HTML Document View

Full title: Motion to Extend Exclusivity Period for Filing a Chapter 11 Plan and Disclosure Statement Filed by Suitable Technologies, Inc.. Hearing scheduled for 2/16/2021 at 03:00 PM at US Bankruptcy Court, 824 Market St., 5th Fl., Courtroom #4, Wilmington, Delaware. Objections due by 2/3/2021. (Attachments: # 1 Notice # 2 Exhibit A) (Feldman, Betsy) (Entered: 01/20/2021)

Document posted on Jan 19, 2021 in the bankruptcy, 13 pages and 0 tables.

Bankrupt11 Summary (Automatically Generated)

On February 26, 2020 (the “Petition Date”), the Debtor commenced a voluntary case (the “Chapter 11 Case”) under chapter 11 of the Bankruptcy Code. “Schedules”); (iv) pursuant to an order of the Court [Docket No. 125] (the “Bar Date Order”), establishing claims bar dates for pre-petition claims and claims pursuant to section 503(b)(9) of the Bankruptcy Code; (v) reconciling proofs of claim filed in this Chapter 11 Case and, where appropriate, objecting to the same; (vi) obtaining entry of interim [Docket No. 23] and final orders [Docket No. 74] (together, the “Financing Orders”) approving the Debtor’s post-petition financing and use of cash collateral; (vii) retaining professionals; (viii) continuing to evaluate certain of the Debtor’s executory contracts and unexpired leases and, where appropriate, rejecting the same, and engaging in discussions and negotiations with various counterparties regarding objections to the Debtor’s rejection motions; (ix) working with the Office of the United States Trustee for the District of Delaware (the “U.S. Trustee”) to resolve a number of its comments with respect to the Bidding Procedures Order, the Bar Date Order, the Financing Orders, and the Sale Orders; (x) responding to various creditor inquiries and demands; and (xi) handling the various other tasks related to the administration of the Debtor’s estate and this Chapter 11 Case and the wind down of its business affairs.During this time, the Debtor has worked diligently to ensure the Debtor’s smooth transition into chapter 11 and to maximize the value of the Debtor’s estate for the benefit of all stakeholders through a robust marketing and sale process.Since the filing of the Prior Exclusivity Motions, the Debtor has continued to diligently prosecute this Chapter 11 Case by, among other things: Based on the foregoing, the Debtor respectfully submits that more than sufficient cause exists, pursuant to section 1121(d) of the Bankruptcy Code, for the Court to extend the Debtor’s Exclusive Filing Period through and including April 21, 2021, and the Debtor’s Exclusive Solicitation Period through and including June 21, 2021.

Page 1

IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: Chapter 11 SUITABLE TECHNOLOGIES, INC.,1 Case No. 20-10432 (MFW) Debtor. Hearing Date: February 16, 2021 at 3:00 p.m. (ET) Objection Deadline: February 3, 2021 at 4:00 p.m. (ET) DEBTOR’S MOTION FOR AN ORDER, PURSUANT TO SECTION 1121(d) OF THE BANKRUPTCY CODE, FURTHER EXTENDING THE EXCLUSIVE PERIODS WITHIN WHICH THE DEBTOR MAY FILE A CHAPTER 11 PLAN AND SOLICIT ACCEPTANCES THEREOF Suitable Technologies, Inc., the debtor and debtor in possession in the above-captioned chapter 11 case (the “Debtor”), hereby moves the Court (this “Motion”) for the entry of an order, substantially in the form attached hereto as Exhibit A (the “Proposed Order”), pursuant to section 1121(d) of title 11 of the United States Code, 11 U.S.C. §§ 101 et seq. (the “Bankruptcy Code”), Rule 9006(b) of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”), and Rule 9006-2 of the Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the District of Delaware (the “Local Rules”), further extending the exclusive periods during which only the Debtor may file a chapter 11 plan and solicit acceptances thereof. In support of this Motion, the Debtor respectfully states as follows: INTRODUCTION 1. Section 1121(b) of the Bankruptcy Code provides for an initial period of one hundred twenty (120) days after the commencement of a chapter 11 case during which the 1 The last four digits of the Debtor’s United States federal tax identification number are 7816. The Debtor’s mailing address is 921 East Charleston Road, Palo Alto, CA 94303.

