Second Interim Order — Cash Management System — In re KServicing

Record facts

U.S. Bankruptcy Court for the District of Delaware · No. 22-10951 · Doc. 195 · 2022-11-02 · Docket on CourtListener

Full text

RLF1 28161729v.3 
IN THE UNITED STATES BANKRUPTCY COURT 
FOR THE 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)  
 
Ref. Docket No. 12 & 78 
------------------------------------------------------------ x 
 
SECOND INTERIM ORDER (I) AUTHORIZING (A) DEBTORS TO CONTINUE  
USING EXISTING CASH MANAGEMENT SYSTEM, BANK ACCOUNTS, AND  
BUSINESS FORMS, (B) IMPLEMENT CHANGES TO CASH MANAGEMENT IN THE  
ORDINARY COURSE OF BUSINESS; AND (II) GRANTING RELATED RELIEF 
 
Upon the motion, dated October 3, 2022 (the “Motion”),2 of Kabbage, Inc. d/b/a/ 
KServicing and its debtor affiliates, as debtors and debtors in possession in the Chapter 11 Cases 
(collectively, the “Debtors”), for entry of an order pursuant to sections 105, 345, and 363 of the 
Bankruptcy Code, Bankruptcy Rules 6003 and 6004, and Local Rule 2015-2 (a) authorizing the 
Debtors to (i) continue using their existing Cash Management System and business forms and 
(ii) honor certain obligations related to the Cash Management System, (b) extending the time to 
comply with certain requirements of section 345(b) of the Bankruptcy Code, and (iii) granting 
related relief, all as more fully set forth in the Motion; and upon consideration of the Rieger-
Paganis Declaration; and this Court having jurisdiction to consider the Motion and the relief 
requested therein pursuant to 28 U.S.C. §§ 157 and 1334, and the Amended Standing Order of 
 
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. 
2  
Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms 
in the Motion. 
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RLF1 28161729v.3 
Reference entered by the United States District Court for the District of Delaware, dated February 
29, 2012; and consideration of the Motion and the requested relief being a core proceeding 
pursuant to 28 U.S.C. § 157(b); and venue being proper before this Court pursuant to 28 U.S.C. 
§§ 1408 and 1409; and due and proper notice of the Motion having been provided; and such notice 
having been adequate and appropriate under the circumstances, and it appearing that no other or 
further notice need be provided; and this Court having reviewed the Motion and having entered an 
initial interim order approving the Motion on October 6, 2022 [Docket No. 78] (the “Initial 
Interim Order”); and this Court having held a hearing to consider the interim relief requested in 
the Motion on October 6, 2022 (the “Interim Hearing”); and upon the record of the Interim 
Hearing; and this Court having determined that the legal and factual bases set forth in the Motion 
establish just cause for the relief granted herein; and upon all of the proceedings had before this 
Court and after due deliberation and sufficient cause appearing therefor, 
IT IS HEREBY ORDERED THAT 
1. 
The Motion is granted on a further interim basis to the extent set forth 
herein. 
2. 
The Debtors are authorized, but not directed, pursuant to sections 105(a) 
and 363 of the Bankruptcy Code to continue to manage their cash pursuant to the Cash 
Management System maintained prior to the Petition Date, to collect, concentrate, and disburse 
cash in accordance with the Cash Management System and to make ordinary course changes to 
their Cash Management System, absent further order of this Court, as consistent with this Order  
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RLF1 28161729v.3 
(this “Second Interim Order”).3 
3. 
The Debtors are authorized, but not directed, to (i) designate, maintain, and 
continue to use their existing Bank Accounts, in the names and with the account numbers existing 
immediately before the Petition Date, (ii) deposit funds in, and withdraw funds from, such Bank 
Accounts by all usual means, including checks, wire transfers, ACH transfers, and other debits; 
except to the extent the Reserve Bank directs the Debtors to segregate proceeds of the PPPLF 
Collateral into a custodial account, (iii) pay any Bank Fees or other charges associated with the 
Bank Accounts, whether arising before or after the Petition Date, (iv) otherwise perform their 
obligations under the documents governing the Bank Accounts, and (v) treat their prepetition Bank 
Accounts for all purposes as debtor-in-possession accounts.   
4. 
The Debtors are authorized to pay all service charges for the maintenance 
of the Cash Management System owed to any Bank, including any Bank Fees incurred in the 
ordinary course of business, whether arising before or after the Petition Date. 
5. 
Notwithstanding any other provision in this Second Interim Order, should a 
Bank honor a prepetition check or other item drawn on any account that is the subject of this 
Second Interim Order (i) at the direction of the Debtors to honor such prepetition check or item or 
(ii) in good faith belief that this Court has authorized such prepetition check or item to be honored, 
the Bank shall not be deemed to be nor shall be liable to the Debtors or their estates or otherwise 
be in violation of this Second Interim Order.  Without limiting the foregoing, the Banks may rely 
on the representations of the Debtors with respect to whether any check or other payment order 
drawn or issued by a Debtor prior to the Petition Date should be honored pursuant to this or any 
 
