Pg 1 of 6 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re: INTERNATIONAL SHIPHOLDING CORPORATION, et al., 1 Debtors. Chapter 11 Case No. 16-12220 (SMB Jointly Administered DECLARATION OF SARAH LINK SCHULTZ PURSUANT TO LOCAL BANKRUPTCY RULE 9077-1(A IN SUPPORT OF ORDER TO SHOW CAUSE SCHEDULING HEARING ON SHORTENED NOTICE FOR (1 THE DEBTORS SUPPLEMENTAL MOTION FOR AN ORDER AUTHORIZING THE DEBTORS TO (I OBTAIN ADDITIONAL POST-PETITION FINANCING AND (II ENTER INTO THE THIRD AMENDMENT TO THE DIP CREDIT AGREEMENT AND (2 FOR THE SUPPLEMENT TO DEBTORS MOTION FOR ENTRY OF INTERIM AND FINAL ORDERS (I AUTHORIZING DEBTORS TO (A PAY PRE-PETITION WAGES, OTHER COMPENSATION, AND REIMBURSABLE EXPENSES, (B CONTINUE EMPLOYEE BENEFIT PROGRAMS, AND (C PAY DIRECTOR FEES AND EXPENSES; AND (II AUTHORIZING FINANCIAL INSTITUTIONS TO HONOR AND PROCESS ALL CHECKS AND ELECTRONIC PAYMENT REQUESTS RELATED TO SUCH OBLIGATIONS I, Sarah Link Schultz, being duly sworn, deposes and says: 1. I am a partner at the law firm of Akin Gump Strauss Hauer & Feld LLP ( Akin Gump, which maintains offices for the practice of law at, among other locations, One Bryant Park, New York, NY 10036. Akin Gump is proposed counsel to the debtors and debtors in possession in the above-captioned cases (collectively, the Debtors and, together with their nondebtor affiliates, the Company. I am admitted in, practicing in, and a member in good 1 The Debtors in these cases, along with the last four digits of each Debtor s federal tax identification number, are: International Shipholding Corporation (9662; Enterprise Ship Co. (9059; Sulphur Carriers, Inc. (8965; Central Gulf Lines, Inc. (8979; Coastal Carriers, Inc. (6278; Waterman Steamship Corporation (0640; N.W. Johnsen & Co., Inc. (8006; LMS Shipmanagement, Inc. (0660; U.S. United Ocean Services, LLC (1160; Mary Ann Hudson, LLC (8478; Sheila McDevitt, LLC (8380; Tower LLC (6755; Frascati Shops, Inc. (7875; Gulf South Shipping PTE LTD (8628; LCI Shipholdings, Inc. (8094; Dry Bulk Australia LTD (5383; Dry Bulk Americas LTD (6494; and Marco Shipping Company PTE LTD (4570. The service address for each of the above Debtors is 601 Poydras Street, Pan American Building, Suite 1850, New Orleans, Louisiana 70130.
Pg 2 of 6 standing of the bar of the State of Texas and admitted pro hac vice to United States Bankruptcy Court for the Southern District of New York for the above-captioned cases. 2. I submit this declaration, pursuant to Rule 9077-1(a of the Local Bankruptcy Rules for the United States Bankruptcy Court for the Southern District of New York (the Local Bankruptcy Rules, in support of the Debtors request that the Court shorten the time for notice of the hearing (the Hearing to consider the relief requested in the Debtors Supplemental Motion for an Order Authorizing the Debtors to (I Obtain Additional Post-Petition Financing and (II Enter into the Third Amendment to the Dip Credit Agreement (the DIP Supplement and to consider the Supplement to Debtors Motion for Entry of Interim and Final Orders (I Authorizing Debtors to (A Pay Pre-Petition Wages, Other Compensation, and Reimbursable Expenses, (B Continue Employee Benefit Programs, and (C Pay Director Fees and Expenses; and (II Authorizing Financial Institutions to Honor and Process all Checks and Electronic Payment Requests Related to Such Obligations (the Wages Supplement. 3. Except as otherwise indicated, I have personal knowledge of the information contained herein, either directly or through professionals at Akin Gump working at my direction, members of management of the Debtors, or the Debtors other advisors. The Debtors must proceed by Order to Show Cause, scheduling a hearing on shortened notice for expedited consideration of the relief sought under the DIP Supplement and the Wages Supplement, because the Debtors need prompt relief to avoid irreparable injury to their estates, as set forth in more detail below. 4. On July 31, 2016 (the Petition Date, the Debtors filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code. 2
