timothy j. yoo (sbn 155531) eve h. karasik (sbn …omnimgt.com/cmsvol2/pub_47201/640110_146.pdf1 2 3...
TRANSCRIPT
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TIMOTHY J. YOO (SBN 155531) EVE H. KARASIK (SBN 155356) JULIET Y. OH (SBN 211414) LEVENE, NEALE, BENDER, YOO & BRILL L.L.P. 10250 Constellation Boulevard, Suite 1700 Los Angeles, California 90067 Telephone: (310) 229-1234; Facsimile: (310) 229-1244 Email: [email protected], [email protected], [email protected] Attorneys for Chapter 11 Debtor and Debtor in Possession
UNITED STATES BANKRUPTCY COURT
CENTRAL DISTRICT OF CALIFORNIA
LOS ANGELES DIVISION
In re CORNERSTONE APPAREL, INC. Debtor.
))))))))))))))))))))))))))
Case No. 2:17-bk-17292-VZ
Chapter 11 DEBTOR’S REPLY TO OMNIBUS OPPOSITION OF THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS TO THE (I) MOTION FOR ORDER EXTENDING THE DEBTOR’S EXCLUSIVITY PERIODS TO FILE PLAN OF REORGANIZATION AND OBTAIN ACCEPTANCES THEREOF; AND (II) MOTION BY THE DEBTOR TO EXTEND TIME TO ASSUME OR REJECT NONRESIDENTIAL REAL PROPERTY LEASES; DECLARATIONS OF TAE Y. YI AND EVE H. KARASIK IN SUPPORT THEREOF
Hearing: Date: September 19, 2017 Time: 11:00 a.m. Courtroom: 1368 Location: 255 E. Temple Street Los Angeles, California
)
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TABLE OF CONTENTS
A. The Debtor Has Made Meaningful Progress Towards Confirmation Of A Chapter 11 Plan Of Reorganization ........................................................................... 2 B. The Debtor Has Expended Significant Efforts To Respond To Requests For
Information From, And To Engage With, The Committee And Its Professionals ................................................................................................................. 4 C. The Committee’s Proposal To Limit the Extension Of The Section 365(d)(4) Period To 30 Days Calls Into Question Which Constituency the
Committee Represents ................................................................................................. 8 D. Many Of The Issues Raised in the Opposition Are Confusing or Created by the Committee’s Own Actions ............................................................................... 9 E. An Application Of The Dow Corning Factors To The Facts Of This Case Clearly Demonstrates That There Is Cause To Extend The Debtor’s Exclusivity Periods ....................................................................................................... 10
1. The size and complexity of the case ................................................................ 11 2. The necessity of sufficient time to permit the debtor to negotiate a plan of reorganization and prepare adequate information .......................... 11 3. The existence of good faith progress toward reorganization ....................... 13 4. The fact that the debtor is paying its bills as they become due .................... 14 5. Whether the debtor has demonstrated reasonable prospects for filing a viable plan ...................................................................................................... 14 6. Whether the debtor has made progress in negotiations with its creditors ............................................................................................................. 15 7. The amount of time which has elapsed in the case ........................................ 16 8. Whether the debtor is seeking an extension of exclusivity in order to
pressure creditors to submit to the debtor’s reorganization demands ....... 16 9. Whether an unresolved contingency exists .................................................... 17
F. The Debtor Has Satisfied Its Burden Of Establishing Cause To Extend The Section 365(d)(4) Period ............................................................................................... 18
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TABLE OF AUTHORITIES
Page(s) FEDERAL CASES
In re Dow Corning Corp. 208 B.R. 661 (Bankr. E.D. Mich. 1997) ..................................................................... 10, 11, 18
In re Ernst Home Center, Inc. 221 B.R. 243 (9th Cir. B.A.P. 1998) ....................................................................................... 18
In re Wedtech Corporation 72 B.R. 464 (Bankr. S.D.N.Y. 1987) ...................................................................................... 18
FEDERAL STATUTES
11 U.S.C. § 341(a) ........................................................................................................................... 7
11 U.S.C. § 365(d)(4) ............................................................................................................. passim
11 U.S.C. § 365(d) ........................................................................................................................ 18
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Cornerstone Apparel, Inc. d/b/a Papaya Clothing, a California corporation and the debtor
and debtor-in-possession in the above-captioned Chapter 11 bankruptcy case (the “Debtor”),
hereby submits this reply (the “Reply”) to the Omnibus Opposition Of The Official Committee
Of Unsecured Creditors To The (i) Motion For Order Extending The Debtor’s Exclusivity
Periods To File Plan Of Reorganization And Obtain Acceptances Thereof; And (ii) Motion By
The Debtor To Extend Time To Assume Or Reject Nonresidential Real Property Leases [Doc.
No. 139] (the “Opposition”) filed by the Official Committee of Unsecured Creditors appointed
in the Debtor’s case (the “Committee”). The Reply is supported by the Declaration of Tae Y. Yi
(the “Yi Declaration”) and the Declaration of Eve H. Karasik (the “Karasik Declaration”)
annexed hereto.
For the reasons set forth below, the Motion For Order Extending Debtor’s Exclusive
Periods To File Plan Of Reorganization And Obtain Acceptances Thereof [Doc. No. 128] and
the Motion By Debtor To Extend Time To Assume Or Reject Nonresidential Real Property
Leases [Doc. No. 129] (together, the “Motions”) should be granted because the Debtor has
established the requisite cause for the relief requested in the Motions. The Opposition,
supported only by a declaration of a representative of the Committee’s financial advisor, and not
by a declaration of any member of the Committee, does not alter the determination that cause
has been established and should therefore be overruled. It should be noted that no individual
creditor, landlord, or any other party in interest in the Debtor’s case has objected to the relief
requested in the Motions.
A. The Debtor Has Made Meaningful Progress Towards Confirmation Of A Chapter
11 Plan Of Reorganization.
The Committee objects to the Motions on the alleged grounds that the Debtor has not
made sufficient progress towards confirming a Chapter 11 plan of reorganization (a “Plan”). To
the contrary, however, the Debtor has made significant progress towards the confirmation of a
Plan. The Debtor’s case was filed on June 15, 2017 (the “Petition Date”), only three months
ago. At the first day hearing in the Debtor’s case, counsel for the Debtor advised that lease
negotiations needed to proceed so that the Debtor could evaluate its retail store portfolio and
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negotiate lease concessions with landlords, and that when the final store portfolio was
determined, the Debtor would be in a position to propose a Plan. At the Chapter 11 case status
conference in the Debtor’s case, the Debtor advised the Court that, while progress had been
made, additional time was required to complete the Debtor’s ongoing negotiations with the
landlords. As noted in the Motions, significant progress has been made in this regard.
Of the Debtor’s 78 remaining retail store leases, the Debtor has successfully negotiated
amendments with favorable rent concessions for 21 leases, which leases the Debtor anticipates
assuming (subject to such amendments). The Debtor has determined that it will be seeking to
assume an additional 9 leases (as is). Further, the Debtor has determined that it will be seeking
to reject 21 leases. Based on the foregoing, there are 27 remaining retail store leases that the
Debtor is still working on with its landlords. The Debtor has made determinations on nearly
two-thirds of its store portfolio and needs additional time to evaluate whether the remaining 27
leases can be modified to become profitable stores. There has been no “stonewalling” of the
Committee here; rather the Debtor has engaged in the usual process that a retail debtor engages
in in a Chapter 11 bankruptcy case, and has been successful in those efforts in a relatively short
period of time.
Further, while the Debtor has requested extensions of its exclusive periods to file a Plan
and solicit acceptances of a Plan out of an abundance of caution, the Debtor is expending all
efforts to file its Plan by October 13, 2017.1 Given the tenor of the Committee’s Opposition, it
is clear now that the Debtor and the Committee will not be able to work jointly on projections
for a Plan with the Committee’s financial advisor. With the Committee keen on commencing a
competing plan process even though the Debtor’s initial exclusivity periods have not yet expired
– “[t]he Committee must have the opportunity to propose its own plan and to solicit votes for its
plan without unjustifiable delay” – the Debtor has engaged its own financial advisor, Sierra
1 In the Debtor’s Chapter 11 Case Status Report [Doc. No. 140], the Debtor has proposed that the
Court schedule a disclosure statement approval hearing in December, 2017. The Debtor’s proposed schedule will require the Debtor to file the Plan and solicit acceptances thereof within the requested extended exclusivity periods.
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Constellation (“Sierra”), subject to Court approval, who will assist the Debtor on the preparation
of a confirmable Plan. See Opposition, p. 15, lines 17-18.
The Debtor has offered to the Committee to reduce its request to extend the Debtor’s
Plan filing and solicitation exclusivity periods from 90 days to 60 days. The Debtor believes it
makes no sense, particularly from the perspective of the Debtor’s unsecured creditors, not to
extend the Section 365(d)(4) Period. If the Section 365(d)(4) Period is not extended as
requested by the Debtor in its Motion, the likely result will be the premature filing of motions to
assume the Debtor’s retail store leases and an increase in potential administrative claims. The
Committee has not agreed to this proposed resolution as of the date of the filing of this reply.
B. The Debtor Has Expended Significant Efforts To Respond To Requests For
Information From, And To Engage With, The Committee And Its Professionals.
The Committee’s key complaint in the Opposition is that the Debtor has purportedly
been “stonewalling” the Committee and its professionals. This is far from the truth. The Debtor
has expended significant efforts to respond to numerous requests for information from, and to
inform and engage with, the Committee and its professionals. The Debtor has provided the
Committee with volumes of data and information, i.e., enough data and information for the
Committee’s financial advisor, Province, Inc. (“Province”) to create its own financial model that
it has deemed sufficient to share with the Committee. The Debtor has provided both hard copy
and electronic versions of the data and information requested by the Committee and Province.
Indeed, the Debtor is not aware of any pending data request that has not been satisfied by the
Debtor. The Debtor’s management also met in person with Province to review and discuss the
data that was provided by the Debtor to the Committee and had further discussions regarding
such data by telephone. Further, Province requested that the Debtor provide it with biweekly
reports in addition to the monthly operating reports filed by the Debtor with the Court, and the
Debtor agreed and have been providing such biweekly reports to Province as requested.2 To
2 The current biweekly report may have been delayed as the Debtor is preparing its monthly
operating report for August 2017, and would like to involve Sierra (its proposed new financial advisor) in all reporting efforts.
