Full text
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
)
In re:
) Chapter 11
)
VYAIRE MEDICAL, INC., et al.,1
) Case No. 24-11217 (BLS)
)
Debtors.
) (Jointly Administered)
)
) Hearing Date: July 31, 2024 at 2:00 p.m. (ET)
) Objection Deadline: July 23, 2024 at 4:00 p.m. (ET)
APPLICATION OF DEBTORS FOR ENTRY
OF AN ORDER (I) AUTHORIZING THE RETENTION AND
EMPLOYMENT OF PJT PARTNERS LP AS INVESTMENT BANKER TO
THE DEBTORS AND DEBTORS IN POSSESSION EFFECTIVE AS OF THE
PETITION DATE, (II) WAIVING CERTAIN INFORMATION REQUIREMENTS
PURSUANT TO LOCAL RULE 2016-2, AND (III) GRANTING RELATED RELIEF
The above-captioned debtors and debtors in possession (collectively, the “Debtors” and,
each, a “Debtor”) state as follows in support of this application:2
Relief Requested
1.
The Debtors seek entry of an order, substantially in the form attached hereto as
Exhibit A, (a) authorizing the employment and retention of PJT Partners LP (“PJT”) as investment
banker for the Debtors, effective as of June 9, 2024 (the “Petition Date”), in accordance with the
terms and conditions of that certain engagement letter dated as of April 25, 2024 (the “Engagement
Letter”), attached hereto as Exhibit B, (b) approving the terms of PJT’s employment, including
1 The last four digits of Debtor Vyaire Medical, Inc.’s federal tax identification number are 6495. A complete list
of each of the Debtors in these chapter 11 cases and each such Debtor’s federal tax identification number may be
obtained on the website of the Debtors’ claims and noticing agent at https://omniagentsolutions.com/Vyaire. The
location of Debtor Vyaire Medical, Inc.’s principal place of business and the Debtors’ service address in these
chapter 11 cases is 26125 North Riverwoods Boulevard, Mettawa, Illinois, USA 60045.
2
A detailed description of the Debtors and their business, including the facts and circumstances giving rise to the
Debtors’ chapter 11 cases, is set forth in the Declaration of John Bibb, Group Chief Executive Officer of Vyaire
Medical, Inc., in Support of Debtors’ Chapter 11 Petitions and First Day Motions [Docket No. 15] (the “First
Day Declaration”). Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to
them in the First Day Declaration.
Case 24-11217-BLS Doc 240 Filed 07/09/24 Page 1 of 23
2
the proposed compensation arrangements and the indemnification provisions set forth in the
Engagement Letter, as modified by the Proposed Order, under section 328(a) of title 11 of the
United States Code (the “Bankruptcy Code”), (c) modifying the time-keeping requirements of
Rule 2016-2 of the Local Rules of Bankruptcy Practice and Procedure of the United States
Bankruptcy Court for the District of Delaware (the “Local Rules”) and the U.S. Trustee Guidelines
for Reviewing Applications for Compensation and Reimbursement of Expenses Filed Under
11 U.S.C. § 330 (Appendix A to 28 C.F.R. § 58) (the “U.S. Trustee Guidelines”) established by
the Office of the United States Trustee for the District of Delaware (the “U.S. Trustee”) in
connection with PJT’s proposed engagement, and (d) granting related relief. In support of this
Application, the Debtors rely on and incorporate by reference the Declaration of Jamie Baird in
Support of the Application of Debtors for Entry of an Order (I) Authorizing the Retention and
Employment of PJT Partners LP as Investment Banker to the Debtors and Debtors in Possession
Effective as of the Petition Date, (II) Waiving Certain Information Requirements Pursuant to Local
Rule 2016-2, and (III) Granting Related Relief (the “Baird Declaration”), attached hereto as
Exhibit C and incorporated herein by reference.
Jurisdiction and Venue
2.
The United States District Court for the District of Delaware has jurisdiction over
this matter pursuant to 28 U.S.C. § 1334, which was referred to the United States Bankruptcy
Court for the District of Delaware (the “Court”) under 28 U.S.C. § 157 and the Amended Standing
Order of Reference from the United States District Court for the District of Delaware, dated
February 29, 2012. The Debtors confirm their consent, pursuant to rule 9013-1(f) of the
Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the
District of Delaware (the “Local Rules”), to the entry of a final order by the Court in connection
with this application to the extent that it is later determined that the Court, absent consent of the
Case 24-11217-BLS Doc 240 Filed 07/09/24 Page 2 of 23
3
parties, cannot enter final orders or judgments in connection herewith consistent with Article III
of the United States Constitution.
3.
Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409.
4.
The statutory bases for the relief requested herein are sections 327(a) and 328(a) of
title 11 of the United States Code, 11 U.S.C. §§ 101–1532 (the “Bankruptcy Code”), rules 2014(a)
of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”), and Local Rules 2014-1,
2016-2, and 9013-1(f).
Background
5.
Vyaire Medical, Inc., together with its direct and indirect subsidiaries
(collectively, “Vyaire” or the “Company”), is a global company focused on developing products
and providing related services for the diagnosis, treatment, and monitoring of various cardiology,
pulmonology, and respiratory health conditions. With a 70-year history of pioneering breathing
technology, the integrated solutions offered by the Company help enable, enhance, and extend
lives. Headquartered in Mettawa, Illinois, Vyaire operates approximately 27 offices and
manufacturing facilities, and employs approximately 950 individuals around the world. The
Company has a global reach, and Vyaire products are available in more than 100 countries. Its
customers are the hospitals, community centers, and private practice facilities delivering
life-saving products and services to patients every day.
