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1 2 3 4 5 6 7 8 9 10 11 12 13 APPEARANCES: 14 For the U.S. Trustee: 15 16 17 Appearances continued. 18 19 20 Transcription Company: 21 22 23 24 25 Proceedings recorded by electronic sound recording, transcript produced by transcription service. Rand Reporting & Transcription, LLC 80 Broad Street, Fifth Floor New York, New York 10004 (212) 504-2919 www.randreporting.com Audio Operator: Electronically Recorded by Tiffany, ECRO Andrew Velez-Rivera, Esq. U.S. DEPARTMENT OF JUSTICE OFFICE OF THE U.S. TRUSTEE 33 Whitehall Street, 21st Floor New York, New York 10004 TRANSCRIPT OF FINAL HEARING ON MOTION TO APPROVE USE OF CASH COLLATERAL AND ADEQUATE PROTECTION; STATEMENT - NOTICE OF (I) ENTRY OF FOURTH INTERIM AGREED ORDER AUTHORIZING LIMITED USE OF CASH COLLATERAL AND GRANTING ADEQUATE PROTECTION AND (II) FINAL HEARING; APPLICATION OF GREAT AMERICAN GROUP REAL ESTATE, LLC, D/B/A GA KEEN REALTY ADVISORS, CONSULTANT, TO APPROVE FINAL COMPENSATION AND EXPENSES, PERIOD 5/12/2011 TO 7/5/2011; NOTICE OF AGENDA. BEFORE THE HONORABLE ROBERT D. DRAIN UNITED STATES BANKRUPTCY JUDGE IN RE: UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK . . METROPARK USA, INC., . . Debtor. . . . . . . . . . . . . . . . . . . Chapter 11 Case No. 11-22866 (RDD) New York, New York Wednesday, August 31, 2011 10:08 a.m.

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APPEARANCES:

Appearing telephonically: For the Debtor: Alex R. Velinsky, Esq. COOLEY, LLP The Grace Building 1114 Avenue of the Americas New York, New York 10036

For the Official Committee of Unsecured Creditors:

Ronald A. Clifford, Esq. BLAKELY & BLAKELY, LLP 2 Park Plaza, Suite 400 Irvine, California 92614

For Great American Group:

Harold Bordwin, Esq. GREAT AMERICAN GROUP

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(Proceedings commence at 10:08 a.m.) THE COURT: the phone for this. MR. BORDWIN: Bordwin here. THE COURT: Good morning. Good morning, Your Honor. Ron Clifford Good morning, Your Honor. Harold Metropark. I think I have some people on

MR. CLIFFORD:

on behalf of the committee. MR. VELINSKY: Good morning, Your Honor. This is Alex

Velinsky of Cooley, LLP on behalf of the debtor. MR. VALEZ-RIVERA: Trustee. THE COURT: Okay. Anyone else on the phone? Andy Velez-Rivera for the U.S.

(No verbal response.) THE COURT: No. Okay. All right.

Good morning.

There are a couple of matters on the

calendar today; namely, cash collateral and the fee application for Great American Group Real Estate. in any order. committee. Have there been any changes to the proposed cash collateral budget or order? MR. VELINSKY: No, Your Honor. If you don't mind, I'd I'm happy to take them

I did see the limited objection filed by the

like to just do the Keen application first and get that out of the way so that --

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THE COURT:

MR. VELINSKY:

-- the (indiscernible) can drop off the

THE COURT: unopposed?

That's fine.

I understand that that's

MR. VELINSKY: THE COURT:

That's correct.

All right. It was originally noticed for the July

MR. VELINSKY:

29th hearing, and then at the request of the United States Trustee, it was put over to this hearing to give them more time to review the application. They've done that and have signed

off on it, and there were no objections filed. THE COURT: Is that right, Mr. Velez-Rivera? That's correct, Your Honor. All right. It seems to me

MS. VELEZ-RIVERA: THE COURT:

All right.

that this is pretty much a mathematical exercise given the engagement letter and the results. So in the absence of any

objections, and based on my review of the application, I'll grant the application. I just signed off on the assignment of another lease. I don't know if that's the last lease -MR. VELINSKY: THE COURT: That was the very last straggler -So that's the one that's referred

Okay.

to in this application.

