A bank gives you a $128,000 equity line of credit for home improvements on your house in 2006
You then withdraw $57,000 in cash over the next year, and make no home improvements
In 2008, the bank goes bankrupt and terminates the remaining $71,000 line of credit
You then stop making payments on the $57,000
And sue the bank’s creditors because you claim to need the $71,000 line of credit so that you can continue to make the loan payments
But you plan to get some unconstitutional zoning changes and sell the house to somebody else that will make the home improvements
And the local Town Board will stifle public opinion and rubber stamp the approval
Sound like Transparent & Responsible Government? Nope, sounds like The Related Companies doing business with The Town Board of Tuxedo
——————————————————————————————————————————-
Hearing Date and Time: December 3, 2008
at 10:00 a.m. (Prevailing Eastern Time)
Objection Deadline: November 25, 2008 at
4:00 p.m. (Prevailing Eastern Time)
GREENBERG TRAURIG, LLP
Nancy A. Mitchell, Esq.
Maria J. DiConza, Esq.
200 Park Avenue
New York, New York 10166
(212) 801-9200
and
KATSKY KORINS LLP
Mark Walfish, Esq.
Steven H. Newman, Esq.
605 Third Avenue
New York, New York 10158
212 716-3207
Attorneys for Tuxedo Reserve Owner LLC and
Tuxedo TPA Owner LLC
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
———————————————————x
::
In re: :: Chapter 11
::
LEHMAN BROTHERS HOLDINGS INC., :: Case No. 08-13555 (LMP)
et al., ::
:: Jointly Administered
Debtors. ::
::
———————————————————X
MOTION OF TUXEDO RESERVE OWNER LLC AND
TUXEDO TPA OWNER LLC FOR AN ORDER PURSUANT
TO BANKRUPTCY CODE SECTIONS 105, 363 AND 1107
AUTHORIZING AND COMPELLING ACTIONS BY DEBTORS AS AGENT
AND LENDER UNDER LOAN FACILITY AND GRANTING RELATED RELIEF
Tuxedo Reserve Owner LLC and Tuxedo TPA Owner LLC (collectively, “Tuxedo” or
“Borrower”) are the owners and developers of an approximately 2,295 acre master planned
community located in the Town of Tuxedo and Village of Sloatsburg, Counties of Orange and
Rockland, New York (the “Project”). Tuxedo is the borrower under a $128 million loan facility
consisting of a Senior Loan, Building Loan, and Project Loan (each as defined below,
individually and collectively, the “Loans”), under which debtor Lehman Commercial Paper, Inc.
(“LCPI” or “Agent”) is the Administrative Agent and debtor Lehman Brothers Holdings Inc.
(“LBHI” or “Lender” and collectively with LCPI and the other debtors and debtors-in-possession
herein, the “Debtors”) is the sole Lender. Since the commencement of these chapter 11 cases,
LCPI and LBHI have defaulted on their obligations as Agent and Lender under the Loans (by
failing to fund amounts they were obligated to fund under the Loan Agreements) and have
repeatedly failed to agree to any solution to address their defaults. Tuxedo requests that the
Court intervene to compel the Debtors to act in a commercially reasonable manner to avoid
continued harm to Tuxedo and to the Project.
Tuxedo submits this Motion (the “Motion”) for an Order, pursuant to Sections 105, 363,
and 1107 of title 11 of the United States Code (the “Bankruptcy Code”), (a) authorizing Tuxedo
to recoup the funding it has contributed to the Project since the Petition Date, which funding
should have been paid from advances of proceeds of the Loans, from Tuxedo’s post-petition debt
service obligations, (b) authorizing Tuxedo to appoint an agent to replace LCPI as Agent (the
“Replacement Agent”), and (c) authorizing and directing the Agent or, if appointed, the
Replacement Agent and LBHI to consent to the addition of a lender to fulfill the obligations of
LBHI under the Loan Agreements (defined below) and the subordination of LBHI’s interest in
the Loans to amounts funded by the additional lender in the manner provided for in the
defaulting lender provisions of the Loan Agreements. In the alternative, Tuxedo requests an
order compelling the Debtors to commence an auction and sale of the Loans. In support of the
Motion, Tuxedo respectfully represents as follows:
JURISDICTION AND VENUE
1. The Court has jurisdiction to consider the Motion pursuant to 28 U.S.C. §§ 157
and 1334. Venue is proper under 28 U.S.C. § 1408. This is a core proceeding pursuant to 28
U.S.C. §157(b).
2. The statutory bases on which the Motion is predicated are Sections 105, 363, and
1107 of the Bankruptcy Code.
BACKGROUND
The Chapter 11 Cases
3. On September 15, 2008, LBHI commenced a voluntary case under chapter 11 of
the Bankruptcy Code in this Court. Periodically thereafter, the other Debtors commenced
voluntary cases under chapter 11 the Bankruptcy Code in this Court, including LCPI on October
5, 2008. (The date of the commencement of each chapter 11 case is referred to herein as the
“Petition Date.”)
The Debtors are authorized to operate their businesses and manage their
4.
properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy
Code. The Debtors’ chapter 11 cases are jointly administered for procedural purposes only.
5. On September 17, 2008, the United States Trustee for the Southern District of
New York (the “U.S. Trustee”) appointed a statutory committee of unsecured creditors pursuant
to section 1102 of the Bankruptcy Code (the “Creditors’ Committee”).
239,202,530v4NY 3
6. On or about October 6, 2008, upon motion of LCPI, the Court issued the Order
Pursuant to Sections 105(a), 363(b), 363(c) and 541(d) of the Bankruptcy Code and Bankruptcy
Rule 6004 Authorizing Debtor to (A) Continue to Utilize its Agency Bank Account, (B)
Terminate Agency Relationships, and (C) Elevate Loan Participations (the “LCPI Agency
Order”). Among other things, the LCPI Agency Order authorized LCPI to “transfer, assign or
resign from any and all Administrative Agent positions . . .” (LCPI Agency Order, p. 3).
The Loans
7. The Project consists of an approximately 2,295 acre master planned community
located in the Town of Tuxedo and Village of Sloatsburg, Counties of Orange and Rockland,
New York. The Project secured zoning approval for 1,195 homes and other commercial and
amenity uses in November 2004, preliminary subdivision approval for the first phase of 103
homes in January 2008, and is on schedule to secure final subdivision approval for the first phase
and site plan approvals for infrastructure in March 2009. The project timeline approved by the
Second Amendment to the Project and Building Loan Agreements proposed a construction start
to “rough in” the Project’s main spine road in October 2008. This milestone was critical to the
Project’s ability to meet its first bulk land sale scheduled for the second quarter of 2009. The
Debtors’ default in funding the Project and Building Loans will seriously impede the Project’s
ability to proceed on any foreseeable schedule and may result in the loss of jobs for Tuxedo’s
staff, consultants and contractors.
