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UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
. Chapter 11
IN RE: .
. Case No. 24-11217(BLS)
VYAIRE MEDICAL, INC., .
et al, .
. 824 Market Street
. Wilmington, Delaware 19801
Debtors. .
. . . . . . . . . . . . . . Monday, August 26, 2024
TRANSCRIPT OF HEARING RE:
MOTION OF DEBTORS FOR ENTRY OF AN ORDER (I) APPROVING BIDDING
PROCEDURES IN CONNECTION WITH THE SALE OF SUBSTANTIALLY ALL
OF THE DEBTORS' ASSETS, (II) AUTHORIZING THE DEBTORS TO ENTER
INTO A STALKING HORSE AGREEMENT AND PROVIDE BID PROTECTIONS,
(III) APPROVING THE FORM AND MANNER OF NOTICE THEREOF, (IV)
SCHEDULING AN AUCTION AND SALE HEARING, (V) APPROVING
PROCEDURES FOR THE ASSUMPTION AND ASSIGNMENT OF CONTRACTS,
(VI) APPROVING THE SALE OF THE DEBTORS' ASSETS FREE AND
CLEAR, AND (VII) GRANTING RELATED RELIEF
BEFORE THE HONORABLE BRENDAN L. SHANNON
UNITED STATES BANKRUPTCY JUDGE
APPEARANCES:
For the Debtors:
Patrick J. Reilley, Esq.
Michael E. Fitzpatrick, Esq.
COLE SCHOTZ, PC
500 Delaware Avenue, Suite 1410
Wilmington, Delaware 19801
(Appearances Continued)
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Case 24-11217-BLS Doc 503 Filed 09/06/24 Page 1 of 17
APPEARANCES: (Continued)
For the Debtors:
Spencer A. Winters, P.C.
KIRKLAND & ELLIS, LLP
333 West Wolf Point Road
Chicago, Illinois 60654
Christopher R. Ceresa, Esq.
KIRKLAND & ELLIS, LLP
601 Lexington Avenue
New York, New York 10022
Tabitha De Paulo, Esq.
KIRKLAND & ELLIS, LLP
609 Main Street
Houston, Texas 77002
For the U.S. Trustee:
Benjamin Hackman, Esq.
OFFICE OF THE U.S. TRUSTEE
844 King Street, Suite 2207
Wilmington, Delaware 19801
For the Official Committee
of Unsecured Creditors:
Maris J. Kandestin, Esq.
MCDERMOTT, WILL & EMERY, LLP
1007 North Orange Street
10th Floor
Wilmington, Delaware 19801
Kristin K. Going, Esq.
MCDERMOTT, WILL & EMERY, LLP
One Vanderbilt Avenue
New York, New York 10017
For Hartford Fire
Insurance Company and
Hartford Insurance Company
of the Midwest:
Gary D. Bressler, Esq.
MCELROY, DEUTSCH, MULVANEY
& CARPENTER, LLP
300 Delaware Avenue, Suite 1014
Wilmington, Delaware 19801
For SunMed Group Holdings,
LLC:
Kizzy L. Jarashow, Esq.
GOODWIN PROCTER, LLP
The New York Times Building
620 Eighth Avenue
New York, New York 10018
(Appearances Continued)
Case 24-11217-BLS Doc 503 Filed 09/06/24 Page 2 of 17
APPEARANCES: (Continued)
For Dell-Mettawa, LLC:
Evan T. Miller, Esq.
SAUL EWING, LLP
1201 North Market Street
Suite 2300
Wilmington, Delaware 19899
For the 1L Ad Hoc Group: Timothy P. Cairns, Esq.
PACHULSKI, STANG, ZIEHL
& JONES, LLP
919 North Market Street
17th Floor
Wilmington, Delaware 19899
Jason Zachary Goldstein, Esq.
GIBSON, DUNN & CRUTCHER, LLP
200 Park Avenue
New York, New York 10166
For Fischer USA, Inc.:
William A. Hazeltine, Esq.
SULLIVAN HAZELTINE ALLINSON, LLC
919 North Market Street
Suite 420
Wilmington, Delaware 19801
Cigna Health and Life
Insurance Company
and Cigna Behavioral
Health, Inc.:
Jeffrey C. Wisler, Esq.
