Case: HJB Doc #: 690 Filed: 12/03/14 Desc: Main Document Page 1 of 9 HEARING DATE: DECEMBER 10, 2014 AT 10:00 A.M. (E.T.)

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1 Case HJB Doc # 690 Filed 12/03/14 Desc Main Document Page 1 of 9 HEARING DATE DECEMBER 10, 2014 AT 1000 A.M. (E.T.) UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW HAMPSHIRE x In re GT ADVANCED TECHNOLOGIES INC., et al., Debtors x Chapter 11 Case No HJB Jointly Administered Re Docket No. 569 DEBTORS OBJECTION TO MOTION FOR ALLOWANCE AND PAYMENT OF ADMINISTRATIVE EXPENSE CLAIM OF HARRINGTON INDUSTRIAL PLASTICS, LLC PURSUANT TO 11 U.S.C. 503(b)(9) GT Advanced Technologies Inc. ( GT ) and its affiliated debtors as debtors in possession in the above-captioned cases (collectively, GTAT or the Debtors ) object (the Objection ) to the Motion for Allowance and Payment of the Administrative Expense Claim of Harrington Industrial Plastics, LLC Pursuant to 11 U.S.C. 503(b)(9) [Docket No. 569] (the Motion ) filed by Harrington Industrial Plastics, LLC ( Harrington ). In support of this Objection, GTAT respectfully states as follows INTRODUCTION 1. The Motion should be denied because it is premature and contrary to the Debtors efforts to conduct an orderly and efficient claims administration process under orders previously entered by this Court. The request for immediate payment of a claim under section 503(b)(9) appears to be unprecedented as the Debtors have not located and Harrington has not cited any 1 The Debtors, along with the last four digits of each debtor s tax identification number, as applicable, are GT Advanced Technologies Inc. (6749), GTAT Corporation (1760), GT Advanced Equipment Holding LLC (8329), GT Equipment Holdings, Inc. (0040), Lindbergh Acquisition Corp. (5073), GT Sapphire Systems Holding LLC (4417), GT Advanced Cz LLC (9815), GT Sapphire Systems Group LLC (5126), and GT Advanced Technologies Limited (1721). The Debtors corporate headquarters are located at 243 Daniel Webster Highway, Merrimack, NH

2 Case HJB Doc # 690 Filed 12/03/14 Desc Main Document Page 2 of 9 reported decision ordering chapter 11 debtors to pay claims under section 503(b)(9) prior to confirmation, much less in the first two months of the case. This Court should not be the first. 2. In the Motion, Harrington requests that the Court order GTAT to pay $50,750 within five business days on account of goods allegedly delivered by Harrington to GTAT in the twenty days prior to the commencement of these cases (the 503(b)(9) Claim ). Allowing creditors like Harrington to obtain immediate payment of their claims under 503(b)(9) undermines the Debtors efforts to conduct an orderly claims administration process. These cases are barely two months old. The Debtors filed their schedules a few days ago and served notice of the bar date on creditors, including Harrington. These cases will devolve into chaos if every prepetition vendor of goods and there are hundreds of them is permitted to pursue its own parochial interests in a proverbial race to the courthouse for payment. Indeed, two other parties, in addition to Harrington, have already filed similar motions seeking immediate payment of approximately $1.5 million in claims allegedly arising under section 503(b)(9). Granting the Motion would open the floodgates for every creditor with an arguable claim under section 503(b)(9) to file a motion seeking immediate payment of its claim, which would dissipate the estate s assets before GTAT has a chance to develop a plan of reorganization and formulate an exit strategy. Rather than focusing their resources on obtaining postpetition financing, conducting sales of assets, and formulating a reorganization plan, these motions threaten to tie the Debtors and the Court up in endless hearings and briefing over 503(b)(9) claims. 3. Moreover, this Court previously established the manner for creditors to assert their claims under section 503(b)(9) in the order establishing a bar date for the filing of proofs of claim in these cases. See Docket No. 385 (the Bar Date Order ). The Bar Date Order provides, in relevant part, that creditors who do not file a proof of claim for their claims under section 2

3 Case HJB Doc # 690 Filed 12/03/14 Desc Main Document Page 3 of 9 503(b)(9) in the manner provided for [in the Bar Date Order] will not receive any distribution in these chapter 11 cases on account of that claim. See Bar Date Order at 2 (emphasis added). There is nothing onerous about requiring creditors holding prepetition claims under section 503(b)(9) to assert those claims in a proof of claim along with any other prepetition claims they may have. By contrast, it is fundamentally unfair to the estates and other creditors for Harrington to seek preferential payment terms ahead of all other creditors rather than filing a simple proof of claim as provided by the Bar Date Order. 4. The Bankruptcy Code provides that administrative expenses must be paid in full on the effective date of a chapter 11 plan. Harrington has provided absolutely no reason why its claim must be paid two months after these cases were filed. Consequently, the Motion should be denied, without prejudice to Harrington s right to file a proof of claim in the manner prescribed by the Bar Date Order. BACKGROUND 5. On October 6, 2014 (the Petition Date ), GTAT commenced voluntary cases under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of New Hampshire (the Court ). GTAT continues to operate its businesses and manage its properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. No request for the appointment of a trustee or examiner has been made in these chapter 11 cases. 6. On October 14, 2014, the Office of the United States Trustee for the District of New Hampshire appointed an official committee of unsecured creditors in these chapter 11 cases. 3

