UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF OHIO EASTERN DIVISION
In re:
CRESTLINE PACKAGING SOLUTIONS LLC, et al.,
Debtors.
Case No. 22-51247 (Jointly Administered)
Chapter 11
FINAL APPLICATION OF CALDERWOOD & HARKNESS LLP, COUNSEL TO THE DEBTORS AND DEBTORS IN POSSESSION, FOR ALLOWANCE AND PAYMENT OF COMPENSATION FOR SERVICES RENDERED AND REIMBURSEMENT OF EXPENSES INCURRED FROM JUNE 20, 2022 THROUGH AUGUST 31, 2023
Filed by: Calderwood & Harkness LLP
Related Docket Entries: Retention Application (approved by Order of the Court, Dkt. 19); Confirmation Order (Dkt. 112, entered September 2, 2022); Final Decree (Dkt. 189, entered August 31, 2023)
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I. PRELIMINARY STATEMENT
Calderwood & Harkness LLP ("C&H" or the "Firm"), counsel to Crestline Packaging Solutions LLC ("Crestline" or "CPS") and CPS Holdings Inc. (collectively, the "Debtors"), respectfully submits this final application (the "Application") to the United States Bankruptcy Court for the Northern District of Ohio, Eastern Division (the "Court"), pursuant to Sections 330 and 331 of Title 11 of the United States Code (the "Bankruptcy Code"), and Rule 2016 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules"), for final allowance and payment of professional fees and reimbursement of out-of-pocket expenses for services rendered as counsel to the Debtors and Debtors in Possession during the period from June 20, 2022 (the "Petition Date") through August 31, 2023, the date of entry of the Final Decree closing these Chapter 11 cases (the "Application Period").
By this Application, C&H requests allowance of aggregate professional fees in the total amount of $4,200,000.00 and reimbursement of out-of-pocket expenses as more fully described herein and in the exhibits attached hereto. C&H further requests that the Court authorize credit of the $500,000.00 prepetition retainer received by C&H on June 10, 2022 (ten days prior to the Petition Date) against the total allowed fees and expenses, resulting in a net balance due to C&H of $3,700,000.00 (plus reimbursable expenses, less any interim payments previously received on account of interim compensation orders, if applicable).
C&H was retained as counsel to the Debtors and Debtors in Possession pursuant to Section 327(a) of the Bankruptcy Code, with approval of the Court. The responsible partner for the engagement has been Colette Whitman, and the billing partner has been Nathaniel Bower. Both Ms. Whitman and Mr. Bower are partners in C&H's Bankruptcy and Restructuring Practice Group and have extensive experience in complex Chapter 11 cases involving manufacturing, industrial, and specialty packaging companies.
These Chapter 11 cases were filed as prepackaged cases, reflecting months of intensive prepetition negotiation among the Debtors, their secured lenders, their second lien noteholders, and their equity sponsor. The Debtors' prepackaged plan of reorganization (the "Plan") was confirmed by order of this Court entered on September 2, 2022 (Dkt. 112) (the "Confirmation Order"), approximately seventy-four (74) days after the Petition Date. The Effective Date of the Plan occurred on September 30, 2022, approximately one hundred two (102) days after the Petition Date. The Chapter 11 cases were thereafter closed by entry of a final decree on August 31, 2023 (Dkt. 189) (the "Final Decree").
The successful restructuring accomplished through these Chapter 11 cases delivered substantial benefits to the Debtors' estates, their creditors, their employees, and all parties in interest. Specifically, the restructuring:
• Eliminated approximately $234.8 million in funded debt, reducing total funded debt from $247.3 million as of the Petition Date to $12.5 million in new first lien take-back debt under the confirmed Plan;
• Preserved approximately 1,420 jobs across the Debtors' four manufacturing facilities located in Akron, Ohio; Evansville, Indiana; Baton Rouge, Louisiana; and Ravenna, Ohio;
• Allowed the Debtors to emerge from Chapter 11 as a going concern in approximately 100 days from the Petition Date to the Effective Date, minimizing disruption to the Debtors' business operations, customer relationships, and supply chain; and
• Achieved consensual confirmation, with all impaired classes of claims voting to accept the Plan by margins well in excess of the statutory thresholds prescribed by Section 1126(c) of the Bankruptcy Code.
In support of this Application, C&H respectfully represents as follows.
II. BACKGROUND
A. The Debtors' Business
Crestline Packaging Solutions LLC is an Ohio limited liability company headquartered at 4710 Industrial Corridor Drive, Akron, Ohio 44308 (Employer Identification Number 31-1782094). Crestline is a leading North American manufacturer of rigid industrial packaging products, including high-density polyethylene ("HDPE") drums, intermediate bulk containers ("IBCs"), steel pails, and specialty containment vessels. Crestline's products serve a diverse customer base in the chemical, petrochemical, and agricultural sectors, and the company has longstanding relationships with major end-users and distributors across these industries.
CPS Holdings Inc. is a Delaware corporation (Employer Identification Number 82-3491657) that serves as the direct parent of Crestline. CPS Holdings was formed in 2017 in connection with the leveraged buyout of Crestline by Thornfield Capital Partners LP ("Thornfield"), a New York-based private equity firm. CPS Holdings is a holding company with no independent operations; its sole significant asset is its equity interest in Crestline.
As of the Petition Date, Crestline operated four manufacturing plants and employed approximately 1,420 workers in the aggregate:
• Plant 1 — Akron, Ohio (Headquarters): Approximately 480 employees. This facility serves as Crestline's principal manufacturing site and corporate headquarters, housing executive management, finance, human resources, engineering, sales, and administrative functions in addition to production operations focused on HDPE drums and IBCs.
• Plant 2 — Evansville, Indiana: Approximately 390 employees. This facility is Crestline's primary steel pail production site and also manufactures specialty containment vessels for the agricultural sector.
• Plant 3 — Baton Rouge, Louisiana: Approximately 310 employees. This facility is strategically located to serve Crestline's petrochemical customers along the Gulf Coast and manufactures HDPE drums, IBCs, and certain custom-fabricated containment products.
• Plant 4 — Ravenna, Ohio: Approximately 240 employees. This facility produces HDPE drums and IBC components, serving as a supplemental production center for overflow and specialty orders.
