Case KG Doc 1338 Filed 01/29/16 Page 1 of 6 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE.

Transcription

1 Case KG Doc 1338 Filed 01/29/16 Page 1 of 6 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: HAGGEN HOLDINGS, LLC, et al., 1 Debtors. Chapter 11 Case No (KG) (Jointly Administered) Related Docket No Objection Deadline: Jan. 29, 2016 at 5:00 p.m. (ET) Hearing Date: Feb. 17, 2016 at 2:00 p.m. (ET) SUPERVALU INC. S OBJECTION TO DEBTORS PROPOSED CURE AMOUNTS AND ASSUMPTION AND ASSIGNMENT OF EXECUTORY CONTRACTS AND LEASES SUPERVALU INC. ( Supervalu ), by and through its undersigned attorneys, submits its objection to Debtors Notice of Assumption, Assignment and Cure Amount With Respect to Executory Contracts and Unexpired Leases of the Debtors (the Cure Notice ) [Doc. No. 1207]. In support of its Objection, Supervalu respectfully states and represents as follows: BACKGROUND 1. On September 8, 2015 (the Petition Date ), the debtors in the above captioned proceedings (collectively, the Debtors ) filed voluntary petitions for relief under chapter 11 of title 11 of the United States Code ( Bankruptcy Code ) in the United States Bankruptcy Court for the District of Delaware ( Court ). 2. Supervalu and certain of the Debtors are parties to a number of allegedly executory contracts pursuant to which Supervalu provides certain goods and services to the Debtors, several of which were identified by the Debtors in the Cure Notice (the Supervalu Agreements ). Among other agreements, Supervalu and Debtors Haggen Opco North, LLC and 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, are: Haggen Holdings, LLC (7558), Haggen Operations Holdings, LLC (6341), Haggen Opco South, LLC (7257), Haggen Opco North, LLC (5028), Haggen Acquisition, LLC (7687), and Haggen, Inc. (4583). The mailing address for each of the Debtors is 2211 Rimland Drive, Bellingham, WA

2 Case KG Doc 1338 Filed 01/29/16 Page 2 of 6 Haggen, Inc. are parties to that certain supply agreement dated December 6, 2014 (the Supply Agreement ). The Debtors have listed a cure cost of $0.00 for the Supply Agreement in the Cure Notice. Supervalu objects to this listed cure cost, because the true cure cost under the Supply Agreement is $3,946,096.70, as further explained below. 3. Supervalu and Debtors Haggen Opco North, LLC, Haggen Opco South, LLC and Haggen, Inc. are parties to that certain transition services agreement dated December 6, 2014 (the TSA ). The Debtors listed a proposed cure cost of $0.00 for the TSA in the Cure Notice. Supervalu objects to this proposed cure cost, because the true cure cost under the TSA is $1,911, in addition to certain contingent amounts which may be included in the cure cost of the TSA, as further explained below. 4. Supervalu and Debtors Haggen Opco North, LLC, Haggen Opco South, LLC and Haggen, Inc. are parties to that certain service contract for energy and facilities services (the Services Agreement and, together with the Supply Agreement and the TSA, the Agreements ). 2 The Debtors listed a proposed cure cost of $0.00 for the Services Agreement in the Cure Notice. Supervalu objects to this proposed cure cost, because the true cure cost under the Services Agreement is $27,536.83, as further explained below. OBJECTION A. Objection to Cure Amounts 5. Supervalu objects to any assumption, or assumption and assignment of the Agreements absent payment to Supervalu of the appropriate cure cost. The Debtors may not assume, or assume and assign the Agreements to a third party, unless they comply with the provisions of 11 U.S.C. 365(b) and (f). In order to assume and assign the Agreements, the 2 Copies of the Agreements will be provided to the Court or parties in interest upon reasonable request and subject to applicable rules. 2

3 Case KG Doc 1338 Filed 01/29/16 Page 3 of 6 Debtors must a) cure all defaults under the Agreements, and b) provide adequate assurance that the assignee will be able to perform its obligations under the Agreements. Debtors have failed to establish that they can satisfy either requirement. 6. Supervalu objects to the proposed cure cost for the Supply Agreement because, pursuant to the Supply Agreement, Supervalu agreed to supply the Debtors with certain goods and products for which the Debtors have not paid. The Debtors are obligated to pay Supervalu $2,110, for those goods and products. Additionally, Supervalu supplied the Debtors with certain exclusive products and inventory ( Exclusive Products ) pursuant to the Supply Agreement. In accordance with the terms of the Supply Agreement, the Debtors are required to ensure that Exclusive Products do not become obsolete and are required to purchase all Exclusive Products if the Supply Agreement is terminated for any reason. As of December 21, 2015, Supervalu held $1,835, in Exclusive Products which the Debtors are required to purchase pursuant to the terms of the Supply Agreement. Therefore, the correct cure cost under the Supply Agreement is $3,946, rather than the $0.00 listed by the Debtors. 7. To perform its obligations under the TSA, Supervalu contracted with third-party vendors to supply the Debtors with certain information technology services. In order to provide these services to the Debtors, many of the third-party vendors required a consent fee. Pursuant to the TSA, the Debtors were required to pay the consent fees owed to the third parties. The Debtors have not reimbursed $618, in consent fees which were advanced by Supervalu pursuant to the TSA. In addition to obtaining consents, Supervalu contracted with certain vendors to provide information technology services to the Debtors. The Debtors are responsible for reimbursing Supervalu for the services provided by those vendors to the Debtors. The 3

