Case:16-00290 Doc #:8 Filed: 01/25/16 Page 1 of 10 UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF MICHIGAN In re: Chapter 11 GREAT LAKES COMNET, INC. Case No. 16-00290 ( ) Debtor. In re: Chapter 11 COMLINK, L.L.C. Case No. 16-00292 ( ) Debtor. / Honorable DEBTORS MOTION FOR AN ORDER AUTHORIZING CONTINUED USE OF THEIR EXISTING BANK ACCOUNTS, BUSINESS FORMS AND CASH MANAGEMENT SYSTEM Great Lakes Comnet, Inc. ( GLC ) and Comlink, L.L.C. ( Comlink ; and collectively with GLC, the Debtors ), by and through their proposed counsel, Miller, Canfield, Paddock & Stone, PLC ( Miller Canfield ), each hereby moves this Court for entry of an order, in the form of appended Exhibit A, pursuant to 11 U.S.C. 105(a) and 363(b), authorizing the continued use of the Debtors existing bank accounts and cash management system. In support of this Motion, the Debtors incorporate the Declaration of John Summersett in Support of Chapter 11 Petitions and First Day Motions (the Summersett Declaration ), filed contemporaneously herewith, and state as follows. BACKGROUND AND JURISDICTION 1. On January 25, 2016 (the Petition Date ), the Debtors commenced their reorganization cases by filing voluntary petitions for relief under chapter 11 of the Bankruptcy Code, 11 U.S.C. 101, et seq. (the Bankruptcy Code ).
Case:16-00290 Doc #:8 Filed: 01/25/16 Page 2 of 10 2. The Debtors continue in possession of their property and are operating and managing their businesses, as debtors in possession, pursuant to 1107 and 1108 of the Bankruptcy Code. 3. This Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334. Venue of this case and this Motion in this District is proper pursuant to 28 U.S.C. 1408 and 1409. This is a core proceeding pursuant to 28 U.S.C. 157(b)(2)(A). 4. The factual background relating to the Debtors businesses and the commencement of these chapter 11 cases is set forth in detail in the Summersett Declaration. 5. GLC, based in East Lansing, Michigan, owns and operates a 6,500 mile fiber network serving the carrier and enterprise sectors in Michigan, with the network extending to Ohio, Indiana, Illinois, Wisconsin, and Minnesota. GLC s services include transport, dark fiber sales, cloud and datacenter operations, toll resale, toll routes, local switching, tandem switching and SS7. 1 Its fiber and data center-related customers include Verizon, Spectrum Health, Consumers Energy, Google, and the City of East Lansing. Its fiber network borders or serves key Michigan markets, such as Detroit, Grand Rapids, Lansing, and Ann Arbor. GLC provides telecommunications services to telecommunications carrier customers. GLC provides tandem switching and tandem transport services through its tandem switch located in Westphalia, Michigan. 6. GLC has two wholly-owned subsidiaries: Comlink and Clinton County Telephone Company ( CCTC ). CCTC serves residential and business customers through its two whollyowned subsidiaries: Westphalia Telephone Company ( WTC ), operating across the towns of Westphalia, Portland, St. Johns, and Dewitt, Michigan, serving nearly 850 residential and 75 1 Signaling System 7, or SS7 for short, refers to the basic services provided to establish and route telephone calls, along with related services (e.g., billing). - 2 -
Case:16-00290 Doc #:8 Filed: 01/25/16 Page 3 of 10 business customers with voice, data, and video services and Westphalia Broadband, Inc. ( WBI ), offering triple play services with nearly 875 customers, including over 235 business customers across the same geographic territory. CCTC, WTC and WBI are non-debtor subsidiaries and affiliates of GLC and are not participants in these bankruptcy cases. 7. Comlink provides data and communication services, including dedicated ultrahigh-speed bandwidth data transmission, Ethernet private line services and virtual private network services, cloud-based and colocation data center services, and data management services to Consumers Energy, several hospital systems, municipalities and state correctional facilities. Comlink owns and operates a portion of GLC s fiber network and the majority of its data center assets, servicing enterprise and carrier customers. 