Court filing
Motion to Approve Disclosure Statement and Solicitation Procedures — In re KServicing
Record facts
| Court | U.S. Bankruptcy Court for the District of Delaware |
|---|---|
| Filed | 2022-10-31 |
U.S. Bankruptcy Court for the District of Delaware · No. 22-10951 · Doc. 176 · 2022-10-31 · Docket on CourtListener
Summary
A motion by the debtors in the jointly administered chapter 11 cases of Kabbage, Inc. d/b/a KServicing, et al., Case No. 22-10951 (CTG), in the U.S. Bankruptcy Court for the District of Delaware, filed October 31, 2022 as Doc 176. It asks the court to approve the Disclosure Statement for the Joint Chapter 11 Plan of Liquidation as containing adequate information under section 1125 of the Bankruptcy Code, to establish solicitation and voting procedures, to schedule a confirmation hearing, to approve special electronic noticing procedures, and to approve proposed cure procedures for unexpired leases and executory contracts. A table of requested dates sets a Voting Record Date of November 21, 2022, a Voting Deadline of December 23, 2022 at 5:00 p.m. and a Confirmation Hearing on or around January 5, 2023. A proposed order is annexed as Exhibit A. The document is 35 pages.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Full text
RLF1 28178409V.1
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
------------------------------------------------------------ x
:
In re
:
Chapter 11
:
KABBAGE, INC. d/b/a KSERVICING, et al., :
Case No. 22-10951 (CTG)
:
:
Debtors.1
:
(Jointly Administered)
:
:
:
Obj. Deadline: Nov. 14, 2022 at 4:00 p.m. (ET)
Hearing Date: Nov. 21, 2022 at 1:00 p.m. (ET)
------------------------------------------------------------ x
MOTION OF DEBTORS FOR ENTRY OF ORDER (I) APPROVING THE
DISCLOSURE STATEMENT OF THE DEBTORS, (II) ESTABLISHING
SOLICITATION, VOTING, AND RELATED PROCEDURES, (III) SCHEDULING
CONFIRMATION HEARING, (IV) ESTABLISHING NOTICE AND OBJECTION
PROCEDURES FOR CONFIRMATION OF PLAN, (V) APPROVING SPECIAL
ELECTRONIC NOTICING PROCEDURES, (VI) APPROVING DEBTORS’ PROPOSED
CURE PROCEDURES FOR UNEXPIRED LEASES AND EXECUTORY CONTRACTS,
AND (VII) GRANTING RELATED RELIEF
Kabbage, Inc. d/b/a KServicing and its debtor affiliates, as debtors and debtors in
possession in the above-captioned chapter 11 cases (collectively, the “Debtors”), respectfully
represent as follows in support of this motion (the “Motion”):
Relief Requested
1.
By this Motion, the Debtors request, pursuant to sections 502, 1125, 1126, and 1128
of title 11 of the United States Code (the “Bankruptcy Code”), Rules 2002, 3017, 3018, and 3020
of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”), and Rules 2002-1, 3017-
1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification
number, as applicable are: Kabbage, Inc. d/b/a KServicing (3937); Kabbage Canada Holdings, LLC (N/A); Kabbage
Asset Securitization LLC (N/A); Kabbage Asset Funding 2017-A LLC (4803); Kabbage Asset Funding 2019-A
LLC (8973); and Kabbage Diameter, LLC (N/A). Kabbage is a trademark of American Express used under license;
Kabbage, Inc. d/b/a KServicing is not affiliated with American Express. The Debtors’ mailing and service address
is 925B Peachtree Street NE, Suite 383, Atlanta, GA 30309.
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1, and 9006-1 of the Local Rules Bankruptcy Practice and Procedure of the United States
Bankruptcy Court for the District of Delaware (the “Local Rules”), entry of an order:
a.
approving the Disclosure Statement for the Joint Chapter 11 Plan of
Liquidation of Kabbage, Inc. (d/b/a KServicing) and its Affiliated Debtors,
filed on October 5, 2022 [Docket No. 63] (as may be amended, modified,
or supplemented from time to time, the “Disclosure Statement”) as
containing adequate information pursuant to section 1125 of the Bankruptcy
Code; 2
b.
scheduling a hearing (the “Confirmation Hearing”) to consider
confirmation of the Joint Chapter 11 Plan of Liquidation of Kabbage, Inc.
(d/b/a KServicing) and its Affiliated Debtors, filed on October 3, 2022
[Docket No. 14] (as may be amended, modified, or supplemented from time
to time, the “Plan”);
c.
approving the below described solicitation and tabulation procedures for the
Plan;
d.
approving the Ballots (as defined below);
e.
approving the notice of and objection and confirmation procedures in
connection with the Confirmation Hearing;
f.
approving special electronic noticing procedures (the “Special Electronic
Noticing Procedures”) with respect to Borrowers (as defined below);
g.
approving the Debtors’ proposed Cure Procedures (as defined below) for
treatment of unexpired leases and executory contracts pursuant to the Plan;
and
h.
granting related relief.
2.
A proposed form of order granting the relief requested herein is annexed hereto as
Exhibit A (the “Proposed Order”).
2 Capitalized terms used but not defined herein shall have the respective meanings ascribed to such terms in the
Disclosure Statement and Plan.
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3.
The following table summarizes the relevant dates requested in the Motion (subject
to the Court’s calendar):
Event
Deadline
Voting Record Date
November 21, 2022
Solicitation Date
No later than three business days after
entry of Proposed Order
Supplemental Solicitation Date
No later than three business days after
General Bar Date
Deadline to file Claim Objection or Request
to Estimate Claim for Voting Purposes
December 15, 2022 at 4:00 p.m.
(Prevailing Eastern Time)
Plan Supplement Filing Date
December 16, 2022
Rule 3018 Motion Deadline
December 20, 2022 at 4:00 p.m.
(Prevailing Eastern Time)
Voting Deadline
December 23, 2022 at 5:00 p.m.
(Prevailing Eastern Time)
Plan Objection Deadline
December 23, 2022 at 4:00 p.m.
(Prevailing Eastern Time)
Deadline to File (i) Reply to Plan
Objection(s), (ii) Brief in Support of Plan
Confirmation, (iii) Declarations in Support of
Confirmation, and (iv) Voting Certification
January 3, 2023 at 12:00 p.m.
(Prevailing Eastern Time)
Confirmation Hearing
On or around January 5, 2023 (subject to
the Court’s calendar)
4.
Also, summarized below are the attachments and exhibits cited throughout the
Motion:
Document
Exhibit
Proposed Order
Exhibit A to the Motion
Confirmation Hearing Notice
Exhibit 1 to the Proposed Order
Form of Class 3 Ballot (Reserve Bank Claims)
Exhibit 2-A to the Proposed Order
Form of Class 4 Ballot (General Unsecured Claims)
Exhibit 2-B to the Proposed Order
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Jurisdiction and Venue
5.
The Court has jurisdiction to consider this matter pursuant to 28 U.S.C. §§ 157 and
1334, and the Amended Standing Order of Reference from the United States District Court for the
District of Delaware, dated February 29, 2012. This is a core proceeding pursuant to 28 U.S.C.
§ 157(b). Pursuant to Rule 9013-1(f) of the Local Rules, the Debtors consent to the entry of a final
order by the Court in connection with the Motion to the extent it is later determined that the Court,
absent consent of the parties, cannot enter final orders or judgments consistent with Article III of
the United States Constitution. Venue is proper before the Court pursuant to 28 U.S.C. §§ 1408
and 1409.
Background
6.
On October 3, 2022 (the “Petition Date”), the Debtors each commenced with this
Court a voluntary case under chapter 11 of the Bankruptcy Code (the “Chapter 11 Cases”). The
Debtors are authorized to continue to operate their business as debtors in possession pursuant to
sections 1107(a) and 1108 of the Bankruptcy Code. No trustee, examiner, or statutory committee
of creditors has been appointed in these Chapter 11 Cases.
