Case KLP Doc 866 Filed 11/02/17 Entered 11/02/17 22:43:45 Desc Main Document Page 1 of 73

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1 Document Page 1 of 73 Kenneth H. Eckstein (admitted pro hac vice) Robert T. Schmidt (admitted pro hac vice) Stephen D. Zide (admitted pro hac vice) Rachael L. Ringer (admitted pro hac vice) KRAMER LEVIN NAFTALIS & FRANKEL LLP 1177 Avenue of the Americas New York, New York Telephone: (212) Facsimile: (212) Cullen D. Speckhart (VSB No ) Olya Antle (VSB No ) WOLCOTT RIVERS GATES 919 E. Main Street, Suite 2010 Richmond, VA Bendix Road, Ste. 300 Virginia Beach, VA Telephone: (757) IN THE UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF VIRGINIA RICHMOND DIVISION ) In re: ) Chapter 11 ) TOYS R US, INC., et al., 1 ) Case No (KLP) ) Debtors. ) (Jointly Administered) ) ) APPLICATION OF THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS, PURSUANT TO SECTIONS 328 AND 1103 OF THE BANKRUPTCY CODE AND FEDERAL RULE OF BANKRUPTCY PROCEDURE 2014 FOR AN ORDER APPROVING THE RETENTION AND EMPLOYMENT OF KRAMER LEVIN NAFTALIS & FRANKEL LLP AS COUNSEL TO THE COMMITTEE NUNC PRO TUNC TO SEPTEMBER 26, 2017 The Official Committee of Unsecured Creditors (the Committee ) appointed in the above-captioned proceedings (the Chapter 11 Cases ) of Toys R Us, Inc. and its abovecaptioned debtor affiliates, as debtors and debtors in possession (collectively, the Debtors ), files this application (the Application ) for entry of an order substantially in the form 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, are set forth in the Debtors Motion for Entry of an Order (I) Directing Joint Administration of Chapter 11 Cases and (II) Granting Related Relief [Docket No. 10]. The location of the Debtors service address is One Geoffrey Way, Wayne, NJ

2 Document Page 2 of 73 attached hereto as Exhibit A (the Order ) authorizing the Committee to retain and employ Kramer Levin Naftalis & Frankel LLP ( Kramer Levin or the Firm ) as its counsel nunc pro tunc to September 26, In support of this Application, the Committee submits (i) the Declaration of Robert T. Schmidt, a partner at Kramer Levin, attached hereto as Exhibit B (the Schmidt Declaration ) and (ii) the Declaration of Ronald M. Tucker, on behalf of the Committee s co-chairperson, attached hereto as Exhibit C (the Client Declaration ). In further support of this Application, the Committee respectfully represents as follows: Jurisdiction and Venue 1. This Court has jurisdiction to consider this matter pursuant to 28 U.S.C. 157 and This is a core proceeding pursuant to 28 U.S.C. 157(b)(2). 2. Venue is proper before this Court pursuant to 28 U.S.C and Relief Requested 3. By this Application, the Committee seeks entry of the Order authorizing the retention and employment of Kramer Levin as its counsel in these Chapter 11 Cases effective as of September 26, The Committee requests that the Court approve the retention of Kramer Levin in accordance with the terms and conditions set forth herein and in the Schmidt Declaration. 4. The statutory bases for the relief requested in this Application are sections 328(a), and 1103 of title 11 of the United States Code, 11 U.S.C (the Bankruptcy Code ), Rules 2014(a) and 2016 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ), and Rules and of the Bankruptcy Local Rules of the United States Bankruptcy Court for the Eastern District of Virginia (the Local Rules ). Relevant Background 5. On September 18, 2017 (the Petition Date ), each of the Debtors commenced a voluntary case under chapter 11 of the Bankruptcy Code in this Court. The Debtors 2

3 Document Page 3 of 73 are authorized to operate their businesses and manage their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. 6. The Debtors Chapter 11 Cases have been consolidated for procedural purposes only and are being jointly administered pursuant to Bankruptcy Rule 1015(b) and Local Rule On September 26, 2017, the United States Trustee for the Eastern District of Virginia (the U.S. Trustee ), pursuant to sections 1102(a) and (b) of title 11 of the Bankruptcy Code, appointed the Committee to serve as the Committee for each Debtor and to represent the interests of all unsecured creditors in these Chapter 11 Cases. The members appointed to the Committee are: (i) The Bank of New York Mellon, (ii) Euler Hermes North America Insurance Co., (iii) Evenflo Company Inc., (iv) Huffy Corporation, (v) KIMCO Realty, (vi) LEGO Systems, Inc., (vii) Mattel, Inc., (viii) Simon Property Group, Inc., and (ix) Veritiv Operating Company. The Committee has appointed the following two members as the co-chairs: Mattel, Inc. and Simon Property Group, Inc. 8. At a meeting held on September 26, 2017, the Committee selected Kramer Levin to serve as its lead counsel. Kramer Levin s Qualifications 9. The Committee has selected Kramer Levin to perform all of the services necessary and desirable in these Chapter 11 Cases on behalf of the Committee. The Committee selected Kramer Levin primarily because Kramer Levin s corporate restructuring and bankruptcy department has extensive experience in the fields of bankruptcy and creditors rights and, in particular, has represented official creditors committees in some of the largest and most complex chapter 11 bankruptcy cases of recent years, including, among others: CHC Group Ltd., Arch Coal, Inc., NII Holdings, Inc., Residential Capital, L.L.C., Patriot Coal Corporation, Hostess Brands, 3