Page 2

debtor has the exclusive right to file a chapter 11 plan (the “Exclusive Filing Period”). Furthermore, section 1121(c)(3) of the Bankruptcy Code provides that if the debtor files a plan within the Exclusive Filing Period, the debtor has an exclusive period of one hundred eighty (180) days from the commencement of the chapter 11 case to solicit acceptances of and confirm such a plan (the “Exclusive Solicitation Period,” and together with the Exclusive Filing Period, the “Exclusive Periods”). The initial Exclusive Filing Period in this Chapter 11 Case (as defined below) was through and including June 25, 2020, while the initial Exclusive Solicitation Period was through and including August 24, 2020. 2. On July 9, 2020, the Court entered an order [Docket No. 179] (the “First Exclusivity Order”) extending the Exclusive Filing Period through and including October 23, 2020, and the Exclusive Solicitation Period through and including December 22, 2020. On November 9, 2020, the Court entered an order [Docket No. 296] (together with the First Exclusivity Order, the “Prior Exclusivity Orders”) further extending the Exclusive Filing Period through and including January 21, 2021, and the Exclusive Solicitation Period through and including March 22, 2021. By the terms of the Prior Exclusivity Orders, such extensions were without prejudice to the rights of the Debtor and its estate to seek further extensions of the Exclusive Periods. 3. Section 1121(d) of the Bankruptcy Code permits the Court to extend the Exclusive Periods “for cause.” By this Motion, the Debtor requests that (i) the Exclusive Filing Period in this Chapter 11 Case be extended by ninety (90) days, through and including April 21, 2021, and (ii) the Exclusive Solicitation Period in this Chapter 11 Case be extended by approximately ninety (90) days, through and including June 21, 2021, pursuant to section 1121(d) of the Bankruptcy Code.

Page 3

4. For the reasons set forth herein, the Debtor submits that more than ample “cause” exists to grant such extensions. JURISDICTION AND VENUE 5. The Court has jurisdiction to consider the Motion pursuant to 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 (the “Amended Standing Order”). This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2). Venue is proper in this Court pursuant to 28 U.S.C. §§ 1408 and 1409. 6. Pursuant to Local Rule 9013-1(f), the Debtor consents to the Court’s entry of a final judgment or order with respect to the Motion if it is determined that the Court, absent consent of the parties, cannot enter final orders or judgments consistent with Article III of the United States Constitution. 7. The statutory and legal predicates for the relief requested herein are section 1121(d) of the Bankruptcy Code, Bankruptcy Rule 9006(b), and Local Rule 9006-2. BACKGROUND A. General Background 8. On February 26, 2020 (the “Petition Date”), the Debtor commenced a voluntary case (the “Chapter 11 Case”) under chapter 11 of the Bankruptcy Code. Pursuant to sections 1107(a) and 1108 of the Bankruptcy Code, the Debtor is continuing to manage its financial affairs as a debtor in possession. No official committees have been appointed in the Chapter 11 Case, and no request has been made for the appointment of a trustee or examiner. 9. As set forth in the Declaration of Charles C. Reardon in Support of the Debtor’s Chapter 11 Petition and First Day Pleadings [Docket No. 7] (the “First Day

