Create an Account or Login to Existing Account
7-Day Free Trial
HTML Document View
Full title: Second Motion to Extend Exclusivity Period for Filing a Chapter 11 Plan and Disclosure Statement Filed by Gorham Paper and Tissue, LLC. Hearing scheduled for 6/16/2021 at 01:00 PM at US Bankruptcy Court, 824 Market St., 6th Fl., Courtroom #3, Wilmington, Delaware. Objections due by 6/9/2021. (Attachments: # 1 Notice # 2 Exhibit A) (Katona, Shanti) (Entered: 06/02/2021)
Document posted on Jun 1, 2021 in the bankruptcy, 10 pages and 0 tables.
Bankrupt11 Summary (Automatically Generated)
The debtors and debtors-in-possession (the “Debtors”) in the above-captioned chapter 11 cases (the “Chapter 11 Cases”) hereby file this second motion (the “Motion”) pursuant to § 1121(d) of title 11 of the United States Code (the “Bankruptcy Code”), for entry of an order, substantially in the form attached hereto as Exhibit A (the “Proposed Order”), further extending the periods during which the Debtors have the exclusive right to file a chapter 11 plan of liquidation (the “Exclusivity Period”) and to solicit acceptances thereof (the “Exclusive Solicitation Period”) by ninety days (or the next business day thereafter), through and including August 31, 2021, and November 1, 2021, respectively.From the Petition Date through the consummation of the sale of substantially all of the Debtors’ assets on December 31, 2020, the Debtors continued in the management and operation of their businesses and properties as debtors-in-possession pursuant to §§ 1107(a) and 1108 of the Bankruptcy Code.Further, since the Closing Date, the Debtors have engaged in significant efforts to collect outstanding accounts receivable and resolve administrative expense and other claims against the estates—all in an effort to reach a consensual exit plan from chapter 11. Since the Petition Date, the Debtors have made substantial and meaningful progress under chapter 11, including obtaining Court approval of and closing the Sale within the first months of the case, and administering the the assignment of other contracts and leases to the buyer of the Debtors’ assets both prior to and after the Closing Date; Established a claims bar date; Obtained court approval of and closed the Sale of substantially all of the Debtors’ assets; Obtained court approval of a settlement with Zohar and others that infused significant additional cash into the estates and that will be critical for paying remaining claims and charting a successful exit from chapter 11; and Obtained court approval for settlements with some of the largest administrative expense claim holders, including Woodland Pulp and Resolute. 5.
List of Tables
Document ContentsIN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: Chapter 11 Gorham Paper and Tissue, LLC, et al., Case No. 20-12814 (KBO) Debtors.1 (Jointly Administered) SECOND MOTION OF DEBTORS FOR ENTRY OF AN ORDER EXTENDING THE EXCLUSIVITY PERIODS FOR THE FILING OF A CHAPTER 11 PLAN AND SOLICITATION OF ACCEPTANCES THEREOF The debtors and debtors-in-possession (the “Debtors”) in the above-captioned chapter 11 cases (the “Chapter 11 Cases”) hereby file this second motion (the “Motion”) pursuant to § 1121(d) of title 11 of the United States Code (the “Bankruptcy Code”), for entry of an order, substantially in the form attached hereto as Exhibit A (the “Proposed Order”), further extending the periods during which the Debtors have the exclusive right to file a chapter 11 plan of liquidation (the “Exclusivity Period”) and to solicit acceptances thereof (the “Exclusive Solicitation Period”) by ninety days (or the next business day thereafter), through and including August 31, 2021, and November 1, 2021, respectively. In further support of the Motion, the Debtors, by and through their undersigned counsel, respectfully represent: JURISDICTION AND VENUE 1. This Court has jurisdiction to consider this Motion under 28 U.S.C. §§ 157 and 1334 and the Amended Standing Order of Reference from the United States District Court for the District of Delaware, dated as of February 29, 2012. This is a core proceeding under 28 U.S.C. § 1 The last four digits of Gorham Paper and Tissue, LLC’s federal taxpayer identification number are 6533. See 11 U.S.C. § 342(c)(1). The last four digits of White Mountain Tissue, LLC’s federal taxpayer identification number are 0078. See id. Prior to the sale of substantially all of their assets, the principal place of business for Gorham Paper and Tissue, LLC and White Mountain Tissue, LLC was 72 Cascade Flats, Gorham, New Hampshire 03581.
