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Full title: Objection to (related document(s): 364 Notice (generic) filed by Debtor Studio Movie Grill Holdings, LLC) filed by Regions Equipment Finance Corporation, CSI Leasing, Inc.. (Franke, Robert)

Document posted on Jan 26, 2021 in the bankruptcy, 70 pages and 2 tables.

Bankrupt11 Summary (Automatically Generated)

CONTRACTS AND UNEXPIRED LEASES WHICH MAY BE ASSUMED AND ASSIGNED, PURSUANT TO SECTION 365 OF THE BANKRUPTCY CODE, IN CONNECTION WITH THE SALE OF SUBSTANTIALLY ALL OF THE DEBTORS’ ASSETS AND THE PROPOSED CURE AMOUNTS WITH RESPECT THERETO CSI Leasing, Inc. (“CSI”) and Regions Commercial Equipment Finance, LLC (“Regions”, and collectively with CSI, “Movants”) file this Objection to the Amended Notice of Executory Contracts and Unexpired Leases Which may be Assumed and Assigned, Pursuant to Section 365 1The Debtors in these Chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, include: Studio Movie Grill Holdings, LLC (6546) (“SMG Holdings”); OHAM Holdings, LLC (0966); Movie Grill Concepts Trademark Holdings, LLC (3096); Movie Grill Concepts I, Ltd. (6645); Movie Grill Concepts III, Ltd. (2793); Movie Grill Concepts IV, Ltd. (1454); Movie Grill Concepts IX, LLC (3736); Movie Grill Concepts VI, Ltd. (6895); Movie Grill Concepts VII, LLC (2291); Movie Grill Concepts X, LLC (6906); Movie Grill Concepts XI, LLC (2837); Movie Grill Concepts XII, LLC (6040); Movie Grill Concepts XIII, LLC (5299); Movie Grill Concepts XIV, LLC (4709); Movie Grill Concepts XIX, LLC (9646); Movie Grill Concepts XL, LLC (4454); Movie Grill Concepts XLI, LLC (4624); Movie Grill Concepts XLII, LLC (2309); Movie Grill Concepts XLIII, LLC (9721); Movie Grill Concepts XLIV, LLC (8783); Movie Grill Concepts XLV, LLC (2570); Movie Grill Concepts XV, LLC (4939); Movie Grill Concepts XVI, LLC (1033); Movie Grill Concepts XVII, LLC (1733); Movie Grill Concepts XVIII, LLC (8322); Movie Grill Concepts XX, LLC (7300); Movie Grill Concepts XXI, LLC (1508); Movie Grill Concepts XXII, LLC (6748); Movie Grill Concepts XXIV, LLC (5114); Movie Grill Concepts XXIX, LLC (5857); Movie Grill Concepts XXV, LLC (4985); Movie Grill Concepts XXVI, LLC (5233); Movie Grill Concepts XXVII, LLC (4427); Movie Grill Concepts XXVIII, LLC (1554); Movie Grill Concepts XXX, LLC (1431); Movie Grill Concepts XXXI, LLC (3223); Movie Grill Concepts XXXII, LLC (0196); Movie Grill Concepts XXXIII, LLC (1505); Movie Grill Concepts XXXIV, LLC (9770); Movie Grill Concepts XXXIX, LLC (3605); Movie Grill Concepts XXXV, LLC (0571); Movie Grill Concepts XXXVI, LLC (6927); Movie Grill Concepts XXXVII, LLC (6401); Movie Grill Concepts XXXVIII, LLC (9657); Movie Grill Concepts XXIII, LLC (7893); Studio Club, LLC (3023); Studio Club IV, LLC (9440); Movie Grill Concepts XI, LLC (2837); Movie Grill Concepts XLI, LLC (4624); Movie Grill Concepts XLVI, LLC (2344); Movie Grill Concepts XLVII, LLC (5866); Movie Grill Concepts XLVIII, LLC (8601); Movie Grill Concepts XLIX, LLC (0537); Movie Grill Concepts L, LLC (5940); Movie Grill Concepts LI, LLC (7754); Movie Grill Concepts LII, LLC (8624); Movie Grill Concepts LIII, LLC (3066); Movie Grill Concepts LIV, LLC (2018); Movie Grill Concepts LV, LLC (4699); Movie Grill Partners 3, LLC (4200);