4 Document Page 4 of 73 Inc., WP Steel Venture, L.L.C., AES Eastern Energy, L.P., Evergreen Solar, Inc., Chrysler LLC (n/k/a Old Carco LLC), General Motors Corporation (n/k/a Motors Liquidation Company), Dura Automotive Systems, Inc., Capmark Financial Group, Inc., Magna Entertainment Corporation, Smurfit-Stone Container Corporation, and Dana Corporation, among others. 10. Furthermore, Kramer Levin s broad-based practice, which includes expertise in the areas of corporate and commercial law, litigation, tax, intellectual property and real estate, will enable it to represent fully the interests of the Committee in an efficient and effective manner. Scope of Services to be Provided 11. Kramer Levin is expected to render legal services that the Committee may request in order to discharge the Committee s responsibilities and further the interests of the Committee s constituents in these cases. In addition to acting as primary spokesman for the Committee, it is expected that Kramer Levin s services will include, without limitation, assisting, advising and representing the Committee with respect to the following matters: a. The administration of these cases and the exercise of oversight with respect to the Debtors affairs, including all issues in connection with the Debtors, the Committee and/or these Chapter 11 Cases; b. The preparation on behalf of the Committee of necessary applications, motions, objections, memoranda, orders, reports, and other legal papers; c. Appearances in Court, participation in litigation as a party-in-interest, and at statutory meetings of creditors to represent the interests of the Committee; d. The negotiation and evaluation of the use of cash collateral, any proposed debtor-in-possession financing and any other potential financing alternatives; e. The negotiation, formulation, drafting and confirmation of a plan or plans of reorganization or liquidation and matters related thereto; f. Investigation, directed by the Committee, of among other things, unencumbered assets, liabilities, and financial condition of the Debtors, 4

5 Document Page 5 of 73 prior transactions, and operational issues concerning the Debtors that may be relevant to these Chapter 11 Cases; g. The negotiation and formulation of any proposed sale of any of the Debtors assets, including pursuant to section 363 of the Bankruptcy Code; h. Communications with the Committee s constituents in furtherance of its responsibilities, including, but not limited to, communications required under section 1102 of the Bankruptcy Code; and i. The performance of all of the Committee s duties and powers under the Bankruptcy Code and the Bankruptcy Rules and the performance of such other services as are in the interests of those represented by the Committee. 12. As noted above, the Committee selected Kramer Levin as its lead counsel on the September 26, 2017 and requested that Kramer Levin immediately commence work on timesensitive matters and promptly devote substantial resources to the Debtors cases prior to submission and approval of this Application. Since its retention on September 26, 2017, Kramer Levin, on behalf of the Committee, has been focused on, among other things, (a) conducting diligence on the Debtors business operations, (b) reviewing the relief sought in the various first day and second day motions filed by the Debtors, (c) investigating the alleged liens securing the lenders collateral, and (d) investigating certain pre-petition transactions. Accordingly, the Committee requests approval of the Application nunc pro tunc to the date that Kramer Levin was retained on September 26, Statement Regarding Revised Guidelines 13. As this Court is aware, on June 11, 2013, the Executive Office of the United States Trustees (the EOUST ) adopted new Guidelines for Reviewing Applications for Compensation and Reimbursement of Expenses Filed under 11 U.S.C. 330 by Attorneys in Larger Chapter 11 Cases (the Revised Guidelines ). 2 2 By their terms, the Revised Guidelines apply to the [U.S. Trustee s] review of applications for compensation filed by attorneys in larger chapter 11 cases, and are intended as an update to the original Guidelines adopted by the EOUST in

6 Document Page 6 of Among other things, the Revised Guidelines require attorneys in certain larger chapter 11 cases to provide additional documentation and make significant new disclosures in connection with their retention under section 1103 and compensation under section 330 of the Bankruptcy Code. The Committee and Kramer Levin understand that the Revised Guidelines are applicable in these Chapter 11 Cases and intend to make a reasonable effort to comply with the Revised Guidelines both in connection with this Application and the interim and final fee applications to be filed by Kramer Levin in these Chapter 11 Cases. Professional Compensation 15. As further described in the Schmidt Declaration, Kramer Levin intends to seek compensation for professional services rendered on an hourly basis and reimbursement of expenses incurred in connection with these Chapter 11 Cases, subject to the Court s approval and in compliance with applicable provisions of the Bankruptcy Code, the Bankruptcy Rules, the Local Rules, and any procedures or orders of the Court as are applicable to these Chapter 11 Cases. 16. Kramer Levin s billing practices and rates are summarized below and are consistent with those generally governing the firm s representation of its other clients. 17. Kramer Levin s current hourly billing rates, which are charged the same for both bankruptcy and nonbankruptcy clients, are as follows: 3 Partners $850 - $1,250 Counsel $925 - $1,195 Special Counsel $840 - $965 Associates $460 - $890 Paraprofessionals $250 - $380 3 Kramer Levin s rates are adjusted annually starting with January 1 of each calendar year. The above listed billing rates are in effect until January 1,

