Opinion
Procedurally Consolidated Under 01-60386-DOT
September 23, 2002
Benjamin C. Ackerly, VSB No. 9120, Tyler P. Brown, VSB No. 28072, HUNTON WILLIAMS, Richmond, Virginia, Counsel for Keith L. Phillips, Chapter 11 Trustee.
Paul M. Nussbaum, Brent C. Strickland, Bar No. 38850, WHITEFORD, TAYLOR PRESTON, L.L.P., Baltimore, Maryland, H. Slayton Dabney, Jr., Doug Foley, Bar No. 34364, McGUIRE WOODS LLP, Richmond, Virginia, Counsel for the Official Committee of Unsecured Creditors.
Upon consideration of the Emergency Motion by Keith L. Phillips, Chapter 11 Trustee and the Official Committee of Unsecured Creditors for Interim and Final Order Approving Terms of Post-Petition Trade Credit Financing by Critical Vendors (the "Emergency Motion"), and upon consideration of any objection thereto, the Court having held an interim hearing on the Emergency Motion, it is this 23rd day of September, 2002, by the United States Bankruptcy Court for the District of Virginia;
IT IS HEREBY ORDERED, ADJUDGED, FOUND, AND DECREED that:
1. Disposition. The Emergency Motion is hereby granted in its entirety on an interim basis, and any objections thereto that have not previously been withdrawn are hereby overruled. The Loans (defined terms not defined herein shall have the same meaning as in the Emergency Motion), the terms for repayment of the Loans and the security of the Loans are hereby approved and granted upon the following terms:
(a) Amount of the Loan. Each of the vendors identified below ("the Critical Vendors") agree to extend additional credit to the Debtors in the approximate amount but not to exceed the amount set opposite their name, and the amount of such additional credit at any time outstanding shall be deemed a loan (hereinafter, the "Loan" and, collectively, "the Loans") pursuant to Section 364 of the Bankruptcy Code.
1. Citgo Petroleum Corporation — $1.3 million
2. Cloverland Greenspring Diary — $90,000
3. Coca Cola Enterprises, Inc. — $100,000
4. Pepsi Bottling Group and Pepsi-Cola Bottling Group, LLC — $250,000
5. Frank Bradley Entities — $200,000
The Frank Bradley Entities consist of Frank B. Bradley, III, The Beale Company of Virginia, Inc., Bradley Ltd. #1 LLC, Bradley Ltd. #12 LLC, Bradley Ltd. #14, LLC, Bradley Ltd. #19 LLC, Bradley Ltd. #22 LLC, Bradley Ltd. — Sylvania Heights, LLC, Bradley Ltd — Stonewall Parkway, LLC, Bradley Ltd. #30 LLC, Bradley Ltd. #32 LLC, Bradley Ltd. #33 LLC, Bradley Ltd. #34 LLC, Bradley Ltd. #36 LLC, Bradley Ltd. #40 LLC, Bradley Ltd. #41 LLC, Bradley Ltd. #44 LLC, Bradley Ltd. #51 LLC, Bradley Ltd. #52 LLC, Dabco Partners #1 LLC, Dabco Partners #2 LLC, Dabco Partners #18 LLC, Dabco Partners #26 LLC, Dabco Partners #45 LLC, Dabco Partners #48 LLC, and Heritage Properties, LLC.
(b) Term of the Loan. Unless extended by order of the Court upon agreement of the Trustee, the Committee and such Critical Vendor as may be affected by such extension, the Loans shall be due and payable on the earlier to occur of (i) December 31, 2002 or (ii) the date of the closing of the Asset Sale.
(c) Use of the Loan. The Trustee shall utilize the Loans and cash flow benefits derived therefrom to satisfy obligations incurred by the Debtors and their estates and to otherwise operate the Debtors' business.
(d) The Borrower. Each of the Debtors and their estates shall be obligated to repay the Loans.
(e) Interest Rate, Fees and Expenses.
(i) Interest. Interest on the Loans shall accrue at a rate of 8% per annum.
(ii) Fees. A loan fee equal to 3% of the Loan amount shall be payable to each Critical Vendor at the time such Loans become due and payable.
