Motion to Extend Time to Assume or Reject Unexpired Leases — In re KServicing (Bankr. D. Del.)

Record facts

UNITED STATES BANKRUPTCY COURT · No. 22-10951 · Doc. 418 · 2023-01-05 · Docket on CourtListener

Full text

RLF1 28437905V.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) 
 
: 
 
 
: 
Objection Deadline: Jan. 12, 2023 at 4:00 p.m. (ET) 
------------------------------------------------------------ x 
Hearing Date: Jan. 19, 2023 at 10:00 a.m. (ET) 
MOTION OF DEBTORS FOR ENTRY OF ORDER  
(I) EXTENDING TIME TO ASSUME OR REJECT UNEXPIRED LEASES OF 
NONRESIDENTIAL REAL PROPERTY AND (II) 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” and, together with 
their non-Debtor affiliates, the “Company”), respectfully represent as follows in support of this 
motion (the “Motion”):2  
Relief Requested 
1. 
By this Motion, pursuant to section 365(d)(4) of title 11 of the United States 
Code (the “Bankruptcy Code”), the Debtors request entry of an order (i) granting an extension of 
the period of time to assume or reject unexpired leases of non-residential real property 
(the “Assumption/Rejection Deadline”) for an additional ninety (90) days, up to and including 
 
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 Amended Plan (as defined herein).  
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May 1, 2023,3 and (ii) granting related relief.  Such an extension would be without prejudice to the 
Debtors’ rights to seek further extensions, including on the basis that the initial 
Assumption/Rejection Deadline is May 1, 2023, and/or with the consent of the affected landlord, 
as provided by section 365(d)(4)(B)(ii) of the Bankruptcy Code. 
2. 
A proposed form of order granting the relief requested herein is annexed 
hereto as Exhibit A (the “Proposed Order”). 
Jurisdiction 
3. 
 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 of Bankruptcy 
Practice and Procedure of the United States Bankruptcy Court for the District of Delaware , the 
Debtors consent to the entry of a final order by the Court in connection with this 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.   
 
3  Under the Consolidated Appropriations Act of 2021, Pub. L. 116-260 (the “Act”), the initial Assumption/Rejection 
Deadline was extended from 120 days to 210 days; however, the applicable provisions of the Act sunset on 
December 27, 2022 (the “Sunset Date”).  It is presently uncertain whether debtors, such as the Debtors, with 
pending bankruptcy cases prior to the Sunset Date, whose initial Assumption/Rejection Deadline is after the Sunset 
Date, will benefit from the extension of such deadline in the Act.  Here, if the applicable provisions of the Act do 
not apply to the Debtors, the initial Assumption/Rejection Deadline is January 31, 2023, and if such provisions 
apply to the Debtors, the initial Assumption/Rejection Deadline is May 1, 2023.  Given this uncertainty, the Debtors 
are filing this Motion out of an abundance of caution without prejudice to the Debtors’ rights to seek a further 
extension of such deadline, including on the basis that, under the Act, the Debtors’ initial Assumption/Rejection 
Deadline is May 1, 2023.   
 
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Background 
4. 
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.   
5. 
Pursuant to Rule 1015(b) of the Federal Rules of Bankruptcy Procedure 
(the “Bankruptcy Rules”), the Chapter 11 Cases are being jointly administered under the above-
captioned case. 
6. 
Additional information regarding the Debtors’ business, 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]. 
Relief Requested Should Be Granted 
 
7. 
Notwithstanding the Act or its potential applicability to the Debtors and 
these Chapter 11 Cases, section 365(d)(4) of the Bankruptcy Code provides a 120-day period—
and a discretionary 90-day extension—for the assumption or rejection of an unexpired 
nonresidential lease: 
(A) Subject to subparagraph (B), an unexpired lease of nonresidential property 
under which the debtor is the lessee shall be deemed rejected and the trustee shall 
immediately surrender that nonresidential real property to the lessor, if the trustee 
does not assume or reject the unexpired lease by the earlier of— 
 
 
 
(i) the date that is 120 days after the date of the order for relief; or  
 
 
 
 
(ii) the date of the entry of an order confirming the plan. 
 
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(B)(i) The court may extend the period determined under subparagraph (A), prior 
to the expiration of the 120-day period, for 90 days on the motion of the trustee or 
lessor for cause. 
 
 
(B)(ii) If the court grants an extension under clause (i), the court may grant a 
subsequent extension only upon prior written consent of the lessor in each instance. 
11 U.S.C. § 365(d)(4).  
 
8. 
Courts consider the following non-exclusive factors to determine whether  
“cause” exists for purposes of a 90-day extension under section 365(d)(4)(B): 
 
 
(a) 
whether the debtor is paying for the use of the property;  
 
 
 
(b) 
whether the debtor’s continued occupation could damage the lessor  
 
 
 
beyond the compensation available under the Bankruptcy Code; 
 
 
 
(c) 
whether the lease is the debtor’s primary asset; 
 
 
 
(d) 
whether the debtor has had sufficient time to formulate a plan of   
 
 
 
reorganization; 
 
 
(e) 
the complexity of the case facing the debtor; and 
 
 
 
(f) 
the number of leases the debtor must evaluate. 
 
