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VERITEXT REPORTING COMPANY www.veritext.com
UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK Lead Case No. 10-13800(SCC)
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Debtors.
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U.S. Bankruptcy Court One Bowling Green New York, New York
September 14, 2011 10:51 AM B E F O R E: HON. SHELLEY C. CHAPMAN U.S. BANKRUPTCY JUDGE
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Transcribed by: Linda Ferrara HEARING re: Debtors Motion for Entry of an Order (I) Extending the Exclusive Periods During Which Only the Debtors may file a Chapter 11 Plan and Solicit Acceptances Thereof and (II) Approving Modifications to the Fixed/Floating Plan and Remaining Debtor Plan and Related Amendments to the Confirmation Order filed by Jennifer Marines on behalf of Innkeepers USA Trust. [Doc 2051]
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VERITEXT REPORTING COMPANY www.veritext.com
A P P E A R A N C E S : KIRKLAND & ELLIS LLP Attorneys for Debtors 655 Fifteenth Street N.W. Washington, DC 20005
BY:
MORRISON & FOERSTER LLP Attorneys for Official Creditors' Committee 1290 Avenue of the Americas New York, NY 10104
BY:
LORENZO
MARINUZZI, ESQ.
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 BY: TIMOTHY KARCHER, ESQ. DEWEY & LEBOEUF Attorneys for Ad Hoc Preferred Shareholders' Committee 1301 Avenue of the Americas New York, NY 10019 BY: DANIEL A. FLIMAN, ESQ. KASOWITZ, BENSON, TORRES & FRIEDMAN LLP Attorneys for Five Mile 1633 Broadway New York, NY 10019 BY: LENARD PARKINS, ESQ. MARK ELMORE, ESQ. HAYNES AND BOONE, LLP Attorneys for Midland Loan Services 30 Rockefeller Plaza 26th Floor New York, NY 10112
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P R O C E E D I N G S Good morning, Mr. Lennon. Good morning, Your Honor. How are you? Brian Lennon Your Honor,
we're here today on the debtors' motion to extend exclusivity and motion seeking certain plan modifications. Your Honor,
with respect to exclusivity, we had originally requested the full extension to the, I believe it was January 19 statutory deadline. The parties -- we've been talking to our
constituents and have reached an agreement that we will extend to November 10 for no which will allow us to come back in on November 9 if we need a further extension. In the meantime, Your Honor, we've been evaluating various paths forward and considering how the litigation will interplay with the path that we ultimately take in terms of going forward with a plan. THE COURT: MR. LENNON: Okay. Your Honor, unless Your Honor has any
questions with respect to the exclusivity -THE COURT: No, let's come back to the bigger picture.
I see that Mr. Harris is here today, so why don't we take care of the agenda -MR. LENNON: THE COURT: the bigger picture. Okay. -- and then perhaps we could go back to
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MR. LENNON:
Okay.
requested in the motion was a motion to allow the non-effective remaining debtors to consummate the remaining debtor plan and go effective. We've been talking to the constituents about
this relief, as well and there was some technical questions that were raised that were going to take a couple of extra days to try to work through those. THE COURT: MR. LENNON: Okay. And we've agreed to adjourn it to the
hearing that we have on September 26 at 2 p.m. THE COURT: modifications aspect. MR. LENNON: With respect to the remaining debtor Okay. So we're not going forward with the
with respect to the fixed floating plan which was, when we filed the motion, it was to eliminate Cerberus and Chatham's right to consent to an extension of the September 15 outside date. THE COURT: MR. LENNON: Right. Since we filed the motion, we have
entered into a stipulation with Cerberus and Chatham pursuant to which they have agreed that they will not contest the motion essentially. We filed that stipulation last night.