4 Case HJB Doc # 690 Filed 12/03/14 Desc Main Document Page 4 of 9 7. These chapter 11 cases have been consolidated for procedural purposes only and are jointly administered pursuant to Bankruptcy Rule 1015(b). 8. On October 30, 2014, the Court entered the Order, Pursuant to Bankruptcy Code Sections 105(A), 501, 502(b)(9), and 503, Bankruptcy Rules 2002(L) and 3003(C)(3), and LBR (b), (A) Establishing Bar Date for Filing of Proofs of Claim, (B) Designating Form and Manner of Notice Thereof, and (C) Granting Related Relief [Docket No. 395] (the Bar Date Order ) which governs, among other things, the filing of proofs of claim on account of claims arising under section 503(b)(9) of the Bankruptcy Code. The general bar date for parties to file proofs of claim, including claims under section 503(b)(9), is January 26, On November 20, 2014, Harrington filed the Motion seeking the immediate payment of $50,750 on account of goods provided by Harrington to GTAT during the twentyday period prior to the Petition Date. OBJECTION Harrington Is Not Entitled to Immediate Payment of Its Section 503(b)(9) Claim 10. GTAT should not be required to pay the 503(b)(9) Claim immediately because (i) Harrington has provided no reason why it should be paid prior to the effective date of a plan of reorganization, (ii) permitting creditors to seek immediate payment of claims under section 503(b)(9) will open the floodgates to similar motions, which will only serve to interfere with GTAT s reorganization efforts, and (iii) Harrington has provided no reason for why it should be exempt from the claims process for filing section 503(b)(9) claims. I. Harrington Presents No Justification for Its Demand for Immediate Payment 11. Harrington demands that GTAT pay its 503(b)(9) Claim within five days of the entry of an order approving the Motion. Section 503 does not specify a time for payment, but 2 See Notice of Bar Dates for Filing Proofs of Claim [Docket No. 629]. 4

5 Case HJB Doc # 690 Filed 12/03/14 Desc Main Document Page 5 of 9 administrative expenses must be paid on the effective date of a chapter 11 plan as provided in section 1129(a)(9) of the Bankruptcy Code. 3 Prior to that time, creditors have no statutory right to early payment of their administrative claim. Courts have, however, noted that early payment of administrative expenses could be possible, but only if the claimant proves that exceptional immediate payment is necessary. 4 Harrington has provided no reason why its 503(b)(9) Claim should be paid prior to the effective date of a chapter 11 plan. 12. Courts considering a request for payment of section 503(b)(9) claims in advance of the effective date of a plan have generally followed the well-reasoned approach taken by the court in In re Global Home Prods., LLC. 5 In that case, the court denied a creditor s motion seeking immediate payment of a section 503(b)(9) claim because one of the chief factors courts consider is bankruptcy's goal of an orderly and equal distribution among creditors and the need to prevent a race to a debtor's assets. 6 The three factors that the Global Home court examined in denying the request for immediate payment were (1) the prejudice to the debtors, (2) hardship to claimant, and (3) potential detriment to other creditors See 11 U.S.C. 1129(a)(9). In re Continental Airlines, 146 B.R. 520, 531 (Bankr. D. Del. 1992) (denying immediate payment of administrative expense claim because movants have not shown they are entitled to payment ahead of other administrative claimants ); In re Global Home Products, LLC, et al., 2006 Bankr. LEXIS 3608, *11 (Bankr. D. Del. 2006) (refusing to allow immediate payment of 503(b)(9) because the balance of the hardships favored the debtor). In re Global Home Products, LLC, et al., 2006 Bankr. LEXIS 3608, *11. Id. at *11-12 Id. at *12; accord In re NE OPCO, INC., 501 B.R. 233, 259 (Bankr. D. Del. 2013) (refusing to allow immediate payment of 503(b)(9) claim because such payment would unduly prejudice the debtors and the creditor had failed to show cause); In re Modern Metal Prods. Co., 2009 Bankr. LEXIS 1258, *6-7 (Bankr. N.D. Ill. 2009) (denying immediate payment of 503(b)(9) claim because the creditor did not raise a significant hardship justifying payment ahead of other potential claimants). 5

