hcm Doc#493 Filed 12/04/15 Entered 12/04/15 19:09:43 Main Document Pg 1 of 9

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1 hcm Doc#43 Filed 12/04/15 Entered 12/04/15 1:0:43 Main Document Pg 1 of IN THE UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF TEXAS EL PASO DIVISION IN RE: EL PASO CHILDREN S HOSPITAL CORPORATION, CASE NO DEBTOR. CHAPTER 11 EIN: ALAMEDA AVENUE EL PASO, TEXAS 705 MOTION FOR APPROVAL OF NON-MATERIAL MODIFICATIONS TO SECOND AMENDED JOINT CHAPTER 11 PLAN OF REORGANIZATION TO THE HONORABLE U.S. BANKRUPTCY JUDGE H. CHRISTOPHER MOTT: COME NOW El Paso Children s Hospital Corporation ( Debtor ) by and through its undersigned counsel and files this, its Debtor s Motion for Approval of Non-Material Modifications to Second Amended Joint Chapter 11 Plan of Reorganization ( Motion ) and would show the Court as follows: I. JURISDICTION 1. This Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and This is a core proceeding pursuant to 28 U.S.C. 157(b)(2)(A), (L) and (O). Venue in this district is proper pursuant to 28 U.S.C and The statutory predicates for the relief requested in this Motion are 11 U.S.C. 1125, 1127, and 112, and Federal Rule of Bankruptcy Procedure 301. II. BACKGROUND 3. On May 1, 2015 ( Petition Date ), the Debtor filed its voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code, 11 U.S.C. 101, et seq. (as amended the Bankruptcy Code ). The Debtor is a debtor-in-possession pursuant to

2 hcm Doc#43 Filed 12/04/15 Entered 12/04/15 1:0:43 Main Document Pg 2 of 1107(a) and 1108 of the Bankruptcy Code. No request for the appointment of a trustee or examiner has been made in this bankruptcy case. 4. A description of the background of the Debtor and the events leading up to the filing of the voluntary petition by the Debtor is provided in the Declaration of Mark Herbers in Support of First Day Motions ( Herbers Declaration ) [Dckt. No. 12] which is incorporated herein by reference. 5. The Debtor is an independent non-profit 501(c)(3) corporation that is governed by a board of directors ( EPCH Board ), the sole mission of which has been to provide pediatric care to the children of El Paso and the surrounding areas. The Debtor s primary operations have consisted of owning and operating a 122-bed children s hospital. 6. On October 28, 2015, the Court entered its Order (1) Approving Second Amended Disclosure Statement, (2) Fixing Time for Filing Objections and Acceptance or Rejections of Plan Together with (3) Notice of Hearing on Confirmation of Plan ( ( Order Approving Disclosure Statement ) [Dckt. No. 454]. On October 28, 2015, the Debtor filed the Second Amended Joint Chapter 11 Plan of Reorganization ( Plan ) [Dckt. No. 453] and the Second Amended Disclosure Statement in Support of Second Amended Joint Chapter 11 Plan of Reorganization [Dckt. No. 452]. 7. Pursuant to the Order Approving Disclosure Statement, the Court set a hearing for confirmation of the Plan for December 8, 2015 ( Confirmation Hearing ). III. THE PROPOSED MODIFICATIONS 8. The blackline of the proposed Second Amended Joint Chapter 11 Plan of Reorganization, as modified ( Modified Plan ) is attached as Exhibit A. Following are the explanations for the various changes that appear in the Modified Plan (collectively, the proposed Modifications ): - 2 -

3 hcm Doc#43 Filed 12/04/15 Entered 12/04/15 1:0:43 Main Document Pg 3 of a) Treatment of the Cardinal Claim. This modification addresses the provisions requested by Cardinal Health Inc. ( Cardinal ) to provide for payments to commence to Cardinal by the Initial Distribution Date 1 in the amounts set forth in Claims No. 7-2 and 7-1 unless such claims are the subject of an objection filed by the Debtor or as otherwise agreed. The proposed modifications to the treatment of the Cardinal Claim are proposed to resolve Cardinal s request for payment on the Effective Date and the Debtor s need to complete its reconciliation of amounts owed to Cardinal. b) Deadline for Filing Objections to Claims & Post-Effective Date Committee 10. This modification modifies the deadline for filing objections to claims from one year to 0 days to address the Committee s request for a shorter deadline and also accommodate the Reorganized Debtor s need for sufficient time to analyze claims. The Plan is also modified to include a provision providing for the members of the Committee to become members of a Post- Effective Date Committee, which will dissolve 0 days after the Effective Date, as requested by the Committee. c) Insurance Preservation 11. This modification to section 14.5 of the Plan includes language requested by the ACE Companies to address any conflict with the Plan s provision for the assumption of all insurance policies and to provide that the Debtor s assumption of insurance policies is subject to contractual rights and obligations in such policies. The additional language in section 14.5 of the Plan resolves the Limited Objection of the ACE Companies to Second Amended Joint Chapter 11 Plan of Reorganization [Bankr. Dckt. No. 486]. 1 Capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Plan

