UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF OHIO EASTERN DIVISION
DEBTORS' APPLICATION PURSUANT TO 11 U.S.C. § 327(a) AND 11 U.S.C. § 328(a) FOR ENTRY OF AN ORDER AUTHORIZING THE RETENTION AND EMPLOYMENT OF KELLNER & HARTWICK LLP AS LOCAL CO-COUNSEL TO THE DEBTORS, NUNC PRO TUNC TO THE PETITION DATE
Crestline Packaging Solutions LLC ("Crestline" or "CPS") and CPS Holdings Inc. (collectively, the "Debtors"), as debtors and debtors in possession in the above-captioned Chapter 11 cases (the "Chapter 11 Cases"), respectfully represent as follows in support of this Application:
I. PRELIMINARY STATEMENT
1. On June 20, 2022 (the "Petition Date"), each of the Debtors filed a voluntary petition for relief under Chapter 11 of Title 11 of the United States Code, 11 U.S.C. §§ 101–1532 (the "Bankruptcy Code"), in this Court. The Chapter 11 Cases are being jointly administered for procedural purposes only pursuant to an order of this Court entered on June 21, 2022 [Dkt. 15].
2. The Debtors continue to operate their businesses and manage their properties as debtors in possession pursuant to Sections 1107(a) and 1108 of the Bankruptcy Code. No trustee, examiner, or statutory committee of unsecured creditors has been appointed in these Chapter 11 Cases as of the date hereof.
3. By this Application (the "Application"), the Debtors seek entry of an order, pursuant to Sections 327(a) and 328(a) of the Bankruptcy Code, Rules 2014(a) and 2016 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules"), and the Local Rules of the United States Bankruptcy Court for the Northern District of Ohio (the "Local Rules"), authorizing the Debtors to retain and employ Kellner & Hartwick LLP ("K&H" or the "Firm") as local co-counsel to the Debtors in the Chapter 11 Cases, nunc pro tunc to the Petition Date.
4. K&H will serve as local co-counsel alongside Calderwood & Harkness LLP ("C&H"), the Debtors' lead bankruptcy counsel, whose retention is the subject of a separate application filed contemporaneously herewith [Dkt. 36]. C&H, a nationally recognized restructuring practice headquartered in New York, New York, will serve as lead counsel and bear primary responsibility for all substantive aspects of the Debtors' restructuring. K&H will complement C&H's services by providing the local expertise and presence necessary for the efficient administration of these Chapter 11 Cases.
5. K&H is a Cleveland-based law firm with extensive experience in complex Chapter 11 proceedings before this Court. The Firm is well-qualified to provide the local co-counsel services required by the Debtors, and its retention will serve the best interests of the Debtors' estates and their creditors. K&H has been engaged on this matter since immediately prior to the Petition Date and has been providing valuable services since that time. The Debtors therefore seek retention nunc pro tunc to the Petition Date to ensure that K&H may be compensated for services rendered from and after the commencement of these Chapter 11 Cases.
II. JURISDICTION AND VENUE
6. This Court has jurisdiction over this Application pursuant to 28 U.S.C. §§ 157 and 1334. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A), as it involves the administration of the Debtors' estates.
7. Venue of these Chapter 11 Cases and this Application is proper in this District pursuant to 28 U.S.C. §§ 1408 and 1409. Crestline Packaging Solutions LLC is organized under the laws of the State of Ohio and has maintained its principal place of business and principal assets in this District for the 180-day period preceding the Petition Date.
8. The statutory bases for the relief requested herein are Sections 327(a) and 328(a) of the Bankruptcy Code, Rules 2014(a) and 2016 of the Bankruptcy Rules, and the applicable Local Rules of the United States Bankruptcy Court for the Northern District of Ohio.
III. BACKGROUND
A. The Debtors and Their Business
9. Crestline Packaging Solutions LLC is an Ohio limited liability company headquartered at 4710 Industrial Corridor Drive, Akron, Ohio 44308 (Employer Identification Number: 31-1782094). CPS is the principal operating entity among the Debtors and conducts substantially all of the Debtors' business operations.
10. CPS Holdings Inc. is a Delaware corporation and the direct parent of CPS (Employer Identification Number: 82-3491657). CPS Holdings Inc. maintains a registered agent at 1209 Orange Street, Wilmington, Delaware 19801 (c/o National Corporate Services, Inc.). CPS Holdings Inc. is a holding company with no independent operations; its sole material asset is its equity interest in CPS.
11. CPS is a leading manufacturer of specialty chemical packaging and industrial containment products. The Debtors' product line includes high-density polyethylene ("HDPE") drums, intermediate bulk containers ("IBCs"), steel pails, and specialty containment vessels. These products serve a diverse customer base across the chemical, petrochemical, and agricultural sectors, among others. CPS's products are critical to the safe storage and transportation of hazardous and non-hazardous materials across a wide range of industrial applications.
12. CPS operates four manufacturing plants located in Ohio, Indiana, and Louisiana, and employs approximately 1,420 individuals across its operations, including both hourly production workers and salaried administrative, management, and sales personnel. The Debtors' principal executive offices are located in Akron, Ohio.
13. For the fiscal year ended December 31, 2021 ("FY2021"), CPS reported revenue of approximately $312.6 million and earnings before interest, taxes, depreciation, and amortization ("EBITDA") of approximately $38.4 million. For the trailing twelve-month period ended March 31, 2022 ("TTM Q1 2022"), EBITDA had declined to approximately $29.1 million, reflecting the operational and market headwinds described further below.
