Exhibit A, Objection Response Chart — In re Kabbage, Inc. d/b/a KServicing

What This Document Is

Exhibit A to the Debtors' Omnibus Reply (Docket 449.0): a chart pairing each objecting party's specific points with the Debtors' point-by-point responses and a status column (largely "Pending" or "To be addressed in connection with confirmation of the Plan").

Factual Summary

The chart itemizes: the U.S. Trustee's (Docket 431) opt-out-ballot-deficiency and non-voting-class-opt-out arguments; the United States/SBA's (Docket 433) objection to inadequate disclosure of third-party loan servicers' access to loan documentation, with the Debtors' response that they were in ongoing discussions with the United States including on transferring non-transferred Pledged PPPLF Loan documentation to the SBA; and Cross River Bank's (Docket 437) objections — inadequate disclosure of projected unsecured-creditor recoveries (Debtors' response: proceeds are necessarily uncertain, pending Wind Down Officer action), inadequate Liquidation Analysis assumptions (deferred to confirmation), inadequate disclosure of causes of action against shareholders/management related to the AmEx Transaction (Debtors' response: the DS already discloses the AmEx-Transaction investigation, with a schedule of retained Causes of Action to follow in the Plan Supplement), and inadequate disclosure of the Board's connections to existing shareholders and of the not-yet-identified Wind Down Officer (both deferred to the Plan Supplement).

Key Facts

Confirms CRB's specific objection demanded disclosure of "causes of action, including claims against shareholders and management" tied to the AmEx Transaction, and that the Debtors' response pointed to the not-yet-filed Plan Supplement schedule (later Docket 561.2).
Confirms the objecting parties and their docket numbers: U.S. Trustee (431), United States/SBA (433), Cross River Bank (437).
Most responses are marked "Pending" or deferred explicitly to the Confirmation Hearing rather than resolved in this reply.

Source Caveats

The chart itself states it does not address every point in every objection and that the Debtors reserved rights on confirmation-stage arguments; use the full objections and reply for complete argument.

Date: 2023-01-17

Cite this document

“Exhibit A, Objection Response Chart — In re Kabbage, Inc. d/b/a KServicing.” Original at archive.org, dated 2023-01-17. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2023-01-17-kservicing-bankruptcy-6e7e2a73-1/, SHA-256 6e7e2a730b557ec1b07b6034aa7ac3a91585f90e74d399425a98a761d58dbe93.

Full text

Case 22-10951-CTG Doc 449-1 Filed 01/17/23 Page 1 of 5

Exhibit A
Objection Response Chart
Case 22-10951-CTG Doc 449-1 Filed 01/17/23 Page 2 of 5

In re Kabbage, Inc. d/b/a KServicing
Ch. 11 Case No. 22-10951 (CTG)

Summary of the Objections and Debtors’ Responses1

Objecting Party Summary of Objections Debtors’ Responses Status
The opt-out rights, as provided by the The ballots are appropriate and consistent with the Pending.
Debtors’ proposed form of ballot, are requirements of the Bankruptcy Code and corresponding
deficient because there is no option to rules. Holders who are eligible to vote and vote to accept
accept the Plan and “opt-out” of the release. the plan do not require an ability to opt-out of the releases.
United States Trustee
See Disclosure Statement, I.C; Reply, ¶¶ 34-40.
(“U.S. Trustee”) [D.I.
431]
Non-voting classes should be provided an Parties in nonvoting classes appropriately have the Pending.
opt-out form with respect to the releases and opportunity to object to the releases. See Disclosure
that the Debtors’ proposed releases require Statement, I.C; Reply ¶¶ 41-44.
affirmative action to be deemed consensual.
The Disclosure Statement does not contain The Debtors are in ongoing discussions with the United Pending.
adequate disclosure regarding third-party States to resolve any concerns that they have regarding
loan servicers’ access to loan third-party loan servicers’ access to loan documentation,
documentation and information necessary including with respect to the transfer of certain non-
United States of America to service the loans. transferred Pledged PPPLF Loan documentation to the
on behalf of itself and the SBA.
Small Business
Administration (“United As revised, the Disclosure Statement includes disclosure
States”) [D.I. 433] regarding the potential paths ahead (e.g. transfer of loan
servicing obligations to third parties or Post-Effective Date
PPP Servicing), the work done to date, and importantly,
what a work plan for what remains. See Disclosure
Statement, I.B; Reply, ¶ 31.
The Disclosure Statement does not contain The Disclosure Statement states that sources of distribution Pending.
Cross River Bank adequate disclosure regarding the projected under the Plan will include, among other things, proceeds
(“CRB”) [D.I. 437] recoveries the Debtors’ anticipate from the Estate Causes of Action. These proceeds are
unsecured creditors such as CRB will necessarily uncertain given they may be pursued by the