Pg 3 of 6 5. The Debtors continue to operate their business and manage their properties as debtors in possession pursuant to Bankruptcy Code sections 1107(a and 1108. No trustee or examiner has been appointed in the chapter 11 cases. On September 1, 2016, the Office of the United States Trustee for Region 2 (the U.S. Trustee appointed the statutory committee of unsecured creditors (the Committee [ECF No. 125]. 6. A description of the Debtors business and the reasons for filing these chapter 11 cases is set forth in the Declaration of Erik L. Johnsen, President and Chief Executive Officer, Pursuant to Local Bankruptcy Rule 1007-2 and in Support of First Day Filings (the First Day Declaration 2 filed previously with this Court [ECF No. 7]. 7. As set forth in the DIP Supplement and the Wages Supplement, the Debtors seek authority to enter into an amendment to their post-petition financing to obtain additional funding of $2.1 million pursuant to Amendment No. 3 to the Debtor-in-Possession Credit Agreement ( Amendment No. 3, and, contingent upon receiving authority to obtain additional funding, authority to pay the MM&P, MEBA, SIU, and ARA (the Union Benefit Plans amounts totaling $2.1 million (the Union Benefits Payment in satisfaction of pre-petition, priority claims of the Union Benefit Plans, subject to the conditions described in the Wages Supplement. 8. The Debtors seek the relief requested in the DIP Supplement and Wages Supplement after extensive negotiations with the Union Benefit Plans and certain of the various unions that represent certain of the Debtors crew members (the Crew Members. The MM&P Benefits Plans and MEBA Benefits Plans [ECF No. 84], and the Seafarers International Union (the SIU [ECF No. 89] objected to the relief requested in the Debtors Motion for Entry of Interim and Final Orders (I Authorizing Debtors to (A Pay Pre-Petition Wages, Other 2 Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the First Day Declaration, the DIP Supplement, or the Wages Supplement, as applicable. 3
Pg 4 of 6 Compensation, and Reimbursable Expenses, (B Continue Employee Benefit Programs, and (C Pay Director Fees and Expenses; and (II Authorizing Financial Institutions to Honor and Process All Checks and Electronic Payment Requests Related to Such Obligations [ECF No. 10] (the Motion, among other of the Debtors first day motions. These Union Benefit Plans and the SIU asserted, among other things, that the Debtors proposed to use property of the estates to fund benefits programs for non-union personnel, but did not propose to pay the benefits of equally critical union personnel, although union employee benefits were entitled to the same priority under the Bankruptcy Code. In addition, the International Organization of Masters, Mates and Pilots (the MM&P and Marine Engineers Beneficial Association (the MEBA expressly reserved their members purported rights under their collective bargaining agreements to strike if the Debtors failed to pay the Union Benefit Plans for the benefits provided to the Debtors personnel [ECF No. 88]. The relief requested in the DIP Supplement and Wages Supplement will consensually resolve the dispute regarding the Motion and the other first day motions that remain pending. 9. However, the Debtors do not have sufficient cash to make the Union Benefit Payment while maintaining their business in chapter 11 and therefore need to obtain additional debtor-in-possession financing to make the payments. By the DIP Supplement, the Debtors seek the entry of an order authorizing the Debtors to enter into Amendment No. 3 and obtain $2.1 million in additional post-petition financing pursuant to the terms of the DIP Documents (as that term is defined in the Final Order (1 Authorizing Debtors to (A Obtain Postpetition Financing, (B Use Cash Collateral, and (C Grant Certain Protections to Prepetition Lenders and (2 Granting Certain Related Relief [ECF No. 180] (the Final DIP Order for the purpose of making the Union Benefits Payment. 4