6.
On the Petition Date, Vyaire Medical, Inc. and certain of its subsidiaries filed a
voluntary petition for relief under chapter 11 of the Bankruptcy Code. The Debtors are operating
their business and managing their property as debtors in possession pursuant to sections 1107(a)
and 1108 of the Bankruptcy Code. On June 11, 2024, the Court entered an order authorizing the
procedural consolidation and joint administration of these chapter 11 cases pursuant to
Bankruptcy Rule 1015(b) and Local Rule 1015-1. See Docket No. 84. On June 26, 2024, the
Case 24-11217-BLS Doc 240 Filed 07/09/24 Page 3 of 23
4
United States Trustee for the District of Delaware (the “U.S. Trustee”) appointed an official
committee of unsecured creditors (“the Committee”). See Docket No. 121.
PJT’s Qualifications
7.
As detailed in the Baird Declaration, PJT’s Restructuring and Special Situations
Group (“RSSG”) is one of the industry’s leading advisors to companies and creditors in a variety
of complex restructurings and bankruptcies. PJT was spun off from The Blackstone Group L.P.
(“Blackstone”), effective October 1, 2015. Upon the consummation of the spinoff, Blackstone’s
Restructuring and Reorganization advisory group became a part of PJT, and Blackstone’s
restructuring professionals became employees of PJT. The former Blackstone restructuring
professionals, in their capacity as PJT employees, have been conducting business and providing
their clients with the same high-quality restructuring services that Blackstone had itself provided
since the formation of its restructuring advisory practice approximately 33 years ago. PJT
professionals have extensive experience working with financially troubled companies in complex
financial restructurings. Since 1991, PJT professionals have advised on several hundreds of
distressed situations, both in and out of court.
8.
The partners and members of RSSG have assisted and advised in numerous
chapter 11 cases. In particular, they have provided services to debtors, creditors’ committees, and
other constituencies in numerous chapter 11 cases, including, among others: AbitibiBowater Inc.;
Aegean Marine Petroleum Network Inc.; Adelphia Communications Corporation; Allen Systems
Group, Inc.; Ambac Financial Group, Inc.; Apex Silver Mines Ltd.; Arch Coal, Inc.; Arsenal
Resources Development LLC; Ascent Resources Marcellus Holdings, LLC; The Bon-Ton Stores,
Inc.; Careismatic Brands; Caesars Entertainment Operating Corporation; Cengage Learning, Inc.;
Chaparral Energy LLC; CHC Group Ltd.; Cineworld Group plc; Cumulus Media Inc.; Delta Air
Case 24-11217-BLS Doc 240 Filed 07/09/24 Page 4 of 23
5
Lines, Inc.; Dixie Electric, LLC; Dynegy Inc.; Eastman Kodak Company; Edison Mission Energy;
Energy Future Holdings Corporation; Energy XXI Ltd.; Endeavor International Corporation;
Energy & Exploration Partners, Inc.; Enron Corporation; EP Energy Corporation; Excel Maritime
Carriers, Ltd.; EXCO Resources, Inc.; FirstEnergy Solutions Corp.; Flag Telecom Holdings
Limited; Flying J. Inc.; FullBeauty Brands Holding Corp.; Fusion Connect, Inc.; Genco
Shipping & Trading Limited; General Motors Corporation; Global Crossing Ltd.; Hálcon
Resources Corporation; Hawker Beechcraft, Inc.; Hercules Offshore, Inc.; Homer City Generation,
L.P.; Hostess Brands, Inc.; Houghton Mifflin Harcourt Publishing Company; iHeartMedia, Inc.;
Intelsat S.A.; J. Crew Group, Inc.; Lee Enterprises Inc.; Legend Parent Inc.; LightSquared Inc.;
Los Angeles Dodgers LLC; LyondellBasell Industries; Magnetation LLC; Magnum Hunter
Resources Corporation; Merisant Worldwide, Inc.; Mirant Corp.; New Gulf Resources, LLC;
NewPage Corporation; NTK Holdings, Inc.; Paragon Offshore plc; Patriot Coal Corporation; Penn
Virginia Corporation; Pennsylvania Real Estate Investment Trust; PES Holdings, LLC; PHI, Inc.;
Purdue Pharma; Quicksilver Resources, Inc.; Relativity Fashion, LLC; Ruby Pipeline, L.L.C.;
Sabine Oil & Gas Corp.; Samson Resources Corporation; SemGroup; Toisa Ltd.; TerreStar
Networks Inc.; Triangle USA Petroleum Corporation; Trident Holding Company, LLC; Tribune
Company; Ultra Petroleum Corp.; Venoco Inc.; VER Technologies Holdco LLC; Verso
Corporation; Walter Energy, Inc.; Westinghouse Electric Company LLC; W.R. Grace & Co.;
WeWork; Windstream Holdings, Inc.; and Winn-Dixie Stores, Inc. In addition, the restructuring
group has provided general restructuring advice to major companies such as Clearwire
Corporation, Ford Motor Company, The Goodyear Tire & Rubber Company, and Xerox
Corporation.
Case 24-11217-BLS Doc 240 Filed 07/09/24 Page 5 of 23
6
9.
