Case bjh11 Doc 168 Filed 12/20/18 Entered 12/20/18 12:51:25 Page 1 of 9

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1 Case bjh11 Doc 168 Filed 12/20/18 Entered 12/20/18 12:51:25 Page 1 of 9 Shad Robinson State Bar No HALEY & OLSON, P.C. 100 N. Ritchie Rd., Ste. 200 Waco, Texas Tel: Fax: fax Attorneys for City of Hewitt, Texas UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF TEXAS DALLAS DIVISION IN RE: CASE NO BJH-11 SENIOR CARE CENTERS, LLC, et al Chapter 11 Jointly Administered DEBTOR CITY OF HEWITT, TEXAS LIMITED OBJECTION TO THE MOTION FOR ENTRY OF INTERIM AND FINAL ORDERS (I) PROHIBITING UTILITY PROVIDERS FROM ALTERING, REFUSING, OR DISCONTINUING SERVICE, (II) APPROVING THE DEBTORS PROPOSED ADEQUATE ASSURANCE OF PAYMENT FOR POSTPETITION SERVICES, AND (III) ESTABLISHING PROCEDURES FOR RESOLVING REQUESTS FOR ADDITIONAL ADEQUATE ASSURANCE OF PAYMENT TO THE HONORABLE U.S. BANKRUPTCY JUDGE: COMES NOW the City of Hewitt, Texas (the City of Hewitt ) and files this limited objection to the Motion of Debtors for Entry of Interim and Final Orders (I) Prohibiting Utility Providers from Altering, Refusing, or Discontinuing Service, (II) Approving the Debtors Proposed Adequate Assurance of Payment for Post-petition Services, and (III) Establishing Procedures for Resolving Requests for Additional Adequate Assurance of Payment (the Utility Motion at Docket No. 7), and in support thereof contends as follows: 1

2 Case bjh11 Doc 168 Filed 12/20/18 Entered 12/20/18 12:51:25 Page 2 of 9 Introduction 1. The Utility Motion proposes to satisfy adequate assurance of payment to all utility providers as required by Section 11 U.S.C. 366 by segregating on their books and records and in a segregated account controlled by the Debtors an amount equal to what the Debtors assert is the estimated cost for only two (2) weeks of utility services. 2. The Debtors proposal set forth in the Utility Motion does not satisfy any of the forms of assurance of payment required by 11 U.S.C. 366(c)(1)(A). The City of Hewitt objects to the Debtors proposed assurance of payment and requests that a cash deposit be made directly with the City of Hewitt in the amount of the average monthly billing for the property location over the last twelve (12) months. Based on the foregoing, this Court should deny the Utility Motion as to the City of Hewitt and find that the City of Hewitt s cash deposit request is reasonable under 11 U.S.C Procedural Background and Objection 3. On December 4, 2018 (the Petition Date ), the Debtors commenced their cases under Chapter 11 of title 11 of the United States Code (the Bankruptcy Code ) that are now pending with this Court. The Debtors continue to operate their businesses and manage their properties as debtors in possession pursuant to Bankruptcy Code sections 1107(a) and The Debtors chapter 11 bankruptcy cases are being jointly administered. 5. On December 5, 2018, the Debtors filed the Utility Motion. 6. On December 7, 2018, the Court entered the Interim Order (I) Prohibiting Utility Providers from Altering, Refusing, or Discontinuing Service; (II) Approving the Debtors Proposed Adequate Assurance of Payment for Post-Petition Services; and (III) Establishing Procedures for Resolving Requests for Additional Adequate Assurance of Payment (the Interim 2

3 Case bjh11 Doc 168 Filed 12/20/18 Entered 12/20/18 12:51:25 Page 3 of 9 Utility Order at Docket 79). The Interim Utility Order set an objection deadline of December 20, 2018, with the final hearing on the Utility Motion to take place on December 27, 2018 at 1:00 p.m. 7. The Debtors are asking the Court to approve their own form of adequate assurance of payment, which is a bank account containing approximately $791,000 that supposedly equals two-weeks of the Debtors estimated monthly utility charges, based on the historical data for Utility Motion at The Debtors assurance of payment is not acceptable to or agreed to by the City of Hewitt because Sections 366(c)(2) and (3) do not allow the Debtors to establish the form or amount of adequate assurance of payment and the Debtors proposal to set up a segregated account controlled by the Debtors does not satisfy any of the forms of assurance of payment required by 11 U.S.C. 366(c)(1)(A). The City of Hewitt further objects to the Debtors proposed assurance of payment because: (1) the assurance of payment is not held by and under the control of the City of Hewitt, (2) the proposed assurance of payment is only for an estimated two (2) weeks of services, is underfunded, and does not protect the City of Hewitt and shifts the burden and risk to the City of Hewitt, (3) there are no procedures for drawing on the account, replenishing the account, etc., and (4) the Debtors proposal contravenes the City of Hewitt s requirement that commercial accounts post a cash deposit in the amount of one (1) month of services. City of Hewitt Request for Assurance of Payment 9. The City of Hewitt provided the Debtors with prepetition utility goods and/or services and has continued to provide the Debtors with utility goods and/or services since the Petition Date at the facility located at 8836 Mars Drive, Hewitt, Texas (the Property Location ). 3