7 Document Page 7 of Kramer Levin s billing rates are designed to compensate Kramer Levin fairly for the work of its professionals. The hourly fees are comparable to those charged by attorneys of similar experience and expertise for engagements of similar scope and complexity to these Chapter 11 Cases. 19. Kramer Levin s hourly billing rates are subject to periodic review and adjustments to reflect, among other things, changes in responsibilities and increased experience. Kramer Levin will file a supplemental affidavit with the Court describing any increase in its billing rates and provide not less than ten (10) business days notice of such increases to the Debtors, the Committee, and the U.S. Trustee Kramer Levin s hourly billing rates for professionals are not intended to, and do not, cover out-of-pocket expenses and certain elements of overhead that are typically billed separately. Accordingly, Kramer Levin regularly charges its clients for the expenses and disbursements incurred in connection with the client s case, including, inter alia, telecommunications, photocopying, postage and package delivery charges, court fees, transcript costs, travel expenses, expenses for working meals and computer-aided research. Kramer Levin intends to seek reimbursement for expenses incurred in connection with its representation of the Committee in accordance with Kramer Levin s normal reimbursement policies, subject to any modifications Kramer Levin is required to make to comply with the applicable provisions of the Bankruptcy Code, the Bankruptcy Rules, the Local Rules, guidelines established by the U.S. Trustee, and any procedures or other orders of the Court as are applicable to these Chapter 11 Cases. 4 Each September, there is a step-up of associate class to reflect an increase in each associate s class seniority. This annual step-up is not considered a rate increase as the billing rate among the applicable associate class does not change. 7

8 Document Page 8 of 73 Kramer Levin s Disinterestedness 21. Kramer Levin has informed the Committee that in its view it: a. does not hold or represent an interest adverse to the Committee, the Debtors or the estates in the Chapter 11 Cases; b. is a disinterested person as defined by section 101(14) of the Bankruptcy Code; and c. has no connection with the Committee, the Debtors, creditors, any other party in interest, their respective attorneys and accountants, the U.S. Trustee, or any person employed in the office of the U.S. Trustee in these Chapter 11 Cases, except as may be disclosed in the Schmidt Declaration. 22. Kramer Levin has fully informed the Committee of its ongoing representations as described in the Schmidt Declaration and the Committee has consented to Kramer Levin s continued representation of such entities in matters unrelated to these proceedings. 23. Kramer Levin has informed the Committee that Kramer Levin will conduct an ongoing review of its files to ensure that no conflicts or other disqualifying circumstances exist or arise in these Chapter 11 Cases. If any new relevant facts or relationships are discovered or arise, Kramer Levin will use reasonable efforts to identify such further developments and will promptly file a supplemental declaration, as required by Bankruptcy Rule 2014(a). 24. Based on the foregoing and the Schmidt Declaration, Kramer Levin is a disinterested person within the meaning of section 101(14) of the Bankruptcy Code, as required by section 327(a) of the Bankruptcy Code. Employment of Wolcott Rivers Gates 25. By separate application, the Committee is also seeking authority to employ Wolcott Rivers Gates ( Wolcott ) to serve as local counsel in these Chapter 11 Cases. The Committee has carefully considered this matter and determined that, given the size and complexity of these Chapter 11 Cases and the various interests involved, representation of the Committee by 8

9 Document Page 9 of 73 both Kramer Levin and Wolcott is necessary, advisable, and in the best interests of the Committee and the Debtors estates. Kramer Levin and Wolcott will coordinate responsibilities and services rendered to the Committee to avoid any unnecessary duplication and inefficiencies. Supporting Authority 26. The Committee seeks to appoint Kramer Levin as its counsel in accordance with sections 328(a) and 1103 of the Bankruptcy Code. Section 328(a) authorizes a committee appointed under section 1102 of the Bankruptcy Code, with the court s approval, to employ a professional person under section 1103 of the Bankruptcy Code, as the case may be, on any reasonable terms and conditions of employment, including on a retainer, on an hourly basis, on a fixed or percentage fee basis, or on a contingent fee basis. Section 1103 of the Bankruptcy Code, in turn, requires that an attorney employed to represent a committee may not represent any other entity having an adverse interest in connection with the case. 27. The Committee submits that for all the reasons stated above and in the Schmidt Declaration, the retention and employment of Kramer Levin as counsel to the Committee is warranted under sections 328(a) and Further, as described in the Schmidt Declaration, Kramer Levin does not represent any entity in connection with the Debtors cases other than the Committee, is a disinterested person as that term is defined in section 101(14) of the Bankruptcy Code, and does not represent or hold any interest adverse to the interests of the Debtors estates with respect to the matters for which it is to be employed. Notice 28. Notice of this Application has been provided in compliance with this Court s Order (I) Establishing Certain Notice, Case Management, and Administrative Procedures and (II) Granting Related Relief (D.I. 129). The Committee submits that, in light of the nature of the relief requested, no other or further notice need be given. 9

10 Document Page 10 of 73 No Previous Request 29. No previous request for the relief sought herein has been made by the Committee to this or any other court. WHEREFORE the Committee respectfully requests that the Court grant the relief requested herein and such other and further relief as it deems just and proper. Dated: November 2, 2017 THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF TOYS R US, INC., et al. By: /s/ Ronald M. Tucker Ronald M. Tucker, not in his individual capacity, but solely on behalf of Simon Property Group, L.P., in its capacity as Co- Chair of the Official Committee of Unsecured Creditors of Toys R Us, Inc., et al. 10

11 Document Page 11 of 73 Respectfully submitted, /s/ Cullen D. Speckhart Cullen D. Speckhart (VSB No ) Olya Antle (VSB No ) WOLCOTT RIVERS GATES 919 E. Main Street, Suite 2010 Richmond, VA Bendix Road, Ste. 300 Virginia Beach, VA Telephone: (757) and- Kenneth H. Eckstein (admitted pro hac vice) Robert T. Schmidt (admitted pro hac vice) Stephen D. Zide (admitted pro hac vice) Rachael L. Ringer (admitted pro hac vice) KRAMER LEVIN NAFTALIS & FRANKEL LLP 1177 Avenue of the Americas New York, New York Telephone: (212) Facsimile: (212) Proposed Counsel to Official Committee of Unsecured Creditors 11