CONNOLLY GALLAGHER, LLP
1201 North Market Street
20th Floor
Wilmington, Delaware 19801
For Kuehne + Nagel, Inc.: David M. Klauder, Esq.
BIELLI & KLAUDER, LLC
1204 North King Street
Wilmington, Delaware 19801
For the Prepetition First
Lien Agent:
Michael D. DeBaecke, Esq.
ASHBY & GEDDES, PA
500 Delaware Ave, Suite 8
Wilmington, Delaware 19801
Case 24-11217-BLS Doc 503 Filed 09/06/24 Page 3 of 17
4
INDEX
PAGE
STATUS BY MR. WINTERS
6
COMMENTS BY MS. KANDESTIN
12
COMMENTS BY MR. GOLDSTEIN
13
Case 24-11217-BLS Doc 503 Filed 09/06/24 Page 4 of 17
5
1
(Proceedings commence at 10:19 a.m.)
2
(Call to order of the Court)
3
THE COURT: Please be seated.
4
Good morning.
5
MR. REILLEY: Good morning, Your Honor. Patrick
6
Reilley from Cole Schotz on behalf of the debtors. Your
7
Honor, I'm joined at counsel's table by my co-counsel from
8
Kirkland & Ellis. With me is Spencer Winters and Chris
9
Ceresa.
10
THE COURT: Very good.
11
MR. REILLEY: Your Honor, turning to the agenda,
12
the only item scheduled is the debtors' sale motion. If I
13
may, I'd like to cede the podium to Mr. Winters to provide
14
the Court really a status update today.
15
THE COURT: Sure. That sounds great.
16
MR. REILLEY: Thank you, Your Honor.
17
THE COURT: Mr. Winters, good morning. Welcome.
18
MR. WINTERS: Good morning, Your Honor. Spencer
19
Winters of Kirkland & Ellis, LLP on behalf of the debtors.
20
THE COURT: Are congratulations in order?
21
MR. WINTERS: That's right, Your Honor. I had our
22
first baby right before the first-day hearing.
23
THE COURT: Atta boy. Mazel Tov.
24
MR. WINTERS: And she's now about as old as these
25
Chapter 11 cases.
Case 24-11217-BLS Doc 503 Filed 09/06/24 Page 5 of 17
6
1
THE COURT: Congratulations.
2
MR. WINTERS: And it has been a while since we were
3
here, Your Honor; that was early June. So, while it's been
4
relatively quiet on the docket, there's been a ton of work
5
going on outside the courtroom, primarily on the marketing
6
process front.
7
And to that end, I have sort of a mix of good news
8
and bad news. I think the good news greatly outweighs the
9
bad news and the bad news is probably resolvable with a
10
little bit extra time, so we can get to that.
11
THE COURT: Sure.
12
MR. WINTERS: But the good news is that we have
13
achieved our goal of signing up a going concern sale for each
14
of the debtors' two divisions to third-party bidders in each
15
case. That took longer than we wanted. We wanted to get
16
stalking horse bids and we didn't.
17
The prices are, frankly, lower than what we wanted,
18
but it provides a path to preserve the business. It provides
19
the path to repay all of the new money DIP loans and a
20
portion of the roll-up loan. And it provides a path to
21
confirm a liquidating Chapter 11 plan after we get that done.
22
The bad news is that, as of the start of this
23
hearing, the debtors, the lenders, and the UCC are not signed
24
off on the application of the proceeds of those sales.
25
In particular, the lenders would like to receive a
Case 24-11217-BLS Doc 503 Filed 09/06/24 Page 6 of 17
7
1
pay-down on their DIP loans from the proceeds of the sale.
2
From the outset of these cases, we've agreed to propose that
3
pay-down to the Court, subject to agreeing to a holdback
4
reserve that we can use to get a Chapter 11 plan confirmed
5
and implemented. And as of right now, the debtors and the
6
lenders don't have agreement on that holdback reserve amount.
7
The UCC is also not in agreement.
8
So I think today is going to end up being a status
9
conference. We're going to request a short adjournment to
10
see if we can reach resolution with both parties.
11
THE COURT: Okay.
12
MR. WINTERS: We can talk about how long that
13
adjournment should be. From my perspective, the shorter the
14
better, but --
15
THE COURT: It does focus the mind, doesn't it?