14. CPS was acquired by Thornfield Capital Partners LP ("Thornfield"), a private equity firm, in a leveraged buyout transaction that closed in October 2017. The enterprise value at the time of the acquisition was approximately $410 million. Thornfield continues to hold its equity interest in CPS through CPS Holdings Inc.
B. Events Leading to the Chapter 11 Filing
15. The Debtors' capital structure at the Petition Date consisted of total funded debt of approximately $247.3 million. This debt was comprised of three principal facilities:
(a) a first lien revolving credit facility (the "Revolving Credit Facility") with aggregate commitments of $50.0 million, of which approximately $32.6 million was drawn at the Petition Date;
(b) a first lien term loan (the "First Lien Term Loan") with an outstanding principal balance of approximately $158.7 million at the Petition Date; and
(c) $56.0 million in aggregate principal amount of 9.75% Senior Secured Second Lien Notes due 2024 (the "Second Lien Notes").
16. The Revolving Credit Facility and the First Lien Term Loan are governed by that certain First Lien Credit Agreement, dated as of October 13, 2017 (as amended, restated, supplemented, or otherwise modified from time to time, the "First Lien Credit Agreement"), among CPS, as borrower, CPS Holdings Inc., as guarantor, the lenders from time to time party thereto, and Ridgeline National Bank, N.A. ("Ridgeline"), as administrative agent and collateral agent. The Second Lien Notes were issued pursuant to that certain Indenture, dated as of October 13, 2017 (as amended, supplemented, or otherwise modified from time to time, the "Second Lien Notes Indenture"), between CPS, as issuer, CPS Holdings Inc., as guarantor, and Continental Fiduciary Trust Company ("CFTC"), as indenture trustee.
17. Beginning in late 2020 and continuing through 2021 and into 2022, the Debtors experienced significant operational and financial headwinds that materially impacted their financial performance. Revenue declined approximately 18% from fiscal year 2020 to fiscal year 2021, driven by a combination of reduced customer demand in key end-markets, lost volume from certain large chemical manufacturing customers that had curtailed their own operations, and increased competitive pressure from both domestic and international producers. Concurrently, the Debtors experienced significant margin compression attributable to substantial increases in the cost of key raw materials, particularly high-density polyethylene resin and steel, as well as supply chain disruptions affecting the timely delivery of critical production inputs.
18. As a result of these adverse developments, in the first quarter of 2022, CPS breached the maximum total leverage ratio financial covenant set forth in Section 7.11 of the First Lien Credit Agreement. The Debtors' actual total leverage ratio as of March 31, 2022 was approximately 8.50x, which exceeded the maximum covenant level of 5.75x by a substantial margin. This breach constituted an event of default under the First Lien Credit Agreement.
19. On April 22, 2022, Ridgeline, in its capacity as administrative agent under the First Lien Credit Agreement, delivered a formal Notice of Default to the Debtors. The occurrence of a default under the First Lien Credit Agreement, in turn, triggered cross-default provisions under Section 6.01(e) of the Second Lien Notes Indenture, resulting in a default under the Second Lien Notes as well.
20. The Debtors immediately engaged their financial and legal advisors and commenced negotiations with their principal creditor constituencies. On May 18, 2022, the Debtors, Ridgeline, and the requisite lenders under the First Lien Credit Agreement entered into a Forbearance Agreement (the "Forbearance Agreement"), pursuant to which the first lien lenders agreed to forbear from exercising their default remedies for an initial period of forty-five (45) days, through July 2, 2022. The forbearance period was subsequently extended through July 15, 2022 by amendment.
21. During the forbearance period, the Debtors, their advisors, and representatives of their principal stakeholders engaged in intensive negotiations regarding the terms of a consensual restructuring. On June 20, 2022, having determined that a court-supervised restructuring was necessary and in the best interests of all stakeholders, the Debtors filed their voluntary petitions for relief under Chapter 11 of the Bankruptcy Code, commencing these Chapter 11 Cases.
22. On July 8, 2022, the Debtors, Thornfield Capital Partners LP, the Ad Hoc Group of First Lien Lenders (represented by Hargrove, Mitchell & Saunders LLP), and the Ad Hoc Group of Second Lien Noteholders (represented by Pemberton & Locke LLP) entered into a Restructuring Support Agreement (the "RSA") [Dkt. 52], which sets forth the principal terms of a prepackaged plan of reorganization and the commitments of the supporting parties to support confirmation of such plan.
C. The Need for Local Co-Counsel
23. The Debtors' lead bankruptcy counsel, Calderwood & Harkness LLP, is a nationally recognized law firm headquartered at 30 Rockefeller Plaza, New York, New York 10112. C&H maintains an office at 127 Public Square, Suite 4100, Cleveland, Ohio 44114, but the lead engagement team for these Chapter 11 Cases is based in C&H's New York office.
24. Given the complexity of these Chapter 11 Cases, the requirements of this Court's Local Rules, and the Debtors' need for counsel with significant familiarity with the practices, procedures, and preferences of this Court and the judges of this District, the Debtors require local co-counsel with an established and active presence in the Northern District of Ohio. The retention of experienced local co-counsel is especially important in connection with the numerous hearings, status conferences, and administrative proceedings that are expected to occur throughout the pendency of these Chapter 11 Cases.
