Local Rule 4001-2: Use of Cash Collateral and Obtaining Postpetition Credit

Rule 4001-2 Use of Cash Collateral and Obtaining Postpetition Credit

(a) Motions to Use Cash Collateral. Motions by the debtor in possession or trustee for authorization to use cash collateral must, in addition to the information enumerated in Rule 4001(b)(1)(B), Federal Rules of Bankruptcy Procedure, contain: (1) the relationship to the debtor, if any, of the creditor whose cash collateral is to be utilized; (2) the nature or source of the cash collateral; (3) the estimated amount of cash collateral to be used; (4) a 90-day cash flow projection segregating cash receipts from cash collateral from all other sources of cash receipts; (5) the balance owed to the creditor, as of the date the petition was filed, including any accrued, unpaid interest, cost or fees as provided in the agreement; (6) an estimate of the amounts of any postpetition interest, costs and fees the creditor would be entitled to recover under § 506(b) of the Code; (7) if the cash collateral is rent, the amount of the gross and net rent realized each month, and the fair market value of the property from which the rent emanates; (8) if the collateral is receivables, an accounts receivable aging statement; (9) if the collateral is inventory, current book or market value, whichever is lower, of the inventory; (10) for any other collateral, the fair market value of the collateral; (11) the method or means by which the interests of the creditor are to be adequately protected; and (12) a statement of whether or not the debtor proposes to grant any provision contained in paragraph (f) below and, if so, identify the provision.

(b) Cash Collateral Utilization Agreements. Motions or applications for the approval of an agreement for use of cash collateral must, in addition to complying with Rule 4001(b), Federal Rules of Bankruptcy Procedure, set forth in the body of the motion or application the information required by subsections (a)(1) through (a)(10) above, and whether or not the agreement contains any provision(s) contained in subsection (f) below and, if so, identify the provision(s).

(c) Postpetition Financing. Motions by the debtor in possession or trustee for authorization to obtain postpetition credit or for approval of a postpetition financing agreement must contain, as a minimum: (1) identity of the lender and relationship, if any, of the lender to the debtor; (2) the amount of credit to be obtained or, in the case of line of credit financing, the maximum amount the lender is to advance; (3) if funding is to be incremental, timing of funding or method by which funding is to be determined; (4) a 90-day cash flow projection showing all sources of cash receipts other than the amounts to be borrowed; (5) if the lender is a prepetition creditor the following information— [A] the balance owed to the creditor, as of the date the petition was filed, including any accrued, unpaid interest, cost or fees as provided in the agreement, [B] if the lender is secured by receivables, an accounts receivable aging statement, [C] if the lender is secured by inventory, current book or market value, whichever is lower, of the inventory, [D] if the lender is secured by real property, the current fair market value of the property and, if income producing, the gross and net rents produced by the property, and [E] if the lender is secured by any other property, the fair market value of the property; (6) a description of the collateral, if any, to secure the postpetition financing; (7) the current fair market value of the collateral, if any, to secure the postpetition financing; (8) if any other entity has, or claims, a security interest in the collateral to secure the postpetition financing, set forth— [A] identity of the entity, including any relationship to the debtor, [B] the balance owed that entity, [C] whether the interest of that entity is to be subordinated to the postpetition financing and if so— (i) whether the subordinated entity has consented, or (ii) in the absence of consent, how the interest of that entity is to be adequately protected; and (9) whether or not the financing agreement contains any provision(s) contained in subsection (f) below and, if so, identify the provision(s).

(d) Motions Heard on Shortened Time.

(1) Unless otherwise ordered by the court, emergency motions or applications for interim relief made under subsections (a), (b), and (c), above, may be heard upon twenty-four (24) hours' notice by telephonic, electronic, or personal delivery to the entities identified in the applicable provisions of Rule 4001, Federal Rules of Bankruptcy Procedure.

(2) All requests for hearings on shortened time, must set forth with specificity: [A] the immediate and irreparable harm the estate will suffer if relief is not immediately granted; [B] the extent of the relief required to prevent such immediate and irreparable harm to the estate; and [C] contain as much of the information required by subsection (a), (b), or (c), as applicable, as may be necessary to establish the necessity to avoid immediate and irreparable harm to the estate pending a final hearing.

(3) The court may, at its discretion, hold emergency hearings telephonically.

(e) Interim Cash Collateral Orders. Unless otherwise specifically ordered by the court, any interim order entered under this subsection will expire not later than twenty-one (21) days after the motion under subsection (a), (b), or (c) is filed.