7.
The Chapter 11 Cases are being jointly administered for procedural purposes only
pursuant to Rule 1015(b) of the Bankruptcy Rules and Rule 1015-1 of the Local Rules.
8.
Additional information regarding the Debtors’ businesses, capital structure, and the
circumstances leading to the commencement of these Chapter 11 Cases is set forth in the
Declaration of Deborah Rieger-Paganis in Support of Debtors’ Chapter 11 Petitions and First
Day Relief [Docket No. 13] (the “First Day Declaration”).
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Proposed Restructuring
9.
The Plan proposes to effectuate an orderly wind down of the Debtors through a
chapter 11 proceeding. The Plan contemplates a “toggle” implementation, pursuant to which the
Debtors will either, in the broadest of terms, (a) continue servicing their loan portfolio (the
“Funded Transaction”), or (b) transfer their portfolio to third-party servicers (the “Unfunded
Transaction”). The prime difference between the Funded Transaction and the Unfunded
Transaction is the amount of time in chapter 11 and go-forward servicing; importantly, the
determining factor is funding.
In the event of the Funded Transaction: the Debtors are successful in
securing adequate funding (through negotiations with, among others, the
Reserve Bank and Customers Bank (“CUBI”)) and the Debtors contemplate
an approximate six (6)-month bankruptcy case, during which the Debtors
continue servicing their loan portfolio throughout the cases, in the following
ways and at the option of each of the Partner Banks and the Reserve Bank:
(w) the Company continues to service the remaining Loan Portfolio after
the plan effective date, but with each applicable Partner Bank and the
Reserve Bank paying post-effective date servicing costs; or (x) the
Company and each applicable Partner Bank and the Reserve Bank work
cooperatively to transfer after the plan effective date servicing to a third-
party loan servicer.
In the event of the Unfunded Transaction: the Debtors are unsuccessful in
securing adequate funding (through negotiations with among others, the
Reserve Bank and CUBI) and the Debtors contemplate an approximate 100-
day bankruptcy case, pursuant to which the Debtors (y) reject the servicing
agreements with the Partner Banks and (z) service the PPPLF Portfolio until
the plan effective date, at which time the PPPLF Collateral will be returned
to the Reserve Bank in satisfaction of its claims.
10.
Importantly, in either scenario, any fees and costs associated with any transfer of
servicing obligations shall not be borne by the Debtors. The intent of the Debtors’ Plan is to
efficiently and expeditiously wind down the Debtors’ operations but with consideration of that
impact to the Partner Banks, the secured lender—the Reserve Bank, and importantly the PPP and
legacy borrowers (collectively, the “Borrowers”). The Debtors seek to maximize value for all
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stakeholders and minimize, where possible, interruptions to the servicing of the PPP Loans and
Legacy Loans.
Relief Requested Should Be Granted
A.
Approval of Disclosure Statement and Notice Thereof Is Warranted
11.
Pursuant to section 1125 of the Bankruptcy Code and Bankruptcy Rule 3016(b),
the Debtors prepared and filed the Disclosure Statement to provide parties adequate information
and disclosure regarding the terms of the Plan. The Debtors intend to provide parties with copies
of the Disclosure Statement, once approved, in connection with the Debtors’ solicitation of votes
to accept or reject the Plan.
a.
Approval of Disclosure Statement
12.
Pursuant to section 1125(b) of the Bankruptcy Code, a plan proponent must provide
holders of impaired claims and equity interests with “adequate information” regarding a proposed
chapter 11 plan of reorganization. Section 1125(a)(1) of the Bankruptcy Code defines “adequate
information” as:
information of a kind, and in sufficient detail, as far as is reasonably
practicable in light of the nature and history of the debtor and the
condition of the debtor’s books and records, including a discussion
of the potential material Federal tax consequences of the plan to the
debtor, any successor to the debtor, and a hypothetical investor
typical of the holders of claims or interests in the case, that would
enable such a hypothetical investor of the relevant class to make an
informed judgment about the plan.
11 U.S.C. § 1125(a)(1).
13.
Accordingly, a debtor’s disclosure statement must provide sufficient information
to permit an informed judgment by impaired creditors entitled to vote on the plan. See, e.g.,
Century Glove, Inc. v. First Am. Bank of N.Y., 860 F.2d 94, 100 (3d Cir. 1988) (“[Section] 1125
seeks to guarantee a minimum amount of information to the creditor asked for its vote.”); In re
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Phoenix Petroleum, Co., 278 B.R. 385, 392 (Bankr. E.D. Pa. 2001) (“[T]he general purpose of the
disclosure statement is to provide ‘adequate information’ to enable ‘impaired’ classes of creditors
and interest holders to make an informed judgment about the proposed plan and determine whether
to vote in favor of or against that plan.”). The essential requirement of a disclosure statement is
that it “clearly and succinctly inform[s] the average unsecured creditor what it is going to get,
when it is going to get it, and what contingencies there are to getting its distribution.” In re Keisler,
No. 08-34321, 2009 WL 1851413, at *4 (Bankr. E.D. Tenn. June 29, 2009) (quoting In re Ferretti,
128 B.R. 16, 19 (Bankr. D.N.H. 1991)).
14.
Whether a disclosure statement contains adequate information “is not governed by
any otherwise applicable non-bankruptcy law, rule, or regulation.” 11 U.S.C. § 1125(d). Instead,
bankruptcy courts have broad discretion to determine the adequacy of the information contained
in a disclosure statement. See, e.g., In re Lisanti Foods, Inc., 329 B.R. 491, 507 (D.N.J. 2005)
(“Section 1125 affords the Bankruptcy Court substantial discretion in considering the adequacy of
a disclosure statement.”) (citing In re River Village Assoc., 181 B.R. 795, 804 (E.D. Pa. 1995)); In
re Phoenix Petroleum Co., 278 B.R. at 393 (noting that the determination of what is adequate
information is “largely within the discretion of the bankruptcy court”) (quoting Texas Extrusion
Corp. v. Lockheed Corp. (In re Texas Extrusion Corp.), 844 F.2d 1142, 1157 (5th Cir. 1988)).
Congress granted bankruptcy courts such wide discretion in determining the adequacy of a
disclosure statement to facilitate effective reorganizations of debtors in a broad range of
businesses, taking into account the various circumstances that accompany chapter 11 cases. See
H.R. Rep. No. 595, 95th Cong., 1st Sess. 408–09 (1977); see also In re Copy Crafters Quickprint
Inc., 92 B.R. 973, 979 (Bankr. N.D.N.Y. 1988) (noting that the adequacy of a disclosure statement
“is to be determined on a case-specific basis under a flexible standard that can promote the policy
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of Chapter 11 towards fair settlement through a negotiation process between informed interested
parties”). Accordingly, the determination of whether a disclosure statement contains adequate
information is made on a case-by-case basis, focusing on the unique facts and circumstances of
each case. See Oneida Motor Freight, Inc. v. United Jersey Bank, 848 F.2d 414, 417 (3d Cir.
1988) (“From the legislative history of § 1125 we discern that adequate information will be
determined by the facts and circumstances of each case.”).
15.
In that regard, in determining whether a disclosure statement contains adequate
information, courts generally examine a list of factors, including the following types of
information, as applicable:
the circumstances that gave rise to the filing of the bankruptcy petition;
an explanation of the available assets and their value;
the anticipated future of the debtor(s);
the source of the information provided in the disclosure statement;
a disclaimer, which typically indicates that no statements or information
concerning the debtor or its assets or securities are authorized, other than
those set forth in the disclosure statement;
the condition and performance of the debtor while in chapter 11;
information regarding claims against the estate;
a liquidation analysis setting forth the estimated return that creditors would
receive under chapter 7;
the accounting and valuation methods used to produce the financial
information in the disclosure statement;
information regarding the future management of the debtor, including the
amount of compensation to be paid to any insiders, directors, or officers of
the debtor;
a summary of the plan of reorganization or liquidation;
an estimate of all administrative expenses, including attorneys’ fees;
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the collectability of any accounts receivable;
any financial information, valuations, or pro forma projections that would
be relevant to creditors’ determinations of whether to accept or reject the
plan;
information relevant to the risks being taken by the creditors and interest
holders;
the actual or projected value that can be obtained from avoidable transfers;
the existence, likelihood, and possible success of non-bankruptcy litigation;
the tax consequences of the plan; and
the relationship of the debtor with its affiliates.