The Debtors have selected PJT as their investment banker based upon the foregoing
experience and, among other things: (a) the Debtors’ need to retain a skilled investment banking
firm to provide advice with respect to the Debtors’ restructuring activities; (b) PJT’s extensive
experience and excellent reputation in providing investment banking services in complex
chapter 11 cases such as these; and (c) PJT’s extensive knowledge of the Debtors, as described
more fully below. In light of the size and nature of these chapter 11 cases, PJT’s resources,
capabilities, and experience are crucial to the Debtors’ successful restructuring. An experienced
investment banker such as PJT fulfills a critical need that complements the services provided by
the Debtors’ other restructuring professionals. For these reasons, the Debtors require PJT’s
services in these chapter 11 cases.
10.
In April 2023, the Debtors retained PJT as their investment banker to pursue
balance sheet alternatives (such engagement letter, the “Prior Letter”). In April 2024, the Debtors
expanded the scope of PJT’s engagement to include investment banking services in connection
with a potential capital raise, restructuring, and/or sale of the Debtors, in part or in full, through an
in-court process, including assistance with the negotiation of the terms of debtor-in-possession
financing and the restructuring support agreement in these chapter 11 cases. PJT has led efforts,
in concert with other professionals, to prepare for and formally launch a marketing process in early
May 2024 in connection with a potential sale of the assets of the Debtors’ businesses. To that end,
PJT worked with the Debtors’ management to draft marketing materials and position the Company
for a successful sale process. Throughout this period of advising the Debtors, PJT has become
familiar with the Debtors’ capital structure, liquidity needs, and business operations.
11.
During PJT’s representation of the Debtors, it has, among other things, provided
advice on strategic transaction alternatives, restructuring options, and financings. PJT has
Case 24-11217-BLS Doc 240 Filed 07/09/24 Page 6 of 23
7
participated in negotiations between the Debtors and their creditors and other parties in interest.
PJT also assisted the Debtors in reviewing the terms, conditions, and potential impact of various
potential transactions, including comparing iterations of debtor-in-possession financing proposals.
In addition, PJT has met with the Debtors’ board of directors on numerous occasions throughout
its engagement to discuss and advise on the above matters.
12.
As a result of the work performed by PJT on behalf of the Debtors both pre- and
postpetition, PJT has acquired significant knowledge of the Debtors’ financial affairs, business
operations, capital structure, assets, key stakeholders, financing documents, and other related
material information. Likewise, in providing services to the Debtors, PJT’s professionals have
worked closely with the Debtors’ personnel, board, and other advisors. If the Application is
approved, several of PJT’s professionals, all with substantial expertise in the areas discussed
above, will continue to provide services to the Debtors and will work closely with the Debtors’
personnel and other professionals throughout the reorganization process. Accordingly, as a result
of PJT’s representation of the Debtors prior to and after the commencement of these chapter 11
cases and PJT’s extensive experience representing chapter 11 debtors, PJT is well-qualified to
provide these services and represent the Debtors during these chapter 11 cases.
13.
Indeed, if the Debtors were required to retain an investment banker other than PJT
in connection with these chapter 11 cases, the Debtors, their estates, and other parties in interest
would be unduly prejudiced by the time and expense necessary to familiarize another investment
banker with the intricacies of the Debtors and their business operations.
Case 24-11217-BLS Doc 240 Filed 07/09/24 Page 7 of 23
8
Services Provided by PJT
14.
The terms and conditions of the Engagement Letter3 were the result of significant
discussions and negotiations between PJT and the Debtors, and they reflect the parties’ mutual
agreement as to the substantial efforts that will be required by PJT in respect of this engagement.
The employment of PJT also is necessary to enable the Debtors to execute their duties as debtors
in possession and to realize their reorganization efforts.
15.
Subject to further order of the Court, and consistent with the terms of the
Engagement Letter, PJT’s anticipated services in these chapter 11 cases, to the extent necessary,
appropriate, feasible, and as may be requested by the Debtors, include the following:
a.
assist in the evaluation of the Debtors’ businesses and prospects;
b.
assist in the review and development of the Debtors’ long-term business
plan and related financial projections;
c.
assist in the development of financial data and presentations to the Debtors’
board of directors, various creditors and/or third parties;
d.
analyze the Debtors’ financial liquidity and evaluate alternatives to improve
such liquidity;
e.
analyze various Restructuring scenarios and the potential impact of these
scenarios on the recoveries of those stakeholders impacted by the
Restructuring;4
f.
provide strategic advice with regard to restructuring or refinancing the
Debtors’ Obligations;
3
The summary of the Engagement Letter in this Application is qualified in its entirety by reference to the provisions
of the Engagement Letter. To the extent there is any discrepancy between the summary contained in this
Application and the terms set forth in the Engagement Letter, the terms of the Engagement Letter shall govern.
4 As used in the Engagement Letter, the term (a) “Restructuring” means “any restructuring, reorganization (whether
or not pursuant to chapter 11 of the United States Bankruptcy Code (“Chapter 11”)) and/or recapitalization of the
[Debtors] affecting a material portion of its existing debt obligations or other claims against the [Debtors],
including, without limitation, revolving credit facilities, term loans, any senior debt, junior debt, notes, trade
claims, general unsecured claims (collectively, the “Obligations”), and/or (ii) a sale or other acquisition or
disposition of a material portion of the assets and/or equity of the [Debtors], and/or (iii) any complete or partial
repurchase, refinancing, extension or repayment by the [Debtors] of a material portion of the Obligations”, and
(b) “Capital Raise” means “any debt financing or capital raise arranged by PJT Partners at the request of the
[Debtors].”