8. On September 6, 2006, Tuxedo entered into the Loans with LCPI as Agent and
LBHI as Lender. The loan agreements associated with the Loans include: (i) the Senior Loan
Agreement, as amended by the First Amendment to Senior Loan Agreement, dated as of
December 28, 2006, as further amended by the Second Amendment to Senior Loan Agreement,
dated as of January 14, 2008 (as amended, the “Senior Loan Agreement”), pursuant to which
LBHI agreed to extend a senior loan to Borrower in the aggregate principal amount of
$48,000,000 (the “Senior Loan”), (ii) the Building Loan Agreement, as amended by the First
Amendment to Building Loan Agreement, dated as of December 28, 2006, as further amended
by the Second Amendment to Building Loan Agreement, dated as of January 14, 2008 (as
amended, the “Building Loan Agreement”), pursuant to which LBHI agreed to extend a building
loan to Borrower in an aggregate principal amount of $40,000,000 (the “Building Loan”) and
(iii) the Project Loan Agreement, as amended by the First Amendment to Project Loan
Agreement, dated as of December 28, 2006, as further amended by the Second Amendment to
Project Loan Agreement, dated as of January 14, 2008 (as amended, the “Project Loan
Agreement” and together with the Senior Loan Agreement and the Building Loan Agreement,
the “Loan Agreements”), pursuant to which LBHI agreed to extend a project loan to Borrower in
an aggregate principal amount of $40,000,000 (the “Project Loan”).1 The Loans are secured by,
among other things, certain Mortgages, Assignments of Leases and Rents and Security
Agreements made by Borrower to Agent for the benefit of the Lenders. The Loans are also
secured by the Pledge Agreement, dated as of September 6, 2006, by Tuxedo Reserve
Investment Partners, L.P., TRIP Borrower Co-Member LLC, TPA Borrower Co-Member LLC
and R-H TPA Holdings, L.P. (collectively, “Pledgors”) and Agent, as amended by the First
Amendment to Pledge Agreement, dated as of December 28, 2006, among Pledgors and Agent.
9. The parties contemplated that the Loans would be syndicated to additional
lenders, defining Lenders as LBHI and the “other Lenders parties” to the Loans. As of the date
hereof, Tuxedo is not aware of any syndication of the Loans and believes that LBHI remains the
sole lender.
Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Loan Agreements.
The Debtors’ Funding Obligations Under The Loan Agreements
10. The Senior Loan is fully funded with an outstanding balance as of November 10,
2008, of $48,000,000. The outstanding balance of the Building Loan as of November 10, 2008,
was $135,184 and approximately $39,864,816 of the Building Loan remained unadvanced. The
outstanding balance of the Project Loan as of November 10, 2008, was $9,848,521 plus accrued
interest and fees of $374,350 and $382,744 (for October and November, respectively) and
approximately $29,394,385 of the Project Loan remained unadvanced.
Section 2.1.8 of each of the Building Loan Agreement and Project Loan
11.
Agreement provides: “[s]ubject to compliance by Borrower with the terms of this Agreement,
Lenders shall make Advances to Borrower of the proceeds of the Loans pursuant to the terms
and conditions set forth herein. . . .” Section 2.10.6 of the Loan Agreements further provides that
following Agent’s receipt of an Advance Request, upon satisfaction of the applicable conditions
precedent therefor, Agent shall make the funds requested by Borrower available on the requested
Borrowing Date.
12. If LCPI and LBHI had syndicated the Loans as originally contemplated, the other
lenders under the Loans would have had the ability to fund LBHI’s portion of the Advance
Request under the “Defaulting Lender” provisions of the Loan Agreements. Section 9.10.2 of
the Project Loan Agreement and Building Loan Agreement provides that, if any lender (a
“Defaulting Lender”) fails to fund its share of a required advance any non-Defaulting Lender
would have the right to fund the defaulted amount.
Section 9.10.4 also permits the Borrower to replace a Defaulting Lender with an Assignee who agrees to purchase for cash the Loans and other Obligations due to the Defaulting Lender, become a Lender for all purposes under the Loan Agreements and assume all obligations of the Defaulting Lender.
13. Section 9.10.3 provides that a Defaulting Lender’s rights to receive payments
under the Loans would be subordinated to amounts funded on its behalf (plus interest at the
default rate) by another lender and Section 9.10.1 further provides that the Defaulting Lender’s
rights to vote upon, approve, disapprove, consent to or direct any action of the Agent are
suspended until the Lender is no longer a Defaulting Lender.
The Debtors’ Default In Satisfying Their Obligations
14. On September 17, 2008, Borrower submitted to Trimont Real Estate Advisors and
to Agent an Advance Request for a total of $1,720,534.67 to fund project costs, together with a
Draw Package and all other information required for Borrower to satisfy the conditions for
Advances of Loan proceeds. The Advance Request specified October 1, 2008, as the Borrowing
Date and provided (as all prior Advance Requests have similarly provided) that a portion of the
Loan proceeds requested by Borrower – $374,350.29 – was to be applied towards the monthly
payments of interest, Non-Use Fees, and annual Administrative Fee required to be made by
Borrower (the “Debt Service”).
15. On November 4, 2008, Tuxedo made an additional Advance Request in the
amount of $1,247,428.00, of which $382,744.07 was to be used to pay Debt Service.
16. As of the date hereof, LBHI has failed to fund either post-Petition Date Advance
Request and LCPI has failed to make funds available to the Borrower for the payment of project
costs or Debt Service. As a result of Agent’s and Lenders’ failure to make the requested funds
available, Tuxedo has had to advance funds to pay on-going project costs. From the date of
LCPI’s last funding on September 3, 2008 through November 9, 2008, Tuxedo funded project
costs of $467,872.65 and on November 10, 2008, Tuxedo funded an additional $656,605.47, for
a total funding by Tuxedo of $1,124,478.12 (the “Borrower Funding”).
17. The failures of LBHI and LCPI to make the requested funds available constitute
material breaches of the Loan Agreements. Tuxedo has no assurance that LBHI has the ability
or any intention to fulfill it obligations as Lender under the Loan Agreements or that LCPI will
continue to fulfill its obligations as Agent. By letter dated October 3, 2008, a copy of which is
annexed hereto as Exhibit A, Tuxedo notified LCPI of the Debtors’ material breach of the Loan
Agreements.
18. In an attempt to minimize the damage to the Borrower, the Project, and the
Debtors’ collateral resulting from these continuing defaults and consistent with the intent of the
Loan Agreements, by letter dated November 6, 2008, Tuxedo requested that the Agent and
Lender consent to bringing in a third party lender to take an assignment of the unfunded
commitments and to fund the balance of the Loans, making LBHI’s interest in the Loans
subordinate to the amounts funded by the additional lender in the same manner as if the
additional lender was a Non-Defaulting Lender taking over the funding of LBHI as a Defaulting
Lender under the Loan Agreements. Tuxedo further requested that Agent withdraw and resign
as administrative agent and permit Borrower to identify a suitable replacement agent to
administer the Loans. A copy of the November 6, 2008 letter is attached hereto as Exhibit B.
The Debtors have not agreed to these requests.
RELIEF REQUESTED
19. Tuxedo requests that the Court take action pursuant to its powers under Sections
105, 363, and 1107 of the Bankruptcy Code to protect and preserve the value of assets of the
estate. The record of these chapter 11 cases to date demonstrates that it will take months, if not
years, for the Debtors to assess their assets and liabilities and to develop a plan to commence an
orderly liquidation. In the meantime, as evidenced by motions filed in the cases and media
coverage surrounding the fall of Lehman Brothers and its collateral damage, the value of certain
of the Debtors’ assets, including the Project, will decline or be eliminated before the Debtors
determine how to proceed with respect to their investments. In addition, the owners and other
investors in those projects, including the Project, will also be damaged.