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date, the Debtor has provided all of the foregoing information to the Committee and its
professionals without the assistance of its own financial advisor. Rather than be criticized, the
Committee should be appreciative of the efforts by the Debtor to date.
The Debtor commenced this case with the belief that it could reduce professional fees by
not hiring its own financial advisor and/or an expensive lease negotiation agent. The Debtor has
sophisticated management with the requisite financial expertise to operate its business. The
Debtor prepared its own Schedules of Assets and Liabilities and Statement of Financial Affairs,
and prepared its monthly operating reports to date without the assistance of a financial advisor.
Further, the Debtor has made significant progress on its negotiations with landlords and its
evaluation of the retail store leases without the expense of yet another professional. The Debtor
was also hopeful that the Committee and the Debtor could work cooperatively in this case and
jointly utilize the services of the Committee’s financial advisor, Province.
Unfortunately, given the Committee’s Opposition to the Motions and current stance in
this case, the Debtor believes it has no choice other than to retain its own financial advisor, at a
further administrative expense to the Debtor’s estate. The Committee complains that the Debtor
has not timely provided information to the Committee, uses Quickbooks (which is apparently
unsatisfactory to the Committee), has not created its own financial models, and has committed a
host of other perceived deficiencies. Given these complaints and the clear message in the
Opposition that the Committee intends to file a competing plan of some sort, the Debtor has
now engaged Sierra as its financial advisor, subject to the approval of the Court. Sierra has
jumped into the case, has reviewed the model prepared by Province, and will review and work
from that model in an effort to conserve costs. However, the Committee has now succeeded in
increasing the administrative costs of the Debtor’s estate.
Further, the Debtor has attempted to engage the Committee in certain decisions
regarding the disposition of certain real property leases. Counsel for the Debtor prepared a
detailed email regarding the proposed assumption of several retail store leases and sent such
email to counsel for the Committee on two separate occasions. A true and correct copy of the
email is attached as Exhibit “A” to the Karasik Declaration annexed hereto. The Committee
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has not advised whether it supports or opposes the proposed assumption of the specified retail
store leases as set forth in the emails.
Notwithstanding the Committee’s statements to the contrary in the Opposition, the
Debtor has made no secret about its anticipated exit strategy or the basis for the proposed terms
of a Plan in this case. The Debtor has disclosed its exit strategy from the outset of this case.
The Debtor told the Court and the Committee on several occasions that the Debtor intends to file
a “true” reorganization Plan, and that the details of such Plan depends on the ultimate size of the
Debtor’s retail store portfolio. A Plan for a chain of 78 stores will look very different from a
Plan for a chain of 40 stores. For example, if the chain is significantly smaller, then the total
amount of general unsecured claims against that will need to be addressed in the Plan will
increase due to additional lease rejection damage claims. Whether and how much of an equity
infusion is needed, and the term and aggregate amount of the payout to creditors, are also driven
by the makeup of the retail store portfolio.
The Committee suggests that the Debtor should have expended efforts to create
alternative models for a Plan. While the Debtor is aware that there is significant cash in the
Debtor’s estate and no secured creditor, the Debtor is not eager to direct its professionals or
management to engage in projects that have limited or minimal benefits. The Debtor believes it
makes no sense whatsoever to model Plan projections when there is no certainty regarding the
store portfolio upon which the Plan will be based. All this would result in are the expenditure of
management time which could be better used to operate and improve the business and the
increase in administrative fees incurred by estate professionals to assist in the creation and
review of multiple scenarios, with little or no corresponding benefit to the Debtor or its
creditors.
The Committee also asserts that there are significant discrepancies in the financial
information provided by the Debtor to Province regarding all of the Debtor’s retail stores and
the financial information provided by the Debtor to Simon Properties (“Simon”), which is the
landlord for 36 of the Debtor’s retail store leases and the co-Chair of the Committee, for the
Simon stores. The Debtor provided Simon with profit and loss analyses for each of the Simon
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stores prior to the Petition Date. The analyses provided to Simon included allocations for
general and administrative expenses (“G&A Expenses”) for each of the Simon stores. The
profit and loss analyses that were provided to Province included a separate column labeled
“Main” that included aggregate numbers for G&A Expenses rather than allocations of the G&A
Expenses among the individual stores. Indeed, when the purported “discrepancy” in the
financial data was explained to Province in a meeting between Province and Sierra, Province
was not surprised. There was no meaningful discrepancy between the two sets of data. In short,
there is nothing nefarious here – the alleged “discrepancies” identified by the Committee are not
discrepancies at all, but are a result of two different methods of presenting the same financial
data.
At one point during the Debtor’s case, two meetings were scheduled between the Debtor
and Simon (in its capacity as the Debtor’s landlord, and not as a representative of the
Committee) to continue lease negotiations and to discuss the perceived discrepancy in the
financial information provided by the Debtor to Simon and Province. These were meetings
between the Debtor and Simon; not between the Debtor and the Committee. The Committee
complains in its Opposition that Province was not permitted to participate at these meetings.
However, this begs the question – why would the Committee’s financial advisor participate in a
meeting between the Debtor and its landlord? Province had not been a participant in the
Debtor’s discussions with any other landlord. The Debtor has serious concerns that Province
may be wearing two hats in this case.
Finally, the Committee alleges that the Debtor was not forthright with respect to the five
(5) stores operated as Papaya stores but owned by other non-Debtor entities. This ownership
structure has never been a secret. It was disclosed in the Debtor’s reply to the limited opposition
filed by the United States Trustee (the “UST”) to certain of the Debtor’s first day motions, a true
and correct copy of which reply is attached as Exhibit “B” to the Karasik Declaration annexed
hereto. The ownership and operation of the five (5) Papaya stores by such non-Debtor entities
were also discussed in detail at the Debtor’s Section 341(a) meeting of creditors, in which
Committee counsel participated. The Debtor’s Statement of Financial Affairs further discloses
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the intercompany transfers between the Debtor and the foregoing non-Debtor entities as the
Debtor regularly transfers inventory to the non-Debtor entities’ stores and the non-Debtor
entities regularly send funds to the Debtors to pay for such inventory. The Debtor has openly
disclosed and discussed the ownership and operation of the five (5) Papaya stores by the
foregoing non-Debtor entities. Thus, the Committee’s suggestion that the Debtor has not been
transparent about such entities is both inaccurate and misleading.
C. The Committee’s Proposal To Limit the Extension Of The Section 365(d)(4) Period
To 30 Days Calls Into Question Which Constituency the Committee Represents.
The Opposition calls into question which constituency the Committee is actually
representing in the Debtor’s case. The Debtor cannot understand why the Committee, which is
supposed to represent the interests of general unsecured creditors as a whole (and not just
landlords, for example) would oppose an extension of the Section 365(d)(4) Period as requested
by the Debtor in its Motion. Does the Committee understand that, if the Section 365(d)(4)
Period is not extended, the Debtor will potentially be forced to prematurely assume certain store
leases, creating unnecessary and potentially substantial administrative expense claims in the
event issues later arise with certain landlords or in the event that unforeseen events occur with
respect to Plan confirmation?
The proposal by the Committee in its Opposition to limit the extension of the Section
365(d)(4) Period to 30 days makes no sense. Even if the Debtor were to file a plan by October
13, 2017, it would still need to extend the Section 365(d)(4) Period in order to obtain approval
of a disclosure statement (which requires 42-days’ notice under the Local Bankruptcy Rules for
this District), and then solicit and obtain acceptances of the Plan. While the 90-day extension
requested in the Motion may not get the Debtor all the way to Plan confirmation, it will get the
Debtor to January 2018, at which time the Debtor will likely be on the eve of Plan confirmation.
At that point, the Debtor will have much more information and certainty as to the likelihood of
Plan confirmation and the corresponding risk of creating administrative expense claims from the
assumption of its retail store leases. It is striking that not one individual landlord has objected to
the Debtor’s request to extend the Section 365(d)(4) Period.
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D. Many Of The Issues Raised in the Opposition Are Confusing or Created by the
Committee’s Own Actions .
The Opposition is perplexing in many other respects. The Committee complains that the
Debtor has only reached out to landlords for concessions, but has not reached out to vendors,
factors, or wage and hour claimants. As to vendors and factors,3 what does the Committee
expect the Debtor to do – ask the vendors and factors to reduce their claims from the outset?4
The alleged wage and hour claimants have, at best, litigation claims, which are disputed by the
Debtor. Again, what would the Committee like for the Debtor to do with these claimants at this
stage of the case – ask such claimants to waive their claims (which is most likely an exercise in
futility) or agree to pay their disputed claims? To the extent the Committee requires concessions
from the non-landlord members of its constituency, the Committee is in the ideal position to
suggest what concessions would be appropriate contributions from general unsecured creditors.
Inexplicably, the Opposition also states that “the Debtor must have a plan of
reorganization for it to seek concessions it wants from landlords.” See Opposition, page 11,
lines 12-13. Isn’t this putting the cart before the horse? The lease concessions obtained by the
Debtor from its landlords will ultimately drive the Plan. The landlords in the Debtor’s case
know this as they are involved in numerous retail cases throughout the country. This is why the
Debtor has already received concessions and lease modifications from many of its landlords.
Finally, the Committee itself has contributed to the need for an extension of the Debtor’s
exclusivity periods. A key element to determining claim treatment under a Plan is knowledge of
the claims asserted against the Debtor. Indeed, disclosure statements should include data
regarding the claims asserted against the Debtor in various Plan classes as well as unclassified
claims. Accordingly, the Debtor filed a motion requesting that the Court establish a claims bar
3 The factors do not factor the Debtor’s receivables in the traditional sense; rather the factors
acquire vendor receivables due from the Debtor.
4 The Debtor has engaged with Prime Business Credit, a vendor factor that filed a proof of claim in an amount much less than the scheduled amount. Despite the fact that Prime Business Credit should be tasked with contacting the vendors from whom it acquired its claims for the invoices to resolve the inconsistency in the claim amounts, the Debtor is working to provide the requested information to Prime Business Credit.