12 Document Page 12 of 73 EXHIBIT A Proposed Order

13 Document Page 13 of 73 Kenneth H. Eckstein (admitted pro hac vice) Robert T. Schmidt (admitted pro hac vice) Stephen D. Zide (admitted pro hac vice) Rachael L. Ringer (admitted pro hac vice) KRAMER LEVIN NAFTALIS & FRANKEL LLP 1177 Avenue of the Americas New York, New York Telephone: (212) Facsimile: (212) Cullen D. Speckhart (VSB No ) Olya Antle (VSB No ) WOLCOTT RIVERS GATES 919 E. Main Street, Suite 2010 Richmond, VA Bendix Road, Ste. 300 Virginia Beach, VA Telephone: (757) IN THE UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF VIRGINIA RICHMOND DIVISION ) In re: ) Chapter 11 ) ) TOYS R US, INC., et al., 1 ) Case No (KLP) ) Debtors. ) (Jointly Administered) ) ) ORDER APPROVING THE RETENTION AND EMPLOYMENT OF KRAMER LEVIN NAFTALIS & FRANKEL LLP AS COUNSEL TO THE COMMITTEE NUNC PRO TUNC TO SEPTEMBER 26, 2017 Upon the Application (the Application ) 2 of the Official Committee of Unsecured Creditors (the Committee ) of the above captioned debtors and debtors in possession (the Debtors ) for an order, pursuant to Sections 328 and 1103 of title 11 of the United States Code (the Bankruptcy Code ), Rules 2014(a) and 2016 of the Federal Rules of 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, are set forth in the Debtors Motion for Entry of an Order (I) Directing Joint Administration of Chapter 11 Cases and (II) Granting Related Relief [Docket No. 10]. The location of the Debtors service address is One Geoffrey Way, Wayne, NJ Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Application.

14 Document Page 14 of 73 Bankruptcy Procedure (the Bankruptcy Rules ), and Rules and of the Local Rules of Bankruptcy Practice of the United States Bankruptcy Court for the Eastern District of Virginia (the Local Rules ), authorizing the Committee to employ and retain Kramer Levin Naftalis & Frankel LLP ( Kramer Levin ) as the Committee s lead bankruptcy counsel in these Chapter 11 cases, nunc pro tunc to September 26, 2017, all as more fully described in the Application; and upon consideration of the Schmidt Declaration and the Client Declaration; and the Court having jurisdiction to consider the matters raised in the Application pursuant to 28 U.S.C. 1334; and it having authority to hear the matters raised in the Application pursuant to 28 U.S.C. 157; and it having venue pursuant to 28 U.S.C and 1409; and the Court having found that notice of the Application has been given as set forth in the Application and that such notice is adequate and sufficient and no further notice need to be given; and the Court having reviewed the Application, the Schmidt Declaration and the Client Declaration; and the relief requested in the Application being in the best interests of the Debtors estates; and the Court having determined that there exists the required basis for the relief requested in the Application; and after due deliberation, and sufficient cause appearing therefor; It is hereby ORDERED that: 1. The Application is hereby granted to the extent set forth herein. 2. In accordance with sections 328(a) and 1103 of the Bankruptcy Code, Bankruptcy Rules 2014(a) and 2016, and Local Rules and , the Committee is hereby authorized and empowered to employ Kramer Levin as its counsel in these chapter 11 Cases, nunc pro tunc to September 26, 2017, and Kramer Levin is authorized to perform the services set forth in the Application and the Schmidt Declaration. 3. Kramer Levin shall be compensated for its services and reimbursed for any reasonable and necessary expenses and disbursements in accordance with the procedures set forth 2

15 Document Page 15 of 73 in sections 330 and 331 of the Bankruptcy Code, the applicable Bankruptcy Rules, Local Rules for the Eastern District of Virginia, and any other applicable procedures and orders of the Court. Kramer Levin also intends to make a reasonable effort to comply with the U.S. Trustee s Guidelines for Reviewing Applications for Compensation and Reimbursement of Expenses Filed Under 11 U.S.C. 330 by Attorneys in Larger Chapter 11 Cases Effective as of November 1, 2013 (the Revised UST Guidelines ) and any procedures or other orders of the Court as are applicable to these Chapter 11 Cases. 4. The Committee is authorized and empowered to take all actions necessary to effectuate the relief granted by this Order. 5. The terms and conditions of this Order shall be immediately effective and enforceable upon its entry. 6. Prior to any increases in rates as set forth in paragraph 17 of the Application, Kramer Levin shall give ten (10) business days notice to the Committee, the Debtors, and the United States Trustee, which notice shall be filed with the Court. 7. In the event that there is any inconsistency between the Declaration, Application, or Order, the Order shall govern. 8. This Court shall retain exclusive jurisdiction to hear and determine all matters arising from or related to the implementation, interpretation and/or enforcement of this Order. Dated:, 2017 Richmond, Virginia THE HONORABLE KEITH L. PHILLIPS UNITED STATES BANKRUPTCY JUDGE 3

16 Document Page 16 of 73 WE ASK FOR THIS: /s/ Cullen D. Speckhart (VSB No ) Olya Antle (VSB No ) WOLCOTT RIVERS GATES 919 E. Main Street, Suite 2010 Richmond, VA Bendix Road, Ste. 300 Virginia Beach, VA Telephone: (757) and- Kenneth H. Eckstein (admitted pro hac vice) Robert T. Schmidt (admitted pro hac vice) Stephen D. Zide (admitted pro hac vice) Rachael L. Ringer (admitted pro hac vice) KRAMER LEVIN NAFTALIS & FRANKEL LLP 1177 Avenue of the Americas New York, New York Telephone: (212) Facsimile: (212) Proposed Counsel to Official Committee of Unsecured Creditors 4

