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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., . Jointly Administered
.
. Courtroom No. 1
. 824 North Market Street
Debtors.
. Wilmington, Delaware 19801
.
. Thursday, November 14, 2024
. . . . . . . . . . . . . . . . 10:00 a.m.
TRANSCRIPT OF HEARING
BEFORE THE HONORABLE BRENDAN L. SHANNON
UNITED STATES BANKRUPTCY JUDGE
APPEARANCES:
For the Debtors:
Patrick J. Reilley, Esquire
COLE SCHOTZ P.C.
500 Delaware Avenue
Suite 1410
Wilmington, Delaware 19801
Matteo Percontino, Esquire
COLE SCHOTZ P.C.
1325 Avenue of the Americas
19th Floor
New York, New York 10019
(APPEARANCES CONTINUED)
Audio Operator: Ashley Alexander, ECRO
Transcription Company: Reliable
1007 N. Orange Street
Wilmington, Delaware 19801
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Email: gmatthews@reliable-co.com
Proceedings recorded by electronic sound recording,
transcript produced by transcription service.
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APPEARANCES (CONTINUED):
For the Debtors:
Spencer Williams, Esquire
KIRKLAND & ELLIS LLP
KIRKLAND & ELLIS INTERNATIONAL LLP
333 West Wolf Point Plaza
Chicago, Illinois 60654
For the U.S. Trustee:
Benjamin Hackman, Esquire
OFFICE OF THE UNITED STATES TRUSTEE
844 King Street, Suite 2207
Lockbox 35
Wilmington, Delaware 19801
For the Committee:
Kristin Going, Esquire
MCDERMOTT WILL & EMERY LLP
One Vanderbilt Avenue
New York, New York 10017
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(Proceedings commenced at 10:03 a.m.)
THE COURT: Good morning, all. This is Judge
Shannon. I understand from the court reporter that necessary
parties have joined.
This is a hearing in the matter of Vyaire Medical
which is Case No. 24-11217. Specifically, this I the time
that the Court has set for consideration of the debtors joint
plan and the request for confirmation.
Upon request of counsel, the Court has agreed to
conduct today's hearing via Zoom. I understand that we have
the affiants that are identified in the agenda and the
materials are participating remotely.
I will hear first from counsel for the debtor.
MR. REILLEY: Good morning, Your Honor. Patrick
Reilley from Cole Schotz on behalf of the debtors.
Your Honor, I am joined on the Zoom by my co-
counsel, Spencer Winters, who is from Kirkland, and my
colleagues from Cole Schotz, Warren Usatine and Matteo
Percontino. Also on the Zoom, Your Honor, is Charles Braley,
the debtors chief restructuring officer, and Paul Deutch from
Omni, the debtors' claim and noticing agent. And as Your
Honor noted, both Mr. Deutch and Mr. Braley are declarants
for today's hearing.
Your Honor, the only matter going forward is
confirmation. We have resolved all objections to
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confirmation and we believe we will be presenting uncontested
confirmation of the debtors plan. Mr. Percontino, from Cole
Schotz, will be presenting confirmation but before turning to
the plan I would like to turn the podium over to Mr. Winters
to first say a few words to the Court and then turn to Mr.
Percontino.
Thank you, Your Honor.
THE COURT: Very good. Thank you, Mr. Reilley.
Mr. Winters, good morning. Good to see you.
MR. WINTERS: Good to see you as well, Your Honor.
Spencer Winters of Kirkland & Ellis LLP on behalf of the
debtors.
Your Honor, I will be very brief before turning
the podium over to Mr. Percontino. Cole Schotz has led the
disclosure statement and plan workstream and they are going
to lead the winddown project and ultimately assist with
wrapping up the cases. But I did want to briefly rise to
note how far we have come in these Chapter 11 cases and to
make a couple of acknowledgements.
As the Court will recall, we first filed these
Chapter 11 cases about five months ago. Easy for me to
remember because it was less then a week after my daughter
was born. The debtors had under $1.7 million of cash at that
time. We had no buyer for either the ventilator business or
the respiratory diagnostics business. And we had a 22-day
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milestone to either find a buyer or pivot to a total
liquidation of the business.
Things look a lot better today then they did five
months ago. As I previously said, no one is celebrating the
stark economic realities of the situation. I think when I
last said that the Court mentioned a famous play that Ms.
Lincoln attended but in all seriousness the outcome is
excellent under the very challenging circumstances that we
found ourselves in here.
