Chapter 11 REVSTONE INDUSTRIES, LLC, et al.
Case 12-13262-BLS
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IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
In re:
) Chapter 11 )
REVSTONE INDUSTRIES, LLC, et al.,’
) Case No. 12-13262 )
Debtors.
) (Jointly Administered) )
) Related to Docket Nos. 558, 595, 596, 597,604
OMNIBUS REPLY IN SUPPORT OF: DEBTORS’ MOTION FOR AN ORDER (A) APPROVING ASSET PURCHASE AGREEMENT AND AUTHORIZING THE SALE OF ASSETS OF DEBTOR GREENWOOD FORGINGS, LLC OUTSIDE THE ORDINARY COURSE OF BUSINESS, (B) AUTHORIZING THE SALE OF GREENWOOD’S ASSETS FREE AND CLEAR OF ALL LIENS, CLAIMS, ENCUMBRANCES AND INTERESTS PURSUANT TO SECTIONS 363(b), (1) AND (m) OF THE BANKRUPTCY CODE; (C) AUTHORIZING THE ASSUMPTION AND ASSIGNMENT OF CERTAIN EXECUTORY CONTRACTS AND UNEXPIRED LEASES; AND (D) GRANTING RELATED RELIEF The above-captioned debtors and debtors in possession (collectively, the "Debtors") hereby submit this omnibus reply in support of the Debtors’ Motion For An Order (A) Approving Asset Purchase Agreement and Authorizing the Sale ofAssets of Debtor
Greenwood Forgings, LLC Outside the Ordinary Course of Business; (B) Authorizing the Sale of Greenwood’s Assets Free and Clear ofAll Liens, Claims, Encumbrances and Interests Pursuant to Sections 363(b), (I) and (m) of the Bankruptcy Code; (C) Authorizing the Assumption and Assignment of Certain Executory Contracts and Unexpired Leases; and (D) Granting Related Relief (the "Sale Motion"), and respectfully state as follows:
The Debtors in these Chapter 11 Cases and the last four digits of each Debtor’s federal tax identification numbers are: Revstone Industries, LLC (7222); Spara, LLC (6613); Greenwood Forgings, LLC (9285); and US Tool & Engineering, LLC (6450). The location of the Debtors’ headquarters and the service address for each of the Debtors is 2250 Thunderstick Dr., Suite 1203, Lexington, KY 40505.
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Preliminary Statement 1.
Greenwood Forgings, LLC ("Greenwood"), though the tireless efforts of
its representatives and professionals, has entered into a stalking horse agreement, as amended (the "Agreement") with a third party buyer, American Axle & Manufacturing, Inc. ("AA&M"). Under the Agreement, AA&M would acquire Greenwood’s tangible and intangible property, primarily consisting of equipment, excluding any inventory, accounts, or the proceeds thereof. The proposed stalking horse sale will yield immediate cash value of $2,500,000 for the benefit of this estate, plus minimizes claims associated with Greenwood’s facility lease. The sale is the product of an extensive marketing effort by Greenwood, effectuated with the assistance of its investment bankers at Angle Advisors, LLC. 2.
Greenwood has received one overbid to the proposed sale to AA&M from
Angstrom Automotive Group, LLC at a purchase price of $2,675,000. To determine the highest and best price for the assets, Greenwood intends to go forward with the auction scheduled for May 29, 2013. Greenwood does not expect any credit bids. 3.
The proposed sale to AA&M, or a higher and better bidder at auction, will
represent the highest and best bid for Greenwood’s assets and will be the result of arms’ length and good faith negotiations. There are no executory contracts or unexpired leases to be assumed or assigned as part of the proposed sale. Greenwood’s facility lease will be terminated and the real estate sold to AA&M, or a higher and better bidder, as a condition to the sale of Greenwood’s assets. It is anticipated that the buyer will re-start operations in Greenwood’s facility following the closing. The assets included in the sale are subject to the liens of Boston Finance Group, LLC ("BFG"), which asserts a claim against Greenwood of not less than 2 DOCS_SF:83220.2 73864-001
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$4,800,000. BFG has informed Greenwood that BFG will not submit a credit bid for the assets in connection with the proposed sale under the Agreement. 4.
The following parties have filed objections to the sale: (a) BFG; (b)
Hillsdale Hourly Pension Plan and Hillsdale Salaried Pension Plan (together, the "Pension Plans"); and (c) the Pension Benefit Guaranty Corporation (the "PBGC"). 2 Reply A.
Obiection of BFG 5.
BFG’s objection to the sale is notable in that BFG does not oppose the sale
itself and does not seek to credit bid, but rather BFG focuses on the distribution of sale proceeds. BFG asserts that it will not consent to the sale free and clear of its liens absent a provision in the sale order requiring immediate distribution of 100% of the proceeds of sale to BFG. Greenwood cannot agree to this provision because certain necessary expenses have been incurred by the estate for the benefit of BFG that need to be surcharged against BFG’s collateral. If the proceeds of BFG’s collateral are distributed in their entirety to BFG, then there will no property remaining against which the estate can seek surcharge. 6.
Section 506(c) of the Bankruptcy Code provides as follows:
The trustee may recoverfrom property securing an allowed secured claim the reasonable, necessary costs and expenses of preserving, or disposing of, such property to the extent of any benefit to the holder of such claim, including the payment of all ad valorem property taxes with respect to the property. 11 U.S.C. § 506(c) (emphasis added).
2
The U.S. Department of Justice, on behalf of the Environmental Protection Agency, raised informal comments with the proposed form of sale order, which have been resolved in a revised form of order.
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As expressly stated by section 5 06(c), Greenwood may only recover its
surchargeable expenses "from property securing [BFG’s] allowed secured claim[.]" If the property securing BFG’s property has been distributed to BFG, the estate will have no property against which to seek surcharge under section 5 06(c). 8.