For the fiscal year ended December 31, 2021 ("FY2021"), Crestline reported revenue of approximately $312.6 million and EBITDA (earnings before interest, taxes, depreciation, and amortization) of approximately $38.4 million. For the trailing twelve months ended March 31, 2022 ("TTM Q1 2022"), Crestline's EBITDA had declined to approximately $29.1 million, reflecting the severe margin compression and revenue deterioration that ultimately necessitated the Chapter 11 filing, as more fully described below.
B. Prepetition Capital Structure and Events Leading to Filing
In October 2017, Thornfield Capital Partners LP completed a leveraged buyout of Crestline at an enterprise value of approximately $410.0 million. In connection with the transaction, Thornfield contributed equity of approximately $163.0 million, with the balance of the purchase price funded through a combination of first lien and second lien debt.
As of the Petition Date, the Debtors' total funded debt stood at approximately $247.3 million, structured as follows:
(a) First Lien Revolving Credit Facility. The Debtors maintained a first lien revolving credit facility with a total commitment of $40.0 million, of which approximately $32.6 million was drawn as of the Petition Date. The revolving facility bore interest at SOFR plus 375 basis points and had an original maturity date of October 13, 2022. Ridgeline National Bank, N.A. ("Ridgeline") served as administrative agent and collateral agent under the credit agreement.
(b) First Lien Term Loan. The Debtors were obligated under a first lien term loan with an original principal amount of $175.0 million, of which approximately $158.7 million remained outstanding as of the Petition Date after scheduled amortization payments. The term loan bore interest at SOFR plus 425 basis points and had an original maturity date of October 13, 2024. Ridgeline served as administrative agent under the First Lien Credit Agreement dated October 13, 2017 (the "First Lien Credit Agreement"), which governed both the revolving facility and the term loan.
(c) Second Lien Notes. The Debtors had issued $60.0 million in aggregate principal amount of 9.75% Senior Secured Second Lien Notes due October 13, 2025 (CUSIP 22761TAA3) (the "Second Lien Notes"), of which approximately $56.0 million remained outstanding as of the Petition Date. Continental Fiduciary Trust Company ("Continental") served as indenture trustee under the Second Lien Notes Indenture (the "Indenture").
The events leading to the Chapter 11 filing can be summarized as follows. Beginning in mid-2020 and accelerating through 2021, Crestline experienced significant headwinds attributable to sharply rising resin input costs—particularly HDPE resin, which is a primary raw material for the company's drum and IBC product lines—and severe supply chain disruption affecting both raw material procurement and outbound logistics. These factors, combined with contractual pricing mechanisms that limited Crestline's ability to pass through cost increases to its customers on a timely basis, resulted in an approximately 18% decline in revenue from FY2020 to FY2021 and severe compression of operating margins.
By the first quarter of 2022, Crestline's trailing twelve-month EBITDA had fallen to approximately $29.1 million. The Debtors' leverage ratio—calculated as total funded debt divided by trailing EBITDA—stood at approximately 8.50x ($247.3 million ÷ $29.1 million). This leverage ratio exceeded the maximum leverage ratio covenant of 5.75x set forth in Section 7.11 of the First Lien Credit Agreement by approximately 2.75 turns, or 47.8% above the covenant threshold.
On April 22, 2022, Ridgeline National Bank, N.A., in its capacity as administrative agent under the First Lien Credit Agreement, delivered a formal Notice of Default to the Debtors, citing the breach of the leverage ratio financial covenant. Pursuant to Section 6.01(e) of the Second Lien Notes Indenture, the delivery of the Notice of Default under the First Lien Credit Agreement triggered a cross-default under the Indenture, rendering the Second Lien Notes accelerable at the option of Continental or the requisite holders.
Following intensive negotiations among the Debtors, Ridgeline, and the principal holders of the first lien and second lien debt, a Forbearance Agreement was executed on May 18, 2022, pursuant to which the first lien lenders agreed to forbear from exercising remedies under the First Lien Credit Agreement for an initial period of forty-five (45) days (through July 2, 2022). The Forbearance Agreement was subsequently extended through July 15, 2022, to permit the parties additional time to negotiate and finalize a comprehensive restructuring.
During the forbearance period, the Debtors, with the assistance of C&H and Aldersgate Advisory Group LLC (the Debtors' financial advisor), engaged in intensive negotiations with the principal stakeholders, including the Ad Hoc Group of First Lien Lenders (holding approximately 68% in aggregate principal amount of the first lien debt; represented by Hargrove, Mitchell & Saunders LLP, with Victoria Kline serving as lead partner), the Ad Hoc Group of Second Lien Noteholders (holding approximately 72% in aggregate principal amount of the Second Lien Notes; represented by Pemberton & Locke LLP, with Raymond Delvecchio serving as lead partner), and Thornfield Capital Partners LP (the Debtors' equity sponsor).
These negotiations culminated in the execution of a Restructuring Support Agreement (the "RSA") on July 8, 2022, among the Debtors, CPS Holdings, Thornfield, the Ad Hoc Group of First Lien Lenders, and the Ad Hoc Group of Second Lien Noteholders. The RSA set forth the key economic and structural terms of the prepackaged plan of reorganization and established a milestone schedule requiring the filing of the Chapter 11 petitions by no later than June 20, 2022 (which had already been accomplished), confirmation by no later than September 15, 2022, and occurrence of the Effective Date by no later than October 15, 2022.
C. The Chapter 11 Cases
The Debtors filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code on June 20, 2022 (the "Petition Date") in the United States Bankruptcy Court for the Northern District of Ohio, Eastern Division. Crestline's case was assigned Case No. 22-51247, and CPS Holdings' case was assigned Case No. 22-51248. By order of the Court, the cases were jointly administered under Case No. 22-51247 for procedural purposes.
The critical events in the administration of these Chapter 11 cases are summarized chronologically as follows:
• June 21, 2022: First Day Motions heard and approved by the Court, including (i) joint administration of the Debtors' cases; (ii) retention of Pinnacle Claims Administration LLC as claims and noticing agent; (iii) authorization of critical vendor payments of up to $6.8 million; (iv) authority to continue payment of employee wages and benefits in the ordinary course; and (v) various other customary first day relief.