6 Case HJB Doc # 690 Filed 12/03/14 Desc Main Document Page 6 of The Global Home court denied immediate payment of the section 503(b)(9) claim because the Debtors would be prejudiced by, among other things, other requests for immediate payment of section 503(b)(9) claims. 8 Indeed, the court noted that other creditors, as is the case here, were also seeking the same preferential treatment and had filed motions under section 503(b)(9) seeking payment of $2.1 million. The court also found that the creditor seeking immediate payment failed to demonstrate any evidence of hardship if its claim was not paid immediately In adopting the same three-factor test, the court in In re Arts Dairy, LLC focused on the detriment immediate payment of a 503(b)(9) claim has on other creditors, noting that there was no showing of a compelling reason why the claimants should be afforded favorable treatment over other similarly situated creditors Likewise, Harrington provides no reason why its 503(b)(9) Claim should be paid now. As in Global Home, there would be great prejudice to GTAT if it was required to pay Harrington s 503(b)(9) Claim immediately. Two other creditors have already filed similar motions seeking immediate payment in excess of approximately $1.5 million on account of alleged claims arising under section 503(b)(9). 11 If the Court were to grant Harrington s request, other creditors with claims under section 503(b)(9) would most likely seek the same relief, quickly inundating the Court and the Debtors with motions that would disrupt the Debtors Global Home, 2006 Bankr. LEXIS 3608 at * Id. at *14. In re Arts Dairy, LLC, 414 B.R. 219, 221 (Bankr. N.D. Ohio 2009). See Motion for Allowance and Payment of the Administrative Expense Claim of Sumitomo Electric U.S.A., Inc. Pursuant to 11 U.S.C. 503(b)(9) [Docket No. 495]; Motion for Allowance and Payment of the Administrative Expense Claim of Advanced Process Systems, LLC Pursuant to 11 U.S.C. 503(b)(9) [Docket No. 564]. 6

7 Case HJB Doc # 690 Filed 12/03/14 Desc Main Document Page 7 of 9 reorganization efforts less than 3 months into these chapter 11 cases. The filing of motions seeking payment of section 503(b)(9) claims would inevitably distract GTAT from critical tasks such as obtaining postpetition financing and developing a plan of reorganization and exit strategy. 16. Moreover, no hardship would befall Harrington if its Motion were denied. Instead, Harrington would do what it should have done from the start file a proof of claim. Filing a proof of claim is not onerous at all and Harrington has not even attempted to show any hardship if its claim is not paid prior to the effective date of a plan of reorganization. In sum, Harrington has not carried its burden to prove that its 503(b)(9) Claim, if any, should be paid before the effective date of a plan and its request for immediate payment should be denied. II. The Motion Circumvents the Claims Process and Forces the Estates to Unnecessarily Expend Funds in Response 17. The Bar Date Order provides a centralized process for GTAT to review the claims of parties, including claims asserted under section 503(b)(9), in an orderly fashion at the appropriate time. At this early stage of these cases, GTAT and its professionals are focusing their energy on, among other things, (i) procuring debtor-in-possession financing, (ii) obtaining Court s approval of the settlement with Apple Inc., (iii) winding down GTAT s operations in Mesa, Arizona, (iv) marketing and selling items in inventory and non-core assets, and (v) formulating a confirmable plan of reorganization. Harrington s Motion only serves to distract GTAT from advancing these critical efforts for the benefit of all stakeholders. 18. Moreover, despite its failure to follow the claims procedures established by the Bar Date Order, Harrington never explains why it should be exempt from that simple and efficient process. By ignoring the Bar Date Order, Harrington has forced GTAT to unnecessarily use the limited resources of the estates responding to the Motion. If the Motion is granted, other 7

8 Case HJB Doc # 690 Filed 12/03/14 Desc Main Document Page 8 of 9 parties will inevitably become incentivized to inundate the Debtors and the Court with their own motions seeking immediate payment of their section 503(b)(9) claims. Apart from creating utter chaos in the claims reconciliation process, this exercise would quickly dissipate the estates funds as creditors engage in a race to the courthouse. Accordingly, the Court should deny the Motion, without prejudice to Harrington s right to file a proof of claim in accordance with the Bar Date Order, and permit GTAT to resolve Harrington s claims through the claims reconciliation process. [remainder of page intentionally left blank] 8

9 Case HJB Doc # 690 Filed 12/03/14 Desc Main Document Page 9 of 9 WHEREFORE, GTAT respectfully request that the Court enter an order denying the Motion, without prejudice to Harrington s right to file a proof of claim, and granting such other relief as the Court may deem just and proper. Dated December 3, 2014 /s/ James T. Grogan Luc A. Despins, Esq. Andrew V. Tenzer, Esq. James T. Grogan, Esq. (BNH07394) PAUL HASTINGS LLP Park Avenue Tower 75 East 55th Street, First Floor New York, New York Telephone (212) Facsimile (212) and- Daniel W. Sklar, Esq. Holly J. Barcroft, Esq. NIXON PEABODY LLP 900 Elm Street Manchester, NH Telephone (603) Facsimile (603) Co-Counsel for the Debtors and Debtors in Possession 9