25. K&H is located in Cleveland, Ohio, and has extensive experience practicing before this Court, including in complex Chapter 11 reorganization proceedings involving significant multi-creditor constituencies and contested matters. K&H's professionals are well-acquainted with the Local Rules, the preferences and procedures of the judges of this Court, and the practices of the Office of the United States Trustee for Region 9.
26. The retention of K&H as local co-counsel will allow the Debtors to benefit from K&H's local expertise and presence while avoiding unnecessary duplication of effort with lead counsel C&H. The Debtors believe that the retention of K&H will promote the efficient and cost-effective administration of these Chapter 11 Cases and is in the best interests of the Debtors' estates and their creditors.
IV. K&H'S QUALIFICATIONS AND PROPOSED SCOPE OF SERVICES
A. Firm Overview
27. Kellner & Hartwick LLP is a law firm with its principal office at 600 Superior Avenue East, Suite 1800, Cleveland, Ohio 44114. Founded in 1987, K&H has developed a well-established bankruptcy and restructuring practice with significant experience representing debtors, creditors' committees, secured lenders, and other parties in interest in Chapter 11 proceedings before the United States Bankruptcy Court for the Northern District of Ohio. K&H's bankruptcy and restructuring practice group has been regularly recognized for its expertise in complex restructuring matters in this District.
28. The lead partner responsible for this engagement is Bruce Tatelman, a partner in K&H's Bankruptcy and Restructuring group. Mr. Tatelman has practiced before this Court for over twenty years and has served as lead or local co-counsel in numerous significant Chapter 11 cases in this District. Mr. Tatelman's extensive familiarity with the practices and procedures of this Court will be of particular value to the Debtors as these Chapter 11 Cases proceed. Additional K&H professionals expected to work on this engagement are identified in the Declaration of Bruce Tatelman filed contemporaneously herewith as Exhibit B.
B. Proposed Scope of Services
29. K&H will provide the following services as local co-counsel to the Debtors, in coordination with and under the direction of lead counsel Calderwood & Harkness LLP:
(a) Advising the Debtors with respect to the Local Rules, local practices, and procedures of this Court, including any applicable standing orders, general orders, and chambers procedures of the presiding judge;
(b) Preparing, filing, and serving pleadings, motions, applications, notices, proposed orders, and other documents as required under the Local Rules or as otherwise directed by C&H in connection with the administration of the Chapter 11 Cases;
(c) Appearing at hearings, status conferences, and other proceedings before this Court on behalf of the Debtors, including regularly scheduled omnibus hearings, case management conferences, and hearings on contested matters and adversary proceedings;
(d) Assisting with the preparation and prosecution of first day motions and related relief, including motions seeking authority to pay critical vendors, use cash collateral, maintain existing bank accounts, pay employee wages and benefits, and other customary first day relief;
(e) Coordinating with the Office of the United States Trustee for Region 9 (Howard M. Metzenbaum U.S. Courthouse, 201 Superior Avenue, Cleveland, Ohio 44114) on case administration matters, including compliance with U.S. Trustee reporting requirements, quarterly fee payments, and other administrative obligations;
(f) Assisting with claims analysis, objections to claims, and resolution of disputed claims, including coordination with the Debtors' claims and noticing agent, Pinnacle Claims Administration LLC;
(g) Advising on and assisting with the solicitation and confirmation process for the Debtors' prepackaged plan of reorganization, including preparation of solicitation procedures, review of ballots, and preparation of confirmation-related filings;
(h) Assisting with post-confirmation matters, including satisfaction of conditions precedent to the Effective Date, preparation of motions for final decree, and other actions necessary to close the Chapter 11 Cases; and
(i) Performing such other legal services as may be required or requested by the Debtors or C&H in connection with the Chapter 11 Cases that are consistent with K&H's role as local co-counsel.
C. Coordination with Lead Counsel
30. K&H will work under the direction of C&H's engagement team for these Chapter 11 Cases, which includes Colette Whitman (Responsible Partner), Nathaniel Bower (Billing Partner), Gabrielle Moss (Lead Associate), and Amy Chesterton (Working Associate). K&H and C&H have established protocols for regular communication and coordination to ensure that their respective efforts are efficiently allocated and that unnecessary duplication of services is avoided.
31. K&H will primarily focus on matters requiring local presence, familiarity with the Local Rules and procedures of this Court, and appearances before this Court. C&H will retain primary responsibility for all substantive aspects of the Debtors' Chapter 11 Cases, including negotiation and drafting of the plan of reorganization and disclosure statement, negotiations with the Debtors' principal creditor constituencies, debtor-in-possession financing matters, and other matters of substantive restructuring strategy. Where overlap between the respective responsibilities of K&H and C&H is likely, the firms will coordinate staffing and work allocation to minimize costs to the Debtors' estates.
V. K&H'S DISINTERESTEDNESS AND ABSENCE OF ADVERSE INTERESTS
32. K&H does not hold or represent any interest adverse to the Debtors' estates. K&H is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code, as modified by Section 1107(b) of the Bankruptcy Code.
33. In connection with this Application, K&H has conducted a comprehensive conflicts review of its records and has determined that it does not have any connection with the Debtors, their creditors, any other party in interest, or their respective attorneys and accountants that would disqualify K&H from serving as local co-counsel to the Debtors under Sections 327(a) and 328(c) of the Bankruptcy Code.