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date at the end of August 2017 so that the Debtor would have time to evaluate claims prior to
the expiration of its plan filing exclusivity period. In response, the Committee asked that a 90-
day claims bar date be set such that the claims bar date would pass after the Debtor’s plan filing
exclusivity period had already expired. As a compromise, the Debtor agreed to request that the
claims bar date be set for September 30, 2017, which is only 13 days prior to expiration of the
Debtor’s Plan filing exclusivity period (unless extended). Thirteen (13) days is a very limited
time within which to evaluate filed proofs of claim, particularly in a case like the Debtor’s case
where there are over 400 scheduled claims and potentially many more filed claims, for purposes
of developing a Plan. The proximity of the claims bar date to October 13, 2017 (on which the
Debtor’s plan filing exclusivity period will expire), which is a direct result of the Committee’s
request, further supports an extension of the Debtor’s exclusivity periods.
E. An Application Of The Dow Corning Factors To The Facts Of This Case Clearly
Demonstrates That There Is Cause To Extend The Debtor’s Exclusivity Periods.
In its Opposition, the Committee notes that “[m]ost bankruptcy courts have adopted the
following Dow Corning factors to determine ‘cause’ [to extend exclusivity]:
1. the size and complexity of the case;
2. the necessity of sufficient time to permit the debtor to negotiate a plan of
reorganization and prepare adequate information;
3. the existence of good faith progress toward reorganization;
4. the fact that the debtor is paying its bills as they become due;
5. whether the debtor has demonstrated reasonable prospects for filing a viable
plan;
6. whether the debtor has made progress in negotiations with its creditors;
7. the amount of time which has elapsed in the case;
8. whether the debtor is seeking an extension of exclusivity in order to pressure
creditors to submit to the debtor’s reorganization demands; and
9. whether an unresolved contingency exists.”
See, Opposition, p. 8, lines 10-27 (citing In re Dow Corning Corp., 208 B.R. 661, 664-65
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(Bankr. E.D. Mich. 1997)).
The Committee concludes in its Opposition that six of the foregoing nine Dow Corning
factors weigh against an extension of the Debtor’s exclusivity periods. As discussed in detail
below, the Debtor strongly disagrees with the Committee’s conclusion and submits that an
objective evaluation of the circumstances of this case demonstrates that virtually all of the Dow
Corning factors weigh in favor of an extension of the Debtor’s exclusivity periods.
Accordingly, “cause” exists to extend the Debtor’s exclusivity periods as requested in the
Debtor’s Motion.
1. The size and complexity of the case.
The Committee concludes in its Opposition that the Debtor’s case is “neither large nor
complex” without any explanation or analysis. The Committee fails to indicate the guideline
against which the Debtor’s case is being (or should be) measured to determine whether the
Debtor’s case is sufficiently “large” or “complex” to support an extension of exclusivity.
As of the Petition Date, the Debtor was operating over eighty (80) retail stores located in
malls and shopping centers in sixteen (16) different states within the United States. As of the
Petition Date, the Debtor employed a workforce of approximately 1,300 individual employees.
In 2016, the Debtor generated annual gross revenues of more than $134 million. The Debtor
estimates that it has more than 400 creditors. Given the size and geographical spread of the
Debtor’s business operations, and the large number of employees, landlords, and vendors with
whom the Debtor interacts on a regular basis, the Debtor’s case is, by any measure, both large
and complex.
Based on the foregoing, the Debtor respectfully submits that this factor weighs in favor
of an extension of the Debtor’s exclusivity periods.
2. The necessity of sufficient time to permit the debtor to negotiate a plan of
reorganization and prepare adequate information.
The Committee appears to concede that this factor weighs in favor of an extension of the
Debtor’s exclusivity periods as the Opposition excludes any discussion of this factor. Even if
the Committee does not concede the foregoing, an objective evaluation of the facts and
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circumstances of the Debtor’s case reflects that the Debtor has not had sufficient time to permit
the Debtor to negotiate a Plan and prepare adequate information in connection with such Plan.
The Debtor filed its bankruptcy case three (3) months ago. Since then, the Debtor has
performed detailed analyses (both on store-by-store and consolidated bases) of all of its retail
stores to determine which of the stores are profitable (or potentially profitable if rent
concessions can be successfully negotiated) and which of the stores are not profitable and
therefore must be closed on an expeditious basis, which analyses have been shared with the
Committee as well as the Debtor’s numerous landlords. In addition, since the Petition Date, the
Debtor has engaged in (often extensive) negotiations with many of its landlords to try to obtain
rent concessions, which would reduce rent to a level that would render currently
underperforming retail stores profitable.
As a result of the Debtor’s efforts during the three-month period following the Petition
Date, the Debtor has successfully negotiated amendments of 21 of its remaining retail store
leases, has determined that it will be assuming the leases for nine (9) of its remaining retail
stores without any amendment, and has determined that it will be rejecting the leases for 21 of
its remaining retail store leases. As noted by the Committee in its Opposition, this leaves the
Debtor with a total of 27 retail store leases, which require further evaluation and/or negotiation.
While the Committee appears to focus on these remaining 27 retail store leases as the
basis for not affording the Debtor an extension of its exclusivity periods, it is precisely because
of the Debtor’s diligent efforts during the past three months that the Debtor has only 27 retail
store leases left to evaluate and negotiate. Contrary to the Committee’s suggestion otherwise,
the Debtor has not been sitting idly by during the three months that the Debtor’s bankruptcy
case has been pending. The Debtor has spent that time doing exactly what the Debtor indicated
at the outset of this case that it would be doing during the early stages of this case – i.e.,
evaluating the Debtor’s store portfolio and negotiating with the Debtor’s landlords to obtain rent
concessions and modifications as necessary.
The details of any feasible plan of reorganization in this case will hinge on the number of
retail store locations which will continue to be operated going forward since that will dictate,
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among other things, (i) the amount of lease rejection damage claims that will need to be
accounted for in the plan of reorganization, (ii) the amount of revenue anticipated to be
generated from operations going forward, (iii) the level of operating expenses (e.g., rent,
utilities, payroll, inventory purchases, etc.) anticipated to be incurred in connection with
operations going forward, and (iv) the profit estimated to be generated from operations going
forward and the amount ultimately available to make distributions to creditors under the plan of
reorganization. As a result, the Debtor’s evaluation and negotiation of the lease terms for its
retail stores are a necessary and critical first step before the Debtor can be in a position to
formulate the terms of a feasible plan of reorganization and prepare accurate projections in
support of such a plan.
Based on the foregoing, there is no question that the Debtor has had insufficient time to
negotiate a plan of organization and prepare adequate information in connection with such plan.
Accordingly, this factor weighs in favor of an extension of the Debtor’s exclusivity periods.
3. The existence of good faith progress toward reorganization.
As noted above, during the three-month period following the Petition Date, the Debtor
has succeeded in making determinations on nearly two-thirds of its store portfolio. As a result,
at this point in the case, the Debtor has only 27 retail stores leases left to evaluate and negotiate.
The Committee’s accusations of the Debtor’s “inactions” in this case are unfounded and are not
supported by any credible evidence.
Although the Committee contends that there has been a “lack of meaningful
transparency from the Debtor” and that the Committee’s requests for information concerning the
Debtor’s exit strategy have been ignored, nothing could be further from the truth. As discussed
at length above, there has been no stonewalling by the Debtor here; rather, the Debtor has
expended significant efforts to inform and engage the Committee. The Debtor has provided the
Committee and its professionals with volumes of data and information in response to numerous
requests from the Committee. Indeed, the Debtor is not aware of any pending data request that
has not been satisfied by the Debtor (and the Committee provides no specific example in its
Opposition about a request for information that has purportedly been ignored by the Debtor).
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The Debtor’s management has conferred with the Committee’s financial advisor (in person and
by telephone) and has provided the Committee with biweekly reports in addition to the monthly
operating reports filed with the Court. Further, the Debtor has attempted to engage the
Committee in certain decisions regarding the disposition of leases (an issue that the Debtor has
repeatedly stated is a critical issue in this case), with no response from the Committee and its
professionals. Finally, and more significantly, the Debtor has kept no secrets regarding its exit
strategy and the potential terms of a plan of reorganization in this case. The Debtor has
represented to this Court and the Committee, on several occasions, that the Debtor intends to file
a true plan of reorganization centered around a core group of retail stores, and that the details of
such plan depends on the ultimate size of its store portfolio.
Under the circumstances, the Debtor is hard pressed to know what additional
information or “transparency” could have been provided to the Committee to satisfy the
Committee. The Debtor submits that, notwithstanding the Committee’s unsupported
contentions to the contrary, the Debtor has worked in good faith to provide the Committee with
all of the information that it has requested and to make progress towards a successful
reorganization in this case. Accordingly, the Debtor submits that this factor also weighs in favor
of an extension of the Debtor’s exclusivity periods.
4. The fact that the debtor is paying its bills as they become due.
Since the Committee does not address this factor in its Opposition, it appears to concede
that this factor weighs in favor of an extension of the Debtor’s exclusivity periods. As reflected
in the monthly operating reports filed by the Debtor, the Debtor has been paying, and will
continue to pay, all of its post-petition bills and operating expenses as they become due.
Accordingly, this factor weighs in favor of an extension of the Debtor’s exclusivity periods.
5. Whether the debtor has demonstrated reasonable prospects for filing a viable
plan.
The Committee indicates in its Opposition that, based upon the financial data provided
by the Debtor to the Committee, the Committee’s financial advisor, Province, has prepared a
“preliminary analysis” of the Debtor’s financial performance and the viability of a
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reorganization plan which suggests that landlord concessions alone will not result feasible
reorganization plan. As a preliminary matter, if the financial data that the Committee received
from the Debtor is as unreliable as the Committee contends, the preliminary analysis that the
Committee has prepared using the Debtor’s financial data is likely also inaccurate and/or
unreliable and should not be relied upon by the Committee to make conclusions about the
Debtor’s financial performance or the viability of a reorganization plan.
Assuming, however, that the financial data that the Committee received from the Debtor
is, in fact, accurate and reliable (as the Debtor contends), the Committee’s “preliminary
analysis” is nevertheless premature and not at all indicative of the Debtor’s ability to propose a
feasible plan of reorganization in this case since the Committee’s preliminary analysis appears
to include all of the Debtor’s retail stores (including the stores that the Debtor has already
identified are unprofitable and must be closed). The Debtor believes (and the Committee has
provided nothing to dispute) that it is likely or at least possible that, once the Debtor identifies
the core group of retail stores around which it intends to reorganize, and the Debtor prepares
projections for just that core group of retail stores, the rent concessions obtained from the
landlords of such stores may be more than sufficient to support a feasible plan of reorganization.