Case 24-11217-BLS Doc 240 Filed 07/09/24 Page 8 of 23
9
g.
evaluate the Debtors’ debt capacity and alternative capital structures;
h.
participate in negotiations among the Debtors and their creditors, suppliers,
lessors, and other interested parties and/or potential financing parties;
i.
value securities offered by the Debtors in connection with a Restructuring;
j.
provide financial and valuation advice and assistance to the Debtors in
developing and seeking approval of an in-court Restructuring (including a
Chapter 11 plan);
k.
advise the Debtors and negotiate with lenders with respect to potential
waivers or amendments of various credit facilities;
l.
assist in arranging financing for the Debtors, as requested;
m.
provide expert witness testimony concerning any of the subjects
encompassed by the other investment banking services; and
n.
provide such other advisory services as are customarily provided in
connection with the analysis and negotiation of a transaction similar to a
potential Restructuring and/or Capital Raise, as requested and mutually
agreed.
Professional Compensation
16.
PJT’s decision to advise and assist the Debtors in connection with these chapter 11
cases is subject to its ability to be retained in accordance with the terms of the Engagement Letter
pursuant to section 328(a), and not section 330, of the Bankruptcy Code.
17.
In consideration of the services to be provided by PJT, and as more fully described
in the Engagement Letter, subject to the Court’s approval, the Debtors and PJT have agreed that
PJT shall, in respect of its services, be compensated under the following fee structure (the “Fee
Structure”):5
a.
Monthly Fee: The Debtors shall pay a monthly advisory fee (the “Monthly
Fee”) in the amount of $175,000. Fifty percent (50%) of the first
$1,050,000 in Monthly Fees paid to PJT under the Engagement Letter
and/or the Prior Letter shall be credited, once and without duplication,
5
Capitalized terms used in the following subparagraphs shall have the meanings given in the Engagement Letter.
Case 24-11217-BLS Doc 240 Filed 07/09/24 Page 9 of 23
10
against any Restructuring and/or Capital Raising Fee, up to a maximum
total aggregate credit against all such fees equal to $525,000.
b.
Capital Raising Fee: The Debtors shall pay a capital raising fee
(the “Capital Raising Fee”) for any Capital Raise, earned and payable upon
the earlier of the receipt of a binding commitment letter and the closing of
such Capital Raise. If access to the financing is limited by orders of the
bankruptcy court, a proportionate fee shall be payable with respect to each
available commitment (irrespective of availability blocks, borrowing base,
or other similar restrictions). The Capital Raising Fee will be calculated as:
i.
Secured Debt: One-and-a-half percent (1.5%) of the total
issuance and/or committed amount of senior debt financing,
excluding senior debt financing that is or may (or is
anticipated in the future to) constitute a Structured
Financing,6
ii.
Unsecured Debt: Three-percent (3.0%) of the total issuance
and/or committed amount of (A) Structured Financing, (B)
junior debt financing, or (C) unsecured debt financing
(including, without limitation, financing that is junior in
right of payment, second lien, subordinated (structurally or
otherwise) and unsecured debt), and
iii.
Equity Financing: Five-percent (5.0%) of the issuance
and/or committed amount of equity financing,
in each case, including by means of a back-stop commitment;
provided that, (x) the minimum Capital Raise Fee in respect of any
Capital Raise shall be $750,000, and (y) if any portion of the debt or
equity financing is raised from Apax Partners, LLP or its affiliates
(collectively, the “Sponsor”), then PJT Partners shall be entitled to
receive 50% of the Capital Raising Fee (the “Sponsor Capital
Raising Fee”) to which it otherwise would have been entitled in
respect of any debt or equity financing raised from the Sponsor.
c.
Restructuring Fee: The Debtors shall pay a fee in respect of a
Restructuring (the “Restructuring Fee”) equal to $7,000,000, earned and
payable upon the consummation of a Restructuring.
6 As used in the Engagement Letter, “Structured Financing” means “senior debt (A) issued at (or intended to be
moved to or owed or guaranteed by) a non-guarantor of the [Debtors’] funded debt and/or (B) issued at (or
intended to be moved to or owed or guaranteed by) an unrestricted subsidiary of the [Debtors] and/or (C) issued
at borrower entities in the restricted group as to which debt additional credit support is provided by an entity that
was not previously (or is not expected to be going forward) a guarantor of the [Debtors’] funded debt and/or (D)
as to which liens are granted in respect of additional collateral not already pledged for the benefit of the [Debtors’]
funded debt.”
Case 24-11217-BLS Doc 240 Filed 07/09/24 Page 10 of 23
11
d.
Expense Reimbursements: In addition to the fees described above, the
Debtors agree to reimburse PJT for all reasonable and documented
out-of-pocket expenses incurred during PJT’s engagement, including, but
not limited to, travel and lodging, direct identifiable data processing,
document production, publishing services and communication charges,
courier services, working meals, reasonable and documented fees and
expenses of PJT’s outside counsel (without the requirement that the
retention of such counsel be approved by the court in any bankruptcy case),
and other necessary expenditures, payable upon rendition of invoices setting
forth in reasonable detail the nature and amount of such expenses. Further,
in connection with the reimbursement, contribution and indemnification
provisions set forth in the Engagement Letter and Attachment A to the
Engagement Letter (the “Indemnification Agreement”), which is
incorporated therein by reference and addressed further below, the Debtors
agree to reimburse each PJT Party, for its legal and other expenses
(including the cost of any investigation and preparation) as they are incurred
in connection with any matter in any way relating to or referred to in the
Engagement Letter or arising out of the matters contemplated by the
Engagement Letter (including, without limitation, in enforcing the
Engagement Letter), subject to certain exceptions, limitations, and
requirements set forth in the Indemnification Agreement.