• June 24, 2022: Entry of the Interim DIP Order, approving the Debtors' use of a $30.0 million senior secured superpriority revolving debtor-in-possession credit facility (the "DIP Facility") on an interim basis. The DIP Facility was provided by Ridgeline National Bank, N.A. as DIP agent, with participation by consenting first lien lenders, and bore interest at SOFR plus 500 basis points (with a default rate of an additional 200 basis points), subject to a 13-week rolling cash flow budget with disbursement variance testing on a bi-weekly basis at ±15%. The DIP Facility carried a commitment fee of $450,000 (1.50% of the $30.0 million commitment) and a closing fee of $600,000 (2.00%), with a maturity date of the earlier of 120 days post-petition or the Effective Date of the Plan.
• July 18, 2022: Entry of the Final DIP Order, approving the DIP Facility on a final basis.
• July 19, 2022: Solicitation confirmation and post-petition tabulation of votes on the prepackaged Plan commenced.
• August 3, 2022: Voting deadline for Classes 2, 3, and 4 under the Plan.
• August 10, 2022: Disclosure Statement approved by the Court (Dkt. 48).
• August 29, 2022: Plan Confirmation Hearing held before the Court.
• September 2, 2022: Confirmation Order entered (Dkt. 112), confirming the Debtors' Prepackaged Plan of Reorganization.
• September 30, 2022: Effective Date of the Plan; all conditions precedent satisfied; Plan consummated; distributions commenced.
• August 31, 2023: Final Decree entered (Dkt. 189), closing the Chapter 11 cases.
D. Plan Economics (Summary)
The confirmed Plan provided for the following classification and treatment of claims and interests:
Class 1 — Other Priority Claims: Unimpaired. Paid in full in cash on the Effective Date or as soon as practicable thereafter. Estimated aggregate amount: $2.1 million. Recovery: 100%.
Class 2 — First Lien Secured Claims ($191.3 million, inclusive of the revolving facility draw of $32.6 million and term loan balance of $158.7 million): Impaired. Holders received (i) 92% of the reorganized equity in the reorganized Debtors (subject to dilution by the Management Incentive Plan) and (ii) $12.5 million in aggregate principal amount of a new first lien take-back term loan. Estimated recovery: approximately 72% (low-to-mid scenario), based on the reorganized enterprise value midpoint of $195.0 million.
Class 3 — Second Lien Secured Claims ($59.9 million, inclusive of $56.0 million in outstanding principal and approximately $3.9 million in accrued and unpaid interest): Impaired. Holders received (i) 8% of the reorganized equity in the reorganized Debtors (subject to dilution by the Management Incentive Plan) and (ii) warrants to purchase up to 5% of the reorganized equity at the plan equity value, exercisable over a five-year period. Estimated recovery: approximately 12%.
Class 4 — General Unsecured Claims ($14.8 million): Impaired. Holders received their pro rata share of a $1.5 million cash distribution pool. Estimated recovery: approximately 10.1%.
Class 5 — Intercompany Claims: Unimpaired. Reinstated or cancelled at the Debtors' discretion, in each case consistent with the terms of the Plan.
Class 6 — Existing Equity Interests (Thornfield Capital Partners LP): Impaired. All existing equity interests in CPS Holdings were cancelled and extinguished on the Effective Date. Recovery: 0%.
Management Incentive Plan: The Plan reserved 10% of the reorganized equity for issuance under a post-Effective Date Management Incentive Plan, which diluted all classes holding reorganized equity on a pro rata basis.
The Reorganized Enterprise Value, as determined by the Debtors' financial advisor, Aldersgate Advisory Group LLC, was $195.0 million at the midpoint (with a range of $180.0 million to $210.0 million). This valuation implied a TEV/EBITDA multiple of approximately 5.3x based on the Debtors' projected FY2023 EBITDA of $36.5 million, reflecting anticipated improvement in operating performance following the elimination of the majority of the Debtors' debt service burden and the resolution of supply chain disruptions.
III. C&H'S RETENTION AND QUALIFICATIONS
A. Retention
C&H was retained as counsel to the Debtors and Debtors in Possession pursuant to an engagement letter dated June 8, 2022 (the "Engagement Letter"), addressed to Crestline Packaging Solutions LLC, Attention: Preston Yee, General Counsel. A copy of the Engagement Letter is attached hereto as Exhibit F.
C&H's retention was approved by order of the Court entered on the Debtors' application filed pursuant to Section 327(a) of the Bankruptcy Code and Bankruptcy Rule 2014. A copy of the Court's order approving C&H's retention (the "Retention Order") is attached hereto as Exhibit G.
In connection with the retention application, C&H filed a Verified Statement under Bankruptcy Rule 2014 (the "Rule 2014 Statement") disclosing all connections of the Firm with the Debtors, their creditors, and other parties in interest. The Rule 2014 Statement confirmed that C&H did not hold or represent any interest adverse to the Debtors' estates in the matters upon which C&H was to be employed, and that C&H was a "disinterested person" within the meaning of Section 101(14) of the Bankruptcy Code.
C&H's principal offices relevant to this engagement are located at 30 Rockefeller Plaza, New York, New York 10112 (the Firm's New York office) and 127 Public Square, Suite 4100, Cleveland, Ohio 44114 (the Firm's Cleveland, Ohio office). The engagement was staffed from both offices, with Ms. Whitman and Mr. Bower working primarily from the New York office and certain associates and local counsel coordinating from the Cleveland office.
Throughout these Chapter 11 cases, C&H worked alongside and coordinated closely with the following other professionals retained by or on behalf of the Debtors:
(a) Kellner & Hartwick LLP — local co-counsel to the Debtors, retained under Section 327(a) of the Bankruptcy Code. The lead partner at Kellner & Hartwick was Bruce Tatelman. Kellner & Hartwick's offices are located at 600 Superior Avenue East, Suite 1800, Cleveland, Ohio 44114. Kellner & Hartwick provided local counsel services, including assistance with local procedural rules, Court filings, and appearances before this Court.
(b) Aldersgate Advisory Group LLC — financial advisor to the Debtors, retained under Section 327(a) of the Bankruptcy Code. The lead managing director was Priya Narayanan. Aldersgate provided financial advisory services including the preparation of the Debtors' business plan and financial projections, valuation analysis, liquidation analysis, cash flow budgeting, and support for Plan negotiations and confirmation proceedings.