34. Specifically, K&H has reviewed its records for connections with each of the following parties in interest in these Chapter 11 Cases:
(a) Crestline Packaging Solutions LLC and CPS Holdings Inc. (the Debtors);
(b) Marcus J. Reinholdt, Chief Executive Officer of CPS; Dana Kowalski, Chief Financial Officer of CPS; and Preston Yee, General Counsel of CPS;
(c) Thornfield Capital Partners LP (equity sponsor of the Debtors), including Julian Ashford, Managing Partner, and Rebecca Strand, Deal Partner;
(d) Ridgeline National Bank, N.A., in its capacity as administrative agent and collateral agent under the First Lien Credit Agreement and as agent under the Debtors' debtor-in-possession financing facility;
(e) Members of the Ad Hoc Group of First Lien Lenders, including Blackmoor Capital Management LLC (Arthur Ng), Greystone Fixed Income Partners LP (Sandra Ibanez), and Wexford Opportunity Fund III LP (Derek Loomis);
(f) Members of the Ad Hoc Group of Second Lien Noteholders, including Fenwick Structured Credit Fund II LP (Liam Driscoll) and Millhaven Capital Advisors LLC (Karen Ostrowski);
(g) Continental Fiduciary Trust Company, in its capacity as indenture trustee under the Second Lien Notes Indenture;
(h) Hargrove, Mitchell & Saunders LLP, counsel to the Ad Hoc Group of First Lien Lenders, including Victoria Kline, Lead Partner, and Thomas Frey, Lead Associate;
(i) Pemberton & Locke LLP, counsel to the Ad Hoc Group of Second Lien Noteholders, including Raymond Delvecchio, Lead Partner, and Nia Patterson, Lead Associate;
(j) Calderwood & Harkness LLP, the Debtors' lead bankruptcy counsel;
(k) Aldersgate Advisory Group LLC, financial advisor to the Debtors, including Priya Narayanan, Lead Managing Director;
(l) Dralvecen Reyes Linley CPAs LLP & Associates LLP, tax and accounting advisor to the Debtors, including Catherine Holtz, Lead Partner;
(m) Pinnacle Claims Administration LLC, claims and noticing agent for the Debtors;
(n) Apex Indemnity Insurance Company, carrier of the Debtors' directors and officers liability tail insurance policy;
(o) Northstar Polymers Inc., a principal resin supplier to the Debtors;
(p) Meridian Industrial Leasing Corp., an equipment lessor to the Debtors;
(q) Benchmark Real Estate Holdings LLC, a warehouse landlord to the Debtors; and
(r) The Office of the United States Trustee, Region 9.
35. Based upon this comprehensive review, K&H has determined that it has no disqualifying connections with any of the foregoing parties. K&H has not previously represented any of the Debtors, their insiders, their equity sponsor, their secured or unsecured creditors, or any other party in interest in these Chapter 11 Cases in any matter related to the Debtors or these Chapter 11 Cases.
36. Reference is made to the Declaration of Bruce Tatelman (the "Tatelman Declaration"), filed contemporaneously herewith as Exhibit B, which provides further detail regarding K&H's disinterestedness and connections with parties in interest, as required by Rule 2014(a) of the Bankruptcy Rules. To the extent K&H discovers any new connections or potential conflicts during the pendency of these Chapter 11 Cases, K&H will promptly disclose such information to the Court, the Office of the United States Trustee, and the Debtors, as required by applicable law.
VI. TERMS OF RETENTION AND COMPENSATION
A. Compensation Structure
37. K&H will be compensated for professional services rendered and reimbursed for actual and necessary expenses incurred in connection with these Chapter 11 Cases at its standard hourly rates in effect at the time such services are rendered, subject to the approval of this Court pursuant to Sections 330 and 331 of the Bankruptcy Code.
38. K&H's current standard hourly rates for the professionals expected to work on this engagement are set forth in the accompanying Declaration of Bruce Tatelman, filed herewith as Exhibit B. K&H's hourly rates are consistent with the rates charged by firms of comparable standing and experience for similar services in this market and in similar Chapter 11 cases.
39. K&H will seek compensation and reimbursement of expenses in accordance with applicable provisions of the Bankruptcy Code, the Bankruptcy Rules, the Local Rules, and the guidelines established by the Office of the United States Trustee for professionals retained in Chapter 11 cases in the Northern District of Ohio (the "U.S. Trustee Guidelines").
B. Estimated Fees
40. K&H estimates that its total fees and expenses for services rendered throughout the Chapter 11 Cases will be approximately $380,000. This estimate is based on K&H's preliminary assessment of the scope of services likely to be required in these Chapter 11 Cases, given the prepackaged nature of the Debtors' proposed plan of reorganization and the anticipated duration and complexity of the cases. The actual fees and expenses incurred by K&H will depend on the scope of services ultimately required, the duration and complexity of the Chapter 11 Cases, and the extent to which contested matters, adversary proceedings, or other unanticipated developments arise during the pendency of the cases. K&H's estimate is provided for informational purposes only and does not constitute a cap on K&H's fees and expenses.
C. Retainer.
41. K&H has not received any prepetition retainer from the Debtors in connection with its engagement as local co-counsel in these Chapter 11 Cases. K&H has not received any payments from the Debtors' estates or from any other source on account of services rendered or to be rendered in these Chapter 11 Cases.
