In re Kabbage, Inc., 3-13-23

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UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE

IN RE:

   .  Chapter 11

   .  Case No. 22-10951 (CTG)
KABBAGE, INC., d/b/a
   .  (Jointly Administered)
KSERVICING, et al.,
.

   .  Courtroom No. 7

   .  824 Market Street

Debtors.    .  Wilmington, Delaware 19801

   .
                            .  Monday, March 13, 2023
. . . . . . . . . . . . . . .  1:00 p.m.

TRANSCRIPT OF ZOOM HEARING
BEFORE THE HONORABLE CRAIG T. GOLDBLATT
UNITED STATES BANKRUPTCY JUDGE

APPEARANCES:

For the Debtors:
Zachary I. Shapiro, Esquire

RICHARDS, LAYTON & FINGER, PA

One Rodney Square

920 North King Street

Wilmington, Delaware 19801

-and-

Candace M. Arthur, Esquire

Natasha S. Hwangpo, Esquire

Chase A. Bentley, Esquire

Theodore E. Tsekerides, Esquire

WEIL, GOTSHAL & MANGES, LLP

767 Fifth Avenue

New York, New York 10153

(APPEARANCES CONTINUED)
Audio Operator:          Sean Moran, ECRO

Transcription Company:   Reliable

                    The Nemours Building
                         1007 N. Orange Street, Suite 110
                         Wilmington, Delaware 19801
                         Telephone: (302)654-8080
                         Email:  gmatthews@reliable-co.com

Proceedings recorded by electronic sound recording,
transcript produced by transcription service.

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APPEARANCES (CONTINUED):

For the US Trustee:
Rosa Sierra-Fox, Esquire

OFFICE OF THE UNITED STATES TRUSTEE

J. Caleb Boggs Federal Building

844 King Street

Suite 2207, Lockbox 35

Wilmington, Delaware 19801

For Cross River Bank:
Gregory W. Werkheiser, Esquire

BENESCH, FRIEDLANDER, COPLAN
                           & ARONOFF, LLP
                         1313 North Market Street

Suite 1201

Wilmington, Delaware 19801

-and-

Matthew R. Scheck, Esquire

QUINN EMANUEL URQUHART
                           & SULLIVAN, LLP

300 West 6th Street

Suite 2010

Austin, Texas 78701

For the Federal Reserve
Bank of San Francisco:
Lisa M. Schweitzer, Esquire

CLEARY GOTTLIEB STEEN
                           & HAMILTON, LLP

One Liberty Plaza

New York, New York 10006

For the United States
of America:

Alastair Gesmundo, Esquire

UNITED STATES DEPARTMENT OF JUSTICE

1100 L Street, NW

Washington, DC 20005

For Customers Bank:
John J. Monaghan, Esquire

HOLLAND & KNIGHT, LLP

10 St. James Avenue

Boston, Massachusetts 02116

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APPEARANCES (CONTINUED):

For American
Express:

James L. Bromley, Esquire

SULLIVAN & CROMWELL, LLP

125 Broad Street

New York, New York 10004

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INDEX

MOTIONS:

  PAGE

Agenda
Item 1:  Amended Joint Chapter 11 Plan of Liquidation       6
         of Kabbage, Inc. (d/b/a KServicing) and its
         Affiliated Debtors
         [Docket No. 627 - filed March 9, 2023]

         Court's Ruling:                                   60

WITNESSES CALLED
BY THE DEBTORS:

       PAGE

SALIM KAFITI

Direct examination by

    --

Cross-examination by Ms. Sierra-Fox

    16

DECLARATIONS:

  PAGE

1) Declaration of Salim Kafiti

    14

2) Declaration of Deborah Rieger-Paganis                   14

3) Declaration of Kim D. Steverson                         14

4) Declaration of Laquisha Milner                          14

Declaration of Transcriptionists                           62

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(Proceedings commence at 1:00 p.m.)

THE COURT:  Be seated.

MS. ARTHUR:  I was going to say good morning, but
good afternoon, Your Honor.

(Laughter)

THE COURT:  Good afternoon.

MS. ARTHUR:  For the record, Candace Arthur of
Weil, Gotshal & Manges on behalf of Kabbage, Inc., doing
business as KServicing.  They are the debtors in this case.

Your Honor, thank you for your time and,
particularly, thank you for the accommodations that you
provided to the debtors this morning.  The time was very well
spent.  It is definitely a testament to the bankruptcy
process, and I think you're going to be pleased at least with
the outcome and what we have done during the period.

The debtors are here today seeking confirmation of
their liquidating plan.  Your Honor, I'm not going to bury
the lead here.  The only live issue that's going to be before
the Court is with respect to the limited objection of the
United States Trustee.  I will make some brief statements for
the record and to also provide some of the general idea, in
terms of the resolutions that have been reached.  We'll also
go through it with the confirmation order as to the specific
language changes.

But again, for the most part, all objections have
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been fully resolved.  And again, it -- the only one that
remains for the Court to address would be the United States
Trustee's objection.

So, Your Honor, we are here today seeking
confirmation of the debtors' liquidating plan.  We came
before the Court on October 3rd, and we didn't have a precise
view as to how these cases would end.

Without a liquidity solution in the form of the
Reserve Bank providing us with their consent to use cash
collateral and for the debtors' ability to obtain the balance
of an outstanding receivable from the partner bank Customers
Bank, we would not have been able to proceed with a -- what
we coined the "funded Chapter 11 cases."  The debtors would
have had to cease operating right away, they would have had
to cease assisting borrowers right away, and they would have
had to turn off the proverbial lights.

The debtors were able to secure the necessary
liquidity in mid to late November.  And as a result, as I
mentioned, the pursued the funded Chapter 11 case.  And once
the exit -- once the exit path materialized for the debtors,
they were able to turn their attention and focus to designing
a plan for transitioning their servicing obligations to the
relevant stakeholders.

I think it's important for the record to note that
this was not a prepackaged case, it wasn't prearranged.  And
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in five months' time, the debtors were able to secure
liquidity, continue operating in the ordinary course.

They developed a transition plan, which they had
begun to implement before confirmation -- this confirmation
hearing.  And they were also able to manage through many of
the investigations and audits that were not stayed as a
result of their commencing the cases.

I would like to, before turning over to the
objection I had mentioned, provide you with the developments
that occurred.

So we reached a resolution with the Carr
Plaintiffs, Your Honor.  And one change was specific to the
plan and another one was to the wind-down agreement.  I do
have redlines of those if you would like to see those now, or
we can handle it at the balance of the hearing.

THE COURT:  I'm happy to --

MS. ARTHUR:  Just --

THE COURT:  -- happy to look at that.

MS. ARTHUR:  Okay.

THE COURT:  Do you have them?  Yes.  If that makes
sense.

(Participants confer)

THE COURT:  Okay.  Thank you.  Okay.

MS. ARTHUR:  Okay.  We also resolved the limited
objection and reservation of rights of Cross River Bank.
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They have -- or they will -- I'm not quite sure, actually,
depending upon how the -- what the docket reflects at the
moment -- withdraw their objection.  And the language
reflecting the resolution is also going to be included in the
confirmation order, as well as certain conforming changes to
the Chapter 11 plan.

To the extent that that has not actually been
presented before the Court, so that Your Honor knows, in
general form, what the parties have agreed to is that we're
going to provide Cross River Bank with all of the data and
documents that are relevant for the transferring of their
servicing files that's in the debtors' possession, custody,
or control by April 17th.

The data and -- the data information is listed in
a December -- no, in a work plan that was affixed to the
stipulation that the Court entered, so that's also the
guidelines that we're using in connection with providing them
with those documents.

In addition, we have also agreed to provide
certain cooperation to them in connection with a 2004 motion
that they have pending against AmEx.

THE COURT:  Okay.  And that was in the redline to
the confirmation order that came in --

MS. ARTHUR:  This morning?

THE COURT:  -- at some point earlier today.
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MS. ARTHUR:  I believe --

THE COURT:  Got it.

MS. ARTHUR:  Perfect.