Based on the foregoing, the Debtor submits that the Committee’s analysis and conclusions about
the Debtor’s ability (or inability) to file a viable plan are unsupported by any evidence and are
entirely premature.
Based on the foregoing, the Debtor respectfully submits that this factor weighs in favor
of an extension of the Debtor’s exclusivity periods.
6. Whether the debtor has made progress in negotiations with its creditors.
In its Opposition, the Committee appears to argue that, since the Debtor has focused on
negotiations with its landlords, and not with its trade creditors, factors, and adverse litigation
parties, the Debtor has not made a “genuine effort to reach a consensus with unsecured creditors
concerning Debtor’s plan of reorganization” and therefore the Debtor’s request to extend its
exclusivity periods should be denied. See Opposition, p. 11, lines 4-6. The Committee’s
argument is confounding. As discussed above, any Plan proposed in this case will depend on
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the portfolio of stores that will continue to be operated going forward. As a result, the first step
in formulating a feasible Plan is the evaluation and negotiation of lease modifications and rent
concessions with the Debtor’s landlords. That is precisely what the Debtor has been doing in
the case to date. Once the core group of stores is identified, projections revolving around such
stores can then be prepared to determine the amount of funds that will ultimately be available
for distribution to unsecured creditors. The only “negotiations” to be had with the Debtor’s
trade vendors and other unsecured creditors are regarding the amounts to be paid to such
unsecured creditors on account of their claims under a Plan. The Debtor cannot see how a
discussion (much less, a consensus) regarding the payout to unsecured creditors under a Plan
can be conducted or reached without first concluding negotiations with the Debtor’s landlords.
The Debtor has been working diligently and in good faith during the past three months to
take the actions necessary (i.e., evaluating the performance of its stores and negotiating with
landlords) to be in a position to model plan projections that make sense and formulate the terms
of a feasible Plan. Accordingly, the Debtor submits that this factor also weighs in favor of an
extension of the Debtor’s exclusivity periods.
7. The amount of time which has elapsed in the case.
The Debtor’s bankruptcy case has been pending for only three (3) months. This is the
Debtor’s first request to extend its exclusivity periods. Given the foregoing, particularly in light
of the size and complexity of the Debtor’s case, the Debtor submits that this factor weighs in
favor of an extension of the Debtor’s exclusivity periods.
8. Whether the debtor is seeking an extension of exclusivity in order to pressure
creditors to submit to the debtor’s reorganization demands.
In its Opposition, the Committee indicates that it believes that the extension of the
Debtor’s exclusivity periods is being sought “for the sole purpose of pressuring creditors to
accede to the Debtor’s plan terms.” See Opposition, p. 11, lines 9-10. However, the Committee
simultaneously argues in its Opposition that the Debtor has provided little or no information
about the Debtor’s exit strategy and/or proposed plan terms. The Committee’s position is
baffling. It is unclear how the Debtor could possibly be pressuring creditors to accede to plan
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terms that the Debtor has not provided to, or discussed with, the Committee and/or the Debtor’s
creditors. The reality is that the Debtor cannot discuss concrete plan terms without first
concluding its negotiations with its landlords and determining the core group of stores around
which the Debtor will be seeking to reorganize. Since the Debtor is not yet in a position to
formulate, much less, discuss, plan terms with the Committee and its creditors, the Debtor
cannot possibly be seeking to pressure or “cram down” plan terms on its creditors. Rather, the
Debtor’s request to extend its exclusivity periods is made in good faith so that it may continue to
make progress towards a consensual Plan in this case if at all possible. Accordingly, the Debtor
submits that this factor also weighs in favor of an extension of the Debtor’s exclusivity periods.
9. Whether an unresolved contingency exists.
In its Opposition, the Committee calls into question the Debtor’s contention that
unresolved contingencies exist, which warrant an extension of the Debtor’s exclusivity periods.
For the reasons discussed above, the Debtor believes that its lease negotiations with landlords
must be substantially concluded before the Debtor can formulate and propose a feasible Plan in
this case. The Debtor also believes it is important that the claims bar date in the Debtor’s case
(i.e., September 30, 2017) passes so that the Debtor can determine the universe of claims that
will need to be addressed in a Plan.
The Committee contends that the Debtor’s concurrent request to extend the Section
365(d)(4) Period means that the Debtor will not be able to ascertain the total amount of lease
rejection damage claims until after the Section 365(d)(4) Period has passed, so the Debtor will
be seeking a further extension of its exclusivity periods in the future. The Committee’s
purported concern is a red herring. The Debtor intends to finalize its decisions to assume or
reject its remaining real property leases well before the expiration of the requested extended
Section 365(d)(4) Period. Even if the Debtor is not able to assume or reject all of its remaining
real property leases by the extended Section 365(d)(4) Period, the Debtor will nevertheless be
able to estimate the total amount of potential lease rejection damage claims that it will have to
address in the Plan well before the expiration of the extended Section 365(d)(4) Period and the
requested extended exclusive plan filing period.
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The Debtor respectfully submits that there are valid, unresolved contingencies in this
case which warrant an extension of the Debtor’s exclusivity periods. Accordingly, this factor
also weighs in favor of an extension of the Debtor’s exclusivity periods.
As the analysis of the Dow Corning factors above demonstrates, virtually all of the
factors weigh in favor of an extension of the Debtor’s exclusivity periods. The Motion to
extend the Debtor’s exclusivity periods should therefore be granted.
F. The Debtor Has Satisfied Its Burden Of Establishing Cause To Extend The Section
365(d)(4) Period.
In its Motion requesting an extension of the Section 365(d)(4) Period, the Debtor
provides an analysis of the so-called Wedtech factors that are relevant to the Debtor’s case to
demonstrate that “cause” exists to extend the Section 365(d)(4) Period. Specifically, the Debtor
has demonstrated that (1) the lease is a primary asset of the Debtor’s estate, (2) the Debtor has
not had sufficient time to intelligently appraise its financial situation and the potential value of
its assets in terms of the formulation of a Plan, (3) the Debtor reasonably requires more time to
formulate a Plan, and (4) the Debtor is current in paying post-petition rent. See In re Ernst
Home Center, Inc., 221 B.R. 243, 253 (9th Cir. B.A.P. 1998), citing, In re Victoria Station, Inc.,
supra, 88 B.R. at 236, In re Wedtech Corporation, 72 B.R. 464, 471-72 (Bankr. S.D.N.Y. 1987).
While the Committee notes the various Wedtech factors in its Opposition (including
certain factors which are wholly inapplicable to the Debtor’s case), the Committee fails to
provide a detailed analysis of such factors or any compelling counterargument to the Debtor’s
analysis of such factors.
Rather, the Committee simply concludes in its Opposition that the facts of the Debtor’s
case “do not favor a 90-day extension of the deadline under § 365(d): (i) the case is neither large
nor complex; (ii) the leases to be evaluated have been reduced to 27 leases; (iii) many of these
lease agreements are being negotiated with one landlord; (iv) the Debtor has not been
forthcoming about its plan of reorganization and financial information, (v) the Debtor has
refused to provide the Committee further access to its financial records, and (vi) the Debtor’s
back-to-school sales were weak.” See Opposition, p. 13, lines 23-28.
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Many of the Committee’s conclusions are countered in the discussion above
demonstrating that “cause” exists to extend the Debtor’s exclusivity periods, and will not be
repeated here. Specifically, as the Debtor has discussed above, the Debtor’s case is, by any
measure, large and complex; the Debtor has provide extensive information to the Committee
and its professionals to date and has addressed each and every request for financial information
made by the Committee and its professionals; and the Debtor has disclosed its exit strategy and
the anticipated basis for the proposed terms of a Plan from the outset of the case.
While the Committee continues to focus on the fact that there are 27 remaining store
leases left for the Debtor to evaluate and negotiate (arguing that the Debtor should therefore be
able to complete such evaluation and negotiation sooner), the Committee ignores the fact that it
is because of the Debtor’s efforts during the past three (3) months that the number of store
leases left to evaluate and negotiate has been reduced from over 80 leases to the 27 remaining
store leases. Moreover, it is likely that the 27 remaining store leases represent the more difficult
leases to negotiate and may therefore require additional effort and time to address.
The Committee also argues that many of the 27 remaining store leases are being
negotiated with one landlord (such as Simon). Although the Debtor notes that there are a
number of different landlords who represent the 27 remaining store leases, even if a company
like Simon represents the landlords of multiple store locations, the negotiations of those leases
must still be conducted on a store-by-store and lease-by-lease basis. Since the negotiations are
not conducted on an “all or nothing” basis, the Debtor and the landlord must evaluate and
negotiate the terms of each lease individually. Accordingly, the fact that a company like Simon
may represent the landlords of multiple store locations does not alter the fact that this case
involves a large number of leases, which require more time to evaluate.
Finally, the Committee argues that the Debtor’s allegedly “weak” back-to-school sales
weigh against an extension of the Debtor’s Section 365(d)(4) Period. As a preliminary matter, it
is difficult to determine whether the Committee’s statements about the Debtor’s back-to-school
sales are even accurate. The Committee provides virtually no information to support its
conclusion that the Debtor’s back-to-school sales were “weak,” other than to state in its
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supporting declaration that “[t]he Debtor’s sales at the beginning of the back-to-school season
were lackluster and a decline from last year.” Does the fact that the Debtor’s sales at the
beginning of the season (which was very shortly after the Petition Date) mean that the Debtor’s
sales for the season as a whole were “weak”? What constitutes “lackluster” sales, and how
much did the Debtor’s back-to-school sales decline from last year? Is it possible that the filing if
the Chapter 11 case has had a one time impact on sales? Without such information, it is difficult
to evaluate the accuracy of the Committee’s statements. Even assuming that the Committee is
correct that the Debtor’s back-to-school sales were “weak,” it is unclear how that fact would
weigh against the granting of the relief requested in the Motion. Wouldn’t the fact that the
Debtor’s back-to-school sales were “weak” (if true) weigh in favor of an extension of the
Debtor’s Section 365(d)(4) Period so that the Debtor can have more time to evaluate the
financial performance and viability of the Debtor’s retail stores?
The Debtor respectfully submits that it has sufficiently demonstrated that cause exists to
grant the extension of the Section 365(d)(4) Period requested in its Motion, and that the
Committee has provided no compelling argument to the contrary.
