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HEARING DATE: JUNE 15, 2012 HEARING TIME: 10:00 A.M. TARTER KRINSKY & DROGIN LLP Attorneys for The Christian Brothers Institute, et al. Debtors and Debtors-in-Possession 1350 Broadway, 11th Floor New York, New York 10018 (212) 216-8000 Scott S. Markowitz, Esq. UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ------------------------------------------------------------------- x In re: : : THE CHRISTIAN BROTHERS INSTITUTE, et al. : : Debtors. : ------------------------------------------------------------------- x

Chapter 11 Case No.: 11-22820 (RDD) (Jointly Administered)

DEBTORS THIRD MOTION FOR ENTRY OF AN ORDER PURSUANT TO 11 U.S.C. 1121(d) FURTHER EXTENDING THE DEBTORS EXCLUSIVE PERIODS TO FILE A PLAN AND SOLICIT ACCEPTANCES THERETO TO: THE HONORABLE ROBERT D. DRAIN UNITED STATES BANKRUPTCY JUDGE The Christian Brothers Institute (CBI) and The Christian Brothers of Ireland, Inc. (CBOI), the above-captioned debtors and debtors-in-possession (collectively, the Debtors), hereby file this motion (the Motion) for the entry of an order further extending the exclusive periods for the filing of a Chapter 11 plan and solicitation of acceptance thereof. In support of the Motion, the Debtors respectfully represent as follows: RELIEF REQUESTED 1. Pursuant to 1121 of the Bankruptcy Code, a debtor has the exclusive right to file

a plan for one hundred twenty days after the case commences and has an additional period of

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sixty (60) days during which the plan must be accepted. The original deadline for the Debtors to file a plan in these cases would have expired on August 26, 2011. 2. By motion dated July 28, 2011 (Docket No. 62), the Debtors sought entry of an

order pursuant to 1121(d)(1) of the Bankruptcy Code granting an extension of the exclusive periods within which the Debtors may file a plan and solicit acceptances thereto for an additional one hundred and twenty (120) days, to through and including December 24, 2011 and February 22, 2012, respectively. By order dated October 28, 2011 (Docket No. 145), the Court extended the Debtors 120-day exclusive period to through and including December 24, 2011, and the 180-day exclusive period to through and including February 22, 2012. 3. Additionally, by motion dated November 10, 2011 (Docket No. 153), the Debtors

requested entry of an order pursuant to 1121(d)(1) of the Bankruptcy Code granting a further extension of the exclusive periods within which the Debtors may file a plan and solicit acceptances thereto for an additional period of one hundred and eighty (180) days, to through and including June 21, 2012 and August 20, 2012, respectively. By order dated January 26, 2012 (Docket No. 231), the Court further extended the Debtors 120-day exclusive period to June 21, 2012, and the 180-day exclusive period to through and including August 20, 2012. 4. By this Motion, the Debtors seek entry of an order pursuant to 1121(d)(1) of the

Bankruptcy Code granting a further extension of the exclusive periods within which the Debtors may file a plan and solicit acceptances thereto through and including October 26, 2012 and December 27, 2012, respectively. JURISDICTION, VENUE AND STATUTORY BASES FOR RELIEF 5. This Court has jurisdiction over this Motion pursuant to 28 U.S.C. 1334 and the

Standing Order of Referral of Cases to Bankruptcy Judges for the Southern District of New

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York, dated July 10, 1984 (Ward, acting C.J.). These are core proceedings pursuant to 28 U.S.C. 157(b). Venue is proper before this Court pursuant to 28 U.S.C. 1408 and 1409. The statutory predicate for the relief requested herein is 11 U.S.C. 1121(d) of the Bankruptcy Code. BACKGROUND A. General Background 6. On April 28, 2011 (the Petition Date), each of the above-captioned Debtors

commenced their respective Chapter 11 cases (individually, a Case and together, the Cases) by filing a voluntary petition for relief under Chapter 11 of Title 11, United States Code (the Bankruptcy Code). Pursuant to 1107(a) and 1108 of the Code, the Debtors continue to operate as debtors-in-possession. No trustee has been appointed. 7. The Debtors cases were consolidated for administrative purposes only, by order

dated May 2, 2011. Thereafter, by order dated May 18, 2011, the Debtors were authorized to retain Tarter Krinsky & Drogin LLP as bankruptcy counsel. 8. On May 11, 2011, the United States Trustee appointed an Official Committee of