THE COURT:  Okay.  So then that --

MS. ARTHUR:  Then that's -- so we're --

THE COURT:  Okay.  I'm with you, I'm with you that
far.

MS. ARTHUR:  Okay.  Great.  Thank you, Your Honor.

And then I want to make a -- make some following
statements for the record for the hearing in the Chapter 11
cases.

For the first point:  As provided for and set
forth more fully in the plan, the allowed Reserve Bank claim
is comprised of an estimated principal amount in the debtors'
liquidation analysis.  It was estimated as of the conversion
date in a PPP transfer scenario as approximately 427.4
million, including, among other things, accrued and unpaid
interest, as well as additional expected costs and expenses
to be determined, which we satisfied through proceeds of the
pledged PPPLF collateral.  And adequate protection collateral
and any deficiency amounts will be afforded priority status.

Your Honor, this is only further -- I wouldn't say
the word "clarifying," but it's a further point that Ms.
Deborah Paganis also made in her declaration.

I would also note for the record in these cases,
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as well, that the debtors have been working cooperatively
with the Reserve Bank on transfer of servicing of the pledged
PPPLF loans, and the Reserve Bank has been cooperatively
working with the debtors to identify an alternative servicer
since early on in these Chapter 11 cases.

Among other things, the debtors and the Reserve
Bank are working on a plan for the orderly and efficient
transfer of servicing or related loan documents, based on the
statement of work and the feedback from the Reserve Bank,
which the debtors envision to be an iterative and evolving
process.  And the parties will continue to work together in
good faith to finalize a mutually agreeable transition plan.

Finally, the debtors refer to the transition
parties as a whole, I think, in a lot of our papers.  I do
want to note specifically that the Reserve Bank is supporting
the plan and they have been and continue to work very
cooperatively with the debtors.

I think another point to note in connection with
the Reserve Bank is that we are working with them to agree to
a cash collateral budget for the period after March 31st
through the effective date, so the parties are working on
that currently, Your Honor.

We also have been successful in reaching an
agreement in principle with Customers Bank that will resolve
both their plan objection or the joinder that they filed
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today, as well as their pending 2004 motion against the
debtors.  The precise language will be reflected in the 2004
motion.  But I think, for the record, and given the impact it
has on their plan objection, it would be prudent to just
provide you with some of the guardrails of that, as well.

The debtors have agreed that they will provide,
similar in nature to what has been agreed to with Cross River
Bank, they will provide Customers Bank with the documents and
information that they have in their possession, custody, or
control as described in the statement of work that the bank
received on or about March 8th or 9th.  And then they will do
so by a date certain, as well.

The -- any recourse that Customers Bank has in
connection with these -- with the debtors' efforts to provide
the information by a certain date is expressly limited to
specific performance.

We have also agreed with Customers Bank that, in
connection with their efforts to transition certain of the
billing, payment, and invoicing features that American
Express may have either control over or be involved with,
that we're going to facilitate them, working with American
Express to partition their particular loans in connection
with their particular invoicing procedures, so long as it
doesn't either impact the other transfer parties or in other
way -- otherwise impact the transfer process as a whole.  We
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want to make sure that it doesn't impede or delay it or
there's no costs that are incurred because AmEx is doing
something particularly for one party, versus all of the
parties.

We have also agreed, similar to Cross River, that
we were going to facilitate their efforts in connection with
the 2004 motion that they filed against American Express and
file a statement in support, in connection with that -- those
efforts, as well.  The language is very similar in that
particular paragraph.  And again, noting, of course, that the
debtors are not going to incur, in connection with their
cooperation, any costs that are material or out of the
ordinary course in connection with those cooperation efforts.

They are also working with Customers Bank in
connection with sending, I think what we'll call, I think,
the "goodbye letter" to borrowers, just to make sure that
they have noticing time of any of the transition that happens
in connection with ACH or any of the electronic payment
functions and things of that nature, in connection with the
transfer.

I'm going to look around, just to make sure that I
think I captured all of the statements and resolutions to
date.  I believe so.

So, Your Honor, that's going to conclude the
introductory remarks.
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Subject to the Court having another way that you
would like for the hearing to progress, we are going to admit
the declarations into evidence, of course give any parties
who may be remaining the option to cross.  And then we can
move forward with providing the Court with, I think, I guess
whatever is left for the balance of the hearing.  It's a good
day to be confirmed, so we'll do so.

(Laughter)

THE COURT:  I think it does make sense for you to
go ahead and get the evidence in --

MS. ARTHUR:  Sure.

THE COURT:  -- and then we'll see where we are.

MS. ARTHUR:  Okay.  I will cede the podium to my
partner Ted Tsekerides to do so.

THE COURT:  Okay.  Thank you, Ms. Arthur.

Mr. Tsekerides.

MR. TSEKERIDES:  Good afternoon, Your Honor.  Ted
Tsekerides from Weil Gotshal for the debtors.

Pretty simple, we have four declarations:

Laquisha Milner, the CEO, is at Docket 636.  I'll
just do them in order, then we can do them en masse, if
that's okay.

Salim Kafiti is the Deputy General Counsel, he's
at Document 633.

Deborah Paganis, Managing Director at
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AlixPartners, Docket 634.

And Kim Steverson from Omni Agent Solutions at
Document 635.

We ask that those be admitted into evidence.

THE COURT:  Is there any party-in-interest that
would like to be heard with respect to the admission into
evidence of the four declarations that Mr. Tsekerides just
mentioned?

(No verbal response)

THE COURT:  Seeing no one would like to be heard,
those will be admitted without objection.

(Milner Declaration received in evidence)

(Kafiti Declaration received in evidence)

(Rieger-Paganis Declaration received in evidence)

(Steverson Declaration received in evidence)

MR. TSEKERIDES:  Okay.  And the witnesses are here
or are on screen if anyone has any questions; otherwise,
that's it.

THE COURT:  Let me see.  Is there any party-in-
interest that would like the opportunity to cross-examine any
of the witnesses?

MS. SIERRA-FOX:  Yes, Your Honor.  Rosa Sierra-Fox
on behalf of the U.S. Trustee.

THE COURT:  Okay.  I'd like to cross-examine Mr.
Kafiti, I believe is the name, the General Counsel.
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MR. TSEKERIDES:  Okay.  What was her objection, on
the releases?  I guess we'll see what questions they ask, but
I'll reserve my objections.

THE COURT:  Okay.

MR. TSEKERIDES:  Okay.  Mister --

THE COURT:  Very well.  So if you can call the
witness to the stand.

(Participants confer)

THE COURT:  So apologies.  Which --

MR. TSEKERIDES:  That is 633, Docket --

THE COURT:  Thank you.

THE COURT:  Mister -- okay.  So, Mr. Kafiti, if
you could take the stand.  I apologize.  Is it Kafiti?

THE WITNESS:  Kafiti.

THE COURT:  Okay.  Apologies.  If you could -- Ms.
Barksdale, if you could swear the witness.

THE COURT OFFICER:  Raise your right hand.
SALIM KAFITI, WITNESS FOR THE DEBTORS, AFFIRMED

THE COURT OFFICER:  Please state your full name,
and spelling your last name for the record.

THE WITNESS:  Salim Kafiti, K-a-f-i-t-I.

THE COURT OFFICER:  Thank you.  You may be seated.

THE COURT:  Ms. Sierra-Fox, you can proceed.
//
//
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CROSS-EXAMINATION
BY MS. SIERRA-FOX:
Q     Good morning, Mr. Kafiti.  I'm Rosa Sierra-Fox on
behalf of the U.S. Trustee.  I just have a few questions.

You're aware of your declaration filed at Docket Entry
633?
A     Yes.
Q     In support of the confirmation of the plan?
A     Yes, I am.
Q     Okay.  Do you have that declaration in front of you?
A     I do not.
Q     Okay.  You can let me know if you need it, but I'm
going to be --

MR. TSEKERIDES:  I'd prefer that the witness have
it then, Your Honor --

MS. SIERRA-FOX:  Okay.

MR. TSEKERIDES:  -- if that's okay.

THE COURT:  Very well.

MS. SIERRA-FOX:  Okay.