18.
PJT will maintain records in support of any actual, necessary costs and expenses
incurred in connection with the rendering of its services in these chapter 11 cases. However,
because (a) it is not the general practice of investment banking firms such as PJT to keep detailed
time records similar to those customarily kept by attorneys, (b) PJT does not ordinarily keep time
records on a “project category” basis, and (c) PJT’s compensation is based on a fixed Monthly Fee
and certain fixed percentage and/or contingency based fees (namely the Restructuring Fee and
Capital Raising Fees), the Debtors respectfully request that PJT’s investment banking
professionals be required to maintain records (in summary format) of the services rendered for the
Debtors, including summary descriptions of those services, the approximate time expended in
providing those services (in half-hour increments), and the identity of the professionals who
provided those services. PJT will present such records to the Court in its fee application(s).
Moreover, the Debtors respectfully request that PJT’s professionals not be required to keep time
records on a “project category” basis, that its non-investment banking professionals and personnel
Case 24-11217-BLS Doc 240 Filed 07/09/24 Page 11 of 23
12
in administrative departments (including legal) not be required to maintain any time records, and
that it not be required to provide or conform to any schedule of hourly rates. To the extent that
PJT would otherwise be required to submit more detailed time records for its professionals by the
Bankruptcy Code, the Bankruptcy Rules, the Local Rules, the U.S. Trustee Guidelines, or other
applicable procedures and orders of the Court, the Debtors respectfully request that the Court
waive such requirements.
19.
The Debtors believe the Fee Structure is consistent with, and typical of,
compensation arrangements entered into by PJT and other comparable firms in connection with
the rendering of similar services under similar circumstances, both in and out of bankruptcy
proceedings. The Debtors also believe that the Fee Structure reflects a balance between a fixed,
monthly fee, and certain fixed percentage and/or contingency based fees, which are tied to the
occurrence of certain transactions contemplated by the Debtors and PJT in the Engagement Letter.
In determining the Fee Structure and the reasonableness of such compensation, the Debtors
compared PJT’s fee proposal to comparable precedents. After such comparison, followed by
discussions and arm’s-length negotiations, the Debtors believe that the Fee Structure is in fact
reasonable, market-based, and designed to compensate PJT fairly for its work.
20.
The Debtors request to pay PJT’s fees and to reimburse PJT for its reasonable costs
and expenses as provided in the Engagement Letter, including, but not limited to, in-sourced
document production costs, travel costs, meals, and the fees, disbursements, and other charges of
PJT’s legal counsel (without the need for such legal counsel to be retained as a professional in
these chapter 11 cases and without regard to whether such legal counsel’s services satisfy
section 330(a)(3)(C) of the Bankruptcy Code). In the event that PJT seeks reimbursement from
the Debtors for attorneys’ fees and expenses pursuant to this Application and the Engagement
Case 24-11217-BLS Doc 240 Filed 07/09/24 Page 12 of 23
13
Letter, PJT will include the invoices and supporting time records for the attorneys’ fees and
expenses in PJT’s own applications, both interim and final, and these invoices and time records
shall be subject to the U.S. Trustee Guidelines and the approval of the Court pursuant to
sections 330 and 331 of the Bankruptcy Code, without regard to whether such attorneys have been
retained under section 327 of the Bankruptcy Code and without regard to whether such attorneys’
services satisfy section 330(a)(3)(C) of the Bankruptcy Code. PJT will not seek reimbursement of
fees of its counsel incurred in defending any of PJT’s fee applications in these chapter 11 cases.
21.
PJT’s strategic and financial expertise, as well as its capital markets knowledge,
financing skills, mergers and acquisitions experience, and restructuring capabilities, some or all of
which has and will be required by the Debtors during the term of PJT’s engagement, were
important factors to the Debtors in determining the Fee Structure. The Debtors believe that the
ultimate benefits of PJT’s services hereunder cannot be measured by reference to the number of
hours to be expended by PJT’s professionals in the performance of such services. The Debtors
and PJT agreed upon the Fee Structure in anticipation that a substantial commitment of
professional time and effort would be required of PJT and in light of the fact that (a) such
commitment could have and may still foreclose other opportunities for PJT and (b) the actual time
and commitment required of PJT and its professionals to perform the restructuring services may
vary substantially from week to week and month to month creating “peak load issues” for PJT.
22.
During the ninety (90)-day period before the Petition Date, the Debtors paid PJT
$657,535.44 for fees earned and expenses incurred prior to the Petition Date. Prior to the Petition
Date, PJT had also received advance payments from the Debtors in the aggregate amount of
$153,333.33. Given the timing of the filing, PJT may not yet have accounted for all expenses it
incurred before the Petition Date. In the event PJT subsequently becomes aware of additional
Case 24-11217-BLS Doc 240 Filed 07/09/24 Page 13 of 23
14
prepetition expenses incurred on behalf of the Debtors, PJT will reduce its advance by such
amounts. To the extent that amounts paid by the Debtors to PJT prior to the Petition Date exceed
amounts incurred by PJT prepetition, such excess will be held by PJT as security throughout these
chapter 11 cases until PJT’s fees and expenses are fully paid. As of the Petition Date, the Debtors
were current on their obligations to PJT under the Engagement Letter.
Indemnification
23.