Greenwood has proposed a compromise to BFG to hold back a portion of
the sale proceeds, subject to the estate’s surcharge rights, while distributing the remainder of the proceeds to BFG. To date, there has been no resolution with BFG on this point. 9.
BFG further argues that, even in the event certain expenses are
surchargeable against the property, BFG has a superpriority claim for the diminution in value of its collateral based upon Greenwood’s purported use of $1,000,000 of cash collateral over the course of its bankruptcy case. BFG’s collateral consists of Greenwood’s equipment and a disputed claim to proceeds of certain accounts receivable pursuant to prepetition garnishments. 3 In fact, there has been no diminution in BFG’s collateral position. 10.
First, the value of BFG’s liens on Greenwood’s equipment has been
preserved by Greenwood expending cash, consistent with this Court’s cash collateral orders, to, among other things, insure the equipment, provide security for the equipment, and satisfy rent obligations for the facility where the equipment is housed. Further, there has been no appreciable depreciation in the value of Greenwood’s equipment since the commencement of this case nearly five months ago.
The Pension Plans have now asserted an interest in proceeds of accounts receivable to the extent that such proceeds relate to inventory dispositions, thereby creating a challenge to BFG’s asserted liens in Greenwood’s cash collateral.
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Second, even to the extent that BFG is entitled to a lien against cash
proceeds of accounts receivable (a position that Greenwood and the Pension Plans dispute), there has been no diminution in value. Greenwood had less than $11,000 in cash on the petition date. Greenwood collected most accounts receivable on a postpetition basis through a lockbox account held by Bridgeport Capital Funding, LLC ("Bridgeport"). Certain Greenwood accounts receivable were owned by Bridgeport under a factoring agreement. Bridgeport collected approximately $845,000 during the case on account of prepetition receivables, some of which had been purchased by Bridgeport from the Debtor, and Bridgeport retained approximately $400,000 on account of either its ownership interest in some accounts receivable or to satisfy other outstanding fees and expenses payable by Greenwood. The remainder was distributed to Greenwood by Bridgeport consistent with the parties’ contractual arrangement. There was no diminution in accounts receivable - collections were received and applied to satisfy all obligations to Bridgeport as the senior lender. BFG has admitted that Bridgeport’s liens on accounts are senior to those of BFG. Greenwood has also earned approximately $860,000 in postpetition receipts and disbursed approximately $840,000 on account of postpetition operations. As of May 20, 2013, Greenwood was holding cash in the approximate amount of $460,000. In sum, this estate has been run extremely efficiently and has generated a significant increase in cash on hand through collection of accounts receivable. Greenwood has maximized value during the course of the case and there has been no diminution in value as to BFG. 12.
A party claiming entitlement to an administrative claim under section
507(b) of the Bankruptcy Code bears the burden of proof. General Amer. Transp. Corp. v.
Martin (In re Mid Region Petroleum, Inc.), 1 F.3d 1130, 1132 (10th Cir. 1993). BFG has not
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provided any evidence of diminution of its interest in Greenwood’s assets during the Debtors’ cases. Greenwood’s limited use of cash collateral, while generating a substantial cash balance through collections of accounts receivable, is not evidence of diminution. See Chase Manhattan
Bank v. Stembridge (In re Stembridge), 394 F.3d 383, 387 (5th Cir. 2004) ("Adequate protection, properly defined, is the amount of an asset’s decrease in value from the petition date.") (citing
United Savings Assn v. Timbers of Inwood Forest Assocs., 13.
484 U.S. 365, 370 (1988)).
Finally, BFG raises certain objections to particular provisions of the
Agreement with AA&M. These objections have been resolved through an amended form of Agreement with AA&M, which was filed with the Court on May 23, 2013 [Docket No. 606]. B.
Objection of the Pension Plans 14.
The Pension Plans wear two hats in Greenwood’s case: (a) they assert
claims against Greenwood secured by inventory; and (b) they are Greenwood’s landlord with respect to its principal facility. The Pension Plans have asserted objections to the Sale Motion in both capacities. 15.
First, contrary to BFG’s position, the Pension Plans object to disposition
of any of the proceeds of the contemplated sale based on asserted priority disputes that may exist amongst the secured creditors. In fact, there is no inventory or accounts that will be sold to AA&M under the Agreement and the proposed sale order so confirms. Hence, the Pension Plans have no security interest in the assets at issue. 16.
Next, the Pension Plans’ objections to the assumption and assignment of
the facility lease and the associated cure payable thereunder are moot because Greenwood does not intend to assume and assign the lease. Rather, the Agreement requires that the facility lease 6 DOCS_SF:83220.2 73864-001
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is terminated with the consent of Greenwood and the Pension Plans and that the real estate is sold to AA&M concurrent with the closing of the sale of Greenwood’s assets. See sections 4.2.7 and 4.2.8 of the Agreement and Exhibit C of the Agreement. C.
Obiection of the PBGC. 17.
The PBGC has joined in the objection to the sale filed by the Pension
Plans. Like the Pension Plans, the PBGC has no security interest in the assets that are the subject of the sale. The PBGC also requests the inclusion of language in the sale order that nothing in the sale shall have any effect on the rights of the Pension Plans against non-debtor parties. That is in fact the case and the Debtor anticipates reaching agreement with the PBGC on protective language to be included in the sale order. Dated: May 28, 2013
PAC HI STANG ZIEHL & JONES LLP
Laura Davis Jones (Bar No. 2436) David M. Bertenthal (CA Bar No. 167624) Maxim B. Litvak (CA Bar No. 215852) Timothy P. Cairns (Bar No. 4228) 919 North Market Street, 17th Floor P.O. Box 8705 Wilmington, DE 19899-8705 (Courier 19801) Telephone: (302) 652-4100 Facsimile: (302) 652-4400 Email: [email protected] [email protected] [email protected] [email protected] Counsel for Debtors and Debtors in Possession
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IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re:
)
Chapter 11
REVSTONE INDUSTRIES, LLC, et al.,
)
Case No. 12-13262 (BLS)
)
Debtors.