Page 4

Declaration”),2 the Debtor commenced the Chapter 11 Case to continue the process of winding down its business affairs and to conduct a sale process (the “Sale Process”) for substantially all of its assets pursuant to section 363 of the Bankruptcy Code. On April 20, 2020, the Court entered an order [Docket No. 110] (the “Bidding Procedures Order”) establishing, among other things, certain bidding and auction procedures in connection with the Sale Process. In accordance with the Bidding Procedures Order, the Debtor, in consultation with its professional advisors, conducted a thorough marketing and auction process for its assets. At the conclusion of the auction, the Debtor designated Blue Ocean Robotics ApS (“Blue Ocean”) and Magicheart Investments LLC as the successful bidders for the assets contemplated to be purchased pursuant to their respective asset purchase agreements. On August 20, 2020, the Court entered orders [Docket Nos. 225 and 226] (the “Sale Orders”) approving such sales (the “Sales”). The Sales closed on August 21, 2020. 10. Additional information regarding the Debtor’s business, capital structure, and the circumstances leading to the commencement of this Chapter 11 Case is set forth in the First Day Declaration. B. Prior Exclusivity Extension Request 11. The motions that sought approval of the Prior Exclusivity Orders (together the “Prior Exclusivity Motions”) identify and describe a number of the matters that the Debtor addressed in this Chapter 11 Case through the dates of the Prior Exclusivity Motions, including, without limitation: (i) commencing the Sale Process and obtaining entry of the Bidding Procedures Order; (ii) obtaining court approval of, and subsequently closing, the Sales; (iii) filing its Schedules of Assets and Liabilities and Statements of Financial Affairs (the 2 Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the First Day Declaration.

Page 5

“Schedules”); (iv) pursuant to an order of the Court [Docket No. 125] (the “Bar Date Order”), establishing claims bar dates for pre-petition claims and claims pursuant to section 503(b)(9) of the Bankruptcy Code; (v) reconciling proofs of claim filed in this Chapter 11 Case and, where appropriate, objecting to the same; (vi) obtaining entry of interim [Docket No. 23] and final orders [Docket No. 74] (together, the “Financing Orders”) approving the Debtor’s post-petition financing and use of cash collateral; (vii) retaining professionals; (viii) continuing to evaluate certain of the Debtor’s executory contracts and unexpired leases and, where appropriate, rejecting the same, and engaging in discussions and negotiations with various counterparties regarding objections to the Debtor’s rejection motions; (ix) working with the Office of the United States Trustee for the District of Delaware (the “U.S. Trustee”) to resolve a number of its comments with respect to the Bidding Procedures Order, the Bar Date Order, the Financing Orders, and the Sale Orders; (x) responding to various creditor inquiries and demands; and (xi) handling the various other tasks related to the administration of the Debtor’s estate and this Chapter 11 Case and the wind down of its business affairs. RELIEF REQUESTED 12. By this Motion, the Debtor requests the Court to enter the Proposed Order, further extending (i) the Exclusive Filing Period in this Chapter 11 Case by ninety (90) days, through and including April 21, 2021, and (ii) the Exclusive Solicitation Period in this Chapter 11 Case by approximately ninety (90) days, through and including June 21, 2021. The Debtor further requests that entry of the Proposed Order be without prejudice to the Debtor’s rights to seek additional extensions of the Exclusive Periods.3 3 The Debtor has filed this Motion with the intent of it being heard at the February 16, 2021 omnibus hearing, which is scheduled to take place after the expiration of the Exclusive Filing Period. Pursuant to Local Rule 9006-2, the Exclusive Filing Period is automatically extended until the Court has had an opportunity to consider the relief requested in this Motion.

Page 6

BASIS FOR RELIEF 13. The exclusive periods under section 1121(d) of the Bankruptcy Code are intended to afford a debtor a full and fair opportunity to formulate and propose a chapter 11 plan and to solicit acceptances thereof without the disruption that might be caused by the filing of competing plans of reorganization by non-debtor parties. To this end, where the exclusive periods prove to be unfeasible timeframes, section 1121(d) of the Bankruptcy Code allows the Court to extend such exclusive periods for “cause”: (1) Subject to paragraph (2), on 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. (2)(A) The 120-day period specified in paragraph (1) may not be extended beyond a date that is 18 months after the date of the order for relief under this chapter. (B) The 180-day period specified in paragraph (1) may not be extended beyond a date that is 20 months after the date of the order for relief under this chapter. 11 U.S.C. § 1121(d). A. Section 1121(d) of the Bankruptcy Code Permits the Court to Extend the Exclusive Periods for “Cause” 14. It is well established that the decision to extend a debtor’s exclusive periods is committed to the sound discretion of the Court, and should be based upon the facts and circumstances of a particular case. See First Am. Bank of New York v. Southwest Gloves and Safety Equip., Inc., 64 B.R. 963, 965 (D. Del. 1986); 203 N. LaSalle Street P’ship v. Bank of Am., N.A., 1999 U.S. Dist. LEXIS 19425, at *12 (N.D. Ill. 1999); In re Mid-State Raceway, Inc., 323 B.R. 63, 68 (Bankr. N.D.N.Y. 2005); In re Reetz, 61 B.R. 412, 414 (Bankr. W.D. Wis. 1986). Although the Bankruptcy Code does not define “cause” for purposes of an extension