1157(b). Venue of the Chapter 11 Cases and the Motion in this district is proper under 28 U.S.C. §§ 1408 and 1409. 2. Pursuant to Local Rule 9013-1(f), the Debtors consent to the entry of a final judgment or order with respect to this Motion if it is determined that the Court would lack Article III jurisdiction to enter such final order or judgment absent consent of the parties. 3. The statutory predicate for the relief requested herein is Bankruptcy Code § 1121(d). BACKGROUND 4. On November 4, 2020 (the “Petition Date”), each of the Debtors filed a voluntary petition for chapter 11 relief in this Court commencing the Chapter 11 Cases. Factual background regarding the Debtors, including their business operations, their capital and debt structures, and the events leading to the filing of the Chapter 11 Cases, is set forth in the Declaration of Richard Arnold In Support of Chapter 11 Petitions and First Day Pleadings [Docket No. 13], which is incorporated herein by reference. From the Petition Date through the consummation of the sale of substantially all of the Debtors’ assets on December 31, 2020, the Debtors continued in the management and operation of their businesses and properties as debtors-in-possession pursuant to §§ 1107(a) and 1108 of the Bankruptcy Code. The Debtors continue to manage their remaining assets after the sale. No trustee has been appointed in the Chapter 11 Cases. 5. On November 10, 2020, the United States Trustee for the District of Delaware (the “U.S. Trustee”) appointed the Committee. 6. On December 18, 2020, the Bankruptcy Court entered the Order (I) Authorizing and Approving (A) the Sale of Substantially All of the Debtors’ Assets Free and Clear of All Liens, Claims, Encumbrances, and Interests and (B) the Assumption and Assignment of Certain Contracts and Leases, and (II) Granting Related Relief [Docket No. 196] (the “Sale Order”),
2which, among other things, authorized the Debtors to sell (the “Sale”) substantially all of their assets to Gorham Acquisition, LLC. The Sale closed on December 31, 2020 (the “Closing Date”). 7. As this Court is aware from prior statements on the record, both before and after the Closing Date, the Debtors have worked with various interested parties, including the Committee and Zohar III, Limited (“Zohar”), regarding a potential chapter 11 plan of liquidation to effectuate the Debtors’ chapter 11 exit strategy and ensure that payments can be made to the remaining creditors of the estates. Those efforts culminated with the settlement among the Debtors, the Committee, Zohar III, and Ankura Trust Company, LLC, which this Court approved through entry of an order on February 17, 2021 [Docket No. 273], and which agreement provided for, among other terms, the infusion of more than $1 million of cash back into the estates to fund the Debtors’ winddown and chapter 11 exit strategy. 8. Further, since the Closing Date, the Debtors have engaged in significant efforts to collect outstanding accounts receivable and resolve administrative expense and other claims against the estates—all in an effort to reach a consensual exit plan from chapter 11. In addition, the Debtors have sent demand letters to more than a dozen potential preference defendants, and the Debtors have been working diligently to evaluate potential defenses, negotiate settlements, and prepare for litigation on those claims that do not settle. 9. It was and remains important for the Debtors to engage in these efforts prior to filing a plan. The claims analysis, settlements, and recoveries have allowed the Debtors to evaluate their exit strategy and formulate a plan that is now substantially drafted and should be filed in the upcoming weeks. 10. Accordingly, the relief requested in this Motion is intended to preserve the value of the Debtors’ significant efforts so far, while also affording the Debtors a reasonable amount of
3additional time to continue executing their chapter 11 strategy without interference from a competing plan. 11. This is the Debtors’ second motion for the relief requested herein. The Debtors previously filed a motion on March 2, 2021 [Dkt. No. 293], which was granted by an Order on March 11, 2021 [Dkt. No. 303]. RELIEF REQUESTED 12. The Debtors respectfully request, pursuant to Bankruptcy Code § 1121(d), a ninety-day extension of: (i) the Exclusivity Period through and including August 31, 2021, and (ii) the Exclusive Solicitation Period through and including November 1, 2021, without prejudice to any party in interest’s rights to seek to reduce or increase such periods in accordance with § 1121(d). 13. The Debtors’ Exclusivity Period and Exclusive Solicitation Period are currently set to expire on June 2, 2021, and August 2, 2021, respectively. BASIS FOR RELIEF 14. Pursuant to § 1121(d), the Court may extend exclusivity periods “for cause.” See 11 U.S.C. § 1121(d) (“[O]n request of a party in interest made within the respective periods specified in subsections (b) and (c) of this section and after notice and a hearing, the court may for cause reduce or increase the 120-day period or the 180-day period referred to in this section.”). However, the 120-day period “may not be extended beyond a date that is 18 months after the [petition] date” and the 180-day period “may not be extended beyond a date that is 20 months after the [petition] date.” Id. §§ 1121(d)(2)(A), (B). The Bankruptcy Code neither defines “cause” for purposes of § 1121(d), nor establishes formal criteria for an extension of the exclusive periods. The legislative history of § 1121 indicates, however, that “cause” is intended to be a flexible standard that balances the competing interests of a debtor and its creditors. See H.R. Rep. No. 95-