8. By this Motion, the Debtors seek entry of an order authorizing them to continue to use their existing cash management systems, including, without limitation, their bank accounts and business forms. THE DEBTORS PRE-PETITION BANK ACCOUNTS, BUSINESS FORMS AND CASH MANAGEMENT SYSTEM 9. As noted above, the size and scale of the Debtors operations necessitates the collection, concentration, and ultimate disbursement of significant funds each month. The Debtors and their subsidiaries use in the ordinary course of their business a cash management system (the Cash Management System ) commonly used by comparably-sized companies to collect, transfer, and disburse funds through the Debtors operations and to accurately record such transactions. As part of the Cash Management System, the Debtors maintain the bank accounts listed below. Bank Acct # Nature of Account Comerica Bank xxxxxx8520 GLC Checking Account Comerica Bank xxxxxx8538 GLC Money Market Account Comerica Bank xxxxxx9049 Comlink Checking Account - 3 -
Case:16-00290 Doc #:8 Filed: 01/25/16 Page 4 of 10 10. All of the bank accounts are in the United States and with a well-known and respected banking institution having insurance with the Federal Deposit Insurance Corporation ( FDIC ). The Debtors believe Comerica Bank to be financially stable. 11. Funds collected by each Debtor are deposited into its respective Comerica Bank checking account. As needed, funds are drawn from the Debtors Comerica Bank checking accounts. Only the GLC checking account is used to pay payroll. The GLC checking account is mainly used to pay professional fees, though a small amount is paid via the Comlink checking account. Both checking accounts are used for all other operating disbursements. 12. The following chart generally summarizes the basic cash flow mechanisms. (For completeness, the bank accounts of the Debtors subsidiaries are also depicted.) - 4 -
Case:16-00290 Doc #:8 Filed: 01/25/16 Page 5 of 10 Cash Management Chart 13. Additionally, in the ordinary course of business, the Debtors use a number of business forms, including checks, letterhead, purchase orders, and invoices. If the Debtors were required to obtain all new business forms as a result of the filing of these cases, the Debtors would incur significant expense and attendant delay in effectuating their ordinary course, postpetition business transactions. Notwithstanding the foregoing, upon entry of this Order, the Debtors will order checks, for delivery as soon as can be reasonably obtained, that are imprinted with the notification Debtor in Possession, Case # 2 or similar language as may be acceptable to the United States Trustee s Office and will begin using them as soon as practicable 2 Actual case number to be filled in when assigned. - 5 -
Case:16-00290 Doc #:8 Filed: 01/25/16 Page 6 of 10 after they have been received. Until these new checks are received, however, the Debtors request permission to use their existing checks. Checks that are printed by Debtors directly will be adjusted to incorporate language acceptable to the United States Trustee s Office as soon as practicable after such language is determined. 14. The Cash Management System is also used to pay certain expenses for the Westphalia Subsidiaries. In addition to paying certain professional expenses, the Cash Management System manages the payroll and benefits for twelve employees of the Westphalia Subsidiaries, as described in greater detail in the Debtors Motion for an Order (I) Authorizing Payment of (A) Prepetition Employee Wages, Salaries and Related Items; (B) Prepetition Contributions Under Employee Benefit Plans; and (C) Prepetition Employee Payroll Deductions; and (II) Granting Further Relief filed concurrently with this Motion. The Westphalia Subsidiaries reimburse GLC each week for these expenses, with such reimbursements averaging approximately $29,000 per week. Because GLC is made whole on a weekly basis for these expenses, and to avoid the expense of setting up a separate system, GLC asks the Court for authority to continue to manage the payroll and other expenses for the nondebtor Westphalia Subsidiaries. RELIEF REQUESTED 15. By this Motion, the Debtors seek entry of an order (a)(i) authorizing the Debtors to maintain their existing bank accounts, checks (until suitable replacement checks can be reasonably obtained), and business forms without being required to close such accounts and forms and re-open new ones, (ii) authorizing the Debtors to continue using its cash management system, and (iii) authorizing the Debtors bank to accept and rely upon Debtors notices and instructions as to which pre-petition checks can be honored pursuant to any order(s) entered by this Court and which checks must be dishonored; and (b) authorizing the Debtor to continue - 6 -
