemtura Corp .................................................................................................. 15

Debtors’ Motion For Entry Of Interim And Final Orders (I) Authorizing Post-Petition Secured Superpriority Financing Pursuant To 11 U.S.C. §§ 105(A), 362, 364(C)(1), 364(C)(2), 364(C)(3) And 364(D), (II) Authorizing The Debtors’ Use Of Cash Collateral Pursuant To 11 U.S.C. § 363, (III) Authorizing The Debtors’ Use Of Proceeds To Repurchase A Receivables Portfolio (IV) Granting Adequate Protection Pursuant To 11 U.S.C. § 361, 363 And 364, And (V) Scheduling A Final Hearing Pursuant To Bankruptcy Rules 4001(B) And 4001(C) [docket #4]. .............................................................................................................................................. 5

Objection Of The Official Committee Of Equity Security Holders To Debtors’ Motion For Entry Of An Order Authorizing The Debtors To Enter Into A Plan Support Agreement With The Creditors' Committee And Certain Holders Of The Debtors’ 2009 Notes, 2016 Notes And 2026 Debentures [docket # 3154]............................................................................................... 3

Verified Statement Of Jones Day Regarding Representation Of An Ad Hoc Committee Of Bondholders Pursuant To Federal Rule Of Bankruptcy Procedure 2019 [docket # 2479] ....... 7

Transcripts

Tr. of Proceedings 19:16-19:25, In re Visteon Corp., Case No. 09-11786 (Bankr. D. Del. July 15, 2010), a copy of which is attached hereto as Exhibit 2. ........................................................... 16

NYI-4293830v10 4

Tr. of Proceedings, In re Chemtura Corp., Case No. 09-11233 (Bankr. S.D.N.Y. June 17, 2010), a copy of which is attached hereto as Exhibit 1.......................................................................... 4

NYI-4293830v10 1

TO THE HONORABLE ROBERT E. GERBER UNITED STATES BANKRUPTCY JUDGE:

The Ad Hoc Committee of Bondholders (the “Bondholder Committee”) hereby objects

to the Motion Of The Official Committee Of Equity Security Holders For An Order, Pursuant To

Section 1121(d) Of The Bankruptcy Code, Terminating The Exclusive Periods During Which

Only The Debtors May File A Chapter 11 Plan And Solicit Acceptances Thereof [docket # 3171]

(the “Termination Motion”). In support of this Objection, the Bondholder Committee

respectfully represents as follows:

PRELIMINARY STATEMENT

1. The Debtors have not proposed a perfect plan that satisfies all of the divergent

creditor and interest groups in this case. In fact, a more perfect plan would be the one that the

Bondholder Committee would propose if the Court were to terminate exclusivity and decline to

approve the Plan Support Agreement on August 4, 2010.1 That plan would differ from the

Debtors’ Plan in several important respects. It would be based upon a plan value for Chemtura

which is significantly lower than the $2.050 Billion that the Debtors have proposed. It would

provide for the payment in full, with post-petition interest, of all creditors’ claims, along with full

payment of the Debtors’ no-call and make-whole obligations under the 2026 and 2016

indentures, respectively, to the extent there exists sufficient value, based upon the various claim

priorities. It would provide for a step-up in consideration to the extent that creditors are paid in

the form of new common stock as opposed to cash. And it would provide no recovery to

existing equity-holders, as the Debtors are insolvent. This would be the perfect plan, indeed.

2. But this is not a perfect world. And in this imperfect world, where the Debtors

1 While the vast majority of bondholders in these cases have agreed to the Plan Support Agreement, there are

some that have not. If exclusivity is terminated, those bondholders would be free to file their own plan or plans (independent of the Bondholder Committee) even if the Court approves the Plan Support Agreement.

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have used exclusivity and their best fiduciary judgments to negotiate an even-handed plan that

provides for both a fair (albeit never ideal) recovery for its constituents and a prompt exit from

Chapter 11, the Bondholder Committee has agreed to support the Debtors’ proposed Plan. The

Creditors’ Committee, the PBGC,2 and others – each of whom likely also views the Plan as

somewhat imperfect – have agreed to support the Debtors’ Plan as well. And as the Debtors

continue to make progress in negotiating achievable (although not perfect) settlements with other

important creditor constituencies, support for the Debtors’ Plan is likely only to grow.

3. In fact, the Debtors’ Plan already has the support of the majority of the Debtors’

creditor constituencies. It is the product of an extensively negotiated global settlement among

the Debtors, the Bondholder Committee, the PBGC, and the Official Committee of Unsecured

Creditors’ (the “Creditors’ Committee,” and collectively with the foregoing parties, the

“Parties”), resolving a myriad of issues and disputes relating to, among other things, (1) the

Debtors’ enterprise value,3 (2) the allocation of that enterprise value (between creditors with very

different claims, rights and priorities),4 (3) the allowance of the Noteholders claims to Make-

Whole and No-Call damages, (4) the allowance and application of inter-company claims, (5) the

pending litigation between the Creditors’ Committee and the agent for the Debtors’ pre-petition

secured credit facility, (6) the allowance, extent, and treatment of certain environmental 2 Capitalized terms not otherwise defined herein are as defined in the Debtors’ Plan. 3 The significance of the Parties’ compromise over the Debtors’ enterprise value cannot be overstated.

Whereas the enterprise value helps to dictate the Debtors’ potential solvency in these cases, it also dictates the value of the Debtors’ New Common Stock to be distributed under the Plan to creditors, including members of the Bondholder Committee. By agreeing to an enterprise value which is higher than the Bondholder Committee believes is appropriate, the Bondholder Committee essentially agreed to receive New Common Stock with significantly more market risk and at a value which is lower than warranted under the circumstances. This was a significant concession on the part of the Bondholder Committee, underscoring the fragility of the Global Settlement and the benefit of that settlement to the Debtors’ estates.

4 Just one example of the concessions made by individual bondholders is the agreement by the structurally senior holders of the 2016 notes to accept the same treatment as creditors with less priority in the Debtors’ capital structure, without any step-up for that loss of priority. Holders of the 2016 notes were willing to make this concession in order to facilitate the reorganization and provide the Debtors with a more financeable post-emergence capital structure and in the interests of maintaining unity of the Bondholder Committee.

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liabilities, (7) the allowance, extent, and treatment of asserted Diacetyl liabilities, and (8) the

extent and treatment of the Debtors’ allegedly under-funded pension obligations (as described in

the Debtors’ Disclosure Statement and Plan, the “Global Settlement”).

4. The Debtors worked for months to investigate all of the rights, claims, and

obligations of various creditor groups, and began substantial litigation efforts with respect to

Diacetyl and Environmental claims. This was all necessary predicate work in order to negotiate

the Global Settlement, where the Debtors obtained significant concessions from each of the

parties thereto in the process. It is unlikely that all of these parties, including the Bondholder

Committee, would have made any of these concessions had the Debtors’ not maintained

exclusivity throughout the plan negotiation process: the Bondholder Committee and other

parties simply would have filed their own plans and then sought and fought to have their plan

confirmed. Terminating exclusivity now would unravel the Debtors’ carefully negotiated plan,

and could lead to the same result.5

5. Yet that is exactly what the Equity Committee wants to do. The Equity

Committee is unhappy with the Debtors’ Plan. But rather than engage in constructive

negotiations, or simply voting against the Plan and challenging its confirmation, the Equity

Committee has sought to terminate exclusivity – threatening to destroy the Debtors’ fragile

Global Settlement and throw these cases into at least months, and possibly even years, of the

chaos and confusion that would result from competing plans. For what? To give the Equity 5 A majority of the Bondholder Committee members as well as certain other noteholders have committed to

support the Debtors’ Plan, and to that end have entered into a Plan Support Agreement with the Creditors' Committee. The Plan Support Agreement contemplates that the Debtors will become a party to the agreement upon approval and authority from this Court, and a hearing thereon is scheduled for August 4, 2010. The Equity Committee has objected to that motion. See Objection Of The Official Committee Of Equity Security Holders To Debtors’ Motion For Entry Of An Order Authorizing The Debtors To Enter Into A Plan Support Agreement With The Creditors' Committee And Certain Holders Of The Debtors’ 2009 Notes, 2016 Notes And 2026 Debentures [docket # 3154]. If the Court terminates exclusivity and also denies the Debtors the authority to enter into the Plan Support Agreement, the Bondholder Committee will be free to, and likely will, file a competing plan of reorganization based on, among other things, the lower plan value that the Bondholder Committee believes is appropriate.