See, e.g., In re Scioto Valley Mortg. Co., 88 B.R. 168, 170–71 (Bankr. S.D. Ohio 1988); see also
In re Oxford Homes, Inc., 204 B.R. 264, 269 n.17 (Bankr. D. Me. 1997) (using a similar list). Such
a list is not meant to be comprehensive and a debtor is not required to provide all the information
on the list. Rather, the bankruptcy court must decide what is appropriate in each case in light of
the particular facts and circumstances present. See Ferretti, 128 B.R. at 18–19 (adopting a similar
list); see also In re Phoenix Petroleum Co., 278 B.R. at 393 (making use of a similar list but
cautioning that “no one list of categories will apply in every case”).
16.
The Disclosure Statement contains the necessary information for holders of Claims
entitled to vote to make an informed decision about whether to vote to accept or reject the Plan,
including many of the categories cited above, such as:
the Debtors’ business, including their corporate history and organizational
structure, business operations, and prepetition capital structure and
indebtedness, see Disclosure Statement, at Section III.;
key events leading to the Chapter 11 Cases, including the Debtors’
restructuring negotiations, see id., at Section IV;
an overview of events during the Chapter 11 Cases, see id., at Section V;
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a summary of the Plan, including the classification and treatment of Claims
and Interests under the Plan and who is entitled to vote on the Plan, see id.,
at Section VI;
certain tax consequences of the Plan, see id., at Section VII;
certain risk factors affecting the Debtors, see id., at Section VIII;
the voting procedures and requirements for voting on the Plan, see id., at
Section IX;
requirements for confirmation and consummation of the Plan, see id., at
Section X;
alternatives to confirmation and consummation of the Plan, see id., at
Section XI; and
the Debtors’ liquidation analysis (annexed to the Disclosure Statement as
Exhibit C).3
the Debtors’ conclusion and recommendation, see id., at Section XII.
17.
Based on the foregoing, the Debtors submit that the Disclosure Statement contains
sufficient information for a voting party to make an informed judgment regarding whether to vote
to accept or reject the Plan. Thus, the Debtors respectfully request that the Court approve the
Disclosure Statement as containing adequate information in satisfaction of the requirements of
section 1125 of the Bankruptcy Code.
b.
The Disclosure Statement Provides Adequate Notice of Release,
Exculpation, and Injunction Provisions in Plan
18.
Pursuant to Bankruptcy Rule 3016(c), “[i]f a plan provides for an injunction against
conduct not otherwise enjoined under the Bankruptcy Code, the plan and disclosure statement must
describe in specific and conspicuous language (bold, italic, or underlined text) all acts to be
3 The Debtors will file the liquidation analysis prior to the hearing on approval of this Motion and the Disclosure
Statement.
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enjoined and identify the entities that would be subject to the injunction.” Fed. R. Bankr. P.
3016(c).
19.
The Plan includes injunction, release, and exculpation provisions highlighted in
bold in Sections 10.5, 10.6, and 10.7. The Disclosure Statement describes in detail the releases
provided under the Plan, the entities providing such releases, the entities being released, and the
Claims and Causes of Action so released. See Disclosure Statement, at pages 53–54, 55.
Additionally, the Disclosure Statement sets forth the terms of the exculpation provision under the
Plan. See id., at page 55. Each of the foregoing sections is set forth in conspicuous, bold print. In
addition, Section 10.3 of the Plan sets forth the injunction related to the release and exculpation
provisions in the Plan. Accordingly, the Debtors respectfully submit that the Disclosure Statement
complies with Bankruptcy Rule 3016(c).
B.
Solicitation and Voting Procedures
20.
In connection with the Disclosure Statement and Plan, the Debtors propose to
implement the solicitation and balloting procedures described below (collectively,
the “Solicitation Procedures”). As set forth herein, the Solicitation Procedures comply with the
various applicable provisions of the Bankruptcy Code, the Bankruptcy Rules, and the Local Rules
and should be approved.
21.
The Debtors are providing copies of the Disclosure Statement (including all
exhibits and appendices) and related materials and a Ballot (collectively, a “Solicitation
Package”) to record holders of Reserve Bank Claims and General Unsecured Claims. In order to
vote, holders of Reserve Bank Claims and General Unsecured Claims should provide all of the
information requested by the Ballot and, as applicable, should complete and deliver their
completed Ballots so that they are actually received by the Debtors’ voting agent, Omni Agent
Solutions (“Omni”), no later than the Voting Deadline.
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a.
Parties Entitled to Vote
22.
Under the Bankruptcy Code, only holders of claims or interests in “impaired”
classes are entitled to vote on a plan. Under section 1124 of the Bankruptcy Code, a class of claims
or interests is deemed to be “impaired” under a plan unless (i) the plan leaves unaltered the legal,
equitable, and contractual rights to which such claim or interest entitles the holder thereof or
(ii) notwithstanding any legal right to an accelerated payment of such claim or interest, the plan
cures all existing defaults (other than defaults resulting from the occurrence of events of
bankruptcy) and reinstates the maturity of such claim or interest as it existed before the default.
23.
If, however, the holder of an impaired claim or interest will not receive or retain
any distribution under the plan on account of such claim or interest, the Bankruptcy Code deems
such holder to have rejected the plan, and, accordingly, holders of such claims and interests do not
actually vote on the plan. If a claim or interest is not impaired by the plan, the Bankruptcy Code
deems the holder of such claim or interest to have accepted the plan and, accordingly, holders of
such claims and interests are not entitled to vote on the Plan. Further, a vote may be disregarded
if the Bankruptcy Court determines, pursuant to section 1126(e) of the Bankruptcy Code, that it
was not solicited or procured in good faith or in accordance with the provisions of the Bankruptcy
Code.
24.
For a detailed description of the treatment of Claims and Interests under the Plan,
see Section VI of the Disclosure Statement.
25.
The Debtors propose that the following classes (the “Voting Classes”) be entitled
to vote to accept or reject the Plan as such classes are impaired but entitled to receive distributions
under the Plan, subject to certain exceptions discussed below:
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Class
Description
Class 3
Reserve Bank Claims
Class 4
General Unsecured Claims
26.
Classes 3 (Reserve Bank Claims) and 4 (General Unsecured Claims) are impaired
under the Plan and the only Classes of Claims or Interests entitled to vote to accept or reject the
Plan.
b.
Parties Not Entitled to Vote
27.
A holder of a Claim in a Voting Class is nonetheless not entitled to receive a ballot
or vote if:
as of the Voting Record Date, such creditor’s Claim relates to a debt or
obligation that the Debtors have already paid or otherwise satisfied;
as of the Voting Record Date (as defined below), the outstanding amount of
such holder’s Claim is zero ($0.00);
as of the Voting Record Date, such holder’s Claim has been disallowed,
expunged, disqualified, or suspended;
such holder’s Claim is not scheduled in the Debtors’ schedules of assets and
liabilities (collectively, as may be amended from time to time, the “Schedules”)
or such holder’s Claim is scheduled in an undetermined amount or as
contingent, unliquidated, or disputed, except as provided in paragraph 32 of the
Motion;
such holder’s Claim is subject to an objection or request for estimation as of the
Voting Record Date, subject to the procedures set forth below; or
such holder was required to timely file a proof of claim in the form and manner
specified by the Bar Date Order (as defined below) and did not do so on or
before the applicable Bar Date (as defined in the Bar Date Order).