1
Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Debtors’ Omnibus Reply to Objections to Disclosure
Statement (full title) (the “Reply”), the applicable Objection, the Plan, the Disclosure Statement, or the Motion, as applicable. This chart summarizes certain key
issues raised in the Objections. To the extent that an Objection or a specific point raised in an Objection is not addressed herein, the Debtors reserve the right to
respond to such Objection up to and at the hearing on the Disclosure Statement. The Debtors reserve all rights with respect to the confirmation objections raised in
the Objections.
Case 22-10951-CTG Doc 449-1 Filed 01/17/23 Page 3 of 5

Objecting Party Summary of Objections Debtors’ Responses Status
receive and how the Debtors’ intend to fund Wind Down Officer on a post-Effective Date basis. See
the Plan distribution. Disclosure Statement, V.I; Reply, ¶ 19.

The Debtors are not entitled to make certain The Debtors disclose the reasonable basis for their To be addressed in
assumptions in their Liquidation Analysis assumptions in their Liquidation Analysis, including with connection with
with respect to creditor recoveries based on respect to certain ranges of recoveries. Disclosure confirmation of the Plan.
projections of outstanding balances of loan Statement, Exhibit C. The Debtors will be prepared to
portfolios. prove at confirmation that the assumptions are reasonable,
as the standard requires.

The Disclosure Statement does not contain The Disclosure Statement discloses that the Debtors are Pending.
adequate disclosure regarding the causes of investigating any potential claims and causes of action
action, including claims against relating to the AmEx Transaction. See Disclosure
shareholders and management. Statement, V.I. The Debtors’ plan supplement will reflect
a schedule of retained Causes of Action.

The Disclosure Statement does not contain The Disclosure Statement discloses information regarding Pending.
adequate disclosure regarding the current the Board of Directors and their connections to current
Board of Directors and their connections to shareholders. See Disclosure Statement, II.C.
the Debtors’ existing shareholders.
The Disclosure Statement does not contain The Debtors will disclose as part of their plan supplement, To be addressed in
adequate disclosure regarding the identity the identity of the Wind Down Officer; the plan supplement connection with
of the Wind Down Officer and process for as part of confirmation, is subject to objection. The Plan confirmation of the Plan
selection. also provides CRB with consultation rights over the identity
of the Wind Down Officer and certain material decisions of
the Wind Down Officer. See Plan § 5.4(a), (b).

The plan is patently unconfirmable because The Plan states the single share is held in trust consistent Pending.
the issuance of a single share to the Wind with such holders’ priority, which is, by definition, treated
Down Officer to hold as a custodian for as junior to holders of General Unsecured Claims and
former holders of KServicing Equity consistent with the absolute priority rule. The single share
Interests violates the absolute priority rule. construct is a standard one, meant to preserve the priority
waterfall for tax-reasons, which has been approved by
courts in this district with respect to other plans. The Plan
as revised, reflects certain language that for the avoidance
of doubt notes, the Wind Down Officer owes fiduciary
duties to creditor beneficiaries and owes no fiduciary duties
to KServicing Existing Equity Interests on account of the
Single Share until all Allowed Claims have been satisfied
in full. See Plan, § 5.4(d).

