mew Doc 4174 Filed 01/28/19 Entered 01/28/19 19:22:04 Main Document Pg 1 of 43

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1 Pg 1 of 43 PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP 1285 Avenue of the Americas New York, New York Telephone: +1 (212) Facsimile: +1 (212) Alan W. Kornberg Kyle J. Kimpler John T. Weber Michael J. Colarossi Counsel to W Wind Down Co LLC UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK x In re: : Chapter 11 : WESTINGHOUSE ELECTRIC COMPANY : Case No (MEW) LLC, et al., : : (Jointly Administered) Debtors. 1 : x WIND DOWN CO S OBJECTION TO MOTIONS OF TOSHIBA CORPORATION AND ITS AFFILIATES REQUESTING ALLOWANCE AND PAYMENT OF ADMINISTRATIVE EXPENSE CLAIMS TO THE HONORABLE MICHAEL E. WILES, UNITED STATES BANKRUPTCY JUDGE: 1 Pursuant to the Order (I) Consolidating the Administration of Certain Remaining Matters at the Lead Case; (II) Entering a Final Decree Closing Certain Affiliate Cases; (III) and Granting Related Relief [ECF No. 3956], entered on September 25, 2018, many of the Debtors Chapter 11 Cases were closed. The Debtors in the remaining chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, are: Westinghouse Electric Company LLC (0933), Stone & Webster Services LLC (5448), WEC Carolina Energy Solutions, Inc. (8735), WEC Carolina Energy Solutions, LLC (2002), WECTEC Global Project Services Inc. (8572), WECTEC LLC (6222), and WECTEC Staffing Services LLC (4135). The Reorganized Debtors principal offices are located at 1000 Westinghouse Drive, Cranberry Township, Pennsylvania

2 Pg 2 of 43 W Wind Down Co LLC ( Wind Down Co ), the company established on the Effective Date 2 and responsible for administering the Debtors obligations under the Plan, as directed by the Plan Oversight Board, hereby objects to the (i) Motion of Toshiba Corporation for Entry of an Order (I) Directing Immediate Payment of an Administrative Expense Claim Pursuant to 11 U.S.C. 503(a), 503(b)(1)(A), and 503(b)(3)(D); or (II) in the Alternative, Allowing Toshiba Corporation s Amended Proof of Claim [ECF No. 3742] (the Motion ), (ii) Toshiba America Energy Systems Corporation s Request for Allowance and Payment of Administrative Expense [ECF No. 3826], and (iii) TurbinePROs, LLC s Request for Allowance and Payment of Administrative Expense [ECF No. 3823], and respectfully represents as follows: PRELIMINARY STATEMENT 1. As this Court is aware, Toshiba Corporation ( Toshiba ) and its affiliates were key parties in these Chapter 11 Cases, integrally involved with the formulation of the Plan. The Plan was premised upon a global compromise and settlement of all disputes among the Debtors [and] the PSA Parties of which Toshiba is one for the express purpose of avoiding the delay, expense, and uncertainty associated with expensive potential litigation. Plan at 5.3 (emphasis added). Toshiba s claims were a chief component of that concern, and resolving them was essential to the overall success of the Plan. The Plan s express language makes this clear, as it specifically identifies the benefits of forestalling litigation relating to the allowance and amount 2 Capitalized terms used herein but not otherwise defined shall have the meanings ascribed to them in the Modified Second Amended Joint Chapter 11 Plan of Reorganization, filed by the Debtors on March 28, 2018 [ECF No. 2986] (the Plan ). 2

3 Pg 3 of 43 of the... Claims and Interests of Toshiba and the Toshiba Affiliates as one justification for the global settlement and for the proposed treatment of Toshiba s myriad claims under the Plan. Id. 2. Yet here we are litigating over Toshiba s and the Toshiba Affiliates purported claims. Seven months after Toshiba executed the Plan Support Agreement, and five months after this Court confirmed the Plan, Toshiba filed a motion seeking reimbursement of $8.7 million in fees and expenses it incurred between the Petition Date and January 2018 to maintain certain prepetition letters of credit (the L/Cs ) for the benefit of the Project Owners. 3 It is apparent from the Motion that Toshiba believes the Plan does not address these amounts. But the Plan fully resolved and addressed Toshiba s claims against the estates, which (by virtue of the negotiated compromises on which the Plan is based) expressly include claims related to L/C fees. 3. Nevertheless, Toshiba argues that costs of maintaining these L/Cs for a period of time during the Chapter 11 Cases are actual, necessary costs of preserving the estates and that Toshiba s decision to pay them constitutes a substantial contribution to the estates that is somehow not picked up by the Plan. But neither the Debtors nor their estates are liable for such costs. The Debtors were not party to the L/Cs, or identified as beneficiaries thereunder. There is no agreement or document that obliges the Debtors to reimburse Toshiba for such amounts, and that includes the Plan Support Agreement and the Plan itself. Indeed, Toshiba s Motion fails to point to any provision in any document that would demonstrate that the Debtors had any obligation 3 In addition to asserting administrative expense claims related to the L/C fees, two Toshiba Affiliates Toshiba America Energy Systems Corporation and TurbinePROs LLC have asserted administrative expense claims in the amounts of $246,517 and $65,840, respectively, related to other purported postpetition services that were known at the time Toshiba and the Toshiba Affiliates entered into the Plan Support Agreement. See ECF Nos and Wind Down Co objects to these claims on the basis that such claims were resolved pursuant to the Plan, as further described in this Objection. 3