)
(Jointly Administered)
)
CERTIFICATE OF SERVICE I, Timothy P. Cairns, hereby certify that on the 28th day of May, 2013, I caused a copy of the following document(s) to be served on the individuals on the attached service list(s), in the manner indicated thereon:
Omnibus Reply In Support Of: Debtors’ Motion For An Order (A) Approving Asset Purchase Agreement And Authorizing The Sale Of Assets Of Debtor Greenwood Forgings, LLC Outside The Ordinary Course Of Business, (B) Authorizing The Sale Of Greenwood’s Assets Free And Clear Of All Liens, Claims, Encumbrances And Interests Pursuant To Sections 363(b), (f) And (m) Of The Bankruptcy Code; (C) Authorizing The Assumption And Assignment Of Certain Executory Contracts And Unexpired Leases; And (D) Granting Related Relief
c1>
Timothy . Cairns (Bar No. 4228)
The Debtors in these Chapter 11 Cases and the last four digits of each Debtors’ federal tax identification numbers are: Revstone Industries, LLC (7222); Spara, LLC (6613); Greenwood Forgings, LLC (9285); and US Tool and Engineering, LLC (6450). The location of the Debtors’ headquarters and the service address for each of the Debtors is 2250 Thunderstick Dr., Suite 1203, Lexington, KY 40505.
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Revstone Consolidated 2002 Service List (First Class) Lead Case No. 12-13262 Document No. 185822 01 INTEROFFICE MAIL 12 - HAND DELIVERY 30 FIRST CLASS MAIL
HAND DELIVERY (Counsel to Boston Financial Group) Stuart M. Brown, Esquire R. Craig Martin, Esquire Cynthia Moh, Esquire DLA Piper LLP (US) 919 N. Market Street, 15th Floor Wilmington, DE 19801
Laura Davis Jones, Esquire Timothy P. Cairns, Esquire Pachulski Stang Ziehl & Jones, LLP 919 North Market Street, 17th Floor P.O. Box 8705 Wilmington, DE 19899-8705
HAND DELIVERY (Counsel to Schoeller Arca Systems, Inc.) Carl N. Kunz, III, Esquire Morris James LLP 500 Delaware Avenue, Suite 1500 P. 0. Box 2306 Wilmington, DE 19801
INTEROFFICE MAIL David M. Bertenthal, Esquire Pachuiski Stang Ziehl & Jones, LLP 150 California Street, 15 th Floor San Francisco, CA 94111 HAND DELIVERY Jane Leamy, Esquire Office of the United States Trustee 844 King Street, Suite 2207 Lockbox 35 Wilmington, DE 19801 HAND DELIVERY (Counsel to Ford Motor Company) Karen C. Bifferato, Esquire Connolly Gallgaher LLP 1000 West Street, Suite 1400 Wilmington, DE 19801 HAND DELIVERY (Counsel to Airgas, Inc. and related Airgas Entities) Kathleen M. Miller, Esquire Smith, Katzenstein & Jenkins LLP The Corporate Plaza 800 Delaware Avenue, Suite 1000 P. 0. Box 410 Wilmington, DE 19899
HAND DELIVERY (Counsel to United Steelworkers) Susan E. Kaufman, Esquire Cooch and Taylor, P.A. 1000 West Street, 10th Floor P. 0. Box 1680 Wilmington, DE 19801 HAND DELIVERY (Counsel to Official Committee of Unsecured Creditors) Matthew P. Ward, Esquire Womble Carlyle Sandridge & Rice, LLP 222 Delaware Avenue, Suite 1501 Wilmington, DE 19801 HAND DELIVERY (Counsel to Official Committee of Unsecured Creditors) Steven K. Kortanek, Esquire Mark L. Degrosseilliers, Esquire Womble Carlyle Sandridge & Rice, LLP 222 Delaware Avenue Wilmington, DE 19801
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HAND DELIVERY (Counsel to George S. Hoflneister) Evan 0. Williford, Esquire The Williford Firm LLC 901 N. Market Street, Suite 800 Wilmington, DE 19801
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FIRST CLASS MAIL Delaware State Treasury 820 Silver Lake Blvd., Suite 100 Dover, DE 19904
FIRST CLASS MAIL HAND DELIVERY (Counsel to Bridgeport Capital Funding LLC) Patrick J. Reilly, Esquire Cole, Schotz, Meisel, Forman & Leonard, P.A. 500 Delaware Avenue, Suite 1400 Wilmington, DE 19801 HAND DELIVERY (Counsel to GE CF Mexico of S.A. de C. V) Kurt F. Gwynne, Esquire and Lucy Qiu, Esquire Reed Smith LLP 1201 N. Market Street, Suite 1500 Wilmington, DE 19801
Secretary of State Division of Corporations - Franchise Tax P.O. Box 898 Dover, DE 19903
FIRST CLASS MAIL Internal Revenue Service P0 Box 7346 Philadelphia, PA 19101
FIRST CLASS MAIL Zillah A. Frampton Delaware Division of Revenue Bankruptcy Administrator CSOB 8th Floor 820 N. French Street Wilmington, De 19801
HAND DELIVERY (Counsel to Hillsdale Salaried Pension Plan and Hillsdale Hourly Pension Plan) Joel A. Waite, Esquire, Kenneth J. Enos, Esquire Young Conaway Stargatt & Taylor LLP Rodney Square 1000 North King Street Wilmington, DE 19801
