Kabbage - Second Objection to Claims for Reclassification As Filed
- Date
- 2023-03-14
Summary
Exhibit B to the debtors' second omnibus claim objection in the Chapter 11 cases of Kabbage, Inc. d/b/a KServicing, et al., Case No. 22-10951 (CTG), in the United States Bankruptcy Court for the District of Delaware, filed March 14, 2023 as Doc 679-3. It is a declaration under 28 U.S.C. § 1746 by a Director at AlixPartners, LLP, the debtors' financial advisor, in support of the Debtors' Second Omnibus Objection (Substantive) to Certain Misclassified Claims. The declaration states that the claims listed on Schedule 1 assert priority under section 507(a), administrative expense status under section 503(b)(9) or secured status under section 506 of the Bankruptcy Code, that the debtors' books and records show no basis for those classifications, and that each claimant is a borrower of a Paycheck Protection Program loan the debtors service. The document is 9 pages.
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Case 22-10951-CTG Doc 679-3 Filed 03/14/23 Page 1 of 9
Exhibit B
Declaration of Thora Thoroddsen
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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)
:
------------------------------------------------------------ x
DECLARATION OF THORA THORODDSEN
IN SUPPORT OF THE DEBTORS’ SECOND OMNIBUS
OBJECTION (SUBSTANTIVE) TO CERTAIN MISCLASSIFIED CLAIMS
I, Thora Thoroddsen, pursuant to 28 U.S.C. § 1746, hereby declare under penalty
of perjury that the following is true and correct to the best of my knowledge, information, and
belief:
1. I am a Director at AlixPartners, LLP (“AlixPartners”), who was retained
as financial advisor to Kabbage, Inc. d/b/a KServicing and its affiliated debtors in the above-
captioned chapter 11 cases (the “Chapter 11 Cases”), as debtors and debtors-in-possession
(collectively, the “Debtors”), by order of the Court entered on October 21, 2022, and have served
in such capacity since July, 2022.
2. I have been actively involved in the services provided by AlixPartners to
the Debtors. In particular, I was directly involved in preparing the Debtors’ requests for first-day
relief sought on the Petition Date and the schedules of assets and liabilities and statements of
1
The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification
number, as applicable are: Kabbage, Inc. d/b/a KServicing (3937); Kabbage Canada Holdings, LLC (N/A); Kabbage
Asset Securitization LLC (N/A); Kabbage Asset Funding 2017-A LLC (4803); Kabbage Asset Funding 2019-A
LLC (8973); and Kabbage Diameter, LLC (N/A). Kabbage is a trademark of American Express used under license;
Kabbage, Inc. d/b/a KServicing is not affiliated with American Express. The Debtors’ mailing and service address
is 925B Peachtree Street NE, Suite 383, Atlanta, GA 30309.
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financial affairs (the “Schedules and Statements”). I have also led efforts to take inventory of
and analyze all proofs of claim filed against the Debtors. Through these efforts, I have become
generally knowledgeable and familiar with the Debtors’ day-to-day operations, business and
financial affairs, books and records, and the progression of these Chapter 11 Cases.
3. I have reviewed the Debtors’ Second Omnibus Objection (Substantive) to
Certain Misclassified Claims (the “Objection”) filed by the Debtors contemporaneously herewith,
and I am authorized to submit this declaration (this “Declaration”) on behalf of the Debtors in
support of the Objection. Except as otherwise indicated herein, the facts set forth in this
Declaration are based upon my personal knowledge, my review of relevant documents, the
Debtors’ books and records, the Schedules and Statements, information provided to me by the
Debtors and the Debtors’ advisors, and my opinion based upon my experience, knowledge, and
information concerning the Debtors. If called upon to testify, I would testify competently to the
facts set forth in this Declaration.
Misclassified Claims
4. Based upon a careful review and analysis in good faith of the Debtors’
books and records, the Schedules and Statements, and the Claims Register, utilizing due diligence
by appropriate personnel, I believe that the Misclassified Claims, listed on Schedule 1 and
summarized below, fail to provide, and I am not otherwise aware of, any facts to support their
priority, administrative expense, and/or secured claim status as asserted.