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Committee the opportunity to solicit a plan that is neither confirmable or feasible, having been

based, among other things, on an overleveraged capital structure and uncommitted and unfunded

financing. Notably, this is based on the exact same fluff that the equity has been proposing for

the past eight months, while it continues to proclaim the Debtors’ “substantial” solvency.” But

the Debtors are not an athanor that can turn base metals into gold (if they were, they would

hardly be in bankruptcy in the first place). And the Equity Committee’s plan proposal is nothing

close to what it touts as a viable plan that can pay all creditors in full while preserving equity

value.

6. In reality, the Equity Committee’s proposal – and, for that matter, its attempt to

terminate exclusivity – is nothing more than an option or a stop-gap delay tactic intended to drag

out the plan confirmation process – and these bankruptcy cases – until the Equity Committee can

somehow (if ever) cobble together viable committed equity and debt financing.6 As proposed,

the Equity Committee’s plan concept would have the company emerge from Chapter 11 with a

funded debt level that is greater than that which saddled the Debtors upon filing for bankruptcy

relief (which heavy debt load in no small part necessitated theses chapter 11 cases), and that is

almost double that which the Debtors’ management and advisors believe is prudent (or even

obtainable in the current markets). Even after all of these months, the Equity Committee’s

proposal is not based on committed equity and debt financing, but is based solely upon a highly

confident letter from UBS (the Equity Committee’s proposed financial advisor) along with

6 The Equity Committee’s timing with respect to its Termination Motion is further evidence of its stopgap

strategy. At the June 17, 2010 hearing on the Debtors’ motion to extend exclusivity, the Equity Committee stated that it “hoped” to procure financing and propose a fully funded plan “within a couple of weeks.” See Tr. of Proceedings, In re Chemtura Corp., Case No. 09-11233 (Bankr. S.D.N.Y. June 17, 2010), a copy of which is attached hereto as Exhibit 1. It is now a month later, and not surprisingly in this market, it has yet to locate any truly committed debt or equity financing. With time now running out (given the Debtors’ impending solicitation), the Equity Committee has apparently decided to seek to terminate exclusivity even without a fully funded deal. But make no mistake, nothing except the Equity Committee’s characterization of its hoped-for commitments has changed since that June 17, 2010 exclusivity hearing. There was no committed funding then, and there is no committed funding now.

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contingent, partial equity funding proposals7 from two Equity Committee members. Other fatal

defects of the Equity Committee’s proffered plan construct include:

• Providing for a capital structure post-emergence with up to $1.3 billion in secured debt, rendering the Debtors overleveraged and not competitive;8

• Seeking to reinstate the 2016 notes (which have the most valuable package of rights and guarantors), while purportedly subordinating them to hundreds of millions in new senior secured debt;

• Ignoring the negative pledge contained in the 2016 notes9 which will result in all $1.3 billion of post-emergence debt being given secured status;10

• Providing a substantial recovery for equity even though senior creditors will not be paid in full;

• Failing to provide any payment – or even reserves for – post-petition interest and the other claims of the bondholders;

• Ignoring the Debtors Diacetyl and Environmental claimants altogether, despite the significant time and resources invested by the Debtors thus far in addressing these claims and the very substantial progress made towards settling those claims;11 and

7 The supposed commitments to provide a partial equity funding by Canyon Capital Advisors, LLC,

Strategic Value Master Fund, Ltd., and Strategic Value Special Situations Master Fund, LP have significant exceptions and contingencies , including (1) an “out” for a Material Adverse Change which is triggered by, among other things, (a) a deviation by more than 10% from EBITDA or net debt in Chemtura’s Long Range Plan (4/2010 version) and (b) termination or modification in any material respect of any material business relationship, including with customers or suppliers, (2) the right to back out if the Equity Committee is unable to raise a sufficient level of secured financing, and (3) a broad “out” for the confirmation of “due diligence” and the provision of “comfort letters.” See Termination Motion, Ex. B.

8 The Bondholder Committee believes that the interest costs associated with $1.3 billion of debt may result in negative cash flow post-emergence, even assuming the Debtors meet their aggressive projections for 2011 EBITDA.

9 The extent of the negative pledge contained in the 2016 is described in the Debtors’ Motion For Entry Of Interim And Final Orders (I) Authorizing Post-Petition Secured Superpriority Financing Pursuant To 11 U.S.C. §§ 105(A), 362, 364(C)(1), 364(C)(2), 364(C)(3) And 364(D), (II) Authorizing The Debtors’ Use Of Cash Collateral Pursuant To 11 U.S.C. § 363, (III) Authorizing The Debtors’ Use Of Proceeds To Repurchase A Receivables Portfolio (IV) Granting Adequate Protection Pursuant To 11 U.S.C. § 361, 363 And 364, And (V) Scheduling A Final Hearing Pursuant To Bankruptcy Rules 4001(B) And 4001(C) [docket #4].

10 To the extent the Equity Committee proposes to reinstate the 2016 notes and disregard its associated negative pledge, the proposal to saddle the Debtors with up to $1.3 billion in new financing would create inexcusable and non-curable non-monetary breaches in the 2016 notes and prevent reinstatement altogether. To the extent the Equity Committee proposes to honor the negative pledges and provide ratable liens to the 2016 notes, such liens would result in, among other things, (1) the perverse result that the Debtors will emerge from bankruptcy with more secured debt and less EBITDA than the Debtors had upon filing for bankruptcy relief, and (2) negative cash flow upon emergence, causing a likely successive bankruptcy case

11 As this Court is aware, the Debtors, in the exercise of their reasonable business judgment, have focused their efforts in these cases on addressing and resolving the environmental and diacetyl claims, terming each

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• Ignoring the PBGC and its significant threats to terminate the Debtors’ pension plans.

7. In short, having been unable to devise any other way to obtain a recovery for

equity out of the Debtors’ insolvent estates, the Equity Committee is proposing to finance a

grossly inflated immediate recovery on the backs of the Debtors’ business and its creditors. The

Equity Committee seeks to reinstate the claims held by a significant portion of the Debtors’

creditors, leaving these creditors to litigate their claims against the reorganized Debtors now or

in the future – and to years from now enforce any recoveries they might receive – behind over a

billion dollars of new secured debt, in a highly leveraged and fragile capital structure. It is likely

that these same reinstated creditors would then find themselves creditors in the Debtors next

bankruptcy cases, were the Equity Committee’s proposal put in place. Of course, by then the

current equity would be long since cashed out, having been able to sell their interests.

8. The Equity Committee’s uncommitted proposal is dead before arrival. Its efforts

to terminate exclusivity – and thereby jeopardize the Debtors’ fragile Global Settlement for

nothing more than a “hope” that it can someday get a deal financed and done – should be as well.

Maintaining the Debtors’ exclusivity presents the best and clearest route to emergence in these

cases.