Case:16-00290 Doc #:8 Filed: 01/25/16 Page 7 of 10 using its Cash Management System to pay expenses for the Westphalia Subsidiaries, so long as it continues to be promptly reimbursed for those expenses. BASIS FOR RELIEF REQUESTED 16. Region 9 of the United States Trustee s Office (for Ohio/Michigan), like most districts, generally requires all chapter 11 debtors to close all of their pre-petition bank accounts and open new accounts and use new business forms and statements. In some cases, such requirements can impose undue, sometimes unnecessary, burdens on larger companies with more sophisticated banking and cash management systems, and thereby have the unintended consequence of impeding or jeopardizing the goals of rehabilitating a debtor s business. 17. Here, the Debtors Cash Management System has been employed for some time and constitutes an essential business practice. The use of this system provides numerous benefits to the Debtors, including the ability to control and monitor corporate funds, to ensure cash availability, and to reduce administrative expenses by facilitating the movement of funds. The forced closure and reopening of such accounts and systems would be very costly to the Debtors, significantly disruptive to their operations, and potentially damaging to their business relations with customers, vendors, and employees. 18. Consequently, in similar circumstances, bankruptcy courts routinely permit chapter 11 debtors to continue using their existing cash management systems, often treating requests for such relief as relatively simple matters. In re Baldwin-United Corp., 79 B.R. 321, 327 (Bankr. S.D. Ohio 1987); see also (Official Comm. of Unsecured Creditors of Columbia Gas Transmission Corp. v. Columbia Gas Sys. Inc.) In re Columbia Gas Sys. Inc., 997 F.2d 1039, 1061 (3d Cir. 1993) (recognizing that a requirement to maintain all accounts separately would be a huge administrative burden and economically inefficient. ); Charter Co. v. Prudential Ins. Co. of Am. (In re Charter Co.), 778 F.2d 617, 621 (11th Cir. 1985) (holding that allowing the - 7 -
Case:16-00290 Doc #:8 Filed: 01/25/16 Page 8 of 10 debtors to use their prepetition routine cash management system was entirely consistent with applicable provisions of the Bankruptcy Code). 19. Similarly, courts in this district have granted similar motions allowing debtors to maintain their bank accounts and cash management system. See, e.g. In re Family Christian, LLC, Case No. 15-00643, Doc. No. 112 (Bankr. W.D. Mich. Feb. 19, 2015); In re Arrow of Michigan, Inc., Case No. 14-06240-jwb, Doc. No. 19 (Bankr. W.D. Mich. Oct. 2, 2014); In re BHM Techs. Holdings, Inc., Case No. 08-4413-swd, Doc. No. 284 (Bankr. W.D. Mich. June 18, 2008); In re Sturgis Iron & Metal Co., Case No. 08-02966, Doc. No. 86 (Bankr. W.D. Mich. April 15, 2008). 20. Affording such relief is consistent with 363(c)(1) of the Bankruptcy Code, which allows a debtor in possession to continue using its property in the ordinary course of business, as well as 105(a), which authorizes the Court to issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title. 21. The Debtors recognize their obligation to avoid the payment of any pre-petition obligations without approval from the Court. As a matter of course, the Debtors will continue to maintain strict records with respect to all transfers of cash in the bank accounts, ensuring that (1) all pre- and post-petition transactions can be readily ascertained, traced, and properly recorded, and (2) the unauthorized payment of pre-petition claims will be avoided. The Debtors intend to instruct their banks to dishonor any checks or transfers related to payment of prepetition obligations unless such payments have been authorized by the Court. Accordingly, the Debtors request that the banks be authorized to accept and honor all representations from the Debtors as to which checks, drafts, wires, or ACH Transfers should be honored or dishonored consistent with any order(s) of this Court, whether the checks, drafts, wires, or ACH Transfers - 8 -