(f) Lien Status and Priority. As security for repayment of the Loans extended by the Critical Vendors, each Critical Vendor will be granted, pursuant to sections 364(c)(1) of the Bankruptcy Code, an allowed superpriority administrative expense claim (the "Superpriority Claim"), having priority over any and all administrative expenses, including, without limitation, any adequate protection-related claims and any other claims of the kind specified in sections 503(b) and 507(a) and 507(b) of the Bankruptcy Code except that such Superpriority Claim shall be (i) subordinate to (a) the Break-Up-Fee payable to GPM under the Purchase Agreement, (b) to the extent not otherwise paid by the Debtors or recovered from the Trustee's surcharge claims under section 506(c) of the Bankruptcy Code, the expenses payable to the Trustee and the professionals employed by the Trustee, including Matrix, incurred from May 6, 2002, and (c) to the extent not otherwise paid by the Debtors or recovered from the Trustee's surcharge claims under section 506(c) of the Bankruptcy Code, 80% of the fees payable to the Trustee and the professionals employed by the Trustee, including Matrix, earned from May 6, 2002, and (ii) pari passu with the remaining 20% of the fees payable to Trustee and the professionals employed by the Trustee, including Matrix, earned from May 6, 2002 (to the extent not otherwise paid by the Debtors or recovered from the Trustee's surcharge claims under section 506(c) of the Bankruptcy Code), (collectively the "Carve Out"). In addition, as further security for repayment of the Loans, the Critical Vendors will be granted, pursuant to section 364(c)(2) and (3) of the Bankruptcy Code, a first priority security interest, and lien upon, all unencumbered property of the Debtors and their estates, including but not limited to the Debtors' interest in all product supply agreements to which one or more Debtors are parties, or for which one or more Debtors manage the supply agreement, pursuant to which fuel is supplied to the dealer sites (collectively, the "Dealer Contracts") which are to be sold in the Asset Sale, avoidance actions and proceeds thereof under sections 544, 545, 547, 548, 549 and 553(b) of the Bankruptcy Code ("Avoidance Claims") and all surcharge claims available to the Trustee pursuant to section 506(c) of the Bankruptcy Code. Further, the Critical Vendors will be granted a junior security interest, and lien upon, all property of the Debtors and their estates which may as of the date of an order approving the Loans be subject to a pre-existing lien as further security for repayment of the Loans. However, all such liens granted to the Critical Vendors hereunder shall be subject to the Carve Out. The security for repayment of the Loans granted hereunder shall be released by the Critical Vendors and terminated without further order of the Court upon payment in full of the Loans.
(g) Payment of Loans. The Loans shall be paid in full at the earlier of (i) the closing of the Asset Sale from the proceeds of the Asset Sale or (ii) on December 31, 2002.
(h) Allowance of Claims. Subject only to verification of amount, (i) all claims of the Critical Vendors for pre-petition, unsecured obligations will be deemed allowed as unsecured claims against the Debtors' estates and (ii) all reclamation claims of the Critical Vendors will be deemed allowed as administrative priority claims against the Debtors' estates pursuant to § 503(b) of the Bankruptcy Code, and will be paid in accordance with such priority with all other administrative priority claims.
(i) Waiver of Claims. The Trustee, for and on behalf of the Debtors' estates waives all Avoidance Claims against the Critical Vendors.
(j) Conditions Precedent. The Loan is subject to Court approval.
(k) Events of Default. Events of default include but are not limited to:
(i) dismissal or conversion of the Debtors' Chapter 11 cases to Chapter 7 proceedings;
(ii) except as provided herein, any other superiority administrative expense claim which is senior to or pari passu with the Critical Vendors' claims is granted; and
(iii) The Order approving the Loan is amended, modified, reversed or vacated.
2. Final Hearing. A final hearing on the Emergency Motion is scheduled for October 7, 2002 at 10:00 a.m.
3. Jurisdiction. This Court has jurisdiction over these 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. Purpose and Necessity of Financing. Good cause has been shown for entry of this Interim Order. Each of the Debtors require post-petition financing from the Critical Vendors to, among other things, fund their ongoing cash requirements. None of the Debtors are able to obtain adequate unsecured credit allowable under section 503(a), (b) or (c) of the Bankruptcy Code as an administrative expense and are unable to obtain other financing under section 364(c) of the Bankruptcy Code on equal or more favorable terms than the Loan. Post-petition financing is unavailable to the Debtors generally without the Debtors' jointly and severally granting to the Critical Vendor, pursuant to sections 364(c)(1), (2) and (3) of the Bankruptcy Code, the following: (i) superpriority administrative claims, with respect to all credit advanced post-petition having priority over any and all administrative expenses, including, without limitation, adequate protection-related claims and any other claims of the kind specified in sections 503(b) and 507(a) and (b) of the Bankruptcy Code; and (ii) as security for all such post-petition credit, a first priority senior security interest in, and lien on, all unencumbered assets of the Debtors; provided, however, that the Critical Vendors shall be granted a junior lien on all encumbered assets of the Debtors. After considering all alternatives, the Trustee on behalf of the Debtors, has concluded in the exercise of his prudent business judgment that these Loans represent the best working capital financing available.