BACKGROUND

9. The Bondholder Committee formed in September, 2009, with the singular

purpose of encouraging and facilitating the Debtors’ prompt exit from chapter 11. This

Bondholder Committee sought to develop consensus among a broad cross-section of creditors

(all of whom had different rights to recovery from the Debtors) as to their preferred treatment

as “key gating issues” in these cases. Now that the Debtors appear to be on the 1-yard-line with respect to reaching settlements of these claims, the Equity Committee proposes to throw away the Debtors’ significant progress and leave the diacetyl and environmental claims unimpaired to be resolved through litigation post-emergence, leaving the company open to the uncertainties, costs, and risks of litigation.

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under a chapter 11 plan, with the aim of encouraging and expediting a consensual confirmation

process in these cases. By forming a unified group which includes holders of not only bonds, but

also the Debtors’ bank debt and some trade debt, the Bondholder Committee believed (and

continues to believe) that it could avoid the quagmire that inevitably results when splintered

groups of creditors champion only their unique individual causes.

10. To achieve the desired consensus, the Bondholder Committee retained Jones Day

and Moelis & Company to advise the committee, conduct extensive diligence, and work with the

Debtors and Creditors’ Committee. The Bondholder Committee then used this diligence to work

towards an internal compromise of the various creditors’ often divergent and conflicting views,

to form and maintain a united group with whom the Debtors could negotiate. With member

holdings of more than $770 million in funded debt claims against the Debtors, including 62% of

the Debtors’ obligations under their three pre-petition indenture agreements, the Bondholder

Committee represents a majority of the Debtors’ funded creditors in these cases.12

11. The Bondholder Committee’s assessment of the company – both upon its

formation and today – is that every day in Chapter 11 inflicts further damage to the Debtors’

business and the prospects for creditor recoveries. The passage of time makes future financing

more difficult. It also perpetuates uncertainty among customers and suppliers, thereby

worsening the effects of the economic recession faced by the company with its worldwide

footprint. With this in mind, the Bondholder Committee decided early on that a quicker plan

process, allowing the Debtors to emerge from Chapter 11 and stem the costs resulting from the

Chapter 11 process, was preferable to an eventual more “perfect” plan.

12 The extent of the holdings controlled by members of the Bondholder Committee is more fully detailed in

that certain Verified Statement Of Jones Day Regarding Representation Of An Ad Hoc Committee Of Bondholders Pursuant To Federal Rule Of Bankruptcy Procedure 2019 [docket # 2479], as updated and amended from time to time.

NYI-4293830v10 8

12. Thus, shortly after its initial formation, the Bondholder Committee informed the

Debtors and Creditors’ Committee that it sought to negotiate the terms of a plan of

reorganization as soon as possible, and agreed with the Debtors’ analysis that a major reduction

in the future funded debt was necessary for the Debtors future capital structure to enable them to

be competitive on a global scale and maximize value.13 Indeed, the Bondholder Committee was

initially targeting an early 2010 exit from Chapter 11. To the Bondholder Committee’s dismay,

the emergence timeline was substantially delayed while the Debtors engaged in extensive

analysis, litigation and ultimately discussions and negotiations with diacetyl and environmental

creditors, as well as dealing with many other preliminary issues. The Debtors also used this time

to work with the Creditors’ Committee, the PBGC, and the Equity Committee to diligence

various issues of contention and discuss potential resolutions of those issues. While all of this

process was ultimately a necessary prerequisite to the development and negotiation of the Plan,

the corresponding delay was substantial.

13. Notably, the Equity Committee was substantively involved throughout this entire

process, including the plan negotiations. Notwithstanding the Debtors’ insolvency, the Debtors

included the Equity Committee in every step of the plan process – so much so that the

Bondholder Committee at times viewed the Debtors as spending far too much time and effort

catering to the Equity Committee and its demands. To be sure, the Equity Committee had a

literal – not just figurative – seat at the table during both the entire pre-negotiation process and

during the plan negotiations themselves. Unfortunately, despite its significant access to the

negotiation process, the Equity Committee squandered the opportunity to negotiate a plan that

any other constituency would find acceptable. And despite the Parties’ consistent message to the 13 Thus, the Global Settlement, with the Bondholders agreeing to among other key terms, a debt-equity

conversion, albeit at a higher plan value than they considered appropriate, was a major component of the Debtors Plan structure and key aspect of the give and take of the negotiations.

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Equity Committee that its plan construct was not viable, the Equity Committee was insistent that

it would not negotiate outside of anything but its preferred plan structure.

14. Nonetheless, the Debtors and its creditor constituencies pressed on, negotiating

and ultimately agreeing upon a global settlement of issues that laid the framework for a

consensual Chapter 11 plan. The Parties immediately provided the terms of their global

settlement to the Equity Committee, and invited it to sign-on or to engage in constructive

negotiations within the framework of the Global Settlement. The Equity Committee declined

and instead now has sought to terminate exclusivity.

OBJECTION

I. THE EQUITY COMMITTEE’S DISPLEASURE WITH THE DEBTORS’ PLAN IS NOT A BASIS FOR THE COURT TO TERMINATE EXCLUSIVITY.

15. The Debtors have appropriately used exclusivity to bring their various

constituents to the negotiating table, thereby preserving and, in fact, enhancing the value of their

estates. The Debtors conducted extensive negotiations with every significant constituency in

these cases, and have proposed a plan that at this point has “very substantial, but not universal,

indications of potential approval.” In re Adelphia Communications Corp., 352 B.R. 578, 582

(Bankr. S.D.N.Y. 2006) (hereinafter “Adelphia II”) (declining to terminate exclusivity when the

Debtors had proposed a viable plan with significant creditor support). And now that the Plan is

on file, the cases are poised to move expeditiously toward a September 16, 2010 confirmation

hearing. The Court should allow the Debtors to solicit and seek confirmation of the Plan without

the interference of competing Plans.

16. The Equity Committee, however, contends that it should be permitted to file a

competing plan simply because it does not like the Plan currently on file. But whether or not

the Equity Committee likes the Debtors’ Plan, or thinks that it has a better alternative, is

NYI-4293830v10 10

irrelevant to a determination of whether the Court should terminate exclusivity. As this Court

ruled in Adelphia II:

I note that displeasure with a plan on file is not one of the enumerated factors [to terminating exclusivity], and is not a basis for terminating exclusivity. Nor, without more, is creditor constituency unhappiness with a debtor’s plan proposals, with or without a formal plan on file.

Adelphia II at 587 (emphasis added) (citing In re Adelphia, 336 B.R. 610, 676, n.183 (Bankr.

S.D.N.Y. 2006) (“[T]he notion that creditor constituency unhappiness, without more, constitutes

cause to undermine the debtor’s chances of winning final confirmation of its plan during the

exclusivity period has been judicially rejected.”) (citing In re Geriatrics Nursing Home, Inc., 187

B.R. 128, 134 (D.N.J. 1995). This remains true even if the Equity Committee thinks that it has –

or in fact has – devised a “superior” plan structure. See, e.g., Geriatric Nursing Home, Inc., 187

B.R. at 128; In re Express One Int’l, Inc., 194 B.R. 98, 101 (Bankr. E.D. Tex. 1996) (“Kitty

Hawk would have the Court terminate exclusivity because they believe the Kitty Hawk plan is

superior to Express One’s plan. The issue to be determined, however, is not whether some other

plan may exist which provides greater recovery; the issue is whether debtor has been diligent in

its attempts to reorganize.”); In re Spansion, Inc., 426 B.R. 114, 139-40 (Bankr. D. Del. 2010)

(where debtor’s plan was confirmable as is, debtor did not need to consider changes proposed by

the creditors’ committee which would allegedly result in a superior plan (citing Geriatric

Nursing)).