Page 7

request under section 1121(d), courts have looked to the legislative history of section 1121(d) for guidance. See In re Gibson & Cushman Dredging Corp., 101 B.R. 405, 409 (E.D.N.Y. 1989); In re Amko Plastics, Inc., 197 B.R. 74, 77 (Bankr. S.D. Ohio 1996). Such legislative history indicates that Congress did not intend that the 120- and 180-day exclusive periods be a hard and fast limit. See Amko Plastics, Inc., 197 B.R. at 77 (noting that Congress intended courts to have flexibility in dealing with extensions of exclusivity); Gaines v. Perkins (In re Perkins), 71 B.R. 294, 297 (W.D. Tenn. 1987) (“The hallmark of [section 1121(d)] is flexibility.”). Rather, Congress intended that a debtor’s exclusive periods be of an adequate length, given the circumstances, for a debtor to formulate, negotiate and draft a viable plan without the disruptions that would occur with the filing of competing plans of reorganization. See Geriatrics Nursing Home v. First Fidelity Bank, N.A., 187 B.R. 128, 133 (D.N.J. 1995) (“The opportunity to negotiate its plan unimpaired by competition, the court held, is meant to allow the debtor time to satisfy all creditors and win support for its restructuring scheme and thus ensure its survival as a business.”). Further, Congress recognized that often a one hundred twenty (120) day exclusive period will not afford a debtor sufficient time to formulate and negotiate a chapter 11 plan: [t]he court is given the power, though, to increase . . . the 120-day period depending on the circumstances of the case. [T]he bill allows the flexibility for individual cases that is not available today. For example, if an unusually large company were to seek reorganization under chapter 11, the Court would probably need to extend the time in order to allow the debtor to reach an agreement. H.R. Rep. No. 95-595, 95th Cong. 1st Sess. 232 (1977) (footnotes omitted); see also In re Amko Plastics, 197 B.R. at 77 (noting that Congress intended courts to have flexibility in dealing with extensions of exclusivity); Gaines, 71 B.R. at 297. 15. Factors considered by the courts in deciding whether cause exists to grant an extension of the exclusive periods include: (a) the size of the debtor and difficulty in

Page 8

formulating a plan; (b) the necessity of sufficient time to negotiate a plan and prepare adequate information to allow a creditor to determine whether to accept the plan; (c) the existence of good faith progress toward reorganization; (d) whether the debtor is paying its debts as they come due; (e) whether the debtor has demonstrated reasonable prospects for filing a viable plan; (f) whether the debtor has made progress in negotiating with creditors; (g) the length of time the case has been pending; (h) whether the debtor is seeking the extension to pressure creditors to submit to its demands; and (i) whether unresolved contingencies exist. In re Dow Corning Corp., 208 B.R. 661, 664-65 (Bankr. E.D. Mich. 1997); In re Adelphia Commc’ns Corp., 352 B.R. 578, 587 (Bankr. S.D.N.Y. 2006); In re Cent. Jersey Airport Servs., LLC, 282 B.R. 176, 184 (Bankr. D.N.J. 2002). 16. Not all of the above factors are necessary or relevant in determining whether to grant an extension of the exclusivity periods. See, e.g., In re Express One Int’l, Inc., 194 B.R. 98, 100-01 (Bankr. E.D. Tex. 1996) (identifying only four of the factors as relevant in determining whether cause exists to support an extension); In re United Press Int’l, Inc., 60 B.R. 265, 269 (Bankr. D.D.C. 1986) (finding cause to extend exclusivity based on three of the factors). Here, however, nearly all of the factors are relevant and are in favor of extending the Exclusive Periods. As explained more fully below, more than sufficient cause exists to extend the Debtor’s Exclusive Periods pursuant to section 1121(d) of the Bankruptcy Code. B. Cause Exists for an Extension of the Debtor’s Exclusive Periods in this Case 17. The Debtor has been in chapter 11 for approximately eleven (11) months. During this time, the Debtor has worked diligently to ensure the Debtor’s smooth transition into chapter 11 and to maximize the value of the Debtor’s estate for the benefit of all stakeholders through a robust marketing and sale process.

