Thank you Fern for picking up what I could not yesterday after I got called away.
Here are some points I gathered from the courtroom.
Number one it was standing room only and I believe Fern and myself were the only two non-lawyers in the packed room. The Judge sent inn Rick Cieri ( KE lawyer) a few minutes before it started to ask some folks to clear out if there were more than one lawyer from their group present. I scoffed at the idea of leaving. To me we needed representation for the pending news and I wasn't going anywhere ( btw, I was the only guy in shorts and a tee in a room of 75 pin stripe suits. F--k 'em, I am what I am, a common equity holder and observer and not some SOB lawyer getting paid with all our money.)
It was very hard to hear at times. The microphone system was low, and the AC system was loud.
Jay Goffman got up first and started his oral presentation by starting in 2007 when the credit markets were good, money was flowing and Chemtura was profitable. Parlaying this into the economic crisis of March 2008 he took time explaining how these events led to the downfall of CEM, not the fact of a bad business model. Leading on he started talking of how the Debtors and management early on had made the decision to use BK , not to exit back to the levels of success in 2007 pre-overall market crash, but to substantially lower debt levels and leverage in order to make the company more viable. And on the backs of equity, which exists of grandmothers, employees, and small holders. ( He pounded the fact that the decision to crush equity in order to lower debt was made early on between management and KE quite a few times in his argument.)
At this point the Judge stopped him and asked if he had an affidavit of equity holders. He wanted Goffman to present a list of who actually holds the equity to support his statement. ( My belief is he was trying to imply equity wasn't held mostly by retail but by post-BK funds, but that is just my take). He admonished JG by saying that if he were giving an arguement to end exclusivity in a courtroom he would have shown up with an affidavit.
JG continued at this point, citing how the EC had met numerous times with the Debtors and pointed to the May 20 NYC meeting of all committees. He stated that when they entered the room, the EC presented a term sheet in the first 20 minutes and then were left sitting for the next 7 hrs. while the other committees conferenced down the hall. At the end of those hours they emerged and told the EC that they had decided among themselves to exclude the EC and were going with what we now know as the present POR.
* Two things about this. Number one it was verified to me by WallStreet yesterday... he was there and it went down exactly like that. With any luck he might be able to offer more insight to the board. Number two, at this point Dan Golden, the lead attorney for Akin Gump got up and objected stating that none of this was on the record. The Judge ( who never has taken kindly to objections, he always seems to let lawyers talk and talk without much interruption except from himself) admonished Mr. Golden and over-ruled him with a caveat. He stated that he would allow the lawyers to enter what they will, but if it wasn't a matter of record he was taking that into serious account.
That is extremely important. Anything presented, that wasn't presented in court, on paper, verified, or the like was going to be allowed to be presented, but not going to go into his decision. Remember this.
Anyhow, JG finished up with citing the 'Death Trap', how all parties get paid in full with the EC's plan, how the EC would guarantee it would only take two more weeks until the end of Sept. instead of Sept. 16 so there was going to be no real delay,etc. He kept hammering home the fact that the EC has been ignored in discussions and in good faith has not filed motions prior to delay proceedings since they were looking for a compromise ( he brought up the last June 17 court date in particular as an example since they knew on May 20 that the Debtors were not going to include them.), that UBS has highly confident letter and is a respected global bank, All the points we know of the plan.
He is a strong orator and IMO gave a good opening argument. But he lost 'points ' with both of the Judges comments.
Natasha gave a rebuttal next and I'll leave Fern's account to stand. She's good and we all know her game. But she stuck mainly to the business issues and how 18 months of hard work was fragile and that throwing all that work away now was detrimental. She also stated that by lifting exclusivity it could very well be more than just the EC's plan that we will see before Sept.
Dan Golden of Akin Gump went next. He gave a very strong argument against and IMO was quite effective.
His tactic it seemed wasn't to focus on the business issues , but more on the EC's plan and motion before the court.