4 Pg 4 of 43 to reimburse Toshiba for the L/C fees. This alone disposes of any claim whether administrative or unsecured that Toshiba might assert. 4. Moreover, Toshiba did not cause these L/Cs to be posted (or incur the fees and expenses at issue in maintaining them) for the Debtors benefit. Rather, Toshiba did so to protect itself from substantial liability that Toshiba owed to the Project Owners. As the Motion explains, prior to the Petition Date, Westinghouse faced potential defaults under the EPC Agreements that governed the construction of the U.S. AP1000 Projects. Because Toshiba had guaranteed Westinghouse s obligations under the EPC Agreements, this posed significant risk to Toshiba s own liquidity and financial situation. By arranging for the L/Cs to be posted for the benefit of the Project Owners, Toshiba was seeking to manage its own exposure. 5. After the Debtors filed for bankruptcy, the L/Cs remained in place while Toshiba separately negotiated with the Project Owners to resolve its guaranty liability. In contrast to any agreement to which the Debtors were party (like the IAAs that occupy so much focus in the Motion), the settlement agreements that Toshiba eventually negotiated with the Project Owners address the L/Cs in detail. Among other things, they required that the L/Cs remain outstanding until Toshiba satisfied its guaranty obligations, and specified the circumstances under which the L/Cs could be drawn or otherwise utilized by the Project Owners to satisfy Toshiba s guaranty obligations. Consistent with those agreements (to which the Debtors were not party), the L/Cs were terminated only after Toshiba satisfied its guaranty obligations to the Project Owners circumstances that are distinct and separate from the Debtors Chapter 11 Cases. 6. Thus, while the Debtors might have benefited from the initial prepetition posting of the L/Cs, the benefit to the Debtors arising from the L/Cs ceased to exist after the Petition Date. The L/Cs, and the importance of their continued existence after the Petition Date, 4

5 Pg 5 of 43 was of concern for Toshiba and the Project Owners not the Debtors. The L/Cs remained outstanding for as long as they did to prevent Toshiba s guaranty liabilities to the Project Owners from being triggered not to aid the Debtors. Case law is clear that actions taken by a creditor out of its own self-interest cannot sustain a substantial contribution claim. 7. Finally, if Toshiba believed that the Plan was somehow ambiguous or incomplete regarding Toshiba s entitlements to these amounts, it had ample opportunity to raise the matter during the Chapter 11 Cases. Toshiba was a party to the Plan Support Agreement executed in January 2018, where it represented to other PSA Parties that Toshiba and the Toshiba Affiliates hold[] no other Claims. Toshiba was deeply involved in the negotiations that led to the terms of the Plan, and had every opportunity to ensure that each and every one of its asserted claims against the estates was resolved to its satisfaction. As a PSA Party, Toshiba was in a position to negotiate for advantageous treatment under the Plan, and to spell out in detail its recoveries in respect of each identified claim. That is precisely what Toshiba did on Exhibit G to the Plan, where Toshiba specified twenty-eight different claims that it insisted on being satisfied and paid under the Plan. 8. Yet the fees and expenses now at issue were not included in the negotiations of the Plan Support Agreement or the treatment of Toshiba s various claims under the Plan. This is despite the fact that the L/Cs expired before the Plan was filed, meaning that the amount of the fees at issue were known to Toshiba, and Toshiba chose not to raise them as part of the Plan negotiations. There is no reason that Toshiba could not have addressed these fees during Plan negotiations. For a PSA Party to wait until after the Effective Date of the Plan to seek incremental 5

6 Pg 6 of 43 recovery on a known (purported) claim undermines the terms and the spirit of the global settlements and compromises embodied in the Plan. 9. For these and other reasons set forth in detail below, the relief requested in the Motion should be denied. BACKGROUND A. The EPC Agreements and Toshiba s Guaranty Obligations Thereunder 10. The filing of these Chapter 11 Cases on March 29, 2017 (the Petition Date ) was precipitated in substantial part by unforeseen challenges and increasing costs regarding the construction of nuclear plants in Georgia and South Carolina (referred to as the Vogtle and VC Summer projects, respectively). See generally Declaration of Lisa J. Donahue Pursuant to Rule of the Local Bankruptcy Rules for the Southern District of New York (the First Day Declaration ) [ECF No. 4]. Of relevance here, the EPC Agreements 4 that governed the Debtors obligations with respect to those projects required Toshiba, as the Debtors ultimate parent, to provide each Project Owner with a parent guaranty. See EPC Agmts. at 8.6(a). Accordingly, Toshiba unconditionally, irrevocably and absolutely guarantee[d] to [each of the Project Owners] and its respective successors and permitted assigns, the prompt and complete payment, when due and owing, of the payment obligations of Westinghouse under the terms of the [EPC] Agreement. See Toshiba Corporation Guaranty, dated as of April 8, 2008, entered into by Toshiba in favor of Georgia Power; Toshiba Corporation Guaranty, dated as of May 23, 2008 and restated in October 2015, entered into by Toshiba in favor of SCE&G (collectively, the Guaranties ), each at 1. 4 EPC Agreements means (i) that certain Engineering, Procurement and Construction Agreement dated as of April 8, 2008, as amended from time to time, with the Vogtle Owners, and (ii) that certain Engineering, Procurement and Construction Agreement dated as of May 23, 2008, as amended from time to time, with the VC Summer Owners. 6

