Clarifications

1. Does the Nuzilian law have a provision of Cramdown rule in its Insolvency and
bankruptcy law?

As per para. 10 of the background facts, Nuzlian law has a winding up and reorganization law
that gives debtors some latitude in their efforts to reorganize. The record does not show
whether Nuzilian law contains cramdown provisions, only that the stay is limited, and the
debtor must show cause for extending it.

2. Is there any particular reason for the bank to not open a branch in USA?

The Bank is a Nuzilian entity that has chosen not to open a branch in the USA. The Nuzilian
court is not privy to the motivations behind decisions taken by the bank’s officers about the
Bank’s business structure and operations.

3. Is Chinese consortium lender loan secured by collateral?

The position is as set out in para. 4 of the background facts. Whether or not the Chinese
lenders’ loan is secured, it is subordinate to the Bank’s loan.

4. Who has provided Debtor in Possession financing to MI and is there any collateral to
the same?

This information is not part of the record available to the Nuzilian court.

5. What is the current market value of the stocks of 8 operating companies (Hotels) held
with the Nuzilian bank?

This information is not part of the record available to the Nuzilian court. You can assume that
the value of the stocks has been depressed because of the pandemic.

6. Will the temporary stay awarded by Hon’ble justice Ruchika J Singh will continue for
more than 21 days without any show cause as provided under the Nuzilian Law?

The issue before the court is whether Judge Singh was correct to grant a temporary stay as a
matter of Nuzilian law in the first place. The stay continues pending resolution of the appeal.
Thereafter, the Bank will have to show cause why it should continue, but the merits (or
otherwise) of the stay continuing beyond the resolution of these proceedings is not in issue.

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7. Are the operating companies (hotel) of the group in USA and other countries a going
concern when the application of recognition of Chapter 11 proceeding filed in
Nuzilia?

All the operating companies were still trading at the time the chapter 11 case was filed, albeit
the volume of their business has declined because of the pandemic.

8. Did the US court, while accepting application of MI for chapter 11 proceeding,

explicitly extend the automatic stay to its assets located outside the jurisdiction of
USA?

As a matter of US federal bankruptcy law, the automatic stay has worldwide effect. See, e.g.
Hong Kong and Shanghai Banking Corp. v. Simon (In re Simon), 153 F.3d 991, 996 (9th Cir.
1998). Whether or not the US stay will be enforced by courts outside of the US is another
question entirely.

9. In paragraph 3 of the background, a sum of US $150 million is outstanding from the

loan given by the Bank of Nuzilia to MI. What is the breakup of the amount of US
$150 million and does it include the interest levied or any other charges?

The US $150 million includes all sums outstanding under the loan agreement.

10. Under Citation 12 of the problem, Westbrook, Chapter 11 and Discharge, 23 Am.
Bankr. Inst. L. Rev. 503 (2005) is mentioned. Is it the correct citation or should it be
construed as 'Westbrook, Chapter 15 and Discharge'?

There is a scrivener’s error in footnote 12. The citation should read: Westbrook, Chapter 15
and Discharge, 13 Am. Bankr. Inst. L. Rev. 503 (2005).

11. Under Citation 2, it is stated that the bank could make an election under Section
1111(b) of the Bankruptcy Code. However it is also mentioned that the Bank did not
state if it would further participate in chapter 11 cases. Therefore has the bank decided
its course of action whether to participate and make an election or is it still evaluating
the options?

The Bank will reassess its options once the present appeal has been resolved.

12. In paragraph 8 of the background, it is mentioned that the Group disclosed its actions
through a press release and was publicly disseminated to all the Group's creditors.
While the Bank took no overt action, did the other Creditors respond to it or take any
overt action?

This information is not part of the record available to the Nuzilian court.

13. Under Para 10, it is stated that Nuzilia can stay any action by a secured creditor to
foreclose on the date a 'petition for reorganization' is filed. However can the same stay
be granted in case a petition for 'recognition of reorganization' is filed in Nuzilia?