2
Case 22-10951-CTG Doc 449-1 Filed 01/17/23 Page 4 of 5

Objecting Party Summary of Objections Debtors’ Responses Status
The Disclosure Statement does not contain As revised, the Disclosure Statement includes additional Pending.
adequate disclosure regarding how the information on how the Debtors intend to transfer the loan
Debtors will accomplish the transfer of servicing obligations or provide Post-Effective Date PPP
servicing, and, in particular, with respect to Servicing. See Disclosure Statement, I.B.
the ability to transfer data to any applicable
third-party servicer.
The Debtors’ proposed releases as overly Objections to releases are confirmation objections rather To be addressed in
broad, unjustified, and not permitted. than an objection to the adequacy of the information in the connection with
Disclosure Statement, and should be addressed in confirmation of the Plan.
connection with confirmation.

The opt-out rights, as provided by the The ballots are appropriate and consistent with the Pending.
Debtors’ proposed form of ballot, are requirements of the Bankruptcy Code and corresponding
deficient because there is no option to rules. Holders who are eligible to vote and vote to accept
accept the Plan and “opt-out” of the release. the plan do not require an ability to opt-out of the releases.
See Disclosure Statement, I.C; Reply ¶¶ 34-40.

Contingent claims should not be allowed in As explained in the Reply, courts have routinely approved Pending.
the form of $1.00 for voting purposes as voting and tabulation procedures that provide that holders
such a restriction is improper and of contingent claims may vote in the amount of $1.00. See
inconsistent with the plain language of the Reply ¶ 46.
Bankruptcy Code.
10 days is insufficient time to object to the 10 days to object to the Assumption Schedule is sufficient Resolved.
Debtors’ Assumption Schedule and service and more time than is contemplated under the local rules.
of the notice of assumption or rejection be Reply ¶¶ 47-48.
served on counsel through the ECF system
or some electronic means.
The Debtors fail to disclose the impact that Given that the Debtors’ Plan is a chapter 11 plan of Pending.
the dischargeability of certain governmental liquidation, the Debtors are not seeking a discharge
claims may have on the Debtors’ ability to pursuant to section 1141(d). See Plan, § 10.3((f)(2). A
consummate the Plan, the ability to nondischargable general unsecured claim, does not affect
implement the transactions and other plan feasibility (which is a confirmation issue because the
actions contemplated by the Plan, or nondischargable nature of a claim does not affect its
creditor recoveries under the Plan. In priority). Pursuant to section 1122(a) and 1123(a)(4) of the
particular, the Debtors entered into a Bankruptcy Code, unsecured creditors holding
stipulation with the United States to extend nondischargeable debts are to be classified and treated the
the government’s deadline to bring a same as general unsecured claims with dischargeable debts.
nondischargeability complaint premised on, In re Howell, 84 B.R. 834, 836 (Bankr. M.D. Fla. 1988)
among other things, the False Claims Act. (“Pursuant to § 1123(a)(4) of the Code, each claim or
interest of a particular class must receive the same treatment

3
Case 22-10951-CTG Doc 449-1 Filed 01/17/23 Page 5 of 5

Objecting Party Summary of Objections Debtors’ Responses Status
under a plan. Section 1122(a) of the Code prohibits the
placing of substantially similar claims in separate classes …
Accordingly, the plain language of §§ 1122(a) and
1123(a)(4) suggests that unsecured creditors holding
nondischargeable debts are to be classified and treated the
same as other unsecured creditors.”).

File and source

File: gov.uscourts.deb.188293.449.1.pdf
Size: 236,260 bytes
SHA-256: 6e7e2a730b557ec1b07b6034aa7ac3a91585f90e74d399425a98a761d58dbe93
Our copy: gov.uscourts.deb.188293.449.1.pdf
Original: archive.org