MR. TSEKERIDES:  May I approach?

THE COURT:  You may.

THE WITNESS:  Thank you.
BY MS. SIERRA-FOX:
Q     Mr. Kafiti, my question is going to be about Paragraph
30.
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A     Okay.
Q     Which I -- it's on Page 14, it's under the subheading
"Injunction Provision."

(Pause in proceedings)
A     Okay.
Q     Okay.  Mr. Kafiti, you're familiar with the injunction
provision in the plan, correct?
A     I am.
Q     Okay.  And to the best of your understanding, can you
summarize it, what --
A     Yeah.  I -- I think the injunction provision in the --
in the plan prevents claimants from bringing claims against
the wind-down officer, the debtors, and other parties-in-
interest in the amended plan, to the extent that they were
performing duties, you know, in implementing the plan itself.
Q     Okay.  So it's your understanding that the injunction
provision limits claims against those entities only to the
extent that they're prevent -- performing duties in
furtherance of the plan?
A     I think it also covers claims that were resolved by the
plan itself.
Q     Okay.
A     And that's important in this case because it's not
going to be a liquidating trust.  Kabbage, Inc. will continue
on in its own name.
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Q     Okay.  So let me ask you a few questions about that.

What is the "wind-down estate," to your understanding;
what does that mean?
A     The wind-down estate will commence upon effectiveness
of the plan.
Q     Okay.  And what is the "wind-down officer"?
A     The wind-down officer is appointed -- has been
appointed and chosen and is described in some of the plan
supplement documents that were submitted within the last
couple of days, I guess it was.
Q     Okay.  And the debtor.  Is the debtor distinct,
legally, from the wind-down estates and the wind-down
officer?

MR. TSEKERIDES:  Your Honor, I object.  It calls
for a legal conclusion.  I'm fine with her asking about
facts.  At the end of the day, the legal implications of
whatever the documents or their authority over people are,
it's really not appropriate for this witness.

THE COURT:  I think, if -- the pure legal question
is a legal question, so I'll sustain the objection to that
extent.

To the extent that there is a way of getting at
the information by asking about the facts, rather than the
law, I'll give you the opportunity to do that.

MS. SIERRA-FOX:  Okay.
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THE COURT:  And I -- it -- the question, for what
it's worth, is one that I'm interested in.  So, at some
point, if it's a legal question, I'm happy to hear from the
lawyers about it.

MR. TSEKERIDES:  Right.  And we can have argument
about this --

THE COURT:  Understood.

MR. TSEKERIDES:  -- at some point.  Yeah.

THE COURT:  So there we are.
BY MS. SIERRA-FOX:
Q     Mr. Kafiti, is the debtor different from the wind-down
officer?
A     Than the wind-down officer --
Q     Yes.
A     -- or the wind-down estate?
Q     Officer is my first question.
A     The debtor is a corporate entity; the wind-down officer
is a person, so I would say yes.
Q     Okay.  And on whose behalf does the wind-down officer
act or are -- who is it authorized to act on behalf of, the
wind-down officer?
A     Until the plan goes effective, no one.
Q     After the plan goes effective?
A     I -- I'd have to look at those documents I referenced
that were filed.  Again, I've -- I've seen them, but I -- I
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don't recall as I sit here what it says.
Q     Okay.  Is the debtor different from the wind-down
estates?
A     I don't believe they are different.
Q     You don't believe they are different.
A     No, I -- the debtor -- debtors have a certificate of
incorporation, they're a corporation.  There are some
corporate governance provisions in the documents that were
submitted to the Court.  But to my knowledge, the
certificates of -- the debtors will continue on in their
corporate form.
Q     The debtors will continue on in their corporate form?
Is that what you just said?
A     Without changes to those documents, I -- that -- that
is my understanding without having the documents in front of
me.
Q     Okay.

MR. TSEKERIDES:  Your Honor, this is my whole
point.  We can argue about this, but I don't know what we
need a witness on here to have him guess as to what the legal
implications are.

THE COURT:  Yeah.  So, the extent there are actual
factual questions, I'll give you the opportunity to get those
out.  To the extent we're having a conversation about the
consequence of what the documents say, I think we can do
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that, you know --

MS. SIERRA-FOX:  Okay.

THE COURT:  -- as counsel.

MS. SIERRA-FOX:  Okay.  Here's -- I have a factual
question, Your Honor.
BY MS. SIERRA-FOX:
Q     Mr. Kafiti, in your declaration at Paragraph 30, you
state that:

"The injunction provision is essential to protect
the assets of the debtors from potential litigation from pre-
petition creditors on or after the effective date."

Do you have an example of what that litigation -- what
pre-petition litigation, potential litigation you're
referring to in that paragraph?
A     I -- I can think of some hypotheticals.
Q     Well, you have -- can you explain those?

MR. TSEKERIDES:  Well, Your Honor, I don't think a
fact witness should be giving hypotheticals.  If he's talking
about -- if it's meant for a reason, that's fine.  But I
mean, you know --

THE COURT:  I think --

MR. TSEKERIDES:  -- we are getting somewhat --

THE COURT:  I think the question is fair, to the
extent the question is -- he did testify that it's designed
to protect them.  And if the question is protect them from
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what, I think that that's a fair question.

MR. TSEKERIDES:  Okay.  Thank you.
BY MS. SIERRA FOX:
Q     Mr. Kafiti, so to restate my question:  What are you
referring to there, that the wind-down estates and the debtor
and the wind-down officer need protection from through the
injunction provision?
A     Any claimant who wants to bring a claim against the
estate, that would have had their claim, you know, barred or
otherwise, who would -- would bring a claim against Kabbage,
Inc. or any of the other debtors who are continuing to
operate in name as those entities after the effective date.

MS. SIERRA-FOX:  Okay.  Thank you, Your Honor.  No
further questions.

THE COURT:  Okay.  Any redirect?

MR. TSEKERIDES:  No redirect.  Thank you.

THE COURT:  Okay.  Mr. Kafiti, thank you for your
testimony.  You can step down.  Oh, I said -- before I said
you can step down.  Let me take that back.

Is there any other party-in-interest that would
like the opportunity to cross-examine.

UNIDENTIFIED:  No, we're just letting her back in.

(Laughter)

THE COURT:  Fair enough.

Then let me go back to where I was.  Mr. Kafiti,
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thank you for your testimony.  You can step down.

(Witness excused)

MR. TSEKERIDES:  I think that's it, unless you
want to ask if anybody -- you know, on the other witnesses.
I think the answer was no, but --

THE COURT:  Let's just --

MR. TSEKERIDES:  -- I want to make sure --

THE COURT:  Yes.

MR. TSEKERIDES:  -- we're good.

THE COURT:  Yes, let's just get a clear record.

MR. TSEKERIDES:  Yeah.

THE COURT:  Is there any party-in-interest,
including anyone who's here by Zoom and, therefore,
presumably can't cross-examine witnesses, who would like the
opportunity to cross-examine any of the other witnesses whose
declarations were admitted into evidence?

(No verbal response)

THE COURT:  Okay.  Seeing no one.

Any further evidence?

MR. TSEKERIDES:  That's it.  Thank you, Your
Honor.

THE COURT:  Thank you, Mr. Tsekerides.

Ms. Arthur.

MS. ARTHUR:  Thank you, Your Honor.

I think we can proceed now with -- I know there
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are some parties who wanted to make statements in connection
with some of the resolutions I noted.  We can give them a
moment to do so.  And then perhaps we can ask the U.S.
Trustee to come back and we can do the legal argument --

THE COURT:  All right.  Just to make sure we've
got a clear record, I take it there's no other party-in-
interest that wishes to put on evidence in connection with
the confirmation hearing.

(No verbal response)

THE COURT:  Okay.  Seeing none.

Then, Ms. Arthur, I think you're right.  To the
extent there's anyone who wants --

MS. ARTHUR:  To make --

THE COURT:  -- to be heard --

MS. ARTHUR:  -- a statement --

THE COURT:  -- in general --

MR. TSEKERIDES:  May I ask Ms. Arthur a quick
question?