16
MR. WINTERS: Yes, exactly.
17
But before we do that, I figured I'd give the Court
18
just a little more context --
19
THE COURT: Sure.
20
MR. WINTERS: -- on where we are, since it's been a
21
while and it's probably worth making sure you've got the full
22
picture.
23
So, when we were first here at the first-day
24
hearing, we were in the midst of the marketing process for
25
both divisions. We didn't have a stalking horse signed up
Case 24-11217-BLS Doc 503 Filed 09/06/24 Page 7 of 17
8
1
for either, but we were hoping to get going concern sales
2
done and a liquidating plan done. We've fought every day for
3
that outcome, which has been, by no means, assured any step
4
of the way. So it's, you know, great news, as I mentioned at
5
the outset, that we managed to get these two bidders signed
6
up. It was very, very difficult.
7
No one, as I said, is pleased with the price. The
8
debtors, as you'll recall, have an expected 40 million of new
9
money DIP loans that will be outstanding at the close of the
10
sale, plus 135 million of roll-up DIP loans. And in the bid
11
procedures, there was a one-hundred-and-forty-million-dollar
12
aggregate minimum bid, and we viewed that at the time as sort
13
of a bare minimum.
14
But as the marketing process progressed, it turned
15
out that that was more like an aspirational number. And
16
indeed, going into the auction the week before last, it was
17
going to be difficult to even repay the new money portion of
18
the DIP with what we had in hand. After a very successful
19
auction on the vent side that went for three days, we are now
20
out of the woods on that front.
21
THE COURT: Mr. Winters, a three-day auction is
22
part of the reason I took a pay cut, typically only
23
associated with --
24
MR. WINTERS: Exactly.
25
THE COURT: -- prolonged incarceration.
Case 24-11217-BLS Doc 503 Filed 09/06/24 Page 8 of 17
9
1
MR. WINTERS: Exactly, Your Honor.
2
(Laughter)
3
MR. WINTERS: And I think everyone felt like it was
4
prolonged incarceration on all sides.
5
The aggregate price, Your Honor, coming out of that
6
auction at which both divisions is being sold together is
7
90.5 million in cash, which, again, is far short of our
8
aspirations.
9
Otherwise, though, these transactions are a
10
resounding success. Both businesses are being sold as a
11
going concern to separate strategic buyers, hundreds of jobs
12
will be saved, contracts will be assumed, vendors and
13
customer relationship will continue. Multiple crucial lines
14
of medical devices, including ventilators and associated
15
consumables used in neonatal units across the country, will
16
be preserved.
17
In connection with the closing of the two sales, we
18
were and continue to plan to propose a pay-down of the new
19
money portion of the DIP and a modest, modest distribution on
20
the roll-up loans. We also agreed to reduce the commitment
21
on the DIP loans from 45 million to 40 million because we
22
think we can get it done in forty.
23
A key part of that whole bargain, though, is a
24
holdback reserve that will be used to fund a wind-down
25
budget, administrative and priority claims, and claims at
Case 24-11217-BLS Doc 503 Filed 09/06/24 Page 9 of 17
10
1
nondebtor international subsidiaries that are necessary to
2
actually effectuate the sale. This holdback reserve is
3
critical for several reasons:
4
For one, both buyers need the left-behind estates
5
to provide them a transition services agreement for a period
6
of months. There's no deal without a TSA that the estates
7
provide to both buyers. And we need a plan and plan
8
administrator to provide that TSA. So the buyers require a
9
liquidating plan. Of course, even if they didn't, it was our
10
desire and goal to achieve a liquidating plan, and that
11
continues to be our desire and goal. But you really can't
12
get the sales done without it.
13
The international subsidiaries, as I mentioned,
14
have also been a significant challenge here. Many of the
15
critical assets here sit at international subsidiaries that
16
are not on the DIP, they're not on the funded debt, and they
17
have their own non-debt liabilities, and we're selling assets
18
out of those entities. And we can't do that without covering
19
the liabilities of those entities and certain other
20
international liabilities required to be paid by applicable
21
law. So all of that is in the holdback: Wind-down budget,
22
admin and priority claims, and international claims.