See para 3. of Judge Singh’s decision.

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14. Whether Nuzilia can be considered to be a member of the European Union?

Nuzilia is not a member of the European Union and is not bound by EU law.

15. Under Para 13 of the background, the Delaware Court denied the motion to dismiss.
What was the time period between hearing the petition and passing the order denying
motion to dismiss?

This information is not part of the record available to the Nuzilian court and is, in any event,
not relevant to the issues that the court is asked to decide.

16. Under Para 13 of the background, a Chapter 11 plan has been proposed for the Bank
of Nuzilia. However, is there any group plan proposed or are there separate plans
proposed for each creditor?

The cases in the US are jointly administered. There is only one plan, but it is filed in each of
the jointly administered cases for each of the debtors.

17. Whether the Insolvency court, under Justice Ruchika, recognised the US proceedings
as a foreign planning proceeding under the MLEG?
MI applied to the Insolvency Court of Nuzilia for recognition of its chapter 11 case and a stay
of the Bank’s foreclosure proceedings under Nuzilia’s enactment of the MLCBI. As Judge
Singh was not asked to recognize any part of the US proceedings as a planning proceeding,
she made no such order.
18. Whether the parties in the appeal are allowed to contest US proceeding as a foreign
planning proceeding within the ambit of MLEG?
As Judge Singh relied on Nuzilia’s adoption of the MLEG as the principal factor in
determining whether to grant a stay under the Nuzilian MLCBI, it is open to the parties to
argue whether Her Honour was correct to do so.
19. What is the nature of debt raised by other creditors i.e. the Chinese lenders and the
hedge funds? In particular whether it is secured or unsecured?
The position is as set out in paras. 4 and 5 of the background facts. The Chinese lenders’
loan, whether secured or unsecured, is subordinate to the Bank’s loan. The $70 million that
the Group borrowed from the hedge funds is secured on the shares of the operating
companies that own the hotels in Washington, D.C. and Chicago. These shares are not part
of the Bank’s collateral.

20. Whether the judgement given by Judge Ruchika J. Singh gave the relief of stay over
foreclosure under the Articles of MLEG?
MI applied to the Insolvency Court of Nuzilia for recognition of its chapter 11 case and a stay
of the Bank’s foreclosure proceedings under Nuzilia’s enactment of the MLCBI. The relief
was granted under the MLCBI. In her reasoning, Judge Singh relied on Nuzilia’s adoption of
the MLEG as the principal factor in determining, in her discretion, whether to grant a stay
under the Nuzilian MLCBI.

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21. Whether the parties in the appeal are allowed to invoke the Articles 20 or 24 of the
MLEG to seek relief of stay over foreclosure?
The parties are at liberty to rely on the MLEG in developing arguments because of Judge
Singh’s reliance on Nuzilia’s MLEG in reaching her decision. But note that the application
before the court is for recognition and relief under the Nuzilian MLCBI.
22. Whether Nuzilia is a common law country?
You can assume that Nuzilia is a common law jurisdiction.
23. Whether the temporary injunction needs to be justified by the debtor after the expiry
of 21-day period as given under the Nuzilian law?
The issue before the court is whether Judge Singh was correct to grant a temporary stay as a
matter of Nuzilian law in the first place. The stay continues pending resolution of the appeal.
Thereafter, the Bank will have to show cause why it should continue but the merits (or
otherwise) of the stay continuing beyond the resolution of these proceedings is not in issue.

24. Where were the separate companies of the 8 hotels registered and formed?
The operating companies are incorporated locally in the jurisdictions where each hotel is
located. This is not material to the issues before the court.
25. Should legal implications of COVID-19, such as seeing the pandemic as ‘force
majeure’ in contractual relationships, be taken into consideration regarding this case?

The parties are at liberty to make any arguments they consider relevant on the issues before
the court.