17. The Equity Committee would have the Court believe that its constituents will be

marginalized – and unable to meaningfully oppose the Plan – if the Court denies the Termination

Motion. That, of course, is not true. Indeed, as this Court has pointed out, parties who are

unhappy with the Plan (like the Equity Committee) can “express [their] unhappiness with the

merits of the plan, and the reasons for it, to other creditors.” Adelphia II, at 589-90. They can

NYI-4293830v10 11

also vote against the Plan, and object to confirmation at the appropriate time. Maintaining

exclusivity does nothing to impair or marginalize that right.

II. THE EQUITY COMMITTEE HAS NOT SHOWN CAUSE TO TERMINATE EXCLUSIVITY.

18. The Equity Committee has failed to meet its burden to show cause to terminate

the Debtors’ exclusivity in this case. Section 1121 of the Bankruptcy Code provides that the

Court may reduce or increase a period of exclusivity for cause. See 11 U.S.C. § 1121(d).

“Cause” is not defined under the Bankruptcy Code, but courts are clear that a party seeking to

terminate exclusivity “bears a heavy burden,” and must carry its burden through the framework

of nine non-exclusive factors, the so-called “Dow Corning Factors.14 Geriatrics Nursing Home,

187 B.R. at 132. The Equity Committee does not even attempt to address them.

19. Instead, the Equity Committee – citing to this Court’s ruling in the Adelphia II

case – suggests that the Court need not consider the objective Dow Corning Factors at all, and

can instead use its discretion to terminate exclusivity where termination would serve the “interest

of justice” and would “move the case forward materially.” Termination Motion at 11. The

Adelphia II case, however, stands for no such thing. In fact, the Adephia II court is clear that the

Dow Corning Factors are not mere “platitudes”, but are rather objective factors “that cannot be

ignored.” Adelphia II at 587 (citing In re Dow Corning Corp., 208 B.R. 661, 664 (Bankr. E.D.

Mich. 1997) (emphasis added). The Equity Committee’s willingness to misrepresent this Court’s

own ruling belies the weakness of its arguments.

14 The Dow Corning Factors are as follows: (a) the size and complexity of the case, (b) the necessity for

sufficient time to permit the debtor to negotiate a plan of reorganization and prepare adequate information, (c) the existence of good faith progress toward reorganization, (d) the fact that the debtor is paying its bills as they become due, (e) whether the debtor has demonstrated reasonable prospects for filing a viable plan, (f) whether the debtor has made progress in negotiations with its creditors, (g) the amount of time which has elapsed in the case, (h) whether the debtor is seeking an extension of exclusivity in order to pressure creditors to submit to the debtors’ reorganization demands, and (i) whether an unresolved contingency exists. Geriatrics Nursing Home, 187 B.R. at 132.

NYI-4293830v10 12

20. In any event, the Equity Committee has not met its heavy burden of showing

cause to terminate exclusivity. In fact, it has not provided a single reason – other than its

dissatisfaction with the Plan and its desire to propose its own – to terminate exclusivity. That is

not nearly enough. Its Termination Motion must be denied.

III. TERMINATING EXCLUSIVITY WILL RESULT IN UNNECESSARY COST AND DELAY.

21. The Equity Committee also claims that because it is ready to file its competing

plan immediately, there will be no delay in confirmation and emergence if exclusivity is

terminated. Termination Motion at 14. This result is simply inconceivable. Putting aside the

logistical delays intrinsic in allowing the Equity Committee to file and solicit a competing plan,

terminating exclusivity at this point will do nothing more than open the door for other

constituencies – constituencies who might otherwise compromise their claims and sign-on to the

current Plan – to file their own “special interest” plan if the Debtors resist their self-serving

demands. See, e.g., In re Texaco Inc., 81 B.R. 806, 881 (Bankr. S.D.N.Y. 1988) (termination of

debtor’s exclusivity period “could result in [an] avalanche of plans from parties in interest which

would undermine the prospects for prompt resolution [of the cases]”); Johns-Manville Corp. v.

Equity Security Holders, 66 B.R. 517, 537 (Bankr. S.D.N.Y. 1986) (noting that complexities of

maintaining the current consensus would “exploded in the context of competing plans advanced

by parochial interests”).

22. In fact, there are at least two – and possibly more – constituencies that the Court

could expect to file competing plans in this case. The Equity Committee, of course, will file its

competing plan, as might the Diacetyl claimants, who are well organized and represented by

sophisticated counsel. It is also possible that one or more splinter groups of bondholders not part

of the Bondholder Committee or party to the Plan Support Agreement could file competing plans

NYI-4293830v10 13

as well. And if the Court declines to approve the Debtors’ entry into the proposed Plan Support

Agreement, both the Creditors’ Committee and the Bondholder Committee would be free to file

their own competing plans. The confirmation process – now likely to conclude in mid-

September – could drag out for many more months, at the expense of the estates and all of their

constituents. As this Court pointed out in Adephia II:

A competing plans battle now might well jeopardize current fragile agreements between various stakeholders, re-ignite intercreditor disputes, and push this process back to square one. A competing plans battle would also likely drag out the solicitation process, subjecting the estate to substantial extra costs that might otherwise be avoided, . . ..

Adelphia II at 590.

23. This result is not in the best interest of any party, least of all the equity holders,

whose recoveries will be diminished by the administrative costs of a lengthy and litigious

competing plans battle.

IV. THE EQUITY COMMITTEE’S HIGHLY LEVERAGED PLAN IS NOT A MARKET TEST.

24. Based solely on the offer of two Equity Committee members to partially fund an

equity contribution, the Equity Committee argues that the “market has spoken,” and that it

supports the Equity Committee’s plan proposal. Based on this perceived market support, the

Equity Committee contends that the Court should allow it to solicit its competing plan. The

partial funding offer, however, is far from indicative of a “market test” of the Equity

Committee’s plan proposal. For its eight long months of trying, the Equity Committee has

secured no more than a highly contingent “commitment” by the two hedge funds that dominate

the Equity Committee – more of a commitment to protect their own investment interests (and

create the illusion of market interest) than an indication of actual market sentiment. And, of

course, the commitment is all but illusory as it is mired by numerous significant conditions

NYI-4293830v10 14

which essentially render the funding offer a mere option.

25. As a preliminary matter, the Equity Committee has spent the last eight months

attempting to obtain firm commitments for both equity investments and debt financing. It has

yet to obtain either, having secured only conditional indications of potential support. And given

the current and volatile state of the markets, it is getting more and more unlikely that it will ever

be able to do so. The market has spoken, and on this point it is wishy-washy at best.

26. Perhaps more telling, however, is the sheer amount and extent of caveats

underlying the supposed “commitment” to provide an equity contribution. As discussed, Supra

at fn. 7, the commitment by two of the Equity Committee members to fund an equity

contribution would fall away if, among other things, there is a Material Adverse Change

triggered by a deviation of more than 10% from EBITDA or net debt in Chemtura’s Long Range

Plan (4/2010 version) or by termination or modification in any material respect of any material

business relationship, including with customers or suppliers, if the Equity Committee is unable to

raise a sufficient level of secured financing, or if the Equity Committee is unhappy with its “due

diligence.” Given the breadth of these contingencies – which basically give the Equity

Committee members an out under almost any circumstances imaginable – it is inappropriate to

even label the equity funding offer as a true “commitment.”

27. Finally, despite all of these caveats, the two Equity Committee members

apparently require “enhanced” incentives to motivate their “commitment” to the Equity

Committee’s plan proposal. Specifically, under the Equity Committee’s proposal its two leading

members will receive, among other things, $14 million commitment fees, free warrants to

purchase additional stock, and new common stock with preferred treatment including a

liquidation preference. Far from indicating a “market test,” the terms and conditions of the

NYI-4293830v10 15

equity “commitment” reveal the Equity Committee members’ own perceptions as to the

weakness of the Equity Committee proposals.