28.
Certain classes are not entitled to vote on a plan. Section 1126(f) of the Bankruptcy
Code provides that, for the purposes of soliciting votes for confirmation of a plan of reorganization,
“a class that is not impaired under a plan, and each holder of a claim or interest of such class, are
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conclusively presumed to have accepted the plan, and solicitation of acceptances with respect to
such class from the holders of claims or interests of such class is not required.” 11 U.S.C. §
1126(f).
29.
The Plan leaves certain Claims and Interests unimpaired. The holders of such
Claims and Interests are therefore presumed to accept the Plan pursuant to section 1126(f) of the
Bankruptcy Code and not entitled to vote. Further, certain Claims and Interests are impaired, not
entitled to any distributions under the Plan, and, therefore, pursuant to section 1126(f) of the
Bankruptcy Code are not entitled to vote. Holders of Claims and Interests in these classes
constitute non-voting Creditors and Interest Holders who are not entitled to vote (collectively,
the “Non-Voting Classes” or the “Non-Voting Claims”):
Class
Description
Impairment
Acceptance / Rejection
Class 1
Priority Non-Tax
Claims
Unimpaired
Not Entitled to Vote
(Presumed to accept)
Class 2
Other Secured
Claims
Unimpaired
Not Entitled to Vote
(Presumed to accept)
Class 5
Intercompany Claims
Impaired
Not Entitled to Vote
(Deemed to reject)
Class 6
Intercompany Interests
Unimpaired /
Impaired
Not Entitled to Vote
(Presumed to accept /
deemed to reject)
Class 7
Subordinated Securities Claims
Impaired
Not Entitled to Vote
(Deemed to reject)
Class 8
KServicing Equity Interests
Impaired
Not Entitled to Vote
(Deemed to reject)
30.
Because Class 1 (Priority Non-Tax Claims), Class 2 (Other Secured Claims), Class
5 (Intercompany Claims), Class 6 (Intercompany Interests), Class 7 (Subordinated Securities
Claims), and Class 8 (KServicing Equity Interests) are not entitled to vote, in an effort to conserve
the resources of the Debtors’ estates, the Debtors propose to send to holders of such Claims and
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Interests only the Confirmation Hearing Notice (as defined below). Copies of the Disclosure
Statement and the Plan will also be available free-of-charge on the website maintained by the
Debtors’ voting agent, Omni, at www.omniagentsolutions.com/kerservicing (the “Case
Website”), and instructions on how to obtain copies will be set forth in the Confirmation Hearing
Notice. The Debtors submit that such notice satisfies the requirements of Bankruptcy Rule
3017(d).
c.
Temporary Allowance / Disallowance of Claims
31.
Pursuant to section 1126(a) of the Bankruptcy Code, the holder of an “allowed”
claim may accept or reject a chapter 11 plan. Bankruptcy Rule 3018(a) provides, however, that
the “court after notice and hearing may temporarily allow the claim or interest in an amount which
the court deems proper for the purpose of accepting or rejecting a plan.” Fed. R. Bankr. P. 3018(a).
32.
Solely for purposes of voting to accept or reject the Plan, and not for the purpose
of the allowance of, or distribution on account of, a Claim, and without prejudice to the rights of
the Debtors in any other context, each Claim within a Voting Class is temporarily Allowed in an
amount equal to the amount of such Claim either as set forth in the Schedules or in a properly and
timely filed proof of claim, subject to the following exceptions (collectively, the “Temporary
Allowance Exceptions”):
a.
if a proof of claim was filed by the Voting Record Date in an amount that
is liquidated, non-contingent, and undisputed, such Claim will be
temporarily Allowed for voting purposes in the amount set forth on the
proof of claim, unless such Claim is disputed as set forth in subparagraph
(f) below;
b.
if a Claim has been estimated or otherwise Allowed for voting purposes by
order of the Court, such Claim will be temporarily Allowed in the amount
so estimated or Allowed by the Court;
c.
if a Claim is listed in the Schedules as contingent, unliquidated, or disputed
and a proof of claim has not yet been filed as of the Voting Record Date,
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such Claim shall be temporarily Allowed for voting purposes in the amount
of one dollar ($1.00);
d.
if a proof of claim was filed by the Voting Record Date in an amount that
is wholly contingent or unliquidated, such Claim shall be temporarily
Allowed for voting purposes in the amount of one dollar ($1.00), unless
such Claim is disputed as set forth in subparagraph (f) below;
e.
if a Claim is listed in the Schedules or on a proof of claim filed by the Voting
Record Date as contingent or unliquidated, in part, such Claim shall be
temporarily Allowed for voting purposes in the amount of the non-
contingent or liquidated portion of such Claim, unless such Claim is
disputed as set forth in subparagraph (f) below; and
f.
if the Debtors have filed an objection to or a request for estimation of a
Claim at least seven days before the Voting Deadline (as such date may be
extended by order of the Court or on request by the Debtors), such Claim is
temporarily disallowed, unless the Debtors’ objection seeks to reclassify or
reduce the Allowed amount of such Claim, then such Claim is temporarily
Allowed for voting purposes in the reduced amount and/or as reclassified,
except as may be ordered by the Court before the Voting Deadline.
33.
If any creditor seeks to challenge the allowance of its Claim for voting purposes,
the creditor may file with the Court a motion for an order pursuant to Bankruptcy Rule 3018(a)
temporarily allowing such Claim for voting purposes in a different amount. The Debtors request
that the Court (i) fix December 20, 2022 by or before 4:00 p.m. (Prevailing Eastern Time) as
the deadline for the filing and service of motions pursuant to Bankruptcy Rule 3018(a) (the “Rule
3018(a) Motion Deadline”) requesting temporary allowance of a movant’s Claim for purposes of
voting (the “Rule 3018(a) Motion(s)”) and (ii) require that such Rule 3018(a) Motions be filed
with the Court no later than the Rule 3018(a) Motion Deadline and served on the following parties
(the “Objection Notice Parties”) by email:
(a) Debtors at
Kabbage, Inc. d/b/a KServicing
Attn: Holly Loiseau, General Counsel (hloiseau@kservicecorp.com)
925B Peachtree Street NE, Suite 383
Atlanta, GA 30309
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(b) Counsel to Debtors at
Richards, Layton & Finger, P.A.
Attn: Daniel J. DeFranceschi (defranceschi@rlf.com)
Amanda R. Steele (steele@rlf.com)
Zachary I. Shapiro (shapiro@rlf.com)
-and-
Weil, Gotshal & Manges LLP
Attn: Candace M. Arthur (candace.arthur@weil.com)
Natasha Hwangpo (natasha.hwangpo@weil.com)
Chase A. Bentley (chase.bentley@weil.com)
(c) Office of the United States Trustee for the District of Delaware at
Attn: Richard L. Schepacarter (richard.schepacarter@usdoj.gov)
Rosa Sierra-Fox (rosa.sierra-fox@usdoj.gov)
(d) Counsel to any official committee appointed in these Chapter 11 Cases
34.
The Debtors propose that the Court consider only those Rule 3018(a) Motions that
have been timely filed and served in accordance with the provisions of this Motion. The Debtors
further propose that, upon entry of an order of the Court granting a Rule 3018(a) Motion, such
creditor’s Ballot (as defined below) be counted in accordance with the above designated
guidelines, unless temporarily Allowed in a different amount by an order of the Court entered prior
to or concurrent with entry of an order confirming the Plan.
C.
Voting Record Date
35.
Bankruptcy Rule 3017(d) provides, in relevant part, that for the purposes of
soliciting votes in connection with the confirmation of a plan of reorganization, “creditors and
equity security holders [must] include holders of stock, bonds, debentures, notes and other
securities of record on the date the order approving the disclosure statement is entered or another
date fixed by the court, for cause, after notice and a hearing.” Fed. R. Bankr. P. 3017(d).