Unsecured Creditors (the Committee). The Committee has retained Pachulski Stang Ziehl & Jones LLP as its counsel. 9. CBI is a domestic not-for-profit 501(c)(3) corporation organized under 102(a)(5)

of the New York Not-for-Profit Corporation Law. CBI was formed in 1903 pursuant to Section 57 of the then existing New York Membership Law. The Not-for-Profit Corporation Law replaced the Membership Law effective September 1, 1970. The purpose for which CBI was, and continues to be, formed was to establish, conduct and support Catholic elementary and secondary schools principally throughout New York State. As a not-for-profit corporation, the

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assets, and/or income are not distributable to, and do not inure to, the benefit of its directors or officers. CBI depends upon grants and donations to fund a portion of its operating expenses. 10. CBOI is a domestic not-for-profit 501(c)(3) corporation organized under the Not-

for-Profit Corporation Law of the State of Illinois. The purpose for which CBOI was, and continues to be, formed was to establish, conduct and support Catholic elementary and secondary schools principally throughout the State of Illinois, as well as other spiritual and temporal affairs of the former Brother Rice Province of the Congregation of Christian Brothers. As a not-forprofit corporation, the assets, and/or income are not distributable to, and do not inure to the benefit of its members, or officers. CBOI depends upon grants and donations to fund a portion of its operating expenses. 11. The focus of the Debtors mission is on teaching and helping impoverished For example, several

communities or communities in need, primarily through education.

Brothers teach at All Hallows High School in the Bronx, which is the poorest congressional district in the United States. The Brothers have a substantial presence in Bonita Springs, Florida assisting in the education of migrant farm workers. Brothers have also assisted Operation Helping Hands in rebuilding houses for displaced residents in New Orleans as a result of Hurricane Katrina. 12. The cause for the filing of these Chapter 11 case has been extensively detailed in the

affidavit pursuant to Local Bankruptcy Rule 1007-2 filed with the original petitions and is referred to as if fully set forth herein. In short, the Debtors Chapter 11 cases were filed in an effort to resolve in one forum, an onslaught of litigation and claims asserted by alleged sexual abuse plaintiffs against the Debtors in several jurisdictions in North America.

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B.

Establishment of Claims Bar Dates 13. By order dated February 10, 2012, this Court entered an order (the Bar Date

Order) establishing dates by which claimants have to file their claims against the Debtors estates (Docket No. 244). With respect to claims on account of sexual abuse, the Court set August 1, 2012 as the bar date. With respect to other claims against the estates, including general unsecured claims, the Court set May 11, 2012 as the bar date. 14. The establishment of a claims bar date was a significant undertaking in these

cases. As this Court is aware, the Debtors Chapter 11 cases are somewhat unique in that the Debtors, over a period of many decades, either operated or were significantly involved in teaching and ministry with numerous schools, orphanages, and other institutions across the United States and Canada; many of which have been closed for a number of years. The Debtors were required to expend an extraordinary amount of effort to obtain the appropriate names and addresses of the parties to receive actual notice rather than relying solely on publication notice. In fact, various requests and subpoenas were issued and hearings were held with respect to objections raised to such subpoenas as well as the Debtors efforts to give notice of the sexual abuse bar date. 15. The Debtors are pleased to report that the noticing process is essentially complete.

All told, the Debtors served in excess of 150,000 individuals with notice of the bar dates and published in various papers in the United States and Canada.1

Pursuant to the Bar Date Order, the Debtors are required to publish notice of the bar date in those publications a second time. Such noticing will be completed in a timely manner pursuant to the Bar Date Order.

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C.

The Debtors Real Property Holdings 16. As disclosed in the Debtors respective schedules, the Debtors hold a fee simple

interest in twenty properties: CBI seventeen; and CBOI three. Several of those properties are currently being operated as a school or nursing home facility. 17. For instance, Bishop Kearney High School currently operates at the property

located at 125 Kings Highway South, Rochester, New York. Similarly, Iona Grammar School currently operates at the properties located at 173 Stratton Road, New Rochelle, New York as well as a vacant parcel across therefrom. Saint Josephs Care Center currently operates on the property located at 30 Montgomery Circle, New Rochelle, New York. And, up until the end of the 2010-2011 school year, Rice High School operated at the property located at 74 West 124th Street, New York, New York. D. Debtors Sale Efforts 18. Both prior to and since the Petition Date, the Debtors have been diligently

analyzing their real properties in an effort to determine which ones are vital to the Debtors and their mission, and which ones can be sold to generate monies to be utilized towards funding a plan of reorganization. Thus far, seven of the Debtors twenty properties have been listed for sale: (i) (ii) (iii) (iv) (v) (vi) 74 West 124th Street, New York, New York (the Rice HS Property); 117 North Avenue, Mount Vernon, New York; 260 Wilmot Road, New Rochelle, New York; 173 Stratton Road, New Rochelle, New York; Vacant Land on Stratton Road, New Rochelle, New York; 8554 Laverne Avenue, Burbank, Illinois; and

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(vii) 19.