17 Document Page 17 of 73 EXHIBIT B Schmidt Declaration 5

18 Document Page 18 of 73 Kenneth H. Eckstein (admitted pro hac vice) Robert T. Schmidt (admitted pro hac vice) Stephen D. Zide (admitted pro hac vice) Rachael L. Ringer (admitted pro hac vice) KRAMER LEVIN NAFTALIS & FRANKEL LLP 1177 Avenue of the Americas New York, New York Telephone: (212) Facsimile: (212) Cullen D. Speckhart (VSB No ) Olya Antle (VSB No ) WOLCOTT RIVERS GATES 919 E. Main Street, Suite 2010 Richmond, VA Bendix Road, Ste. 300 Virginia Beach, VA Telephone: (757) IN THE UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF VIRGINIA RICHMOND DIVISION ) In re: ) Chapter 11 ) TOYS R US, INC., et al., 1 ) Case No (KLP) ) Debtors. ) (Jointly Administered) ) ) DECLARATION OF ROBERT T. SCHMIDT IN SUPPORT OF APPLICATION OF THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS, PURSUANT TO SECTION 328 AND 1103 OF THE BANKRUPTCY CODE AND FEDERAL RULE OF BANKRUPTCY PROCEDURE 2014 FOR AN ORDER APPROVING THE RETENTION AND EMPLOYMENT OF KRAMER LEVIN NAFTALIS & FRANKEL LLP AS COUNSEL TO THE COMMITTEE NUNC PRO TUNC TO SEPTEMBER 26, 2017 ROBERT T. SCHMIDT makes this declaration under 28 U.S.C. 1746, and states the following: 1. I am an attorney at law and in good standing to practice in the State of New York and before the United States District Court for each of the Southern and Eastern Districts of 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, are set forth in the Debtors Motion for Entry of an Order (I) Directing Joint Administration of Chapter 11 Cases and (II) Granting Related Relief [Docket No. 10]. The location of the Debtors service address is One Geoffrey Way, Wayne, NJ

19 Document Page 19 of 73 New York, and I have been admitted to appear pro hac vice in these Chapter 11 Cases. 2. I am a partner with the law firm of Kramer Levin Naftalis & Frankel LLP ( Kramer Levin ), which is located at 1177 Avenue of the Americas, New York, New York I am duly authorized to make this declaration ( Declaration ) on behalf of Kramer Levin. 4. I submit this Declaration in support of the application (the Application ) 2 of the Official Committee of Unsecured Creditors (the Committee ) of the above captioned debtors and debtors in possession (the Debtors ) for entry of an order authorizing the retention and employment of Kramer Levin as counsel to the Committee, nunc pro tunc to September 26, 2017 (the Engagement ). 5. Unless otherwise stated in this Declaration, I have personal knowledge of the facts as set forth herein. To the extent that any information disclosed herein requires subsequent amendment and/or modification, Kramer Levin will use reasonable efforts to file a supplemental declaration reflecting such amended and/or modified information. Statement Regarding Revised Guidelines 6. Kramer Levin understands that the Revised Guidelines are applicable in these Chapter 11 Cases and intends to make a reasonable effort to comply with the Revised Guidelines in connection with both this Application and the fee requests to be filed by Kramer Levin in these Chapter 11 Cases. Scope of Services 7. Kramer Levin is willing to serve as the Committee s bankruptcy counsel in 2 Capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Application. 2

20 Document Page 20 of 73 connection with these Chapter 11 Cases and to perform all necessary legal services in connection therewith, as is detailed in the Application. Since its retention on September 26, 2017, at the request of the Committee, Kramer Levin immediately commenced work on time-sensitive matters and promptly devoted substantial resources to the Debtors cases prior to submission and approval of this Application. Accordingly, the Committee requests approval of the Application nunc pro tunc to the date that Kramer Levin was retained on September 26, Billing and Compensation 8. Kramer Levin has agreed to receive compensation and reimbursement of expenses in accordance with its standard billing practices and subject to this Court s approval, pursuant to the Bankruptcy Code, the Bankruptcy Rules, the Local Rules, and any procedures or orders of the Court as are applicable to these Chapter 11 Cases. 9. Kramer Levin s standard billing practices and rates, which are described below, are consistent with those generally governing the firm s representation of its other clients. 10. Kramer Levin s hourly rates, which are charged the same for both bankruptcy and nonbankruptcy clients, are as follows: 3 Partners $850-$1,250 Counsel $925-$1,195 Special Counsel $840-$965 Associates $460-$890 Paraprofessionals $250-$ Hourly rates vary with the experience and seniority of the individuals 3 Kramer Levin s rates are adjusted annually starting with January 1 of each calendar year. The above listed billing rates are in effect until January 1,

21 Document Page 21 of 73 assigned. These hourly rates are set at a level designed to compensate Kramer Levin fairly for the work of its attorneys and paraprofessionals and to cover fixed and routine overhead expenses. The hourly fees are comparable to those charged by attorneys of similar experience and expertise for engagements of similar scope and complexity to these Chapter 11 Cases. 12. The rate structure provided by Kramer Levin is substantially similar to (a) the rates that Kramer Levin charges for other similar types of representations or (b) the rates that other comparable counsel would charge to do work substantially similar to the work Kramer Levin will perform in these Chapter 11 Cases. 13. Kramer Levin s hourly billing rates are subject to periodic adjustments to reflect economic and other conditions. If at any time Kramer Levin increases the rates for its services in connection with the Engagement, Kramer Levin will file a supplemental affidavit with the Court describing such increases and provide notice of such increases to the Debtors, the Committee, and the U.S. Trustee It is Kramer Levin s policy to charge clients for reasonable non-overhead expenses incurred by it in connection with representation of a client in a given matter. Such expenses include, without limitation, travel costs, telecommunications, express or overnight mail, messenger service, photocopying costs, document processing, overtime meals, computer researchrelated expenses, court fees, transcript costs and, in general, all identifiable expenses that would not have been incurred except for representation of a particular client. Kramer Levin intends to seek reimbursement for expenses incurred in connection with the Engagement in accordance with Kramer Levin s normal reimbursement policies, subject to any modifications that may be required 4 Each September, there is a step-up of associate class to reflect an increase in each associate s class seniority. This annual step-up is not considered a rate increase as the billing rate among the applicable associate class does not change. 4