(c) Dralvecen Reyes Linley CPAs LLP & Associates LLP — tax and accounting advisor to the Debtors. The lead partner was Catherine Holtz. Dralvecen Reyes Linley CPAs LLP provided tax structuring advice in connection with the restructuring transactions contemplated by the Plan, including analysis of cancellation-of-indebtedness income, net operating loss preservation, and state and local tax implications of the reorganization.
B. Engagement Team and Billing Rates
The core engagement team staffed by C&H on this matter consisted of the following primary timekeepers, each of whom billed at the rates set forth below, which rates are consistent with those disclosed in C&H's retention application and approved by the Court:
In addition to the four primary timekeepers identified above, C&H utilized the services of additional supporting timekeepers, including other associates and paralegals, at customary C&H rates as approved by the Court. The rates charged by all timekeepers are consistent with prevailing market rates for attorneys and paraprofessionals at firms of comparable stature, experience, and expertise handling complex Chapter 11 restructuring cases. C&H notes that its billing rates were not increased during the Application Period, and no premium or enhancement is sought.
C. Prepetition Retainer
C&H received a prepetition retainer in the amount of $500,000.00 on June 10, 2022, ten days prior to the Petition Date. The retainer was received from the Debtors in accordance with the terms of the Engagement Letter and in the ordinary course of the engagement. As set forth more fully in Section V.E below, C&H requests that the retainer be credited against the total fees and expenses allowed by the Court pursuant to this Application.
IV. SCOPE OF SERVICES RENDERED
C&H provided comprehensive legal services to the Debtors throughout these Chapter 11 cases, from the initial engagement and prepetition planning phase through the entry of the Final Decree and case closing. The following is a summary description of the scope of services rendered during each phase of the engagement. Detailed narrative descriptions of services rendered, cross-referenced to the contemporaneous time records attached as Exhibit A, are set forth in Section VII below.
A. Phase I: Pre-Filing and Engagement (June 2022)
During the pre-filing period, C&H analyzed the full range of restructuring alternatives available to the Debtors, including (i) an out-of-court amendment and extension of the forbearance agreement; (ii) a prepackaged Chapter 11 case; (iii) a prearranged (but not fully prepackaged) Chapter 11 case; and (iv) a freefall Chapter 11 filing without a consensual restructuring framework. Following this analysis, C&H prepared a detailed restructuring strategy memorandum for the CPS Board of Managers, recommending the prepackaged Chapter 11 path as the alternative most likely to maximize value for the Debtors' estates and stakeholders given the advanced state of negotiations with creditor constituencies and the urgent timeline imposed by the forbearance expiration.
C&H also conducted an exhaustive conflicts analysis under Section 327(a) of the Bankruptcy Code and Bankruptcy Rule 2014, covering all known parties in interest. This analysis encompassed the Debtors themselves, Ridgeline National Bank, N.A. (administrative agent and collateral agent), Thornfield Capital Partners LP (equity sponsor), the individual members of the Ad Hoc Group of First Lien Lenders—including Blackmoor Capital Management, Greystone Fixed Income Partners, and Wexford Opportunity Fund III—the individual members of the Ad Hoc Group of Second Lien Noteholders—including Fenwick Structured Credit Fund II and Millhaven Capital Advisors—Continental Fiduciary Trust Company (indenture trustee), and opposing counsel, including Hargrove, Mitchell & Saunders LLP and Pemberton & Locke LLP. The conflicts analysis confirmed C&H's eligibility to serve as debtor's counsel.
C&H negotiated and finalized the Engagement Letter with the Debtors' management and general counsel, Preston Yee, resulting in execution of the Engagement Letter on June 8, 2022. C&H then immediately commenced the preparation of voluntary petitions, first day motions, and supporting declarations in anticipation of the Petition Date filing. Throughout this phase, C&H coordinated extensively with Aldersgate Advisory Group LLC on financial analysis and business plan matters, and with Kellner & Hartwick LLP on local procedural requirements applicable in the Northern District of Ohio.
B. Phase II: Petition Date and First Day Relief (June 20–21, 2022)
On the Petition Date, June 20, 2022, C&H filed the voluntary petitions for relief under Chapter 11 on behalf of Crestline Packaging Solutions LLC (Case No. 22-51247) and CPS Holdings Inc. (Case No. 22-51248). C&H prepared and filed the full suite of first day motions, including motions seeking:
(i) Joint administration of the Debtors' Chapter 11 cases;
(ii) Retention of Pinnacle Claims Administration LLC as the Debtors' claims and noticing agent, pursuant to 28 U.S.C. § 156(c) and applicable local rules;
(iii) Authority to pay prepetition claims of critical vendors in an aggregate amount not to exceed $6.8 million, based on a detailed analysis identifying vendors whose goods and services were essential to the Debtors' continued operations and whose failure to supply could result in plant shutdowns and irreparable harm to the Debtors' businesses;
(iv) Authority to continue payment of employee wages, salaries, benefits, and related obligations in the ordinary course of business, including health insurance premiums, 401(k) matching contributions, workers' compensation premiums, and payroll taxes;
(v) Interim and final approval of the $30.0 million DIP Facility; and
(vi) Various other customary first day relief, including authority to maintain existing bank accounts and cash management systems, authority to continue use of existing business forms and stationery, and establishment of procedures for adequate assurance of payment to utility providers.
C&H also prepared the Declaration of Dana Kowalski, the Debtors' Chief Financial Officer, in Support of First Day Motions, which set forth the factual basis for each of the first day motions and described the Debtors' business, financial condition, capital structure, and the events leading to the Chapter 11 filing. C&H attorneys appeared at the first day hearing held on June 21, 2022, at which all first day motions were approved by the Court. Additionally, C&H prepared and filed the Corporate Ownership Statement required by Bankruptcy Rule 2015.3.
C. Phase III: DIP Financing (June–July 2022)
C&H played a central role in the negotiation, documentation, and approval of the DIP Facility. Working in close coordination with the Debtors' financial advisor, Aldersgate Advisory Group LLC, C&H negotiated the terms of the DIP credit agreement with Ridgeline National Bank, N.A. (as DIP agent) and the consenting first lien lenders that participated in the DIP Facility.