7 Pg 7 of 43 The guaranty obligations are primary obligations of Toshiba concerning which [Toshiba] is the principal obligor (id. at 2) and were expressly intended for the sole benefit of [Toshiba] and [the Project Owners] (id. at 18). There were no conditions precedent to the Project Owners ability to call on the Guaranties. Id. at 2. By their terms, the Guaranties would remain in place until the projects reached Substantial Completion (as that term was defined in the respective EPC Agreements). Id. at In 2016, Toshiba caused the four letters of credit to be issued under its own banking facilities: Letter of Credit, dated as of January 13, 2016, issued by Sumitomo Mitsui Banking Corporation in favor of Georgia Power Company, Oglethorpe Power Corporation, Municipal Electric Authority of Georgia, MEAG Power SPVJ, LLC, MEAG Power SPVM, LLC, MEAG Power SPVP, LLC, and The City of Dalton, Georgia (the Vogtle Owners ) in the original amount of $450 million (as amended and increased to $460 million); Letter of Credit, dated as of January 13, 2016, issued by Mizuho Bank, Ltd. In favor of the Vogtle Owners in the original amount of $450 million (as amended and increased to $460 million); Standby Letter of Credit, issued by Sumitomo Mitsui Banking Corporation in favor of South Carolina Electric & Gas Company and the South Carolina Public Service Authority (the VC Summer Owners and, together with the Vogtle Owners, the Project Owners ) in the amount of $22.5 million; and Standby Letter of Credit, issued by Mizuho Bank, Ltd. in favor of the VC Summer Owners in the amount of $22.5 million. 12. The L/Cs are irrevocable letters of credit issued by Sumitomo or Mizuho, as applicable, that specifically reference the EPC Agreements and name the respective Project Owner as the beneficiary thereunder. As such, each Project Owner is entitled to draw upon the bank in the amount of each L/C, when and as provided in the L/C documentation. The Debtors did not sign the L/Cs nor any related documentation, and they have no direct rights in respect of the L/Cs. No separate contract or agreement between the Debtors and Toshiba exists concerning the Debtors liability in respect thereof, including the reimbursement of fees in connection with 7

8 Pg 8 of 43 the L/Cs. Wind Down Co understands, however, that one or more ancillary agreements may exist between Toshiba and the issuing banks related to the parties respective obligations under the L/Cs, but that the Debtors are not party to or privy to those agreements. 13. These L/Cs remained outstanding as of the Petition Date in the approximate aggregate amount of $965 million. B. The Interim Assessment Agreements 14. Given the magnitude of potential liabilities associated with the Vogtle and VC Summer projects, prior to the Petition Date, the Debtors negotiated short-term agreements with each of the Project Owners that set forth the terms under which the Debtors would continue to work on the projects after the commencement of the Chapter 11 Cases. These Interim Assessment Agreements ( IAAs ) provided, in brief, for the continuation of work at the projects after the Petition Date so long as each of the Project Owners paid for the costs associated with ongoing construction. They were designed to provide the Debtors and the Project Owners time to explore the continued feasibility of those projects in a manner that is cost-neutral and cash-neutral to the Debtors. First Day Decl. at 8. The Court approved the Debtors entry into the IAAs on the Petition Date on that basis, after seeking reassurance that the IAAs would not increase administrative costs. See Order Pursuant to 11 U.S.C. 105(a) Approving Interim Assessment Agreements, dated as of March 30, 2017 [ECF No. 68]; see also 3/30/17 Hr g Trans. at 69: The purpose of the IAAs was to prevent the incurrence of administrative expense claims like the ones Toshiba now asserts. The IAAs themselves recite that the Debtors would enter into [the IAAs] only if they would incur no more administrative expense claims than they would if they had rejected the EPC [Agreements] and related contracts as of the Petition Date. IAAs, rec. This essential point was subsequently clarified by the parties through various amendments to the IAAs. See, e.g., Amendment No. 1 to VC Summer IAA [ECF No. 385] at 2 8

9 Pg 9 of 43 ( The V.C. Summer Owners agree to pay all costs and administrative claims accrued by the Debtors during the Interim Assessment Period pursuant to the EPC, the Interim Assessment Agreement, or any other agreement related to the V.C. Summer Project, regardless of whether the costs become payable during or after the Interim Assessment Period... ); Amendment No. 2 to Vogtle IAA [ECF No. 464] at 2 ( GPC agrees to pay all administrative expenses accrued by the Debtors during the Interim Assessment Period for services and goods for the Vogtle Project, regardless of whether the administrative expenses become payable during or after the Interim Assessment Period.... ); see generally ECF No and related briefing (further information concerning the IAAs). 16. In sum, the IAAs preserved the status quo with regards to the EPC Agreements while giving the Debtors and the Project Owners time to determine the best path forward for the two projects. The IAAs also bestowed significant benefits upon Toshiba, by effecting a standstill with respect to the Guaranties that arose under the EPC Agreements. Paragraph 16 of the VC Summer IAA provided that [a]ny actions taken by [the Project Owners] during the Interim Assessment Agreement shall be without prejudice to the respective rights/ obligations of the Parties under the Guaranty issued by Toshiba under 8.6 of the EPC. The [Project Owners] agree, that during the Interim Assessment Period, they shall not (a) commence an action against Toshiba under the Guaranty issued under 8.6 of the EPC or (b) otherwise seek to draw against letters of credit posted by Mizuho Bank, Ltd. or Sumitomo Mitsui Banking Corporation. Similarly, the Vogtle IAA contained an agreement by the Vogtle Owners to forbear from exercising remedies against Toshiba with respect to the Guaranty for the duration of the Interim Assessment Period. See Vogtle IAA at 14. The IAAs (as amended from time to time) 9