36.
To identify and set the universe of Claim and Interest holders entitled to vote on
the Plan, the Debtors request that the Court set November 21, 2022, as the date for determining
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which parties are entitled to vote on the Plan (the “Voting Record Date”). With respect to
transfers of Claims filed pursuant to Bankruptcy Rule 3001(e), the transferee shall be entitled to
receive a Solicitation Package (as defined below) and, if the holder of such Claim is entitled to
vote with respect to the Plan, cast a Ballot on account of such Claim only if (i) all actions necessary
to transfer such Claim are completed by the Voting Record Date or (ii) the transferee files by the
Voting Record Date (a) all documentation required by Bankruptcy Rule 3001(e) to evidence the
transfer and (b) a sworn statement of the transferor supporting the validity of the transfer. In the
event a Claim is transferred after the Voting Record Date or General Bar Date, as applicable, the
transferee of such Claim shall be bound by any vote on the Plan made by the holder of such Claim
as of the Voting Record Date. The Debtors believe that the Voting Record Date is appropriate, as
it facilitates the determination of which holders of Claims are entitled to vote on the Plan.
a.
Approval of Solicitation Packages and Procedures for Distribution
37.
Bankruptcy Rule 3017(d) lists the materials that must be provided to holders of
claims and interests for the purpose of soliciting votes on a chapter 11 plan and providing adequate
notice of the hearing to consider confirmation thereof. Specifically, Bankruptcy Rule 3017(d)
provides, in relevant part, that:
[u]pon approval of a disclosure statement, — except to the extent
that the court orders otherwise with respect to one or more
unimpaired classes of creditors or equity security holders — the
debtor in possession, trustee, proponent of the plan, or clerk as the
court orders shall mail to all creditors and equity security holders,
and in a chapter 11 reorganization case shall transmit to the United
States trustee:
a.
the plan or a court-approved summary of the plan;
b.
the disclosure statement approved by the court;
c.
notice of the time within which acceptances and rejections of the plan may
be filed; and
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d.
any other information as the court may direct, including any court opinion
approving the disclosure statement or a court-approved summary of the
opinion.
Fed. R. Bankr. P. 3017(d).
38.
In compliance with this rule, the Debtors propose to mail or cause to be mailed
solicitation packages (the “Solicitation Packages”) containing the information described below
as soon as practicable after entry of the Proposed Order, but no later than three (3) business days
after the date of entry of the Proposed Order (the “Solicitation Date”), to (i) holders of Claims in
the Voting Classes entitled to vote on the Plan as of the Voting Record Date and (ii) any party who
files a proof of claim by the General Bar Date on account of a Claim in a Voting Class and who
has not previously received a Solicitation Package.
39.
In addition, on October 26, 2022, the Court entered an order [Docket No. 161] (the
“Bar Date Order”) setting November 30, 2022 at 5:00 p.m. (Prevailing Eastern Time) as the
General Bar Date (as defined in the Bar Date Order). Because Solicitation Packages will be mailed
by the Solicitation Date, which falls before the General Bar Date, to ensure that the creditors in
Voting Classes who file timely proofs of claim receive notice and an opportunity to vote, the
Debtors propose a supplemental solicitation procedure whereby they will, within three business
days after the General Bar Date (the “Supplemental Solicitation Date”), cause to be served a
Solicitation Package upon any party who files a proof of claim by the General Bar Date on account
of a Claim in a Voting Class and has not previously received a Solicitation Package.
40.
The Debtors anticipate that most parties holding Claims against the Debtors will
receive a Solicitation Package in the initial mailing being completed by the Solicitation
Commencement Date based on the Schedules being filed by the Debtors. Given that any party
who receives a Solicitation Package pursuant to this supplemental process will have approximately
21 days to consider whether to vote to accept or reject the Plan and to submit their Ballot, the
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Debtors submit this supplemental solicitation process is fair and appropriate under the
circumstances.
41.
In accordance with Bankruptcy Rule 3017(d), Solicitation Packages shall contain
copies of:
a.
the Proposed Order, as entered by the Court and without attachments, the
Disclosure Statement, and the Plan;
b.
the Notice of (I) Approval of Disclosure Statement of the Debtors
(II) Establishment of Solicitation, Voting, and Related Procedures, (III)
Scheduling Confirmation Hearing, (IV) Establishing Notice and Objection
Procedures for Confirmation of Plan, (V) Approval of Special Electronic
Noticing Procedures (VI) Approving Debtors’ Proposed Cure Procedures
for Unexpired Leases and Executory Contracts and Leases, and (VII)
Granting Related Relief, in substantially the form of Exhibit 1 annexed to
the Proposed Order (the “Confirmation Hearing Notice”); and
c.
an appropriate form of Ballot (as defined below) customized for such holder
and conforming to Official Bankruptcy Form No. B 314, in the form
described below, and a postage-prepaid return envelope.
42.
To further simplify the noticing process and to avoid unnecessary costs to the
Debtors’ estates, the Debtors will not mail copies of the Confirmation Hearing Notice or the
Solicitation Package, as applicable, to the holders of Claims or Interests that are non-Debtor
affiliates. In addition, the Debtors will not mail Solicitation Packages to creditors whose Claims
have already been paid in full. However, if any such creditor would be entitled to receive a
Solicitation Package for any other reason, the Debtors will send such creditor a Solicitation
Package in accordance with the procedures set forth herein.
43.
The Debtors further request authority to make non-substantive changes to the
Disclosure Statement, the Plan, and related documents without further order of the Court, including
ministerial changes to correct typographical and grammatical errors, and to make conforming
changes among the Disclosure Statement, the Plan, and any other materials in the Solicitation
Packages prior to mailing.
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44.
Bankruptcy Rule 3017(d) permits a court to order that the Plan and Disclosure
Statement need not be mailed to holders of Claims or Interests in unimpaired classes. In lieu
thereof, a bankruptcy court may order that “notice that the class is designated in the plan as
unimpaired and notice of the name and address of the person from whom the plan or summary of
the plan and disclosure statement may be obtained upon request and at the plan proponent’s
expense, [and] notice of the time fixed for filing objections to and the hearing on confirmation” be
mailed to such classes. Fed. R. Bankr. P. 3017(d).
45.
As discussed above, the Non-Voting Classes (other than Class 5 (Intercompany
Claims), Class 6 (Intercompany Interests) (if so treated), Class 7 (Subordinated Securities Claims),
and Class 8 (KServicing Equity Interests)) are unimpaired and presumed to accept the Plan.
Accordingly, the Debtors propose to mail to holders of Claims or Interests in the Non-Voting
Classes only the Confirmation Hearing Notice. The Confirmation Hearing Notice provides
(i) notice of the approval of the Disclosure Statement, (ii) notice of the filing of the Plan, (iii) notice
that Claims or Interests in Class 1 (Priority Tax Claims), Class 2 (Other Secured), and Class 6
(Intercompany Interests) (if so treated) are unimpaired and Claims or Interests in Class 5
(Intercompany Claims), Class 6 (Intercompany Interests) (if so treated), Class 7 (Subordinated
Securities Claims), and Class 8 (KServicing Equity Interests) are impaired and not entitled to vote,
and (iv) the address of the Case Website, wherefrom copies of the Disclosure Statement and Plan
can be obtained.
46.
The Debtors submit that they have shown good cause for approval of the
Solicitation Packages and procedures for distribution and that mailing the Confirmation Hearing
Notice to the holders of Claims and Interests in Non-Voting Classes satisfies the requirements of
Bankruptcy Rule 3017(d) and should be approved.
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b.
Approval of Forms of Ballots
47.