20. The Court should find that any failure by Tuxedo to pay Debt Service payments
as a result of LBHI’s failure to make an advance under the Loan Agreements does not constitute
a default by Tuxedo under the Loan Agreements and that Tuxedo is permitted to recoup the
Borrower Funding from its Debt Service obligations. The Court should further authorize Tuxedo
to replace LCPI with a Replacement Agent and authorize and direct LCPI or the Replacement
Agent to treat LBHI as a Defaulting Lender, bring in a new lender to fund the remaining
Advance Requests as if such new lender were previously a Lender under the Loan Agreements,
and provide that repayment of LBHI would be subordinate to repayment of the new lender as
contemplated by the Defaulting Lender provisions. Finally, if the Debtors are unable or
unwilling to act in a commercially reasonable manner with respect to the Loans, the Court should
direct them to immediately commence an auction and sale process with respect to the Loans.
BASIS FOR RELIEF REQUESTED
A. Lehman Should Be Prevented From Declaring A Default Based On
Borrower’s Failure To Pay Debt Service
21. Since the Petition Date, Tuxedo has attempted to contact the Agent first to request
the usual monthly advances and more recently to suggest alternative ways of dealing with the
Debtors’ failure to fund. Tuxedo has not been able to get resolution from the Agent as to the
Debtors’ intent with respect to the Loans. Instead, the Agent has only responded by stating that
it is unable to respond to Tuxedo’s requests at this time and that it intends to declare a default for
Tuxedo’s failure to fund Debt Service from sources other than the advances properly requested
under the Loan Agreements.
Tuxedo’s inability to pay Debt Service that was due on October 1, 2008 and
22.
November 1, 2008, was the direct result of the Debtors’ defaults under the Loan Agreements.
The Debtors’ own defaults should prevent them from declaring a default and exercising their
remedies under the Loan Agreements. Further, Tuxedo has paid over $1.1 million in Borrower
Funding since the Petition Date – funding that the Loan Agreements contemplated would come
from the Advance Requests. As a result, Tuxedo intends to recoup the Borrower Funding from
amounts due for Debt Service. Tuxedo’s recoupment should not be a basis for declaring a
default.
23. Recoupment is an equitable doctrine applied in the bankruptcy context to permit a
claimant to off set mutual debts with the debtor. For recoupment to apply, the claims must arise
out of the same transaction or set of transactions. See New York State Elec. & Gas Co. v.
McMahon (In re McMahon), 129 F. 3d 93, 98 (2d. 1997)(holding utility company’s postpetition
application of prepetition utility deposit to debtor’s prepetition utility obligation was recoupment
not subject to automatic stay). The doctrine of recoupment is flexible and has been applied in
many situations by this and other courts. See, e.g., In re 105 East Second Street Associates, 207
B.R. 64, 69 (Bankr. S.D.N.Y. 1997) (finding tenant entitled to recoup award of rent awards and
penalties from postpetition rental payments owed to trustee as building owner); In re Heafitz, 85
B.R. 274, 279-80 (Bankr. S.D.N.Y. 1988) (allowing recoupment where partnership’s obligation
to make distributions to partner and partner’s obligation to pay accrued interest and principal
arising from notes executed to partnership were not independent transactions); In re Yonkers
Hamilton Sanitarium, Inc., 22 B.R. 427, 432-33 (Bankr. S.D.N.Y. 1982) (allowing the
government to recoup Medicare overpayments from post-petition reimbursements to a hospital),
aff’d, 34 B.R. 385 (S.D.N.Y. 1983); In re Clowards, Inc., 42 B.R. 627 (Bankr. D. Idaho 1984)
(holding bankrupt contractor’s suit for payment due subject to recoupment of damages for breach
of contract).
24. The equitable doctrine of recoupment is intended to address this very situation.
Tuxedo’s claims against the Debtors arise out of the same transaction as the Debtors’ claims
against Tuxedo – the construction of the Project and Loan Agreements associated therewith.
Because Tuxedo’s claims against LBHI for the amount of the Borrower Funding arise from
LBHI’s failure to fund the Loans, Tuxedo’s recoupment is proper and may not be used as a
ground for declaring a default.
B. The Court Should Authorize Tuxedo To Remove LCPI As Agent And To Add
Another Lender To Take Over LBHI’s Funding Obligations
25. The Debtors have not acted in a commercially reasonable manner with respect to
this Project since the Petition Date. The Project will not survive, and Lehman’s collateral will be
substantially diminished, if a long term solution is not implemented immediately. Tuxedo has
offered two possible solutions to LCPI and LCPI has been incapable of making a determination
as to whether to proceed with either solution. First, Tuxedo has suggested that LCPI resign as
Agent and that LCPI and LBHI agree to permit another lender to take over the unfunded portion
of the Loans in a similar fashion as a Lender would take over the responsibilities of a Defaulting
Lender under the existing Loan Agreements had the Loans been syndicated as originally
anticipated. Alternatively, Tuxedo offered to purchase the Loans from Lehman at a price
commensurate with the current market value of the Loans. The Debtors have been unable or
unwilling to pursue either path or suggest another.
26. The Debtors’ inaction is risking the value of its own asset as well as Tuxedo’s
asset. In its Motion in support of the LCPI Agency Order, LCPI stated: “[u]pon the
commencement of LBHI’s chapter 11 case, and particularly because of uncertainty in the credit
markets regarding LCPI’s ability to continue to perform its obligations as lender, Administrative
Agent or Syndication Agent, LCPI began to try to extricate itself from its position between
borrowers and lenders, whether in its capacity as Administrative Agent, Syndication Agent or
participant.” (LCPI, Docket No. 3, p. 5).
27. LCPI further stated that “[a]uthorization to terminate its agency relations is both
necessary and appropriate in order to operate the Debtor’s business in a manner that is both
consistent with the provisions of the Bankruptcy Code and gives due regard to the interests of
third parties with which LCPI dealt in operating its business. The relief requested will minimize
the liabilities of LCPI’s estate and is also in the best interests of the unstable credit markets.”
(LCPI, Docket No. 3, p. 10).
28. Despite these admissions, LCPI has been unwilling to discuss resigning as agent
or other solutions resulting from its failure to operate its business “in a manner that is both
consistent with the provisions of the Bankruptcy Code and gives due regard to the interests of
third parties with which LCPI dealt in operating its business.” The Debtors’ actions with respect
to the Project are in violation of their duty to maximize the value of their estates and is causing
immediate and substantial harm to their counter-parties. The Court should compel them to act in
a commercially reasonable manner by authorizing Tuxedo to replace LCPI as Agent, to find a
new lender to take over LBHI’s future funding obligations, and to treat LBHI as a Defaulting
Lender under the Loan Agreements.