V. THE EQUITY COMMITTEE’S PROPOSED “TERM SHEET” IS NOT A SERIOUS ALTERNATIVE

28. Finally, although it is not necessary for this Court to assess the viability of the

Equity Committee’s proposal in deciding the Termination Motion, it merits noting that the

Equity Committee’s term sheet, on its face, is not a viable alternative to the Debtors’ Plan. See

Geriatrics Nursing Home, 187 B.R. at 134 (“This Court is not satisfied that statements made by

creditors and parties in interest that they were prepared to offer more favorable plans if the court

were to terminate the exclusivity period constitutes sufficient cause to cut short the debtor's

window of opportunity opened by Congress 11 U.S.C. § 1121(b) and (c).”). In fact, the Equity

Committee’s proposal – a proposal that it contends is strong enough to justify the termination of

exclusivity – is based on nothing more than a series of unsupported and unjustified assumptions.

29. The proposal assumes, for example, that the Equity Committee can raise $470

million in cash equity, an amount for which it still (after eight months of trying) has no firm

commitment. It assumes that the Equity Committee can secure up to $1.3 billion in secured debt

financing in this difficult market, even though it has yet to raise even one penny of debt. It

assumes that it is at all rational for a company, in this economic climate, to emerge from

bankruptcy relief with more total debt than when they filed (while also resinstating a substantial

portion of its pre-bankruptcy debt).15 It assumes, without any legal authority, that the Equity

Committee will prevail in the inevitable litigation regarding the noteholders’ no-call and make-

whole claims, despite the abundance of precedent supporting the enforceability of these claims.

It assumes that the Debtors will somehow find funding to satisfy reinstated diacetyl and 15 See 2008 Form 10K, Chemtura Corp. (listing total debt of approx. $1.204 billion and EBITDA of $351

million).

NYI-4293830v10 16

environmental claims, which it proposes to put behind more than a billion dollars in new secured

debt. It assumes, again without legal authority, that the Debtors can reinstate certain of their

indenture obligations, putting them behind more than $800 million in new senior secured debt. It

assumes that the PBGC will not seek to terminate the Debtors’ pension plans, even in the face of

a grossly overleveraged capital structure. And it assumes that the Debtors will not be required to

pay postpetition interest on their unsecured claims, even while equity holders receive a

substantial recovery. The Equity Committee’s proposal utterly fails to satisfy the feasibility

requirements for confirmation and is nothing more than a wish and a prayer, intended to buy the

Equity Committee the time to do what it has not been able to do in eight long months – find

anyone to commit to its proposal.

30. The Equity Committee’s proposal is not feasible, nor is it confirmable. And it

certainly is not a basis upon which to terminate the Debtors’ exclusivity, and subject the estates

to a protracted fight over several competing plans. Now is hardly the appropriate time to destroy

the Debtors’ hard-fought, viable global settlement on nothing more than a series of hopeful

assumptions.16

WHEREFORE, the Bondholder Committee respectfully requests that the Court deny the

Termination Motion and grant such other relief as the Court deems appropriate in the interests of

justice.

16 Significantly, just this past week Judge Carey for the Bankruptcy Court for the District of Delaware

rejected similar attempts by equity-holders to interfere with the Debtors’ exclusivity in an attempt to propose a competing plan. As Judge Carey stated:

[T]here’s a strong public policy in bankruptcy code preference or -- not preference but advantage to debtors to have at least a first shot at a plan of reorganization. And I think that’s appropriate here. The plan may or may not be confirmable. I’m not going to deny exclusivity based on a factual and legal argument that the plan that’s on the table that is being solicited is facially unconfirmable. . . . We’re going to go to a plan; we’re going to see what happens.

Tr. of Proceedings 19:16-19:25, In re Visteon Corp., Case No. 09-11786 (Bankr. D. Del. July 15, 2010), a copy of which is attached hereto as Exhibit 2.

NYI-4293830v10 17

Dated: July 18, 2010 New York, New York

JONES DAY /s/ Richard L. Wynne Richard L. Wynne Lance E. Miller JONES DAY 222 East 41st Street New York, New York 10017 Telephone: (212) 326-3939 Facsimile: (212) 755-7306 -and- Erin N. Brady 555 South Flower Street, 50th Floor Los Angeles, California 90071 Telephone: (213) 489-3939 Facsimile: (213) 243-2539 Counsel to the Ad Hoc Committee of Bondholders

EXHIBIT 1

- 1 -

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

- 2 -

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


- 3 -

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


- 4 -

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

- 5 -

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.



- 6 -

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



- 7 -

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.



- 8 -

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



- 9 -

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



- 10 -

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,



- 11 -

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



- 12 -

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



- 13 -

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



- 14 -

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



- 15 -

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



- 16 -

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



- 17 -

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



- 18 -

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,



- 19 -

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



- 20 -

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



- 21 -

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



- 22 -

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



- 23 -

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



- 24 -

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


- 35 -

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

18

19

20

21

22

23

24

25


Dena PageDigitally signed by Dena PageDN: cn=Dena Page, c=USReason: I am the author of thisdocumentDate: 2010.06.18 11:20:26 -04'00'

