Opinion
Case No. 302-00979 Jointly Administered
February 12, 2002
FIRST AMENDED ORDER (1) GRANTING INTERIM AUTHORITY TO USE CASH COLLATERAL AND (2) SCHEDULING AND ESTABLISHING DEADLINES RELATING TO A FINAL HEARING
This matter is before the court on the Emergency Motion for an Order (1) Granting Interim Authority to Use Cash Collateral and (2) Scheduling and Establishing Deadlines Relating to a Final Hearing (the "Cash Collateral Motion") and a further interim hearing thereon held by the Court pursuant to notice on February 12, 2002 (the "Interim Hearing").
FINDINGS OF FACT AND CONCLUSIONS OF LAW
1. Terms. All capitalized terms not otherwise defined herein are as defined in the Cash Colateral Motion.
2. Notice. Pursuant to Bankruptcy Rule 4001(c)(1) notice of the Interim Hearing has been given to: (i) the Office of the United States Trustee (the "U.S. Trustee"), (ii) counsel for the Lenders, (iii) the twenty largest unsecured creditors of the Debtors, and (iv) any other panics requesting such notice (collectively. the "Notice Parties").
3. Jurisdiction. This Court has jurisdiction over the Debtors' cases and the parties and property affected hereby pursuant to 28 U.S.C. § 1334. This is a core proceeding pursuant to 28 U.S.C. § 157 (b)(2)(d).
4. Initia1 Interim Order. On January 25, 2002, this Court entered its Order (1) Granting Interim Authority to Use Cash Collateral and (2) Scheduling and Establishing Deadlines Relating to a Final Hearing (the "Interim Order") following an initial interim hearing on the Cash Ccdlateral Motion conducted on that same date. Among other things, the Intrerim Order (i) authorized the Debtors to use cash collateral on an interim basis through February 12, 2002, and (ii) scheduled a final hearing on the Cash Collateral Motion for February 12, 2002. Together, the Interim Order and this First Amended Order shall be referred to as the "Cash Collateral Orders."
5. Purpose and Necessity of Requested Relief. Good cause has been shown for entry of this First Amended Order. The Debtors assert that they require the continued use of cash collateral to, among other things, fund cash requirements, including without limitation, payroll, purchases of inventory, material and supplies, and other working capital needs until such time as a further interim hearing with respect to the Cash Collateral Motion (a "Further Interim Hearing") and/or Final Hearing may be conducted.
6. Exigency. The Debtors assert that their ability to continue to use cash collateral as provided herein is vital to the Debtors' estates and creditors thereof, so that the Debtors may continue to operate, and that absent entry of this First Amended Order, the Debtors' estates will be immediately and irreparably harmed.
7. Relief Appropriate. The Court finds that the relief requested is appropriate under the circumstances, and hereby enters the following First Amended Order:
IT IS HEREBY ORDERED, ADJUDGED, FOUND, AND DECREED that:
A. Interim Use Authorization. The Debtors are immediately authorized to continue to use cash collateral to the extent that collected funds are available on an interim basis, consistent with and limited to the Budget attached hereto as Exhibit "A" for the period from February 13, 2002 through March 29, 2002 (such time period is referred to hereafter as the "Second Interim Period" and the receipts and disbursements projected on Exhibit "A" for the Second Interim Period are referred to hereafter as the "Second Interim Budget") Such use is necessary to avoid immediate and irreparable harm to the Debtors' estates until the Final Hearing is held and a further interim order or a Final Order is entered. Cash collateral used during the Second Interim Period will be used only to fund the Dcbtors' expenses in accordance with this First Amended Order and the Second Interim Budget. The Debtors' use of cash collateral shall be conditioned on the Debtors' ability to maintain sufficient Net Operating Cashflow such that the actual Cumulative Net Operating Cashflow of the Debtors must be (i) at least 80% of positive projected Cumulative Net Operating Cashflow and (ii) no more than 120% more than negative Cumulative Net Operating Cashflow, as reflected in the Second Interim Budget. The Debtors' use of cash collateral is further conditioned on the Debtors' ability to produce at least 80% of the projected amount of weekly coal tonnage reflected on the production schedule attached hereto as Exhibit "B." If the Debtors Fail to meet the appropriate levels of Cumulative Net Operating Cashflow and coal tonnage as described herein without the consent of the Lenders, the Debtors' right to use cash collateral shall terminate five (5) business days after the Lenders provide the Debtors, Debtors' counsel, and counsel to the Committee with written notice of default under this Order, unless the Debtors (a) cure such defaults within five (5) business days of the date of such notice, or (b) obtain an intervening order issued by this Court
B. Reports. During the Second Interim Period, the Debtors shall provide to the Lenders and the Committee, in addition to other regularly provided reports, weekly reports that indicate the Debtors' actual expenditures in comparison to the expenditures projected in the Second Interim Budget by the third business day of the next week (the "Weekly Reports").