26. Taking into consideration that the MI’s debt to the Bank is guaranteed by all other
members of the group and secured by a pledge of the shares of certain of the operating
companies, could the Bank satisfy its requirements from assets of other members of
the group?

The Bank has guarantee claims against all the operating companies with the exception of the
two operating companies the shares of which are pledged to the hedge funds. The Bank’s
security rests ultimately on the value of the eight operating companies the shares of which are
pledged to it.

27. Is the MI’s debt to the Bank secured in whole by a pledge of shares?
The loan and security agreements are as described in paras 3-4 of the background facts. MI’s
security consists of the shares in eight of the operating companies and the guarantees from
those same operating companies.
28. What is the current value of the shares owned by the Group?
You can assume that the shares in the operating companies are currently worth less than they
would be worth were there not a pandemic. The US Bankruptcy Court valued the Bank’s
collateral at $60 million but the Bank would prefer to foreclose rather than accept the
proposed payments in the chapter 11 case based on that valuation.

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29. Is the Bank of Nuzilia publicly (state) owned or privately owned?

You can assume that it is privately owned but this is not material to the issues before the
court.

30. How much is left owing on the loan from the hedge fund? What jurisdiction governs
the loan agreement between the Cayman Islands’ company and the hedge fund?

This information is not part of the record available to the Nuzilian court.

31. Paragraph 4 on page 2 refers to a singular outstanding loan of $100 million owed to
the consortium of Chinese lenders, but then refers to plural ‘loan agreements’; how
many loan agreements are there?

There are separate loan agreements relating to each one of the five hotels acquired by the
Group prior to Bank’s involvement.

32. Is the Chinese lenders’ loan(s) secured or unsecured, and if secured, over what assets?

You can assume that the Chinese lenders are fully subordinated to the Bank in regard to the
value of the operating companies.

33. Does the Chinese lenders’ loan agreement(s) specify which jurisdiction governs the
terms of these loan(s)?

They are governed by Hong Kong law, but this is not material to the issues before the court.

34. Does “the group” in paragraph 3 on page 2 refer to the ChenGroup (as the g in group
is not capitalized)?

Yes.

35. In footnote 2, on page 6, it states “The Bank could make an election under section
1111(b) of the US Bankruptcy Code and retain a lien on the shares of the eight
operating companies for the face amount of the debt, although it would have to give
up its unsecured claim to do so.” What is the unsecured claim of the bank? Or, was
this intended to be written as “…give up its secured claim to do so.”?

The reference to the Bank’s unsecured claim is correct. Under chapter 11 if the value of a
secured creditor’s collateral is worth less than what that creditor is owed, its claim is split into
two claims: (i) a secured claim equal to the value of the collateral and (ii) an unsecured
“deficiency” claim for the balance. So, for example, if Creditor, owed $100,000, is secured
on all the assets of Debtor, Inc. and the assets are worth only $75,000, Creditor will have a
secured claim of $75,000 and an unsecured claim of $25,000 in Debtor, Inc.’s chapter 11
case. Similarly, the record at para. 13 indicates that Bank’s collateral is valued at $60 million
and so in the chapter 11 case the Bank is being treated as having a secured claim of $60
million and a $90 million deficiency (i.e. unsecured) claim.

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36. What are the conditions of Chapter 11 plan regarding other creditors? Did they appear
in US hearings? What is their position on the plan?

The only other creditors that are relevant are the Chinese lenders and the hedge funds. You
can assume that their interests are wholly aligned with MI’s. See, e.g. their support for MI in
resisting Bank’s motion to dismiss the chapter 11 proceedings (para. 12 of the background
facts).

37. Is there a register of shares and, if yes, who is a registrar?

This is not material to the issues before the court. You can assume that under any law that could
possibly apply that the Bank is properly secured on the shares of the operating companies by
virtue of being in possession of the share certificates or by virtue of being listed in the share
register as a secured party.