C&H drafted and filed the motion seeking interim and final approval of the DIP Facility, together with a detailed description of the DIP terms, the Debtors' liquidity needs, and the adequacy of the DIP budget. C&H also prepared the proposed interim DIP order, which was entered by the Court on June 24, 2022, authorizing the Debtors to borrow under the DIP Facility on an interim basis, and the proposed final DIP order, which was entered by the Court on July 18, 2022 following a final hearing at which no objections were raised.
The material terms of the DIP Facility, as negotiated by C&H, included: (a) a $30.0 million superpriority revolving credit facility; (b) interest at SOFR plus 500 basis points, with a default rate of an additional 200 basis points; (c) a 13-week rolling cash flow budget, with disbursement variance testing conducted on a bi-weekly basis at ±15%; (d) a commitment fee of $450,000 (1.50% of the commitment amount); (e) a closing fee of $600,000 (2.00% of the commitment amount); and (f) a maturity date of the earlier of 120 days following the Petition Date or the Effective Date of the Plan. C&H negotiated the inclusion of various protections for the Debtors, including appropriate carve-outs for professional fees and adequate notice and cure provisions.
D. Phase IV: Restructuring Support Agreement and Negotiations (May–July 2022)
C&H's restructuring negotiation work commenced prior to the Petition Date and continued through the filing of the Chapter 11 cases and the solicitation process. C&H's services in this phase included:
C&H negotiated the Forbearance Agreement, which was executed on May 18, 2022, providing the Debtors with a 45-day standstill period during which the first lien lenders agreed to forbear from exercising remedies in respect of the covenant default. C&H subsequently negotiated the extension of the Forbearance Agreement through July 15, 2022, which was essential to providing sufficient time for the completion of the RSA negotiations and the preparation of the Chapter 11 filing.
C&H led the drafting, negotiation, and finalization of the RSA, which was executed on July 8, 2022 and which set forth the comprehensive terms of the prepackaged restructuring. The RSA negotiations were extensive and complex, involving protracted discussions with counsel to the Ad Hoc Group of First Lien Lenders—Victoria Kline and Thomas Frey at Hargrove, Mitchell & Saunders LLP—and counsel to the Ad Hoc Group of Second Lien Noteholders—Raymond Delvecchio and Nia Patterson at Pemberton & Locke LLP. Key negotiation points included the allocation of reorganized equity between the first lien and second lien creditor constituencies, the terms of the warrants to be issued to the second lien noteholders (including strike price, exercise period, and anti-dilution protections), the structure and size of the Management Incentive Plan (ultimately set at 10% of reorganized equity, with terms to be determined post-emergence), and the treatment of general unsecured claims.
C&H also prepared the RSA joinder agreement form, which was utilized to obtain the formal support of additional holders of first lien and second lien claims who were not parties to the initial RSA execution.
E. Phase V: Professional Retention Applications (June–July 2022)
C&H prepared and filed applications seeking the Court's approval for the retention of each of the Debtors' professionals in these Chapter 11 cases. These included:
(i) The application to retain Calderwood & Harkness LLP as debtor's counsel under Section 327(a) of the Bankruptcy Code, accompanied by the declaration of Colette Whitman and C&H's Verified Statement under Bankruptcy Rule 2014;
(ii) The application to retain Aldersgate Advisory Group LLC as the Debtors' financial advisor, at a monthly advisory fee of $175,000 and a completion fee of $3.5 million (payable upon the occurrence of a "completion event," defined to include confirmation and consummation of a plan of reorganization);
(iii) The application to retain Kellner & Hartwick LLP as local co-counsel to the Debtors, with estimated fees of approximately $380,000 for the anticipated duration of the cases.
Each retention application included the requisite disclosures regarding compensation terms, connections with parties in interest, and disinterestedness, as required by the Bankruptcy Code, the Bankruptcy Rules, and the local rules of this Court.
F. Phase VI: Disclosure Statement, Plan, and Solicitation (July–August 2022)
This phase represented the most document-intensive portion of C&H's engagement and required the drafting and filing of the comprehensive suite of plan-related documents necessary for confirmation of a prepackaged plan of reorganization.
Disclosure Statement. C&H drafted the Disclosure Statement filed at Docket No. 48, which provided holders of impaired claims with adequate information to make an informed decision regarding the Plan, as required by Section 1125 of the Bankruptcy Code. The Disclosure Statement included detailed discussions of: the Debtors' business and industry overview; the prepetition capital structure and the events leading to the Chapter 11 filing; a summary of the terms of the Plan, including classification and treatment of all six classes of claims and interests; a comprehensive liquidation analysis (prepared with assistance from Aldersgate Advisory Group LLC), estimating a Chapter 7 liquidation value of between $96.2 million and $112.5 million, demonstrating that the Plan provided recoveries at least equal to those that creditors would receive in a Chapter 7 liquidation; a valuation analysis establishing a reorganized enterprise value midpoint of $195.0 million; risk factors relating to the Debtors' business, the Plan, and the restructuring transactions; and voting procedures, including the ballot instructions, voting deadline, and procedures for tabulation of votes.
Plan of Reorganization. C&H drafted the Prepackaged Plan of Reorganization filed at Docket No. 47, which set forth the comprehensive terms of the restructuring. The Plan included provisions addressing: the classification of claims and interests into six classes; the specific treatment of each class, as summarized in Section II.D above; the implementation of the restructuring transactions, including the issuance of reorganized equity, the execution of the new first lien take-back term loan credit agreement, and the cancellation of existing equity interests; the terms of the new first lien take-back term loan ($12.5 million in aggregate principal amount, bearing interest at SOFR plus 550 basis points with a 1.00% SOFR floor, maturing on August 31, 2028 (five-year maturity), with annual amortization of 1.00% payable in quarterly installments of $31,250); the Management Incentive Plan (reserving 10% of reorganized equity for post-Effective Date issuance to management); the treatment of executory contracts and unexpired leases, including the assumption of the Northstar Polymers resin supply agreement, the Meridian Industrial Leasing equipment lease (at $87,500 per month), and the Benchmark Real Estate warehouse lease (with a cure amount of $126,000); comprehensive release, exculpation, and injunction provisions, including third-party releases in favor of the Debtors' directors, officers, professionals, and consenting creditor parties; conditions precedent to the Effective Date; and the Court's retention of jurisdiction over post-confirmation matters.