We did find a buyer for the ventilator business
and that sale closed on October 11th and it was truly a
relief when that one closed because that was the business
that housed those highly sensitive products that we talked
about at the first day hearing and throughout the cases. We
also found a buyer for the respiratory diagnostics division
and that sale closed on Tuesday of this week.
We are now here presenting an uncontested
confirmation order to the Court. The hard work and
dedication of a lot of people made that possible, obviously
the Court and its staff, the creditors committee, the secured
lender group, the U.S. Trustee, other parties in interest,
all their advisors. It also includes the purchasers, both the
two that ultimately bought the divisions and the bidders that
participated in the process, and it includes the management
team who have fought every day to help bring about this
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result and the company's board of directors and special
committee. It was a very challenging situation, Your Honor,
but ultimately, we got to the right place.
That is all I have. Unless the Court has any
questions, I will yield the podium to Mr. Percontino.
THE COURT: No, Mr. Winters, I do not have
questions. I was -- I am gratified to see the second sale
that closed this week. I know that, basically, the sale
transactions were moving in tandem with the plan and
disclosure process so I appreciate that report and update.
With that I would be happy to hear from Mr.
Percontino. Good morning, sir.
MR. WINTERS: Thank you, Your Honor.
MR. PERCONTINO: Good morning, Your Honor. Can
you hear me okay?
THE COURT: I sure can.
MR. PERCONTINO: Great. Matteo Percontino from
Cole Schotz, co-counsel to the debtors and debtors-in-
possession.
Your Honor, on November 13th the debtors filed the
second amended agenda which is at Docket 738. And as my
colleagues mentioned, we are here on one item which is
confirmation of a plan and final approval of the disclosure
statement. Unless Your Honor has any initial questions, I
would like to first move into evidence the two declarations
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the debtors submitted in support of the disclosure statement
and plan.
The first being the declaration of Charles Braley,
the debtors chief restructuring officer, which is filed at
Docket No. 721. Mr. Braley is on the Zoom and available for
cross. And unless any questions or -- unless anyone has any
questions, the debtors would respectfully request that Mr.
Braley's declaration be admitted into evidence as his
testimony and support of the plan and disclosure statement.
THE COURT: Very good. I would ask if there are
any objections to the admission of Mr. Braley's declaration
as part of the debtors case in chief for confirmation of
their plan as well as final approval of the disclosure
statement.
(No verbal response)
THE COURT: Very well. Hearing no objection, Mr.
Braley's declaration is admitted.
(Braley declaration received into evidence)
THE COURT: I would ask at this point is there any
party that intends or expects to cross-examine Mr. Brady
regarding the contents of his declaration?
(No verbal response)
THE COURT: Hearing no response, Mr. Braley's
declaration is admitted without contradiction.
Mr. Percontino, you may proceed.
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MR. PERCONTINO: Thank you, Your Honor. Next is
the declaration of Paul Deutch of Omni, the debtors claims
and administrative agent, setting forth the voting report
which is filed at Docket No. 712. Your Honor, Mr. Deutch is
on the Zoom as well and available for cross. Unless there
are any questions, we would respectfully request that his
declaration also be admitted into evidence.
THE COURT: Very good. Good morning, Mr. Deutch.
Its good to see you again.
I would ask fi there are any objections to the
admission of Mr. Deutch's declaration, which is the balloting
declaration, again, as part of the debtors case in chief for
purposes of confirmation of the plan.
(No verbal response)
THE COURT: Hearing no response, Mr. Deutch's
declaration is admitted.
(Deutch declaration received into evidence)
THE COURT: Is there any party that intends or
expects to cross-examine Mr. Deutch regarding the contents of
his declaration?
(No verbal response)
THE COURT: Very well. Hearing no response Mr.
Deutch's declaration is likewise admitted without
contradiction. Thank you, sir.
MR. PERCONTINO: Thank you, Your Honor. Your
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Honor, as was mentioned earlier, the debtors commenced these
cases approximately five months ago in June and missed a
liquidity crunch to effectuate both the sale of its
ventilation and respiratory diagnostics business. The
Chapter 11 filing was supported by a majority of the first
lien lenders, second lien lenders, the sponsor, through the
execution of a restructuring support agreement by which the
parties agree to support the continuation of the debtors sale
process for a limited period of time and to effectuate the
orderly winddown of the debtors estates to a confirmation of
a Chapter 11 winddown plan.
Following the marketing process, the debtors held
a three-day auction in August which openly resulted in naming
ZOLL Medical as the successful bidder for the ventilation
business and Trudell Medical as the successful bidder for the
debtors respiratory diagnostic business. As was mentioned
earlier, again, the ZOLL sale closed on October 11th and the
Trudell sale closed a couple days ago on November 12th.
