Case Document 555 Filed in TXSB on 10/10/18 Page 1 of 7 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

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1 Case Document 555 Filed in TXSB on 10/10/18 Page 1 of 7 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION In re: NEIGHBORS LEGACY HOLDINGS, INC., et al., Debtors. 1 Chapter 11 Case No (Jointly Administered) DEBTORS MOTION TO EXTEND EXCLUSIVE PERIODS FOR DEBTORS TO FILE AND OBTAIN ACCEPTANCES OF A PLAN THIS MOTION SEEKS ENTRY OF AN ORDER THAT MAY ADVERSELY AFFECT YOU. IF YOU OPPOSE THE MOTION, YOU SHOULD IMMEDIATELY CONTACT THE MOVING PARTY TO RESOLVE THE DISPUTE. IF YOU AND THE MOVING PARTY CANNOT AGREE, YOU MUST FILE A RESPONSE AND SEND A COPY TO THE MOVING PARTY. YOU MUST FILE AND SERVE YOUR RESPONSE WITHIN 21 DAYS OF THE DATE THIS WAS SERVED ON YOU. YOUR RESPONSE MUST STATE WHY THE MOTION SHOULD NOT BE GRANTED. IF YOU DO NOT FILE A TIMELY RESPONSE, THE RELIEF MAY BE GRANTED WITHOUT FURTHER NOTICE TO YOU. IF YOU OPPOSE THE MOTION AND HAVE NOT REACHED AN AGREEMENT, YOU MUST ATTEND THE HEARING. UNLESS THE PARTIES AGREE OTHERWISE, THE COURT MAY CONSIDER EVIDENCE AT THE HEARING AND MAY DECIDE THE MOTION AT THE HEARING. A HEARING WILL BE CONDUCTED ON THIS MATTER ON NOVEMBER 1, 2018 AT 2:30 P.M. IN COURTROOM 404, UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS, 515 RUSK STREET, HOUSTON, TEXAS REPRESENTED PARTIES SHOULD ACT THROUGH THEIR ATTORNEYS. Neighbors Legacy Holdings, Inc. ( NLH ) and certain of its affiliates and subsidiaries, as debtors and debtors in possession in the above-captioned cases (collectively, the Debtors ), file their Motion to Extend Exclusive Periods in Which to File and Obtain Acceptances of a Plan. 1 Due to the large number of Debtors in these chapter 11 cases, a complete list of the Debtors and the last four digits of their tax identification numbers is not provided herein. A complete list of such information may be obtained on the website of the Debtors proposed claims and noticing agent at The location of Debtors principal place of business and the Debtors service address is: Richmond Avenue, Houston, Texas

2 Case Document 555 Filed in TXSB on 10/10/18 Page 2 of 7 JURISDICTION AND VENUE 1. This Court has jurisdiction to consider this motion pursuant to 28 U.S.C This matter is a core proceeding pursuant to 28 U.S.C. 157(b). Venue is proper before this Court pursuant to 28 U.S.C RELIEF REQUESTED 2. The Debtors seek a 30-day extension of the exclusive periods within which the Debtors may file and obtain acceptances of a plan under 1121(d) of the Bankruptcy Code. BACKGROUND A. Procedural History 3. On July 12, 2018, and July 23, 2018 (collectively, the Petition Date ), the Debtors each commenced a case by filing a petition for relief under Chapter 11 of the Bankruptcy Code (collectively, the Chapter 11 Cases ). These Chapter 11 Cases are being jointly administered pursuant to Bankruptcy Rule 1015(b) [Docket No. 10] The Debtors continue to operate their businesses and manage their properties as debtors and debtors in possession pursuant to Bankruptcy Code sections 1107(a) and On July 23, 2018, the United States Trustee for the Southern District of Texas (the United States Trustee ) appointed an official committee of unsecured creditors pursuant to section 1102 of the Bankruptcy Code (the Committee ) [Docket No. 87]. No trustee or examiner has been appointed in the Chapter 11 Cases. 2 On July 23, 2018, NEC Beaumont Emergency Center, LP (Case No ) and NEC Beaumont Asset Holdings, LLC (Case No ) each commenced a case by filing a petition for relief under Chapter 11 of the Bankruptcy Code (the Beaumont Cases ). The Beaumont Cases are jointly administered with the above-captioned case by Orders entered in each Beaumont Case Directing that Certain Orders in the Chapter 11 Cases of Neighbors Legacy Holdings, Inc., et al. Apply to the Beaumont Cases (Docket No. 3 in NEC Beaumont Asset Holdings, LLC and Docket No. 4 in NEC Beaumont Emergency Center, LP). 2