MS. ARTHUR:  Sure.

THE COURT:  Certainly.

(Participants confer)

MR. TSEKERIDES:  Thank you, Your Honor.

THE COURT:  To the extent it makes sense to
have -- to the extent there are resolutions that you have all
worked hard to iron out and you think it would be helpful to
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put that on the record --

MS. ARTHUR:  Yes, Your Honor.

THE COURT:  -- that seems entirely --

MS. ARTHUR:  That's part --

THE COURT:  -- appropriate.

MS. ARTHUR:  -- of my conditions.  They have to
come and say something to you.

(Laughter)

THE COURT:  I understand.

MS. ARTHUR:  All right.

THE COURT:  So I'm --

MS. ARTHUR:  Thank you --

THE COURT:  -- happy to --

MS. ARTHUR:  -- Your Honor.

THE COURT:  -- hear from anyone who --

MS. ARTHUR:  Sure.

THE COURT:  -- would like to be heard.

MR. SCHECK:  Good afternoon, Your Honor.  Matthew
Scheck from Quinn Emanuel for Cross River Bank.

I'll keep this brief.  We just wanted to confirm
what Ms. Arthur said.  We are going to withdraw our
objection.  We have not yet, but we will certainly get to it.

And we are in support of confirmation of the plan
based on the resolution that's set forth in the documents
that were filed earlier.  And that's it, unless Your Honor
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has any questions.

THE COURT:  No.  Appreciate that.  Thank you.

MR. SCHECK:  Thank you.

MS. SCHWEITZER:  Your Honor, Lisa Schweitzer from
Cleary Gottlieb for the Federal Reserve Bank of San
Francisco.  I realize we're not an objecting party, but now
is as good of a time as any to jump up and be a proponent.

Your Honor, you're aware that, since the beginning
of the cases, the Federal Reserve Bank has been focused on
ensuring that the debtors are continuing to service the PPP
loans that are pledged as collateral under the PPP liquidity
facility with the Federal Reserve Bank in the ordinary
course.  And we've been working with the debtors on
consensual cash collateral arrangements to further the goal.

We've also been keenly focused on the orderly
transfer of servicing to another servicer that's acceptable
to the Reserve Bank, including the transfer of relevant
records to enable servicing to continue.

The cash collateral order specifically provided,
among other things, that there would be cooperation and
reasonable assistance by the debtors in the transfer of
servicing.

And while it's not a facial issue that's been
raised today as the focus of a dispute at the hearing, it's
important to note that the Federal Reserve bank also wants to
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ensure that other estate assets, particularly including
potential causes of action against third parties, are
properly preserved and available as a source of value from
paid creditors in these cases, and that's an important
provision of the plan as part of the collective plan.

On the transfer of servicing, the Reserve Bank and
the debtors have been engaged in regular dialogue on these
issues.  As Your Honor probably has seen in the submissions
and in the orders, Section 9.1(g) of the plan provides that
the transfer of servicing of the pledged PPP loans that
constitute the PPPLF collateral to a third party must be
completed to the satisfaction of the Reserve Bank as a
condition to the plan effective date.

And that requirement was included as part of the
comprehensive plan terms, where the Reserve Bank has agreed
to allow its pledged collateral to continue to be serviced
following the plan effective date and to bear the up-front
costs of the alternative servicing which will be a component
of its allowed claim, in order to further the orderly
liquidation of the collateral and mitigate the size of any
deficiency claim that may be a priority claim against the
debtors and further the likelihood that assets are available
for distribution to other creditors that are unsecured
creditors of the debtors.

The debtors and the Reserve Bank, as you've heard
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from Ms. Arthur, are -- have been working regularly together
over the last several weeks and throughout the course of the
case to identify alternative servicing options, exchange
information, and work through details to further the transfer
of the servicing.

Those efforts have already resulted in the
identification and preliminary transfer of certain loan
information.  The process is time-intensive and ongoing and
the parties are continuing to work through the remaining
issues.

In particular, the debtors and the Reserve Bank
will need the cooperation of AmEx with respect to the
transfer of certain information.  And we continue to work
with the debtors and American Express on those issues, as
well.  There's -- while there's still real work to be done,
the Reserve Bank is hopeful that the debtors and American
Express will be cooperative and responsive in completing the
transfer of servicing efficiently and to preserve estate
resources and to work towards a plan effective date in the
coming weeks.

As noted, the -- it is an important feature that
the plan does provide for the preservation of various causes
of action relating to Kabbage's 2020 divestiture of its non-
PPP related business operations.  The Reserve Bank has been
working diligently with the debtors on these issues.
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And with respect to the further plan supplement
documents that attend to the wind-down estate, including the
negotiation of a wind-down agreement, agreement on a wind-
down budget, and the selection of a wind-down officer that
would administer the debtors, as opposed to merchant's
estate, including the pursuit of litigation.  And of
particular importance to the Reserve Bank is ensuring the
wind-down budget provides for adequate funding to preserve
and pursue the remaining litigation claims for the benefit of
creditors.

As reflected in filings last week, the wind-down
officer has now been named and we expect that the debtors
will work with the proposed wind-down officer to provide him
background, position him to be able to hit the ground running
on the effective date.

The Reserve Bank will also work with the debtors,
as Ms. Arthur noted, on a budget for the period past March
under the cash collateral order and on these other issues, to
further a smooth exit from these cases in these coming weeks.

The Reserve Bank has voted in favor of the plan as
it provides contours for an orderly liquidation, the transfer
of the PPPLF collateral in a prompt and orderly way, and for
the preservation and pursuit of available litigation claims
for the benefit of all creditors, among other things.

The Reserve Bank intends to continue working with
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the debtors on the loan and servicing transfer agreement
issues and support confirmation of the plan, to the extent
that it helps to pave the way for the debtors to expediently
effectuate the transfer of servicing and the wind down of
their estates.

I realize we're not resolving an objection today.
But we wanted to give context for our support of the plan and
the various issues the parties have been working through.
We're hopeful that it will all continue on a consensual basis
and an expeditious basis.  But we feel it's helpful for you
to have a roadmap of the larger issues behind the case.

THE COURT:  Got it.

MS. SCHWEITZER:  Thank you.

THE COURT:  Thank you, Ms. Schweitzer.

MS. SCHWEITZER:  Thank you, Your Honor.

THE COURT:  Anyone else?

MR. MONAGHAN:  Your Honor, good afternoon.  John
Monaghan, Holland and Knight, counsel to Customers Bank.

As was reported by debtors' counsel, in fact a
resolution to the Customers Bank joinder and objection have
been reached.  Miss -- excuse me.  Debtors counsel did
accurately recite what those provisions with the -- the
general provisions of that agreement is.

There was one reference to a date certain.  I just
wanted to be clear that that date certain for the time in
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which the documents that were referenced would be produced is
April 17th.  It's not a date certain to be determined in the
future.  And with that qualification, Your Honor, Customers
Bank does withdraw its objection and does support
confirmation of the plan of reorganization.

THE COURT:  Okay.

MR. MONAGHAN:  Thank you.

THE COURT:  Thank you, Mr. Monaghan.

I think that's everyone from whom I've heard
objections, other than the U.S. Trustee.

Is there -- but just so there's a clear record, is
there any other party that would like to be heard, other than
the U.S. Trustee with whom -- to whom we'll get to, with
respect to confirmation?

MR. BROMLEY:  Your Honor, can you hear me?

THE COURT:  I can.

MR. BROMLEY:  Your Honor, this is Jim Bromley of
Sullivan & Cromwell on behalf of American Express Kabbage,
Inc.  May I be heard?

THE COURT:  You may.

MR. BROMLEY:  Thank you, Your Honor.

There's been references today to American Express,
and the entity that we're talking about, in particular, is
American Express Kabbage, Inc.

We have not been a party to any of these
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conversations between the debtors or any of the banking
institutions with respect to resolutions or what exactly is
being agreed to.  So, to the extent that American Express is
going to participate in any of this, obviously, we reserve
our rights.

We don't know what the agreements are.  We don't
know what is being asked of American Express.  We can't stand
here and say whether or not we can accommodate those
requests.