List of Tables

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IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION IN RE: § Chapter 11 § STUDIO MOVIE GRILL HOLDINGS, § LLC, et al.1 § Case No. 20-32633 § Debtors. § Jointly Administered § CSI LEASING, INC.’S AND REGIONS EQUIPMENT FINANCE CORPORATION’S OBJECTION WITH RESPECT TO THE AMENDED NOTICE OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES WHICH MAY BE ASSUMED AND ASSIGNED, PURSUANT TO SECTION 365 OF THE BANKRUPTCY CODE, IN CONNECTION WITH THE SALE OF SUBSTANTIALLY ALL OF THE DEBTORS’ ASSETS AND THE PROPOSED CURE AMOUNTS WITH RESPECT THERETO CSI Leasing, Inc. (“CSI”) and Regions Commercial Equipment Finance, LLC (“Regions”, and collectively with CSI, “Movants”) file this Objection to the Amended Notice of Executory Contracts and Unexpired Leases Which may be Assumed and Assigned, Pursuant to Section 365 1The Debtors in these Chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, include: Studio Movie Grill Holdings, LLC (6546) (“SMG Holdings”); OHAM Holdings, LLC (0966); Movie Grill Concepts Trademark Holdings, LLC (3096); Movie Grill Concepts I, Ltd. (6645); Movie Grill Concepts III, Ltd. (2793); Movie Grill Concepts IV, Ltd. (1454); Movie Grill Concepts IX, LLC (3736); Movie Grill Concepts VI, Ltd. (6895); Movie Grill Concepts VII, LLC (2291); Movie Grill Concepts X, LLC (6906); Movie Grill Concepts XI, LLC (2837); Movie Grill Concepts XII, LLC (6040); Movie Grill Concepts XIII, LLC (5299); Movie Grill Concepts XIV, LLC (4709); Movie Grill Concepts XIX, LLC (9646); Movie Grill Concepts XL, LLC (4454); Movie Grill Concepts XLI, LLC (4624); Movie Grill Concepts XLII, LLC (2309); Movie Grill Concepts XLIII, LLC (9721); Movie Grill Concepts XLIV, LLC (8783); Movie Grill Concepts XLV, LLC (2570); Movie Grill Concepts XV, LLC (4939); Movie Grill Concepts XVI, LLC (1033); Movie Grill Concepts XVII, LLC (1733); Movie Grill Concepts XVIII, LLC (8322); Movie Grill Concepts XX, LLC (7300); Movie Grill Concepts XXI, LLC (1508); Movie Grill Concepts XXII, LLC (6748); Movie Grill Concepts XXIV, LLC (5114); Movie Grill Concepts XXIX, LLC (5857); Movie Grill Concepts XXV, LLC (4985); Movie Grill Concepts XXVI, LLC (5233); Movie Grill Concepts XXVII, LLC (4427); Movie Grill Concepts XXVIII, LLC (1554); Movie Grill Concepts XXX, LLC (1431); Movie Grill Concepts XXXI, LLC (3223); Movie Grill Concepts XXXII, LLC (0196); Movie Grill Concepts XXXIII, LLC (1505); Movie Grill Concepts XXXIV, LLC (9770); Movie Grill Concepts XXXIX, LLC (3605); Movie Grill Concepts XXXV, LLC (0571); Movie Grill Concepts XXXVI, LLC (6927); Movie Grill Concepts XXXVII, LLC (6401); Movie Grill Concepts XXXVIII, LLC (9657); Movie Grill Concepts XXIII, LLC (7893); Studio Club, LLC (3023); Studio Club IV, LLC (9440); Movie Grill Concepts XI, LLC (2837); Movie Grill Concepts XLI, LLC (4624); Movie Grill Concepts XLVI, LLC (2344); Movie Grill Concepts XLVII, LLC (5866); Movie Grill Concepts XLVIII, LLC (8601); Movie Grill Concepts XLIX, LLC (0537); Movie Grill Concepts L, LLC (5940); Movie Grill Concepts LI, LLC (7754); Movie Grill Concepts LII, LLC (8624); Movie Grill Concepts LIII, LLC (3066); Movie Grill Concepts LIV, LLC (2018); Movie Grill Concepts LV, LLC (4699); Movie Grill Partners 3, LLC (4200); Movie Grill Partners 4, LLC (1363); Movie Grill Partners 6, LLC (3334); and MGC Management I, LLC (3224) (collectively, the “Debtors”).