Case:16-00290 Doc #:8 Filed: 01/25/16 Page 9 of 10 are dated prior to, on, or subsequent to the Petition Date, and whether or not the bank believes the payment is or is not authorized by any order(s) of the Court. The banks will have no duty to inquire as to whether such payments are authorized by any order(s) of this Court and no liability to any party on account of following the Debtors instructions. 22. The Debtors further request that the banks be permitted to charge back returned items against amounts on deposit in the bank accounts, regardless of whether such amounts were deposited before or after the Petition Date, and that the banks be entitled to receive payment of prepetition and postpetition fees, costs, charges, and expense to which they bank may be entitled under the terms of their contractual arrangements with the Debtors. 23. Finally, the Debtors seek authority to continue using the Cash Management System to manage the payroll and pay other expenses for the non-debtor Westphalia Subsidiaries. Bankruptcy Code 105(a) provides authority for granting this relief. The Debtors estates are not harmed by making these payments, as they are timely reimbursed for doing so. And, the costs avoided by the Westphalia Subsidiaries by not having to set up their own duplicative payroll system directly redounds to GLC s benefit, as the Westphalia Subsidiaries are wholly owned by CCTC, which is in turn wholly owned by GLC (and is thus estate property). 24. Because actions to minimize costs to the Westphalia Subsidiaries directly benefit GLC, and because GLC suffers no loss by using its cash management system in this manner, the Debtors believe it is prudent for the Court to permit GLC to continue this practice. NOTICE 25. Notice of this Motion has been given to the following parties, or in lieu thereof, to their counsel: (a) United States Trustee, (b) the Debtors secured lender, (c) the Debtors 20 largest unsecured creditors, (d) Comerica Bank and (d) any parties that have filed notices of - 9 -
Case:16-00290 Doc #:8 Filed: 01/25/16 Page 10 of 10 appearance or requests for notice. In light of the nature of the relief requested, the Debtors respectfully submit that no further notice is necessary. WHEREFORE, the Debtor respectfully requests that this Court (a) enter an order in form similar to the proposed order attached hereto as Exhibit A granting the relief requested herein and authorizing the Debtors to maintain their existing bank accounts, business forms, and Cash Management System, and (b) grant the Debtors such other and further relief as is just and proper. Respectfully Submitted, MILLER, CANFIELD, PADDOCK AND STONE, P.L.C. Dated: January 25, 2016 By: /s/ Stephen S. LaPlante Timothy A. Fusco (P13768) Stephen S. LaPlante (P48063) Proposed Attorneys for the Debtors 150 West Jefferson, Suite 2500 Detroit, MI 48226 (313) 963-6420 laplante@millercanfield.com - 10 -
Case:16-00290 Doc #:8-1 Filed: 01/25/16 Page 1 of 4 EXHIBIT A UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF MICHIGAN In re: Chapter 11 GREAT LAKES COMNET, INC. Case No. 16-00290 ( ) Debtor. In re: Chapter 11 COMLINK, L.L.C. Case No. 16-00292 ( ) Debtor. / Honorable ORDER GRANTING DEBTORS MOTION TO CONTINUE USING THEIR EXISTING BANK ACCOUNTS, BUSINESS FORMS AND CASH MANAGEMENT SYSTEMS Before the Court is the Debtors Motion for an Order Authorizing Continued Use of Their Existing Bank Accounts, Business Forms and Cash Management System filed on January 25, 2016 (the Motion ). The Court having considered the Motion, the Declaration of John Summersett in Support of Chapter 11 Petitions and First Day Motions, and the record in this case, and it appearing to the Court that (a) the Court has jurisdiction over this proceeding pursuant to 28 U.S.C. 157 and 1334; (b) this is a core proceeding pursuant to 28 U.S.C. 157(b); (c) venue is proper before this Court pursuant to 28 U.S.C. 1408 and 1409; (d) sufficient notice of the Motion has been provided through service given to the Office of the United States Trustee, counsel for the Debtors' pre-petition secured lender, and the Debtors' twenty (20) largest unsecured creditors; and (e) good and sufficient cause exists for the relief granted herein, Accordingly, it is hereby ORDERED as follows:
Case:16-00290 Doc #:8-1 Filed: 01/25/16 Page 2 of 4 1. The Motion is GRANTED pursuant to the terms of this Order. 3 2. The Debtors are authorized to continue maintaining and using (a) their prepetition business forms and bank accounts and to treat such accounts for all purposes as debtorin-possession accounts, and (b) their customary Cash Management Procedures in the ordinary course; provided, however, (i) the Debtors will maintain records of all transactions within their Cash Management System so that pre-petition and post-petition transactions can be readily ascertained, traced, and recorded properly, and so that unauthorized payment of pre-petition claims will be avoided, and (ii) as soon as practicable, the Debtors will obtain new checks imprinted with the notification Debtor in Possession, Case # or with such other language as may be acceptable to the United States Trustee. Checks printed directly by the Debtors will include this language as soon as practicable. 3. The Debtors banks (a) are authorized to continue servicing and administering the Debtors bank accounts as accounts of the Debtors and Debtors in Possession without interruption and in the usual and ordinary course, and to receive, process, honor, and pay any and all checks, drafts, wires, or automated clearing house transfers ( ACH Transfers ) drawn on the Debtor s bank accounts; (b) are authorized to accept and honor all representations from the Debtors as to which checks, drafts, wires, or ACH Transfers should be honored or dishonored consistent with any order(s) of this Court, whether the checks, drafts, wires, or ACH Transfers are dated prior to, on, or subsequent to the Petition Date, and whether or not the Bank believes the payment is or is not authorized by any order(s) of the Court; (c) have no duty to inquire as to whether such payments are authorized by any order(s) of this Court; and (d) have no liability to any party on account of following the Debtors' instructions in accordance with this order. 3 Capitalized terms not otherwise defined herein have the meanings set forth in the Motion.
Case:16-00290 Doc #:8-1 Filed: 01/25/16 Page 3 of 4 4. The Debtors banks are further authorized and permitted to charge back returned items of the Debtors against amounts on deposit in the bank accounts, regardless of whether such amounts were deposited before or after the Petition Date, and the banks will be entitled to receive payment of prepetition and postpetition fees, costs, charges, and expenses to which such bank may be entitled under the terms of their contractual arrangements with the Debtors. 5. Nothing herein will prevent the Debtors from opening any additional bank accounts or closing any existing bank account(s) as the Debtors may deem necessary and appropriate in the ordinary course of their business, and the banks are authorized to honor the Debtors requests to open or close accounts; provided that, any new account will be with a bank that is insured with the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation and that is organized under the laws of the United States or any State therein. Such new accounts will be subject to the same provisions and obligations of this order, and the Debtors will immediately provide the U.S. Trustee's office with notice of the closing or opening of any new accounts. 6. GLC is authorized, but not obligated, to continue to manage the payroll and expenses for the Westphalia Subsidiaries.
Case:16-00290 Doc #:8-1 Filed: 01/25/16 Page 4 of 4 7. This Court retains jurisdiction to hear and determine all matters arising from or related to the implementation or interpretation of this Order END OF ORDER Order prepared and submitted by: Timothy A. Fusco (P13768) Stephen S. LaPlante (P48063) Proposed Attorneys for the Debtors 150 West Jefferson, Suite 2500 Detroit, MI 48226 (313) 963-6420 laplante@millercanfield.com Proposed Attorneys to the Debtors and Debtors-in-Possession