22 Document Page 22 of 73 to make to comply with the Bankruptcy Code, the Bankruptcy Rules, and the Local Rules and any procedures or orders of the Court as are applicable to these Chapter 11 Cases. 15. Kramer Levin understands that its compensation is subject to approval by this Court and has agreed to accept as compensation such sums as are allowed by the Court. Kramer Levin understands, and has explained to the Committee, that the Order (I) Establishing Procedures for Interim Compensation and Reimbursement of Expenses for Retained Professionals and (II) Granting Related Relief [Docket No. 746], permits interim payment of eighty percent (80%) of all professional fees and one-hundred percent (100%) of all authorized expenses on a monthly basis. Kramer Levin expects to receive monthly payments from the Debtors in accordance with the procedures set forth in the interim compensation order and any other procedures or orders of the Court as are applicable to these Chapter 11 Cases. 16. Kramer Levin intends to maintain detailed, contemporaneous time records and apply to the Court for payment of compensation and reimbursement of expenses in accordance with applicable provisions of the Bankruptcy Code, the Bankruptcy Rules, the Local Rules, and any procedures or orders of the Court as are applicable to these Chapter 11 Cases. 17. No agreement exists, nor will any be made, to share any compensation received by Kramer Levin for its services on behalf of the Committee with any other person or firm. Kramer Levin s Disclosure Procedures 18. In preparing its Application and this Declaration, Kramer Levin used a set of procedures, developed to ensure compliance with the requirements of the Bankruptcy Code, the Bankruptcy Rules and the Local Rules applying to the professionals retained by a committee, including compliance with section 1103 of the Bankruptcy Code. Pursuant to this protocol, 5

23 Document Page 23 of 73 Kramer Levin personnel, under my general supervision, undertook the following actions to determine whether it had any conflicts or other relationships that might cause it not to be disinterested or to hold or represent an interest adverse to the Debtors, their estates or the Committee: a. We obtained from the Debtors representatives a comprehensive list of the names and types of entities who may have contacts or connections with the Debtors (the Retention Checklist ). The categories of names that comprise the Retention Checklist is attached hereto as Schedule 1. 5 We also supplemented this list with additional names of entities relating to certain ad hoc groups and other parties-in-interest in these Chapter 11 Cases, as well as the names of the Committee members. b. Kramer Levin s conflicts department compared the Retention Checklist to the names that Kramer Levin has compiled into a master client database from its conflict check database (the Client Database ). The Client Database is comprised of the names of the entities for which any time has been billed and includes the names of each current or former client, the name of the parties who are or were related or adverse to such current or former client, and the names of the Kramer Levin personnel who are or were responsible for current or former matters for such client. It is the policy of Kramer Levin that no new matter may be accepted or opened within Kramer Levin without completing and submitting to those charged with maintaining the conflict check system and adverse party index the information necessary to check each such matter for conflicts, including the identity of the prospective client, the matter and related and adverse parties. Accordingly, the database is regularly updated for every new matter undertaken by Kramer Levin. The scope of the system is a function of the completeness and accuracy of the information submitted by the attorney opening a matter. c. We identified any matches between the Retention Checklist and the Client Database, together with the names of the respective Kramer Levin professionals responsible for the identified entities on the Client Database. Kramer Levin attorneys then reviewed these matches and deleted obvious name coincidences and individuals or entities that were adverse to Kramer Levin s clients in both this matter and the matters referenced on the list. Those connections in which Kramer Levin had represented the client or an affiliate within the last two years were compiled for purposes of being disclosed in this Declaration. 5 Upon information and belief, Schedule 1 is being relied upon by the Debtors professionals in conducting their searches in connection with their retention applications. 6

24 Document Page 24 of 73 d. In addition, I caused the Retention Checklist to be circulated by electronic mail to all Kramer Levin attorneys to determine whether any attorney has any relationship with any such party in interest in these Chapter 11 Cases, including any connections with the U.S. Trustee and the Bankruptcy Judge assigned to these Chapter 11 Cases. 19. Kramer Levin will review its files periodically during the pendency of these Chapter 11 Cases to ensure that no conflicts or other disqualifying circumstances exist or arise. If any new relevant facts or relationships are discovered or arise, Kramer Levin will use reasonable efforts to identify such further developments and will promptly file a supplemental declaration, as required by Bankruptcy Rule 2014(a). Kramer Levin s Disinterestedness 20. As a result of Kramer Levin s review of the Retention Checklist and the Client Database, the following connections warrant disclosure: 6 a. Kramer Levin represented the Official Committee Of Unsecured Creditors of Arch Coal Inc. (the Arch Coal Committee ). Throughout the representation of the Arch Coal Committee, there were seven creditors who have joined the Arch Coal Committee, including two who are identified in the Retention Checklist. U.S. Bank (defined and described below) and Wilmington Savings Fund Society, FSB (identified on the Retention Checklist under the category of Indenture Trustees ) were at some point in time members of the Arch Coal Committee. Fees collected on account of Kramer Levin s representation the Arch Coal Committee comprised approximately 1.27% of Kramer Levin s revenues in the calendar year of All such fees relating to representation of the Arch Coal Committee during this time were paid directly by Arch Coal Inc., and not by individual members of the Arch Coal Committee. Kramer Levin believes that its representation of the Arch Coal Committee does not affect its representation of the Committee in these Chapter 11 Cases. b. Kramer Levin represents a group of holders of Caesars Entertainment Corporation s first lien bond debt (the Caesars Group ) in connection with the chapter 11 cases of Caesars Entertainment ( Caesars ) and certain of its affiliates. Throughout the representation of the Caesars Group, there have been over fifteen bondholders who have joined the Caesars Group, 6 Fees collected from each of the parties identified comprised less than 1.0% of Kramer Levin s revenues for the period January 1, 2016 through August 31, 2017, unless otherwise indicated herein. 7