Pg 5 of 6 10. The Debtors submit that promptly making the Union Benefit Payment is necessary to avoid harm their estates and is in the best interests of the Debtors estates and creditors for the reasons indicated in the Wages Supplement and DIP Supplement. Among other things, the Debtors estates will be at risk of irreparable harm from attrition of Crew Members, negative reputation among the seaman community, the assertion of maritime liens asserted by Crew Members against the Debtors vessels, Crew Member strikes, and other harms if the Union Benefit Payment is not made promptly. The next available omnibus hearing is scheduled for November 10, 2016, which timing is not acceptable to the Union Benefit Plans. 11. Further, the Debtors have consulted with their prepetition secured lenders, the lenders under the Debtors debtor-in-possession financing facility, and the Committee regarding the substance of the relief requested in the Wages Supplement and the DIP Supplement, and the Debtors anticipate that those parties will support the Wages Supplement and DIP Supplement. As a result, no party will be harmed by expediting the hearing. 12. Therefore, to (i allow the Debtors to avoid the unnecessary harm to their estates arising from failure to promptly make the Union Benefit Payment and (ii allow the Debtors to resolve their pending first day motions, the Debtors request that the Court shorten notice with respect to the DIP Supplement and Wages Supplement and consider the relief requested therein at the October 18, 2016 omnibus hearing. 3 The Debtors further request that the Court set corresponding deadlines to object to the relief requested in the DIP Supplement and Wages Supplement. 3 The Debtors believe that the Order Establishing Certain Notice, Case Management, and Administrative Procedures [ECF No. 178] modifies the notice provisions of Rule 2002(a(2 of the Federal Rules of Bankruptcy Procedure such that the deadline to file and serve the DIP Supplement and Wages Supplement to be heard at the October 18, 2016 omnibus hearing does not expire until after fourteen (14 days prior to the hearing; however, because of the urgency of the relief requested in the DIP Supplement and Wages Supplement, and out of an abundance of caution, the Debtors are seeking expedited setting of the DIP Supplement and Wages Supplement though the proposed Order to Show Cause. 5
Pg 6 of 6 13. As required by Local Bankruptcy Rule 9077-1(a, no previous application for similar relief has been made for the DIP Supplement and Wages Supplement. 14. Accordingly, it is in the best interests of all parties in interest for the Court to enter the proposed Order to Show Cause so that the Court can consider approval of the DIP Supplement and the Wages Supplement on October 18, at 10:00 a.m. (prevailing Eastern Time. I declare under penalty of perjury under the laws of the United States of America that, to the best of my knowledge, information, and belief, and after reasonable inquiry, the foregoing is true and correct. Dated: Dallas, Texas September 28, 2016 AKIN GUMP STRAUSS HAUER & FELD LLP By: /s/ Sarah Link Schultz Sarah Link Schultz Partner 1700 Pacific Avenue, Suite 4100 Dallas, Texas 75201 Telephone: (214 969-2800 6
16-12220-smb Doc 215-1 Filed 09/28/16 Entered 09/28/16 23:59:30 Proposed Order Pg 1 of 3 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re: INTERNATIONAL SHIPHOLDING CORPORATION, et al., 1 Debtors. Chapter 11 Case No. 16-12220 (SMB Jointly Administered ORDER TO SHOW CAUSE SCHEDULING HEARING ON SHORTENED NOTICE FOR (1 THE DEBTORS SUPPLEMENTAL MOTION FOR AN ORDER AUTHORIZING THE DEBTORS TO (I OBTAIN ADDITIONAL POST-PETITION FINANCING AND (II ENTER INTO THE THIRD AMENDMENT TO THE DIP CREDIT AGREEMENT AND (2 THE SUPPLEMENT TO DEBTORS MOTION FOR ENTRY OF INTERIM AND FINAL ORDERS (I AUTHORIZING DEBTORS TO (A PAY PRE-PETITION WAGES, OTHER COMPENSATION, AND REIMBURSABLE EXPENSES, (B CONTINUE EMPLOYEE BENEFIT PROGRAMS, AND (C PAY DIRECTOR FEES AND EXPENSES; AND (II AUTHORIZING FINANCIAL INSTITUTIONS TO HONOR AND PROCESS ALL CHECKS AND ELECTRONIC PAYMENT REQUESTS RELATED TO SUCH OBLIGATIONS Upon the motion of the above-captioned debtors and debtors in possession (collectively, the Debtors in the Debtors Supplemental Motion for an Order Authorizing the Debtors to (I Obtain Additional Post-Petition Financing and (II Enter into the Third Amendment to the Dip Credit Agreement (the DIP Supplement and in the Supplement to Debtors Motion for Entry of Interim and Final