C. UST/Clerk Fees. The Debtors are further authorized to use cash collateral to pay amounts payable pursuant to 29 U.S.C. § l930(a)(6) and any fees payable to the clerk of the Court (collectively, the "UST/Clerk Fees").
D. Adequate Protection; Continuation of Replacement Lien. As and for adequate protection for the use of cash collateral, the replacement liens granted to the Lenders under the Interim Order are hereby continued in effect (without the necessity of the execution or filing by the Debtors of a security agreement, financing statements, trademark, copyright, tradename, or patent assignment filings with the United States Patent and Trademark Office or Copyright Office, mortgages, landlord lien waivers, license consents or otherwise), pursuant to sections 361(2), 363(e) and 552 of the Bankruptcy Code as replacement security interests in and liens upon the Debtors' subsequently generated cash, inventory, and accounts receivable and any other property acquired by the Debtors after the Petition Date of the same type as the Lenders held a lien thereon prepetition, to the extent that the Debtors' use of cash collateral results in any decrease, following the petition date, in the value of the collateral securing the Lenders' claims, with such replacement liens having the same validity as the Lenders' liens and security interests in prepetition collateral. As and for additional adequate protection to the Lenders for the Debtors' use of cash collateral, the Debtors shall make weekly cash payments to the Lenders (the "Adequate Protection Payments") in the amounts, and during the weeks, as set forth in the "Adequate Protection Payments's line item of the Second Interim Budget, which payments shall be applied to the claim of the Lenders. The Adequate Protection Payments shall be made without prejudice to the rights of the Debtors, the Committee, or any creditor or party in interest to object to the characterization or allocation by the Lenders of the Adequate Protection Payments, which rights are expressly reserved.
E. Post-petition Interest. Solely for the purposes of this First Amended Order, the Lenders and Debtors hereby agree that the claim of the Lenders is fully secured, and interest that accrues on the claim of the Lenders shall accrue from the petition date at the rate of 6.25% per annum through the last day of the Second Interim Period.
F. Additional Perfection Measures. The replacement liens and priority granted to the Lenders pursuant to the Interim Order and continued in effect pursuant to this First Amended Order with respect to the property of the Debtors' estates have been and shall continue to be perfected by operation of law upon entry of this First Amended Order by the Court. The Lenders shall not be required to enter into or to obtain mortgagee waivers, bailee waivers, or warehouseman waivers or to file or record financing statements, mortgages, deeds of trust, leasehold mortgages, notices of lien or similar instruments in any jurisdiction (including trademark, copyright, tradename or patent assignment filings with the United States Patent and Trademark Office, Copyright Office or any similar agency with respect to intellectual property), or obtain consents from any licensor or similar party-in-interest, or to take any other action in order to validate and to perfect the replacement security interest and lien granted to the Lenders pursuant to this First Amended Order.
G. Reservation of Rights. Nothing contained herein shall in any manner waive or prejudice (i) the right of the Lenders to seek additional adequate protection or a determination that the Lenders are not adequately protected or (ii) any objection that the Lenders may make to any of the relief requested by the Cash Collateral Motion other than the relief expressly granted in the Cash Collateral Orders.
H. Final Hearing. The Final Hearing on the Cash Collateral Motion is adjourned and is rescheduled for March 5, 2002 at 9:00A.m. before this Court. If no objections to the relief sought in the Final Hearing are filed and served in accordance with this First Amended Order, no Final Hearing may be held, and a separate Final Order may be presented by the Debtors and entered by the Court.