(Co-counsel to Debtor) Brian Trust, Esquire Howard S. Beltzer, Esquire Frederick D. Hyman, Esquire Mayer Brown LLP 1675 Broadway New York, NY 10019
FIRST CLASS MAIL
FIRST CLASS MAIL
Securities & Exchange Commission Secretary of the Treasury 100 F. Street, NE Washington, DC 20549
(Counsel to General Motors LLC) Aaron M. Silver, Esquire Honigman Miller Schwartz and Cohn LLP 2290 First National Building 660 Woodward Avenue Suite 2290 Detroit, MI 48226
FIRST CLASS MAIL George S. Canellos Securities & Exchange Commission New York Regional Office 3 World Financial Center, Suite 400 New York, NY 10281
FIRST CLASS MAIL
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FIRST CLASS MAIL (Counsel to Chrysler Group LLC) Sheryl L. Toby, Esquire Dykema Gossett PLLC 39577 Woodward Ave., Suite 300 Bloomfield Hills, MI 48304
FIRST CLASS MAIL Matthew M. Scheff, Esquire Trial Attorney - U.S. Department of Labor Office of the Solicitor 1240 E. 9th Street, Room 881 Cleveland, OH 44199
FIRST CLASS MAIL (Counsel to JTEKT North America, Inc.) Michael E. Baum, Esquire Daniel J. Weiner, Esquire Jeffery J. Sattler, Esquire Schafer and Weiner, PLLC 40950 Woodward Ave., Suite 100 Bloomfield Hills, MI 48304
FIRST CLASS MAIL (Counsel to Boston Financial Group) Gregg M. Galardi, Esquire Gabriella Zborovsky, Esquire DLA Piper LLP (US) 1251 Avenue of the Americas, 27th Floor New York, NY 10020
FIRST CLASS MAIL (Counsel to Ford Motor Company) Stephen S. LaPlante, Esquire Jonathan S. Green, Esquire Miller Canfield 150 West Jefferson, Suite 2500 Detroit, MI 48226 FIRST CLASS MAIL David Boyle Airgas, Inc. 259 Radnor-Chester Road, Suite 100 P. 0. Box 6675 Radnor, PA 01908 FIRST CLASS MAIL Cassandra B. Caverly, Esquire Pension Benefit Guaranty Corp. Office of the Chief Counsel 1200 K Street, N.W. Washington, DC 20005 FIRST CLASS MAIL Ruben R. Chapa, Esquire Senior Trial Attorney, Office of the Solicitor U.S. Department of Labor 230 South Dearborn, Room 844 Chicago, IL 60604
FIRST CLASS MAIL (Counsel to Nexteer Automotive Corporation) Thomas B. Radom, Esquire Butzel Long, PC Stoneridge West 41000 Woodward Avenue Bloomfield Hills, MI 48304 FIRST CLASS MAIL (Counsel to Gary Walter, Vigin Hoey and David l3agby) Don Darnell, Esquire Darnell Law Offices 7926 Aim Arbor Street Dexter, MI 48130 FIRST CLASS MAIL (Counsel to Native American Logistics Worldwide, LLC) Kevin N. Summers, Esquire Dean & Fulkerson, P.C. 801 W. Big Beaver Road, Suite 500 Troy, MI 48084 FIRST CLASS MAIL (Counsel to Multi-Precision Detail, Inc.) Steven A. Siman, Esquire Steven A. Siman, P.C. 3250 W. Big Beaver, Suite 344 Troy, MI 48084
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FIRST CLASS MAIL (Creditor) David R. Jury, Esquire Associate General Counsel United Steelworkers Five Gateway Center Room 807 Pittsburgh, PA 15222 FIRST CLASS MAIL (Counsel to George S. Hofmeister) Sheldon S. Toll, Esquire Sheldon S. Toll PLLC 2000 Town Center, Suite 2550 Southfield, MI 48075 FIRST CLASS MAIL Donna Cutting GIL Inc. 419 E. 4th Street Royal Oak, MI 48067 FIRST CLASS MAIL (Counsel to Bridgeport Capital Funding LLC) Barry P. Gruher, Esquire Genovese Joblove & Battista P.A. 200 E. Broward Blvd, Suite 1110 Ft. Lauderdale, FL 33301
FIRST CLASS MAIL (Counsel to PCG Acquisition Corporation) Aaron L. Hammer, Esquire Christopher J. Horvay, Esquire Suger Felsenthal Grais & Hammer LLP 30 N. LaSalle Street, Suite 3000 Chicago, IL 60602
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FIRST CLASS MAIL (Counsel to Bry-Mac, Inc. dlb/a Dietech Tooling Solutions) Bradley J. Fisher Scholten Fant, P.C. 100 N. Third Street P0 Box 454 Grand Haven, MI 49417 FIRST CLASS MAIL (Counsel to Oakland County Treasurer) Richardo I. Kilpatrick, Esquire Kilpatrick & Associates, P.C. 903 North Opdyke Road, Suite C Auburn Hills, MI 48326 FIRST CLASS MAIL Neil Herskowkitz Riverside Claims P0 Box 626 Planetarium Station New York, NY 10024
FIRST CLASS MAIL (Counsel to GE CF Mexico of S.A. de C. V) Michael J. Venditto, Esquire Reed Smith LLP 599 Lexington Avenue New York, NY 10022 FIRST CLASS MAIL (Counsel to Hillsdale Salaried Pension Plan and Hillsdale Hourly Pension Plan) Dennis J. Connolly, Esquire, Kevin M. Hembree, Esquire Alston & Bird LLP One Atlantic Center 1201 West Peachtree Street Atlanta, GA 30309
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IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
In re:
) Chapter 11 )
REVSTONE INDUSTRIES, LLC, et al.,’
) Case No. 12-13262 )
Debtors.