23
Just a brief word about the successful bids. On
24
the vent side, the winning bidder is ZOLL Medical, another
25
medical device maker. The purchase price is 37 million plus
Case 24-11217-BLS Doc 503 Filed 09/06/24 Page 10 of 17
11
1
cash and assumption of a variety of liabilities. That
2
transaction is expected to close in about five to six weeks.
3
On the RDX side, the winning bid is Trudell
4
Medical, a Canadian company focused on respiratory health.
5
That purchase price is 53.5 million in total, plus assumption
6
of various liabilities. That transaction has an eight-
7
million-dollar purchase price holdback that's held back from
8
the fifty-three and a half for 20 business days and is
9
subject to adjustments based on the amount of certain assumed
10
liabilities. That transaction is expected to close after the
11
vent sale in approximately 8 to 10 weeks.
12
So, as I mentioned, Judge, the sticking point is
13
the application of proceeds and, in particular, this holdback
14
amount. I think we are close. We have whittled that
15
holdback down -- holdback amount down to at or near our
16
breaking point, in terms of what's going to work --
17
THE COURT: Uh-huh.
18
MR. WINTERS: -- but I think we're close.
19
The committee has not had the benefit of time to go
20
through it with us in detail because we haven't managed to
21
agree to it with the secured lenders.
22
Personally, I think, if you have any time this
23
afternoon, that trying to keep people here, go through the
24
wind-down budget with the committee and try to agree to it
25
with the secured lenders, keep the time pressure on, that
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1
would be my suggestion, if the Court is available; if not,
2
your soonest availability, I suppose.
3
THE COURT: I would be able to find time probably
4
at 3:30 this afternoon. And again, I know I haven't heard
5
from anyone else, and so I'm not locked into any particular
6
path or timing. But I don't disagree with you that at least
7
knowing whether I'm available is pretty key to this, and I
8
would prefer to keep that focus on.
9
If it were tomorrow, it would be tricky, but I
10
could accommodate. If it goes further than that -- and I am
11
traveling on Wednesday and Thursday -- I'd be available on
12
Friday. So, if we can do this this afternoon, then you have
13
a willing party in that --
14
MR. WINTERS: Thank you, Your Honor.
15
THE COURT: -- but at least in terms of timing.
16
MR. WINTERS: I think that the committee and the
17
lenders will be amenable to that, but I will -- and I think
18
that that's the right call under the circumstances, but I
19
will let them speak for themselves.
20
THE COURT: Let me hear from the committee, please.
21
Ms. Kandestin, good to see you.
22
MR. KANDESTIN: Good to see you, Your Honor. For
23
the record, Maris Kandestin of McDermott, Will & Emory on
24
behalf of the committee.
25
Your Honor, we agree that the committee needs some
Case 24-11217-BLS Doc 503 Filed 09/06/24 Page 12 of 17
13
1
time to, you know, be involved in the discussion; thus far,
2
we have not been. We received the proposed wind-down budget
3
yesterday --
4
THE COURT: Okay.
5
MR. KANDESTIN: -- and we have not discussed it
6
with the debtors, I believe.
7
And you know, we're in support of even adjourning
8
the hearing. I'm not sure we'll get there in this amount of
9
time, but we have until 3:30, but we'll certainly do our
10
best.
11
THE COURT: Okay. Very good.
12
Can I hear from the lender?
13
MR. GOLDSTEIN: Good morning, Your Honor. Jason
14
Goldstein from Gibson Dunn on behalf of the ad hoc group and
15
DIP lenders.
16
THE COURT: Good to see you.
17
MR. GOLDSTEIN: Good to see you, as well, Your
18
Honor. Thank you for the time this morning.
19
I thought Mr. Winters' presentation was very fair,
20
it's an accurate description of where we are. It's also an
21
accurate description of the result here. Unfortunately, our
22
minimum bid construct, which was carefully negotiated, proved
23
to be aspirational. It is not the best result, particularly
24
for my clients. We understand the desire to consummate,
25
using the sale proceeds in a way that balances a pay-down
Case 24-11217-BLS Doc 503 Filed 09/06/24 Page 13 of 17
14
1
with what the estate needs on the back end.