I. Adequate Notice. The notice given by the Debtors of the Final Hearing was given in accordance with Bankruptcy Rules 2002 and 4001(b)(2) and the local rules of this Court. Under the circumstances, no further notice of the request for the relief requested in the Cash Collateral Motion or the entry of this First Amended Order was required. The Debtors shall, within Five (5) days of the date of this First Amended Order, mail copies of this First Amended Order and notice of the continued Final Hearing to counsel for the Committee and to the Notice Parties. Any objection to the relief sought at the Final Hearing must be made in writing setting forth with particularly the grounds thereof and filed with the Court and served so as to be actually received by co-counsel for the Debtors at (1) Buchanan Ingersoll, P.C., One Oxford Centre, 20th Floor, 301 Grant Street, Pittsburgh, PA 15219, Attn: Joel M. Walker, Esq., Facsimile (412) 562-1041, and (2) Harwell Howard Hyne Gabbert and Manner, P.C., 315 Deaderick Street, Suite 1800, Nashville, TN 37328-1800, Attn: Craig V. Gabbert, Jr., Esq., Facsimile (615) 251-1058(3) Beth Roberts Derrick, Assistant U.S. Trustee, 701 Broadway, 318 Customs House, Nashville, TN 37203, Facsimile (615) 736-2260; (4) counsel for the Lenders, Schulte, Roth Zabel, LLP, 919 Third Avenue, New York, N.Y. 10022, Attn: Mark Broude, Esq., Facsimile (212) 593-5955, and (5) Boult Cummings Conners Berry, P.C., 414 Union Street, Suite 1600, Nashville, TN 37219, Attn: William L. Norton, III, Esq., Facsimile (615) 252-6397; and (6) counsel for the Committee, Akin, Group, Strauss Hauer Feld, LLP, 1700 Pacific Avenue, Suite 4100, Dallas, TX 15201-4675, Attn: Chuck Gibbs, Esq., Facsimile (214) 969-4343, no later than two business days prior to the Final Hearing. Projected Projected Projected Projected Projected Projected Projected Week ending Week ending Week ending Week ending Week ending Week ending Week ending Total 15-Feb-02 22-Feb-02 1-Mar-02 8-Mar-02 15-Mar-02 22-Mar-02 29-Mar-02 7 weeks RECEIPT Total receipts EXPENDITURE 550,000 550,000 Total expenditures 4,566,344 2,504,153 4,707,704 2,432,468 3,729,579 2,818,166 4,111,692 24,870,107 Net Operating Cashflow (281,680) (1,925,833) (1,517,378) 462,915 207,711 (743,756) (854,263) (4,652,284 Cumulative Net Operating Cashflow (281,680) (2,207,514) (3,724,891) (3,261,977) (3,054,265) (3,798,021) (4,652,284) CASH COLLATERAL Ending Cash Balance 8,268,171 6,342,337 4,824,960 5,287,874 5,495,586 4,751,830 3,897,567 3,897,567 OPERATION
Pen Holdings, Inc. Weekly Cash Flow Projection Beginning February 13, 2002 S Coal sales 4,284,664 578,320 2,632,035 2,620,403 3,937,291 2,074,410 2,728,729 18,855,851 Royalties 558,292 274,980 528,700 1,361,972 Other 4,284,664 578,320 3,100,326 2,895,383 3,937,291 2,074,410 3,257,429 20,217,823 S Payroll 917,058 848,968 899,910 867,452 3,533,387 Payroll taxes benefits 321,128 60,781 89,517 66,814 330,936 62,638 59,506 991,320 Contract miners truckers 1,120,438 638,548 870,438 697,923 941,948 697,923 941,048 5,909,166 Utilities telephone vendors 113,517 343,390 87,418 119,206 58,279 721,809 Other supply vendors 1,828,407 1,178,407 1,168,407 1,168,407 1,168,407 1,168,407 1,168,407 8,848,850 Coal and property taxes 397,475 627,129 179,589 106,881 197,109 1,553,184 Royalty wheelage 482,538 506,674 989,212 Operating lease payments 80,000 80,000 Capital lease payments Office building debt payment 36,855 36,855 73,710 Adequate Projection Payments 63,692 63,692 63,692 63,692 63,692 63,692 63,692 445,844 Capital expenditures 165,250 165,250 168,625 168,625 168,625 168,625 168,625 1,173,625 Professional Fees (Restructuring) Beginning Cash Balance 8,549,851 8,268,171 6,341,337 4,824,960 5,287,874 5,495,586 4,751,830 8,549,851 Receipts 4,284,664 578,320 3,190,326 2,895,383 3,937,294 2,074,410 3,257,429 20,217,823 Asset Sales Operating Expenses (4,566,344) (2,504,153) (4,707,704) (2,432,468) (3,729,579) (2,818,166) (4,111,692) (24,870,107) Cash held by bank S Coal — Tons Produced (excluding Elk Horn) 100,805 100,805 101,844 106,000 106,000 106,000 106,000 727,457 Coal — Tons Produced (Elk Horn) 85,388 85,388 83,335 75,125 75,125 75,125 75,125 554,610