We, frankly, are disappointed because this has
been generally the way that the communications have been
going with American Express throughout this case.  Things
have been happening, accusations have been made, and we have
simply not been involved.  And so we reserve all of our
rights with respect to what has been agreed to, what might be
moving forward, what is being requested of American Express.

I will note, Your Honor, that the plan, it
provides for the rejection of the transition services
agreement as of the effective date.  To the extent that any
requests are being made of American Express that are outside
of the four corners of the transition services agreement or
go beyond the date of the rejection, American Express
reserves its right to seek to file administrative expense
claims against the estate with respect to any services that
need to be provided that are not already encompassed by the
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TSA or go beyond the termination of the TSA.
With that, Your Honor, and that reservation of
rights, I just wanted to let you know that's the state of
play.  It's very nice to see everybody so happy and
accommodating.  We wish that they would have treated us the
same way.  We look forward to working on a constructive basis
going forward.
THE COURT:  Okay.  Thank you, Mr. Bromley.
Is there any other party in interest that would
like the opportunity to be heard?
Ms. Arthur?
MS. ARTHUR:  So, Your Honor, just briefly in
connection with some of the statements that were just made,
we do not oppose the reservation of rights that American
Express has stated.  I'm not going to address the
mischaracterizations that were stated on the record or
references to the administrative expense claim that they may
seek to attempt to assert against the debtors, but I do want
to make clear that we don't oppose the reservation rights
that they have.
THE COURT:  Okay.  So, where I understand we are,
is that American Express isn't objecting to confirmation of
the plan but reserves all of its other rights thereafter and
so do you as against they, and I think that is what it is.
MS. ARTHUR:  I agree with it, Your Honor.
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THE COURT:  Okay.
MS. ARTHUR:  There was a (indiscernible).
MS. HWANGPO:  Your Honor, apologies.  Natasha
Hwangpo on behalf of the debtors.
We were actually going to lead in with a couple of
color points as to our resolution with the SBA.
THE COURT:  Okay.
MS. HWANGPO:  So, just in terms of how we want to
conduct the hearing, should we start with Ms. Sierra-Fox and
then we'll go into the resolution with the SBA.  There are no
outstanding items, so just some additional color for the
record.
THE COURT:  I don't have a preference.  If it's
helpful to hear the resolution --
MS. HWANGPO:  Sure, we can start with that.
THE COURT:  -- with the SBA while we're talking --
while we're all mostly talking about areas in which we
agree --
MS. HWANGPO:  Sure, absolutely.
THE COURT:  -- why don't we do that.
MS. HWANGPO:  With respect to the SBA, Your Honor,
we're happy to report, again, no outstanding issues for
today, and before turning the podium over to Mr. Gesmundo, I
wanted to provide the Court with just a little bit of color.
So, we've been working cooperatively with the SBA
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throughout these Chapter 11 cases and as evidenced in the
latest changes in the plan and confirmation, ahead of today's
hearing, there was a little bit of discussions as between the
two parties.  The SBA raised that they do not believe that
they have an obligation to pay for any kind of costs
associated with servicing of the transfer of their specific
loan portfolio.
I think in that vein, the debtors have reflected
language in the order that provides us with a little bit of
flexibility, and I think it states in the case of the SBA,
such fees, costs, and expenses -- expenses, excuse me, shall
be subject to finalization.  The parties have agreed that for
today's purposes, there are no disputes and the parties have
agreed that notwithstanding the parties' differing views on
whose payment obligations these may become, that they will
work together on resolving when and if any of these issues
come about.
So, I think Mr. Gesmundo wanted to say a couple of
things on the record, but to the extent that the parties, you
know, can't get to a consensual resolution, we may be before
the Court again, but for today's purposes, I think we are
aligned.
THE COURT:  Okay.  That sounds like a technical
way of saying "we've all agreed to kick the can down the
road."
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Is that pretty much where we are?
MS. HWANGPO:  That's correct, Your Honor.

(Laughter)
MS. HWANGPO:  You've said it in a much more
succinct way than I did.
THE COURT:  Okay.  Very well.  Thank you.
MR. GESMUNDO:  Good afternoon, Your Honor.
Alastair Gesmundo on behalf of the United States.
So, I'll just make the record clear.  The SBA's
loan program requirements, in particular, 13 CFR 120.1010 and
13 CFR 120.535(d) require that the debtor and Amex transfer
the loan records to the SBA at the SBA's request.  So these
regulations contain no proviso for reimbursement of a
lender's costs.  The program's expectation and norms are that
the lender bear these costs, and so the SBA's position is
that if the debtor and Amex do not transfer the loans at the
SBA's request, the SBA will pursue all appropriate actions to
enforce its loan program requirements.
The other point I'll make is that the
Antideficiency Act, that's 31 U.S.C. 1341(a), prohibits
federal agencies from obligating or expending federal funds
in advance or in excess of an appropriation.  And with that,
the only other thing I'll add is as debtors' counsel has
reflected, the objections that weren't SBA-specific, but more
so the United States that were filed in our limited objection
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have been resolved by the language that's in, among other
places, paragraph 32 of the confirmation order.  So, thank
you, Your Honor.
THE COURT:  Okay.  Thank you very much.
Okay.  Ms. Arthur, do you think there's anything
else, other than addressing the U.S. Trustee issue?
MS. ARTHUR:  (Indiscernible.)
THE COURT:  Okay.  So, I'm happy to proceed in
whatever manner is most helpful.  Actually, Ms. Arthur, can
we start with you?
MS. ARTHUR:  I'm definitely going to start with
Ms. Hwangpo, but yes.

(Laughter)
THE COURT:  So, because I want to make sure I
understand how the plan works and what's going on here.
MS. HWANGPO:  Certainly.
THE COURT:  Okay.  So, I get that the wind-down
estate essentially succeeds to the legal entity that was the
prepetition debtor and exists post-confirmation, post-
effective date.
MS. HWANGPO:  Post-effective date.
THE COURT:  Okay.  Now, I saw -- I just want to
get -- I saw in connection with one of the declarations, a
series of budgets for what the world looks like post-
effective date, and I think there were two and I didn't
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understand how they fit together.  And so, I just want to
understand factually, based on the documents in front of me,
what's happening after the effective date.
MS. HWANGPO:  I see.  So I think --
THE COURT:  Does that question make any sense?
MS. HWANGPO:  Yes.  I think I understand the
question and I wish I had the budgets with me, but I think
can recall from memory that I believe when we submitted the
budgets with respect to the plan supplement, that we
submitted a PPP transfer-related budget and then a post-
effective date PPP servicing budget.  So, we wanted to
provide ourselves a little bit of flexibility in terms of if
we go down one road, what does the budget look like,
especially given the plan supplement was filed in advance of
the voting deadline.
THE COURT:  Okay.
MS. HWANGPO:  We wanted to make sure that everyone
had, you know, the information as to -- at that point, we
just weren't clear as to what road we were going down.
THE COURT:  Let me ask my question in a simpler
way, then.  You now have agreements --
MS. HWANGPO:  Yes.
THE COURT:  -- right, that as I understand there
is sort of coloring that has to happen within the lines to
give effect to all of it, but you've got agreements in
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principle about how you do a transition.  And I confess it's
not crystal clear to me whether you become effective after
that transition or if some of the transition happens after
the effective date.  I'm not sure I need to know the answer
to that for this purpose.
The things that are in the wind-down estate after
the effective date, I get that it has whatever causes of
action there may be, and to the extent there are ongoing
obligations to transfer servicing that haven't already
happened, it has to do that.
What else is in the wind-down estate?
MS. HWANGPO:  Your Honor, honestly, not much more.
I would say that the causes of action are the main source of
what will go into the wind-down and saved in terms of assets.
I think there's going to be whatever cash on hand is there.
I think you've seen in the budgets that we are doing separate
reserves, but beyond that --
THE COURT:  Right.  So, there's a few million
dollars that --
MS. HWANGPO:  Correct, yes.
THE COURT:  Right.  And it's the wind-down estate
that then, does the, to the extent there are distributions to
unsecured creditors, the wind-down estate effectuates that.
MS. HWANGPO:  Correct, Your Honor.  So they're
going to be doing the rest of the liquidation of the estates
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doing claims reconciliation, as well as the subsequent
distributions, if any.
THE COURT:  And so how long the wind-down estate
is open, I take it, depends mostly on how long it takes to
pursue the causes of action and distribute the proceeds to
creditors; is that all we're really talking about?
MS. HWANGPO:  That's correct, Your Honor.
THE COURT:  And that's -- I appreciate that all of
this has been intensely negotiated and I'm not at all trying
to suggest re-doing anything, but if that was done in a,
right, post-liquidating trust that took the assets free and
clear, you wouldn't have this problem, right.  I take it
there's a good reason --  I don't even need to know what it
is -- but I take it there's a good reason why it's being left
in the debtor, such that we do have this problem.
MS. HWANGPO:  Yes, Your Honor.
THE COURT:  Okay.
MS. HWANGPO:  I can also -- I can't go into it too
deeply I can provide a reason if that's helpful.
THE COURT:  Forty thousand feet without giving
away anything that will be value destructive.
MS. HWANGPO:  I don't think I can do that.  I
think it mostly that it was a tax-driven reason.
THE COURT:  Fine.