Page 9

18. Since the filing of the Prior Exclusivity Motions, the Debtor has continued to diligently prosecute this Chapter 11 Case by, among other things: i. working with the DIP Lender in an effort to negotiate and draft a consensual chapter 11 plan of liquidation (and the various related documents, including the disclosure statement); ii. reconciling proofs of claim filed in this Chapter 11 Case and, where appropriate, objecting to the same; iii. continuing to evaluate certain of the Debtor’s executory contracts and unexpired leases and, where appropriate, rejecting the same, and engaging in discussions and negotiations with various counterparties regarding objections to the Debtor’s rejection motions; and iv. handling various other tasks related to the administration of the Debtor’s bankruptcy estate and the Chapter 11 Case, including responding to various inquiries from creditors and interested parties. 19. Accomplishing these tasks, as well as those described above and in the Prior Exclusivity Motions, has been a labor-intensive process given the limited resources available to the Debtor. In light of these circumstances, the Debtor submits that the requested extensions are both appropriate and necessary to afford the Debtor with sufficient time to adequately negotiate and prepare a viable chapter 11 plan and related disclosure statement. (i) The Size, Complexity, and Duration of the Debtor’s Case Necessitates an Extension of the Debtor’s Exclusive Periods. 20. Congress and the courts have recognized that the size and complexity of a debtor’s case alone may constitute cause for extension of a debtor’s exclusive period to file a plan and solicit acceptances of such a plan. H.R. No. 95-595, at 231-232,406 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 6191, 6362 (“[I]f an unusually large company were to seek reorganization under chapter 11, the court would probably need to extend the time in order to allow the debtor to reach an agreement”); see also In re Texaco, Inc., 76 B.R. 322, 326 (Bankr. S.D.N.Y. 1987) (“The large size of the debtor and the consequent difficulty in formulating a plan

Page 10

of reorganization for a huge debtor with a complex financial structure are important factors which generally constitute cause for extending the exclusivity periods.”). 21. Although this Chapter 11 Case might not be characterized as large and complex, the Debtor has nevertheless been required to devote a significant amount of time, energy and resources to tasks other than formulating a chapter 11 plan and related disclosure statement. Throughout the Chapter 11 Case, the Debtor’s Chief Restructuring Officer and professionals were focused on conducting a robust marketing and sale process for the Debtor’s assets. The Debtor devoted significant time and attention to this Sale Process, which began prior to the Petition Date, and continued in accordance with the Bidding Procedures Order on a postpetition basis. These efforts resulted in the Debtor’s obtaining approval for and closing the Sales. Since the Sales have closed, the Debtor has primarily focused on transitioning purchased assets to Blue Ocean and winding down its estate in a manner that maximizes creditor recoveries. 22. Given the foregoing progress, the Debtor submits that the complexity and relatively short duration of this Chapter 11 Case warrant the extension of the Exclusive Periods, so that the Debtor can negotiate and implement in the near term an appropriate exit mechanism for the completion of this Chapter 11 Case. (ii) The Debtor Has Shown Good Faith Progress in this Chapter 11 Case. 23. The requested extension of the Exclusive Periods is reasonable given the Debtor’s progress to date and the current posture of this Chapter 11 Case. The Debtor has complied with its reporting and disclosure requirements under the Bankruptcy Code, including the preparation and filing of the Schedules and the filing of monthly operating reports. As noted above, over an almost six-month period, the Debtor worked extensively with potential bidders and other parties in interest to consummate the Sales.

