IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF ALABAMA SOUTHERN DIVISION ) ) ) ) )

Transcription

1 IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF ALABAMA SOUTHERN DIVISION IN RE: KARSONS INTERNATIONAL, INC., Debtor. Chapter 11 Case No DEBTOR'S MOTION FOR AN ORDER PURSUANT TO 11 U.S.C. 105 AND 363 AUTHORIZING CONTINUED USE OF EXISTING BANK ACCOUNT COMES NOW, Karsons International, Inc. ("Karsons" or "Debtor", as debtor and debtor-in-possession, and, pursuant to 105(a and 363(b of Title 11 of the United States Code, 11 U.S.C. 101 et seq. (the "Bankruptcy Code", moves this Court (this "Motion" to authorize the continued use of Debtor's existing bank account. In support of this Motion, Debtor relies on the Affidavit of Nouman A. Malik In Support Of Chapter 11 Petitions And First Day Motions, filed contemporaneously herewith, and states as follows: JURISDICTION AND VENUE 1. On December 10, 2010 (the "Petition Date", Debtor filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code with the Clerk of this Court. Debtor continues to operate its business and manage its properties as a debtor in possession pursuant to 1107(a and This Court has jurisdiction over this Motion pursuant to 28 U.S.C. 157 and This is a core proceeding pursuant to 28 U.S.C. 157(b. Venue of Debtor's chapter 11 case and this Motion in this district is proper pursuant to 28 U.S.C and The statutory predicates for the relief requested herein are Bankruptcy Code 105(a and 363(b.

2 3. Debtor's business is the operation of one hotel located in Calera, Alabama. These business operations do not constitute "single asset real estate" as that term is defined in Bankruptcy Code 101(51B. FACTUAL BACKGROUND 4. Karsons is an Alabama corporation in Clanton, Alabama which owns and operates a Quality Inn hotel there. Karsons was formed in 1992 by Nouman Malik. Karsons employs, throughout the year, approximately employees, some of which are part-time employees. 5. Karsons began experiencing financial trouble in 1998 when constructing the hotel. Various problems arose in the construction which resulted in a much higher cost than initially expected. Due to cash flow problems, in April of 1999, Karsons was forced to file for protection under Chapter 11 of the Bankruptcy Code. That Chapter 11 case was closed without confirmation in August of 2001, but with the payment of administrative expenses. 6. Soon thereafter, the terrorist attacks of September 11, 2001 occurred, which led to reduced profits. Karsons was again faced with cash flow problems and was forced to refinance the existing mortgage on its properties to avoid foreclosure in September, However, the refinancing agreement only contributed to further cash flow problems and reduced profits. Due to severe liquidity problems, Karsons again filed for Chapter 11 bankruptcy protection in November This time, Karsons emerged from bankruptcy in 2003 with a consensually confirmed plan, successfully reorganized its business, and completed all payments under its plan in Karsons, like many other businesses, has suffered from the recent global economic downturn, which has been felt particularly acutely in the travel and tourism industries. 2

3 Karsons was without a "flag" from March 10, 2010 until June 9, 2010, during which time Karsons was transitioning from operating as a Holiday Inn Express to a Quality Inn. Karsons' inability to operate under a nationally recognized name resulted in decreased business during that time frame. 8. Additionally, the hotel operated by Karsons is located in a good location on Interstate 65. Karsons typically sees a substantial increase in business in the summer months as northern travelers en route to the Gulf of Mexico traditionally keep Karsons' summer vacancy rates quite low. But the effects of the BP oil spill severely impacted Karsons business during the summer of 2010, as vacationers avoided the Gulf region. The combination of a depressed economy and an unprecedented environmental disaster greatly injured Karsons' business. Karsons is filing a claim with the BP claims administration. 9. For the period of January through October, 2010, Karsons expenses exceeded its revenue by nearly $100,000, which has created a severe cash flow situation. 10. On or about August 19, 2008, Metro City Bank (the "Bank" extended funding to Karsons in the amount of $2,640,000.00, secured by the real property on which Karsons hotel sits and perhaps Karsons' personal property. The real property secured by the Bank's note is valued by the Bank in a recent appraisal at approximately $3,500, Karsons generally owes its other creditors for typically one month of products or services. 11. Karsons has fallen behind on payments to the Bank. Throughout 2009, Karsons and the Bank attempted to negotiate in an attempt to restructure Karsons indebtedness, but were unable to agree on a payment plan under which Karsons could perform. The Bank scheduled foreclosure on the hotel for Tuesday, December 14, After further negotiations with the Bank failed, Karsons has been forced to file for Chapter 11 bankruptcy protection. 3

