UPDATE October 8th 2020
Yesterday, the Court held a hearing to consider the Debtors’ emergency motion for entry of a scheduling order establishing deadlines related to the Debtors’ expected proposed sale to Simon/Brookfield and subsequent chapter 11 plan. The motion was opposed by the First Lien Minority Group and the AHEC. While the Court questioned whether the proposed sale is the best outcome, the Court noted that the Simon/Brookfield sale was the only option on the table so far. Accordingly, the Court set the following schedule/deadlines:
October 16, 2020: Deadline for the Debtors’ to file a motion seeking approval of the sale (“Sale Motion”) and proposed plan and disclosure statement.
October 20, 2020: Status conference and hearing to consider conditional approval of the disclosure statement.
November 2, 2020: Hearing to consider the Sale Motion.
November 24-25, 2020: Reserved for confirmation hearing.
Significantly, during the hearing, the Debtors’ counsel confirmed the most important financial component of the proposed sale from shareholders’ point of view – the allocation of the purchase price. Under the expected terms of the sale supported by the Debtors, the DIP Lender Group will purchase substantially all of the Debtors’ assets for a credit bid of $1.0 billion. That credit bid will be allocated toward a $900 million repayment of the DIP Loan and a $100 million repayment of the pre-petition First Lien Debt. As Mr. Sussberg stated: “[The sale] doesn’t provide value to unsecured creditors; doesn’t provide value to equity interest holders.”
Additionally, the Debtors made clear that the only potential competing bid at this time, the potential bid form the First Lien Minority Group, was not expected to change this outcome. Mr. Sussberg stated that he wanted everyone to “completely understand” that the fight between the DIP Lender Group and the First Lien Minority Group related to “value allocated amongst First Lien Lenders. We are not talking about value allocated to anyone else.”
These unequivocal statements from the Debtors are significant and highlight the AHEC’s reasoning for opposing either outcome. As such, as Mr. Okin previewed for the Court, the AHEC Professionals are working to prepare a motion requesting that the Court vacate or modify the order approving the DIP Loan. Undoing or limiting the terms of the DIP Loan Order will significantly increase the Debtors’ options for reorganization – an outcome that the AHEC believes will be favorable for all parties in interest. Be aware, that while the AHEC believes that reorganization is a better path for these Debtors, the AHEC is not currently able to formally propose any particular plan to the creditors and interest holders of the Debtors because, under the Bankruptcy Code, the Debtors have the exclusive right to propose a plan of reorganization for the time being. We are, nevertheless, working to prepare a proposed restructuring transaction reorganizing the Debtors’ entire enterprise to be submitted to the Debtors.
Sincerely,
Niko Celentano
Chairman
JCP Ad Hoc Equity Committee
jcpshareholders@gmail.com
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