(Laughter)
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THE COURT:  That's good enough.
So, let me ask this question.  Let me just
preview, and Ms. Sierra-Fox, you should, when you get here,
you should just tell me if you see this differently, the way
I understand the prohibition on the discharge of a
liquidating debtor, what its intent -- the reason for that
prohibition is essentially to prevent the traffic in
corporate shells.  That once the entity is just a shell, has
no assets, we don't want it discharged because you've got
something with no assets and no liabilities that can be put
to some other purpose.
And as I understand what you're telling me is the
reason you need this entity, the wind-down estates protected,
is that it's not a corporate shell.  And so, my next question
to you is once it is it a corporate shell and it's done what
it's needed to do, do you need it protected thereafter?
MS. HWANGPO:  Standing here today, I do not
believe that we would need to have it protected.
THE COURT:  Okay.  Because it seems to me the
problem you have is that you're asking for a permanent,
rather than a temporary injunction against claims against the
wind-down estates and that you might solve Ms. Sierra-Fox's
problem if, instead of granting it a permanent injunction
against the assertion of claims, it were temporary to end no
later than, say, the day the cases close, then it's not a
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discharge in disguise.
Do you see where I'm going?
MS. HWANGPO:  Yes.  Your Honor, are you alleviated
by any means to the fact that once all of the (indiscernible)
down estates are actually wound down, that they would then
dissolve as corporate entities?
THE COURT:  No, because then we still have a
corporate shell.  Well, you may or may not have a corporate
shell, but in any event, I don't think if we had a Chapter 7
case, you could grant a discharge, so long as the trustee
promised to dissolve the debtor, and so it seems to me the
same principle applies here.  So, it seems to me the more
appropriate response.
So, the problem is to say the injunction against
the assertion of claims, against the wind-down estates, which
is the entity that was the prepetition debtor goes away upon
the closing of the bankruptcy case, then -- so, the question
I have is, is there any reason in terms of how this plan
works, where that causes a problem?
MS. HWANGPO:  Your Honor, if I may just confer?
THE COURT:  Certainly.
MS. HWANGPO:  (Indiscernible.)

(Pause)
THE COURT:  And I say, if you all think I've lost
my mind and you need a few minutes to explain to me why, you
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can just ask for that and I'm --