3 Notwithstanding the foregoing, no change shall be made to the management of the PPPLF Loans payments and 
account without prior written consent by the Reserve Bank, absent entry of an order of the Court after notice and an 
opportunity to be heard. 
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RLF1 28161729v.3 
other order of this Court, and shall not have any liability to any party for relying on such 
representations by a Debtor as provided for herein. 
6. 
The Banks are authorized to receive, process, honor, and pay any and all 
checks issued, or to be issued, and electronic funds transfers requested, or to be requested, by the 
Debtors relating to payment of the obligations described in the Motion, to the extent that sufficient 
funds are on deposit and standing in the Debtors’ credit in the applicable Bank Account to cover 
such payments.   
7. 
Nothing contained herein shall prevent the Debtors from closing any of their 
Bank Account(s) in the ordinary course of business and in accordance with prepetition practices 
as they may deem necessary and appropriate.  The Banks are authorized to honor the Debtors’ 
requests to close such Bank Accounts, and the Debtors shall give notice of the closure of any such 
Bank Account to the U.S. Trustee and any statutory committee within 15 days of such closure. 
8. 
The Debtors are authorized to open any new Bank Accounts as they may 
deem necessary and appropriate in their sole discretion; provided, however, that the Debtors give 
notice within 15 days of opening such new account to the U.S. Trustee and any statutory committee 
appointed in these chapter 11 cases; provided, further, that the Debtors shall open any new Bank 
Account at a bank that has executed a Uniform Depository Agreement with the U.S. Trustee or at 
a bank that is willing to immediately execute such an agreement except to the extent that such new 
Bank Account must be opened at a correspondent bank in order to continue to maintain a 
correspondent bank account as required by the Reserve Bank. 
9. 
The Debtors are authorized to continue the Corporate Credit Card Program 
in the ordinary course, to perform their obligations under the Corporate Credit Card Program, and 
to pay outstanding prepetition expenses arising thereunder. 
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10. 
The Debtors shall maintain accurate records of all transfers within the Cash 
Management System so that all post-petition transfers and transactions shall be adequately and 
promptly documented in, and readily ascertainable from, their books and records. 
11. 
The Debtors are authorized to use their business forms, including checks, 
without alteration and without the designation “debtor in possession” imprinted upon them; 
provided, that, once the Debtors’ existing check stock has been used, the Debtors shall use 
reasonable efforts, when reordering checks, to include the designation “Debtor in Possession” and 
the jointly administered bankruptcy case number on such checks. 
12. 
The Debtors are authorized, but not directed, to issue new post-petition 
checks, or effect new electronic funds transfers, and to replace any prepetition checks or electronic 
fund transfer requests that may be lost or dishonored or rejected as a result of the commencement 
of the Debtors’ Chapter 11 Cases with respect to any prepetition amounts that are authorized to be 
paid pursuant to this Second Interim Order or any other order of this Court. 
13. 
For Banks at which the Debtors hold accounts that are not party to a 
Uniform Depository Agreement with the U.S. Trustee, the Debtors shall use their good-faith 
efforts to cause the Banks to execute a Uniform Depository Agreement in a form prescribed by the 
U.S. Trustee within 30 days of entry of the Initial Interim Order.  The U.S. Trustee’s rights to seek 