4 RELIEF REQUESTED 12. By this Motion, Debtor seeks entry of an order authorizing the maintenance of its existing bank account. BASIS FOR RELIEF 13. Debtor maintains an account to which electronic fund transfers are directed. In particular, charge cards receipts are directed from charge card entities (collectively, the "Payors" into a bank account after the Payors have taken their contractual percentage of the charge card sale. 14. Pursuant to the standard Chapter 11 operating practice, Debtor is required, among other things, to open new bank accounts upon the filing of the bankruptcy petition and designate such accounts as "Debtor-in-Possession" on the respective account signature cards. However, Debtor seeks a waiver of any requirements which mandate, among other things, that the bank account be closed and that new post-petition bank accounts be opened. If any such requirements were enforced in the instant chapter 11 case, the requirements would cause disruption of Debtor's business and impair its ability to reorganize. 15. Debtor believes that its transition into Chapter 11 will be smoother and more orderly, with a minimum of disruption to operations, if the bank account is maintained with the same account numbers following the commencement of this case. 16. By preserving business continuity and avoiding the disruption and delay that would necessarily result from closing the bank account and opening new accounts, all parties in interest, including employees, vendors, and customers will be best served. The disruption that would otherwise result, absent the relief requested herein, would ill-serve Debtor's rehabilitative efforts. 4

5 17. In other chapter 11 cases, bankruptcy courts in this district have recognized that requiring a debtor-in-possession to close its bank accounts does not serve the rehabilitative process of chapter 11. Accordingly, courts in this district have waived such requirements and replaced them with alternative procedures. See, e.g., Bruno's Supermarkets, LLC, Chapter 11 Case No (BGC (Bankr. N.D. Ala. Feb. 5, 2009; In re Bill Heard Enters., Inc., Chapter 11 Case No (JAC (Bankr. N.D. Ala. Sept. 28, 2008; In re Citation Corp., Chapter 11 Case No (TOM (Bankr. N.D. Ala. Sept. 18, 2004; In re Martin Indus., Inc., Chapter 11 Case No (JAC (Bankr. N.D. Ala. Dec. 31, 2002; In re Meadowcraft, Inc., Chapter 11 Case No (TOM (Bankr. N.D. Ala. Sept. 5, 2002; In re Shook & Fletcher Insulation Co., Chapter 11 Case No (BGC (Bankr. N.D. Ala. Apr. 9, Similar authorization is appropriate here. 18. Debtor requests that its bank account be deemed debtor-in-possession account and that Debtor be authorized to maintain and continue to use this account in the same manner as such account was utilized prior to the Petition Date. 19. Debtor agrees to write "Debtor in Possession" on its bank account signature cards and to provide the Bankruptcy Administrator with bank statements for the previous six (6 months. 20. Debtor seeks authorization for the bank at which Debtor's bank account is maintained (the "Deposit Bank" to continue to service and administer the applicable bank account as account of Debtor as a debtor-in-possession without interruption and in the usual and ordinary course, and to receive, process and honor and pay any and all checks, drafts, wires, or automated clearing house transfers ("ACH Transfers" drawn on the bank account after the Petition Date by the holders or makers thereof, as the case may be. Debtor also seeks authority 5

6 to reimburse the Deposit Bank for any claim arising prior to or after the Petition Date in connection with customer checks deposited with the Deposit Bank which have been dishonored or returned for insufficient funds in the applicable customer account; provided, however, that, in addition to the requirements thereof, any checks, drafts, wires, or ACH Transfers drawn or issued by Debtor before the Petition Date shall be timely honored by any such Deposit Bank to the extent necessary to comply with any order(s of this Court authorizing payment of certain prepetition claims, unless such Deposit Bank is instructed by Debtor to stop payment on or otherwise dishonor such check, draft, wire, or ACH Transfer. 21. Notwithstanding anything to the contrary in any other order issued by this Court, Debtor seeks authorization for the Deposit Bank to accept and honor all representations from Debtor 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 Deposit Bank believes the payment is or is not authorized by any order(s of the Court. The Deposit Bank shall 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 Debtor's instructions. 22. Debtor seeks authorization that nothing contained herein shall prevent Debtor from opening any additional bank accounts, or closing any existing bank account(s, and the Deposit Bank is authorized to honor Debtor's requests to open or close, as the case may be, such bank accounts or additional bank accounts; provided, however, that any new account shall 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. Any and all accounts opened by Debtor on or after the Petition Date 6

7 at any bank shall, for all purposes under this Motion, similarly be subject to the rights and obligations of this Motion. 23. Debtor seeks authorization for Debtor and the Deposit Bank to continue to perform pursuant to the terms of any pre-petition agreements that may exist between them and for Debtor to pay the Deposit Bank any fees, expenses or other amounts due in connection with such agreements arising prior to or after the Petition Date. The parties to such agreements shall continue to enjoy the rights and remedies afforded them under such agreements, except to the extent modified by the terms of the order or by operation of the Bankruptcy Code. NOTICE AND PRIOR MOTIONS 24. Notice of this Motion has been provided to (1 the Office of the Bankruptcy Administrator for the United States Bankruptcy Court for the Northern District of Alabama, Southern Division; (2 the Bank; (3 Debtor's twenty (20 largest unsecured creditors; and (4 the Internal Revenue Service. 25. No previous request for the relief sought herein has been made in these bankruptcy cases to this or any other court. WHEREFORE, Debtor requests entry of an order of this Court substantially in the form annexed hereto granting them relief requested by this Motion and such other and further relief as it may be entitled. 7 /s/ Heather A. Lee Michael Leo Hall Heather A. Lee George D. Gaskin, III Attorneys for Debtor Karsons International, Inc.