10 Pg 10 of 43 would continue in effect until July 27, 2017, with respect to the Vogtle Owners, and July 31, 2017, with respect to the VC Summer Owners. C. Toshiba s Settlement Agreements with the Project Owners 17. While the IAAs continued to govern the continued construction of the two projects during the Chapter 11 Cases, the key parties including the Debtors, Toshiba and the Project Owners engaged in negotiations regarding, among other things, the go-forward path for each of the Projects and the resolution of the substantial potential liabilities associated with them. Concurrently, Toshiba and the Project Owners engaged in separate negotiations regarding Toshiba s Guaranty liability. In the summer of 2017, Toshiba reached an agreement with each of the Project Owners regarding its Guaranty obligations. See generally Settlement Agreement between and among Toshiba and the Vogtle Owners, dated as of June 9, 2017 (the Vogtle Settlement ) [filed with the SEC on June 16, 2017]; 5 Settlement Agreement between and among Toshiba and the VC Summer Owners, dated as of July 27, 2017 [ECF No. 1022] (the VC Summer Settlement ) 6 (collectively, the Toshiba/Owner Settlements ). 7 The Debtors were not party to either of the Toshiba/Owner Settlements. 5 Georgia Power Company, Form 8-K, Ex (June 6, 2017). A copy of the Vogtle Settlement is attached as Exhibit A to the Declaration of Kyle J. Kimpler in Support of Wind Down Co s Objection to Toshiba Corporation and its Affiliates Requesting Allowance and Payment of Administrative Expense Claims (the Kimpler Declaration ) filed substantially contemporaneously herewith. 6 A copy of the VC Summer Settlement is attached as Exhibit B to the Kimpler Declaration. 7 Because the Debtors were not party to these settlements, the Debtors did not seek Court approval thereof. However, the Debtors sought, and the Court entered, the Order Regarding Distributions in Respect of Claims and Interests of Toshiba Corporation and Affiliates, dated July 20, 2017 [ECF No. 953], which provided that distributions from the Debtors estates in respect of certain of Toshiba s claims would be paid over to the respective Project Owner until Toshiba s obligations under the relevant Toshiba/Owner Settlements were fully satisfied. This order is no longer in effect. See Conf. Order at 43 ( This Confirmation Order amends and supersedes the Toshiba Distribution Order and the provisions thereof in full. ). 10

11 Pg 11 of In the Toshiba/Owner Settlements, Toshiba conceded that its payment obligations under the Guaranties had accrued, and agreed to make monthly payments to the Project Owners over a period of several years (with a right of early payment under certain circumstances) until the Project Owners had been paid in full under the Guaranties. To the Vogtle Owners, Toshiba agreed to pay a total of $3.68 billion; to the VC Summer Owners, Toshiba agreed to pay a total $2.168 billion. See Toshiba/Owner Settlements at 2.1 & 2.2 & definition of Agreed Amount. 19. Unlike the IAAs, the Toshiba/Owner Settlements addressed the L/Cs in detail, and set forth the terms under which they could be drawn or otherwise utilized by the parties. Among other things, Section 2.4 of each Toshiba/Owner Settlement permitted Toshiba to use the then-available amounts under the L/Cs in lieu of its monthly payments when and if Toshiba s remaining payments were less than available L/C amounts. In other words, the existence of the L/Cs were understood by the parties to be part of the consideration owed by Toshiba to the Project Owners; as such, they were available to be drawn by the Project Owners as partial repayment by Toshiba of its Guaranty obligations under the Toshiba/Owner Settlements. Section 3.1 of the Toshiba/Owner Settlements operated similarly: They allowed the L/Cs to be drawn at certain times and under certain conditions during the term of the Toshiba/Owner Settlements to satisfy particular monthly payment obligations. 8 Here again, the L/Cs existed as currency that Toshiba could utilize in lieu of cash on hand to satisfy its obligations to the Project Owners. 9 8 The two agreements vary as to which party, Toshiba or the Project Owner, has the right the initiate or direct such a draw. 9 Consistent with this premise, the Distribution Order provided that the Project Owners shall receive all distributions from the Debtors estates in respect of... (ii) any claims, if any, the Toshiba Entities may have... against any of the Debtors or any of the Debtors subsidiaries arising from draws by any of the Project Owners under any letters of credit. Distribution Order at F. 11

12 Pg 12 of Thus, Toshiba and the Project Owners agreed that the L/Cs and the Guaranties would remain outstanding for the duration of the Toshiba/Owner Settlements, absent a breach by Toshiba or certain other events. Accordingly, the Project Owners, and specifically, the named beneficiary under each of the Guaranties, agreed not to enforce the Guaranties unless and until a Forbearance Termination Event had occurred. See Vogtle Agreement at 6.1; VC Summer Agreement at 5.1. The defined term Forbearance Termination Event and thus, the trigger for drawing on the L/Cs is focused almost exclusively on Toshiba. It includes Toshiba filing for bankruptcy, or Toshiba failing to make the required payments or honor certain covenants under the Toshiba/Owner Settlements. The only reference to the Debtors Chapter 11 Cases concerns the entry and continued enforceability of the Toshiba Distribution Order. Vogtle Agreement at 1.1 (Forbearance Termination Event def. (g)); VC Summer Agreement at 1.1 (same). 21. In late 2017 and early 2018, Toshiba decided to voluntarily prepay its obligations under the Toshiba/Owner Settlements (the Prepayments ). Such Prepayments would fully satisfy Toshiba s payment obligations under the Toshiba/Owner Settlements, and discharge its Guaranty obligations. Once Toshiba s Guaranty obligations to the Project Owners were fully satisfied, the L/Cs would no longer be necessary. Accordingly, the Toshiba/Owner Settlements were amended (the Settlement Amendments ) to require the Project Owners to surrender the L/Cs within two business days of their receipt of the Prepayments from Toshiba. 22. In December 2017, Toshiba voluntarily prepaid its obligations under the Vogtle/Toshiba Settlement. Then, in January 2018, Toshiba voluntarily prepaid its obligations under the VC Summer/Toshiba Settlement. These Prepayments fully satisfied Toshiba s Guaranty obligations to the Project Owners, and thus the L/Cs were terminated substantially 12