Bankruptcy Rule 3017(d) requires the Debtors to mail a form of ballot, which
substantially conforms to Official Bankruptcy Form No. B 314, to “creditors and equity security
holders entitled to vote on the plan.” Fed. R. Bankr. P. 3017(d). The Debtors propose to distribute
to holders of Claims in the Voting Classes that are eligible to vote ballots substantially in the form
annexed to the Proposed Order as Exhibits 2-A and 2-B (collectively, the “Ballots”), which are
incorporated herein by reference. Although the Ballots are based on Official Bankruptcy Form
No. B 314, they have been modified to address the specific circumstances of these Chapter 11
Cases and to include certain additional information that is relevant and appropriate for the Voting
Classes. The Ballots (i) provide holders of Claims in the Voting Classes with clear instructions on
how to complete and return the Ballot, (ii) prominently feature the Voting Deadline, and
(iii) clearly and unequivocally state that Ballots received after the Voting Deadline may not be
counted.
48.
Each holder of a Claim in Class 3 (Reserve Bank Claims) will receive a Ballot, in
the form annexed as Exhibit 2-A of the Proposed Order, and each holder of a Claim in Class 4
(General Unsecured Claims) will receive a Ballot, in the form annexed as Exhibit 2-B of the
Proposed Order.
49.
Based on the foregoing, the Debtors respectfully request that the Court approve the
proposed form of Ballots and related relief.
c.
Voting Deadline
50.
Bankruptcy Rule 3017(c) provides that, “[o]n or before approval of [a] disclosure
statement, the court shall fix a time within which the holders of claims and interests may accept or
reject [a] plan . . . .” Fed. R. Bankr. P. 3017(c). The Debtors anticipate completing mailing of the
Solicitation Packages by the Solicitation Date with the exception of such mailings to be completed
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in connection with the Supplemental Solicitation Date. Based on such schedule, the Debtors
propose that, to be counted as a vote to accept or reject the Plan, each Ballot must be properly
executed, completed, and delivered to Omni (i) by first class mail (whether in the return envelope
provided with each Ballot or otherwise), (ii) by overnight courier, or (iii) by hand delivery, so that
such Ballot is actually received by Omni no later than December 23, 2022 by or before 5:00 P.M.
(Prevailing Eastern Time) (the “Voting Deadline”). Subject to entry of the Proposed Order on
or about the date of the Disclosure Statement Hearing, the Debtors submit that the proposed
solicitation period of approximately 28 days is a sufficient period within which holders of Claims
in the Voting Classes can make an informed decision whether to accept or reject the Plan.
51.
In addition to accepting hard copy Ballots via first class mail, overnight courier,
and hand delivery, the Debtors request authorization to accept Ballots from holders of Claims in
the Voting Classes via electronic, online transmissions, solely through a customized online
balloting
portal
on
the
Debtors’
Case
Website
maintained
by
Omni
(the “E-Ballot Portal”). Parties entitled to vote may cast an electronic Ballot and electronically
sign and submit the Ballot by utilizing the E-Ballot Portal (which allows a holder to submit an
electronic signature). Instructions for electronic, online transmission of Ballots will be set forth
on the forms of Ballots. The encrypted ballot data and audit trail created by such electronic
submission shall become part of the record of any Ballot submitted in this manner and the
claimant’s electronic signature will be deemed to be immediately legally valid and effective. Any
electronic Ballot must be submitted such that it is actually received by Omni no later than the
Voting Deadline.
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d.
Tabulation Procedures
52.
Sections 1126(c) and 1126(d) of the Bankruptcy Code provide:
(c)
A class of claims has accepted a plan if such plan has
been accepted by creditors, other than any entity designated under
subsection (e) of this section, that hold at least two-thirds in amount
and more than one-half in number of the allowed claims of such
class held by creditors, other than any entity designated under
subsection (e) of this section, that have accepted or rejected such
plan.
(d)
A class of interests has accepted a plan if such plan
has been accepted by holders of such interests, other than any entity
designated under subsection (e) of this section, that hold at least two-
thirds in amount of the allowed interests of such class held by
holders of such interests, other than any entity designated under
subsection (e) of this section, that have accepted or rejected such
plan.
11 U.S.C. § 1126(c) and 1126(d).
53.
The Debtors request that the below procedures apply to tabulating Ballots
(collectively, the “Tabulation Procedures”):
a.
Whenever a holder of a Claim casts more than one Ballot voting the same
Claim(s) before the Voting Deadline, the last valid Ballot received on or
before the Voting Deadline will be deemed to reflect such holder’s intent,
and thus, to supersede any prior Ballot.
b.
Whenever a holder of a Claim casts a Ballot that is properly completed,
executed, and timely returned to Omni, but does not indicate either an
acceptance or rejection of the Plan, the Ballot will not be counted.
c.
Whenever a holder of a Claim casts a Ballot that is properly completed,
executed, and timely returned to Omni, but indicates both an acceptance and
a rejection of the Plan, the Ballot will not be counted.
d.
Each holder of a Claim shall be deemed to have voted the full amount of its
Claim in each Class and shall not be entitled to split its vote within a
particular Class. Any Ballot that partially accepts and partially rejects the
Plan will not be counted.
e.
Whenever a holder of a Claim casts Ballots received by Omni on the same
day, but which are voted inconsistently, such Ballots will not be counted.
f.
The following Ballots will not be counted:
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i.
any Ballot that is not properly submitted by the Voting Deadline,
unless otherwise provided herein or waived by the Debtors;
ii.
any Ballot that is illegible or contains insufficient information to
permit the identification of the Claim holder;
iii.
any Ballot cast by a person or entity that does not hold a Claim in a
Class that is entitled to vote to accept or reject the Plan;
iv.
any Ballot cast by a person who is not entitled to vote, even if such
individual holds a Claim in a Voting Class;
v.
any unsigned Ballot;
vi.
any Ballot for which the Court determines, after notice and a hearing,
that such vote was not solicited or procured in good faith or in
accordance with the provisions of the Bankruptcy Code; or
vii.
any Ballot transmitted to Omni by means not specifically approved by
the Court.
g.
If a Ballot is being signed by a trustee, executor, administrator, guardian,
attorney in fact, officer of a corporation, or someone otherwise acting in a
fiduciary or representative capacity, such person should indicate such
capacity when signing and, if requested by Omni, the Debtors, or the Court,
must submit proper evidence to the requesting party to so act on behalf of
such holder. In addition, authorized signatories should provide their name
and mailing address if it is different from that set forth on the attached
mailing label or if no such mailing label is attached to the Ballot.
h.
A holder of Claims in more than one Class must use separate Ballots for
each Class of Claims.
i.
The Debtors, subject to contrary order of the Court, may waive any defect
or irregularity as to any particular Ballot at any time, either before or after
the Voting Deadline, and any such waiver shall be documented in the voting
certification certifying the amount and number of holders who actually
voted in the Voting Classes and the results of such votes (the “Voting
Certification”).
j.
Neither the Debtors, nor any other entity, will be under any duty to provide
notification of defects or irregularities with respect to delivered Ballots
other than as provided in the Voting Certification, nor will any of them incur
any liability for failure to provide such notification.
k.
Unless waived by the Debtors, subject to contrary order of the Court, any
defects or irregularities in connection with deliveries of Ballots must be
cured prior to the Voting Deadline or such Ballots will not be counted.
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l.
The Debtors are authorized to enter into stipulations or other agreements
with the holder of any Claim agreeing to the amount of a Claim for voting
purposes.
54.
To assist in the solicitation process, the Debtors request that the Court grant Omni
the authority to contact parties that submit incomplete or otherwise deficient Ballots to make a
reasonable effort to cure such deficiencies, but Omni is not obligated to do so.
D.
Proposed Special Electronic Noticing Procedures
55.