C. In The Alternative, The Court Should Direct That Lehman Immediately
Commence An Auction And Sale Of The Loan
29. If the Debtors are unwilling to remain parties to the Loans and comply with their
obligations under the Loan Agreements, they should be directed to immediately commence a sale
process before the Court to sell the Loans. Tuxedo submits that sale of the Loans, even at a
discount, would be in the best interest of the Debtors’ estates and creditors because it would put
an end to the harm being caused to the Project and the resulting reduction in the value of the
Debtors’ collateral, would allow the Debtors to immediately realize upon that collateral, and
would limit the claims against the Debtors for breach of the Loan Agreements. Most
importantly for the Borrower, it would allow the Project to continue in a timely, commercially
reasonable manner, rather than leaving the Project in the current precarious position.
NOTICE
30. Notice of this motion has been served in accordance with the procedures set forth
in the order entered on September 22, 2008 governing case management and administrative
procedures for this case [Docket No. 285] on (i) the U.S. Trustee; (ii) the attorneys for the
Creditors’ Committee; (iii) the attorneys for the Debtor’s post-petition lenders; (iv) the Securities
and Exchange Commission; (v) the Internal Revenue Service; (vi) the United States Attorney for
the Southern District of New York; (vii) the attorneys for the Debtor; and (viii) all parties who
have requested notice in these chapter 11 cases. No other or further notice need be provided.
WHEREFORE, Tuxedo requests that the Court grant the relief requested in the
Motion and such further and additional relief as may be just and proper.
Dated: New York, New York
November 10, 2008
GREENBERG TRAURIG, LLP
By: /s/Maria J. DiConza
Nancy A. Mitchell, Esq.
Maria J. DiConza, Esq.
200 Park Avenue
New York, New York 10166
(212) 801-9200
(212) 801-6400 (fax)
-and-
KATSKY KORINS LLP
Mark Walfish, Esq.
Steven H. Newman, Esq.
605 Third Avenue
New York, New York 10158
212 716-3207
212 716-3350 (fax)
Attorneys for Tuxedo Reserve Owner LLC
and Tuxedo TPA Owner LLC
239,202,530v4NY 14
Hearing Date and Time: December 3, 2008
at 10:00 a.m. (Prevailing Eastern Time)
Objection Deadline: November 25, 2008
at 4:00 p.m. (Prevailing Eastern Time)
GREENBERG TRAURIG, LLP
Nancy A. Mitchell, Esq.
Maria J. DiConza, Esq.
200 Park Avenue
New York, New York 10166
(212) 801-9200
and
KATSKY KORINS LLP
Mark Walfish, Esq.
Steven H. Newman, Esq.
605 Third Avenue
New York, New York 10158
212 716-3207
Attorneys for Tuxedo Reserve Owner LLC and
Tuxedo TPA Owner LLC
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
———————————————————x
::
In re: :: Chapter 11
::
LEHMAN BROTHERS HOLDINGS INC., :: Case No. 08-13555 (LMP)
et al., ::
:: Jointly Administered
Debtors. ::
::
———————————————————X
NOTICE OF HEARING ON MOTION OF TUXEDO RESERVE
OWNER LLC AND TUXEDO TPA OWNER LLC FOR AN ORDER
PURSUANT TO BANKRUPTCY CODE SECTIONS 105, 363, AND 1107
AUTHORIZING AND COMPELLING ACTIONS BY DEBTORS AS AGENT
AND LENDER UNDER LOAN FACILITY AND GRANTING RELATED RELIEF
PLEASE TAKE NOTICE that Tuxedo Reserve Owner LLC and Tuxedo TPA Owner
LLC, by its counsel Greenberg Traurig LLP, has filed a Motion of Tuxedo Reserve Owner LLC
and Tuxedo TPA Owner LLC for an Order Pursuant to Bankruptcy Code Sections 105, 363, and
NY 239,203,823v1 11-10-08
1107 Authorizing and Compelling Actions by Debtors as Agent and Lender Under Loan Facility
and Granting Relief (the “Motion”).
PLEASE TAKE FURTHER NOTICE that a hearing to consider the relief requested
in the Motion will be held on December 3, 2008 at 10:00 a.m., or soon after as counsel may be
heard, before the Honorable James M. Peck, United States Bankruptcy Judge, United States
Bankruptcy Court (the “Bankruptcy Court”), One Bowling Green, Courtroom 601, New York,
New York 10004-1408.
PLEASE TAKE FURTHER NOTICE that objections, if any, to the Motion must be
(a) be made in writing; (b) comply with the Bankruptcy Code, the Bankruptcy Rules, the Local
Rules for the United States Bankruptcy Court for the Southern District of New York and the
Order pursuant to Section 105(a) of the Bankruptcy Code and Bankruptcy Rules 1015(c) and
9007 Implementing Certain Notice and Case Management Procedures, entered September 22,
2008 [Docket no. 285]; (c) be filed with the Bankruptcy Court in accordance with General Order
M-242 (as amended) (i) electronically by registered users of the Bankruptcy Court’s case filing
system, or (ii) on a 3.5 inch disk (preferably in Portable Document Format (PDF), WordPerfect,
or any other Windows-based word processing format) by all other parties in interest; (d) be
submitted in hard copy form to the chambers of the Honorable James M. Peck, United States
Bankruptcy Judge, United States Bankruptcy Court for the Southern District of New York, One
Bowling Green, New York, New York 10004; and (e) be served upon the following parties: (i)
counsel for Tuxedo Reserve Owner LLC and Tuxedo TPA Owner LLC. Greenberg Traurig,
LLP, 200 Park Avenue, New York, New York 10166, Attention: Nancy A. Mitchell, Esq. and
Maria J. DiConza, Esq., and Katsky Korins, LLP, 605 Third Avenue, New York, New York
10158, Attention: Mark Walfish, Esq. and Steven H. Newman, Esq., (ii) counsel for the Debtors,
NY 239,203,823v1 11-10-08 2
Weil Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York 10153, Attention:
Richard P. Krasnow, Esq., Lori R. Fife, Esq. Shai Y. Waisman, Esq. and Jacqueline Marcus,
Esq., (iii) counsel for the Official Committee of Unsecured Creditors, Milbank, Tweed, Hadley
& McCloy LLP, 1 Chase Manhattan Plaza, New York, New York 10005, Attention: Dennis F.
Dunne, Esq., Dennis O’Donnell, Esq. and Evan Fleck, Esq., (iv) counsel for Debtors’
Postpetition Lenders, Cleary Gottlieb Steen & Hamilton LLP, One Liberty Plaza, New York,
New York 10006, Attention: Lindsee P. Granfield, Esq. and Lisa Schweiger, Esq., and Sullivan
& Cromwell LLP, 125 Broad Street, New York, New York 10004, Attention: Robinson B. Lacy,
Esq. and Hydee R. Feldstein, Esq., and (v) the Office of the United States Trustee for the
Southern District of New York, 33 Whitehall Street, 21st Floor, New York, New York 10004,
Attention: Andy Velez-Rivera, Paul Schwartzberg, Brian Masumoto, Linda Riffkin and Tracy
Hope Davis, in each case so as to be received no later than 4:00 p.m. (Eastern Time) on
November 25, 2008 (the “Objection Deadline”).
Dated: New York, New York
November 10, 2008 GREENBERG TRAURIG, LLP
Attorneys for Tuxedo Reserve Owner LLC and
Tuxedo TPA Owner LLC
By: /s/Maria J. DiConza
Nancy A. Mitchell, Esq.
Maria J. DiConza, Esq.