4595, at 231- 32 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 6191 (noting that Congress intended to give bankruptcy courts great flexibility to protect a debtor’s interests by allowing a debtor an unimpeded opportunity to negotiate settlement of debts without interference from other parties in interest). 15. In exercising its broad discretion to determine whether “cause” exists, a bankruptcy court is guided by a variety of factors. See In re Borders Grp., Inc., 460 B.R. 818, 821-22 (Bankr. S.D.N.Y. 2011) (“The determination of cause under section 1121(d) is a fact-specific inquiry and the court has broad discretion in extending or terminating exclusivity.”); In re Adelphia Commc’ns Corp., 352 B.R. 578, 587 (Bankr. S.D.N.Y. 2006) (identifying objective factors courts historically have considered in determining whether cause exists to extend or terminate exclusivity). These factors are include, without limitation: i. the size and complexity of the debtor’s case; ii. the necessity for sufficient time to permit the debtor to negotiate a chapter 11 plan and prepare adequate information; iii. the existence of good faith progress towards reorganization; iv. the fact that the debtor is paying its bills as they become due; v. whether the debtor has demonstrated reasonable prospects for filing a viable plan; vi. whether the debtor has made progress in negotiations with its creditors; vii. the amount of time which has elapsed in the case; viii. whether the debtor is seeking an extension of exclusivity in order to pressure creditors to submit to the debtor’s reorganization demands; and ix. whether an unresolved contingency exists. See, e.g., In re Cent. Jersey Airport Servs., LLC, 282 B.R. 176, 183 (Bankr. D.N.J. 2002); McLean Indus., 87 B.R. at 834; Adelphia Commc’ns, 352 B.R. at 587 (the nine factors listed above are “objective factors which courts historically have considered in making determinations of this
5character”). The above factors are not the exclusive bases for the exercise of the Court’s discretion to extend exclusive periods. See Adelphia Commc’ns, 352 B.R. at 586-87. Finally, not all factors are relevant in every case, and a finding that any one of these factors exists may justify extending a debtor’s exclusive periods. See Express One, 194 B.R. at 100 (finding only some of the factors relevant in determining whether cause exists to extend exclusivity) CAUSE EXISTS TO EXTEND THE EXCLUSIVE PERIODS 16. Cause exists to grant the Debtors’ second requested extensions of the exclusivity periods. The extensions are necessary and appropriate for the Debtors to have the opportunity contemplated by the Bankruptcy Code to implement a plan of liquidation, in furtherance of the Debtors’ notable efforts to date. As set forth below, the requested extensions are appropriate, in the best interest of the Debtors’ stakeholders, and consistent with the intent and purpose of chapter 11. Further, the Debtors have been in chapter 11 since only November 2020, and the extensions requested herein, therefore, do not exceed the statutory limits under §§ 1121(d)(2)(A), (B). A. The Chapter 11 Cases are Complex 2. Until the Closing, the Debtors were national suppliers of high-quality consumer and industrial tissue and paper products. The size and complexity of these Chapter 11 Cases includes multiple secured creditors and numerous classes of potential unsecured claims, including significant § 503(b)(9) claims, that the Debtors must address before they can propose a consensual plan of liquidation. In addition, consistent with the Zohar settlement, the Debtors have been working diligently to pursue preference claims, recover accounts receivable, and settle claims with the largest claim holders, and the Debtors require additional time to work through those efforts before a plan may be finalized and filed. These factors provide sufficient cause for the Court to extend the Exclusivity Period and the Exclusive Solicitation Period (collectively, the “Exclusivity
6Periods”). B. Substantial, Good Faith Progress has been Made to Achieve the Objectives of Chapter 11 3. Since the Petition Date, the Debtors have made substantial and meaningful progress under chapter 11, including obtaining Court approval of and closing the Sale within the first months of the case, and administering the Chapter 11 Cases efficiently, economically, and cooperatively with numerous parties in interest. 4. Since the Petition Date, the Debtors have, among other things: Secured first-day relief to continue operating their businesses until Closing, including authorization: (i) to continue using the existing cash management system, (ii) to pay employee wages, (iii) to maintain and pay insurance policies, (iv) to prohibit utility providers from altering, refusing, or discontinuing service, and (v) to obtain secured post-petition financing and consensual authority to use cash collateral; Filed the Debtors’ schedules of assets and liabilities, statement of financial affairs, and monthly operating reports (including certain amendments thereto); Rejected some leases and executory contracts determined unnecessary to the Debtors’ continued business and/or restructuring goals, and coordinated the assignment of other contracts and leases to the buyer of the Debtors’ assets both prior to and after the Closing Date; Established a claims bar date; Obtained court approval of and closed the Sale of substantially all of the Debtors’ assets; Obtained court approval of a settlement with Zohar and others that infused significant additional cash into the estates and that will be critical for paying remaining claims and charting a successful exit from chapter 11; and Obtained court approval for settlements with some of the largest administrative expense claim holders, including Woodland Pulp and Resolute. 5. The Debtors have clearly made progress to achieve their objectives in chapter 11, and the requested extensions of the Exclusivity Periods are justified.