Bankruptcy Rule 2002 establishes the general rule for notifying creditors of the
deadline to file objections to a plan and the hearing on confirmation of a plan. Specifically,
Bankruptcy Rule 2002(b) states that “the clerk, or some other person as the court may direct, shall
give the debtor, the trustee, all creditors and indenture trustees not less than 28 days’ notice by
mail of the time fixed . . . (2) for filing objections and the hearing to consider confirmation of a
chapter 9, or chapter 11 plan.” Fed. R. Bankr. P. 2002(b).
56.
The Debtors have approximately 456,000 Borrowers identified on the Debtors’
creditor matrix. In the ordinary course of the Debtors’ business, the Debtors communicate with
Borrowers primarily through email. To the best of the Debtors’ knowledge, the vast majority of
the Borrowers, whether PPP or legacy, have consented to the electronic transactions and noticing.
As a result, given the Debtors’ past practices and the volume of Borrowers and the costs associated
with providing actual notice by mail to Borrowers, the Court entered an order [Docket No. 77] (the
“Creditor Matrix Order”)4 approving special electronic noticing procedures with respect to
service of certain notices to Borrowers.
57.
Consistent with the relief approved in the Creditor Matrix Order, the Debtors are
seeking approval of the Special Electronic Noticing Procedures to provide Borrowers with email
4 The Creditor Matrix Order reserved the Debtors’ rights to seek the relief requested herein with respect to electronic
service of the Confirmation Hearing Notice. See Creditor Matrix Order, ¶ 8.
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service of the Confirmation Hearing Notice. The Debtors will serve the Confirmation Hearing
Notice via first-class mail directed to the last known physical address, if available, of a Borrower
in the event that: (1) the Debtors do not have a valid email address on file for a Borrower, (2) the
Debtors have previously received a “bounce-back” email in response to service of notices in these
Chapter 11 Cases or (3) a Borrower has indicated to the Debtors that it wishes to receive future
notices by physical mail.5
58.
The Debtors submit that the Special Electronic Noticing Procedures are the most
practical method by which to notify the Borrowers of the Plan Objection Deadline and the
Confirmation Hearing. If the Debtors were to provide actual notice by mail of the Confirmation
Hearing Notice to all Borrowers, Omni estimates that the cost would exceed $729,000.6 Further,
in accordance with the Creditor Matrix Order, the Debtors have been serving all documents
regarding these Chapter 11 Cases to Borrowers via email. To require the Debtors to serve the
Confirmation Hearing Notice to Borrowers via physical mail would be expensive and inconsistent
with the Debtors’ ordinary business practices.
E.
Confirmation
a.
Confirmation Hearing
59.
Bankruptcy Rule 3017(c) provides that, “[o]n or before approval of the disclosure
statement, the court shall . . . fix a date for the hearing on confirmation” of a chapter 11 plan. Fed.
R. Bankr. P. 3017(c). Pursuant to Bankruptcy Rule 2002(b), creditors must receive at least
5 For the avoidance of doubt, the Special Electronic Noticing Procedures shall not apply to any Borrower in Class (4)
(General Unsecured Claims) or, consistent with the Creditor Matrix Order, the named plaintiffs (or their counsel)
(collectively, the “Class Action Parties”) in the putative class action titled Jason Carr, Vicki LeMaster, Edward
Ford Services LLC, Carlton Morgan¸ 365 Sun LLC and Candice Worthy, individually and on behalf of all others
similarly situated v. Kabbage, Inc. d/b/a K Servicing, Case No. 1:22-cv-01249-VMC (N.D. Ga. 2022).
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28 days’ notice of a confirmation hearing. In accordance with these rules and in view of the
Debtors’ proposed solicitation schedule outlined herein, the Debtors request that a hearing on
confirmation of the Plan (the “Confirmation Hearing”) be scheduled for January 5, 2023 or on
such date and time as is convenient to the Court. The Confirmation Hearing may be adjourned or
continued from time to time by the Court or the Debtors without further notice other than
adjournments announced in open Court or as indicated in any notice of agenda of matters
scheduled for hearing filed with the Court. This will provide parties with more than 28 days’
notice of the hearing. Accordingly, the Debtors request the Court find that the proposed date for
the Confirmation Hearing is in compliance with the Bankruptcy Rules and the Local Rules and
will enable the Debtors to pursue confirmation of the Plan in a timely fashion.
b.
Objection Procedures
60.
Pursuant to Bankruptcy Rule 3020(b)(1), objections to confirmation of a plan must
be filed and served “within a time fixed by the court.” Bankruptcy Rule 2002(b) provides that
parties must receive at least 28 days’ notice of the deadline for filing objections to confirmation.
Accordingly, and in view of the Debtors’ proposed solicitation schedule outlined herein, the
Debtors propose December 23, 2022 by or before 4:00 p.m. (Prevailing Eastern Time) as the
deadline to object or respond to confirmation of the Plan (the “Plan Objection Deadline”). This
date will provide holders of Claims and Interests more than 28 days’ notice of the deadline for
filing objections to the Plan while still affording the Debtors and other parties in interest time to
file a responsive brief and, if possible, resolve any objections received. Accordingly, and in view
of the Debtors’ proposed solicitation schedule outlined herein, the Debtors propose the Plan
Objection Deadline be fixed by the Court as the deadline to object or respond to confirmation of
the Plan.
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61.
The Debtors request that objections and responses, if any, to confirmation of the
Plan (i) be in writing, (ii) conform to the Bankruptcy Rules and the Local Rules, (iii) set forth the
name of the objecting party and the nature and amount of Claims or Interests held or asserted by
the objecting party against the Debtors’ estates or property, (iv) provide the basis for the objection
and the specific grounds thereof, and (v) be filed with the Court. Any objection or response also
must be served by email and received by the Objection Notice Parties no later than the Plan
Objection Deadline. Pursuant to Bankruptcy Rule 3020(b), “[i]f no objection is timely filed, the
[C]ourt may determine that the plan has been proposed in good faith and not by any means
forbidden by law without receiving evidence on such issues.” Fed. R. Bankr. P. 3020(b)(2).
62.
The Debtors request that the Court establish December 16, 2022 as the deadline
for the Debtors to file the Plan Supplement (as defined in the Plan) with authority to further
supplement such Plan Supplement as necessary thereafter.
63.
The Debtors request that the deadline for the Debtors or any other party supporting
the Plan to file a response to any objections to confirmation of the Plan be January 3, 2023 by or
before 12:00 p.m. (Prevailing Eastern Time) (the “Reply Deadline”). The Debtors also request
that the Court establish the Reply Deadline as the deadline for the Debtors to file their brief in
support of confirmation of the Plan, the Voting Certification, and any affidavits or declarations in
support of confirmation of the Plan.
64.
The Debtors respectfully request that the Court approve the procedures for filing
objections to the Plan and replies thereto and find that such procedures comply with Bankruptcy
Rules 2002, 3017, and 3020.
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c.
Confirmation Hearing Notice
65.
Pursuant to Bankruptcy Rule 3017(d), notice of a plan confirmation objection
deadline and hearing must be provided to all creditors and equity security holders in accordance
with Bankruptcy Rule 2002.
66.
In accordance with the foregoing, by no later than the Solicitation Date, the Debtors
propose to provide a copy of the Confirmation Hearing Notice setting forth, among other things,
(i) the Voting Deadline, (ii) the Plan Objection Deadline and procedures for filing objections and
responses to confirmation of the Plan, (iii) the time, date, and place for the Confirmation Hearing,
and (iv) the Cure Procedures (as defined below) in respect of the Debtors’ assumption of executory
contracts and unexpired leases, with service provided by electronic notification for registered Case
Management and Electronic Court Filing System users or first class mail on all parties on the
Debtors’ creditor matrix (other than the Borrowers in accordance with the Special Electronic
Noticing Procedures as discussed further below). Such Confirmation Hearing Notice will be sent
contemporaneously with the Solicitation Packages, and will be supplemented as set forth in the
Proposed Order by the Supplemental Solicitation Date.
67.