Page 11

24. At this stage, an extension of the Exclusive Periods as requested herein will allow the Debtor to formulate and negotiate a chapter 11 plan (or other appropriate chapter 11 exit strategy), while continuing to devote the necessary resources towards maximizing the value of the Debtor’s estate, including by reviewing claims filed against its estate in this Chapter 11 Case and objecting thereto as necessary, and rejecting executory contracts and unexpired leases as necessary. The Debtor’s current progress in this Chapter 11 Case and the remaining tasks justify the requested extension of the Exclusive Periods. (iii) The Debtor Is Paying Its Debts as They Come Due. 25. The Debtor continues to timely pay its undisputed postpetition obligations. As such, the requested extension of the Exclusive Periods will afford the Debtor a meaningful opportunity to formulate, negotiate, and confirm a chapter 11 plan (or other appropriate chapter 11 exit strategy) without prejudice to the parties in interest in this Chapter 11 Case. (iv) An Extension of the Debtor’s Exclusive Periods Will Not Prejudice the Debtor’s Creditors. 26. Throughout the chapter 11 process, the Debtor has endeavored to establish and maintain cooperative working relationships with its primary creditor constituencies, and believes that these relationships will continue during the extension requested herein. Importantly, the Debtor is not seeking the extension to delay administration of this Chapter 11 Case or to exert pressure on its creditors, but rather to continue the orderly, efficient, and cost-effective chapter 11 process. The Debtor’s engagement with these parties therefore weighs in favor of the requested extension of the Exclusive Periods. (v) Additional Factors Exist to Support an Extension of the Debtor’s Exclusive Periods. 27. In addition to the factors discussed above, termination of the Exclusive Periods in this Chapter 11 Case would adversely impact the Debtor’s business affairs and its

Page 12

progress in administering this Chapter 11 Case. Simply put, if the Court were to deny the Debtor’s request for an extension of the Exclusive Periods, upon the expiration of the Exclusive Filing Period, any party in interest would be free to propose a chapter 11 plan for the Debtor and solicit acceptances thereof. Such a ruling could foster a chaotic environment for the Debtor and its estate, significantly delay the administration of this Chapter 11 Case, and otherwise impair the Debtor’s ability to successfully prosecute this Chapter 11 Case, without any corresponding benefit to the Debtor’s estate and creditors. Indeed, denying the relief requested herein could very well thwart the objectives of the chapter 11 process, and result in reduced recoveries for the Debtor’s stakeholders. 28. Based on the foregoing, the Debtor respectfully submits that more than sufficient cause exists, pursuant to section 1121(d) of the Bankruptcy Code, for the Court to extend the Debtor’s Exclusive Filing Period through and including April 21, 2021, and the Debtor’s Exclusive Solicitation Period through and including June 21, 2021. NOTICE 29. The Debtor will provide notice of this Motion to: (i) the U.S. Trustee; (ii) counsel for the DIP Lender; (iii) those creditors holding the largest unsecured claims against the Debtor’s estate (excluding insiders); and (iv) all parties who, as of the filing of this Motion, have requested notice in the Chapter 11 Case pursuant to Bankruptcy Rule 2002. The Debtor submits that, in light of the nature of the relief requested, no other or further notice need be given. [Remainder of page intentionally left blank]

Page 13

CONCLUSION WHEREFORE, the Debtor respectfully requests that the Court enter the Proposed Order, granting the relief requested herein and such further relief as may be just and proper under the circumstances. Dated: January 20, 2021 YOUNG CONAWAY STARGATT & TAYLOR, LLP Wilmington, Delaware /s/ Betsy L. Feldman Robert S. Brady (No. 2847) Robert F. Poppiti, Jr. (No. 5052) Betsy L. Feldman (No. 6410) 1000 North King Street Wilmington, Delaware 19801 Telephone: (302) 571-6600 Facsimile: (302) 571-1253 Emails: rbrady@ycst.com rpoppiti@ycst.com bfeldman@ycst.com Counsel to the Debtor and Debtor in Possession