Plan Supplement. C&H prepared and filed the Plan Supplement documents, which included the new organizational documents for the reorganized Debtors, schedules of assumed and rejected executory contracts and unexpired leases (together with cure amounts), the identities of the new board members of the reorganized Debtors, and the summary terms of the take-back credit agreement.
Solicitation Procedures. C&H prepared and filed the Solicitation Procedures Motion, which established the adequacy of the prepetition solicitation conducted in accordance with Section 1126(b) of the Bankruptcy Code and applicable non-bankruptcy law, and set August 3, 2022 as the voting deadline for Classes 2, 3, and 4. C&H designed the ballots for each impaired class and coordinated with Pinnacle Claims Administration LLC on all aspects of vote tabulation, including the resolution of informal and disputed ballots.
C&H attended the Disclosure Statement hearing on August 10, 2022, at which the Court approved the Disclosure Statement as containing adequate information within the meaning of Section 1125(a) of the Bankruptcy Code.
G. Phase VII: Confirmation (August–September 2022)
C&H prepared and filed a comprehensive Memorandum of Law in Support of Confirmation of the Debtors' Prepackaged Plan of Reorganization. The memorandum addressed each element of Section 1129(a)(1) through (a)(16) of the Bankruptcy Code, providing detailed legal analysis demonstrating that the Plan satisfied all applicable requirements for confirmation. The memorandum addressed, among other things:
(i) Good faith under Section 1129(a)(3), demonstrating that the Plan was proposed in good faith and not by any means forbidden by law;
(ii) The best interests of creditors test under Section 1129(a)(7), referencing the liquidation analysis prepared by Aldersgate Advisory Group LLC, which demonstrated that each holder of a claim or interest in an impaired class would receive or retain under the Plan property of a value not less than the amount that such holder would receive in a Chapter 7 liquidation;
(iii) Feasibility under Section 1129(a)(11), referencing the financial projections and business plan prepared by Aldersgate, which demonstrated that confirmation of the Plan was not likely to be followed by the liquidation or need for further financial reorganization of the reorganized Debtors; and
(iv) The propriety of the third-party release and exculpation provisions included in the Plan, addressing the applicable standards in the Sixth Circuit for approval of such provisions.
C&H coordinated with Aldersgate Advisory Group LLC in connection with the preparation of the Declaration of Priya Narayanan in Support of Confirmation, which set forth the factual and analytical basis for Aldersgate's valuation analysis, feasibility analysis, and liquidation analysis. C&H also prepared the Declaration of Dana Kowalski (CFO) in Support of Confirmation, which addressed the Debtors' good faith in proposing the Plan, the exercise of business judgment in the formulation of the Plan, and the feasibility of the reorganized Debtors' business plan.
C&H further prepared the Declaration of Pinnacle Claims Administration LLC Certifying Voting Results, which certified that the voting results for each impaired class satisfied the statutory thresholds for acceptance under Section 1126(c) of the Bankruptcy Code:
• Class 2 (First Lien Secured Claims): Accepted — 94.7% in amount, 87.5% in number (exceeding the two-thirds in amount and more than one-half in number thresholds);
• Class 3 (Second Lien Secured Claims): Accepted — 89.2% in amount, 78.6% in number;
• Class 4 (General Unsecured Claims): Accepted — 76.3% in amount, 68.4% in number.
C&H prepared and submitted the Proposed Confirmation Order to the Court. C&H attorneys appeared at the Plan Confirmation Hearing held on August 29, 2022, presented evidence in support of confirmation, and addressed questions from the Court. No objections to confirmation were filed or raised at the hearing. The Confirmation Order was entered by the Court on September 2, 2022 (Dkt. 112).
H. Phase VIII: Effective Date and Plan Consummation (September 2022)
Following entry of the Confirmation Order, C&H worked diligently to satisfy all conditions precedent to the occurrence of the Effective Date. These conditions included, among other things, the execution and delivery of the definitive documentation for the new first lien take-back term loan, the receipt of all necessary regulatory approvals, the establishment of distribution mechanisms under the Plan, and the satisfaction of any remaining conditions set forth in the Plan and the RSA milestone schedule.
C&H participated in the execution and closing of the New First Lien Take-Back Term Loan Credit Agreement, which became effective on September 30, 2022, with Ridgeline National Bank, N.A. serving as administrative agent. C&H prepared and filed the Notice of Effective Date, serving it upon all parties in interest, and also prepared and filed the Certificate of Effectiveness.
C&H coordinated the distributions under the confirmed Plan, working with Pinnacle Claims Administration LLC (as disbursing agent) and Aldersgate Advisory Group LLC on the mechanics of distributing reorganized equity, warrants, cash distributions, and take-back debt instruments to the holders of claims in each class entitled to distributions.
Additionally, C&H advised the Debtors in connection with the procurement of a directors' and officers' tail insurance policy with Apex Indemnity Insurance Company, providing coverage of $15.0 million in the aggregate, at a tail premium of $1.2 million. The D&O tail policy was a condition to the effectiveness of the Plan and was necessary to ensure continued coverage for the Debtors' pre-emergence directors and officers.
I. Phase IX: Post-Effective Date and Case Closing (October 2022–August 2023)
Following the Effective Date, C&H continued to provide legal services to the reorganized Debtors in connection with the resolution of remaining administrative matters in the Chapter 11 cases. These services included monitoring plan implementation and compliance with the terms of the Confirmation Order and the Plan, advising on post-effective date disputes and administrative matters, and preparing required post-confirmation reports and filings.
C&H prepared and filed the Motion for Entry of Final Decree and Order Closing Chapter 11 Cases pursuant to Section 350(a) of the Bankruptcy Code and Bankruptcy Rule 3022, demonstrating that the Plan had been substantially consummated, all required distributions had been made or reserved for, and the estates had been fully administered. The Final Decree was entered by the Court on August 31, 2023 (Dkt. 189), formally closing the Chapter 11 cases.
Finally, C&H prepared and filed this Final Fee Application.