7C. The Debtors Need Sufficient Time to Negotiate and Finalize a Plan 6. As detailed herein, since the Petition Date, the Debtors and their professionals smoothly transitioned into chapter 11 and conducted a successful Sale process. Considering the progress made, coupled with the Debtors’ willingness to work cooperatively with the Committee, Zohar, and other parties in interest, it is reasonable and appropriate for the Debtors to be granted additional time to negotiate and finalize a chapter 11 plan of liquidation. D. The Debtors are Not Seeking to Use Exclusivity to Pressure Creditors to Submit to the Debtors’ Demands 7. This is the Debtors’ second request for an extension of the Exclusivity Periods. The Debtors’ conduct in these Chapter 11 Cases, particularly in connection with the ongoing discussions with their stakeholders, demonstrates that the Debtors are acting in a transparent manner and are not seeking an extension of the Exclusivity Periods to artificially delay the administration of these Chapter 11 Cases. To that end, the Debtors, the Committee, Zohar, and others will continue to work together to try to reach consensus on a proposed plan of liquidation. E. The Debtors are Paying Their Debts as They Come Due and have the Ability to Continue to Do So 8. Bankruptcy courts considering an extension of exclusivity may assess a debtor’s liquidity and ability to pay costs and expenses of administration. The Debtors have timely paid quarterly fees to the United States Trustee and their other post-petition administrative obligations in the ordinary course of business to the extent permitted by the Bankruptcy Code, with any remaining claims to be addressed in the Debtors’ plan of liquidation. In addition, the Debtors have sufficient liquidity to continue paying administrative expenses as they become due and will continue to make such payments consistent with the Bankruptcy Code and Court orders (although significantly fewer administrative expenses are being incurred post-Closing given that the Debtors
8no longer operate their businesses). F. The Requested Extension is in the Best Interests of the Debtors’ Estates and Will Not Prejudice Creditors 9. The Debtors’ requested extension is intended to allow the Debtors to work cooperatively with their key constituents toward the goal of finalizing and filing a consensual plan of liquidation in the most cost-efficient manner possible manner. Given the limited extension requested and the circumstances described herein, and the Debtors’ success thus far toward that goal, the extension aligns with the intent and purpose of § 1121 and should be granted. CONCLUSION 10. For the reasons stated herein, the requested extension of the Exclusivity Periods is warranted and necessary to afford the Debtors a meaningful opportunity to continue to pursue the chapter 11 liquidation process as contemplated by the Bankruptcy Code. Accordingly, the Debtors should be afforded a full, fair, and reasonable opportunity to continue to work towards confirmation of a plan of liquidation, and the Exclusivity Periods should be extended as requested. NOTICE 11. Notice of this Motion will be given to the following parties: (a) the Office of the United States Trustee; (b) the Debtors’ prepetition secured lenders; (c) counsel for the Official Committee of Unsecured Creditors; and (d) all persons and entities that have filed a request for service of filings in these Chapter 11 Cases pursuant to Bankruptcy Rule 2002. In light of the nature of the relief requested herein, the Debtors submit that no other or further notice is necessary. PRIOR REQUEST 12. This is the Debtors’ second request for an extension of the Exclusivity Periods. WHEREFORE, the Debtors respectfully request that the Court: (i) enter the Proposed Order in substantially the same form attached hereto as Exhibit A; and (ii) provide such other
9relief as the Court deems appropriate and just. Dated: June 2, 2021 Respectfully submitted, Wilmington, Delaware POLSINELLI PC /s/ Shanti M. Katona Christopher A. Ward (Del. Bar No. 3877) Shanti M. Katona (Del. Bar No. 5352) 222 Delaware Avenue, Suite 1101 Wilmington, Delaware 19801 Telephone: (302) 252-0920 Facsimile: (302) 252-0921 firstname.lastname@example.org email@example.com -and- BERNSTEIN, SHUR, SAWYER & NELSON, P.A. D. Sam Anderson (Admitted Pro Hac Vice) Adam R. Prescott (Admitted Pro Hac Vice) 100 Middle Street PO Box 9729 Portland, Maine 04104 Telephone: (207) 774-1200 Facsimile: (207) 774-1127 firstname.lastname@example.org email@example.com Counsel to the Debtors and Debtors in Possession