9757 South Sealey Avenue, Chicago, Illinois.

This Court has approved the sale of two of the above-referenced seven properties.

By Order dated January 9, 2012 (Docket No. 200), this Court approved the sale of the 74 West 124th Street, New York, New York property to Harlem Village Academies for purchase price of $13 million. Additionally, by Order dated February 16, 2012 (Docket No. 258), this Court approved the sale of the property located at 9757 South Sealey Avenue, Chicago, Illinois for a net purchase price of $248,500. 20. With respect to the two properties located on Stratton Avenue, New Rochelle,

New York (the Stratton Properties), pursuant to Court implemented sale procedures, the Stratton Properties are currently being marketed for sale by Newmark & Company Real Estate, Inc. d/b/a Newmark Knight Frank (Newmark) and an $8.5 million stalking horse agreement is currently in place. With respect to the 8554 Laverne Avenue, Burbank, Illinois, that property is currently listed for sale by a broker. E. Discovery Issues 21. As this Court is aware, on September 28, 2011, the Committee filed a motion

(Docket No. 98) requesting authority to seek discovery from the Debtor pursuant to Bankruptcy Rule 2004. The Court granted that motion on November 1, 2011 (Docket No. 147). The Debtors have been diligently working in good faith with the Committee to satisfy the Committees substantial discovery requests. In fact, the Debtors have provided the Committee with more than 20,000 pages of discovery. 22. Additionally, the Debtors are continuing their review of insurance policies in an

effort to locate all available avenues for funding a plan of reorganization in these cases.

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DISCUSSION 23. Section 1121 of the Bankruptcy Code provides, in pertinent part, as follows: (b) Except as otherwise provided in this section, only the debtor may file a plan until after 120 days after the date of the order for relief under this chapter. (c) Any party in interest, including the debtor, the trustee, a creditors committee, an equity security holders committee, a creditor, an equity security holder, or any indenture trustee, may file a plan if and only if (1) a trustee has been appointed under this chapter; (2) the debtor has not filed a plan before 120 days after the date of the order for relief under this chapter; or (3) the debtor has not filed a plan that has been accepted, before 180 days after the date of the order for relief under this chapter, by each class of claims or interests that is impaired under the plan. (d) (1) Subject to paragraph (2), on request of a party in interest made within the respective periods specified in subsections (b) and (c) of this section and after notice and a hearing, the court may for cause reduce or increase the 120-day period or the 180-day period referred to in this section. (2) (A) The 120-day period specified in paragraph (1) may not be extended beyond a date that is 18 months after the date of the order for relief under this chapter. (B) The 180-day period specified in paragraph 1 may not be extended beyond a date that is 20 months after the date of the order for relief under this chapter. 11 U.S.C. 1121 (b) - (d). 24. The determination of whether sufficient cause exists to grant an extension of a

debtors Exclusive Periods rests with the sound discretion of the court and should be based upon the facts and circumstances of each individual case. In re Adelphia Communications Corp. (In re

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Adelphia), 352 B.R. 578, 586 (Bankr. S.D.N.Y. 2006); In re Texaco Inc., 76 B.R. 322 (Bankr. S.D.N.Y. 1987); In re McLean Industries, Inc., 87 B.R. 830 (Bankr. S.D.N.Y. 1987); See, e.g., First American Bank of New York v. Southwest Gloves, Inc., 64 B.R. 963, 965 (Bankr. D. Del. 1986). While 1121(d)(1) of the Bankruptcy Code requires the bankruptcy court to find cause to extend a debtors Exclusivity Periods, it is clear from the legislative history of that section that the bankruptcy court is given broad flexibility in making such a determination. See, H.R. rep. No. 95-595, 95th Cong.; 2d Sess 221-222 (1978); In re Perkins, 71 B.R. 294 (W.D. Tenn. 1987) (The hallmark of Section [1121(d)] is flexibility); In re Tony Downs Foods Co., 34 B.R. 405, 406-407 (Bankr. D. Minn. 1983). 25. In Adelphia, the court identified several factors that should be evaluated in

considering a debtors request to extend its plan Exclusivity Period. The factors are as follows: (a) (b) the size and complexity of the case; the necessity for sufficient time to permit the debtor to negotiate a plan of reorganization and prepare adequate information; (c) (d) (e) the existence of good faith progress toward reorganization; the fact that the debtor is paying its bills as they become due; whether the debtor has demonstrated reasonable prospects for filing a viable plan; (f) (g) (h) whether the debtor has made progress in negotiations with its creditors; the amount of time which has elapsed in the case; whether the debtor is seeking an extension of exclusivity in order to pressure creditors to submit to the debtors reorganization demands; and (i) whether an unresolved contingency exists.