EXHIBIT 2

- 1 -

1

2 UNITED STATES BANKRUPTCY COURT

3 DISTRICT OF DELAWARE

4 Case No. 09-11786-CSS

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

6 In the Matter of:

7

8 VISTEON CORPORATION, et al.

9

10 Debtors.

11

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

13

14 United States Bankruptcy Court

15 824 North Market Street

16 5th Floor

17 Wilmington, Delaware

18

19 July 15, 2010

20 11:08 AM

21

22 B E F O R E:

23 HON. CHRISTOPHER S. SONTCHI

24 U.S. BANKRUPTCY JUDGE

25 ECR OPERATOR: LESLIE MURIN


- 2 -

1 PEWA Motion to Compel: Motion of Panasonic Electric Works

2 Corporation of America for an Order Compelling Debtors to

3 Assume or Reject Its Pre-Petition Contract

4

5 USF Holland Inc.'s Administrative Claims Motion: USF Holland

6 Inc.'s Motion for Allowance and Payment of Administrative

7 Claims Pursuant to 11 U.S.C. Section 503(b)(9)

8

9 YRC Inc. Administrative Claims Motion: YRC Inc.'s Motion for

10 Allowance and Payment of Administrative Claim Pursuant to 11

11 U.S.C. Section 503(b)(9)

12

13 OCUC Prosecution Motion: Motion of the Official Committee of

14 Unsecured Creditors Requesting Authorization to Prosecute

15 Certain Claims on Behalf of the Debtors' Estates

16

17 OCUC Motion for 2004 Discovery of PwC: Emergency Motion of the

18 Official Committee of Unsecured Creditors for Leave to Conduct

19 Discovery Pursuant to Fed.R.Bankr.P.2004

20

21 OCUC Seal Motion re Motion for 2004 Discovery of PwC: Motion

22 for Order Authorizing the Official Committee of Unsecured

23 Creditors to File Emergency Motion of the Official Committee of

24 Unsecured Creditors to Leave to Conduct Discovery Pursuant to

25 Fed.R.Bankr.P.2004 Under Seal


- 3 -

1 OCUC Motion for 2004 Discovery of Debtors: Motion of the

2 Official Committee of Unsecured Creditors for Leave to Conduct

3 Discovery of the Debtors Pursuant to Fed.R.Bankr.R.2004

4

5 OCUC Seal Motion re Motion for 2004 Discovery of Debtors:

6 Motion for Order Authorizing the Official Committee of

7 Unsecured Creditors to File Motion for Leave to Conduct

8 Discovery of the Debtors Pursuant to Fed.R.Bankr.P.2004 Under

9 Seal

10

11 OCUC Motion for 2004 Discovery of Ford: Emergency Motion of

12 the Official Committee of Unsecured Creditors for Leave to

13 Conduct Discovery Pursuant to Fed.R.Bankr.P.2004

14

15 OCUC Seal Motion re Motion for 2004 Discovery of Ford: Motion

16 for Order Authorizing the Official Committee of Unsecured

17 Creditors to File Emergency Motion of the Official Committee of

18 Unsecured Creditors for Leave to Conduct Discovery Pursuant to

19 Fed.R.Bankr.P.2004 Under Seal

20

21 Committee Exclusivity Motion: Motion of the Official Creditors

22 Committee to Terminate Debtors' Exclusive Periods to File and

23 Solicit Votes for Their Chapter 11 Plan

24

25


- 4 -

1 E&Y Retention: Debtors' Motion for Entry of and Order (a)

2 Authorizing the Debtors to Expand the Scope of Employment and

3 Retention of Ernst & Young LLP to Provide Certain Valuation

4 Services Nunc Pro Tunc to April 1, 2010 and (b) Approving and

5 Amendment to the Debtors' Statement of Work with Ernst & Young

6 LLP

7

8 PwC Retention: Debtors' Motion for Entry of and Order

9 Authorizing the Debtors to Expand the Scope of Employment and

10 Retention of PricewaterhouseCoopers LLP as Independent Auditor

11 and Accountant for the Debtors Nunc Pro Tunc to May 27, 2010

12

13 TMD Sale Motion: Debtors' Motion for Entry of an Order (I)

14 Authorizing the Sale of Debtors' Equity Interest In Toledo

15 Molding & Die, Inc. Free and Clear of Liens, Claims,

16 Encumbrances, and Other Interests; (II) Authorizing and

17 Approving Stock Purchase Agreement Related Thereto; and (III)

18 Granting Related Relief

19

20 TMD Sale Seal Motion: Debtors' Motion to File Under Seal the

21 Purchase Order Schedule Annexed to the Debtors' Motion for

22 Entry of an Order (I) Authorizing the Sale of Debtors' Equity

23 Interest in Toledo Molding & Die, Inc. Free and Clear of Liens,

24 Claims, Encumbrances, and Other Interests; (II) Authorizing and

25 Approving Stock Purchase Agreement Related Thereto; and (III)


- 5 -

1 Granting Related Relief

2

3 Thirteenth Omnibus Claim Objection: Thirteenth Omnibus

4 Objection of Visteon Corporation and Its Affiliated Debtors to

5 Proofs of Claim

6

7 Fourteenth Omnibus Claim Objection: Fourteenth Omnibus

8 Objection of Visteon Corporation and Its Affiliated Debtors to

9 Proofs of Claim

10

11 Cash Collateral Motion: Motion of the Debtors for Entry of an

12 Interim Order (A) Authorizing Use of Cash Collateral, (B)

13 Granting Adequate Protection to Prepetition Secured Lenders,

14 and (C) Scheduling Final Hearing

15

16 Debtors' Exclusivity Motion: Debtors' Fourth Motion to Extend

17 Their Exclusive Periods to File and Solicit Votes for Their

18 Chapter 11 Plan

19

20

21

22

23

24

25 Transcribed by: Ellen S. Kolman


- 6 -

1

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

3 KIRKLAND & ELLIS LLP

4 Attorneys for Debtors and Affiliated Debtors

5 300 North LaSalle

6 Chicago, IL 60654

7

8 BY: JAMES J. MAZZA, JR., ESQ.

9 ERIN BRODERICK, ESQ.

10 PHILLIP W. NELSON, ESQ.

11

12 PACHULSKI STANG ZIEHL & JONES LLP

13 Attorneys for Debtors and Affiliated Debtors


15 17th Floor

16 Wilmington, DE 19899

17

18 BY: JAMES E. O'NEILL, ESQ.

19

20 ASHBY & GEDDES, P.A.

21 Co-counsel to the Official Committee of Unsecured

22 Creditors

23 500 Delaware Avenue


25


- 7 -

1 BY: GREGORY A. TAYLOR, ESQ.

2

3 BROWN RUDNICK LLP

4 Co-Counsel to the Official Committee of Unsecured

5 Creditors

6 Seven Times Square


8

9 BY: HOWARD STEEL, ESQ.

10

11 BROWN RUDNICK LLP

12 Co-Counsel to the Official Committee of Unsecured

13 Creditors

14 City Place 1

15 185 Asylum Street

16 Hartford, CT 06103

17

18 BY: HOWARD L. SIEGEL, ESQ.

19

20

21

22

23

24

25


- 8 -

1 MORRIS, NICHOLS, ARSHT & TUNNELL LLP

2 Attorneys for Prepetition Term Agent



5

6 BY: DANIEL B. BUTZ, ESQ.

7

8

9 SAUL EWING, LLP

10 Attorneys for Toledo Molding & Die, Inc.


12 Suite 1200


14

15 BY: LUCIAN MURLEY, ESQ.

16

17

18 U.S. DEPARTMENT OF JUSTICE

19 Office of the United States Trustee

20 J. Caleb Cobbs Federal Building

21 844 King Street

22 Suite 2207


24

25 BY: JANE M. LEAMY, ESQ.


- 9 -

1 AKIN, GUMP, STRAUSS, HAUER & FELD, LLP

2 Attorneys for Informal Group of Noteholders

3 One Bryant Park


5

6 BY: ARIK PREIS, ESQ.

7 ROBERT J. TENNENBAUM, ESQ. (TELEPHONICALLY)

8

9 ANDREWS KURTH LLP

10 Attorneys for Ad Hoc Trade Committee

11 450 Lexington Avenue


13

14 BY: PAUL N. SILVERSTEIN, ESQ. (TELEPHONICALLY)

15 ABHISHEK MATHUR, ESQ. (TELEPHONICALLY)

16 JONATHAN I. LEVINE, ESQ. (TELEPHONICALLY)

17

18

19 BINGHAM MCCUTCHEN LLP

20 Attorneys for Wilmington Trust FSB, as Administrative

21 Agent for Pre-Petition Term Lenders

22 One Federal Street

23 Boston, MA 02110

24

25 BY: SAMUEL R. ROWLEY, ESQ. (TELEPHONICALLY)


- 10 -

1

2 BLANK ROME LLP

3 Attorneys for the Informal Committee of Noteholders

4 1201 Market Street

5 Suite 800


7

8 BY: ALAN M. ROOT, ESQ.

9

10

11 CARSON FISCHER, PLC

12 Attorneys for Toledo Mold & Die

13 4111 Andover Road West

14 Bloomfield Hills, MI 48302

15

16 BY: JOSEPH M. FISCHER, ESQ. (TELPHONICALLY)

17

18

19 DAVIDSON KEMPER CAPITAL MANAGEMENT

20 Attorney for Davidson Kemper Capital Management

21 64 East 55th Street


23

24 BY: EPHRAIM DIAMOND, ESQ. (TELEPHONICALLY)

25


- 11 -

1 DECHERT LLP

2 Attorneys for Law Debenture Trust Company of New York

3 1095 Avenue of the Americas


5

6 BY: STEVEN B. SMITH, ESQ. (TELEPHONICALLY)

7

8

9 DEWEY & LEBOEUF LLP

10 Attorneys for the Ad Hoc Committee of Equity Holders



13

14 BY: MARTIN J. BIENENSTOCK, ESQ. (TELEPHONICALLY)

15

16

17 FOX ROTHSCHILD LLP

18 Attorneys for Lead Investors

19 Citizens Bank Center


21 Suite 1300


23

24 BY: ERIC M. SUTTY, ESQ.

