19-23185-rdd Doc 103 Filed 08/06/19 Entered 08/06/19 16:47:41 Main Document
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`CHAPMAN AND CUTLER LLP
`Steven Wilamowsky
`1270 Avenue of the Americas
`New York, NY 10020-1708
`Telephone: 212.655.6000
`-and-
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`Aaron M. Krieger
`111 West Monroe Street
`Chicago, IL 60603-4080
`Telephone: 312.845.3000
`
`Proposed Counsel for the Debtor and
`Debtor in Possession
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`Retrieval-Masters Creditors Bureau, Inc.,1
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`UNITED STATES BANKRUPTCY COURT
`SOUTHERN DISTRICT OF NEW YORK
`----------------------------------------------------------x
`In re
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`: Chapter 11
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`: Case No. 19-23185 (RDD)
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`:
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`Debtor.
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`DEBTOR’S REPLY TO OBJECTIONS TO MOTION FOR
`APPROVAL OF DEBTOR-IN-POSSESSION FINANCING
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`Retrieval-Masters Creditors Bureau, Inc. (the “Debtor”) as and for its Reply (this
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`“Reply”) to: (a) the State of Indiana’s Objection to Motion of Debtor For Entry of An Order
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`Pursuant to 11 U.S.C. §§ 105, 361, 362, 363, 364, 503, and 507: (I) Authorizing the Debtor to
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`Obtain Secured Superpriority Postpetition Financing; (II) Granting Liens and Superpriority
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`Administrative Expense Claims; (III) Authorizing Use of Cash Collateral; (IV) Granting
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`Adequate Protection; (V) Modifying the Automatic Stay; and (VI) Granting Related Relief, dated
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`July 30, 2019 [Doc. No. 92] (the “Indiana Objection”); and (b) the Joinder of the State of Texas
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`In the Relief Requsted [sic] by the [Indiana Objection] [Doc. No. 97] (the “Texas Joinder” and,
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`The last four digits of the Debtor’s taxpayer identification number is 9495. The location of the Debtor’s
`service address for purposes of this chapter 11 case is 4 Westchester Plaza, Suite 110, Elmsford, NY 10523.
`The Debtor also has done business as American Medical Collection Agency.
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`together with the Indiana Objection, the “Objections”); and (c) in further support of the Motion
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`of Debtor For Entry of An Order Pursuant to 11 U.S.C. §§ 105, 361, 362, 363, 364, 503, and
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`507: (I) Authorizing the Debtor to Obtain Secured Superpriority Postpetition Financing; (II)
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`Granting Liens and Superpriority Administrative Expense Claims; (III) Authorizing Use of Cash
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`Collateral; (IV) Granting Adequate Protection; (V) Modifying the Automatic Stay; and (VI)
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`Granting Related Relief, dated June 22, 2019 [Doc. No. 82] (the “Motion), by its undersigned
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`counsel, respectfully represents as follows:2
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`The Objections
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`1.
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`Including the Texas Joinder, only two objections to the Motion were filed, other
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`than one very limited objection [Doc. No. 101] filed by Conduent State & Local Solutions, LLC
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`(“Conduent”).3
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`2.
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`The Texas Joinder relies entirely on the Indiana Objection, and the Debtor
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`therefore addresses this Reply to that pleading.
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`3.
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`The basis for the Indiana Objection is not entirely clear. However, to the extent
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`the Debtor can glean Indiana’s specific points of objection, it responds serially, in order of the
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`relevant paragraph number of the Indiana Objection, as follows:
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`4.
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`Paragraph 8:
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`Indiana questions the arm’s length nature of the negotiations
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`around the DIP Loan Facility because “no information as to the nature of [Mr. Bradley E.]
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`Scher’s employment, who he reports to, or how he is paid, has been provided by [the] Debtor.”
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`2 Capitalized terms not otherwise defined herein have the meanings ascribed to them by the Motion.
`3 Conduent’s limited objection appears exclusively focused on its concerns that the DIP Loan Facility not be used
`to: (a) “roll up” (i.e., refinance) the Prepetition Loan Facility; (b) limit the ability of any party to challenge the
`Prepetition Lender’s liens and claims; or (c) provide a security interest that would prime or supersede any
`preexisting property right of Conduent. The DIP Loan Facility does none of those things, and the Debtor
`therefore is hopeful that its ongoing discussions with Conduent will result in the withdrawal and/or resolution of
`its objection.