As a result of these sales, approximately $90
million in cash consideration was received plus the
assumption of certain liabilities as set forth in those asset
purchase agreements. In addition, approximately 790 of the
approximately 935 employees employed at the start of these
cases had been transitioned to one of those buyers and many
of the vendor relationships were salvaged in the process.
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Last, the debtors were able to maintain business continuity
for many (indiscernible) products.
We are now here before Your Honor on the final
step in the restructuring process to confirm the debtors
winddown plan which will allow the debtor to serve as the
debtors transition services obligations to the buyers, and
efficiently and effectively winddown the debtors and non-
debtor affiliates.
Your Honor, the disclosure statement, second
amended plan, and proposed confirmation order are the
culmination of extensive negotiations and agreements among
the major stakeholders which have resulted in our being here
on a fully consensual basis. Although the negotiations with
various constituencies were sometimes hard-fought, they were
very productive and we would like to thank all parties
involved for contributing to the success of these cases
including the lenders, the sponsor, the committee, and the
Office of the U.S. Trustee, among others.
We are now requesting the Court approve the
disclosure statement on a final basis which appears at Docket
582 and to confirm the debtors second amended plan which
appears at Docket 719. In support of approval of the
disclosure statement and confirmation, in addition to the
declarations already submitted into evidence, the debtors
filed their confirmation brief at Docket No. 722 --
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THE COURT: I have it.
MR. PERCONTINO: -- which sets out the basis --
great, Your Honor, appreciate that -- which sets out the
basis as to why the debtors believe standards under the code
have been met. The debtors also filed a plan supplement at
Docket No. 689 which, among other things, identified the
debtors independent director, David Barse, as the proposed
plan administrator and attached the proposed administrator
agreement.
The plan supplement was subsequently amended at
Docket No. 720 to remove (indiscernible) causes of action as
part of the committee settlement that I will discuss shortly.
I also note that the plan solicitation packages were served
in accordance with the solicitation procedures order and the
relevant affidavit of service can be found at Docket No. 707.
On November 13th, 2024 the debtors filed the
revised proposed confirmation order which appears at Docket
No. 737. The edits there are generally minor cleanups and
some edits from the U.S. Trustee which are consistent with
the plan language and one edit from the DIP lender which
simply preserves consent rights that are set forth in the
plan itself.
Your Honor, the second amended plan and revised
confirmation order also resolves the U.S. Trustees
confirmation objection filed at Docket No. 705 and reflects
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the resolutions reached on informal comments from various
parties in interest including, among others, the committee,
the DIP lenders, the first lien agent and certain insurers.
With respect to the committee, to achieve consensus the
debtors engaged in good faith arm's length negotiations
resulting in a comprehensive settlement which is embodied in
the second amended plan.
In summary, it provides for four things. The
first is a reserve or approximately $3 million for payment of
allowed administrative claims. Second, a residual recovery
pool that provides for potential recovery of the greater of
$250,000 or the excess of funds in a professional fee escrow
account following the satisfaction of the debtors winddown
obligations all as more fully set forth in the plan and
proposed order. Third, the debtors release of Section 547
preference claims. Fourth, certain treatment for the debtors
vendors who are continuing to serve as the purchasers under
transition services agreements.
Further, as shown in the Deutch declaration, all
votes on the plan were solicited after the Court entered the
procedures order on October 2nd, 2024 which is Docket No.
596. And as reflected therein, the votes in Class IV and V
are overwhelmingly in support of the plan and there were, in
fact, no votes rejecting the plan.
In summary, the debtors submit that the plan is
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the best outcome for the debtors, their estates and all
constituencies effected by these Chapter 11 cases. It allows
the debtors to continue supporting the distribution of life
enhancing medical devises and equipment through the provision
of transition services to the purchasers and further provides
a mechanism to winddown the debtors and their non-debtor
affiliates in an orderly cost-efficient manner through a plan
administrator and subject to an agreed to winddown budget.
Your Honor, with regard to the requirements of
1125, the debtors now believe that there aren't any facts in
dispute and there has been no objections with respect to
those requirements. So, unless Your Honor has any specific
questions or concerns, the debtors intend to rely on the
declaration submitted into evidence in the brief in support.
THE COURT: I do not have questions at this point,
Mr. Percontino.
MR. PERCONTINO: Great. Your Honor, to close, as
wet forth in the confirmation brief, the debtors believe that
the disclosure statement contains adequate information as
required by Section 1125 of the Code and satisfied the
applicable notice requirements. The plan satisfies each of
the requirements of Section 1125 of the Code.
