Opinion
Case No. 02-13533 (AJG), (Jointly Administered).
May 30, 2003.
Recitals
A. On July 21, 2002 (the "Petition Date") and November 8, 2002, WorldCom, Inc. and certain of its direct and indirect subsidiaries (collectively, the "Debtors") filed voluntary petitions under chapter 11 of the Bankruptcy Code, 11 U.S.C. § 101-1330 (the "Bankruptcy Code"). The Debtors operate their businesses and manage their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. The Debtors' cases are consolidated for procedural purposes and jointly administered.
B. Pursuant to a Master Leasing Agreement (together with all individual lease records and amendments, the "MLA") dated as of December 1, 1995 between BLC Corporation and MCI Telecommunications Corporation, predecessor-in-interest to MCI WorldCom Network Services, Inc. ("MCI"), BLC agreed to acquire and provide to MCI certain telecommunications and computing equipment (the "Equipment") in exchange for the payments set forth in the MLA.
C. BLC caused Uniform Commercial Code financing statements to be filed in numerous jurisdictions providing notice of BLC's interests in the Equipment.
D. On January 22, 2003, BLC filed two proofs of claim seeking payment of amounts in respect of the MLA: (1) proof of claim number 19277 in the amount of $78,078.02, asserting amounts attributable to prepetition periods and the postpetition portion of July 2002; and (2) proof of claim number 19279 in the amount of $264,542.30, duplicating the postpetition amounts requested in the Application.
E. On January 13, 2003, BLC filed its Application in Support of Motion for an Order: (i) For Allowance and Payment of Administrative Expense Claim to BLC Corporation, or in the Alternative, (ii) Granting BLC Corporation Relief From the Automatic Stay, or in the Alternative (iii) Directing Adequate Protection Payments (the "Application"). By the Application, BLC sought the entry of an order either (1) directing MCI to pay an administrative expense to BLC in the amount of $264,542.30 for unpaid postpetition obligations under the MLA; (2) granting BLC relief from the automatic stay to terminate the MLA and recover the Equipment; or (3) directing MCI to pay to BLC the rental amounts under the MLA as adequate protection.
F. On the Petition Date, two Individual Lease Records (as that term is defined in the MLA) were outstanding (the "IRLs"). Each IRL had a stated term of 60 months, ending on August 31, 2002 and November 30, 2002. Most of the Equipment no longer is in service, but MCI believes that the cost of locating and turning the Equipment over to BLC would exceed the value of the Equipment.
G. On March 18, 2003, the Debtors filed an objection to the Application, asserting that the MLA should properly be characterized as a secured financing arrangement rather than a true lease and, consequently, BLC is not entitled to payment of any administrative expense. In the Objection, the Debtors (1) argued that BLC is entitled only to adequate protection payments in an amount representing a decline in value of the Equipment from the date of the Application; (2) agreed to make such adequate protection payments to BLC in respect of the Equipment, provided that BLC satisfies its burden of proving (a) that it holds a perfected, first priority security interest in the Equipment and (b) that the value of the Equipment is declining; and (3) argued that no cause exists to lift the automatic stay to permit BLC to foreclose upon and repossess the Equipment so long as BLC receives adequate protection.
H. In an effort to resolve their issues and avoid the need for further litigation, the parties hereto have engaged in good faith, arm's-length discussions, which have culminated in their execution of this Stipulation.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises contained herein, the parties hereby agree to the following:
Agreement:
1. The parties hereby agree not to dispute whether the MLA is properly characterized as a secured financing arrangement.
2. Upon entry of this Stipulation and Order, the Application and proof of claim number 19277 will be deemed withdrawn with prejudice.
3. Upon entry of this Stipulation and Order, proof of claim number 19279 will be deemed an allowed unsecured nonpriority claim in the amount of $139,293.03.
4. In full and final settlement and satisfaction of BLC's interests in the Equipment, on or before the fifth business day after entry of this Stipulation and Order by the Court, MCI shall remit to BLC payment of $125,000.00 (the "Settlement Amount") by wire transfer of immediately available funds pursuant to wiring instructions provided by BLC.
5. Upon payment of the Settlement Amount, MCI shall retain full ownership rights in the Equipment, and BLC shall retain no security interest or other rights whatsoever in the Equipment.
6. Simultaneously with its receipt of the Settlement Amount, BLC shall deliver to MCI (a) bills of sale or comparable documentation acceptable to MCI evidencing MCI's ownership of the Equipment and (b) UCC-3 termination statements or other documentation acceptable to MCI evidencing the release, discharge and termination of all interests of BLC in the Equipment.
7. The parties may execute this Stipulation in one or more counterparts, which, when taken together, shall be considered one and the same agreement.
8. Notwithstanding Rule 6004(g) of the Federal Rules of Bankruptcy Procedure, this Stipulation and Order shall become effective immediately upon its entry.
9. Each person who executes this Stipulation by or on behalf of each respective party warrants and represents that he or she has been duly authorized and empowered to bind, and execute and deliver this Stipulation and Order on behalf of, such party.
10. The Court shall retain jurisdiction to hear and determine all matters arising from implementation of this Stipulation and Order.
SO ORDERED.