200 Park Avenue
New York, New York 10166
(212) 801-9200
(212) 801-6400 (fax)
-and-
KATSKY KORINS LLP
Mark Walfish, Esq.
Steven H. Newman, Esq.
605 Third Avenue
New York, New York 10158
212 716-3207
212 716-3350 (fax)
Example:
——————————————————————————————————————————-
Hearing Date and Time: December 3, 2008
at 10:00 a.m. (Prevailing Eastern Time)
Objection Deadline: November 25, 2008 at
4:00 p.m. (Prevailing Eastern Time)
GREENBERG TRAURIG, LLP
Nancy A. Mitchell, Esq.
Maria J. DiConza, Esq.
200 Park Avenue
New York, New York 10166
(212) 801-9200
and
KATSKY KORINS LLP
Mark Walfish, Esq.
Steven H. Newman, Esq.
605 Third Avenue
New York, New York 10158
212 716-3207
Attorneys for Tuxedo Reserve Owner LLC and
Tuxedo TPA Owner LLC
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
———————————————————x
::
In re: :: Chapter 11
::
LEHMAN BROTHERS HOLDINGS INC., :: Case No. 08-13555 (LMP)
et al., ::
:: Jointly Administered
Debtors. ::
::
———————————————————X
MOTION OF TUXEDO RESERVE OWNER LLC AND
TUXEDO TPA OWNER LLC FOR AN ORDER PURSUANT
TO BANKRUPTCY CODE SECTIONS 105, 363 AND 1107
AUTHORIZING AND COMPELLING ACTIONS BY DEBTORS AS AGENT
AND LENDER UNDER LOAN FACILITY AND GRANTING RELATED RELIEF
Tuxedo Reserve Owner LLC and Tuxedo TPA Owner LLC (collectively, “Tuxedo” or
“Borrower”) are the owners and developers of an approximately 2,295 acre master planned
community located in the Town of Tuxedo and Village of Sloatsburg, Counties of Orange and
Rockland, New York (the “Project”). Tuxedo is the borrower under a $128 million loan facility
consisting of a Senior Loan, Building Loan, and Project Loan (each as defined below,
individually and collectively, the “Loans”), under which debtor Lehman Commercial Paper, Inc.
(“LCPI” or “Agent”) is the Administrative Agent and debtor Lehman Brothers Holdings Inc.
(“LBHI” or “Lender” and collectively with LCPI and the other debtors and debtors-in-possession
herein, the “Debtors”) is the sole Lender. Since the commencement of these chapter 11 cases,
LCPI and LBHI have defaulted on their obligations as Agent and Lender under the Loans (by
failing to fund amounts they were obligated to fund under the Loan Agreements) and have
repeatedly failed to agree to any solution to address their defaults. Tuxedo requests that the
Court intervene to compel the Debtors to act in a commercially reasonable manner to avoid
continued harm to Tuxedo and to the Project.
Tuxedo submits this Motion (the “Motion”) for an Order, pursuant to Sections 105, 363,
and 1107 of title 11 of the United States Code (the “Bankruptcy Code”), (a) authorizing Tuxedo
to recoup the funding it has contributed to the Project since the Petition Date, which funding
should have been paid from advances of proceeds of the Loans, from Tuxedo’s post-petition debt
service obligations, (b) authorizing Tuxedo to appoint an agent to replace LCPI as Agent (the
“Replacement Agent”), and (c) authorizing and directing the Agent or, if appointed, the
Replacement Agent and LBHI to consent to the addition of a lender to fulfill the obligations of
LBHI under the Loan Agreements (defined below) and the subordination of LBHI’s interest in
the Loans to amounts funded by the additional lender in the manner provided for in the
defaulting lender provisions of the Loan Agreements. In the alternative, Tuxedo requests an
order compelling the Debtors to commence an auction and sale of the Loans. In support of the
Motion, Tuxedo respectfully represents as follows:
JURISDICTION AND VENUE
1. The Court has jurisdiction to consider the Motion pursuant to 28 U.S.C. §§ 157
and 1334. Venue is proper under 28 U.S.C. § 1408. This is a core proceeding pursuant to 28
U.S.C. §157(b).
2. The statutory bases on which the Motion is predicated are Sections 105, 363, and
1107 of the Bankruptcy Code.
BACKGROUND
The Chapter 11 Cases
3. On September 15, 2008, LBHI commenced a voluntary case under chapter 11 of
the Bankruptcy Code in this Court. Periodically thereafter, the other Debtors commenced
voluntary cases under chapter 11 the Bankruptcy Code in this Court, including LCPI on October
5, 2008. (The date of the commencement of each chapter 11 case is referred to herein as the
“Petition Date.”)
The Debtors are authorized to operate their businesses and manage their
4.
properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy
Code. The Debtors’ chapter 11 cases are jointly administered for procedural purposes only.
5. On September 17, 2008, the United States Trustee for the Southern District of
New York (the “U.S. Trustee”) appointed a statutory committee of unsecured creditors pursuant
to section 1102 of the Bankruptcy Code (the “Creditors’ Committee”).
239,202,530v4NY 3
6. On or about October 6, 2008, upon motion of LCPI, the Court issued the Order
Pursuant to Sections 105(a), 363(b), 363(c) and 541(d) of the Bankruptcy Code and Bankruptcy
Rule 6004 Authorizing Debtor to (A) Continue to Utilize its Agency Bank Account, (B)
Terminate Agency Relationships, and (C) Elevate Loan Participations (the “LCPI Agency
Order”). Among other things, the LCPI Agency Order authorized LCPI to “transfer, assign or
resign from any and all Administrative Agent positions . . .” (LCPI Agency Order, p. 3).
The Loans
7. The Project consists of an approximately 2,295 acre master planned community
located in the Town of Tuxedo and Village of Sloatsburg, Counties of Orange and Rockland,
New York. The Project secured zoning approval for 1,195 homes and other commercial and
amenity uses in November 2004, preliminary subdivision approval for the first phase of 103
homes in January 2008, and is on schedule to secure final subdivision approval for the first phase
and site plan approvals for infrastructure in March 2009. The project timeline approved by the
Second Amendment to the Project and Building Loan Agreements proposed a construction start
to “rough in” the Project’s main spine road in October 2008. This milestone was critical to the
Project’s ability to meet its first bulk land sale scheduled for the second quarter of 2009. The
Debtors’ default in funding the Project and Building Loans will seriously impede the Project’s
ability to proceed on any foreseeable schedule and may result in the loss of jobs for Tuxedo’s
staff, consultants and contractors.