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See In re Adelphia, 352 B.R. at 587. However, not all of the Adelphia factors are relevant in every case and it is within the courts discretion to determine the relevancy and weight of each such factor. In re Hoffinger Industries, Inc., 292 B.R. 639, 644 (8th Cir BAP 2003).

Furthermore, although such factors are helpful, they serve only as a guide and not as required standards for courts to use when determining whether an extension of the Exclusive Periods should be granted in a particular case. In re R&G Properties, Inc., 2009 WL 269696 (Bankr. D. Vt. January 28, 2009). 26. In applying these factors, it has been noted that the hallmark of . . . section

[1121(d)] is flexibility. In re Perkins, 71 B.R. 294, 297 (W.D. Tenn. 1987). Congress intended that a debtors exclusive periods be of adequate length for the debtor to formulate, negotiate, and draft a consensual plan and solicit acceptances thereof. As explained in the legislative history, section 1121(d) allows the flexibility in individual cases to extend the exclusivity periods to allow the debtor to reach an agreement. H.R. Rep. No. 595, 95th Cong., 1st Sess. 232 (1977); see In re Public Serv. Co. of New Hampshire, 88 B.R. at 534 (the legislative intent... [is] to promote maximum flexibility); see also In re Gibson & Cushman Dredging Corp., 101 B.R. 405,409 (Bankr. E.D.N.Y. 1989); In re McLean Indus. Inc., 87 B.R. at 833. 27. A review of the Adelphia factors supports a further increase of the exclusive

periods sought by the Debtors in this Motion. Although the Debtors Chapter 11 cases may not be considered large by New York standards, the cases are complicated by the fact that they are essentially mass tort cases and the process of identifying and noticing potentially known creditors was a time-consuming task. Indeed, as noted above, the Debtors issued subpoenas on various schools in order to gain access to their alumni directories who were ultimately served with notice of the bar dates. As the Court is aware, several of the schools retained counsel and

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moved to quash the 2004 subpoena issued pursuant to this Courts 2004 order. The Debtors have substantially completed the noticing process. All told, the Debtors served by mail in excess of 150,000 notices and published notice in various publications in the United States and Canada. The August 1st sexual abuse bar date is a critical date in these cases. Once that date passes, the Debtors will be in a better position to evaluate the unliquidated tort claims which is an important step towards negotiating a consensual plan with the Committee. The Debtors cases are also complicated by the fact that since the Debtors Brothers taught or performed ministry at numerous schools throughout the country, the plan will, in all likelihood, provide a mechanism for schools to participate either through contributing insurance policies or some other form of payment and obtain third-party injunctive relief so that plaintiffs will not be able to pursue lawsuits directly against the schools for alleged abuse perpetrated by the Debtors Brothers.2 28. Additionally, as discussed above, the Debtors have actively marketed certain of

their key real estate assets (as well as certain non-core real estate assets) for sale. Indeed, within the last month, the Debtors closed on the sale of the Rice HS Property, resulting in $13 million of gross cash proceeds. 29. Furthermore, the Debtors are paying all bills as they come due. The Debtors are

not seeking an extension of exclusivity in order to pressure creditors to submit to any demands but rather in order to preserve the status quo pending a review and implementation of a procedure to liquidate, or otherwise deal with the sexual abuse claims. 30. Where the initial exclusive periods prove to be inadequate, 1121(d) of the

Bankruptcy Code permits the Court to extend a debtors exclusive periods so long as such extension does not extend beyond eighteen months for filing a plan or twenty months for
2

The Debtors hope to propose a plan term sheet to the Committee prior to a hearing on this Motion. The plan term sheet will detail which assets the Debtors seek to retain to continue its mission and provide for the support of retired and/or infirm Brothers, and what amount of funds will be available for payment of sexual abuse claims.