5. The following claimants assert priority claims pursuant to one or more of
the following subsections of section 507(a) of the Bankruptcy Code: 507(a)(1)(A) or (a)(1)(B),
507(a)(4), 507(a)(5), 507(a)(7), 507(a)(8), and/or an unspecified subsection of 507(a); an
administrative expense claim pursuant to section 503(b)(9) of the Bankruptcy Code; and/or a
secured claim pursuant to section 506 of the Bankruptcy Code. Based on my review of the
2
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Debtors’ books and records, such claims do not satisfy (i) the statutory prerequisites for priority
under any of the aforementioned subsections of section 507(a) of the Bankruptcy Code; (ii) the
requirements for an administrative expense claim under section 503(b)(9) of the Bankruptcy Code;
and/or (iii) a secured claim under section 506 of the Bankruptcy Code, and should be reclassified
as general unsecured claims:
Ayesha Salahuddin – Claim No. 951-232: Ayesha Salahuddin asserted a total
claim of $14,000. Notwithstanding the total amount of the claim set forth on the
proof of claim, the claimant asserts that: (i) $114,350 is entitled to priority pursuant
to sections 507(a)(7), 507(a)(8), and an unspecified subsection of 507(a) of the
Bankruptcy Code; (ii) $140,000 is entitled to administrative expense status
pursuant to section 503(b)(9) of the Bankruptcy Code; and (iii) $14,000 is secured.
The proof of claim asserts “Money loaned, services performed” as the basis for the
claim. See proof of claim no. 951-232. Based on a review of the Debtors’ books
and records, the Debtors have determined Ayesha Salahuddin is a borrower of a
Paycheck Protection Program loan (“PPP Loan”) that the Debtors service.
Based on review of the Debtors’ books and records, the Debtors have determined
that there are no amounts entitled to priority due and owing to Ayesha Salahuddin
under sections 507(a)(7) (the claim is not on account of a deposit in connection
with the purchase, lease, or rental of property or purchase of services), 507(a)(8)
(the claim is not on account of governmental units), or any other section of 507(a)
of the Bankruptcy Code.
In addition, the Debtors have determined there is no evidence of the Debtors
receiving goods from Ayesha Salahuddin within the twenty days prior to the
Petition Date, in the ordinary course, as required by section 503(b)(9) of the
Bankruptcy Code. Accordingly, Ayesha Salahuddin’s administrative expense
claim should be reclassified as a general unsecured claim. Finally, the Debtors have
determined there is no basis for the claim’s secured status under section 506 of the
Bankruptcy Code. Accordingly, the Debtors have determined that Ayesha
Salahuddin’s claim should be reclassified as a general unsecured claim.2
Nella's Seafood Lounge & Co Inc – Claim No. 951-239: Nella's Seafood Lounge
& Co Inc (“Nella’s Seafood”) filed a $20,833 claim asserting that the entire amount
is entitled to priority pursuant to an unspecified subsection of 507(a) of the
Bankruptcy Code. The proof of claim asserts “PPP Loan forgiveness” as the basis
for the claim. See proof of claim no. 951-239. Based on a review of the Debtors’
books and records, the Debtors have determined Nella’s Seafood is a borrower of
a PPP Loan that the Debtors service, and there are no amounts entitled to priority
2
As set forth above, the claimant asserted a total claim amount in the proof of claim of $14,000 but such proof of
claim contained inconsistences regarding the claim amount. The Debtors believe that such claim should be limited
to the asserted amount set forth on the proof of claim.
3
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due and owing to Nella’s Seafood under section 507(a) of the Bankruptcy Code.
Accordingly, Nella’s Seafood’s priority claim should be reclassified as a general
unsecured claim.
Quang Ho – Claim No. 951-235: Quang Ho filed a $7,000 claim asserting that: (i)
an undetermined amount is entitled to priority pursuant to sections 507(a)(4) and
507(a)(7) of the Bankruptcy Code, and (ii) $2,500 is entitled to administrative
expense status pursuant to section 503(b)(9) of the Bankruptcy Code. The proof of
claim asserts “Goods Sold, Lease” as the basis for the claim. See proof of claim
no. 951-235. Based on a review of the Debtors’ books and records, the Debtors
have determined Quang Ho is a borrower of a PPP Loan that the Debtors service.
Based on a review of the Debtors’ books and records, the Debtors have determined
that there are no amounts entitled to priority due and owing to Quang Ho under
sections 507(a)(4) (the claim is not on account of wages) and 507(a)(7) (the claim
is not on account of a deposit in connection with the purchase, lease, or rental of
property or purchase of services) of the Bankruptcy Code, or any record of the
alleged lease. The Debtors have also determined that there is no evidence of the
Debtors receiving goods from Quang Ho within the twenty days prior to the Petition
Date, in the ordinary course, as required by section 503(b)(9) of the Bankruptcy
Code. Accordingly, Quang Ho’s claim should be reclassified as a general
unsecured claim.
Studio Forte Spa Salon – Claim No. 951-238: Studio Forte Spa Salon (“Studio
Forte”) filed a $20,833 claim asserting that the entire amount is entitled to priority
pursuant to an unspecified subsection of 507(a) of the Bankruptcy Code. The proof
of claim asserts “PPP Loan forgiveness that was applied for” as the basis for the
claim. See proof of claim no. 951-238. Based on a review of the Debtors’ books
and records, the Debtors have determined Studio Forte is a borrower of a PPP Loan
that the Debtors service, and there are no amounts entitled to priority due and owing
to Studio Forte under section 507(a) of the Bankruptcy Code. Accordingly, Studio
Forte’s claim should be reclassified as a general unsecured claim.