further relief from this Court on notice in the event that the aforementioned Banks are unwilling 
to execute a Uniform Depository Agreement in a form prescribed by the U.S. Trustee are fully 
reserved. 
14. 
The requirements provided in section 345(b) of the Bankruptcy Code are 
hereby suspended as to the Bank Accounts through and including December 1, 2022 (the “Section 
345 Deadline”).  The Section 345 Deadline may be further extended by agreement of the U.S. 
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RLF1 28161729v.3 
Trustee and the Debtors without further order of the Court or, in the absence of such agreement, 
entry of an order further extending such deadline. 
15. 
The Debtors are authorized to continue all efforts related to replacement of 
the Primis Account in the ordinary course as they had commenced prior to the Petition Date 
without need for any further order or authority from this Court. 
16. 
The Debtors are authorized to continue all efforts related to processing of 
the SBA Direct-Reserve Payments in the ordinary course as they had done prior to the Petition 
Date without need for any further order or authority from this Court. 
17. 
Notwithstanding the historical nature of the remittance of proceeds by the 
Debtors, nothing herein shall limit the Debtors’ duty to remit the full amount of proceeds of the 
PPPLF Loans constituting PPPLF Collateral to the Reserve Bank, which is governed by the PPPLF 
Program Agreements; provided, that the Debtors reserve their rights with respect to whether 
certain proceeds constitute PPPLF Collateral and all rights and defenses thereto are preserved, 
solely to the extent provided in any order approving the Motion of Debtors for Entry of  Order (I) 
Authorizing Debtors’ Limited Use of Cash Collateral, (II) Granting Adequate Protection to 
Secured Lender, (III) Modifying Automatic Stay, and (IV) Granting Related Relief [Docket No. 
143]. 
18. 
Notwithstanding historical practices, the Debtors will segregate all proceeds 
of the PPPLF Loans that constitute PPPLF Collateral that the Debtors receive in the Synovus 
Servicing Account for the sole benefit of the Reserve Bank; provided, that to extent that the 
Company receives any borrower collections on account of KS PPP Loans through the Synovus 
Servicing Account such funds shall be promptly segregated from any proceeds of the PPPLF 
Collateral. 
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RLF1 28161729v.3 
19. 
Despite the use of a consolidated cash management system, the Debtors 
shall calculate quarterly fees under section 28 U.S.C. section 1930(a)(6) based on the 
disbursements of each Debtor, regardless of who pays those disbursements.  
20. 
Notice of the Motion is adequate under Bankruptcy Rule 6004(a). 
21. 
Notwithstanding the provisions of Bankruptcy Rule 6004(h), this Second 
Interim Order shall be immediately effective and enforceable upon its entry. 
22. 
The Debtors are authorized to take all actions necessary or appropriate to 
effectuate the relief granted in this Second Interim Order. 
23. 
This Court shall retain jurisdiction to hear and determine all matters arising 
from or related to the implementation, interpretation, or enforcement of this Further Interim Order. 
24. 
The Final Hearing to consider the relief requested in the Motion shall be 
held on November 21, 2022, at 1:00 p.m. (Prevailing Eastern Time), and any objections or 
responses to the Motion shall be in writing, filed with the Court, and served on or prior to October 
31, 2022 at 4:00 p.m. (Prevailing Eastern Time) (as such deadline may be extended by the 
Debtors). 
 
Dated: November 2nd, 2022 
Wilmington, Delaware
CRAIG T. GOLDBLATT 
UNITED STATES BANKRUPTCY JUDGE
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