38. Whether it is an undisputed fact that FinanceCo is a “necessary and integral” part of
the Group, or participants may rebut it?

The parties are at liberty to make arguments concerning Judge Singh’s reading of Nuzilia’s
MLEG because she relied on it in reaching her decision.

39. Are the grounds for appeal indicated on p. 25 under the letters (d)(i) and (d)(ii)
exhaustive, or participants are allowed to argue beyond them?

Permission to appeal has been granted only on the issues set out in the endorsement.

40. Were any insolvency-related restrictions introduced in any jurisdiction concerned

(Nuzilia, Cayman Islands, Marshall Islands, China and Hong-Kong) in connection
with the COVID-19 pandemic (e.g. moratorium to initiate bankruptcy cases upon the
creditors’ petition etc.)?

None that have any bearing on the issues before the court.

41. Where were the board meetings held before the relocation?

Outside the USA.

42. Are the hotels still functioning?

All the operating companies are still trading albeit the volume of their business has declined
because of the pandemic.

43. Did the bank reach out to other creditors?

This information is not part of the record available to the Nuzilian court.

44. Did the bank confirm the receipt of MI’s e-mail containing a press-release on MI’s
actions during the standstill period?

This information is not part of the record available to the Nuzilian court. It is beyond doubt,

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and not in dispute, that the Bank was familiar with the contents of the press release.

45. Was there a proper contract formed for the ‘standstill agreement’?

The standstill agreement was a properly formed contract. This is not in dispute.

46. During the standstill period, were MI and Cayman Company in operation/ carrying on
any economic activities or had any employees working in the LA branch (other than
Andy Artful)?

The undisputed facts are as stated in para. 8 of the background facts and the first sentence of
para. 17 of Judge Singh’s decision. You can assume that Artful is the only officer and
director of MI and the Cayman company based in LA. The management company is
headquartered in LA and has employees and some directors in LA.

47. Are the share certificates at [3] registered in Bank of Nuzilla’s name?

This is not material to the issues before the court. You can assume that under any law that could
possibly apply that the Bank is properly secured on the shares of the operating companies by
virtue of being in possession of the share certificates or by virtue of being listed in the share
register as a secured party.

48. What were the bargaining powers of both parties?

The parties are commercial parties who bargained at arms’ length. Nothing that the court is
asked to resolve turns on the parties’ relative bargaining power.

49. What law is the standstill agreement governed by?

Nuzilian law.

50. Was there a lockdown during the standstill period?

The hotels owned by the eight operating companies were all subject to governmental
restrictions of varying kinds that affected the Group’s business.

51. How much are each of the hotels worth during the Covid-19 period, and outside of the
covid-19 period?

You can assume that the shares in the operating companies are currently worth less than they
would be worth were there not a pandemic. The US Bankruptcy Court valued the Bank’s
collateral at $60 million but the Bank would prefer to foreclose rather than accept the
proposed payments in the chapter 11 case based on that valuation.

52. Where will the financing come from through the chapter 11 scheme as proposed by
Financeco?
a. How long did the financing negotiations take?

FinanceCo. has obtained court-approved debtor in possession financing as per para. 9 of the
background facts. You can assume that the debtor in possession lender is prepared to take a

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risk on ChenGroup’s long term prospects of success once the pandemic is over and that the
DIP loan is structured and priced accordingly. The record does not show how long the
financing negotiations took and, in any event, the duration of the negotiations is not material
to the issues before the court.

53. Facility agreement, and where was taxes paid for this facility?

This is not material to the issues before the court.

54. How long ago was this loan agreement?

It was arranged during the standstill period.

55. Is the MI office in Marshall Island still present? How many directors are there in the
company?

MI has relocated to Los Angeles.

56. Whose board of directors had a meeting in paragraph 8 of the background?

MI, the Cayman company, and the management company.

57. What were the scope of works for the management company that was managing the
US hotels?

The management company provides management services that assist in running the
operations of all of the Group’s hotels.