4 Case bjh11 Doc 168 Filed 12/20/18 Entered 12/20/18 12:51:25 Page 4 of Under the City of Hewitt billing cycles, the Debtors receive approximately one month of utility goods and/or services before the City of Hewitt issues a bill for such charges. Once a bill is issued, the Debtors have approximately fifteen (15) days to pay the applicable bill. If the Debtors fail to timely pay the bill, a past due notice and notice of disconnection is subsequently issued and a late fee is imposed on the account. Accordingly, under the City of Hewitt s billing cycles, the Debtors could incur as much as two and one-half (2 1/2) months of unpaid service charges before the City of Hewitt would cease the supply of goods and/or services for a post-petition payment default. 11. The City of Hewitt Texas has two accounts with the Debtors (either Senior Care Centers, LLC or Hewitt SCC LLC) at the above referenced Property Location identified as follows: 1) Water, Sewer, Drainage, Trash Account-Account No ( Water Account ); and 2) Irrigation Account-Account No ( Irrigation Account ) The City of Hewitt requests assurance of payment in the form of a cash deposit made directly with the City of Hewitt for both the Water Account and Irrigation Account. Attached hereto as Exhibit A and incorporated herein by reference is an account history for both the Water Account and the Irrigation Account for the last twelve (12) months. The account history shows that the average monthly billing over the last twelve (12) months is approximately $3, for the Water Account and approximately $ for the Irrigation Account. 12. The Debtors have not posted a sufficient deposit with the City of Hewitt with regard to the Water Account and Irrigation Account. The City of Hewitt requires all commercial accounts to provide a cash deposit with the City of Hewitt. Based on the foregoing, the City of Hewitt 4

5 Case bjh11 Doc 168 Filed 12/20/18 Entered 12/20/18 12:51:25 Page 5 of 9 requires a cash deposit in the amount of $3, for the Water Account and a cash deposit in the amount of $ for the Irrigation Account as assurance of future payment. The Water Account and Irrigation Account will be billed separately as a new account beginning December 4, 2018 (the date the bankruptcy case was filed) and the foregoing cash deposits will be held by the City of Hewitt to secure payment of the Water Account and Irrigation Account for all charges for services arising on or after December 4, The City of Hewitt is currently holding a nominal deposit in the amount of $80.00 on the Water Account and $80.00 on the Irrigation Account that will be applied to the pre-petition balance due and owing on each account under 11 U.S.C. 366(c)(4). The pre-petition balance due and owing on the Water Account is approximately $8, (before application of the deposit). The pre-petition balance due and owing on the Irrigation Account is approximately $ (before application of the deposit). 14. The City of Hewitt further incorporates by reference the arguments set forth in the objection filed by Southwestern Electric Power Company d/b/a American Electric Power and Centerpoint Energy Resources Corp. at Docket No WHEREFORE, the City of Hewitt respectfully requests that this Court enter an order: 1. Denying the Utility Motion as to the City of Hewitt; 2. Awarding the City of Hewitt post-petition adequate assurance of payment pursuant to Section 366 in the amounts and form satisfactory to the City of Hewitt, which is the form and amounts requested herein; and 3. Providing such other and further relief as the Court deems just and appropriate. 5

6 Case bjh11 Doc 168 Filed 12/20/18 Entered 12/20/18 12:51:25 Page 6 of 9 Respectfully submitted, HALEY & OLSON, P.C. BY: /s/ Shad Robinson Shad Robinson Bar Card No N. Ritchie Road, Suite 200 Waco, Texas Telephone: (254) Facsimile: (254) srobinson@haleyolson.com ATTORNEY FOR THE CITY OF HEWITT, TEXAS 6

7 Case bjh11 Doc 168 Filed 12/20/18 Entered 12/20/18 12:51:25 Page 7 of 9 Certificate of Service I certify that on December 20, 2018, a true and correct copy of the above and foregoing was served upon the following parties via electronic means as listed on the court's ECF noticing system or by regular first class mail: Senior Care Centers, LLC Attn: Kevin O Halloran 600 N. Pearl Street, Suite 1100 Dallas, TX Trey A. Monsour Polsinelli PC 2950 N. Harwood, Suite 2100 Dallas, TX Jeremy R. Johnson Polsinelli PC rd Avenue, 42 nd Floor New York, NY Meredyth Kippes Counsel for U.S. Trustee 1100 Commerce St., Rm. 976 Dallas, TX Shari L. Heyen Counsel for Official Committee of Unsecured Creditors 1000 Louisiana, Ste Houston, TX John Weiss Counsel for CIBC Bank USA 190 S. LaSalle St., Ste Chicago, IL /s/ Shad Robinson Shad Robinson 7

8 Case bjh11 Doc 168 Filed 12/20/18 Entered 12/20/18 12:51:25 Page 8 of 9 Average billing for this account is $ for 12 months.

9 Average billing for this account Case bjh11 is $ Doc for months. Filed 12/20/18 Entered 12/20/18 12:51:25 Page 9 of 9