25 Document Page 25 of 73 including several who are identified in the Retention Checklist. Brigade Capital Management LP (identified on the Retention Checklist under the category of Banking Relationships ), JP Morgan (defined and described below), and Redwood Capital Management LLC (identified on the Retention Checklist under the category of Lenders ) were at different points in time members of the Caesars Group. Fees collected on account of Kramer Levin s representation of Caesars Group comprised approximately 3.07% of Kramer Levin s revenues for the calendar year of 2016 and 4.39% of Kramer Levin s revenues for the calendar year of 2017 (through August 31). All such fees relating to representation of the Caesars Group during this time were paid directly by Caesars, and not by individual members of the Caesars Group. Kramer Levin believes that its representation of the Caesars Group does not affect its representation of the Committee in these Chapter 11 Cases. c. Kramer Levin represents a group of second lien noteholders (the EFIH Group ) of Energy Future Intermediate Holding Co. LLC and certain affiliates (collectively, EFIH ). Throughout the representation of EFIH Group, there have been over forty-five bondholders who have joined the EFIH Group, including several who are identified in the Retention Checklist. CarVal Investors, LLC (identified on the Retention Checklist under the category of Lenders ), Deutsche Bank (defined and described below), Grantham, Mayo, Van Otterloo & Co. LLC (identified on the Retention Checklist under the category of Lenders ), Marathon (defined and described below), Sound Point (defined and described below), and Taconic (defined and described below) have at different points in time been members of the EFIH Group. Fees collected on account of our representation of the EFIH Group comprised approximately 3.19% of Kramer Levin s revenues for the calendar year of 2017 (through August 31). All such fees relating to representation of the EFIH Group during this time were paid directly by EFIH, and not by individual members of the EFIH Group. Kramer Levin believes that its representation of the EFIH Group does not affect its representation of the Committee in these Chapter 11 Cases. d. Kramer Levin represents bondholders and a trustee in connection with Puerto Rico s restructuring and bankruptcy proceedings (the Puerto Rico Representations ). Angelo Gordon & Co LP (identified on the Retention Checklist under the category of Lenders ), BlueMountain Capital Management LLC (identified on the Retention Checklist under the category of Lenders ), an affiliate of Franklin Mutual (defined and described below), Goldman Sachs (defined and described below), Marathon (defined and described below), Redwood Capital Management LLC (identified on the Retention Checklist under the category of Lenders ), and US Bank (identified on the Retention Checklist under the category of Banking Relationships ) have at different points in time been part of this representation. Fees collected on account of our representation of these 8

26 Document Page 26 of 73 parties in connection with Puerto Rico s restructuring and bankruptcy proceedings comprised approximately 2.08% of Kramer Levin s revenues for the calendar year of 2016 and 3.2% of Kramer Levin s revenues for the calendar year of 2017 (through August 31). Kramer Levin believes that its representation of these parties does not affect its representation of the Committee in these Chapter 11 Cases. e. Bank of America, National Association is identified on the Retention Checklist under the category of Banking Relationships. The Debtors have a banking relationship with Bank of America, National Association and certain of its affiliates (collectively, Bank of America ) which includes Bank of America acting as (i) a lender, an administrative agent, and collateral agent under the prepetition ABL facility and term loan borrowed by Toys R Us Delaware Inc. ( Toys-DE ), and (ii) a dealer under the senior secured notes issued by TRU Taj LLC and TRU Taj Finance, Inc. (collectively, TRU Taj ). In matters wholly unrelated to these Chapter 11 Cases, Kramer Levin represents Bank of America and certain of its affiliates in connection with bankruptcy, corporate, real estate, and litigation matters. Kramer Levin believes that these representations of the Bank of America entities have not and will not affect its representation of the Committee in these proceedings. f. Bank of New York Mellon ( BNY ) is identified on the Retention Checklist under the category of Banking Relationships and is identified as one of the Debtors top 50 unsecured creditors. BNY is the indenture trustee under the Debtors prepetition senior secured notes issued by Toys R Us Inc. ( Toys-Parent ) and prepetition debentures issued by Toys-DE. BNY is also a member of the Committee. In matters wholly unrelated to these Chapter 11 Cases, Kramer Levin represents BNY and certain of its affiliates (collectively, the BNY Entities ) in connection with bankruptcy and corporate finance matters, as agent or participant in various bank groups, and as indenture trustee for various bonds not issued by the Debtors or their non-debtor affiliates. In addition, in matters wholly unrelated to these Chapter 11 Cases, BNY has previously served as a member of official committees of unsecured creditors which Kramer Levin formerly represented. Kramer Levin believes that these representations of the BNY Entities have not and will not affect its representation of the Committee in these proceedings. g. Citibank NA is identified on the Retention Checklist under the category of Banking Relationship. The Debtors have a banking relationship with Citibank NA and certain of its affiliates (collectively, Citigroup ) which includes Citigroup acting as (i) a lender under the prepetition ABL facility and term loan borrowed by Toys-DE and (ii) a dealer under the senior secured notes issued by TRU Taj. In matters wholly unrelated to these Chapter 11 Cases, Kramer Levin represents Citigroup with respect to various bankruptcy, corporate, litigation, tax, land use, intellectual property 9