WHEREFORE, based upon all of the foregoing, the Debtor respectfully requests that
this Court overrule the Opposition and grant both Motions in their entirety.
Dated: September 12, 2017 CORNERSTONE APPAREL, INC.
By: /s/ Eve H. Karasik
TIMOTHY J. YOO EVE H. KARASIK JULIET Y. OH LEVENE, NEALE, BENDER, YOO & BRILL L.L.P. Attorneys for Debtor and Debtor in Possession
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DECLARATION OF TAE Y. YI
I, Tae Y. Yi, hereby declare as follows:
1. I am over 18 years of age. I am the President, Chief Financial Officer, Secretary,
and one of the three shareholders of Cornerstone Apparel, Inc., d/b/a Papaya Clothing, the
debtor and debtor in possession in the above-captioned Chapter 11 bankruptcy case
(“Cornerstone” and the “Debtor”), and am therefore familiar with the business operations and
financial books and records of the Debtor. I have personal knowledge of the facts set forth
below and, if called to testify as a witness, I could and would competently testify thereto.
2. I have access to the Debtor’s books and records. As the President, Chief
Financial Officer and Secretary of the Debtor, I am familiar with the history, organization,
operations and financial condition of the Debtor. The records and documents referred to in this
Declaration constitute writings taken, made, or maintained in the regular or ordinary course of
the Debtor’s business at or near the time of act, condition or event to which they relate by
persons employed by the Debtor who had a business duty to the Debtor to accurately and
completely take, make, and maintain such records and documents. The statements set forth in
this declaration are based upon my own personal knowledge and my review of the Debtor’s
books and records.
3. I make this declaration in support of the reply (the “Reply”) to the Omnibus
Opposition Of The Official Committee Of Unsecured Creditors To The (i) Motion For Order
Extending The Debtor’s Exclusivity Periods To File Plan Of Reorganization And Obtain
Acceptances Thereof; And (ii) Motion By The Debtor To Extend Time To Assume Or Reject
Nonresidential Real Property Leases (the “Opposition”) filed by the Official Committee of
Unsecured Creditors appointed in the Debtor’s case (the “Committee”). All capitalized terms
not specifically defined herein shall have the meanings ascribed to them in the Reply.
4. The Committee’s Opposition is to both the Debtor’s Motion For Order
Extending Debtor’s Exclusive Periods To File Plan Of Reorganization And Obtain Acceptances
Thereof and the Motion By Debtor To Extend Time To Assume Or Reject Nonresidential Real
Property Leases (together, the “Motions”).
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5. As of June 15, 2017 (the “Petition Date”), the Debtor was operating over eighty
(80) retail stores located in malls and shopping centers in sixteen (16) different states within the
United States. As of the Petition Date, the Debtor employed a workforce of approximately
1,300 individual employees. In 2016, the Debtor generated annual gross revenues of more than
$134 million. The Debtor estimates that it has more than 400 creditors. Given the size and
geographical spread of the Debtor’s business operations, and the large number of employees,
landlords, and vendors with whom the Debtor interacts on a regular basis, I believe the Debtor’s
case is, by any measure, both large and complex.
6. Since the Petition Date, the Debtor has performed detailed analyses (both on
store-by-store and consolidated bases) of all of its retail stores to determine which of the stores
are profitable (or potentially profitable if rent concessions can be successfully negotiated) and
which of the stores are not profitable and therefore must be closed on an expeditious basis,
which analyses have been shared with the Committee as well as the Debtor’s numerous
landlords. In addition, since the Petition Date, the Debtor has engaged in (often extensive)
negotiations with many of its landlords to try to obtain rent concessions, which would reduce
rent to a level that would render currently underperforming retail stores profitable.
7. I believe that the Debtor has made significant progress towards the confirmation
of a Chapter 11 plan of reorganization (a “Plan”). As a result of the Debtor’s efforts during the
three-month period following the Petition Date, the Debtor has successfully negotiated
amendments of 21 of its remaining retail store leases, has determined that it will be assuming
the leases for nine (9) of its remaining retail stores without any amendment, and has determined
that it will be rejecting the leases for 21 of its remaining retail store leases. As noted by the
Committee in its Opposition, this leaves the Debtor with a total of 27 retail store leases, which
require further evaluation and/or negotiation.
8. The Committee argues in its Opposition that many of the 27 remaining store
leases are being negotiated with one landlord (such as Simon). Although the Debtor notes that
there are a number of different landlords who represent the 27 remaining store leases, even if a
company like Simon represents the landlords of multiple store locations, the negotiations of
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those leases must still be conducted on a store-by-store and lease-by-lease basis. Since the
negotiations are not conducted on an “all or nothing” basis, the Debtor and the landlord must
evaluate and negotiate the terms of each lease individually. Accordingly, the fact that a
company like Simon may represent the landlords of multiple store locations does not alter the
fact that this case involves a large number of leases, which require more time to evaluate.
9. I believe that the details of any feasible Plan in the Debtor’s case will hinge on
the number of retail store locations which will continue to be operated going forward since that
will dictate, among other things, (i) the amount of lease rejection damage claims that will need
to be accounted for in the plan of reorganization, (ii) the amount of revenue anticipated to be
generated from operations going forward, (iii) the level of operating expenses (e.g., rent,
utilities, payroll, inventory purchases, etc.) anticipated to be incurred in connection with
operations going forward, and (iv) the profit estimated to be generated from operations going
forward and the amount ultimately available to make distributions to creditors under the plan of
reorganization. As a result, I believe the Debtor’s evaluation and negotiation of the lease terms
for its retail stores are a necessary and critical first step before the Debtor can be in a position to
formulate the terms of a feasible Plan and prepare accurate projections in support of such a Plan.
10. Contrary to the Committee’s contentions otherwise, there has been no
“stonewalling” of the Committee and its professionals by the Debtor in this case. The Debtor’s
management has expended significant efforts to respond to numerous requests for information
from, and to inform and engage with, the Committee and its professionals. The Debtor’s
management has provided the Committee with volumes of data and information, i.e., enough
data and information for the Committee’s financial advisor, Province, Inc. (“Province”) to create
its own financial model that it has deemed sufficient to share with the Committee. The Debtor’s
management has provided both hard copy and electronic versions of the data and information
requested by the Committee and Province. Indeed, I am not aware of any pending data request
that has not been satisfied by the Debtor. The Debtor’s management also met in person with
Province to review and discuss the data that was provided by the Debtor to the Committee and
had further discussions regarding such data by telephone. Further, Province requested that the
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Debtor provide it with biweekly reports in addition to the monthly operating reports filed by the
Debtor with the Court, and the Debtor agreed and have been providing such biweekly reports to
Province as requested.
11. The current biweekly report may have been delayed as the Debtor is preparing its
monthly operating report for August 2017, and would like to involve Sierra Constellation
(“Sierra”), the Debtor’s proposed new financial advisor, in all reporting efforts. To date, the
Debtor has provided all of the foregoing information to the Committee and its professionals
without the assistance of its own financial advisor.
12. The Debtor commenced this case with the belief that it could reduce professional
fees by not hiring its own financial advisor and/or an expensive lease negotiation agent. The
Debtor has sophisticated management with the requisite financial expertise to operate its
business. The Debtor prepared its own Schedules of Assets and Liabilities and Statement of
Financial Affairs, and prepared its monthly operating reports to date without the assistance of a
financial advisor. Further, the Debtor has made significant progress on its negotiations with
landlords and its evaluation of the retail store leases without the expense of yet another
professional. The Debtor was also hopeful that the Committee and the Debtor could work
cooperatively in this case and jointly utilize the services of the Committee’s financial advisor,
Province.
13. Unfortunately, given the Committee’s Opposition to the Motions and current
stance in this case, the Debtor had no choice other than to retain its own financial advisor, at a
further administrative expense to the Debtor’s estate. Sierra has jumped into the case, has
reviewed the model prepared by Province, will review and work from Province’s model in an
effort to conserve costs, and assist the Debtor on the preparation of a confirmable Plan.
14. The Debtor has disclosed its exit strategy from the outset of this case. The
Debtor and its counsel told the Court and the Committee on several occasions that the Debtor
intends to file a “true” reorganization Plan, and that the details of such Plan depends on the
ultimate size of the Debtor’s retail store portfolio.
15. The Committee asserts in its Opposition that there are significant discrepancies in
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the financial information provided by the Debtor to Province regarding all of the Debtor’s retail
stores and the financial information provided by the Debtor to Simon Properties (“Simon”),
which is the landlord for 36 of the Debtor’s retail store leases and the co-Chair of the
Committee, for the Simon stores. The Debtor provided Simon with profit and loss analyses for
each of the Simon stores prior to the Petition Date. The analyses provided to Simon included
allocations for general and administrative expenses (“G&A Expenses”) for each of the Simon
stores. The profit and loss analyses that were provided to Province included a separate column
labeled “Main” that included aggregate numbers for G&A Expenses rather than allocations of
the G&A Expenses among the individual stores. In short, there is nothing nefarious here – the
alleged “discrepancies” identified by the Committee are not discrepancies at all, but are a result
of two different methods of presenting the same financial data.
16. At one point during the Debtor’s case, two meetings were scheduled between the
Debtor and Simon (in its capacity as the Debtor’s landlord, and not as a representative of the
Committee) to continue lease negotiations and to discuss the perceived discrepancy in the
financial information provided by the Debtor to Simon and Province. These were meetings
between the Debtor and Simon; not between the Debtor and the Committee. Therefore, there
was no reason to have Province participate in these meetings, particularly since Province has not
participated in the Debtor’s discussions with any other landlord. The Debtor has serious
concerns that Province may be wearing two hats in this case.
17. The Debtor has already received concessions and lease modifications from many
of its landlords.
18. The Debtor filed a motion requesting that the Court establish a claims bar date at
the end of August 2017 so that the Debtor would have time to evaluate claims prior to the
expiration of its plan filing exclusivity period. In response, the Committee asked that a 90-day
claims bar date be set such that the claims bar date would pass after the Debtor’s plan filing
exclusivity period had already expired. As a compromise, the Debtor agreed to request that the
claims bar date be set for September 30, 2017, which is only 13 days prior to expiration of the
Debtor’s Plan filing exclusivity period (unless extended).