See South St. Seaport L.P. v. Burger Boys, Inc. (In re Burger Boys, Inc.), 94 F.3d 755, 760–61 (2d 
Cir. 1996); see also In re Wedtech Corp., 72 B.R. 464, 471–72 (Bankr. S.D.N.Y. 1987); Channel 
Home Ctrs., Inc. v. Channel Home Ctrs., Inc. (In re Channel Home Ctrs., Inc.), 989 F.2d 682, 689 
(3d Cir. 1993), cert. denied, 510 U.S. 865 (1993) (“[I]t is permissible for a bankruptcy court to 
consider a particular debtor’s need for more time in order to analyze leases in light of the plan it is 
formulating.”) (citing Wedtech, 72 B.R. at 471–72); In re GST Telecom Inc., No. 00-1982-GMS 
2001 WL 686971, at *3 (D. Del. June 8, 2001) (holding “equity dictates that courts can grant 
debtors additional time in which to decide whether to assume or reject a particular lease”). 
9. 
Application of these factors to the circumstances of these Chapter 11 Cases 
demonstrates that cause exists to extend the Assumption/Rejection Deadline.  First, this is the 
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Debtors’ initial motion requesting an extension of the Assumption/Rejection Deadline, therefore 
landlord consent is not required.  Second, the Debtors’ only lease for unexpired nonresidential real 
property is for the Debtors’ headquarters, located in Atlanta, Georgia (the “Headquarters 
Lease”), which is integral to the Debtors’ operations and, thus, an important asset of the Debtors’ 
estates.  As the Debtors’ corporate headquarters, the Headquarters Lease is critical to the Debtors’ 
ongoing operations, and among other things, is where the Debtors’ official mail and other 
correspondence is received, where several of the Debtors’ key employees work and meet, and 
where some of the Debtors’ essential IT equipment is located and stored.  Third, the Debtors have 
been, and will continue to be, timely paying rent for the Headquarters Lease as and when such 
rental obligations come due and, accordingly, no party in interest will be prejudiced by the relief 
requested in this Motion.  Fourth, the Chapter 11 Cases are complex and while the Debtors have 
devoted significant attention since the Petition Date towards reaching a consensus with 
stakeholders regarding a consensual chapter 11 plan, that consensus has not yet been reached and 
no plan will be confirmed and consummated prior to January 31, 2023.   
10. 
The Debtors worked quickly and diligently to prepare the Joint Chapter 11 
Plan of Liquidation of Kabbage, Inc. (d/b/a KServicing) and its Affiliated Debtors [Docket no. 14] 
to be filed on the Petition Date in an effort to bring stakeholders to the table and build consensus 
for a path forward.  Since that time, the Debtors have filed the Disclosure Statement for the Joint 
Chapter 11 Plan of Liquidation of Kabbage, Inc. (d/b/a KServicing) and its Affiliated 
Debtors [Docket No. 63], the Amended Joint Chapter 11 Plan of Liquidation of Kabbage, Inc. 
(d/b/a KServicing) and its Affiliated Debtors [Docket No. 395] (as may be amended, modified, or 
supplemented, the “Amended Plan”), and the Amended Disclosure Statement for the Amended 
Joint Chapter 11 Plan of Liquidation of Kabbage, Inc. (d/b/a KServicing) and its Affiliated 
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Debtors [Docket No. 396] (as may be amended, modified, or supplemented, the “Amended 
Disclosure Statement”), reflecting, among other things, negotiations with the Reserve Bank and 
other stakeholder comments.  A resolution of the Chapter 11 Cases requires substantial effort from 
the Debtors and their advisors as they continue to engage with various stakeholders, who each 
have raised unique and complex issues that require continued coordination among the Debtors and 
their advisors.   
11. 
Importantly, the Debtors continue to focus their efforts on seeking approval 
of the Amended Disclosure Statement so that they can begin soliciting votes on the Amended Plan.  
The Debtors’ hearing to approve the Amended Disclosure Statement is currently scheduled for 
January 19, 2023, at which time the Debtors will also seek to have the confirmation hearing related 
thereto scheduled for March 13, 2023.  In connection therewith, the Debtors intend to file an 
assumption schedule setting forth a list of agreements that the Debtors intend to assume under the 
Amended Plan, together with the Plan Supplement, on or about February 14, 2023.  The Amended 
Plan currently contemplates optionality as to whether the Debtors will continue to service their 
loan portfolios following the Effective Date of the Amended Plan.  Consequently, the Debtors’ 
analysis of whether to assume or reject the Headquarters Lease will be largely determined by 
events yet to be known or decided in connection with stakeholder negotiations and ultimate 
confirmation.  Providing the requested relief herein will ensure that the Debtors will have the 
requisite time needed to prudently determine whether to assume or reject the Headquarters Lease.   
12. 
Absent the relief requested herein, the Debtors risk the Headquarters Lease 
being rejected by operation of law pursuant to section 365(d)(4) of the Bankruptcy Code on the 
Assumption/Rejection Deadline.  Such premature rejection would be detrimental to the Debtors’ 
continued operations and would jeopardize their efforts in seeking approval of the Amended 
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Disclosure Statement, soliciting votes on the Amended Plan, and confirming and consummating 
the Amended Plan.  Further, if the Headquarters Lease is rejected prematurely, the Debtors would, 
among other things, need to transition their business operations to another location or a fully-
remote workplace system and relocate vital Company IT equipment—each of which would be 
unduly burdensome on the Debtors and would result in unnecessary and significant costs that 
would negatively impact the Debtors’ estates, and thereby, the Debtors’ stakeholders.    
13. 
For these reasons, the Debtors respectfully request an extension of the 
Assumption/Rejection Deadline by an additional ninety (90) days, as is appropriate and in the best 
interests of the Debtors, their estates, and all parties in interest. 
Notice 
14. 
Notice of this 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) the non-Debtor counterparties to the Headquarters Lease; and (m) any party that is 
entitled to notice pursuant to Bankruptcy Rule 2002 (collectively, the “Notice Parties”).  The 
Debtors believe that no further notice is required. 
No Prior Request 
15. 
No previous request for the relief sought herein has been made by the 
Debtors to this or any other court. 
 
 
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RLF1 28437905V.1 
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:  January 5, 2023 
 
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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