As part of the overall compensation payable to PJT under the terms of the
Engagement Letter, the Debtors have agreed to certain indemnification, contribution, and
reimbursement obligations, set forth in the Indemnification Agreement. The Indemnification
Agreement provides that the Debtors will indemnify and hold harmless the PJT Parties from
and against Losses incurred by a PJT Party in connection with PJT’s engagement, except for
any Losses to the extent such Losses resulted solely from the bad faith, willful misconduct, or
gross negligence of such PJT Party. The Debtors will reimburse such PJT Party for its legal and
other expenses (including the cost of any investigation and preparation) as such expenses are
incurred by such PJT Party in connection therewith.
24.
The Engagement Letter’s indemnification and contribution provisions were fully
negotiated by the Debtors and PJT at arm’s length and in good faith. The Debtors believe that
the indemnification provisions in the Engagement Letter are appropriate and reasonable for
investment banking engagements in chapter 11 cases and reflect the qualifications and
limitations on indemnification provisions that are customary in the industry as previously
determined in this District and other jurisdictions. As such, the Debtors believe that the
indemnification provisions described in the Indemnification Agreement are appropriate under
the circumstances and should be approved, subject to the modifications set forth in the
Proposed Order.
Case 24-11217-BLS Doc 240 Filed 07/09/24 Page 14 of 23
15
No Duplication of Services
25.
The services of PJT will complement and not duplicate the services rendered by
any other professional retained in these chapter 11 cases. PJT understands that the Debtors have
retained and may retain additional professionals during the term of the engagement and agrees to
work cooperatively with such professionals to integrate any respective work conducted by the
professionals on behalf of the Debtors. PJT is providing distinct and specific investment banking
services as set forth in the Engagement Letter, and such services are not expected to duplicate
those to be provided by any other consultants, legal advisors, or financial advisor.
PJT’s Disinterestedness
26.
PJT has reviewed the list of parties in interest provided by the Debtors. To the best
of the Debtors’ knowledge, information, and belief, and except to the extent disclosed herein or in
the Baird Declaration, PJT: (a) is a “disinterested person” within the meaning of section 101(14)
of the Bankruptcy Code; (b) does not hold or represent an interest materially adverse to the
Debtors’ estates; and (c) has no connection to the Debtors, their creditors, or related parties, except
as disclosed in the Baird Declaration.
27.
Given the large number of parties in interest in these chapter 11 cases, despite the
efforts to identify and disclose PJT’s relationships with parties in interest in these chapter 11 cases,
PJT is unable to state with absolute certainty that every client relationship or other connection has
been disclosed in the Baird Declaration. PJT will make continued inquiries following the filing of
this Application, on a periodic basis, with additional disclosures to the Court if necessary or
otherwise appropriate.
28.
The Debtors are informed that PJT will not share any compensation to be paid by
the Debtors, in connection with services to be performed after the Petition Date, with any other
Case 24-11217-BLS Doc 240 Filed 07/09/24 Page 15 of 23
16
person, other than principals and employees of PJT, to the extent permitted by section 504 of the
Bankruptcy Code.
Basis for Relief Requested
I.
The Debtors Should Be Permitted to Retain and Employ PJT in Accordance with the
Terms of the Engagement Letter Pursuant to Sections 327(a), 328(a), and 1107(b) of
the Bankruptcy Code.
29.
The Debtors seek approval of the retention and employment of PJT under
sections 327(a), 328(a), and 1107(b) of the Bankruptcy Code. Section 328(a) of the Bankruptcy
Code provides, in relevant part, that a debtor in possession, “with the court’s approval, may employ
or authorize the employment of a professional person under section 327 . . . on any reasonable
terms and conditions of employment, including on a retainer, on an hourly basis, on a fixed or
percentage fee basis, or on a contingent fee basis.” 11 U.S.C. § 328(a). Section 327(a) of the
Bankruptcy Code, in turn, authorizes a debtor in possession to employ professionals that “do not
hold or represent an interest adverse to the estate, and that are disinterested persons.” 11 U.S.C.
§ 327(a). Section 1107(b) of the Bankruptcy Code provides that “a person is not disqualified for
employment under section 327 of the Bankruptcy Code by a debtor in possession solely because
of such person’s employment by or representation of the debtor before the commencement of the
case.” 11 U.S.C. § 1107(b).
30.
Section 328 of the Bankruptcy Code permits the compensation of professionals,
including financial advisors, on more flexible terms that reflect the nature of their services and
market conditions. As the U.S. Court of Appeals for the Fifth Circuit recognized in Donaldson
Lufkin & Jenrette Secs. Corp. v. Nat’l Gypsum Co. (In re Nat’l Gypsum Co.), 123 F.3d 861 (5th
Cir. 1997):
Prior to 1978 the most able professionals were often unwilling to
work for bankruptcy estates where their compensation would be
subject to the uncertainties of what a judge thought the work was
Case 24-11217-BLS Doc 240 Filed 07/09/24 Page 16 of 23
17
worth after it had been done. That uncertainty continues under the
present § 330 of the Bankruptcy Code, which provides that the court
award to professional consultants “reasonable compensation” based
on relevant factors of time and comparable costs, etc. Under present
§ 328 the professional may avoid that uncertainty by obtaining court
approval of compensation agreed to with the trustee (or debtor or
committee).
123 F.3d at 862 (footnote omitted).
31.
Additionally, Bankruptcy Rule 2016 and Local Rule 2016-2 require retained
professionals to submit applications for payment of compensation in chapter 11 cases. Local
Rule 2016-2(d) also requires retained professionals to submit detailed time entries that set forth,
among other things, a detailed description of each activity performed, the amount of time spent on
the activity (in tenth of an hour increments), the subject matter of the activity and the parties
involved with the activity at issue. Local Rule 2016-2(h), however, allows a retained professional
to request a waiver of these requirements for cause.