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Your Honor, also last night the ad hoc committee had filed an objection to this aspect of the motion. We had some
discussions with Mr. Karcher this morning and I believe they are now comfortable with us going forward and also having the relief in the order. So the order will modify the plan and we
also have the benefit of the stipulation with Cerberus and Chatham, pursuant to which they agree that they will not have the right to consent to an extension. THE COURT: All right. So do I have -- I've been I have an objection
trying to follow this as it moves along. of the ad hoc committee. the ad hoc committee. MR. LENNON: THE COURT: MR. LENNON:
Do I have the final form of order yet? No, Your Honor. Okay. We're still working on the final form of
We have one comment from Midland that we'll take back to our office, put it into the order and if it's okay, e-mail it down this afternoon. THE COURT: All right. Since from time to time in
this case, things don't happen exactly we think they will, I just want to tell you that as of 2:30 tomorrow, I am on my way to Washington. So -- and tomorrow is September 15. Yes, Your Honor. I do have the Cerberus
MR. LENNON:
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THE COURT: MR. LENNON: entered immediately. THE COURT: Okay. MR. HARRIS: THE COURT:
That we'll
with respect to the Cerberus piece of it? MR. HARRIS: No, but if Mr. Lennon just wants to
handwrite the addition, if that's okay and you can sign the order if you'll consider it now rather than worrying about it because of your time -THE COURT: MR. HARRIS: I can do that. I don't mind the changes if they're
handwritten, if you don't mind, Your Honor. THE COURT: handwritten. I don't mind the changes if they're
but in terms of actually entering the order on the docket, I'll need a conformed copy. MR. HARRIS: THE COURT: MR. LENNON: THE COURT: you want us to do it? MR. HARRIS: No, I think Mr. -- someone with legible Just interlineations notes; yes. Right. Okay. Maybe we're not saying the same thing. Do
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handwriting other -- which is not me could write it in and then everybody could initial it and give it to you, Judge. all. THE COURT: MR. LENNON: Okay. Your Honor, I have a confession. I don't That's
have the disc with me with the order. THE COURT: MR. LENNON: anyway. THE COURT: MR. LENNON: MR. HARRIS: MR. LENNON: MR. KARCHER: THE COURT: MR. KARCHER: Okay. So -All right. Your Honor, Mr. Karcher? Good morning, Your Honor. Good morning. Timothy Karcher of Dewey & LeBoeuf on We That's fine. So it's going to have to be e-mailed
behalf of the ad hoc committee of preferred shareholders. did file a response last night. THE COURT: MR. KARCHER: Right.
said, we have come to an agreement with respect to the Cerberus portion of it. THE COURT: MR. KARCHER: Okay. Our understanding is that the only real
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modification that's being approved today is with respect to 155 of the confirmation order and it's the removal of the consent of Cerberus/Chatham fixed/floating plan sponsors. THE COURT: confused. Okay. So we're not -- I'm still probably
as to the effective date of the release provided by the preferred shareholders today. MR. KARCHER: THE COURT: MR. KARCHER: That was on the table. Right. But now that the Cerberus -- because
what they were doing -- what we thought they were doing was trying to remove Cerberus and Chatham without their consent but now my understanding is that based on the stipulation before Your Honor that Cerberus and Chatham have -THE COURT: MR. KARCHER: THE COURT: MR. KARCHER: Correct. -- waived their consent rights -Right. -- which is not a -- which is a
different state of play than we had thought early this morning. So with that modification, and while Cerberus and Chatham and the fixed/floating plan sponsors have waived their consent rights, our objection is with respect to that particular modification is -THE COURT: Let me just ask you because I just -- I In your supplemental objection in
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paragraph 3, you say "By extending the effective date beyond the fixed/floating plan outside date, the debtors proposed modification prejudices preferred shareholders because they release future conduct of the trustees and management which has the effect of insulating trustees and management from fulfilling their fiduciary duties to preferred shareholders". I am having a hard time understanding the nexus between that statement and what you just said about the Cerberus and Chatham waiver. MR. KARCHER: Well, the nexus is, Your Honor, if they
were making -- we signed up for a particular deal. THE COURT: MR. KARCHER: Right. Okay? And we agreed way back when that
we would support the plan and the plan would have a particular effect and things would happen on a particular schedule. THE COURT: MR. KARCHER: Right. One of the things we agreed with was
that we would become releasing parties -THE COURT: MR. KARCHER: THE COURT: MR. KARCHER: Right. -- under the fixed/floating rate plan. Right. Okay? The fixed/floating rate plan
under Your Honor's confirmation order and the plan itself provides that there's an outside date -THE COURT: Right.