(f) Provisions Normally Approved. The court will normally approve inclusion of the following provisions in any order or agreement for the use of cash collateral or any postpetition financing agreement: (1) withdrawal of consent to use cash collateral or termination of further financing, upon occurrence of a default or conversion to chapter 7; (2) securing any postpetition diminution in the value of the secured party's collateral with a lien on postpetition collateral of the same type as the secured party had prepetition, if such lien is subordinated to the compensation and expense reimbursement allowed to any trustee thereafter appointed in the case; (3) securing new advances or value diminution with a lien on other assets of the estate, but only if the lien is subordinated to all the expenses of administration of a superseding chapter 7 case; (4) reservation of rights under § 507(b) of the Code, unless the provision calls for modification of the Code's priorities in the event of conversion to chapter 7; (5) reasonable reporting requirements; (6) reasonable budgets and use restrictions; and (7) expiration date for the stipulation.

(g) Other Provisions. Inclusion of any of the following provisions in any order or agreement for the use of cash collateral may be scrutinized by the court even in the absence of an objection by a party in interest: (1) cross-collateralization clauses that secure prepetition debt by postpetition assets in which the secured party would not otherwise have a security interest by virtue of its prepetition security agreement; (2) provisions or findings of fact that bind the estate or all parties in interest with respect to the validity, perfection or amount of the secured party's lien or debt; (3) provisions or findings of fact that bind the estate or all parties in interest with respect to the relative priorities of the secured party's lien and liens held by persons who are not party to the agreement; (4) clauses that prime the liens and/or security interests of secured creditors who are not parties to the agreement, unless consented to by the affected creditor; (5) waivers of § 506(c) of the Code, except to the extent effective only during the period in which the debtor in possession or trustee is authorized to use cash collateral or borrow funds; (6) provisions that preclude a future trustee with a duty to care for, preserve, and/or liquidate collateral from recovering the expenses of administration; (7) provisions that characterize any postpetition payments as payments of interest, fees, or costs on prepetition obligations; (8) provisions that operate specifically or as a practical matter to divest the debtor, or any other party in interest, of any discretion in the formulation of a plan or administration of the estate, or limit access to the court to seek any relief under applicable provisions of law; (9) releases of liability for the creditor's prepetition torts, breaches of contract, or lender liability, as well as releases of prepetition or postpetition defenses and/or counterclaims; (10) waivers of avoidance actions; (11) provisions that would include the recovery from avoidance actions as adequate protection or part of the secured creditor's collateral; (12) automatic relief from the automatic stay of § 362(a) of the Code upon default, conversion to chapter 7, or the appointment of a trustee; (13) adequate protection provisions that create liens on claims for relief arising under the Bankruptcy Code; (14) waivers of the right to move for a court order under § 363(c)(2)(B) of the Code authorizing the use of cash collateral in the absence of the secured party's consent; (15) carve outs for administrative expenses that do not treat all professionals equally or on a pro rata basis; (16) provisions that shorten the period of limitations any party in interest (including a successor trustee) for bringing claims or causes of action against the lender or secured creditor; (17) a finding without testimony to the effect that in consenting to the use of cash collateral or postpetition financing, the secured creditor or lender is acting in good faith; (18) waivers of the procedural requirements for foreclosure or repossession mandated under applicable nonbankruptcy law; (19) provisions applicable in the event of a dispute under the agreement that place venue in a foreign jurisdiction; (20) provisions applicable in the event of a dispute or default under the agreement wherein the debtor waives— [A] service of process, [B] the doctrine of forum non conveniens, [C] notice and hearing, or [D] the right to a jury trial; and

(21) Findings of fact on matters extraneous to the approval process.

(g) Notice of Final Hearing.

(1) In addition to service on the persons specified in Rule 4001, Federal Rules of Bankruptcy Procedure, a motion for the use of cash collateral under subsections (a) or (b), or to obtain credit under subsection (c), must be transmitted to the United States trustee.

(2) In addition to the persons specified in rule 4001, Federal Rules of Bankruptcy Procedure, notice of the final hearing on a motion for the use of cash collateral under subsections (a) or (b), or to obtain credit under subsection (c), must be given in form substantially conforming to AK LBF 35 or AK LBF 36, as applicable, to: [A] the United States trustee; [B] any person having filed a request for special notice; and [C] such other persons as the court may direct.