(Pause)
MS. HWANGPO:  Your Honor, we're going to do a tag-
team effort if that's okay?
THE COURT:  Absolutely.  I'm happy to hear anyone
who will help me get it right, I will hear from.
MS. HWANGPO:  I will be right back.
THE COURT:  Mr. Shapiro?
MR. SHAPIRO:  For the record, Zach Shapiro from
Richards, Layton & Finger.  So, I guess going back to the
question that you were asking, I think it's a little more
nuanced than on the date that the cases closes, the
injunction could then be modified, because there are plenty
of circumstances where the entity will continue to hold funds
for whatever reason and distribute them later.
THE COURT:  After the case closes, okay.  So that
may not be the right date.  I'm more concerned about the
concept than the precise words.
MR. SHAPIRO:  Right.
THE COURT:  To me, what -- okay.  Look, the U.S.
Trustee says this is, in substance, a discharge, because it's
essentially a permanent injunction against the assertion of
claims against the entity and that runs up against the policy
concerns that underlie 1141(d) and 727.
MR. SHAPIRO:  Right.
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THE COURT:  It seems to me those policy concerns
aren't things that are your problem, and so the question I'm
asking is, is there a way to effectuate the purposes of the
Code --
MR. SHAPIRO:  Right.
THE COURT:  -- and give you the relief that you
want.
MR. SHAPIRO:  Yeah, so I just don't think there
needs to be.  So, we -- so, we have a plan, right, and we
designed it in a way that will protect estate assets, right.
We have creditors, all of whom had an opportunity to object.
All of them had an opportunity to -- and, actually, some of
them did, right; we had three parties object to the
injunction.  We resolved all of those objections.
THE COURT:  I understand, but the Bankruptcy Code
says the United States Trustee is standing to appear and be
heard on all of that.
MR. SHAPIRO:  But remember, I guess what I'm
saying is, there are provisions that can be disputed, right.
THE COURT:  Uh-huh.
MR. SHAPIRO:  And I don't think that anyone in
this courtroom would say that an injunction to protect estate
assets, one that has been improved in countless cases before,
the one that we have here today, that's a mirror off of
injunctions from other plans, is prohibited by law, right.
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So, at what point does it become a disputed
provision?  As of right now, all of the creditors who had an
opportunity to review it decided that, either I have an issue
with it, which we resolved, or they didn't have an issue with
it.  So, whose interests are we protecting here?
THE COURT:  I understand.  Look, I get it and I --
I think that the fact that all of the -- everyone who has
skin in the game is onboard is certainly a consideration
and -- look, but I do have an objection from a party that, at
least has a statutory matter, has standing to be heard.
MR. SHAPIRO:  Certainly.  Right.
THE COURT:  And the question that I'm asking
you -- I understand that there are some cases that do this.
MR. SHAPIRO:  Yeah.
THE COURT:  I'll tell you that the snippets of
transcripts that were cited in the brief I find to be a
personal representative aggressive and muscular use of the
bankruptcy power.  And I'm not saying that I would never do
that, but I would do it only as a last resort.
MR. SHAPIRO:  Okay.
THE COURT:  And it does seem to me you need to
come to me with a good reason why it's necessary to do that
if there's a more narrowly tailored solution that gets you
what you need.
MR. SHAPIRO:  Well, I mean, I guess where I would
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start is, I think that where we began the conversation was
there's something different here about what you normally see,
right.  A lot of times, we see assets vest in a trust, free
and clear, and we have a debtor entity that's a shell.  And
in a lot of those instances, we will resolve those objections
to the extent the U.S. Trustee raises it.  And we will
resolve that because we can craft careful language to make
sure that the actual shell entity is not getting the benefit
of the injunction or getting the benefit of the injunction in
such a way that results in a de facto discharge.
But here, we can't do that.  And what our concern
is that crafting language now to allow the injunction to be
automatically lifted, I don't know how we do that.
THE COURT:  Let me give you another solution.
We're going to put in a temporary stay without prejudice to
extending it and we can come back periodically, hopefully not
very often, and where there's a reason to continue to extend
it, we'll continue to extend it.  And when someone at the
podium runs out of reasons why it should be extended, then
we'll stop extending it.
MS. HWANGPO:  Your Honor, so we have been, as you
can probably see, discussing with different stakeholders who
have skin in the game, as you referred to it earlier, as we
talked about there are real world repercussions for immediate
purposes if we don't provide an extension or, sorry, extend
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the plan injunction to the wind-down estates.
THE COURT:  Oh, we're certainly going to -- look,
I'm not talking about lifting --
MS. HWANGPO:  Absolutely.
THE COURT:  I'm 100 percent talking about
protecting the assets, as long as there's anything there.
The only question is, once everything is gone, is there any
reason why the injunction can't then be lifted?
MS. HWANGPO:  Your Honor, I think we're aligned.
I think what we would propose, and obviously we would have to
speak to Ms. Sierra-Fox about this, but what we would propose
as an initial matter is extending the plan injunction until
distributions have been made, there are no assets left
remaining in the corporate forms, and then just giving
ourselves a little bit of flexibility so, to the extent that
the wind-down officer sees, for some unforeseen reason that
that needs to be continued to extend, we'll do that.
THE COURT:  Whatever we would do would be without
prejudice to anyone's rights to come in earlier and ask that
it be ended or your rights to come in and ask that it be
extended.  And I'll tell you now, if someone wants it ended
while there are assets there, they've got a tough road to
hoe.  But it seems to me like any injunction, this seems to
me what Section 105 is made for, which is the purpose of the
Code is to avoid the creation of a freestanding shell entity
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and the risk of trafficking shell entities, which is the way
Colliers describes the reason why we have 1141(d) and 727.
Here, we're not talking about any concern about
the trafficking in a shell entity, as long as the wind-down
estates have assets.  Once they do, the concern is present.
So, to me, to use the supplemental interstitial authority to
give effect to the purpose, allow the plan to work, serve the
purposes of the Code, while still respecting the letter, that
we're not giving a discharge or the functional equivalent of
a discharge, seems to me to be a solution that would both,
allow the estate to do what it needs to do and respect
bankruptcy law.
And while I'm not saying that one would never run
over bankruptcy law, it seems to me my broader lesson is that
should be a last resort, not the first resort.
MS. HWANGPO:  Certainly, Your Honor.  We are
agreed there.
THE COURT:  So, let me -- I guess I -- I'm not
saying this is okay with Ms. Sierra-Fox.  I want to give her
the opportunity to be heard to say, Judge, you've lost your
mind.
MS. HWANGPO:  Sure.
THE COURT:  So, Ms. Sierra-Fox, let me give you a
chance to be heard.
MS. SIERRA-FOX:  Good afternoon, Your Honor.  Rosa
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Sierra-Fox, on behalf of the United States Trustee.
THE COURT:  Okay.  Needless to say, you should
begin on the assumption that I'm inclined to agree with you
that something that is the functional equivalent of a
discharge is as prohibited by 1140(d) -- 1141(d) as an actual
discharge, and something that uses the word "discharge" in
it, seems to me to be the functional equivalent of a
discharge.
So, what we're talking about -- so, I start out
that you've persuaded me with that.  I understand Mr.
Shapiro's point about the U.S. Trustee's, you know, interest
in a world where all the creditors agree.  Let's hold that
aside for the moment, and I guess I'm interested in if I were
to enter a temporary injunction that were extendable that was
going to have an end and the end would occur at some point
when the, what are now the wind-down estates no longer had
any assets and was a shell entity, whether your office would
have a problem with that.
MS. SIERRA-FOX:  Your Honor, I think that that
solves part of the issue.
THE COURT:  Okay.  And what part doesn't it solve?
MS. SIERRA-FOX:  So, I think as written, the
injunction provision -- so, assuming all it did was -- let me
back up.
The purpose is to protect estate assets, to
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protect the property.  As I understand it, it's supposed to
be to protect the property that's going to be hopefully
distributed under the plan.
THE COURT:  Correct.
MS. SIERRA-FOX:  As written --
THE COURT:  Take out the word "discharge" from --
MS. SIERRA-FOX:  Yes.
THE COURT:  -- 11(f) or (c), I think it is, right?
Let me dig it up.  It's 11.3; is that right?
MS. SIERRA-FOX:  It's 10.3, Your Honor.
THE COURT:  Oh, I'm sorry.
MS. SIERRA-FOX:  I might have an old version of it
at this point.
THE COURT:  Right.  So, where it says,
"permanently enjoined on and after the effective date," et
cetera, and there's a language that says it's discharged, I
think that's in.
UNIDENTIFIED SPEAKER:  75(3)(c) (phonetic).
THE COURT:  Right.  By accepting distributions --
well, so I have no problem with if you accept a distribution
on account of your claim -- no, I guess it's not discharged.
To the extent you've got a deficiency, that still exists,
it's going to be stayed as long as the wind-down estates have
any assets.
But I think the notion would be that if you
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receive -- whether or not you receive a distribution,
everyone is stayed from proceeding against the wind-down
estates and whatever other entities need to be protected --
MS. SIERRA-FOX:  Right.
THE COURT:  -- for as long as there are assets in
the wind-down estate.  And I don't purport to be the
draftsperson, but I don't think this concept is that
complicated, and it would be for a period that is open-ended
and extendable or shortenable, you know, under the
circumstances.
MS. SIERRA-FOX:  Your Honor, yes, I think the way
we presented this objection was that it went beyond --
THE COURT:  You said it was a discharge in
disguise and you were right.
MS. SIERRA-FOX:  Yeah, right.  It went beyond.
With respect to the underlying claims or actions
so to speak that it's enjoining, went beyond doing that,
which was necessary to effectuate the distribution of
property or whatnot.  So, I do think that a tailoring of this
injunction provision to state that its purpose is to protect
the wind-down estates and the wind-down officer, and I think
Mr. Kafiti began describing it in this way --
THE COURT:  Right.
MS. SIERRA-FOX:  -- to do the things they need to
do in order to get, you know --
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THE COURT:  So, just so we're on the same page,
Ms. Sierra-Fox, to the extent the wind-down estate finds
itself with some cash or holds a cause of action or has, you
know, any assets, right --
MS. SIERRA-FOX:  Uh-huh.
THE COURT:  -- and under this plan, that's an
asset that's supposed to be distributed, according to the
plan, right, the waterfall established by the plan and the
Code, you don't disagree that it's appropriate for us to
enter an order that says no one else gets that while the
wind-down estate has it?
MS. SIERRA-FOX:  We don't disagree -- the U.S.
Trustee does not disagree with that.
THE COURT:  Okay.  It seems to me with that, there
ought to be a way to come up with language that accomplishes
the purpose.  And I'm not sure you need me to be the
draftsperson, actually, I'm quite sure you don't want me to
be the draftsperson, but Ms. Arthur, does that give you
enough to work with?
MS. ARTHUR:  We'll get there, Your Honor.  Yes, it
does.
THE COURT:  Look, if there's a dispute about
implementing this, I'm available, but it seems to me this
concept shouldn't be that hard, and it seems to be a
reasonably obvious way to give effect to the purposes of the
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Code while -- the prohibition on discharging a liquidating
debtor while, at the same time, protecting the estate in this
case.
MS. SIERRA-FOX:  Your Honor, and one
(indiscernible) just since we have the benefit of being in
front of you right now, I think one of the issues that --
THE COURT:  That's a kind way of putting it.
MS. SIERRA-FOX:  One of the issues that tripped us
up is the inclusion of the actual debtors.  I mean, I
understand that -- so, the plan defines a wind-down estate
separately -- not separately -- it's a separate definition,
but in essence, it's the debtors posed --
THE COURT:  Right.  It's the same legal entity.
MS. SIERRA-FOX:  Right.  I mean, I'm not sure what
the significance of having the debtors included in that,
but --
THE COURT:  It seems to me that as long as it's
temporary --
MS. SIERRA-FOX:  Okay.
THE COURT:  -- and will ultimately end, there's no
harm in being overinclusive.  There's certainly much more
risk of being underinclusive than there is of being
overinclusive.
MS. SIERRA-FOX:  Okay.  I'm willing to work
with --
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MS. ARTHUR:  We'll work with her on that, Your
Honor.
THE COURT:  Okay.
MS. SIERRA-FOX:  Okay.
THE COURT:  So, how do we proceed from here?
MS. ARTHUR:  I think that's the confirmation
order.
MR. BENTLEY:  Your Honor, Chase Bentley, Weil
Gotshal, on behalf of the debtors.
Your Honor, I believe that my colleague Ms. Arthur
already brought up to you the revised plan, which hasn't been
filed on the docket yet, but we would intend to file it after
the hearing once we've --
THE COURT:  Okay.  And, presumably, there will be
further changes to --
MR. BENTLEY:  Yes, to reflect our conversations.
THE COURT:  -- reflect this issue.
MR. BENTLEY:  Right.  And, likewise, she also
brought up to comments to the wind-down agreement, which had
been filed as part of the plan supplement.
If Your Honor has any questions about that, I
think that those have already been discussed at length
between the parties, but I'm happy to walk you through those.
THE COURT:  Okay.  So, anything that was forwarded
to chambers while you were all talking, I've read, and I
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think I understand.
MR. BENTLEY:  Yeah.
THE COURT:  If there's anything that I haven't
seen, then I don't understand it.