) (Jointly Administered) )
) Related to Docket Nos. 558, 595, 596, 597,604
OMNIBUS REPLY IN SUPPORT OF: DEBTORS’ MOTION FOR AN ORDER (A) APPROVING ASSET PURCHASE AGREEMENT AND AUTHORIZING THE SALE OF ASSETS OF DEBTOR GREENWOOD FORGINGS, LLC OUTSIDE THE ORDINARY COURSE OF BUSINESS, (B) AUTHORIZING THE SALE OF GREENWOOD’S ASSETS FREE AND CLEAR OF ALL LIENS, CLAIMS, ENCUMBRANCES AND INTERESTS PURSUANT TO SECTIONS 363(b), (1) AND (m) OF THE BANKRUPTCY CODE; (C) AUTHORIZING THE ASSUMPTION AND ASSIGNMENT OF CERTAIN EXECUTORY CONTRACTS AND UNEXPIRED LEASES; AND (D) GRANTING RELATED RELIEF The above-captioned debtors and debtors in possession (collectively, the "Debtors") hereby submit this omnibus reply in support of the Debtors’ Motion For An Order (A) Approving Asset Purchase Agreement and Authorizing the Sale ofAssets of Debtor
Greenwood Forgings, LLC Outside the Ordinary Course of Business; (B) Authorizing the Sale of Greenwood’s Assets Free and Clear ofAll Liens, Claims, Encumbrances and Interests Pursuant to Sections 363(b), (I) and (m) of the Bankruptcy Code; (C) Authorizing the Assumption and Assignment of Certain Executory Contracts and Unexpired Leases; and (D) Granting Related Relief (the "Sale Motion"), and respectfully state as follows:
The Debtors in these Chapter 11 Cases and the last four digits of each Debtor’s federal tax identification numbers are: Revstone Industries, LLC (7222); Spara, LLC (6613); Greenwood Forgings, LLC (9285); and US Tool & Engineering, LLC (6450). The location of the Debtors’ headquarters and the service address for each of the Debtors is 2250 Thunderstick Dr., Suite 1203, Lexington, KY 40505.
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Preliminary Statement 1.
Greenwood Forgings, LLC ("Greenwood"), though the tireless efforts of
its representatives and professionals, has entered into a stalking horse agreement, as amended (the "Agreement") with a third party buyer, American Axle & Manufacturing, Inc. ("AA&M"). Under the Agreement, AA&M would acquire Greenwood’s tangible and intangible property, primarily consisting of equipment, excluding any inventory, accounts, or the proceeds thereof. The proposed stalking horse sale will yield immediate cash value of $2,500,000 for the benefit of this estate, plus minimizes claims associated with Greenwood’s facility lease. The sale is the product of an extensive marketing effort by Greenwood, effectuated with the assistance of its investment bankers at Angle Advisors, LLC. 2.
Greenwood has received one overbid to the proposed sale to AA&M from
Angstrom Automotive Group, LLC at a purchase price of $2,675,000. To determine the highest and best price for the assets, Greenwood intends to go forward with the auction scheduled for May 29, 2013. Greenwood does not expect any credit bids. 3.
The proposed sale to AA&M, or a higher and better bidder at auction, will
represent the highest and best bid for Greenwood’s assets and will be the result of arms’ length and good faith negotiations. There are no executory contracts or unexpired leases to be assumed or assigned as part of the proposed sale. Greenwood’s facility lease will be terminated and the real estate sold to AA&M, or a higher and better bidder, as a condition to the sale of Greenwood’s assets. It is anticipated that the buyer will re-start operations in Greenwood’s facility following the closing. The assets included in the sale are subject to the liens of Boston Finance Group, LLC ("BFG"), which asserts a claim against Greenwood of not less than 2 DOCS_SF:83220.2 73864-001
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$4,800,000. BFG has informed Greenwood that BFG will not submit a credit bid for the assets in connection with the proposed sale under the Agreement. 4.
The following parties have filed objections to the sale: (a) BFG; (b)
Hillsdale Hourly Pension Plan and Hillsdale Salaried Pension Plan (together, the "Pension Plans"); and (c) the Pension Benefit Guaranty Corporation (the "PBGC"). 2 Reply A.
Obiection of BFG 5.
BFG’s objection to the sale is notable in that BFG does not oppose the sale
itself and does not seek to credit bid, but rather BFG focuses on the distribution of sale proceeds. BFG asserts that it will not consent to the sale free and clear of its liens absent a provision in the sale order requiring immediate distribution of 100% of the proceeds of sale to BFG. Greenwood cannot agree to this provision because certain necessary expenses have been incurred by the estate for the benefit of BFG that need to be surcharged against BFG’s collateral. If the proceeds of BFG’s collateral are distributed in their entirety to BFG, then there will no property remaining against which the estate can seek surcharge. 6.
Section 506(c) of the Bankruptcy Code provides as follows:
The trustee may recoverfrom property securing an allowed secured claim the reasonable, necessary costs and expenses of preserving, or disposing of, such property to the extent of any benefit to the holder of such claim, including the payment of all ad valorem property taxes with respect to the property. 11 U.S.C. § 506(c) (emphasis added).
2
The U.S. Department of Justice, on behalf of the Environmental Protection Agency, raised informal comments with the proposed form of sale order, which have been resolved in a revised form of order.
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As expressly stated by section 5 06(c), Greenwood may only recover its
surchargeable expenses "from property securing [BFG’s] allowed secured claim[.]" If the property securing BFG’s property has been distributed to BFG, the estate will have no property against which to seek surcharge under section 5 06(c). 8.
