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r&h Emergencymotion 6

r&h Emergencymotion 6

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Published by SharonWaxman

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Published by: SharonWaxman on Feb 15, 2013
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74262-00017/1896543.10
 
EMERGENCY MOTION TO APPROVE DIPFINANCING
BRIAN L. DAVIDOFF (SBN 102654)BDavidoff@GreenbergGlusker.comJEFFREY A. KRIEGER (SBN 156535)JKrieger@GreenbergGlusker.comC. JOHN M. MELISSINOS (SBN 149224)JMelissinos@GreenbergGlusker.comGREENBERG GLUSKER FIELDS CLAMAN& MACHTINGER LLP1900 Avenue of the Stars, 21st FloorLos Angeles, California 90067-4590Telephone: 310.553.3610Fax: 310.553.0687Proposed General Bankruptcy Attorneys forDebtor and Debtor in PossessionUNITED STATES BANKRUPTCY COURTCENTRAL DISTRICT OF CALIFORNIALOS ANGELES DIVISIONIn re:RHYTHM AND HUES, INC.,Debtor and Debtor in Possession.Case No. 2:13-bk-13775-NBChapter 11
EMERGENCY MOTION FOR INTERIMAND FINAL ORDERS APPROVINGPOST-PETITION FINANCINGAGREEMENT WITH UNIVERSAL CITYSTUDIOS LLC AND TWENTIETHCENTURY FOX; MEMORANDUM OFPOINTS AND AUTHORITIES INSUPPORT THEREOF
[Declarations of John Hughes and John F. Hedge in support of First Day Motions filed concurrently herewith]
 
Emergency HearingDate: TBDTime: TBDCtrm: 1545255 E. Temple StreetLos Angeles, CA 90012 / / /  / / /  / / / 
 
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2EMERGENCY MOTION TO APPROVE DIPFINANCING
TO THE HONORABLE NEIL W. BASON, UNITED STATES BANKRUPTCYJUDGE, THE UNITED STATES TRUSTEE, ALL PARTIES IN INTEREST HEREIN,AND THEIR RESPECTIVE COUNSEL:PLEASE TAKE NOTICE
that Debtor and Debtor in Possession Rhythm And Hues, Inc.(
R&H
, the
Company
or the
Debtor
) hereby submits this Motion (the
Motion
), on anemergency basis, for entry of interim and final orders (i) authorizing the Debtor to obtain post-petition financing on a secured basis in the amount of up to $17,086,000 (the
DIP Loan
)pursuant to 11 U.S.C. §§105, 361, 362, 363 and 364, and (ii) scheduling a final hearing on theDebtor
s Motion to incur such financing on a permanent basis pursuant to Rules 4001(b) and (c)of the Federal Rules of Bankruptcy Procedure. The DIP Loan will be provided by Universal CityStudios LLC (
Universal
) and Twentieth Century Fox, a division of Twentieth Century FoxFilm Corporation (
Fox
and, together with Universal, herein the
DIP Lenders
), two of theDebtor
s most significant customers. The DIP Lenders, through Fox, as administrative andcollateral agent for the DIP Lenders, will receive security interests in substantially all the assets of the Debtors (except in the property of a Dormant Non Lender Project, as defined in the DIP LoanAgreement), as well as other protections, all as set forth in the Senior Secured Super-PriorityDebtor In Possession Loan Agreement (the
DIP Loan Agreement
) and related documentsevidencing the proposed DIP Loan, copies of which are attached hereto as Exhibit
A
.
PLEASE TAKE FURTHER NOTICE
that pursuant to Local Bankruptcy Rule 2081-1(a)(9), this Motion may be heard pursuant to Local Bankruptcy Rule 9075-1 as an emergencymotion.
PLEASE TAKE FURTHER NOTICE
that pursuant to Local Bankruptcy Rule 9075-1any response, written or oral, to the moving papers may be presented before or at the time of thehearing on the Motion.As set forth in the annexed Memorandum of Points and Authorities, there are good andsufficient grounds for granting this Motion and for approving the DIP Loan. Without the DIPLoan, the Debtor will be unable to operate and will have to liquidate immediately. While aprincipal purpose of the DIP Loan is to allow the Debtor to finish existing projects for Universal
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3EMERGENCY MOTION TO APPROVE DIPFINANCING
and Fox, the proceeds of the DIP Loan will also allow the Debtor to remain in business forapproximately the next 75 days and, potentially for additional time as new work is bid andsecured. This period will also allow R&H to continue to market the business to third party buyerswith the potential goal of entering into a sale or other financing transaction, allowing R&H to exitits chapter 11 case as a healthier company.The DIP Loan is being offered by the DIP Lenders on favorable terms, all of which werenegotiated at arms-length by R&H and the DIP Lenders. Significantly, the DIP Loan, an interestonly loan at an interest rate of 6% per annum, will not mature until December 31, 2015, almostthree years from today. This extended repayment period will greatly assist the Debtor in itsrestructuring efforts. Thus, even if there is no immediate sale opportunity, R&H may be able toemerge promptly from Bankruptcy Court protection with additional third party financing.On January 18, 2013, in order to keep R&H in business so that it could complete existingprojects for Universal and Fox, the DIP Lenders advanced $750,000 to the Debtor on anunsecured basis which was used to meet the shortfall in its Canadian subsidiary
s payrollobligations through January 15, 2013 (the
January 18 Loan
). On January 25, 2013, the DIPLenders advanced an additional $5,250,000 on an unsecured basis (the
January 25 BridgeAdvance
and together with the January 18 Loan, the
Pre-petition Loan
). The Pre-petitionLoan allowed the Debtor to meet its then immediate obligations, including payroll throughJanuary 15, 2013, and to remain in business through the anticipated closing date of a sale to athird party buyer, who had guaranteed repayment of the January 25 Bridge Advance. However,that sale transaction failed to close on February 7, 2013. The Debtor is unable to obtain furthercredit on an unsecured basis.As a result, the proceeds of the DIP Loan are now urgently needed to pay the Debtor
soperational expenses incurred since January 15, 2013, the most significant of which is payroll,and to pay all necessary operational expenses through April 26, 2013. Such payment will allowthe Debtor to maintain the continuity of the Debtor
s ongoing operations, which are, in turn,essential to its reorganization efforts. In addition, the provision of the DIP Loan will allowDebtor time to restructure its operations and to pursue its strategic alternatives, including locating
Case 2:13-bk-13775-NB Doc 7 Filed 02/14/13 Entered 02/14/13 03:16:17 DescMain Document Page 3 of 25

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