13 Pg 13 of 43 contemporaneously with the Prepayments in accordance with the Settlement Amendments. Motion at 9 (Vogtle L/Cs terminated on December 18, 2017 and VC Summer L/Cs terminated on January 24, 2018). The L/Cs remained undrawn at the time of their termination. D. Toshiba s Proofs of Claim 23. Toshiba and its affiliates filed numerous claims against various Debtors, 10 totaling more than $6.9 billion in the aggregate. See Decl. of Lisa J. Donahue in Support of Confirmation of Debtors Joint Chapter 11 Plan of Reorganization [ECF No. 2957] ( Conf. Decl. ) at 57. In its Motion, Toshiba focuses exclusively on Claim No as the relevant proof of claim for the L/Cs (for reasons explained below). In that proof of claim, Toshiba asserted contingent and unliquidated claims that might arise in the event the L/Cs were drawn upon by the Project Owners. Toshiba explained that its L/Cs claims were contingent and unliquidated since no such draws had yet occurred, but that [a]ny such draws would damage Toshiba Corporation and may give rise to certain contribution, reimbursement, subrogation, indemnification, or other claims against Westinghouse. Addendum to Claim No at 11. Thus, Toshiba reserved its right to bring any and all additional claims for damages arising from draws against the L/Cs. Id. (emphasis added). 24. Claim No which is the claim that Toshiba now seeks to amend did not mention any fees or other costs relating to the L/Cs. Instead, Claim No was limited to contingent, unliquidated claims that might arise in the event the L/Cs were drawn upon by the Project Owners a circumstance that never came to pass. 10 These include Proof of Claim Nos. 839, 2132, 2200, 2222, 2408, 2409, 2415, 2449, 3002, 3010, 3044, 3060, 3198 &

14 Pg 14 of Though they are not part of the relief Toshiba seeks, certain other proofs of claim filed by Toshiba are relevant to the relief requested in the Motion. Claim No. 3010, for example, generally addressed claims arising out of or related to Toshiba s various credit support of the Debtors. As Toshiba explained in that proof of claim: Toshiba Corporation supplied certain credit support commitments to support Westinghouse s general prepetition business operations. Such commitments included, among other things, parent guaranties of performance or payment, as applicable, under various customer contracts,... and indemnification and other forms of support. In certain instances, Toshiba also collateralized such credit support commitments with cash or other cash-equivalent instruments, in full or in in part, prior to the petition date. Addendum to Claim No at 5. The Guaranties arising from the EPC Agreements on account of which the L/Cs at issue were posted are listed at rows 10 and 11 of the schedule attached to Claim No as unliquidated/contingent claims in unknown amounts. 26. Furthermore, Claim No addressed a variety of claims that Toshiba asserted against the Debtors arising out of or relating to various Trade Payables. Among the claims listed in this proof of claim are claims for prepetition fees arising under the L/Cs. Specifically, Claim Nos A-3, 4 and 5 are described as recharge invoices relating to the projects and were sought in the aggregate amount of approximately $10.18 million plus additional contingent and unliquidated amounts. Addendum to Claim No. 3060, Ex. A. 27. The foregoing claims are not mentioned by Toshiba in its Motion because Toshiba sold those specific claims to a third party (Nucleus Acquisition LLC, the Consenting Claimholder under the Plan Support Agreement). 11 Through that transaction, the Consenting 11 Pursuant to the Plan, the Consenting Claimholder holds 100% of the membership interests in Wind Down Co. 14

15 Pg 15 of 43 Claimholder not only purchased the identified claims (which included the specific claims in Claim No addressing the Guaranties and those in Claim No addressing the L/C fees), but also the portions of the proofs of claim relating thereto (which sought additional contingent and unliquidated amounts related to those claims), as well as any supplements, modifications or amendments [to the proofs of claim]. See Assignment and Purchase Agreement, dated as of January 17, 2018, between Toshiba and Nucleus Acquisition LLC (the Claim Purchase Agreement ) at 2.2(a)(ii). 12 The Consenting Claimholder now owns these claims, and has the sole right to settle them, or to seek to amend or otherwise modify them. See Conf. Decl. at 58 ( On January 18, 2018, Toshiba announced that it had selected the Consenting Claimholder, an entity managed by an affiliate of the Baupost Group L.L.C., as the buyer of the Toshiba Claims and the Vogtle Claims and had accordingly entered into an assignment and purchase agreement with the Consenting Claimholder. Pursuant to such agreement, Toshiba transferred the Toshiba Claims and Vogtle Claims to the Consenting Claimholder on January 22, See ECF Nos ). E. The Plan Support Agreement and Chapter 11 Plan 28. On January 17, 2018 well after Toshiba was aware of the L/C fees the Debtors, Toshiba, the Consenting Claimholder, and certain other key parties executed a Plan Support Agreement ( PSA ) describing the terms and conditions under which those parties would support the Debtors Plan. 13 An agreed Plan term sheet was attached as an exhibit thereto (the Term Sheet ). The PSA contains standard terms of support, including an agreement by Toshiba not to file any motion seeking any relief inconsistent with [the] PSA, the Term Sheet, the Plan 12 A copy of the Claim Purchase Agreement is attached as Exhibit C to the Kimpler Declaration. 13 A copy of the Plan Support Agreement is attached as Exhibit D to the Kimpler Declaration. 15