D. Fee Applications
42. K&H will submit interim and final fee applications to this Court for approval in accordance with Sections 330 and 331 of the Bankruptcy Code, Rule 2016 of the Bankruptcy Rules, the applicable Local Rules, and the U.S. Trustee Guidelines. All interim and final fee applications filed by K&H will be subject to review by the Office of the United States Trustee for Region 9 and to approval by this Court after notice and a hearing. K&H acknowledges that the allowance of compensation and reimbursement of expenses is subject to the standards set forth in Section 330 of the Bankruptcy Code, including the requirements that services be actual, necessary, and beneficial to the Debtors' estates, and that fees be reasonable.
VII. APPLICABLE LEGAL STANDARD
43. Section 327(a) of the Bankruptcy Code provides, in relevant part, that:
"[T]he trustee, with the court's approval, may employ one or more attorneys, accountants, appraisers, auctioneers, or other professional persons, that do not hold or represent an interest adverse to the estate, and that are disinterested persons, to represent or assist the trustee in carrying out the trustee's duties under this title."
11 U.S.C. § 327(a). Pursuant to Section 1107(a) of the Bankruptcy Code, the rights and powers of a trustee under Section 327(a) are vested in the debtor in possession.
44. Section 328(a) of the Bankruptcy Code authorizes the court to approve the terms and conditions of the employment of a professional retained under Section 327(a), including approval of compensation "on a reasonable basis" for "any term customary in the professional's trade." 11 U.S.C. § 328(a). Compensation on an hourly basis, as proposed here, is the customary and well-accepted form of compensation for legal professionals retained in Chapter 11 cases.
45. Rule 2014(a) of the Bankruptcy Rules requires that an application for the employment of a professional be accompanied by a verified statement of the person to be employed, setting forth "the person's connections with the debtor, creditors, any other party in interest, their respective attorneys and accountants, the United States trustee, or any person employed in the office of the United States trustee." Fed. R. Bankr. P. 2014(a). The Tatelman Declaration, filed herewith as Exhibit B, satisfies this requirement.
46. K&H satisfies the requirements of Section 327(a) of the Bankruptcy Code. As demonstrated by the Tatelman Declaration and as set forth herein, K&H does not hold or represent any interest adverse to the Debtors' estates, and K&H is a "disinterested person" within the meaning of Section 101(14) of the Bankruptcy Code, as modified by Section 1107(b). K&H has no connection with the Debtors, their creditors, or any other party in interest that would disqualify K&H from retention as local co-counsel.
47. Courts routinely authorize the retention of local co-counsel in complex Chapter 11 cases where the debtor's lead counsel is based in another jurisdiction, particularly where local expertise in court procedures, practices, and rules is beneficial to the efficient administration of the case. See, e.g., In re Akron Thermal, Ltd. P'ship, Case No. 10-51942 (Bankr. N.D. Ohio) (authorizing retention of local co-counsel); In re Brightmoor Corporation Sols. Corp., Case No. 18-50757 (Bankr. N.D. Ohio) (same); see also 3 Collier on Bankruptcy ¶ 327.02 (16th ed.) (discussing retention of multiple professionals where the needs of the estate so require). The retention of K&H as local co-counsel is consistent with the prevailing practice in complex Chapter 11 cases before this Court and will benefit the Debtors' estates by ensuring that the Debtors have experienced counsel with deep familiarity with the Local Rules, the procedures and preferences of this Court, and the practices of the Office of the United States Trustee for Region 9.
VIII. NO DUPLICATION OF SERVICES
48. K&H and C&H will employ procedures to avoid unnecessary duplication of services. The respective roles of K&H and C&H have been clearly delineated: K&H's role as local co-counsel will be limited to those services requiring local presence, local expertise, and familiarity with the Local Rules and procedures of this Court, while C&H will retain primary responsibility for all substantive aspects of the Debtors' Chapter 11 Cases.
49. Specifically, C&H will retain primary responsibility for, among other things, the preparation and negotiation of the Debtors' prepackaged plan of reorganization [Dkt. 47], the disclosure statement [Dkt. 48], all matters relating to debtor-in-possession financing, negotiations with the Debtors' principal creditor constituencies, cash collateral matters, and the overall restructuring strategy. K&H's services will be focused on local court appearances, preparation and filing of routine and administrative pleadings, coordination with the Office of the United States Trustee for Region 9, and other matters where the presence of local counsel is necessary or advisable.
50. Staffing and work allocation between K&H and C&H will be coordinated between Bruce Tatelman of K&H and Colette Whitman and Nathaniel Bower of C&H on an ongoing basis to ensure efficiency, to minimize costs to the Debtors' estates, and to avoid any duplication of professional effort. Where both firms attend a hearing or participate in a matter, only one firm will be designated as lead counsel for that proceeding, and the other firm will provide only such supporting services as are necessary and non-duplicative. In the event that K&H's fee applications reflect any services that overlap with services provided by C&H, the Debtors, K&H, and C&H will cooperate in identifying and eliminating any such duplication before submission to the Court.
IX. NOTICE
51. Notice of this Application has been provided to the following parties:
(a) The Office of the United States Trustee for Region 9, Howard M. Metzenbaum U.S. Courthouse, 201 Superior Avenue, Cleveland, Ohio 44114;
(b) Ridgeline National Bank, N.A. (as administrative agent, collateral agent, and DIP agent), 200 Public Square, Cleveland, Ohio 44114;
(c) Hargrove, Mitchell & Saunders LLP (counsel to the Ad Hoc Group of First Lien Lenders), 51 West 52nd Street, New York, New York 10019 (Attn: Victoria Kline);
(d) Pemberton & Locke LLP (counsel to the Ad Hoc Group of Second Lien Noteholders), 1 Liberty Plaza, New York, New York 10006 (Attn: Raymond Delvecchio); and
(e) All other parties entitled to notice under Rule 2002 of the Bankruptcy Rules and the applicable Local Rules.