Orders (I Authorizing Debtors to (A Pay Pre-Petition Wages, Other Compensation, and Reimbursable Expenses, (B Continue Employee Benefit Programs, and (C Pay Director Fees and Expenses; and (II Authorizing Financial Institutions to Honor and Process all Checks and Electronic Payment Requests Related to Such Obligations (the Wages 1 The Debtors in these cases, along with the last four digits of each Debtor s federal tax identification number, are: International Shipholding Corporation (9662; Enterprise Ship Co. (9059; Sulphur Carriers, Inc. (8965; Central Gulf Lines, Inc. (8979; Coastal Carriers, Inc. (6278; Waterman Steamship Corporation (0640; N.W. Johnsen & Co., Inc. (8006; LMS Shipmanagement, Inc. (0660; U.S. United Ocean Services, LLC (1160; Mary Ann Hudson, LLC (8478; Sheila McDevitt, LLC (8380; Tower LLC (6755; Frascati Shops, Inc. (7875; Gulf South Shipping PTE LTD (8628; LCI Shipholdings, Inc. (8094; Dry Bulk Australia LTD (5383; Dry Bulk Americas LTD (6494; and Marco Shipping Company PTE LTD (4570. The service address for each of the above Debtors is 601 Poydras Street, Pan American Building, Suite 1850, New Orleans, Louisiana 70130.
16-12220-smb Doc 215-1 Filed 09/28/16 Entered 09/28/16 23:59:30 Proposed Order Pg 2 of 3 Supplement ; and the Court having jurisdiction to consider the relief requested in the DIP Supplement and Wages Supplement in accordance with 28 U.S.C. 1334 and the Amended Standing Order of Reference from the United States Southern District of New York, dated as of January 31, 2012; and consideration of the DIP Supplement and Wages Supplement and the relief requested therein being a core proceeding in accordance with 28 U.S.C. 157(b(2; and venue being proper in this jurisdiction pursuant to 28 U.S.C. 1408 and 1409; and it appearing that consideration of the motion on an expedited basis is in the best interest of the Debtors, their estates, their creditors, their stakeholders, and other parties in interest; and after due deliberation thereon, and sufficient cause appearing therefor, it is hereby ORDERED: 1. The Debtors DIP Supplement and Wages Supplement are hereby scheduled for October 18, 2016, at 10:00 a.m. (prevailing Eastern Time (the Hearing before the Honorable Stuart M. Bernstein at the United States Bankruptcy Court for the Southern District of New York, One Bowling Green, New York, NY 10004, Courtroom 723. 2. The Debtors shall promptly serve notice of the Hearing and the DIP Supplement and Wage Supplement by serving a copy of this Order and the DIP Supplement and Wage Supplement, and the exhibits thereto, by electronic mail, facsimile, regular or overnight mail, and/or hand delivery to: (i the Office of the United States Trustee for Region 2, Attn: Serene Nakano; (ii the Committee and its counsel; (iii counsel to the agents under the Debtors prepetition credit facilities; (iv counsel to the DIP Agent; (v the Internal Revenue Service; (vi the United States Attorney for the Southern District of New York; (vii the Securities and Exchange Commission; (viii all parties that have filed a request to receive service of court filings pursuant to Bankruptcy Rule 2002; and (ix any party that filed an objection Motion for Entry of Interim and Final Orders (I Authorizing Debtors to (A Pay Pre-Petition Wages, Other Compensation, 2
16-12220-smb Doc 215-1 Filed 09/28/16 Entered 09/28/16 23:59:30 Proposed Order Pg 3 of 3 and Reimbursable Expenses, (B Continue Employee Benefit Programs, and (C Pay Director Fees and Expenses; and (II Authorizing Financial Institutions to Honor and Process All Checks and Electronic Payment Requests Related to Such Obligations [ECF No. 10]; and (x all other parties on the master service list prepared and maintained pursuant to the Order Establishing Certain Notice, Case Management, and Administrative Procedures [ECF No. 178]. 3. Any objections to the relief sought in the DIP Supplement or the Wage Supplement must be filed by October 11, 2016 at 4:00 p.m. (prevailing Eastern Time. 4. The Debtors are authorized and empowered to take all actions necessary to implement the relief granted in this Order to Show Cause. New York, New York Dated:, 2016 UNITED STATES BANKRUPTCY JUDGE 3