01/18/2008 357 Emergency Motion to Approve Postpetition Secured Financing, filed by Stephen Palmer. (Attachments: # 1 Continuation of Main Document Exhibit A (Budget)# 2 Continuation of Main Document Exhibit B (Financing Commitment)# 3 Continuation of Main Document Exhibit C (Note)# 4 Proposed Order) (Barnes, Stephen) (Entered: 01/18/2008)
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Doc 357
IN RE:
PLASTICON INTERNATIONAL , INC.
DEBTOR.
CASE NO. 07-50934
CHAPTER 11
HON. WILLIAM S. HOWARD
EMERGENCY MOTION BY TRUSTEE FOR ENTRY OF AN INTERIM ORDER APPROVING POSTPETITION SECURED FINANCING AND FOR SUBSEQUENT FINAL ORDER
Comes Stephen Palmer, Trustee of the estate of Plasticon International, Inc., solely in his capacity as Trustee and not individually or personally (the “Trustee”), by counsel, and hereby moves the Court for the entry of an interim order sustaining this Emergency Motion (the “Motion”) and granting interim approval, pursuant to Sections 362, 364 and 507(b) of title 11 of the United States Code (the “Bankruptcy Code”) and Rules 2002, 4001(b), (c) and (d) and 9014 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”), (1) authorizing the Trustee, solely in his capacity as Trustee of the estate of Plasticon International, Inc., Debtor, and not individually or personally, inter alia, to obtain post-petition financing (the “Post-Petition Secured Financing”) as described herein; (2) granting liens pursuant to Bankruptcy Code Sections 364(c)(2) and (3); (3) modifying the automatic stay; and (4) prescribing the form and manner of notice and time for final hearing under Bankruptcy Rule 4001(c), and in support hereof, respectfully states as follows:
JURISDICTION AND VENUE
1. On May 16, 2007 (the “Petition Date”), Plasticon International, Inc. (the “Debtor”) filed with this Court its voluntary petition for relief under Chapter 11 of the Bankruptcy Code. The Debtor operated its businesses as debtor and debtor-in-possession pursuant to §§ 1107(a) and 1108 of the Bankruptcy Code until October 3, 2007.
2. On October 4, 2007, this Court entered its Order [D.E. 262] directing the appointment of a trustee under Chapter 11 of the Bankruptcy Code. On October 4, 2007, Stephen Palmer was appointed Trustee [D.E. 265], which appointment was approved by Order of this Court entered October 10, 2007 [D.E. 271].
3. This Court has jurisdiction over this Chapter 11 case under 28 U.S.C. §§ 157 and 1334. These matters constitute core proceedings under 28 U.S.C. § 157(b)(2)(A).
4. The Debtor is a Wyoming corporation with its principal place of business located in Lexington, Kentucky. Accordingly, venue for the Debtor’s Chapter 11 case is proper in this
District under 28 U.S.C. § 1408 and 1409.
BACKGROUND
5. The Debtor owns 100% of the issued and outstanding stock of Pro Mold, Inc., a Missouri corporation. Pro Mold, Inc. is also a debtor before this Court in a Chapter 11 case also filed on May 16, 2007, Case No. 07-50935. On October 4, 2007, this Court entered an order [D.E. 249] in the Chapter 11 case of Pro Mold, Inc. directing the appointment of a Chapter 11 trustee. On October 5, 2007, Ken Henry was appointed Chapter 11 trustee [D.E. 254]. On October 10, 2007, this Court entered an order approving the appointment of Ken Henry as Chapter 11 trustee [D.E. 260].
6. Additionally, and importantly, the Debtor, Plasticon International, Inc., lists on its schedules ownership of certain patents and molds for the plastic support of rebar in construction, ownership of 100% of the stock of Semco, Inc., a Nevada corporation, which owns certain concrete resurfacing technologies, and Ultimate, LLC, a Nevada limited liability company, an installer of the concrete resurfacing technology of Semco, Inc.
7. At the time of the appointment of the Trustee herein, the Debtor had run out of cash and had incurred post-petition administrative expenses as set out on Ex. A hereto, consisting primarily of accrued payroll and payroll taxes, health insurance, rent and telephone expense. The Debtor employed six employees at the time the Chapter 11 Trustee was appointed, and their employment was terminated on October12, 2007.
8. On November 7, 2007, the Trustee removed all property from the Debtor’s leased premises and on November 8, 2007, this Court sustained the landlord’s motion for immediate possession of the premises.
9. Two of the employees of the Debtor have serious health problems and their medical expenses incurred will not be paid by Anthem unless the accrued and unpaid premiums are
immediately paid. Anthem has agreed not to cancel the policy pending ruling on this Motion. Effective as of January 31, 2008, all employees’ health coverage with Anthem will be canceled and employees have been able to make other arrangements for health insurance.
10. Additionally, the non-payment of wages has imposed an economic hardship on employees for the period prior to their termination as set out on Schedule A hereto.