3 Case Document 555 Filed in TXSB on 10/10/18 Page 3 of 7 B. The Exclusive Period 6. As the Court is aware, the Debtors are in the process of closing sales for substantially all of their assets to five separate buyers in five separate asset packages. Each of the five sales currently contemplate a closing deadline of October 31, 2018, although certain extensions may be necessary. Currently, the Debtors exclusive period terminates on November 9, 2018, and the Debtors deadline to obtain acceptances of a plan terminates on January 8, The Debtors request (i) a 30-day extension of their exclusive period to file a plan through and including December 9, 2018; and (ii) a 30-day extension of their period to obtain acceptances of a plan through and including February 8, If granted, extension of the Debtors exclusive periods will be without prejudice to (i) the Debtors right to seek further extensions, subject to the limitations set forth in 1121(d)(2) of the Bankruptcy Code, or (ii) the right of any party-in-interest to seek to reduce the exclusive periods for cause. BASIS FOR RELIEF A. Legal Standard 8. Pursuant to 11 U.S.C. 1121(b), the Debtors have 120 days or until November 9, 2018, to file a plan and, pursuant to 1121(c), the Debtors have 180 days or until January 9, 2019, to file a plan that has been accepted by each class of claims or interests that is impaired under the plan. 11 U.S.C. 1121(c)(3). 9. Under 1121(d) of the Bankruptcy Code, the Court may extend the exclusivity periods for cause. While the Code does not define cause, courts have referred to the cause standard set forth in 1121(d) as a general standard that allows the Bankruptcy Court maximum flexibility to suit various types of reorganization proceedings. In re Gibson & Cushman Dredging Corp., 101 B.R. 405, 409 (E.D. N.Y. 1989) (citing In re Public Serv. Co. of N.H., 88 B.R. 521, 534 (Bankr. D. N.H. 1988); In re Amko Plastics, Inc., 197 B.R. 74, 77 (Bankr. S.D. Ohio 1996)). 3

4 Case Document 555 Filed in TXSB on 10/10/18 Page 4 of 7 Legislative history indicates that 1121(d) is to be viewed flexibly in order to allow the debtor to reach an agreement. H.R. Rep. No , at 232 (1977) (the House Report ); see also In re Public Serv. Co. of N. H., 88 B.R. 521, 534 (Bankr. D.N.H. 1988) ( [T]he legislative intent... [is] to promote maximum flexibility ); In re McLean Indus., Inc., 87 B.R. 830, 833 (Bankr. S.D.N.Y. 1987) (quoting the House Report). 10. The decision to extend a debtor s exclusive periods to file a plan and solicit acceptances thereto is committed to the sound discretion of the bankruptcy court, based upon the facts and circumstances of each particular case. See, e.g., First Am. Bank of N.Y. v. Southwest Gloves & Safety Equip., Inc., 64 B.R. 963, 965 (D. Del. 1986); Bunch v. Hoffinger Indus., Inc. (In re Hoffinger Indus., Inc.), 292 B.R. 639, 644 (B.A.P. 8th Cir. 2003). 11. Though courts applying 1121(d) have not consistently relied on the same factors, the following factors have been identified and generally relied upon by courts as being relevant in determining whether cause exists: (a) (b) (c) (d) (e) (f) (g) (h) (i) the size and complexity of the case; the necessity of sufficient time to permit the debtor to negotiate a plan of reorganization and prepare adequate information; the existence of good faith progress toward reorganization; the fact that the debtor is paying its bills as they become due; whether the debtor has demonstrated reasonable prospects for filing a viable plan; whether the debtor has made progress in negotiations with its creditors; the amount of time which has elapsed in the case; whether the debtor is seeking an extension of exclusivity to pressure creditors to submit to the debtor s reorganization demands; and whether an unresolved contingency exists. 4

5 Case Document 555 Filed in TXSB on 10/10/18 Page 5 of 7 In re Express One Int l, Inc., 194 B.R. 98, 100 (Bankr. E.D. Tex. 1996); In re Dow Corning Corp., 208 B.R. 661, 664 (Bankr. E.D. Mich. 1997). When a court considers the enumerated factors in deciding whether to extend the exclusivity periods, it is not limited to the task of counting factors. In re Dow Corning Corp., 208 B.R. at 699. Sometimes certain factors are more relevant, important or persuasive than others, and sometimes one or more factors determine the particular result. Id. B. Cause to Extend Debtors Exclusive Period 12. Given the size and complexity of the Debtors operations, the hundreds of creditors and parties-in-interest, and the complexity of the five separate sale transactions, this case is large and complex within the meaning of 1121 and warrants an extension of the Debtors exclusive period. See, e.g., Gaines v. Perkins (In re Perkins), 71 B.R. 294, 296 (Bankr. W.D. Tenn. 1987) (approving five extensions of debtor s exclusivity because the debtor s case was unusually large and complex where there were only 100 creditors holding approximately 225 claims totaling $10,000,000 on an estate valued at only $13,000,000); see also Express One, 194 B.R. at 100 ( The traditional ground for cause is the large size of the debtor and the concomitant difficulty in formulating a plan of reorganization. ); see also In re Hoffinger Indus., 292 B.R. at 644 (affirming extension of exclusivity period because of the complexity of the debtor s case). 13. Since the filing of these cases, the Debtors have endeavored to stabilize the Debtors business operations and protect the estates assets in good faith. The Debtors have diligently worked to sell the Debtors assets and maximize estate value. The Debtors have expended significant resources in selling the their assets, which included marketing and auctioning the assets, and negotiating five asset purchase agreements and one back-up asset purchase agreement. The Court has approved the sales and the asset purchase agreements and the Debtors are focused on ensuring a smooth sale process and timely closings. Upon the sales closing, the 5