But there's approval in this

application for the fee in connection with that lease as well.

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MR. VELINSKY:

It's actually, believe it or not, the

last one that was just signed -- excuse me -- yesterday. THE COURT: Yes. It was not the last one that we thought That one was a termination

MR. VELINSKY:

-- that the fee is connected with.

that was approved I believe last week -THE COURT: Oh, okay. -- or the week before. So this was --

MR. VELINSKY:

the one that was signed yesterday had been approved several weeks ago and the order was just (indiscernible). THE COURT: Okay. So there was no additional fee

MR. VELINSKY: associated with that. THE COURT:

Okay.

So that's incorporated in the --

not the to-come, but the actual schedule here of fees? MR. VELINSKY: THE COURT: Correct. All right. So you can e-mail

Okay.

chambers the order on this application. MR. VELINSKY: THE COURT: collateral? MR. VELINSKY: Yes. So with respect to cash Thank you. So shall we turn to cash

Okay.

collateral, they were requesting that the Court enter a fifth interim cash collateral order. The debtors continued the

interim orders authorizing the limited use of cash collateral

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since the beginning of the case for almost four months now in large part to accommodate the committee's investigation of the term loan and active discussions between the committee and the term lenders regarding any potential challenge that the committee might bring. We understand that those discussions The debtor hasn't been a part

are active and remain ongoing. of them.

Today, we're asking that the Court grant our request for a fifth interim order with the understanding that the committee is not prejudiced and has full rights to object to final use of cash collateral when that hearing and objection deadline are set. THE COURT: Okay. And does the budget that would go

along with this include a provision for payment under the fee order of the committee? MR. VELINSKY: The current -- the budget that's to be

submitted with this order today is (indiscernible) I think that is in force, which was filed a couple of weeks ago. That

budget is going to have to be switched out for a new budget. It only runs through this week. THE COURT: Right. We've had some trouble just with

MR. VELINSKY: timing.

There are a lot of people who have to sign off on this

budget and given the time of year with vacation schedules it's been difficult. That budget does not include payment beyond

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the initial $50,000 that was paid through the committee.

this time, the term lenders agreed to pay for the -- you know, to increase the budget line item for the committee. I

understand that the committee and the term lenders are, you know, in discussions on that very point. The term lenders'

counsel didn't expect this to be a contested hearing, so they haven't made an appearance. And to be frank, we barely had

time to review the committee's limited objection which was filed late last night after business hours. THE COURT: Okay. I'm not sure I heard you. Did you

say that the lender has agreed in concept to the continued payment of the committee's reasonable fees and expenses, but hasn't agreed on a cap? MR. VELINSKY: Is that -I -- as of today, they have not agreed

to pay any more than the original $50,000 that was budgeted for the committee. ongoing. But I understand that there are discussions

I don't know the substance of those discussions. MR. CLIFFORD: If -- Your Honor, Ron Clifford on If I could jump in here momentarily

behalf of the committee.

just to I guess set the table for Your Honor. We've been in discussions with the term lenders as to a resolution of the entire case. We made it clear when we got

the budget for the last -- the August budget for the fourth interim use cash collateral order that we opposed any different treatment for the committee's professionals as the debtor's

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professionals were receiving.

We made it clear that we were

going to oppose any budget that went forward that contained this provision. Debtor's counsel and financial advisor agreed

to not take any pay under the former budget based on our working this out with the term lenders to the extent we could. We worked clear until yesterday afternoon trying to work out an agreement with the term lenders as to how this case will wind down. Unfortunately, we received no response from the term And so we were left with no choice

lenders at all yesterday.

except to oppose the use of cash only as to the treatment of professionals themselves. The local rules make it clear if

you're going to treat professionals differently through a cash collateral budget, the reasons for those different treatments have to be spelled out, we have to have an opportunity to respond, and none of that was done. THE COURT: Well, there's a specific cap, I think,

right, in the original cash collateral agreement with regard to investigation? MR. CLIFFORD: THE COURT: That's correct.