11. Further, the Trustee intends to apply for authority to employ on a contract basis an accountant and a bookkeeper to prepare such amended schedules as are necessary, bring the
operating reports current, and calculate fees due the Office of the United States Trustee.
12. The Trustee desires to incur such debt, as hereinafter set out, to minimally fund the foregoing; such will assist the Trustee in evaluating the prospects for sale of the assets of the Debtor or the filing of a plan of reorganization. The lender set forth below has expressed interest in such alternatives and is willing to lend funds to the Trustee as set forth below for such purposes. The loan proceeds shall be used solely by the Trustee for such operational purposes and not for payment of fees of the Trustee or professionals in the case, except to fund $25,000 into the escrow account for the benefit of counsel for the Official Committee of Unsecured Creditors (the “Committee”) to be disbursed in accordance with orders of this Court), and to pay fees due the Office of the United States Trustee.
RELIEF REQUESTED
13. By this Motion, the Trustee seeks to obtain Post-Petition Secured Financing from Princeton Partnership LLC (the “Lender”) on the terms as set forth below. The Trustee seeks:
a. Authority to obtain financing from Lender according to the terms of the commitment letter dated December 7, 2007, a copy of which is attached hereto as Ex. B;
b. Authority pursuant to an order substantially in the form of the order tendered herewith (the “Interim Order”) to execute and enter into the Revolving Demand Note and Security Agreement substantially in the form attached hereto as Ex. C (collectively, the “Loan Documents”), which, if approved by the Bankruptcy Court on a final basis, would provide the Trustee with postpetition secured financing of One Hundred and Forty Thousand Dollars ($140,000), and to perform such other and further acts as may be contemplated by, or required in connection with, the Loan Documents;
c. Authority under both the Interim and Final Orders, pursuant to section 364(c)(2) of the Bankruptcy Code, to grant to Lender a perfected, first priority security interest in and lien on all property and assets of the Debtor’s estate of every kind or type whatsoever, tangible, intangible, real, personal and mixed, whether now owned or hereafter acquired or arising, wherever located and all property of the estate of the Debtor within the meaning of section 541 of the Bankruptcy Code and all proceeds, rents, and products of the foregoing (collectively, the “Property”), except for all causes of action of the Debtor arising or asserted under Chapter 5 of the Bankruptcy Code (“Avoidance Actions”), which shall not be considered part of the Property. The granting of the first-priority security interest in and lien in the Property (the “(c)(2) Liens”) shall be subject only to all prepetition
perfected, valid, and non-avoidable security interests in existence at the time of the commencement of the case or to non-avoidable valid liens in existence at the time of such commencement that are perfected subsequent to such commencement as permitted by section 546(b) of the Bankruptcy Code (the “Existing Liens”);
d. Authority under both the Interim and Final Orders, pursuant to section 364(c)(3) of the Bankruptcy Code, to grant to the Lender a junior perfected security interest and lien on all Property (the “(c)(3) Liens”) that is subject to non- voidable, valid, and perfected liens in existence at the time of the commencement of the case or to non-avoidable valid liens in existence at the time of such commencement that are perfected subsequent to such commencement as permitted by section 546(b) of the Bankruptcy Code (collectively, the (c)(2) Liens and the (c)(3) Liens are referred to as the “Liens”);
e. Modification of the 11 U.S.C. § 362 Automatic Stay only to the extent as set forth in the Interim Order;
f. The scheduling of a hearing (the “Final Hearing”) to be held as soon as possible after fifteen days of the entry of the Interim Order to consider the entry of the Final Order granting all of the relief requested in the Motion on a final basis.
14. In particular, the Trustee seeks this Court’s approval to enter into the Post-Petition Secured Financing arrangement and, as a necessary corollary, to execute the Revolving Demand Note and the Security Agreement. The Post-Petition Secured Financing arrangement would allow the Lender to make loans to the Trustee following the approval of the Post-Petition Secured Financing arrangement on an interim and thereafter on a final basis, in such amounts as are necessary to cover expenses set out on Exhibit A, on an as-needed, discretionary basis, up to the maximum of $140,000.00.
15. The basic terms of the Post-Petition Secured Financing arrangement include the following:
a. The Lender shall make advances to the Trustee in the maximum aggregate principal amount not to exceed at any one time the amount of $140,000.00.
b. The unpaid principal balance of the Loan shall at all time bear interest at the Interest Rate set forth in the Revolving Demand Note.
c. Unpaid principal, interest and other amounts payable by Trustee shall be due and payable (the “Due Date”) on the earlier of:
i. upon conversion of the case to a case under chapter 7 of the Bankruptcy Code,
ii. the sale of all, or substantially all, of the assets of the Debtor,
iii. the confirmation of a plan of reorganization or liquidation,
iv. upon the occurrence of an Event of Default, or
v. May 1, 2008.