Greenwood has proposed a compromise to BFG to hold back a portion of
the sale proceeds, subject to the estate’s surcharge rights, while distributing the remainder of the proceeds to BFG. To date, there has been no resolution with BFG on this point. 9.
BFG further argues that, even in the event certain expenses are
surchargeable against the property, BFG has a superpriority claim for the diminution in value of its collateral based upon Greenwood’s purported use of $1,000,000 of cash collateral over the course of its bankruptcy case. BFG’s collateral consists of Greenwood’s equipment and a disputed claim to proceeds of certain accounts receivable pursuant to prepetition garnishments. 3 In fact, there has been no diminution in BFG’s collateral position. 10.
First, the value of BFG’s liens on Greenwood’s equipment has been
preserved by Greenwood expending cash, consistent with this Court’s cash collateral orders, to, among other things, insure the equipment, provide security for the equipment, and satisfy rent obligations for the facility where the equipment is housed. Further, there has been no appreciable depreciation in the value of Greenwood’s equipment since the commencement of this case nearly five months ago.
The Pension Plans have now asserted an interest in proceeds of accounts receivable to the extent that such proceeds relate to inventory dispositions, thereby creating a challenge to BFG’s asserted liens in Greenwood’s cash collateral.
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Second, even to the extent that BFG is entitled to a lien against cash
proceeds of accounts receivable (a position that Greenwood and the Pension Plans dispute), there has been no diminution in value. Greenwood had less than $11,000 in cash on the petition date. Greenwood collected most accounts receivable on a postpetition basis through a lockbox account held by Bridgeport Capital Funding, LLC ("Bridgeport"). Certain Greenwood accounts receivable were owned by Bridgeport under a factoring agreement. Bridgeport collected approximately $845,000 during the case on account of prepetition receivables, some of which had been purchased by Bridgeport from the Debtor, and Bridgeport retained approximately $400,000 on account of either its ownership interest in some accounts receivable or to satisfy other outstanding fees and expenses payable by Greenwood. The remainder was distributed to Greenwood by Bridgeport consistent with the parties’ contractual arrangement. There was no diminution in accounts receivable - collections were received and applied to satisfy all obligations to Bridgeport as the senior lender. BFG has admitted that Bridgeport’s liens on accounts are senior to those of BFG. Greenwood has also earned approximately $860,000 in postpetition receipts and disbursed approximately $840,000 on account of postpetition operations. As of May 20, 2013, Greenwood was holding cash in the approximate amount of $460,000. In sum, this estate has been run extremely efficiently and has generated a significant increase in cash on hand through collection of accounts receivable. Greenwood has maximized value during the course of the case and there has been no diminution in value as to BFG. 12.
A party claiming entitlement to an administrative claim under section
507(b) of the Bankruptcy Code bears the burden of proof. General Amer. Transp. Corp. v.
Martin (In re Mid Region Petroleum, Inc.), 1 F.3d 1130, 1132 (10th Cir. 1993). BFG has not
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provided any evidence of diminution of its interest in Greenwood’s assets during the Debtors’ cases. Greenwood’s limited use of cash collateral, while generating a substantial cash balance through collections of accounts receivable, is not evidence of diminution. See Chase Manhattan
Bank v. Stembridge (In re Stembridge), 394 F.3d 383, 387 (5th Cir. 2004) ("Adequate protection, properly defined, is the amount of an asset’s decrease in value from the petition date.") (citing
United Savings Assn v. Timbers of Inwood Forest Assocs., 13.
484 U.S. 365, 370 (1988)).
Finally, BFG raises certain objections to particular provisions of the
Agreement with AA&M. These objections have been resolved through an amended form of Agreement with AA&M, which was filed with the Court on May 23, 2013 [Docket No. 606]. B.
Objection of the Pension Plans 14.
The Pension Plans wear two hats in Greenwood’s case: (a) they assert
claims against Greenwood secured by inventory; and (b) they are Greenwood’s landlord with respect to its principal facility. The Pension Plans have asserted objections to the Sale Motion in both capacities. 15.
First, contrary to BFG’s position, the Pension Plans object to disposition
of any of the proceeds of the contemplated sale based on asserted priority disputes that may exist amongst the secured creditors. In fact, there is no inventory or accounts that will be sold to AA&M under the Agreement and the proposed sale order so confirms. Hence, the Pension Plans have no security interest in the assets at issue. 16.
Next, the Pension Plans’ objections to the assumption and assignment of
the facility lease and the associated cure payable thereunder are moot because Greenwood does not intend to assume and assign the lease. Rather, the Agreement requires that the facility lease 6 DOCS_SF:83220.2 73864-001
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is terminated with the consent of Greenwood and the Pension Plans and that the real estate is sold to AA&M concurrent with the closing of the sale of Greenwood’s assets. See sections 4.2.7 and 4.2.8 of the Agreement and Exhibit C of the Agreement. C.
Obiection of the PBGC. 17.
The PBGC has joined in the objection to the sale filed by the Pension
Plans. Like the Pension Plans, the PBGC has no security interest in the assets that are the subject of the sale. The PBGC also requests the inclusion of language in the sale order that nothing in the sale shall have any effect on the rights of the Pension Plans against non-debtor parties. That is in fact the case and the Debtor anticipates reaching agreement with the PBGC on protective language to be included in the sale order. Dated: May 28, 2013
PAC HI STANG ZIEHL & JONES LLP
Laura Davis Jones (Bar No. 2436) David M. Bertenthal (CA Bar No. 167624) Maxim B. Litvak (CA Bar No. 215852) Timothy P. Cairns (Bar No. 4228) 919 North Market Street, 17th Floor P.O. Box 8705 Wilmington, DE 19899-8705 (Courier 19801) Telephone: (302) 652-4100 Facsimile: (302) 652-4400 Email: [email protected] [email protected] [email protected] [email protected] Counsel for Debtors and Debtors in Possession
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IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re:
)
Chapter 11
REVSTONE INDUSTRIES, LLC, et al.,
)
Case No. 12-13262 (BLS)
)
Debtors.