5. Exigency. The ability of each of the Debtors to obtain sufficient working capital and liquidity through the incurrence of new trade credit is vital to each of the Debtors' estates and creditors thereof, so that the business need for the Debtors to be operating under normal business terms may be met. The preservation and maintenance of the going concern value of the Debtors generally, and jointly and severally, is integral to the Chapter 11 proceedings to maximize the value of the Debtors' assets being sold pursuant to the Asset Sale.
6. Good Faith Bargaining. The Loans, the repayment of the Loans and the security granted for the Loans have been negotiated in good faith and at arm's-length between the Trustee on behalf of each of the Debtors' estates, the Committee and each of the Critical Vendors, and the Loans extended to the Debtors and their estates by the Critical Vendors as specified in the Emergency Motion and herein, have been and shall be deemed to have been extended by the Critical Vendors in good faith, as that term is used in section 364(e) of the Bankruptcy Code.
7. Fees. The fees payable by the Debtors to the Critical Vendors as provided herein are hereby approved and shall be promptly paid in full in accordance herewith.
8. Power to Execute Necessary Documents. The Trustee on behalf of the Debtors and their estates is expressly authorized and empowered to enter into and deliver any such document as may be necessary in connection with the Loans, and the security granted for the Loans. The Trustee on behalf of the Debtors and their estates is also authorized, empowered and directed to perform all of the obligations under the Loans in compliance with the terms of the financing provided for in this Interim Order. The Loans shall constitute valid and binding obligations of each of the Debtors and their estates and shall be and are enforceable against each of the Debtors and their estates, and each of their successors and assigns, in accordance with their terms. The Debtors, with the express written consent of the Critical Vendors, may enter into any non-material amendments or modifications to the Loans without the need of further notice and hearing or Order of this Court; provided that, such modifications or amendments do not materially and adversely affect the rights of any creditor, equity holder or party-in-interest.
9. Lien to Secure Post-Petition Credit. As security for repayment of the Loans, the Critical Vendors are hereby granted (effective immediately and without the necessity of the execution or filing by the Debtors of a security agreement, financing statements, trademark, copyright, trade name or patent assignment filings with the United Sates Patent and Trademark Office or Copyright Office, mortgages, landlord lien waivers, licensee consents or otherwise), pursuant to sections 364(c) (2) and (3) of the Bankruptcy Code, as applicable, the liens and security interests described in paragraph 1(f) hereof.
10. Additional Perfection Measures. The liens and priority granted to the Critical Vendors pursuant to this Interim Order with respect to property of the Debtors' estates shall be perfected by operation of law upon entry of this Interim Order by the Court.
11. Successors and Assigns. The provisions of this Interim Order shall be binding upon the Critical Vendors, the Trustee and the Debtors and their estates and their respective successors and assigns and the same shall inure to the benefit of the Critical Vendors, the Trustee and the Debtors and their estates and their respective successors and assigns, including any subsequent trustee for the Debtors' estates including in any successive Chapter 7 case for the Debtors and their estates.
12. Subsequent Reversal or Modification. This Interim Order is entered pursuant to section 364 of the Bankruptcy Code. The Critical Vendors are entitled to all protection afforded by section 364(e) of the Bankruptcy Code. If any or all of the provisions of this Interim Order are hereafter reversed, modified, vacated or stayed, such reversal, stay, modification or vacation shall not affect: (i) the validity of any obligation, indebtedness or liability incurred hereunder by any of the Debtors to the Critical Vendors prior to the date of receipt of written notice to the Critical Vendors of the effective date of such reversal, stay, modification or vacation; or (ii) the validity and enforceability of any lien or priority authorized or created hereby or pursuant to the Loan. Notwithstanding any such reversal, stay, modification or vacation, any indebtedness, obligation or liability incurred post-petition hereunder by any of the Debtors to the Critical Vendors prior to written notice to the Critical Vendors of the effective date of such reversal, stay, modification or vacation shall be governed in all respects by the original provisions of this Interim Order, and the Critical Vendors shall be entitled without exception or limitation to all the rights, security liens, remedies, privileges and benefits granted herein and pursuant to the Loans.
13. Supremacy of Terms. To the extent of any conflict between or among the express terms or provisions of any of the Loan, the Emergency Motion, any other order of this Court, or any other agreements and the express written terms and provisions of this Interim Order — unless such term or provision herein is phrased in terms of "as defined in" or "as described in" — the terms and provisions of the Interim Order shall govern.
SO ORDERED.