d. It shall be an event of default (“Event of Default”) if:
i. all amounts due under the Loan Documents are not paid when due as set out in paragraph 15.c. above,
ii. any motion is filed to make the Liens of Lender on a parity with, or subordinate to, any other security interest or lien under Section 364(d) of the Bankruptcy Code or otherwise,
iii. any motion is filed for the obtaining of credit or incurring of indebtedness as a super priority claim under Section 364(c)(1) of the Bankruptcy Code,
iv. the granting of relief from the automatic stay of Bankruptcy Code section 362 as to the Property or a portion thereof, absent consent of Lender,
v. Failure of a Final Order to be entered by the Bankruptcy Court on terms as set out in the Motion, or
vi. the reversal, vacation or stay of the effectiveness of either the Interim Order or the Final Order.
16. The Post-Petition Secured Financing arrangement should provide sufficient funds to allow the Trustee to pay administrative expenses as set out on Exhibit A and evaluate the assets of the Debtor. Funding is necessary for the Trustee to maintain value of the Debtor’s assets for the benefit of all creditors. The Trustee’s ability to administer the estate of the Debtor, to evaluate most effectively Debtor’s assets and preservation of asset values requires the availability of additional funds. The absence of such funds will harm the estate, the creditors, and the prospects for a successful reorganization or liquidation.
17. An immediate need exists for the Trustee to obtain funds because there is no cash from the operation of the Debtor’s business which has come to a halt due to unavailability of funds.
The Trustee submits that the estate and employees of the Debtor will suffer immediate and irreparable harm if the Trustee is not permitted to obtain the Post-Petition Secured Financing arrangement until a final hearing is held. Failure to pay expenses, particularly health insurance premiums and accrued and unpaid payroll, immediately will impose an extreme financial hardship on these employees, now creditors, and the ongoing case herein. The Post-Petition Secured Financing arrangement would begin immediately on an emergency basis and continue until the Interim Order becomes final pursuant to its own terms or a final hearing is held (the “Interim Financing Period”).
18. The minimum funding necessary to avoid immediate and irreparable harm will be disbursed under the Post-Petition Secured Financing arrangement, pending a final hearing, on approval of the Motion. Specifically, the Trustee shall pay only the wages, insurance and Committee escrow deposit set forth on the attached budget prior to entry of a final order approving the Post-Petition Secured Financing.
19. Based on the foregoing, the Trustee submits that it is in the best interest of all creditors and other parties in interest that the Trustee be authorized to enter into the Post-Petition Secured Financing.
20. As required by 11 U.S.C. §§ 364(a) and (b), the Trustee is unable to obtain credit on more favorable terms, including unsecured financing.
21. The Lender is willing to provide the financing on the terms set out in the Loan Documents if the Lender receives liens and a security interest as described above. In order to enter into the Post-Petition Secured Financing arrangement, the Lender has demanded security as set out above, according to the terms and conditions set out in the Loan Documents and pursuant to 11 U.S.C. §§364(c)(2) and (3). The grant of the security interest will be subject to carve-outs for the escrow funds with counsel for the Committee and U.S. Trustee fees.
22. The Lender is unwilling to extend the financing on other terms.
23. The Trustee seeks this Court’s approval to establish and implement the Post-Petition Secured Financing arrangement on an interim basis, and thereafter, after notice and opportunity to object, on a final basis, and as a necessary corollary, to execute the Loan Documents, and such documents as Lender may require to perfect the liens granted thereby.
24. The terms and conditions of the Post-Petition Secured Financing arrangement are fair, reasonable, the best available under the circumstances, and are the product of good-faith, armslength negotiations between the Trustee and the Lender. The credit contemplated under and in accordance with the terms of the Post-Petition Secured Financing arrangement is extended in good faith and, accordingly, the Lender is entitled to the protections and benefits of Bankruptcy Code Sections 364(c) and 364(e).
NOTICE
Please take notice that the foregoing Motion for an Interim Order shall come on for hearing at the convenience of the Court, before the United States Bankruptcy Court, 100 East Vine Street, 2nd Floor, Lexington, Kentucky 40507.
Respectfully submitted,
WALTHER, ROARK & GAY, PLC
/s/ Stephen Barnes, Esq.
Jonathan L. Gay, Esq.
Stephen Barnes, Esq.
163 E. Main Street, Suite 200
P.O. Box 1598
Lexington, KY 40588-1598
(859) 225-4714
(859 225-1493 fax
jgay@wrgfirm.com
sbarnes@wrgfirm.com
COUNSEL FOR TRUSTEE
CERTIFICATE OF SERVICE
I hereby certify that the foregoing was served this the 18th day of January, 2008, electronically in accordance with the method established under this Court’s CM/ECF Administrative Procedures and Standing Order dated July 25, 2002 upon all parties in the electronic filing system in this case and by mail upon all parties on the Master Service List herein.
/s/ Stephen Barnes, Esq.
COUNSEL FOR TRUSTEE |