27 Document Page 27 of 73 and ERISA matters. Kramer Levin also uses Citibank N.A. as its principal commercial bank. Kramer Levin believes that its representation of Citigroup has not and will not affect its representation of the Committee in these proceedings. h. Deutsche Bank and certain of its affiliates (collectively, Deutsche Bank ) are identified on the Retention Checklist under the category of Banking Relationships. The Debtors have a banking relationship with Deutsche Bank which includes Deutsche Bank acting as (i) a lender under the prepetition ABL facility and term loan borrowed by Toys-DE and (ii) a dealer under the senior secured notes issued by TRU Taj. In matters wholly unrelated to these Chapter 11 Cases, Kramer Levin represents and formerly represented Deutsche Bank in connection with bankruptcy and corporate matters. As mentioned above, Kramer Levin also represented Deutsche Bank in connection with its membership in the EFIH Group. Kramer Levin believes that these representations of the Deutsche Bank entities have not and will not affect its representation of the Committee in these proceedings. i. Franklin Mutual Advisors LLC ( Franklin Mutual ) is identified in the Retention Checklist under the category of Lenders. Franklin Mutual is a lender under the prepetition term loan borrowed by Toys-DE. In matters wholly unrelated to these Chapter 11 Cases, Kramer Levin represents Franklin Mutual in connection with bankruptcy matters. Franklin Mutual also served as a member of the Caesars Group and an affiliate of Franklin Mutual serves as a member of the Puerto Rico Representations. Kramer Levin believes that these representations of Franklin Mutual have not and will not affect its representation of the Committee in these proceedings. j. Goldman Sachs and certain of its affiliates (collectively, Goldman Sachs ) are identified on the Retention Checklist under the category of Banking Relationships. The Debtors have a banking relationship with Goldman Sachs which includes Goldman Sachs acting as (i) a lender under the prepetition ABL facility and term loan borrowed by Toys-DE and (ii) a dealer under the senior secured notes issued by TRU Taj. In matters wholly unrelated to the Debtors, Kramer Levin currently represents and has formerly represented certain parties that are or may be otherwise directly or indirectly affiliated with Goldman Sachs and its affiliates in connection with bankruptcy, corporate and litigation matters. Additionally, as mentioned above, Kramer Levin formerly represented Goldman Sachs in connection with their previous membership in the Puerto Rico Representations. Kramer Levin believes that its representation of Goldman Sachs has not affected and will not affect its representation of the Committee in these proceedings. k. Johnson & Johnson is identified on the Retention Checklist under the category of Vendors. Kramer Levin currently represents Johnson & Johnson in various litigation matters that are wholly unrelated to these 10

28 Document Page 28 of 73 Chapter 11 Cases. Kramer Levin believes that its representation of Johnson & Johnson has not and will not affect its representation of the Committee in these proceedings. l. JP Morgan Chase and certain of its affiliates (collectively, JP Morgan ) are identified on the Retention Checklist under the category of Banking Relationships. The Debtors have a banking relationship with JP Morgan which includes JP Morgan acting (i) as lender and syndication agent under the prepetition ABL facility and term loan borrowed by Toys-DE and (ii) a dealer under the senior secured notes issued by TRU Taj. In matters wholly unrelated to these Chapter 11 Cases, Kramer Levin represents and formerly represented JP Morgan in connection with bankruptcy, corporate, and real estate matters. JP Morgan has also served as a member of the Caesars Group. Kramer Levin believes that these representations of JP Morgan have not and will not affect its representation of the Committee in these proceedings. m. LF Products Pte. Ltd. ( LF Products ) is identified on the Retention Checklist under the category of Vendors. Upon information and belief, LF Products is an entity affiliated with Li & Fung Limited ( L&F ). Kramer Levin currently represents and has represented L&F and/or certain of its affiliates in bankruptcy, corporate and intellectual matters wholly unrelated to the Debtors and these Chapter 11 Cases. In addition, Fung Retailing Limited ( Fung Retailing ), an affiliate of L&F, owns a 15% minority interest in Toys (Labuan) Holding Limited (BVI) ( Toys Holding ) which is a non-debtor, indirect subsidiary of TRU Asia, LLC. Kramer Levin briefly conferred with Fung Retailing prior to and shortly after the occurrence of the Petition Date. Kramer Levin did not open a new client matter number and did not bill L&F for any of the aforementioned discussions, which were provided as a courtesy to L&F. Kramer Levin does not represent and will not represent this party in connection with the Chapter 11 Cases. Kramer Levin believes that these representations and discussions have not and will not affect its representation of the Committee in these proceedings. n. Marathon Asset Management LP ( Marathon ) is identified in the Retention Checklist under the category of Lenders. Marathon is a lender under the prepetition term loan borrowed by Toys-DE. In matters wholly unrelated to these Chapter 11 Cases, Kramer Levin represents and/or formerly represented Marathon in connection with bankruptcy and employment matters. Marathon also served as a member of the Puerto Rico Representations and the EFIH Group. Kramer Levin believes that these representations of Marathon have not and will not affect its representation of the Committee in these proceedings. 7 7 Marathon left the EFIH Group prior to the start of