25


- 12 -

1 GOLDBERG, KOHN, BELL, BLACK, ROSENBLOOM & MORITZ, LTD.

2 Attorneys for Johnson Controls Interiors, LLC

3 55 East Monroe Street

4 Suite 3300

5 Chicago, IL 60603

6

7 BY: DANIELLE WILDERN JUHLE, ESQ. (TELEPHONICALLY)

8

9

10 MCGUIREWOODS, LLP

11 Attorneys for Ford Motor Company

12 625 Liberty Avenue

13 23rd Floor, EQT Plaza

14 Pittsburgh, PA 15222

15

16 BY: MARK E. FREEDLANDER, ESQ. (TELEPHONICALLY)

17

18

19 MILLER CANFIELD PADDOCK & STONE, P.L.C.

20 Attorneys for Ford Motor Company

21 150 West Jefferson

22 Suite 2500

23 Detroit, MI 48226

24

25 BY: STEPHEN S. LAPLANTE, ESQ. (TELEPHONICALLY)


- 13 -

1 MORRIS JAMES LLP

2 Attorneys for Nissan Trading Corp.


4 Suite 1500


6

7 BY: CARL N. KUNZ III, ESQ. (TELEPHONICALLY)

8

9

10 PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP

11 Attorneys for Mason Capital Management LLC



14

15 BY: SARAH HARNETT, ESQ. (TELEPHONICALLY)

16

17

18

19

20

21

22

23

24

25


- 14 -

1 WHITE & CASE LLP

2 Attorneys for Lead Investors, Working Group of the

3 Informal Noteholder Committee



6

7 BY: ANDREW C. AMBRUOSO, ESQ. (TELEPHONICALLY)

8 GERARD UZZI, ESQ. (TELEPHONICALLY)

9 J. CHRISTOPHER SHORE, ESQ. (TELEPHONICALLY)

10 LYDIA E. LIN, ESQ. (TELEPHONICALLY)

11 THOMAS E. LAURIA, ESQ. (TELEPHONICALLY)(

12

13

14

15

16

17

18

19

20

21

22

23

24

25


VISTEON CORPORATION, et al.

- 15 -

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

2 THE CLERK: All rise.

3 THE COURT: Please be seated. Good morning.

4 MR. MAZZA: Good morning, Your Honor. James Mazza

5 for Visteon Corporation and its affiliated debtors. Your

6 Honor, just on the agenda today, I believe, every -- all the

7 orders that we've submitted have been now entered. The first

8 matters, 1 through 11, are all continued through -- to the

9 August 17th omnibus and it would bring us to matter 19 as the

10 only item that's left open and that's our exclusivity extension

11 motion.

12 THE COURT: Yes, let me hear from the objector. I

13 think I've decided this about three times unless you've reached

14 a resolution?

15 MR. MAZZA: We haven't reached a resolution with the

16 objector, Your Honor, so, I'm happy to cede the podium.

17 THE COURT: Why am I hearing this again?

18 MR. BIENENSTOCK: Your Honor, this is Martin

19 Bienenstock. May I speak to that?

20 THE COURT: Of course.

21 MR. BIENENSTOCK: Thank you, Your Honor. Good

22 morning. I'm with Dewey & LeBoeuf representing the ad hoc

23 equity committee. We filed the opposition to extending

24 exclusivity, obviously, cognizant of Your Honor's prior

25 rulings. But for very important reasons, and, basically, they



- 16 -

1 are as follows.

2 The issue teed up in the case now is -- there are a

3 lot of legal issues but the factual issue is the value of the

4 reorganized debtor. The playing field is badly slanted and

5 unfairly slanted against the equity because -- for many

6 reasons. But one reason is that one way to show the Court that

7 the company has mass insolvency and the plan wrongfully

8 deprives equity of their solvency in the company is to bring to

9 the Court an offer that pays off all of the debt and leaves

10 money for equity. It is very hard to obtain offers if you're

11 not allowed to propose a plan. The confirmation hearing is not

12 a sale hearing; it's not an auction where people are invited to

13 attend. So, when you ask multi-billion dollar corporations to

14 make offers and to do the due diligence that that requires, it

15 is very helpful to have the ability to put those offers into a

16 plan that you're allowed to propose so the Court can see it.

17 So, the inability to propose a plan chills the

18 ability to get an offer. As an alternative, Your Honor, as a

19 lesser relief if the Court is going to deny -- or not sustain

20 our objection, would be at least to order the debtors to

21 provide Johnson Controls, Inc. and my clients access to the

22 data room at least for the one week that Johnson Controls, Inc.

23 requested in the letter that's in evidence at the prior

24 hearings, so that at least an offer, a firm offer, can be

25 fashioned. The debtor well knows that by having exclusivity,



- 17 -

1 by not allowing Johnson Controls into the data room, the estate

2 is sending every signal to the world that if you try to make an

3 offer you won't even get to first base so don't even bother.

4 Now, additionally, Your Honor, there's another

5 important reason to terminate exclusivity. The debtor has

6 testified and the Court has observed that the time in Chapter

7 11 is detrimental to the debtor because they -- it chills new

8 business and new business may be heading to other parts

9 suppliers as long as the auto manufacturers are not certain

10 that Visteon will emerge from Chapter 11.

11 If we take that as the truth, one would think that

12 Visteon would be interested in making sure that there's a plan

13 on file that can be confirmed at the earliest possible date.

14 The current plan is not confirmable if the debtor is solvent

15 which we think it is. What we're asking for is consistent with

16 the Court's observations and the debtors' testimony that there

17 ought to be another plan on file which has the opposite

18 valuation so that at least one of them is confirmable and the

19 company can come out of bankruptcy.

20 And I know Your Honor recalls it so I won't take a

21 long time on this, but there are already many indicia in the

22 record. In fact, there in our objection to extending

23 exclusivity, showing that the debtor -- debtors' valuation is

24 way off base whether we talk about the par trading value of the

25 debt, whether we talk about Johnson Controls, Inc. offering a



- 18 -

1 billion and a quarter for a thirty to fifty percent of the

2 revenues and all of the other evidence we have there is much

3 indicia indicating that there is solvency here. And while I'm

4 on that topic, Your Honor, there is a very deceptive footnote,

5 footnote 3, I think -- there's a footnote in the debtors' reply

6 to our opposition. It's footnote 3, I believe, on page 4,

7 attempting to give the Court the impression that another

8 shareholder, Aurelius, has -- now supports the plan as a

9 shareholder because it signed the plan support agreement.

10 As the debtor knows, because it's received a letter

11 from Aurelius, after the last hearing where the Court did not

12 sustain Aurelius' position or my client's position, Aurelius

13 sold its share position and under the plan support agreement

14 anyone who sells bonds has to get the purchaser to sign the

15 plan support agreement. So, that's how Aurelius came to sign

16 the plan support agreement. If it couldn't make a profit as a

17 shareholder, it thought the odds -- you know, the winds were

18 not blowing in the right direction it figured it would make the

19 profit we've been saying is inherent in the bonds and so it

20 bought bonds and had to sign the PSA because that was the only

21 way bonds were available. I say that to make two points.

22 One is the debtors' implication that shareholders

23 support this plan is completely wrong. And two, why are people

24 paying par in that neighborhood for the bonds? It's -- you

25 only pay that money if you think the return will be twenty-



- 19 -

1 five, fifty, a hundred percent greater than what you're paying

2 in a Chapter 11 case.

3 So, to summarize, Your Honor, I think we -- there are

4 valid reasons consistent with the debtors' interest in emerging

5 quickly to enable us to file a plan. And if the Court is not

6 disposed to do that, and even if it is, I would ask as lesser

7 relief at least direct the debtors to let Johnson Controls,

8 Inc. and my client into the data room so that we can formulate

9 offers that can disprove the debtors' notion that the estate is

10 insolvent.