52. The Debtors submit that the foregoing notice is sufficient under the circumstances and that no further notice of this Application is required.
X. PRAYER FOR RELIEF
WHEREFORE, the Debtors respectfully request that this Court enter an order, substantially in the form attached hereto as Exhibit A:
1. Authorizing the Debtors to retain and employ Kellner & Hartwick LLP as local co-counsel to the Debtors in the Chapter 11 Cases, nunc pro tunc to the Petition Date of June 20, 2022;
2. Authorizing K&H to be compensated at its standard hourly rates and to be reimbursed for actual and necessary expenses incurred in connection with the Chapter 11 Cases, subject to the approval of this Court pursuant to Sections 330 and 331 of the Bankruptcy Code, the Bankruptcy Rules, the Local Rules, and the U.S. Trustee Guidelines; and
3. Granting such other and further relief as this Court deems just and proper.
Dated: July 12, 2022
Respectfully submitted,
CALDERWOOD & HARKNESS LLP Counsel to the Debtors and Debtors in Possession
By: ________
Colette Whitman (Responsible Partner) CALDERWOOD & HARKNESS LLP 30 Rockefeller Plaza New York, New York 10112 Telephone: (212) 558-4000 Facsimile: (212) 558-3588 E-mail: cwhitman@calderwoodharkness.com
— and —
127 Public Square, Suite 4100 Cleveland, Ohio 44114 Telephone: (216) 479-8500 Facsimile: (216) 479-8780
— and —
KELLNER & HARTWICK LLP
By: ________
Bruce Tatelman (Partner) KELLNER & HARTWICK LLP 600 Superior Avenue East, Suite 1800 Cleveland, Ohio 44114 Telephone: (216) 861-7000 Facsimile: (216) 861-7050 E-mail: btatelman@kellnerhartwick.com
EXHIBIT A
PROPOSED ORDER AUTHORIZING RETENTION OF KELLNER & HARTWICK LLP AS LOCAL CO-COUNSEL TO THE DEBTORS, NUNC PRO TUNC TO THE PETITION DATE
UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF OHIO EASTERN DIVISION
ORDER AUTHORIZING THE RETENTION AND EMPLOYMENT OF KELLNER & HARTWICK LLP AS LOCAL CO-COUNSEL TO THE DEBTORS, NUNC PRO TUNC TO THE PETITION DATE
Upon the Application (the "Application") of the above-captioned debtors and debtors in possession (collectively, the "Debtors"), pursuant to Sections 327(a) and 328(a) of Title 11 of the United States Code (the "Bankruptcy Code"), Rules 2014(a) and 2016 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules"), and the Local Rules of the United States Bankruptcy Court for the Northern District of Ohio, for entry of an order authorizing the retention and employment of Kellner & Hartwick LLP ("K&H") as local co-counsel to the Debtors in the above-captioned Chapter 11 cases (the "Chapter 11 Cases"), nunc pro tunc to June 20, 2022 (the "Petition Date"); and the Court having reviewed the Application and the Declaration of Bruce Tatelman filed in support thereof (the "Tatelman Declaration"); and the Court having considered the statements and representations of counsel at the hearing held on this Application; and due and sufficient notice of the Application having been provided to all parties entitled to such notice; and it appearing that no other or further notice need be provided; and the Court having determined that the relief requested in the Application is in the best interests of the Debtors' estates and their creditors; and after due deliberation and sufficient cause appearing therefor, it is hereby:
FOUND AND DETERMINED THAT:
A. K&H is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code, as modified by Section 1107(b) of the Bankruptcy Code, and does not hold or represent any interest adverse to the Debtors' estates within the meaning of Section 327(a) of the Bankruptcy Code.
B. K&H's retention as local co-counsel to the Debtors in the Chapter 11 Cases, nunc pro tunc to the Petition Date, is necessary and in the best interests of the Debtors' estates and their creditors.
C. The terms and conditions of K&H's employment, including its proposed hourly rate compensation structure, are reasonable and consistent with the terms customary in K&H's trade, as contemplated by Section 328(a) of the Bankruptcy Code.
D. The Debtors have demonstrated good cause for the retention of K&H as local co-counsel in the Chapter 11 Cases, including K&H's significant experience in Chapter 11 proceedings before this Court and its familiarity with the Local Rules, practices, and procedures of this Court.
ORDERED THAT:
1. The Application is GRANTED in its entirety.
2. The Debtors are hereby authorized to retain and employ Kellner & Hartwick LLP as local co-counsel to the Debtors in the Chapter 11 Cases, nunc pro tunc to the Petition Date of June 20, 2022, pursuant to Sections 327(a) and 328(a) of the Bankruptcy Code.
3. K&H shall be compensated for professional services rendered at its standard hourly rates in effect at the time such services are rendered, and shall be reimbursed for actual and necessary expenses incurred in connection with the Chapter 11 Cases, subject in all respects to the approval of this Court pursuant to Sections 330 and 331 of the Bankruptcy Code.