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of the Bankruptcy Code, in Connection with the Sale of Substantially all of the Debtors’ Assets and the Proposed Cure Amounts with Respect Thereto (the “Objection”). In Support of the Objection, Movants state the following: BACKGROUND A. The Bankruptcy Case 1. On October 23, 2020 (the “Petition Date”), the Debtors each filed a voluntary petition for bankruptcy relief under chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”). 2. On November 5, 2020, Debtors filed their Motion for (I) Entry of an Order Approving (A) Bid Procedures; (B) the Form and Manner of Notice; (C) the Procedures for Determining Cure Amounts for Executory Contracts and Unexpired Leases; and (II) Entry of an Order Approving (A) the Sale of Substantially All of the Debtors’ Assets Free and Clear of All Liens, Claims, Encumbrances and Interest; and (B) the Assumption and Assignment of Certain Contracts and Unexpired Leases [ECF No. 133] (the “Bid Procedures Motion”). On December 8, 2020, the Court heard and approved of the Bid Procedures Motion. The Court subsequently entered the Order Approving (A) Bid Procedures; (B) the Form and Manner of Notice; (C) the Procedures for Determining Cure Amounts for Executory Contracts and Unexpired Leases; and (D) Granting Related Relief [ECF No. 335]. 3. On December 21, 2020, the Debtors filed the Amended Notice of Executory Contracts and Unexpired Leases Which may be Assumed and Assigned, Pursuant to Section 365 of the Bankruptcy Code, in Connection with the Sale of Substantially all of the Debtors’ Assets and the Proposed Cure Amounts with Respect Thereto [ECF No. 364] (the “Cure Notice”). The Cure Notice contains a schedule listing the potential assumed contracts (the “Assumption Schedule”).

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4. In the Assumption Schedule, the Debtors identify the following contracts which are relevant to Movants that may be assumed and assigned to the Prevailing Purchaser2 and the proposed Cure Amount with respect to each:
Table 1 on page 3. Back to List of Tables
Debtor Title of
Contract
State What the
Contract or
Lease is For
Nature of the
Debtor’s
Interest
Counter
-party
Estimated
Cure
Amount
Movie Grill
Concepts VI,
Ltd.
Smarttrack
Schedule No.
23
Equipment
Lease – Chairs
Equipment
lease for
theater chairs
CSI
Leasing,
Inc.
$20,149.14
Movie Grill
Concepts III,
Ltd.
Equipment
Schedule No.
24
Equipment
Lease – Chairs
Equipment
lease for
theater chairs
CSI
Leasing,
Inc.
$10,966.64
Movie Grill
Concepts IX,
Ltd.
Equipment
Schedule No.
25
Equipment
Lease – Chairs
Equipment
lease for
theater chairs
CSI
Leasing,
Inc.
$22,689.16
5. On December 29, 2020, the Debtor filed the Notice of Extension of (i) Milestones Pursuant to Final Order (I) Authorizing Debtors to (A) Use Cash Collateral on a Limited Basis and (B) Obtain Postpetition Financing on Secured, Superpriority Basis, (II) Granting Adequate Protection, and (III) Granting Related Relief and (ii) Certain Deadlines Under Bid Procedures and Bid Procedures Order [ECF No. 383] that extends the deadline to object to the Cure Notice to January 27, 2021 at 4:00 PM CST. B. The Lease Documents and Past Due Amounts 6. On June 1, 2012, CSI and the Debtors entered into the Master Lease Agreement No. 273517 (the “Master Lease Agreement”). Since entering into the Master Lease Agreement, CSI and the Debtors have entered into 14 separate amendments that, among other things, incorporate the Relevant Debtors (as defined below) as parties to the Master Lease Agreement. 7. On February 18, 2020, in connection with the Master Lease Agreement, Movie Grill Concepts VI, Ltd., Movie Grill Concepts III, Ltd., and Movie Grill Concepts IX (the “Relevant 2 Terms not defined herein, contain the definition prescribed to them in the Cure Notice.