Summer Stegall – Claim No. 951-2343: Summer Stegall filed a $42,023.65 claim
asserting that: (i) $12,023.63 is entitled to priority pursuant to section 507(a)(8) of
the Bankruptcy Code and (ii) $30,000 is secured. The proof of claim asserts
“Money loaned/personal injury/lose of business” as the basis for the claim. See
proof of claim no. 951-234. Based on a review of the Debtors’ books and records,
the Debtors have determined Summer Stegall is a borrower of a PPP Loan that the
Debtors service.
Based on the Debtors’ books and records, the Debtors have determined that there
are no amounts entitled to priority due and owing to Summer Stegall under section
507(a)(8) (the claim is not on account of governmental units) of the Bankruptcy
Code. In addition, the Debtors have determined that there is no basis for the claim’s
3
Claim no. 951-234, filed on February 6, 2023, amends claim no. 951-49 that was reclassified as a general unsecured
claim on February 17, 2023, pursuant to the Order Granting Debtors’ First Omnibus Objection (Substantive) to
Certain Misclassified Claims (the “First Omnibus Objection Order”) [Docket No. 546].
4
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secured status under section 506 of the Bankruptcy Code. Accordingly, Summer
Stegall’s claim should be reclassified as a general unsecured claim.
6. Based on the foregoing, I believe that the Misclassified Claims on Schedule
1 should be reclassified as general unsecured claims because the claims are not entitled to priority,
administrative expense, and/or secured status under the Bankruptcy Code. Failure to reclassify the
Misclassified Claims would lead to an inaccurate Claims Register and, based on my understanding,
would provide the claimants a recovery higher than what they should be afforded under the
Bankruptcy Code. As such, I believe the reclassification of the Misclassified Claims on the terms
set forth in the Objection is appropriate.
7. In addition to each classification error, the Misclassified Claims were all
filed after the General Bar Date. After reviewing their books and records, with the assistance of
Omni, the Debtors determined that each holder of a Misclassified Claim received notice of the
General Bar Date. As such, the Misclassified Claims are all late filed claims.
8. Based on the foregoing, my experience, and my review of the Objection, the
Debtors’ books and records, the Schedules and Statements, and the Claims Register, it is my
position that the information contained in the Objection and Schedule 1 attached thereto is true
and correct, and the relief requested by the Objection is in the best interests of the Debtors’ estates,
creditors, and economic stakeholders.
I declare under penalty of perjury that the foregoing is true and correct to the best of my
knowledge, information, and belief.
Date: March 14, 2023
Woodcliff Lake, New Jersey
/s/ Thora Thoroddsen
Thora Thoroddsen
Director
AlixPartners, LLP
5
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Schedule 1
Misclassified Claims
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Misclassified Claims
(Claims are listed alphabetically)
Claimant Name Misclassified Modified
Date Claim Claim
# Debtor Name Claim Classification Reason for Reclassification
Filed No.
Amount Status1
Ayesha Salahuddin asserted a total claim of $14,000. Notwithstanding the total
amount of the claim set forth on the proof of claim, the claimant asserts that: (i)
$114,350 is entitled to priority pursuant to sections 507(a)(7), 507(a)(8), and an
unspecified subsection of 507(a) of the Bankruptcy Code; (ii) $140,000 is entitled to
administrative expense status pursuant to section 503(b)(9) of the Bankruptcy Code;
and (iii) $14,000 is secured. The proof of claim asserts “Money loaned, services
performed” as the basis for the claim. See proof of claim no. 951-232. Based on a
review of the Debtors’ books and records, the Debtors have determined Ayesha
$114,350.00 (P) $0.00 (P) Salahuddin is a borrower of a Paycheck Protection Program loan (“PPP Loan”) that
Ayesha Salahuddin $140,000.00 (A) $0.00 (A) the Debtors service, and that there are no amounts entitled to priority due and owing to
Kabbage, Inc.
1 01/30/2023 951-232 $14,000.00 (S) $0.00 (S) Ayesha Salahuddin under sections 507(a)(7) (the claim is not on account of a deposit in
d/b/a KServicing
$0.00 (U) $14,000.00 (U)2 connection with the purchase, lease, or rental of property or purchase of services),
507(a)(8) (the claim is not on account of governmental units), or any other section of
507(a) of the Bankruptcy Code.
In addition, the Debtors have determined there is no evidence of the Debtors receiving
goods from Ayesha Salahuddin within the twenty days prior to the Petition Date, in the
ordinary course, as required by section 503(b)(9) of the Bankruptcy Code, and that
there is no basis for the claim’s secured status under section 506 of the Bankruptcy
Code. Accordingly, Ayesha Salahuddin’s claim should be reclassified as a general
unsecured claim.