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soliciting acceptances to a plan. 11 U.S.C. 1121(d). This Motion is the Debtors third request for extensions of its exclusive periods, and the Debtors request is within the extension periods permitted by statute. If the Court grants this request, it will be the final extension. 31. As detailed above, since the Petition Date, the Debtors have been focusing their

efforts on a variety of issues which must be resolved in order to be in a position to file a meaningful plan. As this Court is aware, the Debtors case is akin to a mass tort case. The crux of the cases is the establishment of a bar date, the proper noticing of same which the Debtors have substantially completed, and the implementation of procedures to liquidate the claims, which by nature are unliquidated.3 32. The Debtors have, in good faith, complied and continue to comply with the

Committees extensive document requests and subpoenas authorized by this Court. In short, the Debtors have made significant progress towards being in a position to propose a viable plan of reorganization shortly after the August 1, 2012 bar date, and have been attempting to cooperate with the Committee on a variety of fronts. 33. The Debtors submit that ample cause exists for the Court to grant the requested

extensions of the time. See In re McLean Indus., Inc., 87 B.R. at 834; see also In re Jasik, 727 F.2d at 1382 (extension of exclusivity period to be granted based upon degree of progress that has been achieved by the debtor in the Chapter 11 process); In re Public Serv. Co. of New Hampshire, 88 B.R. 521 at 524 (extension of exclusivity period to be granted based upon whether debtor has shown progress in attempting in good faith to formulate a viable plan).

Other religious order Chapter 11 cases have provided for various procedures for a streamlined resolution of sexual abuse claims, which the Debtors expect to implement herein. However, depending upon the number of sexual abuse claims and the nature of the claims, the Debtors plan may very well provide that certain funds will be made available to deal with sexual abuse claims, and the Committee will have discretion on the allocation of the funds. The Debtors goal, of course, being to obtain a discharge and continue operations not hampered by litigation based upon alleged sexual abuse which occurred, for the most part, decades ago.

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NOTICE 34. Notice of this Motion is being given to the Committee and its counsel, the United

States Trustee and all parties having filed a notice of appearance or a request for notice in these cases. The Debtors respectfully submit that no further or other notice need be provided under the circumstances of these cases. PRIOR REQUESTS 35. This is the Debtors third request for an extension of its exclusivity periods.

WHEREFORE, the Debtors respectfully request that the Court enter an order, substantially in the form attached as Exhibit A hereto, granting the Motion, and granting the Debtors such other and further relief as the Court deems just and proper. Dated: New York, New York May 14, 2012 TARTER KRINSKY & DROGIN LLP Attorneys for The Christian Brothers Institute, et al. By: /s/ Scott S. Markowitz Scott S. Markowitz 1350 Broadway, 11th Floor New York, New York 10018 (212) 216-8000

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UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ------------------------------------------------------------------- x In re: : : THE CHRISTIAN BROTHERS INSTITUTE, et al. : : Debtors. : ------------------------------------------------------------------- x

Chapter 11 Case No.: 11-22820 (RDD) (Jointly Administered)

ORDER PURSUANT TO 1121(d) OF THE BANKRUPTCY CODE FURTHER EXTENDING THE DEBTORS EXCLUSIVE PERIODS TO FILE A PLAN AND SOLICIT ACCEPTANCES THERETO Upon the motion (the Motion) of The Christian Brothers Institute, et al., debtors and debtors-in-possession herein (the Debtors) dated May 14, 2012, for an order pursuant to 1121(d) of Title 11 of the United States Code (the Bankruptcy Code), further extending the Debtors exclusive periods in which to file a plan and solicit acceptances thereto; and notice of the Motion having been given to the Office of the United States Trustee, counsel to the Official Committee of Unsecured Creditors, and any party having filed a notice of appearance in these cases; and no other or further notice being necessary or required; and a hearing to consider the Motion having been held on June 15, 2012, and after due deliberation and sufficient cause appearing therefor, it is ORDERED, that the Motion is granted; and it is further ORDERED, that pursuant to Bankruptcy Code 1121(d), the Debtors exclusive period in which to file a plan is extended to and including October 26, 2012; and it is further ORDERED, that pursuant to Bankruptcy Code 1121(d), the Debtors exclusive period in which to solicit acceptances to the plan is extended to and including December 27, 2012; and it is further

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ORDERED, that the relief granted herein is without prejudice to the Debtors right to request further extensions of its exclusive periods, and the rights of other parties to oppose any further extensions. Dated: White Plains, New York June ___, 2012 THE HONORABLE ROBERT D. DRAIN UNITED STATES BANKRUPTCY JUDGE

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