With this, Your Honor, the debtors would
respectfully request entry of the proposed confirmation order
approving the disclosure statement on a final basis and
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confirmation of the debtors second amended plan. Thank you
for your time.
THE COURT: Thank you, Mr. Percontino.
I would like to hear from the committee, please.
Ms. Going, good to see you again.
MS. GOING: Good to see you too, Your Honor.
Kristin Going on behalf of the committee.
I know Your Honor hasn't seen much of us in this
case but that certainly doesn’t mean that there wasn't
anything going on. In fact, as you have heard, this was an
extremely difficult case for all stakeholders. I am not going
to sugarcoat it, this debtor really teetered on
administrative insolvency literally every day.
I want Your Honor to know that there was also a
very active and invested committee in this case made up of
vendors who often felt that they were financing this debtor
through their continued support by providing goods and
services post-petition. Now that is why I am so very pleased
to be here supporting a fully consensual plan.
I also really want to acknowledge the efforts of
Mr. Salloum from Kirkland & Ellis because without him I do
believe that we would be in a very different place. He gave
significant time and attention to this case and to
structuring the settlement and negotiations. I personally am
very grateful for his work and his efforts. And it's because
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of that that we are before you with a true win, win result.
Mr. Percontino provided the highlights of what the
settlement provides for unsecured creditors and I just want
to make one further point. On the key terms of the
settlement there is a process whereby vendors will either be
identified as necessary for transition services agreements or
have their contracts rejected.
With that, unless Your Honor has any questions for
me, I will conclude by saying the committee supports
confirmation of the current second amended plan.
THE COURT: Thank you very much, Ms. Going. I
have no further questions for the committee.
I would like to hear from the United States
Trustee just to confirm that all their concerns are resolved.
Mr. Hackman, as always, good morning. Good to see you.
MR. HACKMAN: Good morning, Your Honor. May I
please the Court, its Ben Hackman for the U.S. Trustee.
Can Your Honor hear me okay?
THE COURT: I sure can.
MR. HACKMAN: Thank you, Your Honor. I confirm
that our limited objection, filed at Docket Item 705, is
fully resolved. We do not oppose entry of the confirmation
order and like Ms. Going, I thank debtors counsel for working
with us to resolve our concerns.
Thank you, Your Honor.
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THE COURT: Very good. I would ask if anyone else
wishes to be heard with respect to the debtors request for an
order confirming the plan as well as providing for final
approval of the disclosure statement.
(No verbal response)
THE COURT: Very good. I will grant the relief
requested by the debtor. Given the resolution of any pending
objections or open issues I am not going to burden the record
with extensive findings. I note, as Mr. Percontino walked
through the record that the debtor developed that we have
admitted today two separate declarations.
Mr. Deutch's declaration, which is the balloting
certification, which shows overwhelming support from those
classes entitled to vote which were Classes IV and V. Clearly
from Mr. Deutch's declaration, again which has been admitted
without contradiction, the debtors have carried their burden
under Section 1126 to demonstrate sufficient creditor support
through the suffrage process to permit and win information.
Likewise, the Court admitted the Braley
declaration which lays out with particularity both the
factual predicate for the debtors plan and the circumstances
of this case as well as the relevant 1129 and 1123 standards
and identifies how those standards have been met or how they
do not apply to this particular case.
I note that the Court has previously approved, on
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an interim basis, the disclosure statement by order dated
October 2nd, appearing at Docket No. 596, which laid out
preliminary approval of the disclosure statement as well as
laying out the solicitation process to get us to today. I
note that a review of the docket reflects scrupulous
compliance with the requirements and timeline set forth in
that disclosure statement.
Based upon the record before me, considering in
particular the lack of any objection to the disclosure
statement, and the unalloyed support of the creditors
committee for approval of the plan I am satisfied that the
debtors have carried their burden under Bankruptcy Code
Section 1125 for entry of a final order finding that the
disclosure statement contains information adequate to permit
a hypothetical stakeholder to make an informed decision to
vote for or against the plan. I note, again, with Mr.
Deutch's declaration that the Court's confidence in the
disclosure statement is supported, frankly, by, again, the
overwhelming results of the balloting process that was
obtained here.
That brings, again, to the debtors request for
confirmation. I appreciate getting in advance of today's
hearing the confirmation order that was filed a couple of
days ago that, again, identifies the resolution of some open
issues and I assume some informal discussions between
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stakeholders that were resolved by language added to that
form of confirmation order.
