STATUS CONFERENCE:
At a brief status conference this afternoon, Judge Christopher Sontchi addressed a letter filed by the Paragon Offshore term lenders this morning regarding a confirmation "rebuttal report" prepared by the debtors' expert valuation witness, Doug Fordyce, and submitted to the term lenders Friday evening, Sept 23. The judge ruled that the debtors must make Fordyce available for deposition by the term lenders, adding that issues of valuation have not been waived as part of confirmation. According to counsel for the term lenders, the debtors had purposefully waited to serve the rebuttal report, which counsel said "introduces entirely new information that we haven't been provided any discovery on" to advance brand new valuation scenarios on the company.
The debtors' confirmation hearing is scheduled to continue tomorrow, Sept. 27, at 1 p.m. EDT and will conclude on Friday, Sept. 30. Confirmation proceedings on Sept. 28 through Sept. 30 will start at 9:30 a.m. EDT.
Peter Isakoff of Weil Gotshal for the debtors noted at the beginning of the status conference that the parties have agreed that opening and closing arguments will not be necessary. Noting that the term lenders have apparently requested more time to present their case in opposition to confirmation, Isakoff argued that a chess clock should be utilized for the remaining time in the confirmation trial, with each side receiving 9 hours. "Eighteen hours is more than enough," asserted Isakoff. Isakoff also addressed the term lenders' proposed expert on insolvency, Professor Daniel Fischel, arguing that the debtors believe balance sheet insolvency is irrelevant to feasibility.
In response, Madlyn Primoff of Kaye Scholer for the term loan agent asserted that "trial time is an issue" because confirmation, originally scheduled to last for four days, has now been reduced to three and a half days due to Judge Sontchi's tight court calendar. In objecting to the rebuttal report, Primoff questioned the timing of the rebuttal report and also raised concerns about the contents of the report, including discovery that may be necessary on new information. Primoff argued that this is a "valuation trial inside of a feasibility and confirmation trial" and that the term lenders are prejudiced by the late introduction of the rebuttal report.
Judge Sontchi said that he does not believe issues of valuation have been waived and that it would be fair to give the term lenders "an opportunity to respond" regarding valuation evidence. "I do believe that the rebuttal report and rebuttal testimony is not untimely," added the judge, saying that while it puts the term lenders in a "difficult situation," the matter can be addressed due to the several days allotted for confirmation. While declining to set a chess clock to govern the length of each side's confirmation presentations, Judge Sontchi firmly stated that the trial "will finish Friday." "If people don't get their evidence in by Friday, that's their problem not mine," said the judge, adding that if he believes the parties are "dilly-dallying simply to put the other side at a disadvantage," he will cut the presentations short.