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MR. KARCHER: THE COURT: MR. KARCHER: tomorrow -THE COURT: MR. KARCHER:
modification that they were seeking didn't have the consent of Cerberus and Chatham because they didn't extend the outside date, then it would be a different plan. There would be
something different about it that would materially affect our rights. Now we're reserving all of our rights to the extent We don't
that there's a material modification of the plan. know what they're going to come back with. THE COURT: Okay. Remind me.
delighted that you've worked it out but just remind me how the preferreds still have an interest in what happens at the end of the day in the fixed and floating pool. MR. KARCHER: Sure. There are certain interests that
we -- there are certain plans that went effective. THE COURT: MR. KARCHER: THE COURT: Right. And certain plans that -And the remaining debtor plans.
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And the remaining debtor plans. Right. Okay. And we have an interest in that
and it's my understanding that the way the -THE COURT: MR. KARCHER: escaping me. THE COURT: MR. KARCHER: The guarantee claims? Certain guarantee claims, that what The waterfall works? Not the waterfall, I'm sorry that it's
they're -- that it may have an effect on us and the plan we signed up for -THE COURT: How much of the guarantee goes upstairs to
Grand Prix; is that what we're talking about? MR. KARCHER: THE COURT: Yes, we are. Okay. All right. I just was trying to
connect the dots between essentially why you still cared. MR. KARCHER: plan gets confirmed. We signed up for a plan. We hoped that
we don't want anything that happens now -THE COURT: MR. KARCHER: THE COURT: Right. -- to mess with what we agreed to. Okay. So you're satisfied that as long as
Cerberus and Chatham are waiving their consent rights -MR. KARCHER: THE COURT: Right. -- you're good.
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MR. KARCHER:
And to the extent that they revoke that So we're, you know -- I don't
know if they can or if they can't. THE COURT: Well, we're not going to get into revoking
That's just -MR. KARCHER: THE COURT: I just wanted to be clear. Even for Innkeepers, that's just beyond
what we're going to even think about. MR. KARCHER: THE COURT: MR. LENNON: Thank you very much. Okay. Thank you, Mr. Karcher. Okay.
any further questions about the motion -THE COURT: positions are. MR. LENNON: THE COURT: I will make the -All right. Does anyone else wish to be No, now I understand what the parties
heard with respect to the motion to extend exclusivity and to dispose of at least a part of the modification motion? (No response) THE COURT: All right. So, we'll wait to get an order
All right.
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and you also filed a notice of amendment to the DIP credit agreement. MR. LENNON: THE COURT: Yes, Your Honor. I don't need to do anything on that;
We had reached an
We reached an agreement to extend that maturity date out to September 19. THE COURT: September 19? MR. LENNON: We're continuing to work with both Lehman All right. And what's going to happen on
and Five Mile with respect to future extensions of the debt. So we may need to come back at some point to seek relief with respect to those. THE COURT: Okay. As you always do, just keep in
touch with Ms. Eisen because we've a full trial calendar next week but we'll try to squeeze you in. Mindful of
confidentiality concerns, are there any developments with respect to the Cerberus litigation or whatever additional process the debtor is contemplating that you feel comfortable telling me about on the record? MR. LENNON: Answering no is fine.
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Donovan regarding the litigation. THE COURT: MR. LENNON: process question. THE COURT: MR. DONOVAN: THE COURT: MR. DONOVAN: THE COURT: MR. DONOVAN: Okay. Good morning, Your Honor. Hello, Mr. Donovan. The litigation is proceeding on pace. Okay. I believe yesterday the parties had a I guess the one thing is I Okay. Thank you, Mr. Lennon.
would -- maybe we'll touch base with Ms. Eisen to reserve some time, although hope spring is eternal, I think there probably will be some issues in discovery. Just as an example, we asked
an interrogatory of Cerberus and Chatham, please tell us your basis for the MAC. They declined to answer that saying they We're trying
don't have to or maybe at the end of discovery. to work all this out. THE COURT: MR. DONOVAN: THE COURT: MR. DONOVAN: Okay.