32.
The Court’s approval of the Debtors’ retention of PJT in accordance with the terms
and conditions of the Engagement Letter is warranted. First, as discussed above and in the Baird
Declaration, PJT satisfies the disinterestedness standard in section 327(a) of the Bankruptcy
Code.7 PJT has already committed a significant amount of time and effort with respect to these
chapter 11 cases. The Debtors require PJT to continue to assist with the Debtors’ negotiations, as
necessary, to provide expert advice and testimony regarding financial matters related to the
7
Bankruptcy Rule 2014(a) requires that an application must be made for retention of professionals pursuant to
section 327 of Bankruptcy Code. Under Bankruptcy Rule 2014(a), such application must “state the specific facts
showing the necessity for the employment, the name of the person to be employed, the reasons for the selection,
the professional services to be rendered, any proposed arrangement for compensation, and, to the best of the
applicant’s knowledge, all of the person’s connections with the debtor, creditors, any other party in interest, their
respective attorneys and accountants, the United States trustee, or any person employed in the office of the United
States trustee.” Additionally, the application “shall be accompanied by a verified statement of the person to be
employed setting forth the person’s connections” to the parties in interest list. FED. R. BANKR. P. 2014. Here,
Bankruptcy Rule 2014 is satisfied by the contents of this Application and the Schlappig Declaration attached
hereto.
Case 24-11217-BLS Doc 240 Filed 07/09/24 Page 17 of 23
18
proposed transactions, and to enable the Debtors to discharge their duties as debtors under the
Bankruptcy Code. PJT has extensive experience and an excellent reputation in providing
high-quality investment banking services to debtors and creditors in bankruptcy reorganizations,
mergers and acquisitions, and other restructurings. PJT has become familiar with the Debtors’
business operations, capital structure, financing documents, and other material information
and is able to assist the Debtors in their restructuring efforts. The Debtors believe that PJT is
well-qualified to provide its services to the Debtors in a cost-effective, efficient, and timely
manner. Furthermore, as detailed herein and in the Baird Declaration, PJT does not hold or
represent an interest adverse to the Debtors’ estates and is disinterested.
33.
In addition, the Debtors believe that the Fee Structure is market-based, fair, and
reasonable under the standards set forth in section 328(a) of the Bankruptcy Code. The
Fee Structure reflects PJT’s commitment to the variable level of time and effort necessary to
perform the restructuring and investment banking services, PJT’s particular expertise, and the
market prices for PJT’s services for engagements of this nature both out of court and in a chapter 11
context. Indeed, the Debtors believe that the Fee Structure appropriately reflects: (a) the nature
and scope of services to be provided by PJT; (b) PJT’s substantial experience with respect to
investment banking services; (c) the fee structures typically utilized by PJT and other leading
investment bankers that do not bill their clients on an hourly basis; and (d) indemnification
provisions typically utilized by PJT in restructuring transactions of this size.
34.
Notwithstanding the foregoing, under the Proposed Order, the U.S. Trustee retains
all rights to object to PJT’s fee application (including expense reimbursement) pursuant to
section 330 of the Bankruptcy Code.
Case 24-11217-BLS Doc 240 Filed 07/09/24 Page 18 of 23
19
35.
As set forth above, and notwithstanding approval of the Engagement Letter under
section 328 of the Bankruptcy Code, PJT intends to apply for compensation for professional
services rendered and reimbursement of expenses incurred in connection with these chapter 11
cases, subject to the Court’s approval and in compliance with applicable provisions of the
Bankruptcy Code, the Bankruptcy Rules, the Local Rules, the U.S. Trustee Guidelines, and any
other applicable procedures and orders of the Court, with certain limited modifications requested
herein.
36.
The Debtors request that the requirements of Local Rule 2016-2(d) and the
U.S. Trustee Guidelines be tailored to appropriately reflect PJT’s engagement and its
compensation structure. PJT has requested, under section 328(a) of the Bankruptcy Code,
payment of its fees on a fixed-rate, fixed-percentage and/or contingency basis. Additionally, it is
not the general practice of investment banking firms to keep detailed time records similar to those
customarily kept by attorneys. As discussed above, however, PJT’s investment banking personnel
will keep summary time records in half-hour increments describing their daily activities and the
identity of persons who performed such tasks. Apart from the time recording practices described
above, however, PJT’s personnel do not maintain their time records on a “project category” basis.
As such, the Debtors request modification of the requirements pursuant to Local Rule 2016-2(h).
37.
Courts in this jurisdiction have approved relief similar to that requested in this
Application. See e.g., In re Akorn, Inc., No. 20-11177 (KBO) (Bankr. D. Del. June 23, 2020)
(authorizing retention of PJT as investment banker to the debtors); In re High Ridge Brands Co.,
No. 19-12689 (BLS) (Bankr. D. Del. Jan. 24, 2020) (same); In re Anna Holdings, Inc., No.
19-12551 (CSS) (Bankr. D. Del. Jan. 7, 2020) (same); In re PES Holdings, LLC, No. 19-11626
Case 24-11217-BLS Doc 240 Filed 07/09/24 Page 19 of 23
20
(LSS) (Bankr. D. Del. August 20, 2019) (same); In re VER Tech. Holdco LLC, No. 18-10834 (KG)
(Bankr. D. Del. June 4, 2018) (same).
II.
The Indemnification and Contribution Terms of the Engagement Letter Are
Appropriate.
38.