4 Case KG Doc 1338 Filed 01/29/16 Page 4 of 6 Debtors have not made payment of $133, due and owing to Supervalu on account of these services. 8. Additionally, Supervalu also provided the Debtors with other critical services that the Debtors are obligated to make payment to Supervalu for under the TSA. The Debtors have failed to make payment to Supervalu for these critical services. The Debtors currently owe Supervalu approximately $438, for these critical services pursuant to the TSA. 9. Certain third-party vendors have assigned claims against the Debtors to Supervalu. Supervalu had contracted with these vendors to provide certain services to the Debtors, but the Debtors remained directly obligated to make payments to the vendors under the TSA. When the Debtors failed to make these payments, Supervalu paid the vendors and took assignments of their claims to avoid disruption of the services being provided for the Debtors under the TSA. Upon assignment and payment of these claims the Debtors payment for these services became due and owing to Supervalu. Supervalu is owed approximately $720, on account of these assigned claims. 10. Pursuant to the TSA, Supervalu contracted with certain third-party vendors to provide goods and services to the Debtors, for which the Debtors were obligated to pay. Certain of those vendors have made claims against Supervalu for amounts which are owed directly from the Debtors. In the event Supervalu is obligated to make payment on those claims, the Debtors are obligated to reimburse Supervalu for those amounts pursuant to the TSA. Any amounts paid by Supervalu should be included in the cure cost due under the TSA. 11. In total, the Debtors currently owe Supervalu approximately $1,911, pursuant to the TSA, plus any contingent amounts which become due in the future. Therefore, 4

5 Case KG Doc 1338 Filed 01/29/16 Page 5 of 6 the correct cure cost under the TSA is at least $1,911, rather than the $0.00 proposed by the Debtors. 12. Pursuant to the Services Agreement, Supervalu provided the Debtors with certain energy services and facilities maintenance services for which the Debtors have not made payment. The Debtors owe Supervalu approximately $27, for these services under the Services Agreement. Therefore the correct cure cost under the Services Agreement is $27, rather than the $0.00 proposed by the Debtors. B. Objection to Adequate Assurance 13. Because Supervalu is required to submit this Objection before the scheduled auction of the Debtors assets, which includes the possible assumption and assignment of the Supervalu Agreements, Supervalu does not yet know the identity of any proposed assignee of those agreements or the terms of any assignment. Absent this basic and necessary information, Supervalu is unable to determine whether any proposed assignee or assignment of the Supervalu Agreements can or will satisfy all of the requirements of sections 365(b) and (f) of the Bankruptcy Code. Supervalu therefore does not waive its rights and specifically objects to any proposed assignee or assignment of Debtors rights and interests under the Supervalu Agreements on the basis that such assignee or assignment does not satisfy all of the requirements of sections 365(b) and (f) of the Bankruptcy Code, including adequate assurance of future performance by the assignee. RESERVATION OF RIGHTS 14. Supervalu reserves the right to amend, supplement and revise this Objection, including but not limited to adding any and all other or additional amounts that Debtors may be obligated to pay Supervalu under the Supervalu Agreements. 5

6 Case KG Doc 1338 Filed 01/29/16 Page 6 of 6 CONCLUSION WHEREFORE, Supervalu requests that the Court enter an order denying any attempt by the Debtors to assume or assign the aforementioned contracts without full payment to Supervalu of the appropriate cure costs, and granting Supervalu such other and further relief as is just and equitable. Dated: January 29, 2016 ASHBY & GEDDES, P.A. /s/ F. Troupe Mickler IV William P. Bowden (#2553) F. Troupe Mickler IV (#5361) 500 Delaware Avenue, 8th Floor P.O. Box 1150 Wilmington, Delaware Tel: (302) Fax: (302) wbowden@ashby-geddes.com tmickler@ashby-geddes.com -and- FAEGRE BAKER DANIELS LLP Dennis M. Ryan, Esq. (admitted pro hac vice) 2200 Wells Fargo Center 90 South 7 th Street Minneapolis, Minnesota Tel: (612) Fax: (612) dennis.ryan@faegrebd.com Counsel for Supervalu Inc. 6

7 Case KG Doc Filed 01/29/16 Page 1 of 1 CERTIFICATE OF SERVICE I, F. Troupe Mickler IV, hereby certify that on January 29, 2016, I caused one copy of the foregoing document to be served upon the parties below via first class mail and . STROOCK & STROOCK & LAVAN, LLP Attn: Frank Merola, Esq Century Park East Los Angeles, CA YOUNG CONAWAY STARGATT & TAYLOR LLP Attn: Matthew Lunn, Esq. and Robert Poppitti, Jr., Esq. Rodney Square 1000 North King Street Wilmington, DE BLANK ROME LLP Attn: Regina Kelbon, Esq. and Michael Graziano, Esq Market Street, Suite 800 Wilmington, DE STROOCK & STROOCK & LAVAN, LLP Attn: Sayan Bhattacharyya, Esq. 180 Maiden Lane New York, NY PACHULSKI STANG ZIEHL & JONES LLP Attn: Bradford Sandler, Esq. 919 North Market Street 17 th Floor Wilmington, DE /s/ F. Troupe Mickler IV F. Troupe Mickler IV (DE #5361) { ;v1 }