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19. As reflected in the monthly operating reports filed by the Debtor, the Debtor has
been paying, and will continue to pay, all of its post-petition bills and operating expenses as they
become due.
20. I believe that the “preliminary analysis” prepared by the Committee’s financial
advisor, Province, is premature and not indicative of the Debtor’s ability to propose a feasible
plan of reorganization in this case since such preliminary analysis appears to include all of the
Debtor’s retail stores (including the stores that the Debtor has already identified are unprofitable
and must be closed). I believe that it is likely or at least possible that, once the Debtor identifies
the core group of retail stores around which it intends to reorganize, and the Debtor prepares
projections for just that core group of retail stores, the rent concessions obtained from the
landlords of such stores may be more than sufficient to support a feasible Plan.
21. The Debtor’s request for an extension of its exclusivity periods is being made in
good faith so that the Debtor may continue to make progress towards a consensual Plan in this
case if at all possible.
22. The Debtor intends to finalize its decisions to assume or reject its remaining real
property leases well before the expiration of the requested extended Section 365(d)(4) Period.
Even if the Debtor is not able to assume or reject all of its remaining real property leases by the
extended Section 365(d)(4) Period, the Debtor will nevertheless be able to estimate the total
amount of potential lease rejection damage claims that it will have to address in the Plan well
before the expiration of the extended Section 365(d)(4) Period and the requested extended
exclusive plan filing period.
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DECLARATION OF EVE H. KARASIK
I, Eve H. Karasik, hereby declare as follows:
1. I have personal knowledge of the facts set forth below and, if called to testify,
would and could competently testify thereto.
2. I am a partner of the law firm of Levene, Neale, Bender, Yoo & Brill L.L.P.
(“LNBYB”), counsel for Cornerstone Apparel, Inc. d/b/a Papaya Clothing, the debtor and
debtor-in-possession herein (the “Debtor”). I am an attorney licensed to practice law in the
State of California and the United States District Court and the Bankruptcy Court for Central
District of California.
3. I make this declaration in support of the reply (the “Reply”) to the Omnibus
Opposition Of The Official Committee Of Unsecured Creditors To The (i) Motion For Order
Extending The Debtor’s Exclusivity Periods To File Plan Of Reorganization And Obtain
Acceptances Thereof; And (ii) Motion By The Debtor To Extend Time To Assume Or Reject
Nonresidential Real Property Leases (the “Opposition”) filed by the Official Committee of
Unsecured Creditors appointed in the Debtor’s case (the “Committee”). All capitalized terms
not specifically defined herein shall have the meanings ascribed to them in the Reply.
4. The Committee’s Opposition is to both the Debtor’s Motion For Order
Extending Debtor’s Exclusive Periods To File Plan Of Reorganization And Obtain Acceptances
Thereof and the Motion By Debtor To Extend Time To Assume Or Reject Nonresidential Real
Property Leases (together, the “Motions”).
5. At the first day hearing in the Debtor’s case, I advised the Court that lease
negotiations needed to proceed so that the Debtor could evaluate its retail store portfolio and
negotiate lease concessions with landlords, and that when the final store portfolio was
determined, the Debtor would be in a position to propose a Plan.
6. At the Chapter 11 case status conference in the Debtor’s case, I advised the Court
and parties in interest who appeared at such status conference that, while progress had been
made, additional time was required to complete the Debtor’s ongoing negotiations with the
landlords.
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7. The Debtor has attempted to engage the Committee in certain decisions regarding
the disposition of certain real property leases. I prepared a detailed email regarding the
proposed assumption of several retail store leases and sent such email to counsel for the
Committee on two separate occasions. A true and correct copy of the email is attached as
Exhibit “A” hereto. Notwithstanding the requests for a response to the email, no response has
been received to date. Accordingly, neither I nor the Debtor has any idea whether the
Committee supports or opposes the proposed assumption of the specified retail store leases.
8. When the purported “discrepancy” in the financial data provided by the Debtor to
Province and the financial data provided pre-petition to Simon Properties (“Simon”) regarding
just the Simon stores was explained to Province in a meeting between Province and Sierra (in
which meeting I participated), Province was not surprised. There was no meaningful
discrepancy between the two sets of data.
9. The Committee alleges that the Debtor was not forthright with respect to the five
(5) stores operated as Papaya stores but owned by other non-Debtor entities. This ownership
structure has never been a secret. It was disclosed in the Debtor’s reply to the limited opposition
filed by the United States Trustee (the “UST”) to certain of the Debtor’s first day motions, a true
and correct copy of which reply is attached as Exhibit “B” hereto. The ownership and
operation of the 5 Papaya stores by such non-Debtor entities were also discussed in detail at the
Debtor’s Section 341(a) meeting of creditors, in which Committee counsel and I appeared and
participated. The Debtor’s Statement of Financial Affairs further discloses the intercompany
transfers between the Debtor and the foregoing non-Debtor entities as the Debtor regularly
transfers inventory to the non-Debtor entities’ stores and the non-Debtor entities regularly send
funds to the Debtors to pay for such inventory.
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10. The Debtor has offered to the Committee to reduce its request to extend the
Debtor’s Plan filing and solicitation exclusivity periods from 90 days to 60 days. The
Committee has not yet responded to this offer of compromise.
I declare under penalty of perjury under the laws of the United States of America that the
foregoing is true and correct.
Executed this 12th day of September, 2017 at Los Angeles, California.
/s/ Eve H. Karasik EVE H. KARASIK
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EXHIBIT “A”
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From: Eve H. Karasik Sent: Monday, August 21, 2017 2:25 PM To: Lauter, Richard ([email protected]); Lee, Scott ([email protected]); Sarenas, Lovee ([email protected]) Cc: Eve H. Karasik; Timothy J. Yoo; Juliet Y. Oh Subject: Cornerstone - Proposed Assumption of Leases as Amended for the Stores in the Dolphin / Fair Oaks / Sunvalley Malls Hi all – I never heard from you on this email. The Debtor is going to proceed to prepare a motion to assume these leases. There may be one or two other leases too and I have asked the client for a similar summary that I hope to provide to you before filing. Thanks much, Eve
EVE H. KARASIK, Esq. LEVENE, NEALE, BENDER, YOO & BRILL L.L.P. 10250 Constellation Blvd. | Suite 1700 | Los Angeles, CA 90067 Phone 310 229 1234 | Direct 310 229 3350 | Cell 310 614 5144 | Fax 310 229 1244 [email protected] | www.lnbyb.com The preceding E-mail message is subject to Levene, Neale, Bender, Yoo & Brill L.L.P.'s email policies which can be found at http://www.lnbyb.com/disclaimers.htm. Please consider the environment before printing this email
From: Eve H. Karasik Sent: Friday, August 4, 2017 2:46 PM To: Lee, Scott ([email protected]); Lauter, Richard ([email protected]); Sarenas, Lovee ([email protected]) Cc: Eve H. Karasik; Timothy J. Yoo; 'Steven Kim' Subject: Cornerstone - Proposed Assumption of Leases as Amended for the Stores in the Dolphin / Fair Oaks / Sunvalley Malls All – the Debtor has negotiated lease amendments for three leases with Taubman. Taubman has required that the leases be assumed as amended by October 30, 2017. The Debtor believes that the lease amendments are very favorable and would like to assume them as amended by the deadline. Copies of the proposed lease
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amendments are attached. I believe Province has copies of the leases and amendments, as well as four wall analyses for these stores, but if not, let me know and I can send them to you. The three amendments effect the following stores and provide the following benefits per Cornerstone: FLB (Dolphin Mall) - The landlord agreed to a rent relief request by reducing the rent $150,000 per year until the lease expires on 1/31/2022. (The reduction is from $67,300/month to $53,800/month). FLB is a profitable store, but will be more profitable now with rent relief. CNC (Sunvalley Mall) – Cornerstone paid monthly rent of $42,000 in 2015. In the second amendment to the lease, monthly rent was reduced to $15,800. Another amendment in January 2017 reduced the monthly rent to $11,000 per month. The Debtor believes that even if sales are little soft, this is a profitable store. The current lease expires on 1/31/2018. This proposed fourth amendment extends the term to 1/31/2022 at the rent of $11,000 per month to coincide with FLB's termination date. VAG (Fair Oaks Mall) – Cornerstone paid monthly rent of $63,000 until January 2017 when the landlord reduced the monthly rent to $18,000 retroactively from September 2016, ($540,000 reduction per year). This amendment extends the term to 1/31/2022 to coincide with FLB's termination date. These amendments are, in part, in exchange for Cornerstone’s agreement not to reject Store MOC, which is a Taubman lease in the Taubman Prestige Outlets in Missouri. In 2014, Taubman offered Cornerstone a center-court location and additional favorable incentives to open a store at the Outlets. The Debtor accepted the offer and opened a MOC store in July 2015. Even if sales are soft, the Debtor is not losing money and the concessions on the three leases above justify retaining the MOC Store. The Debtor would like to file a motion to assume the leases as amended so that it can obtain an order prior to the October 30, 2017 deadline. Please advise if the Committee has any questions or issues regarding the foregoing, and whether the Committee will object to this requested relief. I have copied Steven Kim on this email. Steven is real estate counsel to the Debtor and worked with the Debtor on the amendments. Feel free to contact Steven or me to discuss. Best, Eve
EVE H. KARASIK, Esq. LEVENE, NEALE, BENDER, YOO & BRILL L.L.P. 10250 Constellation Blvd. | Suite 1700 | Los Angeles, CA 90067 Phone 310 229 1234 | Direct 310 229 3350 | Cell 310 614 5144 | Fax 310 229 1244 [email protected] | www.lnbyb.com The preceding E-mail message is subject to Levene, Neale, Bender, Yoo & Brill L.L.P.'s email policies which can be found at http://www.lnbyb.com/disclaimers.htm. Please consider the environment before printing this email
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EXHIBIT “B”
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TIMOTHY J. YOO (SBN 155531) EVE H. KARASIK (SBN 155356) JULIET Y. OH (SBN 211414) LEVENE, NEALE, BENDER, YOO & BRILL L.L.P. 10250 Constellation Boulevard, Suite 1700 Los Angeles, California 90067 Telephone: (310) 229-1234; Facsimile: (310) 229-1244 Email: [email protected], [email protected], [email protected] Proposed Attorneys for Chapter 11 Debtor and Debtor in Possession
UNITED STATES BANKRUPTCY COURT
CENTRAL DISTRICT OF CALIFORNIA
LOS ANGELES DIVISION
In re CORNERSTONE APPAREL, INC. Debtor.