(Laughter)
THE COURT:  And I am -- if there are points that
you think for the record you should put on the record, I
certainly want to give you that opportunity, but don't feel
the need to humor me.  If there's something that just needs
to be submitted, I'm happy to look at it and in the highly
unlikely event that everyone agrees and I'm the problem, I'll
reach out, but I try not to be that kind of judge.
MR. BENTLEY:  Your Honor, insofar as -- certainly,
insofar as the plan and the wind-down agreement go, I think
those are very straightforward and they've been brought up to
you.  They haven't been filed yet, but I don't think that we
need to walk through those.
As for the proposed confirmation order, we filed a
redline last night at Docket 655 and then emailed it to
you --
THE COURT:  Yes.
MR. BENTLEY:  -- to your chambers, just ahead of
the hearing.  And, likewise, I think that my colleagues, and
as well as the other parties in interest have discussed those
at length at the hearing, while some of the changes are, I
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wouldn't stay "extensive," but they're certainly material, I
don't know that we need to walk through them because I think
the high-level negotiations and settlements that were
discussed by the parties already cover the gist of it.
THE COURT:  Okay.  Can I just offer maybe just
one, but I'll keep going and maybe more than one comment just
of my own on the confirmation order.
MR. BENTLEY:  Of course.
THE COURT:  Paragraph R, which in the version I've
got is -- it's on page 10 of 28 of the document that's D.I.
655, says this confirmation order constitutes a final order.
I've said this a handful of times.  I tend to be -- if you
could change that to "this confirmation order is intended to
be a final order," just so that I'm not ruling on the
jurisdiction of the District Court who gets to decide what
order is final, because it triggers the District Court's
jurisdiction.  I'm just -- I'm annoying about that.
I think the language in the earlier paragraph that
said that the injunctions are appropriate, I think if we --
once we revise the injunctions as discussed, then that will
be fine and I think -- just give me a second to flip through
it -- okay, and the only other trivial point is that what is
on the fifth page, where you say, "and for the reasons stated
by the Court at the confirmation hearing," I think I've now
stated reasons for what we're doing, so I think that's okay.
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I might just add a few words in writing just on this last
point, so if you can add words to say, you know, "as may be
supplemented in a memorandum opinion," just to the extent I
add a few words to flush out my thinking on these issues.
MR. BENTLEY:  Okay.  Thank you, Your Honor.  We'll
certainly add those.
THE COURT:  Okay.  But none of that, of course,
affects the finality of this order which is intended to be a
final order.  So, I take it, it seems to me what would make
the most sense -- look, well, it is to give the parties a
chance to work on language that gives effect to this, and if
that comes in under certification, I'll happy to enter that
order.
I take it you're not talking about going effective
for another couple of weeks, in any event, right, so this is
not a "house on fire" situation?
MS. ARTHUR:  I agree, Your Honor.
THE COURT:  Is that right?
MS. ARTHUR:  Yes.
THE COURT:  Okay.  Mr. Bentley, anything else I
can do to be helpful?
MR. BENTLEY:  No, that's all, Your Honor.  We'll
submit a revised, proposed order.
THE COURT:  Okay.
MR. BENTLEY:  Thank you.
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THE COURT:  Thank you.
MS. ARTHUR:  Hi, Your Honor, for the record,
again, Candace Arthur.  I'm only standing up to see if you
wanted to take a few moments to give me a final ruling or not
or what you wanted next.  (Indiscernible.)
THE COURT:  So, look, I'm -- let me say the
following, and if you need --
MS. ARTHUR:  Please.
THE COURT:  -- me to say more, I will.  But I
think the findings and conclusions in what will be the
confirmation order will be sufficient for the record to have
reflected the satisfaction of the elements of confirmation
and the propriety of the plan.  I'll say having, you know,
spent some of the weekend reading the declarations and the
like, I am satisfied that but for -- let me take this in
order.
First, you know, I appreciate that a ton of work
was done, some of it, you know, today, to resolve objections.
And Ms. Arthur, you said earlier in the hearing that this was
the bankruptcy process working the way it should, and I just
wanted to underscore that observation.  The work that all of
you did so that this was 99.5 percent consensual is really in
the best traditions of the profession and you're all to be
congratulated for that.
You know, many of you have heard me say that the
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more you do to prevent me from deciding issues, the less
likely I am to make a mistake, and I really do appreciate all
of the good work of the parties (indiscernible) consensus and
thought that where you've all landed was imminently sensible
and to have good effect.
Look, I appreciate that this case, you know, even
as messy cases go, is messy and the work of all of the
professionals on all sides to bring this to this point, even
if there's -- you know, we're not at the end of the tunnel
yet -- but to get to this point really is remarkable and
everyone has my thanks and my congratulations for all of that
terrific work.
Having reviewed all of the declarations and in
light of the resolution of all of the disputes, save for one,
I am 100 percent satisfied that the requirements for
confirmation are met and that this plan is appropriately
confirmed.  As I said, I meant to say a few more words about,
my view is that the injunctive language that was permanent
was -- look, I don't need to rule definitively that it was --
MS. ARTHUR:  We're resolving that.  You don't need
to rule definitively.
THE COURT:  Right.  Exactly.  I think that issue
is going to be resolved in a way that will obviate my
concerns and I think that the resolution will -- is an
appropriate one.
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And so, that's all I've got and subject to the
parties coming up with language, I'm delighted to enter the
confirmation order and appreciate everyone's good work.
MS. ARTHUR:  Thank you very much, Your Honor.
THE COURT:  So, is there any -- while we're
here -- so, let me just ask this question.  So, I have on the
calendar a hearing next week on sort of a reconciliation
dispute.  Is that still on?  While peace has broken out, that
hasn't --
MS. ARTHUR:  No, I don't have a check yet, so no,
it has not.  It's still pending, Your Honor.
THE COURT:  Okay.  That's fine.
MS. ARTHUR:  But we did clear up the other, the
2004, I think was also on that date, too, so your calendar is
a little lighter, for sure.
THE COURT:  Okay.  No worries.  I just wanted to
understand where we were.
Mr. Werkheiser?
MR. WERKHEISER:  Good afternoon, Your Honor.
I just, while we were touching on the calendar for
next week, I did just want to remind Your Honor that the
Cross River Bank 2004 motion is still scheduled to go forward
I believe on the 22nd at 1 o'clock.
THE COURT:  Got it.  Okay.
MR. WERKHEISER:  Thank you, Your Honor.
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THE COURT:  Thank you.
While we're here, is there any other way in which
the Court can be helpful to any of the parties in interest?

(No verbal response)
THE COURT:  Okay.  So, anything else from the
debtor, Ms. Arthur?
MS. ARTHUR:  That's all, Your Honor.  We'll rest
today.
THE COURT:  Okay.  Thanks to everyone.
And with that, we're adjourned.  Thank you.
COUNSEL:  Thank you, Your Honor.

(Proceedings concluded at 2:06 p.m.)

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CERTIFICATION

We certify that the foregoing is a correct
transcript from the electronic sound recording of the
proceedings in the above-entitled matter to the best of our
knowledge and ability.

/s/ William J. Garling                      March 13, 2023
William J. Garling, CET-543
Certified Court Transcriptionist
For Reliable

/s/ Coleen Rand                             March 13, 2023

Coleen Rand, CET-341

Certified Court Transcriptionist
For Reliable

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