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`Response: While the Debtor has described Mr. Scher’s role in prior pleadings, the Debtor
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`is prepared at the Hearing to make an evidentiary showing of Mr. Scher’s independence
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`and exclusive authority in all matters related to the DIP Loan Facility.
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`5.
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`Paragraph 11: Indiana claims that the Debtor “fails to recognize the position in
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`which [the] postpetition DIP Note would put Fuchs in relation to other creditors,” insofar as
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`(according to the Indiana Objection) there will be no value remaining to support a distribution to
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`other creditors. Indiana further alleges that “control of the estate will be undoubtedly ceded to
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`Fuchs,” which is purported to “therefore benefit[] a singular party in interest.” Response: In
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`fact, as will be adduced at the Hearing, any chance of a recovery to creditors will disappear
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`if the DIP Loan Facility is not approved. Moreover, Indiana and other States are likely to
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`be the greatest beneficiaries of the granting of the Motion, because without the DIP Loan
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`Facility, the Debtor simply will not have the wherewithal to respond in any meaningful way
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`to their information requests.
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`6.
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`Paragraph 12: Indiana concedes that the terms of the DIP Note may be fair and
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`reasonable, but suggests that Mr. Fuchs “could easily provide unsecured lending to the Debtor.”
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`In addition, Indiana claims “the transaction is not necessary to preserve the assets of the estate as
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`there are little to no assets.” Response: It is unclear why what Mr. Fuchs could do, if he so
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`chose in his sole discretion and most likely against the advice of his personal counsel, is
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`relevant to the Court’s determination of the Motion. As far as whether the DIP Loan
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`Facility likely is necessary for preservation of the estate, that is a question of fact in respect
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`of which the Debtor will be prepared to present evidence at the Hearing.
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`7.
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`Paragraphs 14 and 15. Indiana complains of what it characterizes as “zero effort”
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`on the part of the Debtor “to obtain outside financing[.]” Response: This objection, and the
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`implicit suggestion that it would be possible to obtain non-insider financing, is
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`fundamentally at odds with Indiana’s claim in paragraph 11 of the Indiana Objection that
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`the Debtor’s secured liabilities will exceed the value of its assets. In any event, the Debtor
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`is prepared to present evidence at the Hearing (in addition to the record of its case)
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`regarding its financing prospects in the absence of the DIP Loan Facility.4
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`8.
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`Paragraph 17: Indiana requests that the Motion “be heard in conjunction with
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`[its] Motion to Convert [the Debtor’s case].” Response: The Debtor is aware of no legal basis
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`for Indiana’s request. As of the date hereof, the Motion referred to has not been scheduled
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`for hearing. Morever, as will be adduced at the Hearing, delaying the Court’s
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`consideration of the Motion could have grievous consequences, including the likelihood
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`that the Debtor would be left without the liquidity to meet its payroll obligations in the near
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`term.5
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`4 The Debtor notes that, upon information and belief, both the public retirement systems for Indiana and Texas
`allocate a portion of their investments to distressed debt and special situations. If either State (or anyone else) has
`any interest in extending a loan to the Debtor here, the Debtor would be open to entertaining an offer. The Debtor
`notes in that vein that the DIP Loan Facility comes with no commitment fee and contains no prepayment penalties
`of any kind, and therefore contains no structural impediments to “take out” financing on terms favorable to the
`Debtor’s estate.
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`5 In any event, there are no grounds justifying the granting of the “Motion to Convert,” and the Debtor will be
`prepared to address Indiana’s allegation to the contrary at the appropriate time.
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`WHEREFORE, the Debtor respectfully requests that the Court grant the Motion and
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`Conclusion
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`overrule the Objections.
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`Dated: August 6, 2019
`New York, New York
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`CHAPMAN AND CUTLER LLP
`Proposed Counsel for the Debtor and
`Debtor in Possession
`
`By: /s/Steven Wilamowsky
`Steven Wilamowsky
`1270 Avenue of the Americas
`New York, NY 10020-1708
`Telephone: 212.655.6000
`
`
`
`-and-
`
`Aaron M. Krieger
`111 West Monroe Street
`Chicago, IL 60603-4080
`Telephone: 312.845.3000
`
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`