16 Pg 16 of 43 Funding Agreement, and/or the Plan Documents. PSA at 3.01(i)(vii). In the PSA, Toshiba represented to the Debtors and other PSA parties that neither it nor any of its affiliates held any other claims against the Debtors. See id. at 7.06 (representing that Toshiba (or a Toshiba Affiliate)... (iii) holds no other Claims ). Claims, as used in the PSA, means the expansive definition that is set forth in the Bankruptcy Code. See id. at 3.01(a). 29. The Plan ultimately confirmed by the Court embodies the terms first agreed to in the Term Sheet. Toshiba s claims against the Debtors fall into three discrete categories: 30. First, the claims originally asserted by Toshiba in respect of certain intercompany advances and certain prepetition credit support arrangements and guaranties (including the Guaranties at issue here), which Toshiba had sold to the Consenting Claimholder, were classified as Allowed Class 3B General Unsecured Claims in the amount of $6.9 billion, subject to adjustment for continuing postpetition demands or draw requests actually satisfied by Toshiba or Toshiba Affiliates prior to the Effective Date. See Disclosure Statement at 39 (describing the Toshiba Claims ); see also Memo. of Law in Support of Conf. [ECF No. 2959] at These claims are specifically listed in Exhibits E and F to the Plan and include, among other things, (i) the portions of Claim No that seek payment of accrued L/C fees and (ii) the portions of Claim No regarding the Guaranties. 31. Second, the claims originally asserted by Toshiba arising from its ordinary course trade relationship with the Debtors, which Toshiba did not sell, were classified as Allowed Class 3A General Unsecured Claims in the amount of approximately $43.7 million. See Disclosure Statement at (describing the Toshiba GUC Claims ). Twenty-eight such claims are specifically listed in Exhibit G to the Plan. Neither the L/Cs, nor the L/C fees at issue in this Motion, are included in that schedule. 16

17 Pg 17 of Third, certain claims originally asserted by Toshiba relating to the EMEA Subsidiaries were deemed satisfied and discharged under the Plan as part of the settlement reached between Toshiba and the EMEA Subsidiaries. See Disclosure Statement at 59 (describing Toshiba s waiver of claims against these entities). 33. The foregoing treatment was negotiated amongst the key parties as part of the global compromises reflected in the Plan. To effect the complete resolution of these claims as was intended, the Plan provides that Class 3B General Unsecured Claims would be allowed only in the amounts reflected on the exhibits to the Plan, and that [a]ll Claims for amounts in excess of the amounts listed on Exhibit E and Exhibit F hereto shall be deemed withdrawn. Plan at 5.3(a). With respect to those claims that Toshiba did not sell or release as part of the Plan, the Plan provides similarly. Specifically, section 5.3(b) of the Plan provides that the Toshiba GUC Claims would be allowed as Class 3A General Unsecured Claims in the amounts reflected on the exhibits to the Plan, which amounts shall not exceed $43,665,642.48, and that [a]ll amounts claimed in excess of the amounts shall be Disallowed. Id. at 5.3(b). With the Plan now effective, the foregoing language prohibits any party from seeking additional amounts in respect of these claims. 34. By its express terms, the Plan (and the negotiated recoveries for Toshiba thereunder) embody a global and integrated compromise and settlement of all disputes among the Debtors [and] the PSA Parties of which Toshiba is one. Plan at 5.3 (emphasis added). The Plan continues: Specifically, and without limitation, the treatment of the Class 3A General Unsecured Claims (including the Toshiba GUC Claims ), the Class 3B General Unsecured Claims, Intercompany Claims, [and] Released Toshiba Claims provided herein is a settlement and compromise of the delay, expense, and uncertainty associated with extensive potential litigation, including among other things (b) litigation relating to the allowance and amount of the Claims and 17

18 Pg 18 of 43 Interests of Toshiba and the Toshiba Affiliates. Further, the treatment of such Claims pursuant to the settlements provided herein supports maximum recoveries for the holders of Allowed Claims while provides for the going concern emergence of the Reorganized Debtors from these Chapter 11 Cases. Plan at 5.3 (emphasis added). 35. Consistent with the premise of a global settlement and compromise, the Plan includes extensive release provisions in favor of the parties to that settlement. In section 11.6 of the Plan, the Debtors agreed to release, waive and discharge any and all liabilities against any Released Party (which includes Toshiba) relating to, among other things, the Debtors, the Chapter 11 Cases, the negotiation and prosecution of the Chapter 11 Plan and the Restructuring Transactions contemplated thereby. Furthermore, in section 11.7 of the Plan, each creditor who voted in favor of the Plan (or who did not vote on the Plan but opted in to the release) was similarly deemed to release, waive and discharge any and all liabilities against any Released Party (which again includes Toshiba) relating to, among other things, the Debtors, the Chapter 11 Cases, the negotiation and prosecution of the Chapter 11 Plan and the Restructuring Transactions contemplated thereby. In addition to receiving the benefit of these release provisions, Toshiba was also included as a beneficiary of the exculpation provision set forth in section 11.8 of the Plan, and in section 11.2 of the Plan the Debtors agreed not to bring any Avoidance Actions it might have been able to assert against Toshiba. In sum, Toshiba received significant consideration under the Plan in recognition of its role as a PSA Party, in addition to the negotiated recoveries on account of its claims. 36. At confirmation, the Court approved the terms of the Plan, including these negotiated recoveries for Toshiba and the granting of the third-party release in favor of Toshiba, among others, as part of the global settlement and compromise of such claims and in light of the substantial potential litigation that was avoided. In pertinent part, the Court found that the 18