Nella's Seafood Lounge & Co Inc (“Nella’s Seafood”) filed a $20,833 claim asserting
that the entire amount is entitled to priority pursuant to an unspecified subsection of
507(a) of the Bankruptcy Code. The proof of claim asserts “PPP Loan forgiveness” as
Nella's Seafood Lounge & Co Inc the basis for the claim. See proof of claim no. 951-239. Based on a review of the
Kabbage, Inc. $20,833.00 (P) $0.00 (P)
2 02/22/2023 951-239 Debtors’ books and records, the Debtors have determined Nella’s Seafood is a
d/b/a KServicing $0.00 (U) $20,833.00 (U)
borrower of a PPP Loan that the Debtors service, and there are no amounts entitled to
priority due and owing to Nella’s Seafood under section 507(a) of the Bankruptcy
Code. Accordingly, Nella’s Seafood’s priority claim should be reclassified as a
general unsecured claim.
1
(A) - Administrative, including 503(b)(9); (S) - Secured; (P) - Priority; (U) - Unsecured; (T) – Total.
2
The amount reflected herein is the total claim amount asserted on the proof of claim notwithstanding any inconsistencies contained in such proof of claim.
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Claimant Name Misclassified Modified
Date Claim Claim
# Debtor Name Claim Classification Reason for Reclassification
Filed No.
Amount Status1
Quang Ho filed a total claim of $7,000 asserting that: (i) an undetermined amount is
entitled to priority pursuant to sections 507(a)(4) and 507(a)(7) of the Bankruptcy
Code, and (ii) $2,500 is entitled to administrative expense status pursuant to section
503(b)(9) of the Bankruptcy Code. The proof of claim asserts “Goods Sold, Lease” as
the basis for the claim. See proof of claim no. 951-235. Based on a review of the
Debtors’ books and records, the Debtors have determined Quang Ho is a borrower of a
Quang Ho Undetermined (P) $0.00 (P) PPP Loan that the Debtors service, and there are no amounts entitled to priority due
Kabbage, Inc.
3 02/13/2023 951-235 $2,500.00 (A) $0.00 (S) and owing to Quang Ho under sections 507(a)(4) (the claim is not on account of
d/b/a KServicing
Undetermined (U) $7,000.00 (U) wages) and 507(a)(7) (the claim is not on account of a deposit in connection with the
purchase, lease, or rental of property or purchase of services) of the Bankruptcy Code,
or any record of the alleged lease. The Debtors have also determined that there is no
evidence of the Debtors receiving goods from Quang Ho within the twenty days prior
to the Petition Date, in the ordinary course, as required by section 503(b)(9) of the
Bankruptcy Code. Accordingly, Quang Ho’s claim should be reclassified as a general
unsecured claim.
Studio Forte Spa Salon (“Studio Forte”) filed a $20,833 claim asserting that the entire
amount is entitled to priority pursuant to an unspecified subsection of 507(a) of the
Bankruptcy Code. The proof of claim asserts “PPP Loan forgiveness that was applied
Studio Forte Spa Salon Kabbage, Inc. $20,833.00 (P) $0.00 (P) for” as the basis for the claim. See proof of claim no. 951-238. Based on a review of
4 02/22/2023 951-238
d/b/a KServicing $0.00 (U) $20,833.00 (U) the Debtors’ books and records, the Debtors have determined Studio Forte is a
borrower of a PPP Loan that the Debtors service, and there are no amounts entitled to
priority due and owing to Studio Forte under section 507(a) of the Bankruptcy Code.
Accordingly, Studio Forte’s claim should be reclassified as a general unsecured claim.
Summer Stegall filed a $42,023.65 claim asserting that: (i) $12,023.63 is entitled to
priority pursuant to section 507(a)(8) of the Bankruptcy Code and (ii) $30,000 is
secured. The proof of claim asserts “Money loaned/personal injury/lose of business”
as the basis for the claim. See proof of claim no. 951-234. Based on a review of the
Summer Stegall $12,023.63 (P) $0.00 (P) Debtors’ books and records, the Debtors have determined Summer Stegall is a
Kabbage, Inc.
5 02/06/2023 951-234 $30,000.00 (S) $0.00 (S) borrower of a PPP Loan that the Debtors service, and that there are no amounts entitled
d/b/a KServicing
$0.00 (U) $42,023.65 (U) to priority due and owing to Summer Stegall under section 507(a)(8) (the claim is not
on account of governmental units) of the Bankruptcy Code. In addition, the Debtors
have determined that there is no basis for the claim’s secured status under section 506
of the Bankruptcy Code. Accordingly, Summer Stegall’s claim should be reclassified
as a general unsecured claim
2
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