4. K&H shall file interim and final fee applications in accordance with Sections 330 and 331 of the Bankruptcy Code, Rule 2016 of the Bankruptcy Rules, the applicable Local Rules of this Court, and the guidelines established by the Office of the United States Trustee for Region 9 for the allowance of compensation and reimbursement of expenses of professionals retained in Chapter 11 cases.
5. This Order is without prejudice to the rights of any party in interest, including the Office of the United States Trustee, to object to any interim or final fee application filed by K&H, or to seek review of any compensation or reimbursement of expenses awarded to K&H.
6. K&H shall promptly disclose to this Court, the Office of the United States Trustee, and the Debtors any connections or potential conflicts of interest that arise during the pendency of these Chapter 11 Cases that may be relevant to K&H's continued retention under Section 327(a) of the Bankruptcy Code.
7. This Court shall retain jurisdiction to hear and determine all matters arising from or related to the implementation, interpretation, and enforcement of this Order.
Dated: ____, 2022 Cleveland, Ohio
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UNITED STATES BANKRUPTCY JUDGE
EXHIBIT B
DECLARATION OF BRUCE TATELMAN IN SUPPORT OF APPLICATION TO RETAIN AND EMPLOY KELLNER & HARTWICK LLP AS LOCAL CO-COUNSEL TO THE DEBTORS, NUNC PRO TUNC TO THE PETITION DATE
UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF OHIO EASTERN DIVISION
DECLARATION OF BRUCE TATELMAN PURSUANT TO RULE 2014(a) OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE AND LOCAL RULE 2014-1
I, Bruce Tatelman, hereby declare and state under penalty of perjury pursuant to 28 U.S.C. § 1746 as follows:
1. I am a partner of Kellner & Hartwick LLP ("K&H"), a law firm with its principal office at 600 Superior Avenue East, Suite 1800, Cleveland, Ohio 44114. I am authorized to submit this declaration on behalf of K&H in connection with the Application of Crestline Packaging Solutions LLC ("CPS") and CPS Holdings Inc. (collectively, the "Debtors") for entry of an order authorizing the retention and employment of K&H as local co-counsel to the Debtors in the above-captioned Chapter 11 cases (the "Chapter 11 Cases"), nunc pro tunc to the Petition Date of June 20, 2022 (the "Application").
2. I submit this Declaration pursuant to Rule 2014(a) of the Federal Rules of Bankruptcy Procedure and Local Rule 2014-1 of the United States Bankruptcy Court for the Northern District of Ohio. Except as otherwise noted, I have personal knowledge of the facts set forth herein, or the facts are based on information provided to me by other professionals at K&H or by the Debtors and their counsel, and if called upon to testify, I could and would testify competently to each of them.
Firm Background and Qualifications
3. K&H is a Cleveland-based law firm that has maintained an active bankruptcy and restructuring practice for over thirty years. K&H has regularly appeared before the United States Bankruptcy Court for the Northern District of Ohio in complex Chapter 11 reorganization proceedings, representing debtors, official committees, secured and unsecured creditors, asset purchasers, and other parties in interest. K&H's bankruptcy and restructuring professionals are well-known to the judges of this Court and are thoroughly familiar with the Local Rules, standing orders, chambers procedures, and the practices of the Office of the United States Trustee for Region 9.
4. I have been a partner in K&H's Bankruptcy and Restructuring group since 2006. I have over twenty years of experience in complex Chapter 11 proceedings before this Court. I am admitted to practice before the United States Bankruptcy Court for the Northern District of Ohio, the United States District Court for the Northern District of Ohio, the United States Court of Appeals for the Sixth Circuit, and the Supreme Court of Ohio. I am the lead partner responsible for K&H's engagement as local co-counsel to the Debtors in the Chapter 11 Cases.
5. The following additional K&H professionals are expected to work on this engagement:
6. The foregoing hourly rates are K&H's current standard rates for the professionals identified above, and they are consistent with rates customarily charged by firms of comparable standing and experience for similar services in this market and in similar Chapter 11 cases. K&H's standard hourly rates are adjusted periodically, typically on an annual basis, and K&H reserves the right to adjust its rates during the pendency of these Chapter 11 Cases in accordance with its customary practice. Any rate adjustments will be disclosed in K&H's interim and final fee applications.
Scope of Engagement
7. K&H has been asked to serve as local co-counsel to the Debtors in the Chapter 11 Cases, working in coordination with and under the direction of lead counsel Calderwood & Harkness LLP ("C&H"). K&H's services will include, but are not limited to, the following:
(a) Advising the Debtors with respect to the Local Rules, local practices, and procedures of this Court;
(b) Preparing, filing, and serving pleadings, motions, applications, notices, proposed orders, and other documents as required under the Local Rules or as directed by C&H;
(c) Appearing at hearings, status conferences, and other proceedings before this Court on behalf of the Debtors;
(d) Assisting with the preparation and prosecution of first day motions and related relief;
(e) Coordinating with the Office of the United States Trustee for Region 9 on case administration matters, including reporting, quarterly fees, and other administrative obligations;
(f) Assisting with claims analysis, objections, and resolution of disputed claims;
(g) Advising on and assisting with the solicitation and confirmation process for the Debtors' prepackaged plan of reorganization;
(h) Assisting with post-confirmation matters, including satisfaction of conditions to the Effective Date, preparation of motions for final decree, and case closing; and
(i) Performing such other legal services as may be required or requested by the Debtors or C&H in connection with the Chapter 11 Cases.