11 THE COURT: Anyone else objecting? All right. I'm

12 going to overrule the objection. With all due respect, we are

13 retreading the ground that has been gone over time and time

14 again. I haven't heard anything new today that would, in the

15 context of extending exclusivity to allow the debtor to go

16 forward with its plan, and again, there's a strong public

17 policy in bankruptcy code preference or -- not preference but

18 advantage to debtors to have at least a first shot at a plan of

19 reorganization. And I think that's appropriate here.

20 The plan may or may not be confirmable. I'm not

21 going to deny exclusivity based on a factual and legal argument

22 that the plan that's on the table that is being solicited is

23 facially unconfirmable. I dealt with that at the disclosure

24 statement hearing. We're going to go to a plan; we're going to

25 see what happens. I'm not going to make a decision whether or



- 20 -

1 not to confirm an unconfirmable plan based on the fact that it

2 would hurt the debtors' business if I didn't confirm the plan.

3 If the standards are met, the plan will be confirmed. If the

4 standards are not met, the plan won't be confirmed.

5 The factual issue of whether or not there is value

6 here is fully preserved, however, I leave it to the debtors'

7 business judgment and their fiduciary duties to respond to

8 request for information. I'm certainly not going to order in

9 the context of this motion that the debtors provide access to

10 your client, Mr. Bienenstock, or to Johnson Controls. I fully

11 expect the debtors to operate in the context and consistent

12 with the fiduciary duties and if they don't they will not be

13 happy with the result.

14 So, I'm going to overrule the objection. This is

15 basically a bridge to where we're already going which is a

16 contested confirmation hearing. We'll see what happens there

17 and we'll see how it plays out then. At that time, I may very

18 well lift exclusivity. Parties always have a right to seek to

19 terminate exclusivity even if I filed an extension motion.

20 That may be appropriate if the plan is not confirmed. We'll

21 decide that then. But at this point, we're on this path, we're

22 going to continue on this path for better or for worse, and all

23 rights to present whatever evidence is appropriate at the

24 confirmation hearing are, of course, fully preserved. I'll

25 overrule the objection and grant the motion. You have form of



- 21 -

1 order?

2 MR. MAZZA: Yes, Your Honor. There's one change, if

3 I may approach?

4 THE COURT: Yes. And then I'm going to have two

5 housekeeping matters at the end of the hearing.

6 MR. MAZZA: Okay, Your Honor.

7 The change is with respect to the solicitation

8 period. It's exclusivity -- the exclusivity period with

9 respect to solicitation is November 15th as opposed to our

10 original motions ask of December 15th after discussions with

11 the creditors' committee on that point.

12 THE COURT: I'll sign the order as modified.

13 MR. MAZZA: Okay. Thank you.

14 One other item I'd like to mention with respect to

15 where we are on an issue with the so-called Ad Hoc Trade

16 Committee in the case that has objected previously to the

17 disclosure statement in connection with the rights offering not

18 applying to the general unsecured class. We've been in

19 discussions with them regarding a potential 15.75 million

20 dollar rights offering of reorganized Visteon common stock on

21 top of the current rights offering under toggle A of our plan.

22 We're still working through some of the details but if we can

23 solve the open issues and reach a deal, this will provide what

24 we think will be an insurance policy that will enhance what we

25 believe are the already strong prospects of the general



- 22 -

1 unsecured class voting in favor of the plan.

2 THE COURT: Okay.

3 MR. MAZZA: If we reach a deal on this, Your Honor,

4 we'd anticipate filing a motion to approve of a -- a material

5 plan modification to implement this rights offering and we'd

6 like to do so by the July 30th voting deadline depending on the

7 Court's schedule. So, we don't have a motion at this point or

8 deal but we're getting close. And to the extent we can get a

9 hearing date in that respect, we'd appreciate that.

10 THE COURT: File your motion to shorten and I'll

11 decide at that time.

12 MR. MAZZA: Okay. Very well.

13 THE COURT: I have two housekeeping matters, if I

14 may?

15 MR. MAZZA: Okay.

16 THE COURT: One, I received earlier today a

17 certification of counsel regarding the stipulation resolving

18 the debtors' potential objection to purchase a common stock by

19 Aurelius and I've reviewed it; it's a little strange in that

20 there's not a pending motion.

21 MR. MAZZA: Right.

22 THE COURT: And it's a little strange that it's,

23 basically, a reservation of rights without the debtor agreeing

24 to anything. I think -- and it's been noticed on a very short

25 time frame, what I'd like do is send this out on full notice --



- 23 -

1 MR. MAZZA: Okay.

2 THE COURT: -- and schedule it for a hearing and if

3 there's no objections we can do a C&O but given it's sort of

4 strange procedural posture, I'm really not comfortable signing

5 it.

6 MR. MAZZA: Yes, I don't think that affects our view

7 of the certification, putting it out on notice. I don't know

8 if it has any --

9 THE COURT: I don't know if Aurelius has --

10 MR. MAZZA: -- any bearing on Aurelius. But we can

11 check with them and --

12 THE COURT: Well, it's just -- you know, that's the

13 standard.

14 MR. MAZZA: I understand.

15 THE COURT: There's no matter in controversy at this

16 point. And often, the Court approves stipulations resolving

17 issues that are in controversy without requiring a 9019 but

18 there's no dispute, really, and there's certainly nothing

19 before the Court.

20 MR. MAZZA: Well, I think that --

21 THE COURT: I mean there's an order in place and

22 perhaps you're clarifying an order but I think given the fact

23 that it's really not -- it wasn't raised in the context of the

24 motion. It wasn't raised in the context of the order that's on

25 file with the Court. I think it needs to go out on notice.



- 24 -

1 MR. MAZZA: Okay. We're happy to do that.

2 THE COURT: I read a very interesting opinion a

3 couple days ago.

4 MR. MAZZA: Referring to the Third Circuit?

5 THE COURT: Yes. I just -- I didn't know -- the

6 opinion calls for remand.

7 MR. MAZZA: Right.

8 THE COURT: I just didn't know if there was anything

9 the parties could offer as to whether how they intend to

10 proceed. If they can't, that's fine. I just wanted to

11 inquire.

12 MR. MAZZA: Yes, I think from the debtors'

13 perspective, we're still evaluating what our options are based

14 on that ruling having come down. I think it has to go back

15 down to the district court and back down here before any

16 activity would happen in front of Your Honor.

17 THE COURT: Right.

18 MR. MAZZA: So, whether we ask for a re-hearing or

19 proceed further in the Third Circuit remains to be seen and if

20 that would have an effect on that process.

21 THE COURT: Okay. So, basically, you haven't decided

22 how to proceed at this point?

23 MR. MAZZA: No, because we're also evaluating, you

24 know, the effects of what that ruling would be from an

25 implementation standpoint.



- 25 -

1 THE COURT: Right. Okay. Just --

2 MR. MAZZA: And that's where we are.

3 THE COURT: All right. Anything further?

4 MR. MAZZA: That's all we have. Thank you, Your

5 Honor.

6 THE COURT: Hearing adjourned.

7 (Proceedings concluded at 11:25 AM)

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1

2 I N D E X

3

4 R U L I N G S

5 DESCRIPTION PAGE LINE

6 Debtors' exclusivity motion approved 20 25

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8 Exclusivity period with respect to solicitation 21 8

9 change to November 15th approved as modified

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1

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

3

4 I, Ellen S. Kolman, certify that the foregoing transcript is a

5 true and accurate record of the proceedings.

6

7 ___________________________________

8 ELLEN S. KOLMAN

9

10 Veritext

11 200 Old Country Road

12 Suite 580

13 Mineola, NY 11501

14

15 Date: July 18, 2010

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