But we may need to reserve some time. All right. Otherwise, I think although everyone's
working hard we're on pace for the schedule. THE COURT: All right. Well, I've become one of the
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Columbus Day date, but that's -MR. DONOVAN: THE COURT: MR. HARRIS: THE COURT: MR. HARRIS: I'm sure you have. Mr. Harris? Good morning, Your Honor. Good morning. Mr. Donovan's correct and we obviously
exchanged our responses to the discovery requests in accordance with the scheduling order that was entered by the Court. The
parties took the weekend, I think, to evaluate those and we did have about a two and a half hour meet and confer conference yesterday. THE COURT: MR. HARRIS: Okay. We're also -- had served discovery on a
number of third parties who are not technically parties to the litigation. We got their responses back. We're working with
them, as well.
as pace with them as we would hope and obviously as third parties, they're -- feel somewhat burdened by all of this but we need obviously them to respond as well. THE COURT: in the case? MR. HARRIS: Yes, I mean it's Five Mile, it's Lehman, Third parties who are parties-in-interest
it's Midland and we're trying to work it out with their lawyers, as well, Your Honor but obviously we think they have critical information here that we need access to. And again,
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we are in contact with all of them and we're hopeful -THE COURT: deals with -MR. HARRIS: damages. THE COURT: your MAC. -- the liquidated damage provisions, not Among other things, the liquidated Is that on the prong of the case that
is within your control. MR. HARRIS: Well other than the negotiation of it
which we actually were not a party to, which was brought into -- was an issue raised in the case actually by the debtors. THE COURT: MR. HARRIS: I see. So we have asked for some documents on
that and there may be other things but as I say, we're trying to work it out with everybody. THE COURT: MR. DONOVAN: Okay. All right. Thank you.
your schedule and while we're all here is whether or not we could get on your calendar. It could be telephonic but just to
set a time just in case and I know your schedule continues to fill up. I'd prefer to have it and then release it but that's up to you. THE COURT: MR. DONOVAN: Okay. What dates did you have --
I was thinking --
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What dates did you have in mind? Give us until the weekend, you know, for
everyone to work; maybe Monday afternoon, if you could give us an hour or so on the phone or no. THE COURT: MR. DONOVAN: call-in number? THE COURT: MR. DONOVAN: THE COURT: Well -Or here? 1 o'clock or -- I have trial starting at 1 o'clock. Sure. Do you want me to circulate a
We can even come late in the day. I don't want to burden you. Yes.
think that you would benefit from continuing to talk throughout the day -MR. DONOVAN: partners to make sure. THE COURT: -- then you can -- right. And I would do I'll confer with Mr. Harris and his
it by phone but as you all know, it's much better for you to come down here, even though it's a little bit of a burden on you. It's just very hard to do that on the phone. MR. DONOVAN: THE COURT: Not at all; okay. So, you could put 1 o'clock on and then
just talk to Ms. Eisen that morning and we'll remain flexible.
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appreciate Mr. Donovan's desire to have things on the calendar. I have no ability to speak for the availability of any of my partners -THE COURT: MR. HARRIS: Certainly. -- or anybody at Wachtell, so we'll try
and tentatively schedule it for 1:00. THE COURT: MR. HARRIS: Understood. If that time doesn't work, we'll come
back to you and advise and try and -THE COURT: I'm going to do this. I'm just going to
put it on 1 o'clock on our calendar, so that we don't give that away to anybody else; all right? MR. HARRIS: THE COURT: MR. HARRIS: THE COURT: MR. HARRIS: Okay. So you have a roper on the 1 o'clock spot. Okay. All right? And then it may be that --
mutually convenient time if that one doesn't work out. THE COURT: MR. HARRIS: Okay. But we obviously need to talk to the
Wachtell people here -- who aren't even here. THE COURT: Okay. Just to remind you, and I may have
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told you before, but the following week, the week of the 26th is going to be extremely challenging to do anything at all. I have a disclosure statement hearing on the Monday, a judicial retreat on the Tuesday and Wednesday and then it's the Jewish holidays which I am out. hearing on Monday morning. the 26th; right? MR. LENNON: THE COURT: MR. LENNON: THE COURT: That's for the bankruptcy case; yes. For the bankruptcy case. Yes. Right. Yes, I guess the Kirkland people I think we're done for today. Right? No, a disclosure statement
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Date: September 15, 2011 Veritext 200 Old Country Road Suite 580 Mineola, NY 11501 I, Linda Ferrara, certify that the foregoing transcript is a true and accurate record of the proceedings. C E R T I F I C A T I O N
LINDA FERRARA
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