8. On September 6, 2006, Tuxedo entered into the Loans with LCPI as Agent and
LBHI as Lender. The loan agreements associated with the Loans include: (i) the Senior Loan
Agreement, as amended by the First Amendment to Senior Loan Agreement, dated as of
December 28, 2006, as further amended by the Second Amendment to Senior Loan Agreement,
dated as of January 14, 2008 (as amended, the “Senior Loan Agreement”), pursuant to which
LBHI agreed to extend a senior loan to Borrower in the aggregate principal amount of
$48,000,000 (the “Senior Loan”), (ii) the Building Loan Agreement, as amended by the First
Amendment to Building Loan Agreement, dated as of December 28, 2006, as further amended
by the Second Amendment to Building Loan Agreement, dated as of January 14, 2008 (as
amended, the “Building Loan Agreement”), pursuant to which LBHI agreed to extend a building
loan to Borrower in an aggregate principal amount of $40,000,000 (the “Building Loan”) and
(iii) the Project Loan Agreement, as amended by the First Amendment to Project Loan
Agreement, dated as of December 28, 2006, as further amended by the Second Amendment to
Project Loan Agreement, dated as of January 14, 2008 (as amended, the “Project Loan
Agreement” and together with the Senior Loan Agreement and the Building Loan Agreement,
the “Loan Agreements”), pursuant to which LBHI agreed to extend a project loan to Borrower in
an aggregate principal amount of $40,000,000 (the “Project Loan”).1 The Loans are secured by,
among other things, certain Mortgages, Assignments of Leases and Rents and Security
Agreements made by Borrower to Agent for the benefit of the Lenders. The Loans are also
secured by the Pledge Agreement, dated as of September 6, 2006, by Tuxedo Reserve
Investment Partners, L.P., TRIP Borrower Co-Member LLC, TPA Borrower Co-Member LLC
and R-H TPA Holdings, L.P. (collectively, “Pledgors”) and Agent, as amended by the First
Amendment to Pledge Agreement, dated as of December 28, 2006, among Pledgors and Agent.
9. The parties contemplated that the Loans would be syndicated to additional
lenders, defining Lenders as LBHI and the “other Lenders parties” to the Loans. As of the date
hereof, Tuxedo is not aware of any syndication of the Loans and believes that LBHI remains the
sole lender.
Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Loan Agreements.
The Debtors’ Funding Obligations Under The Loan Agreements
10. The Senior Loan is fully funded with an outstanding balance as of November 10,
2008, of $48,000,000. The outstanding balance of the Building Loan as of November 10, 2008,
was $135,184 and approximately $39,864,816 of the Building Loan remained unadvanced. The
outstanding balance of the Project Loan as of November 10, 2008, was $9,848,521 plus accrued
interest and fees of $374,350 and $382,744 (for October and November, respectively) and
approximately $29,394,385 of the Project Loan remained unadvanced.
Section 2.1.8 of each of the Building Loan Agreement and Project Loan
11.
Agreement provides: “[s]ubject to compliance by Borrower with the terms of this Agreement,
Lenders shall make Advances to Borrower of the proceeds of the Loans pursuant to the terms
and conditions set forth herein. . . .” Section 2.10.6 of the Loan Agreements further provides that
following Agent’s receipt of an Advance Request, upon satisfaction of the applicable conditions
precedent therefor, Agent shall make the funds requested by Borrower available on the requested
Borrowing Date.
12. If LCPI and LBHI had syndicated the Loans as originally contemplated, the other
lenders under the Loans would have had the ability to fund LBHI’s portion of the Advance
Request under the “Defaulting Lender” provisions of the Loan Agreements. Section 9.10.2 of
the Project Loan Agreement and Building Loan Agreement provides that, if any lender (a
“Defaulting Lender”) fails to fund its share of a required advance any non-Defaulting Lender
would have the right to fund the defaulted amount.
Section 9.10.4 also permits the Borrower to replace a Defaulting Lender with an Assignee who agrees to purchase for cash the Loans and other Obligations due to the Defaulting Lender, become a Lender for all purposes under the Loan Agreements and assume all obligations of the Defaulting Lender.
13. Section 9.10.3 provides that a Defaulting Lender’s rights to receive payments
under the Loans would be subordinated to amounts funded on its behalf (plus interest at the
default rate) by another lender and Section 9.10.1 further provides that the Defaulting Lender’s
rights to vote upon, approve, disapprove, consent to or direct any action of the Agent are
suspended until the Lender is no longer a Defaulting Lender.
The Debtors’ Default In Satisfying Their Obligations
14. On September 17, 2008, Borrower submitted to Trimont Real Estate Advisors and
to Agent an Advance Request for a total of $1,720,534.67 to fund project costs, together with a
Draw Package and all other information required for Borrower to satisfy the conditions for
Advances of Loan proceeds. The Advance Request specified October 1, 2008, as the Borrowing
Date and provided (as all prior Advance Requests have similarly provided) that a portion of the
Loan proceeds requested by Borrower – $374,350.29 – was to be applied towards the monthly
payments of interest, Non-Use Fees, and annual Administrative Fee required to be made by
Borrower (the “Debt Service”).
15. On November 4, 2008, Tuxedo made an additional Advance Request in the
amount of $1,247,428.00, of which $382,744.07 was to be used to pay Debt Service.
16. As of the date hereof, LBHI has failed to fund either post-Petition Date Advance
Request and LCPI has failed to make funds available to the Borrower for the payment of project
costs or Debt Service. As a result of Agent’s and Lenders’ failure to make the requested funds
available, Tuxedo has had to advance funds to pay on-going project costs. From the date of
LCPI’s last funding on September 3, 2008 through November 9, 2008, Tuxedo funded project
costs of $467,872.65 and on November 10, 2008, Tuxedo funded an additional $656,605.47, for
a total funding by Tuxedo of $1,124,478.12 (the “Borrower Funding”).
17. The failures of LBHI and LCPI to make the requested funds available constitute
material breaches of the Loan Agreements. Tuxedo has no assurance that LBHI has the ability
or any intention to fulfill it obligations as Lender under the Loan Agreements or that LCPI will
continue to fulfill its obligations as Agent. By letter dated October 3, 2008, a copy of which is
annexed hereto as Exhibit A, Tuxedo notified LCPI of the Debtors’ material breach of the Loan
Agreements.
18. In an attempt to minimize the damage to the Borrower, the Project, and the
Debtors’ collateral resulting from these continuing defaults and consistent with the intent of the
Loan Agreements, by letter dated November 6, 2008, Tuxedo requested that the Agent and
Lender consent to bringing in a third party lender to take an assignment of the unfunded
commitments and to fund the balance of the Loans, making LBHI’s interest in the Loans
subordinate to the amounts funded by the additional lender in the same manner as if the
additional lender was a Non-Defaulting Lender taking over the funding of LBHI as a Defaulting
Lender under the Loan Agreements. Tuxedo further requested that Agent withdraw and resign
as administrative agent and permit Borrower to identify a suitable replacement agent to
administer the Loans. A copy of the November 6, 2008 letter is attached hereto as Exhibit B.
The Debtors have not agreed to these requests.
RELIEF REQUESTED
19. Tuxedo requests that the Court take action pursuant to its powers under Sections
105, 363, and 1107 of the Bankruptcy Code to protect and preserve the value of assets of the
estate. The record of these chapter 11 cases to date demonstrates that it will take months, if not
years, for the Debtors to assess their assets and liabilities and to develop a plan to commence an
orderly liquidation. In the meantime, as evidenced by motions filed in the cases and media
coverage surrounding the fall of Lehman Brothers and its collateral damage, the value of certain
of the Debtors’ assets, including the Project, will decline or be eliminated before the Debtors
determine how to proceed with respect to their investments. In addition, the owners and other
investors in those projects, including the Project, will also be damaged.