)
(Jointly Administered)
)
CERTIFICATE OF SERVICE I, Timothy P. Cairns, hereby certify that on the 28th day of May, 2013, I caused a copy of the following document(s) to be served on the individuals on the attached service list(s), in the manner indicated thereon:
Omnibus Reply In Support Of: Debtors’ Motion For An Order (A) Approving Asset Purchase Agreement And Authorizing The Sale Of Assets Of Debtor Greenwood Forgings, LLC Outside The Ordinary Course Of Business, (B) Authorizing The Sale Of Greenwood’s Assets Free And Clear Of All Liens, Claims, Encumbrances And Interests Pursuant To Sections 363(b), (f) And (m) Of The Bankruptcy Code; (C) Authorizing The Assumption And Assignment Of Certain Executory Contracts And Unexpired Leases; And (D) Granting Related Relief
c1>
Timothy . Cairns (Bar No. 4228)
The Debtors in these Chapter 11 Cases and the last four digits of each Debtors’ federal tax identification numbers are: Revstone Industries, LLC (7222); Spara, LLC (6613); Greenwood Forgings, LLC (9285); and US Tool and Engineering, LLC (6450). The location of the Debtors’ headquarters and the service address for each of the Debtors is 2250 Thunderstick Dr., Suite 1203, Lexington, KY 40505.
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Revstone Consolidated 2002 Service List (First Class) Lead Case No. 12-13262 Document No. 185822 01 INTEROFFICE MAIL 12 - HAND DELIVERY 30 FIRST CLASS MAIL
HAND DELIVERY (Counsel to Boston Financial Group) Stuart M. Brown, Esquire R. Craig Martin, Esquire Cynthia Moh, Esquire DLA Piper LLP (US) 919 N. Market Street, 15th Floor Wilmington, DE 19801
Laura Davis Jones, Esquire Timothy P. Cairns, Esquire Pachulski Stang Ziehl & Jones, LLP 919 North Market Street, 17th Floor P.O. Box 8705 Wilmington, DE 19899-8705
HAND DELIVERY (Counsel to Schoeller Arca Systems, Inc.) Carl N. Kunz, III, Esquire Morris James LLP 500 Delaware Avenue, Suite 1500 P. 0. Box 2306 Wilmington, DE 19801
INTEROFFICE MAIL David M. Bertenthal, Esquire Pachuiski Stang Ziehl & Jones, LLP 150 California Street, 15 th Floor San Francisco, CA 94111 HAND DELIVERY Jane Leamy, Esquire Office of the United States Trustee 844 King Street, Suite 2207 Lockbox 35 Wilmington, DE 19801 HAND DELIVERY (Counsel to Ford Motor Company) Karen C. Bifferato, Esquire Connolly Gallgaher LLP 1000 West Street, Suite 1400 Wilmington, DE 19801 HAND DELIVERY (Counsel to Airgas, Inc. and related Airgas Entities) Kathleen M. Miller, Esquire Smith, Katzenstein & Jenkins LLP The Corporate Plaza 800 Delaware Avenue, Suite 1000 P. 0. Box 410 Wilmington, DE 19899
HAND DELIVERY (Counsel to United Steelworkers) Susan E. Kaufman, Esquire Cooch and Taylor, P.A. 1000 West Street, 10th Floor P. 0. Box 1680 Wilmington, DE 19801 HAND DELIVERY (Counsel to Official Committee of Unsecured Creditors) Matthew P. Ward, Esquire Womble Carlyle Sandridge & Rice, LLP 222 Delaware Avenue, Suite 1501 Wilmington, DE 19801 HAND DELIVERY (Counsel to Official Committee of Unsecured Creditors) Steven K. Kortanek, Esquire Mark L. Degrosseilliers, Esquire Womble Carlyle Sandridge & Rice, LLP 222 Delaware Avenue Wilmington, DE 19801
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HAND DELIVERY (Counsel to George S. Hoflneister) Evan 0. Williford, Esquire The Williford Firm LLC 901 N. Market Street, Suite 800 Wilmington, DE 19801
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FIRST CLASS MAIL Delaware State Treasury 820 Silver Lake Blvd., Suite 100 Dover, DE 19904
FIRST CLASS MAIL HAND DELIVERY (Counsel to Bridgeport Capital Funding LLC) Patrick J. Reilly, Esquire Cole, Schotz, Meisel, Forman & Leonard, P.A. 500 Delaware Avenue, Suite 1400 Wilmington, DE 19801 HAND DELIVERY (Counsel to GE CF Mexico of S.A. de C. V) Kurt F. Gwynne, Esquire and Lucy Qiu, Esquire Reed Smith LLP 1201 N. Market Street, Suite 1500 Wilmington, DE 19801
Secretary of State Division of Corporations - Franchise Tax P.O. Box 898 Dover, DE 19903
FIRST CLASS MAIL Internal Revenue Service P0 Box 7346 Philadelphia, PA 19101
FIRST CLASS MAIL Zillah A. Frampton Delaware Division of Revenue Bankruptcy Administrator CSOB 8th Floor 820 N. French Street Wilmington, De 19801
HAND DELIVERY (Counsel to Hillsdale Salaried Pension Plan and Hillsdale Hourly Pension Plan) Joel A. Waite, Esquire, Kenneth J. Enos, Esquire Young Conaway Stargatt & Taylor LLP Rodney Square 1000 North King Street Wilmington, DE 19801
