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Full title: Objection by U.S. Trustee US Trustee to 9 Motion for use of cash collateral. Proof of service. (Wencil, Sarah) (Entered: 01/13/2021)

Document posted on Jan 12, 2021 in the bankruptcy, 4 pages and 0 tables.

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UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF MINNESOTA ______________________________________________________________________________ In re: Tea Olive I, LLC d/b/a Stock + Field Case No. 21-30037 Debtor. Chapter 11 Case ______________________________________________________________________________ OBJECTION TO MOTION FOR ORDER (I) GRANTING EXPEDITED RELIEF, AND (II) AUTHORIZING USE OF CASH COLLATERAL ON AN INTERIM AND FINAL BASIS COMES NOW the Acting United States Trustee (UST) and files this objection to the motion for order granting expedited relief and authorizing use of cash collateral on an interim and final basis. In support of this objection, he states the following: 1. Hearings on this motion and other “first day” motions have been scheduled on January 13, 2021 at 2:00 p.m. before the U.S. Bankruptcy Court, Courtroom 2B, U.S. Courthouse, 316 North Robert Street, St. Paul, Minnesota. 2. The UST files this objection to reserve any objection he or a committee may raise at the final hearing. 3. The case is a liquidating chapter 11 case. The debtor is seeking authorization to conduct going out of business sales through March of 2021. 4. The UST is concerned that the debtor is seeking to assign estate property to the benefit of its senior secured lenders and at the expense of the other parties in interest, such as administrative expense holders not subject to the carve-out and priority and general unsecured creditors. The proposed order at paragraph 6 grants super priority administrative status and a lien in chapter 5 causes of action to the secured lenders subject to the credit agreement. In this

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District, such relief has resulted in administratively insolvent cases that conferred no benefit to other parties in interest. See e.g. Genmar Holdings, Inc. Bankr. No. 09-43537 (the court granted a super-priority lien in chapter 11 and trustee was not able to recover any assets beyond the administrative claims; Granite City Food & Brewery Ltd., Bankr. No. 19-43756 ( (case dismissed after being administratively insolvent). Granting the secured lender a lien in assets that it would not ordinarily be entitled may deny the unsecured creditors their only viable asset in the case. The case should not be administered for the sole benefit of the secured lien holders. 5. The Declaration of Matthew F. Whebbe states that the inventory is valued at $45,492,831 and accounts receivable total $734,000 (Doc. 22, para 33 and 34). Those amounts exceed the senior lender claims totaling $29,724, 104. Therefore, such a lien and super priority interest may be justified; however, at this time, no record has been made why these liens would be in the best interest of the estate. 6. The proposed order at paragraph 20 waives the estate’s ability to assert Section 506(c) claims against the secured creditor. The Eight Circuit has noted that Section 506(c) provides that “an expense may be surcharged against a secured creditor’s collateral if the expenditure was necessary, reasonable, and directly benefitted the secured creditor. “ Hartford Underwriters Ins. Co. v. Magna Bank N.A. (In re Hen House Interstate, Inc.), 150 F.3d 868, 871 (8th Cir. 1998), rev’d on other grounds, Hartford Underwriters Ins. Co. v. Magna Bank, N.A. In re Hen House Interstate, Inc.), 177 F.3d 719 (8th Cir. 1999)(en banc), aff’d Hartford Underwriters Ins. Co v. Union Planters Bank, 530 U.S. 1 (2000). The Eighth Circuit holds that “an agreement by a debtor and secured creditor to prohibit the payment of § 506(c) administrative expenses from the secured creditors’ collateral would operate as a windfall to the

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secured creditor at the expense of administrative claimants. We therefore conclude that such a provision is unenforceable.” Id., 150 F.3d at 872. 7. The provisions for the super priority interest, chapter 5 liens and Section 506(c) waiver appear to be “subject and effective upon entry of a Final Order” and therefore, do not need to be addressed at the interim hearing. It is unnecessary to include the language approving the provisions in the interim order. 8. The proposed order at paragraph 13 causes Section 522(b) to be inapplicable to the secured lenders, without being subject to a final order. Some courts have held that prospective waivers of Section 552 claims are not warranted, as they are essentially equitable claims to be asserted in the future. See In re Metaldyne Corp, 2009 WL 2883045, at *6 (Bankr. S.D.N.Y., June 23, 2009). Contra, e.g. In re General Growth Props., Inc. 412 B.R. 122, 127 (Bankr. S.D.N.Y. 2009) (approving waiver without discussion). The provision (along with Section 506(c)) is designed to protect the bankruptcy estate from spending money to protect a secured creditors collateral with no benefit to the estate. The motion does not provide any explanation as to why the waiver is necessary. WHEREFORE, the UST requests that the Court grant his objections herein and/or reserve his objections for the final hearing. Dated: January 13, 2021 JAMES L. SNYDER Acting United States Trustee Region 12 /s/ Sarah J. Wencil Sarah J. Wencil Trial Attorney Office of U.S. Trustee Iowa Atty. No. 14014 1015 U.S. Courthouse 300 South Fourth Street Minneapolis, MN 55415 TELE: (612) 334-1350

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UNITED STATES BANKRUPTCY COURT DISTRICT OF MINNESOTA ______________________________________________________________________________ In re: Tea Olive I, LLC d/b/a Stock + Field Case No. 21-30037 Debtor. Chapter 11 Case UNSWORN CERTIFICATE OF SERVICE The undersigned hereby certifies under penalty of perjury that on January 13, 2021, she electronically filed the attached: Objection, thereby causing the following parties to be served by CM/ECF at the addresses set forth below: CM/ECF: • Samuel M. Andre,;, • James C. Brand,, • Clinton E. Cutler,,, • Steven E. Fox • Steven R. Kinsella,; • Steven W Meyer • Paul L. Ratelle, • George H. Singer, • Kesha L. Tanabe, Executed: January 13, 2021 By: /s/ Sarah Wencil Sarah Wencil Office of the United States Trustee