6 Case Document 555 Filed in TXSB on 10/10/18 Page 6 of 7 Debtors intend to file a plan of liquidation in order to wind up their remaining businesses. The Debtors, while working to ensure a smooth closing process, are cognizant of the complexity of a transaction with five separate buyers and the possibility that the Debtors may have a back-up buyer step in prior to closing; any change in the current timeline for closings could impact the Debtors plan of liquidation. The Debtors believe that their focus should be on maximizing the value of their assets by working to ensure they close on the sale of their assets. In light of the foregoing, the Debtors believe that cause exists to grant the requested extensions. 14. Further, the Debtors are operating their businesses and paying their post-petition bills as they come due. See, e.g., In re McLean Indus., 87 B.R. 830, 834 (Bankr. S.D.N.Y. 1987). The Debtors continue to manage their businesses effectively and are preserving the value of their assets for the benefit of creditors. This Motion is the Debtors first request for an extension of the exclusivity periods. This Motion is not filed for purposes of delay but to allow the Debtors to close on the sale of their assets prior to proposing a plan of liquidation. The extension requested is reasonable and realistic in view of the circumstances of this case, the nature of the Debtors businesses, and the Debtors need to focus on closing the sales. This Motion is the Debtors first request for an extension to the exclusive period and the Debtors are only requesting a short extension. 15. Finally, it should be noted that the following factors, which may preclude an extension or result in a reduction of the exclusivity periods, are non-existent in this case: (a) (b) (c) No progress in arranging financing. See In re EUA Power Corp., 130 B.R. 118 (Bankr. D. N.H. 1991); Extension would be fruitless. See In re Gagel & Gagel, 24 B.R. 674 (Bankr. S.D. Ohio 1982); Extension is to pressure a creditor to accede to the debtor s point of view on an issue in dispute. See Matter of Lake in the Woods,10 B.R. 338, 346 (E.D. Mich. 1981); and 6

7 Case Document 555 Filed in TXSB on 10/10/18 Page 7 of 7 (d) Multiple previous extensions of the exclusive periods with the stated intention to continue extensions indefinitely and the substantial passage of time. Id. CONCLUSION 16. The Debtors respectfully request that this Court (i) grant the Debtors a 30-day extension of their exclusive period to file a plan through and including December 9, 2018; (ii) grant the Debtors a 30-day extension of the period to obtain acceptances of a plan through and including February 8, 2019; and (iii) grant the Debtors such other and further relief as the Court may deem just and proper. Dated: Houston, Texas October 10, PORTER HEDGES LLP By: /s/ John F. Higgins John F. Higgins State Bar No Eric M. English State Bar No Genevieve M. Graham State Bar No Main Street, 36th Floor Houston, Texas Telephone: (713) Fax: (713) COUNSEL FOR DEBTORS AND DEBTORS IN POSSESSION 7

8 Case Document Filed in TXSB on 10/10/18 Page 1 of 2 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION In re: NEIGHBORS LEGACY HOLDINGS, INC., et al., Debtors. 1 Chapter 11 Case No (Jointly Administered) ORDER EXTENDING THE EXCLUSIVE PERIODS FOR DEBTORS TO FILE AND OBTAIN ACCEPTANCES OF A PLAN The above-referenced debtors and debtors-in-possession (collectively, the Debtors ) filed their motion (the Motion ) 2 to extend their exclusive periods in which to file and obtain acceptances of a plan. The Court has jurisdiction over the Motion and the relief requested in the Motion pursuant to 28 U.S.C and venue is proper in this District pursuant to 11 U.S.C The Motion is a core proceeding pursuant to 28 U.S.C. 157(b)(2) and the Court may enter a final order on the Motion. The relief requested by the Motion is in the best interests of the Debtors, their estates, creditors, stakeholders, and other parties in interest and the Debtors gave sufficient and proper notice of the Motion and related hearings. Upon consideration of the Motion the Court finds that good cause exists to grant the requested relief. It is therefore ORDERED THAT 1. The Motion is granted. 2. Pursuant to 11 U.S.C. 1121(d), the exclusive period for the Debtors to file a plan is extended through and including December 9, Due to the large number of Debtors in these chapter 11 cases, a complete list of the Debtors and the last four digits of their tax identification numbers is not provided herein. A complete list of such information may be obtained on the website of the Debtors proposed claims and noticing agent at The location of Debtors principal place of business and the Debtors service address is: Richmond Avenue. Houston, Texas Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Motion v1 1

9 Case Document Filed in TXSB on 10/10/18 Page 2 of 2 3. Pursuant to 11 U.S.C. 1121(d), the exclusive period for the Debtors to obtain acceptances of a plan is extended through and including February 8, This Order is without prejudice to the Debtors seeking additional extensions of the exclusive periods. 5. The Court retains jurisdiction with respect to all matters arising from or related to the interpretation or implementation of this Order. Dated:, MARVIN ISGUR UNITED STATES BANKRUPTCY JUDGE v1 2