V. SUMMARY OF FEES AND EXPENSES REQUESTED
A. Total Fees Requested
C&H requests allowance and payment of aggregate professional fees in the total amount of $4,200,000.00 for services rendered during the Application Period from June 20, 2022 (the Petition Date) through August 31, 2023 (the date of entry of the Final Decree). This amount represents the aggregate fees for all timekeepers who performed services on behalf of the Debtors during the Application Period, as more fully detailed in the exhibits attached hereto.
B. Fee Breakdown by Timekeeper
The following table summarizes the professional fees incurred by each primary timekeeper during the Application Period. Approximate hours for each timekeeper have been computed to reconcile to the aggregate fee total of $4,200,000.00. Exact hours and fee amounts for each timekeeper are set forth in the detailed time records attached hereto as Exhibit A and the timekeeper summary attached as Exhibit B.
As reflected in the table above, C&H staffed this engagement with a lean core team of four primary timekeepers—two partners and two associates—supplemented by limited additional associate and paralegal support as needed for discrete tasks. This staffing approach reflects C&H's commitment to efficient resource utilization and cost-effective delivery of legal services.
C. Fee Breakdown by Task Category
The following table summarizes the professional fees incurred during the Application Period by task category. These categories correspond to the phases of service described in Section IV above and are consistent with the task-based categorization required by the U.S. Trustee Guidelines. A detailed fee-by-category summary is attached hereto as Exhibit C.
As reflected in the table above, the largest single category of fees was Disclosure Statement & Plan Drafting, at $1,150,000 (27.4% of total fees), which is consistent with the document-intensive nature of this phase and the complexity of the plan-related documentation in a prepackaged Chapter 11 case. The second largest category was Confirmation Proceedings, at $640,000 (15.2%), reflecting the extensive work required to prepare confirmation briefs, declarations, and the evidentiary presentation at the confirmation hearing. RSA Negotiation & Forbearance constituted the third largest category at $520,000 (12.4%), reflecting the extensive multi-party negotiations that were essential to achieving the consensual restructuring.
D. Expenses
C&H requests reimbursement of out-of-pocket expenses incurred during the Application Period in connection with the provision of legal services to the Debtors. These expenses include, without limitation:
(i) Court filing fees;
(ii) Travel expenses (airfare, hotel, ground transportation, and meals) incurred in connection with travel to Cleveland, Ohio for Court hearings, client meetings, and other matters requiring in-person attendance;
(iii) Printing and copying charges;
(iv) Court reporting and transcription fees;
(v) Electronic legal research charges (Westmark Data Systems, PACER, and similar services);
(vi) Postage, courier, and overnight delivery charges;
(vii) Telecommunications charges; and
(viii) Other miscellaneous expenses.
An itemized summary of all reimbursable expenses by category is attached hereto as Exhibit D. All expenses were incurred in compliance with the Court's guidelines, the U.S. Trustee Guidelines for the Northern District of Ohio, and the terms of the Engagement Letter and Retention Order.
E. Retainer Credit
C&H received a prepetition retainer in the amount of $500,000.00 on June 10, 2022, ten days prior to the Petition Date. C&H requests that this retainer be credited against the total fees and expenses allowed by the Court pursuant to this Application. After application of the retainer credit, the net amount due to C&H is as follows:
Total Professional Fees Requested: $4,200,000.00 Less: Prepetition Retainer Credit: ($500,000.00) Net Balance Due (fees only): $3,700,000.00 Plus: Reimbursable Expenses (as set forth in Exhibit D) Less: Interim Fee Payments Previously Received (if any)
A complete statement of the retainer, any interim payments received, and the net balance due is attached hereto as Exhibit E.
F. Interim Fee Payments
To the extent that C&H has filed any interim fee applications during the Application Period and received any payments on account of interim orders, the amounts previously received shall be deducted from the net balance due under this Final Fee Application. C&H will confirm the amount of any interim payments in the materials attached as Exhibit E and requests that the Court's order on this Application reconcile all interim and final fee amounts to avoid any duplication.
VI. THE REQUESTED FEES SATISFY THE STANDARDS OF 11 U.S.C. § 330
A. Legal Standard
Section 330(a)(1) of the Bankruptcy Code authorizes the Court to award to a professional employed under Section 327 "reasonable compensation for actual, necessary services rendered by the [professional] . . . and reimbursement for actual, necessary expenses." 11 U.S.C. § 330(a)(1)(A)–(B).
In determining the amount of reasonable compensation, Section 330(a)(3) directs the Court to consider the following factors:
(i) The time spent on such services;
(ii) The rates charged for such services;
(iii) Whether the services were necessary to the administration of, or beneficial at the time at which the service was rendered toward the completion of, a case under this title;
(iv) Whether the services were performed within a reasonable amount of time commensurate with the complexity, importance, and nature of the problem, issue, or task addressed;
(v) With respect to a professional person, whether the person is board certified or otherwise has demonstrated skill and experience in the bankruptcy field; and
(vi) Whether the compensation is reasonable based on the customary compensation charged by comparably skilled practitioners in cases other than cases under this title.
See 11 U.S.C. § 330(a)(3)(A)–(F). The applicant bears the burden of demonstrating that the compensation sought is reasonable and that the services rendered were actual and necessary. See, e.g., In re Boddy, 950 F.2d 334, 337 (6th Cir. 1991). As demonstrated below, C&H's requested fees satisfy each of these statutory factors.
B. Reasonableness of Fees
C&H's billing rates are consistent with prevailing market rates charged by attorneys and paraprofessionals at law firms of comparable stature and experience handling complex Chapter 11 restructuring cases. The rates charged by Ms. Whitman ($1,575/hour), Mr. Bower ($1,475/hour), Ms. Moss ($895/hour), and Ms. Chesterton ($725/hour) are within the range of rates customarily charged by partners and associates at peer firms for similar restructuring and bankruptcy engagements, including representations of debtors, committees, secured lenders, and other parties in complex Chapter 11 cases involving comparable aggregate claim pools and levels of complexity.