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Case No. 2:17-bk-17292-VZ
Chapter 11 DEBTOR’S REPLY TO LIMITED OPPOSITIONS FILED BY THE UNITED STATES TRUSTEE TO DEBTOR’S EMERGENCY MOTIONS FOR ENTRY OF ORDERS (1) AUTHORIZING DEBTOR TO REJECT CERTAIN UNEXPIRED NON-RESIDENTIAL REAL PROPERTY LEASES PURSUANT TO 11 U.S.C. § 365 AND ABANDON ANY REMAINING PERSONAL PROPERTY LOCATED AT THE LEASED PREMISES, AND (2) FOR AUTHORITY TO PAY PRE-PETITION PRIORITY WAGES; DECLARATION OF TAE Y. YI
Hearing: Date: June 20, 2017 Time: 1: 30 p.m. Courtroom: 1368 Location: 255 E. Temple Street Los Angeles, California
)
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Cornerstone Apparel, Inc. d/b/a Papaya Clothing, a California corporation and the debtor
and debtor-in-possession in the above-captioned Chapter 11 bankruptcy case (“Cornerstone”) or
the “Debtor”), hereby submits this reply (the “Reply”) to the limited oppositions filed by the
United States Trustee (the “UST”) to the Debtor’s Emergency Motion For Entry Of An Order
Authorizing Debtor To Reject Certain Unexpired Non-Residential Real Property Leases
Pursuant To 11 U.S.C. § 365 And Abandon Any Remaining Personal Property Located At The
Leased Premises [ECF No. 5] (the “Lease Rejection Motion”), and Debtor’s Emergency Motion
For Authority To Pay Pre-Petition Priority Wages [ECF No. 22] (the “Wage Motion”).
A. The Court Should Permit the Debtor to Abandon Any Personal Property to the
Landlords at the Rejected Lease Sites As Applicable to Avoid the Potential
Occurrence of Administrative Expense Claims.
The UST objects to the portion of the Lease Rejection Motion that provides that any
personal property left at the rejected lease sites would be abandoned. Cornerstone has
determined that it will remove all personal property remaining at the closed stores such as
inventory, fixtures, computers and other personal property, and have such property delivered to
the Cornerstone corporate office/warehouse. There is no personal property remaining at the
Vacated Retail Stores.1 None of the personal property located at the Rejected Operating Retail
Stores is subject to a personal property lease.
Cornerstone seeks the relief in the Lease Rejection Motion that any remaining personal
property inadvertently left at the rejected lease sites be deemed abandoned to the landlords for
the respective rejected lease sites. This relief will protect the Debtor and the estate from the
creation of unintended administrative expense claims. Landlords may assert claims under
Bankruptcy Code section 503(b) if personal property remains on the site as the leased site may
not be “vacated” as provided for under the leases.
The request to abandon personal property to landlords for rejected lease sites has been
granted by other courts in retail bankruptcy cases in an effort to reduce the incurrence of
1 Capitalized terms used and not defined herein have the meanings set forth in the Lease Rejection Motion
and the Wage Motion, and such definitions are incorporated herein by this reference.
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administrative expense claims. In particular, this relief has also been granted in the United States
Bankruptcy Court for the Central District of California. See, e.g., Order Granting Motion for
Entry of An Order Authorizing Debtor to Reject Certain Unexpired Non-Residential Real
Property Leases Pursuant to 11 U.S.C. § 365 and Abandon any Remaining Personal Property
Located at Leased Premises, In re Blue Bee, Inc., Case No. 2:16-bk-23836-SK, [ECF No.103];
Final Order Granting Emergency Motion By Debtor For Entry Of Interim And Final Orders:
(A) Authorizing Assumption Of Agency Agreement; (B) Authorizing Sale Free And Clear Of All
Liens, Claims, And Encumbrances Pursuant To Bankruptcy Code Sections 363(B) And (F); (C)
Approving The Store Closing Sale Guidelines; (D) Authorizing The Debtor To Abandon; And
(E) Authorizing Lease Rejection Procedures With Respect To The Closing Stores Pursuant To
Section 365, Paragraph 54, Case No. 8:15-bk-13008- TA, (ECF No. 240].
Accordingly, Cornerstone respectfully requests that the Court grant the relief requested
in the Lease Rejection Motion and permit the Debtor to abandon personal property to the
landlords for the rejected lease sites.
B. The Debtor Has Provided Information Below that Resolves the UST’s Limited
Opposition to the Wage Motion.
The UST objects to the Wage Motion on the grounds that insufficient evidence has been
submitted to support the payment of priority wages for two (2) of the Debtor’s stores, and that
the Debtor has not identified the names of all of the insiders so that the Court and the UST can
confirm that no insiders will be paid pursuant to the Wage Motion.
The two insiders in addition to Mr. Tae Yi are Mr. Kenneth Choi and Mrs. Rachel Choi.
Mr.Choi is the Chief Executive Officer and a shareholder of Cornerstone. Mrs. Rachel Choi is
the Vice President and a shareholder of Cornerstone. None of the insiders will be paid pursuant
to the Wage Motion.
The two stores for which the Debtor submitted no schedule of wages for employees are
not subject to the Wage Motion. The Roseville Galleria (CNG) is not yet an operating store.
Cornerstone has a signed lease with the landlord for the Roseville Galleria, but the store has not
been built-out or opened for business. Accordingly, it has no employees.
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The Glendale Galleria (CAO) is an operating store, which operates as Papaya Clothing,
but the store is owned by a non-debtor entity. There are five stores that operate as Papaya
Clothing (including the Glendale Galleria) that are owned by non-debtor entities, which include
the Glendale Galleria. These non-debtor entities are Glendale CSA, Inc. (Store CAO), CSA
Apparel Co. LP (Stores TXF and TXH), and Vision Canaan Corp. (Stores FLG and FLH).
Accordingly, the employees at the Glendale Galleria store are not included in the Wage Motion.2
WHEREFORE, the Debtor respectfully requests that this Court grant the Lease
Rejection Motion and the Wage Motion on the terms set forth above.
Dated: June 19, 2017 CORNERSTONE APPAREL, INC.
By: /s/ Eve H. Karasik
TIMOTHY J. YOO EVE H. KARASIK JULIET Y. OH LEVENE, NEALE, BENDER, YOO & BRILL L.L.P. Proposed Attorneys for Debtor and Debtor in Possession
2 The five non-debtor stores were inadvertently included in the Debtor’s Emergency Motion For Entry Of
An Order Authorizing Debtor To Provide Adequate Assurance Of Future Payment To Utility Companies Pursuant To 11 U.S.C. § 366 [ECF No. 6]. The Debtor will provide in the order for the Utility Motion that the five non-debtor stores are excluded from the requested relief.
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DECLARATION OF TAE Y. YI
I, Tae Y. Yi, hereby declare as follows:
1. I am over 18 years of age. I am the President, Chief Financial Officer, Secretary,
and one of the three shareholders of Cornerstone Apparel, Inc., d/b/a Papaya Clothing, the
debtor and debtor in possession in the above-captioned Chapter 11 bankruptcy case
(“Cornerstone” and the “Debtor”), and am therefore familiar with the business operations and
financial books and records of the Debtor. I have personal knowledge of the facts set forth
below and, if called to testify as a witness, I could and would competently testify thereto.
2. I have access to the Debtor’s books and records. As the President, Chief
Financial Officer and Secretary of the Debtor, I am familiar with the history, organization,
operations and financial condition of the Debtor. The records and documents referred to in this
Declaration constitute writings taken, made, or maintained in the regular or ordinary course of
the Debtor’s business at or near the time of act, condition or event to which they relate by
persons employed by the Debtor who had a business duty to the Debtor to accurately and
completely take, make, and maintain such records and documents. The statements set forth in
this declaration are based upon my own personal knowledge and my review of the Debtor’s
books and records.
3. I make this declaration in support of the motion (the “Reply”) to which this
declaration is attached, pursuant to which the Debtor is responding to the limited oppositions of
the United States Trustee (the “UST”) to the Debtor’s emergency motions seeking the entry of
(i) an order authorizing the Debtor to pay pre-petition priority wages, and (ii) an order
authorizing the Debtor to reject certain leases and abandon personal property at the rejected
lease sites.
4. Cornerstone has determined that it will remove all personal property remaining at
the closed stores such as inventory, fixtures, computers and other personal property and have
them delivered to the Cornerstone corporate office/warehouse. There is no personal property
remaining at the Vacated Retail Stores. None of the personal property located at the Rejected
Operating Retail Stores is subject to a personal property lease.
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This form is mandatory. It has been approved for use by the United States Bankruptcy Court for the Central District of California.
June 2012 F 9013-3.1.PROOF.SERVICE
PROOF OF SERVICE OF DOCUMENT
I am over the age of 18 and not a party to this bankruptcy case or adversary proceeding. My business address is: 10250 Constellation Boulevard, Suite 1700, Los Angeles, CA 90067 A true and correct copy of the foregoing document entitled: DEBTOR’S REPLY TO LIMITED OPPOSITIONS FILED BY THE UNITED STATES TRUSTEE TO DEBTOR’S EMERGENCY MOTIONS FOR ENTRY OF ORDERS (1) AUTHORIZING DEBTOR TO REJECT CERTAIN UNEXPIRED NON-RESIDENTIAL REAL PROPERTY LEASES PURSUANT TO 11 U.S.C. § 365 AND ABANDON ANY REMAINING PERSONAL PROPERTY LOCATED AT THE LEASED PREMISES, AND (2) FOR AUTHORITY TO PAY PREPETITION PRIORITY WAGES; DECLARATION OF TAE Y. YI will be served or was served (a) on the judge in chambers in the form and manner required by LBR 5005-2(d); and (b) in the manner stated below: 1. TO BE SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (NEF): Pursuant to controlling General Orders and LBR, the foregoing document will be served by the court via NEF and hyperlink to the document. On June 19, 2017, I checked the CM/ECF docket for this bankruptcy case or adversary proceeding and determined that the following persons are on the Electronic Mail Notice List to receive NEF transmission at the email addresses stated below:
Ronald E Gold [email protected], [email protected] Eve H Karasik [email protected] John W Kim [email protected] Kelly L Morrison [email protected] Juliet Y Oh [email protected], [email protected] Kristen N Pate [email protected] Christopher E Prince [email protected],
[email protected];[email protected];[email protected] Benjamin Seigel [email protected],
[email protected];[email protected] Ronald M Tucker [email protected],
[email protected];[email protected];[email protected] United States Trustee (LA) [email protected] Timothy J Yoo [email protected]
2. SERVED BY UNITED STATES MAIL: On June 19, 2017, I served the following persons and/or entities at the last known addresses in this bankruptcy case or adversary proceeding by placing a true and correct copy thereof in a sealed envelope in the United States mail, first class, postage prepaid, and addressed as follows. Listing the judge here constitutes a declaration that mailing to the judge will be completed no later than 24 hours after the document is filed.