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Debtors”) entered into Smarttrack Schedule No. 23, Equipment Schedule No. 24, and Equipment Schedule 25, each as amended, (collectively, the “Equipment Schedules”), for the lease of theater style reclining chairs that were installed in specific locations, as identified in the Equipment Schedules. In essentially a leaseback transaction, each of the Relevant Debtors purchased the chairs and subsequently sold them to CSI. Thereafter, CSI leased the chairs back to the Relevant Debtors under the Master Lease Agreement and Equipment Schedules. 8. In conjunction with the leaseback transaction, CSI received a non-recourse loan from Regions to finance the rental payments due under the Equipment Schedules. CSI executed a separate Promissory Note and Security Agreement for each Equipment Schedule that granted Regions a security interest in the chairs identified in the Equipment Schedules. Specifically, the Security Agreement provided a security interest to Regions in: (i) the equipment (“Equipment”) described in [the corresponding Equipment Schedules] between [CSI] as lessor, and the party named therein as lessee (“Lessee”), which is attached as Exhibit A hereto and any replacements thereof, (ii) the Schedule (along with the Master Lease Agreement (“Lease”) incorporated by reference into the Schedule, to the extent it applies to the Schedule and Equipment being leased thereunder), (iii) all rental payments and other amounts payable with respect to the Lease period from and after May 1, 2019 under the Schedule by Lessee to the Company (“Lease Payments”), (iv) all proceeds of any of the foregoing and of the insurance referred to in paragraph (4) hereof, and (v) any guarantee, letter of credit, security agreement, credit enhancement or support agreement, insurance indemnity, warranty, maintenance or service agreement or other agreement identified in the Schedule, or executed in connection with or in any way related to the Equipment, the Schedule or the Lease, but not to the extent such documents relate to any lease schedule that does not constitute Collateral. True and correct copies of the Master Lease Agreement, Equipment Schedule No. 243, corresponding Promissory Note and corresponding Security Agreement are attached as Exhibit A, B, C and D, respectively. 3 As discussed below, Equipment Schedule No. 24 is the Equipment Schedule objected to in this Objection.

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9. Accordingly, as of the Petition Date, Regions holds a security interest in, among other things, the chairs leased to the Relevant Debtors under the Equipment Schedules. 10. Below is a summary identifying the relevant lease documents and the corresponding cure amount owed to CSI:
Table 1 on page 5. Back to List of Tables
Master
Lease
Schedule
No.
Date
Executed
Expiration Date Prepetition Past Due
Amount
273517 23 2/18/19 1/31/2024 $20,149.14
273517 24 2/18/19 1/31/2024 $16,966.64
273517 25 2/18/19 1/31/2024 $22,689.16
Total Prepetition Past Due Amount None None None $59,804.94
As seen in the chart above and evidenced in the invoices attached as Exhibit E, the correct cure amount for assumption of Equipment Schedule No. 24 is $16,966.64 (the “Equipment Schedule No. 24 Cure Amount”) as opposed to the Debtors’ “Estimated Cure Amount” of $10,966.64. 11. On December 18, 2020, CSI contacted the Debtors’ counsel to attempt to address the inaccurate cure amount reflected on the Cure Notice without the necessity of filing an objection as it appeared to be merely a typographical error. On January 13, 2021 Debtors’counsel responded to Movants’ counsel that that Debtors would review Movants’ request to correct the apparent error. On January 26, 2021, the Debtors filed the Supplement to Amended Notice of Executory Contracts and Unexpired Leases Which may be Assumed and Assigned, Pursuant to Section 365 of the Bankruptcy Code, in Connection with the Sale of Substantially all of the Debtors’ Assets and the Proposed Cure Amounts with Respect Thereto [ECF No. 545] (the “Supplemented Cure Notice”). The assumption schedule (the “Supplemented Assumption Schedule”) attached to the Supplemented Cure Notice still contains the incorrect cure amount for Equipment Schedule No. 24. Accordingly, the Movants file this Objection.