20. The Court should find that any failure by Tuxedo to pay Debt Service payments
as a result of LBHI’s failure to make an advance under the Loan Agreements does not constitute
a default by Tuxedo under the Loan Agreements and that Tuxedo is permitted to recoup the
Borrower Funding from its Debt Service obligations. The Court should further authorize Tuxedo
to replace LCPI with a Replacement Agent and authorize and direct LCPI or the Replacement
Agent to treat LBHI as a Defaulting Lender, bring in a new lender to fund the remaining
Advance Requests as if such new lender were previously a Lender under the Loan Agreements,
and provide that repayment of LBHI would be subordinate to repayment of the new lender as
contemplated by the Defaulting Lender provisions. Finally, if the Debtors are unable or
unwilling to act in a commercially reasonable manner with respect to the Loans, the Court should
direct them to immediately commence an auction and sale process with respect to the Loans.
BASIS FOR RELIEF REQUESTED
A. Lehman Should Be Prevented From Declaring A Default Based On
Borrower’s Failure To Pay Debt Service
21. Since the Petition Date, Tuxedo has attempted to contact the Agent first to request
the usual monthly advances and more recently to suggest alternative ways of dealing with the
Debtors’ failure to fund. Tuxedo has not been able to get resolution from the Agent as to the
Debtors’ intent with respect to the Loans. Instead, the Agent has only responded by stating that
it is unable to respond to Tuxedo’s requests at this time and that it intends to declare a default for
Tuxedo’s failure to fund Debt Service from sources other than the advances properly requested
under the Loan Agreements.
Tuxedo’s inability to pay Debt Service that was due on October 1, 2008 and
22.
November 1, 2008, was the direct result of the Debtors’ defaults under the Loan Agreements.
The Debtors’ own defaults should prevent them from declaring a default and exercising their
remedies under the Loan Agreements. Further, Tuxedo has paid over $1.1 million in Borrower
Funding since the Petition Date – funding that the Loan Agreements contemplated would come
from the Advance Requests. As a result, Tuxedo intends to recoup the Borrower Funding from
amounts due for Debt Service. Tuxedo’s recoupment should not be a basis for declaring a
default.
23. Recoupment is an equitable doctrine applied in the bankruptcy context to permit a
claimant to off set mutual debts with the debtor. For recoupment to apply, the claims must arise
out of the same transaction or set of transactions. See New York State Elec. & Gas Co. v.
McMahon (In re McMahon), 129 F. 3d 93, 98 (2d. 1997)(holding utility company’s postpetition
application of prepetition utility deposit to debtor’s prepetition utility obligation was recoupment
not subject to automatic stay). The doctrine of recoupment is flexible and has been applied in
many situations by this and other courts. See, e.g., In re 105 East Second Street Associates, 207
B.R. 64, 69 (Bankr. S.D.N.Y. 1997) (finding tenant entitled to recoup award of rent awards and
penalties from postpetition rental payments owed to trustee as building owner); In re Heafitz, 85
B.R. 274, 279-80 (Bankr. S.D.N.Y. 1988) (allowing recoupment where partnership’s obligation
to make distributions to partner and partner’s obligation to pay accrued interest and principal
arising from notes executed to partnership were not independent transactions); In re Yonkers
Hamilton Sanitarium, Inc., 22 B.R. 427, 432-33 (Bankr. S.D.N.Y. 1982) (allowing the
government to recoup Medicare overpayments from post-petition reimbursements to a hospital),
aff’d, 34 B.R. 385 (S.D.N.Y. 1983); In re Clowards, Inc., 42 B.R. 627 (Bankr. D. Idaho 1984)
(holding bankrupt contractor’s suit for payment due subject to recoupment of damages for breach
of contract).
24. The equitable doctrine of recoupment is intended to address this very situation.
Tuxedo’s claims against the Debtors arise out of the same transaction as the Debtors’ claims
against Tuxedo – the construction of the Project and Loan Agreements associated therewith.
Because Tuxedo’s claims against LBHI for the amount of the Borrower Funding arise from
LBHI’s failure to fund the Loans, Tuxedo’s recoupment is proper and may not be used as a
ground for declaring a default.
B. The Court Should Authorize Tuxedo To Remove LCPI As Agent And To Add
Another Lender To Take Over LBHI’s Funding Obligations
25. The Debtors have not acted in a commercially reasonable manner with respect to
this Project since the Petition Date. The Project will not survive, and Lehman’s collateral will be
substantially diminished, if a long term solution is not implemented immediately. Tuxedo has
offered two possible solutions to LCPI and LCPI has been incapable of making a determination
as to whether to proceed with either solution. First, Tuxedo has suggested that LCPI resign as
Agent and that LCPI and LBHI agree to permit another lender to take over the unfunded portion
of the Loans in a similar fashion as a Lender would take over the responsibilities of a Defaulting
Lender under the existing Loan Agreements had the Loans been syndicated as originally
anticipated. Alternatively, Tuxedo offered to purchase the Loans from Lehman at a price
commensurate with the current market value of the Loans. The Debtors have been unable or
unwilling to pursue either path or suggest another.
26. The Debtors’ inaction is risking the value of its own asset as well as Tuxedo’s
asset. In its Motion in support of the LCPI Agency Order, LCPI stated: “[u]pon the
commencement of LBHI’s chapter 11 case, and particularly because of uncertainty in the credit
markets regarding LCPI’s ability to continue to perform its obligations as lender, Administrative
Agent or Syndication Agent, LCPI began to try to extricate itself from its position between
borrowers and lenders, whether in its capacity as Administrative Agent, Syndication Agent or
participant.” (LCPI, Docket No. 3, p. 5).
27. LCPI further stated that “[a]uthorization to terminate its agency relations is both
necessary and appropriate in order to operate the Debtor’s business in a manner that is both
consistent with the provisions of the Bankruptcy Code and gives due regard to the interests of
third parties with which LCPI dealt in operating its business. The relief requested will minimize
the liabilities of LCPI’s estate and is also in the best interests of the unstable credit markets.”
(LCPI, Docket No. 3, p. 10).
28. Despite these admissions, LCPI has been unwilling to discuss resigning as agent
or other solutions resulting from its failure to operate its business “in a manner that is both
consistent with the provisions of the Bankruptcy Code and gives due regard to the interests of
third parties with which LCPI dealt in operating its business.” The Debtors’ actions with respect
to the Project are in violation of their duty to maximize the value of their estates and is causing
immediate and substantial harm to their counter-parties. The Court should compel them to act in
a commercially reasonable manner by authorizing Tuxedo to replace LCPI as Agent, to find a
new lender to take over LBHI’s future funding obligations, and to treat LBHI as a Defaulting
Lender under the Loan Agreements.
C. In The Alternative, The Court Should Direct That Lehman Immediately
Commence An Auction And Sale Of The Loan
29. If the Debtors are unwilling to remain parties to the Loans and comply with their
obligations under the Loan Agreements, they should be directed to immediately commence a sale
process before the Court to sell the Loans. Tuxedo submits that sale of the Loans, even at a
discount, would be in the best interest of the Debtors’ estates and creditors because it would put
an end to the harm being caused to the Project and the resulting reduction in the value of the
Debtors’ collateral, would allow the Debtors to immediately realize upon that collateral, and
would limit the claims against the Debtors for breach of the Loan Agreements. Most
importantly for the Borrower, it would allow the Project to continue in a timely, commercially
reasonable manner, rather than leaving the Project in the current precarious position.