(Co-counsel to Debtor) Brian Trust, Esquire Howard S. Beltzer, Esquire Frederick D. Hyman, Esquire Mayer Brown LLP 1675 Broadway New York, NY 10019
FIRST CLASS MAIL
FIRST CLASS MAIL
Securities & Exchange Commission Secretary of the Treasury 100 F. Street, NE Washington, DC 20549
(Counsel to General Motors LLC) Aaron M. Silver, Esquire Honigman Miller Schwartz and Cohn LLP 2290 First National Building 660 Woodward Avenue Suite 2290 Detroit, MI 48226
FIRST CLASS MAIL George S. Canellos Securities & Exchange Commission New York Regional Office 3 World Financial Center, Suite 400 New York, NY 10281
FIRST CLASS MAIL
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FIRST CLASS MAIL (Counsel to Chrysler Group LLC) Sheryl L. Toby, Esquire Dykema Gossett PLLC 39577 Woodward Ave., Suite 300 Bloomfield Hills, MI 48304
FIRST CLASS MAIL Matthew M. Scheff, Esquire Trial Attorney - U.S. Department of Labor Office of the Solicitor 1240 E. 9th Street, Room 881 Cleveland, OH 44199
FIRST CLASS MAIL (Counsel to JTEKT North America, Inc.) Michael E. Baum, Esquire Daniel J. Weiner, Esquire Jeffery J. Sattler, Esquire Schafer and Weiner, PLLC 40950 Woodward Ave., Suite 100 Bloomfield Hills, MI 48304
FIRST CLASS MAIL (Counsel to Boston Financial Group) Gregg M. Galardi, Esquire Gabriella Zborovsky, Esquire DLA Piper LLP (US) 1251 Avenue of the Americas, 27th Floor New York, NY 10020
FIRST CLASS MAIL (Counsel to Ford Motor Company) Stephen S. LaPlante, Esquire Jonathan S. Green, Esquire Miller Canfield 150 West Jefferson, Suite 2500 Detroit, MI 48226 FIRST CLASS MAIL David Boyle Airgas, Inc. 259 Radnor-Chester Road, Suite 100 P. 0. Box 6675 Radnor, PA 01908 FIRST CLASS MAIL Cassandra B. Caverly, Esquire Pension Benefit Guaranty Corp. Office of the Chief Counsel 1200 K Street, N.W. Washington, DC 20005 FIRST CLASS MAIL Ruben R. Chapa, Esquire Senior Trial Attorney, Office of the Solicitor U.S. Department of Labor 230 South Dearborn, Room 844 Chicago, IL 60604
FIRST CLASS MAIL (Counsel to Nexteer Automotive Corporation) Thomas B. Radom, Esquire Butzel Long, PC Stoneridge West 41000 Woodward Avenue Bloomfield Hills, MI 48304 FIRST CLASS MAIL (Counsel to Gary Walter, Vigin Hoey and David l3agby) Don Darnell, Esquire Darnell Law Offices 7926 Aim Arbor Street Dexter, MI 48130 FIRST CLASS MAIL (Counsel to Native American Logistics Worldwide, LLC) Kevin N. Summers, Esquire Dean & Fulkerson, P.C. 801 W. Big Beaver Road, Suite 500 Troy, MI 48084 FIRST CLASS MAIL (Counsel to Multi-Precision Detail, Inc.) Steven A. Siman, Esquire Steven A. Siman, P.C. 3250 W. Big Beaver, Suite 344 Troy, MI 48084
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FIRST CLASS MAIL (Creditor) David R. Jury, Esquire Associate General Counsel United Steelworkers Five Gateway Center Room 807 Pittsburgh, PA 15222 FIRST CLASS MAIL (Counsel to George S. Hofmeister) Sheldon S. Toll, Esquire Sheldon S. Toll PLLC 2000 Town Center, Suite 2550 Southfield, MI 48075 FIRST CLASS MAIL Donna Cutting GIL Inc. 419 E. 4th Street Royal Oak, MI 48067 FIRST CLASS MAIL (Counsel to Bridgeport Capital Funding LLC) Barry P. Gruher, Esquire Genovese Joblove & Battista P.A. 200 E. Broward Blvd, Suite 1110 Ft. Lauderdale, FL 33301
FIRST CLASS MAIL (Counsel to PCG Acquisition Corporation) Aaron L. Hammer, Esquire Christopher J. Horvay, Esquire Suger Felsenthal Grais & Hammer LLP 30 N. LaSalle Street, Suite 3000 Chicago, IL 60602
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FIRST CLASS MAIL (Counsel to Bry-Mac, Inc. dlb/a Dietech Tooling Solutions) Bradley J. Fisher Scholten Fant, P.C. 100 N. Third Street P0 Box 454 Grand Haven, MI 49417 FIRST CLASS MAIL (Counsel to Oakland County Treasurer) Richardo I. Kilpatrick, Esquire Kilpatrick & Associates, P.C. 903 North Opdyke Road, Suite C Auburn Hills, MI 48326 FIRST CLASS MAIL Neil Herskowkitz Riverside Claims P0 Box 626 Planetarium Station New York, NY 10024
FIRST CLASS MAIL (Counsel to GE CF Mexico of S.A. de C. V) Michael J. Venditto, Esquire Reed Smith LLP 599 Lexington Avenue New York, NY 10022 FIRST CLASS MAIL (Counsel to Hillsdale Salaried Pension Plan and Hillsdale Hourly Pension Plan) Dennis J. Connolly, Esquire, Kevin M. Hembree, Esquire Alston & Bird LLP One Atlantic Center 1201 West Peachtree Street Atlanta, GA 30309