8. K&H will coordinate its efforts with C&H to avoid unnecessary duplication of services and to ensure that the Debtors' estates receive efficient and cost-effective legal representation.
Connections Disclosure Pursuant to Rule 2014(a)
9. Pursuant to Rule 2014(a) of the Federal Rules of Bankruptcy Procedure, I have conducted a comprehensive review of K&H's records to identify any connections between K&H and the Debtors, their creditors, any other party in interest, their respective attorneys and accountants, the United States Trustee, and any person employed in the office of the United States Trustee.
10. In conducting this conflicts review, I caused K&H's conflicts database to be searched against the names of all parties identified in the Application and their known principals, officers, directors, attorneys, accountants, and advisors. The parties reviewed include, without limitation, the following:
(a) Crestline Packaging Solutions LLC and CPS Holdings Inc. (the Debtors);
(b) Marcus J. Reinholdt (CEO of CPS), Dana Kowalski (CFO of CPS), and Preston Yee (General Counsel of CPS);
(c) Thornfield Capital Partners LP (equity sponsor), Julian Ashford (Managing Partner), and Rebecca Strand (Deal Partner);
(d) Ridgeline National Bank, N.A. (administrative agent, collateral agent, and DIP agent);
(e) Blackmoor Capital Management LLC (Arthur Ng), Greystone Fixed Income Partners LP (Sandra Ibanez), and Wexford Opportunity Fund III LP (Derek Loomis), each as members of the Ad Hoc Group of First Lien Lenders;
(f) Fenwick Structured Credit Fund II LP (Liam Driscoll) and Millhaven Capital Advisors LLC (Karen Ostrowski), each as members of the Ad Hoc Group of Second Lien Noteholders;
(g) Continental Fiduciary Trust Company (indenture trustee under the Second Lien Notes Indenture);
(h) Hargrove, Mitchell & Saunders LLP (counsel to the Ad Hoc Group of First Lien Lenders), Victoria Kline (Lead Partner), and Thomas Frey (Lead Associate);
(i) Pemberton & Locke LLP (counsel to the Ad Hoc Group of Second Lien Noteholders), Raymond Delvecchio (Lead Partner), and Nia Patterson (Lead Associate);
(j) Calderwood & Harkness LLP (Debtors' lead bankruptcy counsel), Colette Whitman (Responsible Partner), Nathaniel Bower (Billing Partner), Gabrielle Moss (Lead Associate), and Amy Chesterton (Working Associate);
(k) Aldersgate Advisory Group LLC (financial advisor to the Debtors), Priya Narayanan (Lead Managing Director);
(l) Dralvecen Reyes Linley CPAs LLP & Associates LLP (tax and accounting advisor to the Debtors), Catherine Holtz (Lead Partner);
(m) Pinnacle Claims Administration LLC (claims and noticing agent);
(n) Apex Indemnity Insurance Company (D&O tail insurance carrier);
(o) Northstar Polymers Inc. (resin supplier to the Debtors);
(p) Meridian Industrial Leasing Corp. (equipment lessor to the Debtors);
(q) Benchmark Real Estate Holdings LLC (warehouse landlord to the Debtors); and
(r) The Office of the United States Trustee, Region 9, and all persons employed in such office.
11. Based upon this comprehensive review, I have determined that K&H does not have any connection with any of the foregoing parties that would disqualify K&H from retention as local co-counsel to the Debtors under Section 327(a) of the Bankruptcy Code. K&H has not previously represented any of the Debtors, their insiders, their equity sponsor, their secured or unsecured creditors, or any other party in interest in these Chapter 11 Cases in any matter related to the Debtors or these Chapter 11 Cases.
12. K&H does not hold or represent any interest adverse to the Debtors' estates within the meaning of Section 327(a) of the Bankruptcy Code. K&H is a "disinterested person" as defined in Section 101(14) of the Bankruptcy Code, as modified by Section 1107(b) of the Bankruptcy Code.
13. Neither K&H nor any of its partners, counsel, associates, or other professionals is a creditor, an equity security holder, or an insider of the Debtors. No partner, counsel, associate, or other professional of K&H is or was, within two years before the date of the filing of the petition, a director, officer, or employee of the Debtors. No partner, counsel, associate, or other professional of K&H holds or has held any material interest in any property of the Debtors' estates.
14. To the best of my knowledge, information, and belief, K&H does not have any relationship with any of the parties identified above that would constitute a disqualifying connection under Rule 2014(a) of the Federal Rules of Bankruptcy Procedure or that would create a conflict of interest or an appearance of a conflict of interest that would preclude K&H's retention as local co-counsel.
15. To the extent that K&H discovers any previously undisclosed connections or potential conflicts of interest during the pendency of these Chapter 11 Cases, K&H will promptly file a supplemental disclosure with this Court and provide notice to the Office of the United States Trustee and the Debtors, as required by applicable law and the rules of professional conduct.
Estimated Fees and Retainer
16. Based on K&H's preliminary assessment of the scope of services likely to be required in these Chapter 11 Cases, K&H estimates that its total fees and expenses for services rendered throughout the Chapter 11 Cases will be approximately $380,000. This estimate is based on the assumption that the Chapter 11 Cases will proceed on a prepackaged basis without significant contested matters or adversary proceedings, and that K&H's role will be limited to local co-counsel services as described herein. Actual fees and expenses may vary depending on the duration and complexity of the Chapter 11 Cases and the scope of services ultimately required.