The Debtors submit that the foregoing notice procedures comply with all notice
requirements under Bankruptcy Rules 3017(d) and 2002(b) and (d). Accordingly, the Debtors
request that the Court find that such notice is due and proper and no further notice is necessary.
68.
Moreover, Bankruptcy Rule 2002(l) permits the Court to “order notice by
publication if it finds that notice by mail is impracticable or that it is desirable to supplement
notice.” Fed. R. Bankr. P. 2002(l). The Debtors propose to publish the Confirmation Hearing
Notice, with such modifications as the Debtors deem appropriate for purposes of publication
(the “Publication Notice”), no later than 10 days following entry of the Proposed Order, which
will provide at least 28 days’ notice of the Confirmation Hearing, in the national edition of USA
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Today subject to applicable publication deadlines. The Debtors believe that publication of the
Publication Notice will give sufficient notice of the Confirmation Hearing to persons who do not
otherwise receive notice by electronic or first-class mail.
F.
Procedures for Assignment, Assumption, or Rejection of Executory Contracts
and Unexpired Leases Under Plan
69.
Section 8 of the Plan provides, as of and subject to the occurrence of the Effective
Date and the payment of any applicable Cure Amount,7 that all executory contracts and unexpired
leases to which any of the Debtors are parties shall be deemed rejected, unless such contract or
lease (i) was previously assumed or rejected by the Debtors pursuant to an order of the Bankruptcy
Court; (ii) previously expired or terminated pursuant to its own terms or by agreement of the parties
thereto; (iii) is the subject of a motion to assume filed by the Debtors on or before the Confirmation
Date; (iv) is identified in Section 8.4 of the Plan; or (v) is identified for assumption on the
Assumption Schedule included in the Plan Supplement.
70.
As provided for in the Plan, the Debtors will file, as part of the Plan Supplement,
the Assumption Schedule,8 and at least fourteen (14) days before the Confirmation Hearing, serve
a notice on parties to executory contracts or unexpired leases to be assumed or assumed and
assigned reflecting the Debtors’ intention to potentially assume or assume and assign the contract
or lease in connection with this Plan and, where applicable, setting forth the proposed Cure
Amount (if any).
7 “Cure Amount” is defined in the Plan as the payment of Cash or the distribution of other property (as the parties
may agree or the Bankruptcy Court may order) as necessary pursuant to section 365(b)(1)(A) of the Bankruptcy
Code to permit the Debtors to assume such executory contract or unexpired lease.
8 “Assumption Schedule” is defined by the Plan as the schedule of executory contracts and unexpired leases to be
assumed by the Debtors and assigned to the Wind Down Estate or GUC Trust as applicable, pursuant to the Plan
and included in the Plan Supplement, as may be amended, modified, or supplemented from time to time.
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71.
Any objection by a counterparty to an executory contract or unexpired lease to the
proposed assumption, assumption and assignment, or related Cure Amount must be filed, served,
and actually received by the Debtors within ten (10) days of the service of the assumption notice,
or such shorter period as agreed to by the parties or authorized by the Bankruptcy Court. The
Debtors request that any objections to the Debtors’ proposed Cure Amounts or assumption of
executory contracts and unexpired leases under the Plan (i) be in writing, (ii) conform to the
applicable Bankruptcy Rules and Local Rules, (iii) set forth the name of the objecting party, the
basis for the objection, and the specific grounds thereof, and (iv) be filed with the Court by the
Plan Objection Deadline and served upon the Objection Notice Parties by e-mail.
72.
The Debtors request that any counterparty to an executory contract or unexpired
lease that does not timely object to the notice of the proposed assumption of such executory
contract or unexpired lease shall be deemed to have assented to assumption of the applicable
executory contract or unexpired lease notwithstanding any provision thereof that purports to (i)
prohibit, restrict, or condition the transfer or assignment of such contract or lease; (ii) terminate or
modify, or permit the termination or modification of, a contract or lease as a result of any direct or
indirect transfer or assignment of the rights of any Debtor under such contract or lease or a change,
if any, in the ownership or control to the extent contemplated by the Plan; (iii) increase, accelerate,
or otherwise alter any obligations or liabilities of any Debtor, or any Wind Down Estate, under
such executory contract or unexpired lease; or (iv) create or impose a Lien upon any property or
Asset of any Debtor, or Wind Down Estates, as applicable.
73.
The Debtors intend to serve the Confirmation Hearing Notice on all parties to
executory contracts and unexpired leases, reflecting the Debtors’ intention to assume the executory
contracts or unexpired leases in connection with the Plan and indicating the Debtors’ proposed
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Cure Amount owed in connection with each such executory contract or unexpired lease. In
addition, the Confirmation Hearing Notice provides that in the event of any dispute pertaining to
the proposed Cure Amount such dispute will be addressed pursuant to Section 8.2 of the Plan,
which provides in part that, to the extent any such dispute relates solely to any Cure Amount, the
applicable Debtor may assume the executory contract or unexpired lease prior to the resolution of
any such dispute, as long as the Debtor reserves cash in an amount sufficient to pay the full amount
reasonably asserted as the required Cure Amount by the contract counterparty. Following entry
of a final order resolving any such dispute, the Debtors will have the right to reject any executory
contract or unexpired lease within 30 days of such resolution.
74.
The Debtors respectfully submit that the foregoing procedures, as provided in the
Confirmation Hearing Notice (collectively, the “Cure Procedures”), are appropriate under the
circumstances and should be approved.
75.
For the foregoing reasons, approval of the Debtor’s Disclosure Statement and
establishment of the Solicitation Procedures and Tabulation Procedures, among other relief sought
herein, is necessary, appropriate, and in the best interests of the Debtors, their estates, and all other
parties in interest in these cases. Accordingly, the Court should approve the Motion and grant the
relief requested herein.
Notice
76.
Notice of the Motion will be provided to (a) the Office of the United States Trustee
for the District of Delaware; (b) the holders of the thirty (30) largest unsecured claims against the
Debtors on a consolidated basis; (c) the Federal Reserve Bank; (d) Customers Bank; (e) Cross
River Bank; (f) the United States Department of Justice; (g) the Federal Trade Commission; (h)
the Small Business Administration; (i) the Internal Revenue Service; (j) the Securities and
Exchange Commission; (k) the United States Attorney’s Office for the District of Delaware; (l)
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the Banks; and (m) any party that has requested notice pursuant to Bankruptcy Rule 2002
(collectively, the “Notice Parties”). The Debtors believe that no further notice is required.
No Prior Request
77.
No previous request for the relief sought herein has been made by the Debtors to
this or any other court.
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WHEREFORE the Debtors respectfully request entry of the Proposed Order
granting the relief requested herein and such other and further relief as the Court may deem just
and appropriate.
Dated: October 31, 2022
Wilmington, Delaware
/s/ Matthew P. Milana
RICHARDS, LAYTON & FINGER, P.A.
Daniel J. DeFranceschi, Esq. (No. 2732)
Amanda R. Steele (No. 5530)
Zachary I. Shapiro (No. 5103)
Matthew P. Milana (No. 6681)
One Rodney Square
920 North King Street
Wilmington, Delaware 19801
Telephone: (302) 651-7700
E-mail: defranceschi@rlf.com
steele@rlf.com
shapiro@rlf.com
milana@rlf.com
-and-
WEIL, GOTSHAL & MANGES LLP
Ray C. Schrock, P.C. (admitted pro hac vice)
Candace M. Arthur (admitted pro hac vice)
Natasha S. Hwangpo (admitted pro hac vice)
Chase A. Bentley (admitted pro hac vice)
767 Fifth Avenue
New York, New York 10153
Telephone:
(212) 310-8000
E-mail:
ray.schrock@weil.com
candace.arthur@weil.com
natasha.hwangpo@weil.com
chase.bentley@weil.com
Attorneys for Debtors
and Debtors in Possession
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