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OBJECTION 12. Movants object to the Cure Notice and Supplemented Cure Notice because the Assumption Schedule and Supplemented Assumption Schedule incorrectly state the cure amount necessary to assume and assign Equipment Schedule No. 24, and the Cure Notice and the Supplemented Cure Notice do not list the potential assumption of the Master Lease Agreement. 13. First, the Debtors must adhere to the requirements of § 365(b)(1)(A) of the Bankruptcy Code to assume Equipment Schedule No. 24. Section 365(b) states in pertinent part that: If there has been a default in an executory contract or unexpired lease of the debtor, the trustee may not assume such contract or lease unless, at the time of assumption of such contract or lease, the trustee—(A) cures, or provides adequate assurance that the trustee will promptly cure, such default . . . (B) compensates, or provides adequate assurance that the trustee will promptly compensate, a party other than the debtor to such contract or lease, for any actual pecuniary loss to such party resulting from such default; and (C) provides adequate assurance of future performance under such contract or lease.4 Further, pursuant to § 365(f)(2) of the Bankruptcy Code, a debtor in possession may assign an executory contract only if: “(A) the [debtor in possession] assumes such contract or lease in accordance with the provisions of this section; and (B) adequate assurance of future performance by the assignee of such contract or lease is provided, whether or not there has been a default in such contract or lease.”5 14. Pursuant to § 365 of the Bankruptcy Code, the Debtors must cure all outstanding amounts due to Movants at the time of the assumption. As discussed above, at the time of filing this Objection, the Debtors have an outstanding cure amount from Equipment Schedule No. 24 in the amount of $16,966.64. Thus, the Debtors must pay the full cure amount due under the Equipment Schedules in the amount of $59,804.94 prior to assumption and assignment. 4 11 U.S.C. § 365(b). 5 11 U.S.C. § 365(f)(2).

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15. Second, a bedrock principle of bankruptcy law is that pursuant to § 365 of the Bankruptcy Code, a debtor must assume a contract in toto and may not pick through the agreement to accept some of the benefits without the burdens.6 Accordingly, the Debtors must assume and assign the Master Lease Agreement along with the Equipment Schedules. The Master Lease Agreement and Equipment Agreements are non-divisible and must be assumed in toto. RESERVATION OF RIGHTS 16. Movants hereby expressly reserve all rights, including, without limitation, (a) the right to supplement and/or amend this Objection and (b) all of its rights, claims, defenses, and remedies with respect to the Debtors (or other parties). Nothing in this Objection is intended to be, or should be construed as, a waiver by Movants of any of their rights under the applicable agreements, the Bankruptcy Code or applicable law. Further, Movants specifically reserve all rights with respect to asserting additional objections to the Cure Notice and Supplemental Cure Notice and any other document related thereto, and to the assignment of any agreement between Movants and the Debtors. 17. In addition, Movants reserve the right to object on the grounds of adequate assurance of future performance based on the assignment of the Equipment Agreements. WHEREFORE, for the reasons stated in this Objection, CSI Leasing, Inc. and Regions Commercial Equipment Finance, LLC respectfully request that the Court enter an order that (I) sustains this Objection; (II) requires as a condition precedent to assuming the Equipment Schedules that the Debtors promptly cure the outstanding balance in the amount of $59,804.94, which includes the correct Equipment Schedule No. 24 Cure Amount; (III) requires as a condition precedent to assuming the Equipment Schedules that the Debtors assume the Master Lease 6 In re Mirant Corp., 197 F. App'x 285, 289 (5th Cir. 2006); In re AbitibiBowater Inc., 418 B.R. 815, 822 (Bankr. D. Del. 2009).

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Agreement and (IV) grants to Movants such other and further relief as this Court deems just and proper. Dated: January 27, 2021 Respectfully submitted, /s/ Robert P. Franke Robert P. Franke (TX Bar No. 07371200) Andrew G. Edson (TX Bar No. 24076364) Audrey L. Hornisher (TX Bar No. 24094396) CLARK HILL STRASBURGER 901 Main St., Suite 6000 Dallas, Texas 75202 (214) 651-4300 (214 651-4330 (Fax) COUNSEL TO CSI LEASING, INC. AND REGIONS EQUIPMENT FINANCE CORPORATION CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of the foregoing has been served upon all parties that are registered or otherwise entitled to receive electronic notices via electronic notification pursuant to the ECF procedures in this District on this 27th day of January, 2021. /s/ Robert P. Franke Robert P. Franke

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EXHIBIT A

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EXHIBIT B

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EXHIBIT C

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EXHIBIT D

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EXHIBIT E

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