19 Pg 19 of 43 settlements and compromises of claims and potential causes of action which comprise the global settlement, and which specifically included agreements to avoid litigation relating to the allowance and amount of the VC Summer Claims, Vogtle Claims, and Claims and Interests of Toshiba and the Toshiba Affiliates... are integral to the Plan, are reasonable in their terms, [and] are in the best interests of the Debtors estates and their creditors.... Conf. Order, dated as of March 28, 2018 [ECF No. 2988] at 10(i). 37. Notably, counsel for Toshiba specifically spoke at the confirmation hearing in support of the third party releases that would benefit Toshiba, couching them as part of the overall settlement and compromise embodied in the Plan. In doing so, counsel described the deal under the Plan as follows: [I]t was a critical element of the entire transaction which is a settlement under 9019 that Your Honor is being asked to approve as well, that Toshiba is basically getting a divorce from Westinghouse. 3/27/18 Hr g Trans. at 35:24-36:2. Counsel continued, highlighting the unusual circumstances of these cases, as a case where we take $10 billion of litigation away from the estate and so that money can be spent on creditors instead of on legal fees, so that money can be distributed faster instead of waiting for outcomes on how claims get allowed.... Id. at 38:1-6; see also id. at 34:8-9 (again mentioning that the Plan avoid[s] litigation over those $10 billion of claims ) Since the Effective Date, Toshiba has continued to emphasize the importance of the global settlements on which the Plan is based. On November 6, 2018, for example, Toshiba invoked the global settlements and their resolution of the largest claims as a reason why the Court might be skeptical of Wind Down Co s request for an extension of the original administrative expense claims bar date. Specifically, Toshiba noted that [t]he Global Settlements in the Plan represent the culmination of extensive arm s-length negotiations between the Debtors and various supporting parties, including Toshiba.... Such settlements resolved the largest general unsecured claims in these Chapter 11 Cases prior to the Confirmation Date, and should have allowed the Debtors to focus on reviewing the remaining general unsecured and Administrative Expense Claims. ECF No at 4. 19

20 Pg 20 of The Plan became effective on August 1, 2018 (the Effective Date ) when Brookfield, as the Plan Investor, acquired the Reorganized Debtors pursuant to the terms of the Plan and the Plan Funding Agreement. On the Effective Date, the terms of the Plan (including the settlements contained therein) became binding on the Reorganized Debtors and all parties in interest, including Toshiba. ARGUMENT 39. In its Motion, Toshiba seeks reimbursement for certain fees it paid to its own banks on account of L/Cs that Toshiba had posted for the Project Owners benefit as both (a) actual, necessary costs and expenses of preserving the estate under section 503(b)(1)(A) of the Bankruptcy Code and (b) a substantial contribution to the estates under section 503(b)(3)(D) of the Bankruptcy Code. In the alternative, Toshiba requests leave to amend Claim No to include accrued L/Cs fees, and thereby increase its previously-negotiated recovery as a general unsecured creditor of the estates. These requests should be denied in their entirety. I. Toshiba Has Already Been Compensated for its Overall Contributions to, and Involvement in, the Chapter 11 Cases. 40. The Plan in these Chapter 11 Cases is clear that it, and the global settlement on which it was based, resolved Claims and Interests of Toshiba. Plan at 5.3. That means all such claims; now that the Plan has been confirmed and gone effective, there is no second look or re-opening of the fundamental terms on which the Plan is based to adjust a highly-negotiated recovery. Yet that is precisely what Toshiba seeks to do. 41. By making this request, Toshiba risks undermining the global settlement and compromise on which the Plan is based. As this Court knows, the Plan resolved key claims, including Toshiba s claims, as part of a comprehensive settlement among the key players, including Toshiba. The specific negotiated recoveries embodied in that settlement and approved 20

21 Pg 21 of 43 by this Court reflected the benefits to the estates as a whole in avoiding complex litigation with these parties over their claims. Each party to the PSA, including Toshiba, agreed to support the Plan with the understanding that the Plan fully dealt with these complex issues. See 3/27/18 Hr g Trans. at 35:24-36:2 (counsel for Toshiba describing the deal under the Plan as one where Toshiba is basically getting a divorce from Westinghouse ). The Plan s global settlement is an interlocking set of compromises and concessions: No one piece or recovery can be modified without disrupting the whole, 15 and the finality of the Plan is even more important now that it has gone effective. 42. Toshiba whether in its role as the ultimate parent of the Debtors, or as a critical counterparty involved in many of the most prominent disputes and claims at issue in the Chapter 11 Cases, or as a PSA Party was in a position to, and did, negotiate for a robust recovery for itself and its affiliates. As a result of these extensive negotiations, and to avoid litigating over Toshiba s claims, the Debtors and other key parties agreed that Toshiba and its affiliates would receive an aggregate recovery of more than $43.7 million under the Plan on account of its claims (not counting those claims that it sold to third parties). 16 As a PSA Party, Toshiba also received the benefit of third-party releases and other provisions under the Plan that were not available to all parties in interest. See Conf. Decl. at 70 (explaining that the Debtors agreed to pursue the various release, injunction and exculpation provisions in the Plan to incentivize the PSA Parties to grant 15 See Conf. Decl. at 71 ( Each aspect of the Global Settlement is interdependent and relied upon by the PSA Parties, who made material concessions as to their respective positions to enable the expeditious confirmation of the Plan. Such settlements take into account the legal and factual risks to the allowance of the claims. Modifications to any aspect of the Global Settlement or the failure to approve the Global Settlement undoubtedly may result in events of termination under the Plan Support Agreement, jeopardize the sale of the Debtors businesses, and set back the administration of the Chapter 11 Cases for an extended period as the Debtors and their adversaries get bogged down in the maze of uncontrolled litigation for prosecution of competing proposed plans. ). 16 In addition, Toshiba is an indirect stakeholder in Advance Uranium Asset Management Limited ( AUAM ) and insisted that AUAM receive an Allowed Class 3A General Unsecured Claim of $43,152,613, which was part of the global compromise reflected in the Plan. See Plan at 5.3(c). 21