When the Court reviews both the Braley declaration
as well as the Deutch declaration and, again, given the
absence of objection, the record is certainly sufficient. I
am simply prepared to find that the debtors have carried
their burden under Bankruptcy Code Section 1129 and 1123 to
the extent applicable for entry of an order approving plan
confirmation.
I would also note, as Mr. Percontino observed,
that the debtors have filed a comprehensive memorandum in
support of plan confirmation. That is, obviously, not
evidence but it is, nevertheless, still a part of the record
before the Court and, again, demonstrates with particularity
the plan and the disclosure statement's compliance with
applicable rules as well as provisions of the bankruptcy code
for purposes of approval of the disclosure statement and
confirmation of the plan.
Mr. Percontino, I just want to confirm, I believe
that the debtors are also requesting a waiver of the 14-day
stay, otherwise applicable, in order to allow them to go
effective with the plan promptly. Am I correct?
MR. PERCONTINO: That is correct, Your Honor.
THE COURT: Very well. I am satisfied, based upon
the record before me and considering both the lack of any
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objections as well as the support of the official committee
of unsecured creditors, that cause here exists for a waiver
of the rule -- of the Rule 6004 stay for purposes of allowing
the debtor to confirm and then go effective with their plan
in less then 14 days. As is typical I would encourage the
debtor to go forth and go effective at its earliest
opportunity. The request for a waiver is approved.
I would ask -- I will just want to confirm that
the final form of the confirmation order is uploaded and if
so, I would be happy to make sure that that gets entered
today. Mr. Percontino, is the document up.
MR. PERCONTINO: I am just going to confer with my
colleague, Patrick Reilley, who is on the line.
MR. REILLEY: Your Honor, we will upload it
immediately after the hearing.
THE COURT: Very good. I will look for that order.
It will be uploaded upon arrival.
I would ask, Mr. Percontino or Mr. Reilley, going
forward, obviously, I just generally check, the -- I am
confident that we will have necessary steps to close out the
case. Does the debtor or the reorganized debtor or the post-
confirmation entity anticipate significant or major
litigation or, essentially, just claims administration,
Chapter V stuff and -- I just want to know what kind of
category I ought to keep this in for scheduling purposes on
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my docket.
MR. PERCONTINO: There wouldn’t be major
litigation, Your Honor. There is one retained cause of action
set forth in the plan supplement related to one landlord
potential claim issue. Otherwise, most of what is going to
take place is going to be taking place through the plan
administrator on winding down the debtor entities and non-
debtor affiliates across internationally and going to the
claims reconciliation.
THE COURT: Very good. That all sounds fine to me
and that is pretty much what I would have expected. I just
like to, if I think of it, just ask because sometimes we then
-- if we don’t know that significant litigation is coming
sometimes, we are not necessarily anticipating for scheduling
purposes what you might need. Obviously, you will need some
time for claims administration as well as, I assume, final
fee apps and the like. So, in that you can expect that
Chambers will be a willing partner in terms of scheduling
necessary hearings in order to keep the process moving
forward.
Mr. Percontino, do we have anything else this
morning? I believe the second agenda item has been resolved.
I believe that order has been entered and if it hasn't been
entered and if it hasn't been entered today.
Any other issues this morning?
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MR. PERCONTINO: No, Your Honor. Thank you. That
order has been entered. We very much again appreciate Your
Honor's time.
THE COURT: Very good. I would make -- I would be
remiss if I didn't make one other observation and its
consistent with Mr. Winter's comments from the outset of this
case. You know, it was no secret that this debtor was
facing, frankly, you know, really challenging and dire
circumstances. It was hardly, by any stretch, a given that
the debtor would have been able to hold things together in
order to get to a sale process and then for, frankly, both of
the divisions given both the economic circumstances and the
structural issues that the debtor was facing.
So, I am sympathetic to the challenges that the
debtor faced and I certainly would commend all of the parties
on preserving both value as well as a terribly important
product to the end users. I appreciate everyone's effort in
that respect. With that, I will look for the confirmation
order to be uploaded. We will enter it promptly.
Mr. Winters, do we have anything else before we
conclude?
MR. WINTERS: Nothing further. Thank you, Your
Honor.
THE COURT: Very well. With that we are
adjourned. Thank you, counsel.
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(Proceedings concluded at 10:28 a.m.)
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CERTIFICATION
I 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 my
knowledge and ability.
/s/ William J. Garling November 15, 2024
William J. Garling, CET-543
Certified Court Transcriptionist
For Reliable
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