He brought up the fact that it is two hedge funds on the EC that are supplying the money for the RO, that they have not signed a thing yet , and could pull out at any time. He seemed to hint at how it was a sweetheart deal for those two participants. He worked over the idea of a 'highly confident letter' as not the same as having the money and terms in hand.
He brought up the fact that Judge Gerber has two written decisions denying the motion to lift exclusivity in other cases and went point by point through them comparing those merits to this case ( This was smart and hugely effective IMO. Using the presiding Judges prior written decisions.)
He brought up how there are 9 established rules to meet to lift exclusivity and how the EC had only met one in their motion.
And he took it one step further than Natasha, he stated that if the Judge granted the motion, that his committee was going to file their own POR and the court could expect all the committees to do the same. ( Smart again.)
The lawyer for the Bond Holders was next and I'll have to admit I could not hear much of what he said, but what I did hear was the threat of their own POR if the motion was granted. He didn't seem as effective, but like I said, hearing was hard to do.
JG had his chance to rebutt all arguements next ( btw, during all three other lawyers arguements he and his team were taking furious notes and he was constantly shaking his head at many comments.) He gave a very, very, strong and impassioned closing argument. Much better than the opening one. All these lawyers stretch the truth to their liking as much as permissible so he knew he had some openings. I'll not elaborate too much ( it's also hard to remember everything , lol.) since it was basically a more impassioned re-hash of his opening arguement.
At this point there was a break and the Judge returned about 20 minutes later.
He denied the motion and started to explain why. He brought up the fact that the EC had not made the 9 points. He brought up the fact that the EC had met with the Debtors on 22 separate occasions and not once had indicated in his court that they were really displeased with events. He indicated this as a sign that good faith bargaining was going on.
I'll post more on his decision as soon as I get the transcript, hopefully today.
At this point I told Fern I had to get outside and make some phone calls. I was one the street within 2 minutes of that decision and posted on IHUB.
My observations:
1. The EC made a tactical mistake by not being adversarial from back in Feb. when they knew the Debtors were playing hardball. They should have motioned the court, or entered into the record these events.
2. The Judge used this in his decision against us. ( btw, Wally was suggesting this adversarial tactic for months to me since he got on the committee, he constantly complained to me he was being told being non adversarial is how the game is played and was getting shot down by suggesting this tactic. It seems he was right all along. The one thing we know aboout Wally is he can be a thorn in the side but I do belive his prior courtroom experience made him realize this was the way to go. They should have listened to him).
3. Dan Golden was great. Period. He used the Judges prior decisions and the 9 rules as his basis for argument. This is about the law in a courtroom and he used the existing law.
4. All these lawyers are friends and get paid no matter what with our money. You see the different law firms yukking it up between themselves on breaks and in the hall. It is a game to them, a high stakes game, but they all know each other and are indifferent.
5. All of us are at a huge disadvantage when it comes to a court decision that can move share price. There were many lawyers texting as soon as the decision went down. Probably a third of the room. By the time I hit the street over a million shares had traded in two minutes. Two minutes for me to leave the room, get my phone, and inform everyone !! As long as lawyers can have phones and PDA's in the courtroom, equity is screwed when these decisions come down, either good or bad, you end up chasing.
6. Based on the law, I do not believe the Judge was bought, has a bias against equity, is in bed with management, or any of the other things suggested on this board. He is impartial and fair from my observations. He made a point about deciding from things' on the record' very early on. And he stuck to that. This was a very good performance by Jay Goffman, but Dan Goldman was better today folks.
7. It seemed that the other committees were very happy with the decision. To the point I do not believe they thought this was a slam dunk for them. It appeared almost as a relief celebration and smiles. Just my take, but I've come to see these type of proceedings as they are for the lawyers, they get hyped like a sports event, it's not personal like we take it.
If I can think of anything else I'll add it.
Thanks to Fernace for being there, I do believe he got an education yesterday that was invaluable.
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