So it seems to me, although I'm happy to

hear anyone on this, including the U.S. Trustee, that that cap should continue to apply, but that there should be no disparate treatment with regard to the committee's reasonable fees and expenses with respect to other matters that it handles, including negotiation of a plan, although that wouldn't -- the

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including part wouldn't have to be specified in the order. it would seem to me that either the provision should be made

for the committee to be paid its reasonable fees and expenses separate and apart from the investigation, which is capped, or that the monthly payment of the other professionals should stop. And my strong inclination is to go with the former and

not the latter. MR. CLIFFORD: the committee. Your Honor, Ron Clifford on behalf of

If I could just add to Your Honor's comments.

The cap that was placed in the original cash collateral budget was geared towards the committee's review of Wells Fargo, the first lienholder's lien in the case. That lien is much

different than the term holder's lien -THE COURT: No, I'm just -- all I'm saying is that The other work that the

that cap should be adhered to.

committee is doing should be compensated like other professionals. So on an interim basis, I think that's what the I don't know what that will be. There

budget should provide.

should be a reasonable projection of it. all subject to fee applications. MR. VELINSKY:

And, of course, it's

So, Your Honor, as we sit here today, It expires

today is the last day on our fourth interim order. today. THE COURT: Right.

MR. VELINSKY:

We do not have a negotiated approved

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budget that the term lenders have approved that provides for payment to the committee. THE COURT: I'm not sure where that leaves us.

It leaves you with an order that I'm

imposing that provides that they'll pay for that as part of the cost of the case. MR. VELINSKY: THE COURT: to. Okay.

And that's the next thing I wanted to turn

Looking at the budget that was put together through the

first week of September, obviously, at least through that date, although the estate is cash positive, the accruing fees are substantially eating into the cash, and it's -- unless I'm missing something, you're not going to get much more cash into the estate. So things need to come to a head here very

promptly, or else the benefits of the sale, which were considerable here given the original expectations, will be lost. So the parties really need to wrap this up. I may not

approve anything going forward if the estate continues to incur these fees, in other words. wrap it up at this point. MR. VELINSKY: debtor. I -- Your Honor, Alex Velinsky for the There's no reason to -- not to

I believe that the committee's discussions with the

term lenders are geared just to that very thing. THE COURT: I'm assuming so. I just wanted to give

you my view of it from the perspective that doesn't really know what's going on behind the scenes. But just so you'll have the

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benefit of that viewpoint. MR. VELINSKY: THE COURT: Thank you, Your Honor. So the -- the order should reflect

Okay.

that ruling by me, and the budget going forward should reflect a reasonable estimate of the fees and expenses of each of the retained professionals. MR. VELINSKY: THE COURT: Subject, of course, to --

Subject to 330, obviously. Right.

MR. VELINSKY: THE COURT:

And just to put a little more flesh on my

ruling, this sale was done in an orderly fashion, and I think the orderly fashion, along with the hard work of the parties, resulted in the proceeds that came into the estate being higher than what would have happened outside of a bankruptcy case. There's a cost to the secured creditor of that happening, which is having a creditors' committee. And that's why I'm imposing

this as a condition of my granting the order and authorizing the debtors to use cash collateral. So -MR. VELINSKY: THE COURT: Thank you, Your Honor.

-- you should circulate the budget and the

order to all the -- well, to the committee, to Mr. VelezRivera, and also to the two lenders. You don't need to settle

it on them, but you should just circulate to them before it's submitted to chambers.

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MR. VELINSKY: THE COURT:

Okay.

MR. VELINSKY: THE COURT:

Thank you, Your Honor.

Okay.

(Proceedings concluded at 10:20 a.m.) ***** CERTIFICATION I certify that the foregoing is a correct transcript from the electronic sound recording of the proceedings in the above-entitled matter.

September 6, 2011 16 17 18 19 20 21 22 23 24 25 Cathryn Lynch, NJ Cert. No. 565 Certified Court Transcriptionist For Rand Reporting & Transcription, LLC