The indemnification provisions in the Engagement Letter, as modified by the
Proposed Order, were fully negotiated between the Debtors and PJT at arm’s length. The Debtors
and PJT believe that the indemnification provisions in the Engagement Letter are customary and
reasonable for financial advisory engagements both out-of-court and in chapter 11 cases, including
investment banking engagements. See United Artists Theatre Co. v. Walton (In re United Artists
Theatre Co.), 315 F.3d 217, 234 (3d Cir. 2003) (finding indemnification agreement between
debtor and financial advisor reasonable under section 328 of the Bankruptcy Code). The Debtors
seek approval of the modified indemnification provisions consistent with other orders of the Court
where PJT has been retained. See, e.g., In re Akorn, Inc., No. 20-11177 (KBO) (Bankr. D. Del.
June 23, 2020); In re High Ridge Brands Co., No. 19-12689 (BLS) (Bankr. D. Del. Jan. 24, 2020)
(same); In re Anna Holdings, Inc., No. 19-12551 (CSS) (Bankr. D. Del. Jan. 7, 2020); In re PES
Holdings, LLC, No. 19-11626 (LSS) (Bankr. D. Del. August 20, 2019); In re VER Tech. Holdco
LLC, No. 18-10834 (KG) (Bankr. D. Del. June 4, 2018).
39.
Accordingly, the Debtors respectfully submit that the terms of the Engagement
Letter, as modified by the Proposed Order, are reasonable and customary and should be approved
in these chapter 11 cases.
III.
The Debtors Should Be Permitted to Retain and Employ PJT Effective as of the
Petition Date.
40.
The Debtors also believe that employment of PJT effective as of the Petition Date
is warranted under the circumstances of these chapter 11 cases. PJT has provided, and will
continue to provide, valuable services to the Debtors regarding the contemplated restructuring
Case 24-11217-BLS Doc 240 Filed 07/09/24 Page 20 of 23
21
transactions. See, e.g., In re Arkansas Co. Inc., 798 F.2d 645, 648 (3d Cir. 1986) (“[T]he
bankruptcy courts have the power to authorize retroactive employment of counsel and other
professionals under their broad equity power.” (collecting cases)); see also Local Rule 2014-1(b)
(“If the retention motion is granted, the retention shall be effective as of the date the motion was
filed, unless the Court orders otherwise.”).
41.
Courts routinely grant retroactive relief in this jurisdiction. See, e.g., In re Akorn,
Inc., No. 20-11177 (KBO) (Bankr. D. Del. June 23, 2020) (granting retroactive relief); In re High
Ridge Brands Co., No. 19-12689 (BLS) (Bankr. D. Del. Jan. 24, 2020) (same); In re Anna
Holdings, Inc., No. 19-12551 (CSS) (Bankr. D. Del. Jan. 7, 2020) (same); In re VER Tech. Holdco
LLC, No. 18-10834 (KG) (Bankr. D. Del. June 4, 2018) (same); In re PES Holdings, LLC,
No. 19-11626 (LSS) (Bankr. D. Del. August 20, 2019) (same).
IV.
Retention of PJT Is Critical to the Debtors’ Restructuring Efforts.
42.
The Debtors submit that the retention of PJT is in the best interests of all parties in
interest in these chapter 11 cases. PJT is a preeminent investment banking firm that is intimately
familiar with the Debtors’ business. Denial of the relief requested herein will deprive the Debtors
of the assistance of uniquely qualified investment banking professionals who have significant
historic knowledge of the Debtors’ business and operations. Indeed, if the Debtors were forced to
engage a new investment banker who lacks a thorough understanding of the Debtors’ business and
the initiatives that have been implemented over the course of PJT’s extensive engagement, such
change would mandate the commitment of significant resources to educate a replacement. As
discussed above, based on services performed to date, PJT has been integral to preparing the
Debtors for these chapter 11 cases.
43.
Based on the foregoing, the Debtors submit that they have satisfied the
requirements of the Bankruptcy Code, the Bankruptcy Rules, and the Local Rules to support entry
Case 24-11217-BLS Doc 240 Filed 07/09/24 Page 21 of 23
22
of an order authorizing the Debtors to retain and employ PJT in these chapter 11 cases on the terms
described herein and in the Engagement Letter.
Notice
44.
The Debtors will provide notice of this application to: (a) the United States Trustee
for the District of Delaware; (b) counsel to the Committee; (c) the holders of the 30 largest
unsecured claims against the Debtors (on a consolidated basis); (d) the office of the attorney
general for each of the states in which the Debtors operate; (e) the United States Attorney’s Office
for the District of Delaware; (f) the Internal Revenue Service; (h) the United States Securities and
Exchange Commission; (h) the DIP Agent and counsel thereto; (i) First Lien Credit Agreement
Agent and counsel thereto; (j) the Second Lien Credit Agreement Agent and counsel thereto;
(k) First Lien Notes Agent and counsel thereto; (l) any party that has requested notice pursuant to
Bankruptcy Rule 2002. The Debtors submit that, in light of the nature of the relief requested, no
other or further notice need be given.
Case 24-11217-BLS Doc 240 Filed 07/09/24 Page 22 of 23
WHEREFORE, the Debtors respectfully request that the Court enter the Order,
substantially in the form attached hereto as Exhibit A, granting the relief requested herein and
granting such other relief as is just and proper.
Dated: July 9, 2024
/s/ John Bibb
John Bibb
Vyaire Medical, Inc.
Group Chief Executive Officer
Case 24-11217-BLS Doc 240 Filed 07/09/24 Page 23 of 23