Service information continued on attached page 3. SERVED BY PERSONAL DELIVERY, OVERNIGHT MAIL, FACSIMILE TRANSMISSION OR EMAIL (state method for each person or entity served): Pursuant to F.R.Civ.P. 5 and/or controlling LBR, on June 19, 2017, I served the following persons and/or entities by personal delivery, overnight mail service, or (for those who consented in writing to such service method), by facsimile transmission and/or email as follows. Listing the judge here constitutes a declaration that personal delivery on, or overnight mail to, the judge will be completed no later than 24 hours after the document is filed.
Served via Attorney Service Hon. Vincent P. Zurzolo United States Bankruptcy Court Edward R. Roybal Federal Building 255 E. Temple Street, Suite 1360 / Ctrm 1368 Los Angeles, CA 90012
Served via Overnight Mail United States Trustee 915 Wilshire Blvd., Suite 1850 Los Angeles, California 90017
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This form is mandatory. It has been approved for use by the United States Bankruptcy Court for the Central District of California.
June 2012 F 9013-3.1.PROOF.SERVICE
I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. June 19, 2017 Stephanie Reichert /s/ Stephanie Reichert Date Type Name Signature
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This form is mandatory. It has been approved for use by the United States Bankruptcy Court for the Central District of California.
June 2012 F 9013-3.1.PROOF.SERVICE
PROOF OF SERVICE OF DOCUMENT
I am over the age of 18 and not a party to this bankruptcy case or adversary proceeding. My business address is: 10250 Constellation Boulevard, Suite 1700, Los Angeles, CA 90067 A true and correct copy of the foregoing document entitled: DEBTOR’S REPLY TO OMNIBUS OPPOSITION OF THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS TO THE (I) MOTION FOR ORDER EXTENDING THE DEBTOR’S EXCLUSIVITY PERIODS TO FILE PLAN OF REORGANIZATION AND OBTAIN ACCEPTANCES THEREOF; AND (II) MOTION BY THE DEBTOR TO EXTEND TIME TO ASSUME OR REJECT NONRESIDENTIAL REAL PROPERTY LEASES; DECLARATIONS OF TAE Y. YI AND EVE H. KARASIK IN SUPPORT THEREOF will be served or was served (a) on the judge in chambers in the form and manner required by LBR 5005-2(d); and (b) in the manner stated below: 1. TO BE SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (NEF): Pursuant to controlling General Orders and LBR, the foregoing document will be served by the court via NEF and hyperlink to the document. On September 12, 2017, I checked the CM/ECF docket for this bankruptcy case or adversary proceeding and determined that the following persons are on the Electronic Mail Notice List to receive NEF transmission at the email addresses stated below: Service information continued on attached page 2. SERVED BY UNITED STATES MAIL: On September 12, 2017, I served the following persons and/or entities at the last known addresses in this bankruptcy case or adversary proceeding by placing a true and correct copy thereof in a sealed envelope in the United States mail, first class, postage prepaid, and addressed as follows. Listing the judge here constitutes a declaration that mailing to the judge will be completed no later than 24 hours after the document is filed. Service information continued on attached page 3. SERVED BY PERSONAL DELIVERY, OVERNIGHT MAIL, FACSIMILE TRANSMISSION OR EMAIL (state method for each person or entity served): Pursuant to F.R.Civ.P. 5 and/or controlling LBR, on September 12, 2017, I served the following persons and/or entities by personal delivery, overnight mail service, or (for those who consented in writing to such service method), by facsimile transmission and/or email as follows. Listing the judge here constitutes a declaration that personal delivery on, or overnight mail to, the judge will be completed no later than 24 hours after the document is filed.
Served via Attorney Service Hon. Vincent P. Zurzolo United States Bankruptcy Court Edward R. Roybal Federal Building 255 E. Temple Street, Suite 1360 / Ctrm 1368 Los Angeles, CA 90012 I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. September 12, 2017 Stephanie Reichert /s/ Stephanie Reichert Date Type Name Signature
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This form is mandatory. It has been approved for use by the United States Bankruptcy Court for the Central District of California.
June 2012 F 9013-3.1.PROOF.SERVICE
1. TO BE SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (NEF):
Dustin P Branch on behalf of Creditors PGIM Real Estate, Starwood Retail Partners, LLC, The Macerich Company, and Westfield, LLC [email protected], [email protected];[email protected] John H Choi on behalf of Interested Party Courtesy NEF [email protected], [email protected] Richard T Davis on behalf of Creditor Spotsylvania Mall Company [email protected], [email protected] John P Dillman on behalf of Creditors Cypress-Fairbanks ISD, Galveston County, Harris County, and Tyler County [email protected] Oscar Estrada on behalf of Creditor LOS ANGELES COUNTY TREASURER AND TAX COLLECTOR [email protected] Scott Ewing on behalf of Interested Party Courtesy NEF [email protected], [email protected];[email protected];[email protected] Ronald E Gold on behalf of Creditor Washington Prime Group Inc. [email protected], [email protected] Courtney J Hull on behalf of Creditor Texas Comptroller of Public Accounts [email protected], [email protected] Clifford P Jung on behalf of Interested Party Courtesy NEF [email protected], [email protected];[email protected] Eve H Karasik on behalf of Debtor Cornerstone Apparel, Inc. [email protected] John W Kim on behalf of Attorney John W Kim [email protected] Jeffrey Kurtzman on behalf of Creditor PREIT Services, as agent for PR Springfield Town Center, LLC [email protected] Jeffrey S Kwong on behalf of Debtor Cornerstone Apparel, Inc. [email protected], [email protected] Dare Law on behalf of U.S. Trustee United States Trustee (LA) [email protected] Scott Lee on behalf of Creditor Committee Official Committee of Unsecured Creditors [email protected] Noreen A Madoyan on behalf of Interested Party Courtesy NEF [email protected], [email protected];[email protected];[email protected]
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This form is mandatory. It has been approved for use by the United States Bankruptcy Court for the Central District of California.
June 2012 F 9013-3.1.PROOF.SERVICE
Monserrat Morales on behalf of Interested Party Courtesy NEF [email protected], [email protected];[email protected];[email protected] Kevin M Newman on behalf of Creditors Carousel Center Company, L.P., EklecCo NewCo LLC, and Pyramid Walden Company, L.P. [email protected], [email protected] Juliet Y Oh on behalf of Debtor Cornerstone Apparel, Inc. [email protected], [email protected] Kristen N Pate on behalf of Creditor GGP Limited Partnership [email protected] Christopher E Prince on behalf of Interested Party Courtesy NEF [email protected], [email protected];[email protected];[email protected] Lovee D Sarenas on behalf of Creditor Committee Official Committee of Unsecured Creditors [email protected] Lovee D Sarenas on behalf of Interested Party Courtesy NEF [email protected] Benjamin Seigel on behalf of Interested Party Courtesy NEF [email protected], [email protected];[email protected] Michael A Shakouri on behalf of Creditor c/o Goodkin & Lynch 5060 Montclair Plaza Lane Owner, LLC [email protected], [email protected] Ronald M Tucker, Esq on behalf of Creditor Simon Property Group, Inc. [email protected], [email protected];[email protected];[email protected] United States Trustee (LA) [email protected] Ashley R Wedding on behalf of Creditor Temecula Towne Center Associates L.P. [email protected], [email protected] Elizabeth Weller on behalf of Creditors Dallas County, Smith County, and Tarrant County [email protected] Timothy J Yoo on behalf of Debtor Cornerstone Apparel, Inc. [email protected]
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Cornerstone Apparel, Inc. (8096) Committee
Committee Counsel Lovee D. Sarenas Lewis, Brisbois, Bisgaard & Smith LLP 633 W. 5th Street, Suite 4000 Los Angeles, CA 90071
Committee Counsel Richard Lauter Lewis, Brisbois, Bisgaard & Smith LLP 550 West Adams Street, Suite 300 Chicago, IL 60661
Reflex Trading Inc. c/o Richard H. Song, Owner 1100 S. San Pedro Street, #D-4 Los Angeles, CA 90015
Fashion Magazine Inc. dba Fashion Art c/o William Waneo Ha, CEO 1100 S. San Pedro St., D-l Los Angeles, CA 90015
Xenos Fashion Inc. dba Belinda 1616 E. 14th Street Los Angeles, CA 90021
John Lee 3731 Wilshire Blvd., Suite 940 Los Angeles, CA 90010
GGP Limited Partnership Attn: Julie Minnick Bowden, National Bankruptcy Manager 110 North Wacker Drive Chicago, IL 60606
Ivan Gold, Esq. Allen Matkins Leck Gamble & Mallory, LLP Three Embarcadero Center, 12th FI. San Francisco, CA 94111-4015
Daniela Lee, General Manager dba Chocolate USA 1150 Crocker Street Los Angeles, CA 90021
Simon Property Group 225 West Washington Street Indianapolis, IN 46204
Ronald M. Tucker 225 West Washington Street Indianapolis, IN 46204
Hana Financial c/o Kevin Thomas, SVPlCustomer Credit Mgr. 1000 Wilshire Boulevard Los Angeles, CA 90017
Finance One, Inc. c/o Stephen Kim, Senior VP 801 S. Grand Avenue, Ste. 1000 Los Angeles, CA 90017
Tony Kim, Esq. Kim Park Choi & Yi 3435 Wilshire Blvd., Ste. 2150 Los Angeles, CA 90010
Alliance U.S.A., Inc. dba Ambiance Apparel c/o In Y. Noh, COO 2415 E. 15th Street Los Angeles, CA 90021
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