22 Pg 22 of 43 the concessions [embodied in the global settlement], and in consideration of the substantial contribution provided by the Released Parties... ). 43. Toshiba did not negotiate with the PSA Parties for a recovery on account of the L/C fees at issue in the Motion. Indeed, to the best of Wind Down Co s knowledge, at no point in Plan negotiations did Toshiba raise the payment of these additional fees to the PSA Parties. Toshiba cannot and should not be able to do so now. 44. Nor is this a circumstance where an alleged administrative claim arose after a deal was negotiated, or a cost arose that was unanticipated by the creditor. To the contrary, Toshiba knew about these L/C fees prior to the bar date, 17 and in fact specifically sought payment of certain amounts in respect thereof in Claim No By January 2018, as the parties were finalizing the terms of the PSA (and Toshiba was finalizing a transfer of certain of its claims, including the relevant portions of Claim No. 3060, to a third party), the L/Cs on account of which these fees were being paid were terminated. Thus, at that point in time, Toshiba knew with finality the total amount of fees it had paid in respect of the L/Cs. Toshiba could have insisted that these additional fees be allowed and satisfied in the broader context of Plan negotiations prior to the execution of the PSA on January 17, Toshiba chose not to do so. Accordingly, it must now live with the consequences of a confirmed and effective Plan that is clear in its intention to resolve with finality all of Toshiba s claims against the estates. 17 The Plan set August 31, 2018 as the deadline for filing administrative expense claims (that being the first Business Day that is 30 days following the Effective Date... ) (the Administrative Expense Claims Bar Date ). The Court set a deadline of September 1, 2017 at 5:00 p.m. for filing general unsecured claims (the General Bar Date ). See Order Pursuant to 11 U.S.C. 502(b)(9) Fed. R. Bankr. P and 3003(c)(3) and Local Rule (I) Establishing Deadline for Filing Proofs of Claim and Procedures Relating Thereto and (II) Approving Form and Manner of Notice Thereof [ECF No. 788]. 22

23 Pg 23 of This Court should enforce the finality of the Plan, uphold the interdependent nature of the global settlement on which it is based, and deny Toshiba s after-the-fact request to increase its negotiated recovery. II. Toshiba s Costs in Maintaining the L/Cs Are Not Compensable Administrative Expenses. 46. Even if the Plan did not address the claims at issue in the Motion, Toshiba has not established that the Debtors had any obligations to Toshiba in respect of the L/C fees. Nor has Toshiba shown that the payment of such fees provided sufficient benefit to the Debtors Chapter 11 Cases or business operations to justify awarding them administrative expense priority. For these reasons, as described in detail below, Toshiba s request for administrative expense claims in respect of the L/C fees also must be denied. A. The L/C Fees Were Not Actual, Necessary Costs of Preserving the Estates. 47. Under section 503(b)(1)(A) of the Bankruptcy Code, administrative expenses include the actual, necessary costs and expenses of preserving the estate. In light of the presumption that estate resources will be distributed equally among creditors, such statutory priorities are construed narrowly. See, e.g., In re Bethlehem Steel Corp., 479 F.3d 167, 172 (2d Cir. 2007). Courts award administrative expense priority to claims only when two things are true: (1) [the claim] arises out of a transaction between the creditor and the bankrupt s trustee or debtor in possession and (2) the consideration supporting the claimant s right to payment was both supplied to and beneficial to the debtor-in-possession in the operation of the business. Bethlehem Steel Corp., 479 F.3d at 172 (citing Trustees of Amalgamated Ins. Fund v. McFarlin s, Inc., 789 F.2d 98, 101 (2d Cir. 1986)); see also In re Refco, Inc., 2008 WL , at 4 5 (S.D.N.Y. Jan. 14, 2008), aff d 331 Fed.Appx. 12 (2d Cir. 2009). The burden of proof for 23

24 Pg 24 of 43 establishing both of these points rests with the moving party, here, Toshiba. Bethlehem Steel, 479 F.3d at 172 (citations omitted). 48. Thus, Toshiba must first establish that the claim at issue arose from a postpetition transaction with the Debtors. See, e.g., Bethlehem Steel, 479 F.3d at 172; McFarlin s, 789 F.2d at 101; In re Refco, 2008 WL , at *4 5. Toshiba cannot do so. To begin with, any claims with respect to the L/Cs are prepetition claims. The L/Cs were issued more than a year prior to the Petition Date. The L/Cs, in turn, were issued to protect Toshiba s potential liability to the Project Owners arising under Guaranties that Toshiba executed in That these fees did not accrue until after the Petition Date is not relevant: It is well established that claims arising from prepetition contracts and transactions are not accorded administrative priority simply because the right to payment accrued postpetition. See, e.g., In re Mammoth Mart Inc., 536 F.2d 950, 955 (1st Cir. 1976); In re Worldcom, Inc., 2006 WL , at *3 (Bankr. S.D.N.Y. 2006) (denying request for administrative expense claim where the elements of that claim and the right to payment on that basis were established in the prepetition period... and the relationship of the parties did not alter prepetition to postpetition ); In re Chateaugay Corp., 177 B.R. 176, 182 (S.D.N.Y. 1995) (affirming bankruptcy court s denial of administrative claim, where insurance company s obligations to make payments were required under prepetition agreements and so could not be said to arise from a transaction with the debtors); see also In re East Texas Steel Facilities, Inc., 117 B.R. 235, 243 (Bankr. N.D. Texas 1990) (denying request by creditor that caused letter of credit to be issued on debtor s behalf prepetition 18 The Guaranties and the EPC Agreements also are clearly prepetition agreements giving rise to prepetition claims. In any event, Toshiba cannot rely on those agreements to establish any right to payment in respect of the L/C fees because Toshiba sold its claims relating to the Guaranties to Nucleus, and those claims were resolved in full under the Plan. The same is true for the claims of the Project Owners in respect of the EPC Agreements themselves. See below for further discussion. 24