8 OF COUNSEL: BURR & FORMAN LLP 420 North 20th Street, Suite 3400 Birmingham, Alabama Telephone: ( Facsimile: (

9 EXHIBIT "A" 9

10 IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF ALABAMA SOUTHERN DIVISION IN RE: KARSONS INTERNATIONAL, INC., Debtor. Chapter 11 Case No ORDER PURSUANT TO 11 U.S.C. 105 AND 363 AUTHORIZING CONTINUED USE OF EXISTING BANK ACCOUNT This matter came to be heard upon the motion (the "Motion" 1 of Karsons International, Inc. ("Karsons" or "Debtor" as debtor and debtor in possession, pursuant to 105(a and 363(b of Title 11 of the United States Code, 11 U.S.C. 101 et seq. (the "Bankruptcy Code", for authorization to maintain its existing bank account. Upon consideration of the Affidavit of Nouman A. Malik in Support of Chapter 11 Petitions and First Day Motions filed on the Petition Date; the Court having jurisdiction to consider the Motions and the relief requested therein in accordance with 28 U.S.C. 157 and 1334; due notice of this Motion has been provided to (1 the Office of the Bankruptcy Administrator for the United States Bankruptcy Court for the Northern District of Alabama, Southern Division; (2 Metro City Bank; (3 Debtor's twenty (20 largest unsecured creditors; and (4 the Internal Revenue Service; and it appearing that no other or further notice need be provided; the Court having determined that the relief sought in the Motion is in the best interests of Debtor, its creditors, and all parties in interest; upon the Motion and all of the proceedings before this Court; and after due deliberation and sufficient cause appearing therefore, it is hereby 1 Any capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Motion. 10

11 ORDERED that the Motion is GRANTED; and it is further ORDERED that Debtor is authorized to (1 designate, maintain, and continue to use its existing bank account in the names and with the account numbers existing immediately prior to the Petition Date, (2 deposit funds in and withdraw funds from such account by all usual means including, without limitation, cash, checks, wire transfers, Automated Clearing House transfers ("ACH Transfers", and other debits, and (3 treat its pre-petition bank account for all purposes as a debtor-in-possession account; and it is further ORDERED that the bank at which Debtor's bank account is maintained (the "Deposit Bank" is authorized to continue to service and administer the applicable bank account as account of Debtor as a debtor-in-possession without interruption and in the usual and ordinary course, and to receive, process and honor and pay any and all checks, drafts, wires, or ACH Transfers drawn on the bank account after the Petition Date by the holders or makers thereof, as the case may be. Debtor shall reimburse the Deposit Bank for any claim arising prior to or after the Petition Date in connection with customer checks deposited with the Deposit Bank which have been dishonored or returned for insufficient funds in the applicable customer account; provided, however, that, in addition to the requirements thereof, any checks, drafts, wires, or ACH Transfers drawn or issued by Debtor before the Petition Date shall be timely honored by the Deposit Bank to the extent necessary to comply with any order(s of this Court authorizing payment of certain pre-petition claims, unless the Deposit Bank is instructed by Debtor to stop payment on or otherwise dishonor such check, draft, wire, or ACH Transfer; and it is further ORDERED that, notwithstanding anything to the contrary in any other order issued by this Court, the Deposit Bank (1 is authorized to accept and honor all representations from Debtor as to which checks, drafts, wires, or ACH Transfers should be honored or dishonored 11

12 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 Deposit Bank believes the payment is or is not authorized by any order(s of the Court, (2 have no duty to inquire as to whether such payments are authorized by any order(s of this Court and (3 have no liability to any party on account of following Debtor's instructions in accordance with this order; and it is further ORDERED that nothing contained herein shall prevent Debtor from opening any additional bank accounts, or closing any existing bank account(s as they may deem necessary and appropriate, and the Deposit Bank is authorized to honor Debtor's requests to open or close, as the case may be, such bank accounts or additional bank accounts; provided, however, that any new account shall 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; and it is further ORDERED that any and all accounts opened by Debtor on or after the Petition Date at any Deposit Bank shall, for all purposes under this Order, similarly be subject to the rights and obligations of this Order; and it is further ORDERED that Debtor and the Deposit Bank are hereby authorized to continue to perform pursuant to the terms of any pre-petition agreements that may exist between them, except and to the extent otherwise directed by the terms of this Order, and Debtor is authorized to pay the Deposit Bank any fees, expenses or other amounts due in connection with such agreements arising prior to or after the Petition Date. The parties to such agreements shall continue to enjoy the rights and remedies afforded them under such agreements, except to the extent modified by the terms of this Order or by operation of the Bankruptcy Code. 12

13 Dated this the day of December UNITED STATES BANKRUPTCY JUDGE 13