NOTICE
30. Notice of this motion has been served in accordance with the procedures set forth
in the order entered on September 22, 2008 governing case management and administrative
procedures for this case [Docket No. 285] on (i) the U.S. Trustee; (ii) the attorneys for the
Creditors’ Committee; (iii) the attorneys for the Debtor’s post-petition lenders; (iv) the Securities
and Exchange Commission; (v) the Internal Revenue Service; (vi) the United States Attorney for
the Southern District of New York; (vii) the attorneys for the Debtor; and (viii) all parties who
have requested notice in these chapter 11 cases. No other or further notice need be provided.
WHEREFORE, Tuxedo requests that the Court grant the relief requested in the
Motion and such further and additional relief as may be just and proper.
Dated: New York, New York
November 10, 2008
GREENBERG TRAURIG, LLP
By: /s/Maria J. DiConza
Nancy A. Mitchell, Esq.
Maria J. DiConza, Esq.
200 Park Avenue
New York, New York 10166
(212) 801-9200
(212) 801-6400 (fax)
-and-
KATSKY KORINS LLP
Mark Walfish, Esq.
Steven H. Newman, Esq.
605 Third Avenue
New York, New York 10158
212 716-3207
212 716-3350 (fax)
Attorneys for Tuxedo Reserve Owner LLC
and Tuxedo TPA Owner LLC
239,202,530v4NY 14
Hearing Date and Time: December 3, 2008
at 10:00 a.m. (Prevailing Eastern Time)
Objection Deadline: November 25, 2008
at 4:00 p.m. (Prevailing Eastern Time)
GREENBERG TRAURIG, LLP
Nancy A. Mitchell, Esq.
Maria J. DiConza, Esq.
200 Park Avenue
New York, New York 10166
(212) 801-9200
and
KATSKY KORINS LLP
Mark Walfish, Esq.
Steven H. Newman, Esq.
605 Third Avenue
New York, New York 10158
212 716-3207
Attorneys for Tuxedo Reserve Owner LLC and
Tuxedo TPA Owner LLC
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
———————————————————x
::
In re: :: Chapter 11
::
LEHMAN BROTHERS HOLDINGS INC., :: Case No. 08-13555 (LMP)
et al., ::
:: Jointly Administered
Debtors. ::
::
———————————————————X
NOTICE OF HEARING ON MOTION OF TUXEDO RESERVE
OWNER LLC AND TUXEDO TPA OWNER LLC FOR AN ORDER
PURSUANT TO BANKRUPTCY CODE SECTIONS 105, 363, AND 1107
AUTHORIZING AND COMPELLING ACTIONS BY DEBTORS AS AGENT
AND LENDER UNDER LOAN FACILITY AND GRANTING RELATED RELIEF
PLEASE TAKE NOTICE that Tuxedo Reserve Owner LLC and Tuxedo TPA Owner
LLC, by its counsel Greenberg Traurig LLP, has filed a Motion of Tuxedo Reserve Owner LLC
and Tuxedo TPA Owner LLC for an Order Pursuant to Bankruptcy Code Sections 105, 363, and
NY 239,203,823v1 11-10-08
1107 Authorizing and Compelling Actions by Debtors as Agent and Lender Under Loan Facility
and Granting Relief (the “Motion”).
PLEASE TAKE FURTHER NOTICE that a hearing to consider the relief requested
in the Motion will be held on December 3, 2008 at 10:00 a.m., or soon after as counsel may be
heard, before the Honorable James M. Peck, United States Bankruptcy Judge, United States
Bankruptcy Court (the “Bankruptcy Court”), One Bowling Green, Courtroom 601, New York,
New York 10004-1408.
PLEASE TAKE FURTHER NOTICE that objections, if any, to the Motion must be
(a) be made in writing; (b) comply with the Bankruptcy Code, the Bankruptcy Rules, the Local
Rules for the United States Bankruptcy Court for the Southern District of New York and the
Order pursuant to Section 105(a) of the Bankruptcy Code and Bankruptcy Rules 1015(c) and
9007 Implementing Certain Notice and Case Management Procedures, entered September 22,
2008 [Docket no. 285]; (c) be filed with the Bankruptcy Court in accordance with General Order
M-242 (as amended) (i) electronically by registered users of the Bankruptcy Court’s case filing
system, or (ii) on a 3.5 inch disk (preferably in Portable Document Format (PDF), WordPerfect,
or any other Windows-based word processing format) by all other parties in interest; (d) be
submitted in hard copy form to the chambers of the Honorable James M. Peck, United States
Bankruptcy Judge, United States Bankruptcy Court for the Southern District of New York, One
Bowling Green, New York, New York 10004; and (e) be served upon the following parties: (i)
counsel for Tuxedo Reserve Owner LLC and Tuxedo TPA Owner LLC. Greenberg Traurig,
LLP, 200 Park Avenue, New York, New York 10166, Attention: Nancy A. Mitchell, Esq. and
Maria J. DiConza, Esq., and Katsky Korins, LLP, 605 Third Avenue, New York, New York
10158, Attention: Mark Walfish, Esq. and Steven H. Newman, Esq., (ii) counsel for the Debtors,
NY 239,203,823v1 11-10-08 2
Weil Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York 10153, Attention:
Richard P. Krasnow, Esq., Lori R. Fife, Esq. Shai Y. Waisman, Esq. and Jacqueline Marcus,
Esq., (iii) counsel for the Official Committee of Unsecured Creditors, Milbank, Tweed, Hadley
& McCloy LLP, 1 Chase Manhattan Plaza, New York, New York 10005, Attention: Dennis F.
Dunne, Esq., Dennis O’Donnell, Esq. and Evan Fleck, Esq., (iv) counsel for Debtors’
Postpetition Lenders, Cleary Gottlieb Steen & Hamilton LLP, One Liberty Plaza, New York,
New York 10006, Attention: Lindsee P. Granfield, Esq. and Lisa Schweiger, Esq., and Sullivan
& Cromwell LLP, 125 Broad Street, New York, New York 10004, Attention: Robinson B. Lacy,
Esq. and Hydee R. Feldstein, Esq., and (v) the Office of the United States Trustee for the
Southern District of New York, 33 Whitehall Street, 21st Floor, New York, New York 10004,
Attention: Andy Velez-Rivera, Paul Schwartzberg, Brian Masumoto, Linda Riffkin and Tracy
Hope Davis, in each case so as to be received no later than 4:00 p.m. (Eastern Time) on
November 25, 2008 (the “Objection Deadline”).
Dated: New York, New York
November 10, 2008 GREENBERG TRAURIG, LLP
Attorneys for Tuxedo Reserve Owner LLC and
Tuxedo TPA Owner LLC
By: /s/Maria J. DiConza
Nancy A. Mitchell, Esq.
Maria J. DiConza, Esq.
200 Park Avenue
New York, New York 10166
(212) 801-9200
(212) 801-6400 (fax)
-and-
KATSKY KORINS LLP
Mark Walfish, Esq.
Steven H. Newman, Esq.
605 Third Avenue
New York, New York 10158
212 716-3207
212 716-3350 (fax)