The reasonableness of C&H's fees is further underscored by the expedited timeline on which these Chapter 11 cases were administered. The prepackaged case was completed on an extraordinarily compressed schedule: approximately 74 days from the Petition Date to entry of the Confirmation Order (June 20 to September 2, 2022), and approximately 102 days from the Petition Date to the Effective Date (June 20 to September 30, 2022). This compressed timeline required intensive, sustained, and often around-the-clock work by C&H's engagement team, including the simultaneous preparation of multiple complex documents (the Plan, the Disclosure Statement, the DIP financing documents, the Plan Supplement, and the confirmation memorandum) during overlapping phases of the case.
C&H staffed this matter efficiently, maintaining a lean core team of four primary timekeepers—two partners and two associates—supplemented only by limited additional associate and paralegal support for discrete tasks. This lean staffing approach minimized duplication of effort and ensured that the Debtors received cost-effective representation. C&H did not engage in overstaffing, excessive internal conferencing, or other practices that would have inflated fees without corresponding benefit to the estates.
C. Necessity and Benefit of Services
Each of the services rendered by C&H during the Application Period was necessary to the administration of the Debtors' Chapter 11 cases and beneficial to the estates and their creditors. C&H's services were essential to every major milestone in the restructuring:
(a) C&H negotiated the Forbearance Agreement and its extension, which provided the Debtors with the breathing room necessary to negotiate the RSA and prepare for the Chapter 11 filing without the threat of creditor remedies.
(b) C&H led the negotiation and drafting of the RSA, which established the consensual framework for the prepackaged Plan and obtained the support of holders representing approximately 68% of the first lien debt and 72% of the second lien notes—support that was critical to achieving the consensual confirmation ultimately obtained.
(c) C&H prepared the Plan, the Disclosure Statement, and all related documents, obtaining approval of the Disclosure Statement and confirmation of the Plan without any objections.
(d) C&H negotiated and obtained approval of the DIP Facility, which provided the Debtors with the liquidity necessary to continue operations during the pendency of the Chapter 11 cases without disruption to the Debtors' business.
(e) C&H guided the Debtors through the confirmation process and consummation of the Plan, resulting in the satisfaction of all conditions precedent and the occurrence of the Effective Date on September 30, 2022.
The results of the restructuring speak for themselves. The Debtors' total funded debt was reduced from $247.3 million to $12.5 million—a reduction of approximately $234.8 million, or 95%. Approximately 1,420 jobs across four manufacturing facilities were preserved. All impaired classes of claims voted to accept the Plan by margins substantially exceeding the statutory thresholds. The Debtors emerged from Chapter 11 as a going concern in approximately 100 days, preserving the enterprise for the benefit of the reorganized company, its creditors, employees, customers, and suppliers.
C&H notes that the estimated total professional fees across all retained professionals in these Chapter 11 cases (including C&H, Kellner & Hartwick LLP, Aldersgate Advisory Group LLC, Pinnacle Claims Administration LLC, and the professionals retained by the creditor constituencies) amount to approximately $9.3 million. This aggregate professional fee burden is proportionate to the size and complexity of the case—involving over $247 million in funded debt, four manufacturing facilities, approximately 1,420 employees, and negotiations among multiple sophisticated creditor constituencies—and the substantial value delivered to the estates and their stakeholders through the successful restructuring.
D. Compliance with Guidelines
C&H has complied in all material respects with the U.S. Trustee Guidelines for Reviewing Applications for Compensation and Reimbursement of Expenses Filed Under 11 U.S.C. § 330 (the "U.S. Trustee Guidelines"), the Local Rules and Guidelines of the United States Bankruptcy Court for the Northern District of Ohio, and the terms of the Court's Retention Order.
Detailed contemporaneous time records for all timekeepers are attached hereto as Exhibit A in the format required by the U.S. Trustee Guidelines, organized by date and task category, and showing for each time entry the date of service, the name and title of the timekeeper, the hours expended, the applicable billing rate, the total fee for the entry, and a narrative description of the services performed. Time entries have been maintained on a contemporaneous basis throughout the Application Period and have been reviewed for accuracy, reasonableness, and compliance with applicable guidelines.
C&H has not included in this Application any fees for time spent preparing this Final Fee Application, except to the extent such time is separately identified and disclosed in accordance with the requirements of the Court and the U.S. Trustee. To the extent the Court requires separate identification of fee application preparation time, such information is set forth in the time records attached as Exhibit A.
VII. DESCRIPTION OF SERVICES BY PHASE — DETAILED NARRATIVE
This Section provides a detailed narrative description of the services rendered by C&H in each phase and task category of the engagement, cross-referenced to the contemporaneous time records attached as Exhibit A. The narrative descriptions below supplement the summary scope of services set forth in Section IV above and are organized by the same phase and task category structure utilized in the fee-by-category analysis set forth in Section V.C and Exhibit C.
Phase I — Pre-Filing and Engagement (June 2022). During this phase, C&H performed extensive diligence and analysis in preparation for the Chapter 11 filing. C&H reviewed and analyzed the Debtors' prepetition capital structure, existing credit agreements, and indenture documents; assessed the viability of out-of-court and in-court restructuring alternatives; prepared a restructuring strategy memorandum for the CPS Board of Managers recommending the prepackaged Chapter 11 path; conducted a comprehensive conflicts analysis under Section 327(a) and Rule 2014; negotiated and executed the Engagement Letter; and commenced preparation of the voluntary petitions, first day motions, and supporting declarations.
Phase II — Petition Date and First Day Relief (June 20–21, 2022). During this phase, C&H filed the voluntary petitions, prepared and filed the full suite of first day motions and supporting declarations, appeared at the first day hearing, and obtained approval of all first day relief sought by the Debtors.
Phase III — DIP Financing (June–July 2022). During this phase, C&H negotiated the DIP credit agreement terms, drafted and filed the DIP motion, prepared the interim and final DIP orders, and obtained interim and final approval of the $30.0 million DIP Facility.
Phase IV — RSA Negotiation and Forbearance (May–July 2022). During this phase, C&H negotiated the Forbearance Agreement and its extension, drafted and negotiated the RSA and its attachments (including the restructuring term sheet and milestone schedule), and engaged in extensive multi-party negotiations regarding plan economics, equity allocation, warrant terms, and the Management Incentive Plan.
Phase V — Professional Retention Applications (June–July 2022). During this phase, C&H prepared and filed retention applications for C&H, Aldersgate Advisory Group LLC, and Kellner & Hartwick LLP, including all required declarations and verified statements.