2
Something that Mr. Winters didn't get into is, in
3
order to go forward on the auction -- and the auction did
4
bring some incremental value -- the secured lenders and the
5
debtors reached an agreement which was consummated in writing
6
about the way the value would be split. And the important
7
part of that agreement was the secured lenders recognized
8
that the debtors would need some amounts for a holdback to
9
help wind down the estate and set up a TSA, and we were
10
absolutely willing to accommodate that.
11
So, without getting into the numbers -- and I
12
understand that no one has this in front of them, but just to
13
give you some context, there was an agreement on those
14
numbers, and that's all that the DIP lenders are asking, that
15
the debtors hold to that agreement. And to Mr. Winters'
16
point, I think we are very close, it's a small delta. I
17
understand the committee needs time to review that, we are
18
not trying to jam anyone. We're just looking to accomplish
19
the agreement that we reached in order to go forward with
20
that auction, given the sort of disappointing bids that came
21
in.
22
THE COURT: I understand.
23
MR. GOLDSTEIN: Appreciate it, Your Honor.
24
THE COURT: Thank you, Mr. Goldstein.
25
MR. GOLDSTEIN: Thank you.
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1
THE COURT: Does anyone else wish to be heard with
2
respect to the request for an adjournment to this afternoon?
3
(No verbal response)
4
THE COURT: Okay. Here's what we'll do. I -- so I
5
guess -- Mr. Winters, I guess I want to horse-trade with you
6
a little bit. I can give you until -- well, I can reconvene
7
at 3:30. I could also reconvene briefly at 1:30, if you
8
thought that you'd be in that kind of a range. If that
9
doesn't make any sense, I'm not like asking people to shlep
10
back over here to tell me you're still talking. So I'm
11
really at your pleasure. I do have a commitment that would
12
require me to leave at 5.
13
But I don't think you're talking, in any event,
14
about a very long hearing. You're either going to report
15
that we have a deal or there's going to be some -- it's not
16
an evidentiary dispute or anything like that. I think that's
17
sort of where we are on the bid and ask. Is that fair?
18
MR. WINTERS: Yeah, I agree with all of that, Your
19
Honor. I would say let's try for 1:30.
20
THE COURT: I'm sorry. Hang on. I actually
21
misspoke.
22
MR. WINTERS: If not, 3:30 works, as well.
23
THE COURT: Yeah, let's do 3:30. I have
24
commitments at 1:30 and 2:30. I was going to give you 1, but
25
I think that that's probably -- you guys are all headed back
Case 24-11217-BLS Doc 503 Filed 09/06/24 Page 15 of 17
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1
to --
2
MR. WINTERS: Yeah.
3
THE COURT: -- offices. Why don't we -- let's just
4
do 3:30.
5
MR. WINTERS: Sounds good.
6
THE COURT: And I'll look for guidance from the
7
parties and if you can keep chambers advised.
8
There are, obviously, a number of folks here for
9
cure objections and other issues and, again, I appreciate the
10
debtor communicating with those folks. And it sounds like
11
those issues are either resolved or they'll be carried. So
12
we boiled it down to just sort of what's happening to the
13
money.
14
The sale itself, again, I carefully read the
15
lenders' submission, as well as the committee's most recent
16
submission. There's nobody that's actually challenging the
17
sale. I understand the disappointment with the results, but
18
the market is what it is. And the discussion sounds like it
19
should proceed and, hopefully, this will be enough time for
20
the parties to close that loop.
21
So, with that, why don't we adjourn? I will see
22
the parties back here at 3:30. My chambers is -- or my
23
courtroom is being used for the Chapter 13 calendar today, so
24
that's why we're down here. But with that, go forth and
25
negotiate.
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1
MR. WINTERS: Thank you, Your Honor. Appreciate
2
it.
3
THE COURT: All right. We stand in recess. Thank
4
you.
5
(Proceedings adjourned to 8/26/24 at 3:30 p.m.)
6
(Concluded at 10:33 a.m.)
7
*****
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CERTIFICATION
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I certify that the foregoing is a correct
10
transcript from the electronic sound recording of the
11
proceedings in the above-entitled matter to the best of my
12
knowledge and ability.
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September 3, 2024
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Coleen Rand, AAERT Cert. No. 341
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Certified Court Transcriptionist
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For Reliable
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