4 hcm Doc#43 Filed 12/04/15 Entered 12/04/15 1:0:43 Main Document Pg 4 of d) Modification to Section This proposed modification includes a provision that permits the Lease to be amended to authorize the CCC to appoint members of the Board of Directors of the Reorganized Debtor in the circumstances and matters set forth in the Plan, and the Amended and Restated Bylaws. This proposed modification resolves a potential issue concerning the Board s nomination process of concern to UMC. IV. RELIEF REQUESTED AND SUPPORTING AUTHORITIES 13. By this Motion, the Debtor requests that the Court, at the Confirmation Hearing, (i) approve the pre-confirmation Modifications of the Plan pursuant to 1127(a) of the Bankruptcy Code; (ii) find that the Modifications of the Plan do not adversely affect the treatment of any creditor that has not already accepted the revisions to the Plan implemented thereby or by subsequent agreement; (iii) determine that the Modified Plan is deemed to be accepted by all creditors who formally confirm their acceptance of the Modified Plan on the record at or prior to the hearing on this Motion; and (iv) consider confirmation of the Modified Plan without the need for resolicitation. 14. The Debtor seeks this Court s authority to modify a plan of reorganization that has not yet been confirmed. Such relief is proper in the interests of efficiently allowing the Debtor to propose a consensual plan that has been as exhaustively negotiated with creditors as possible. Furthermore, such relief is expressly contemplated under 1127(a) of the Bankruptcy Code, which provides in pertinent part as follows: (a) The proponent of a plan may modify such plan at any time before confirmation, but may not modify such plan so that such plan as modified fails to meet the requirements of sections 1122 and 1123 of this title. After the proponent of a plan files a modification of such plan with the court, the plan as modified becomes the plan

5 hcm Doc#43 Filed 12/04/15 Entered 12/04/15 1:0:43 Main Document Pg 5 of In addition, 1127(c), applicable to this Motion, provides as follows: (c) The proponent of a modification shall comply with section 1125 of this title with respect to the plan as modified. In addition, any modification under 1127(e) implicates 1127(f)(1) and (2), which provide as follows: (f)(1) Sections 1121 through 1128 and the requirements of section 112 apply to any modification under subsection (e). (2) The plan, as modified, shall become the plan only after there has been disclosure under section 1125 as the court may direct, notice and a hearing, and such modification is approved. 15. Because the Plan is a pre-confirmation plan, the foregoing mandates of 1127, including that sections 1122 (classification); 1123 (contents); 1124 (impairment); 1128 (confirmation hearing); and 112 (confirmation of plan) apply to the Modified Plan, but are not issues that must be decided in conjunction with this Motion. Instead, the foregoing are issues that may be heard and addressed at the Confirmation Hearing of the Modified Plan, if approved by the Court. a) Sections 1125 and 1126 Resolicitation of the Modified Plan is Not Necessary 16. Section 1125 requires that a plan proponent provide interested parties with information that is adequate to allow them to evaluate the plan and to make an informed judgment thereon. See 11 U.S.C Section 1126 of the Bankruptcy Code addresses acceptances and rejections of a plan, and provides, among other things, that: (1) unimpaired classes are deemed to accept a plan; and (ii) plan votes may be solicited prior to the commencement of a bankruptcy case, as long as the requirements of 1125 are followed. See 11 U.S.C

6 hcm Doc#43 Filed 12/04/15 Entered 12/04/15 1:0:43 Main Document Pg 6 of 17. None of the proposed Modifications of the Plan will affect any creditor that voted for the Plan. The Modified Plan does not adversely change the treatment of the claim of any creditor or the interest of any equity security holder who has not accepted the proposed Modifications in writing. The Modified Plan does not adversely affect any creditor as the amounts payable under the Modified Plan are all better than or equal to the Plan as originally solicited. 18. A creditor voting for the Plan is deemed to have accepted the Plan as modified. In In re Dow Corning Corp., 237 B.R. 374, 377 (Bankr. E.D. Mich. 1), a hearing regarding confirmation of the debtor s plan had been scheduled and at the hearing a modification of the plan was filed. The bankruptcy court in Dow Corning determined that the modification did not adversely affect any of the creditors who had previously accepted the plan before its modification. Id. at 37. Further, the Dow Corning court examined Rule 013, stating that it explains when it is necessary to resolicit parties who have previously voted on the plan. It enforces the practical and logical assumption that anyone who voted to accept the previous plan will be deemed to have accepted the modified plan if the modified plan does not adversely change the treatment of [that creditor s] claim. Id. at 378 (citing In re American Solar King Corp., 0 B.R. 808 (Bankr. W.D. Tex. 188); In re Boroff,18 B.R. 53, 57 (D. Vt. 15); In re Transworld Airlines, Inc., 185 B.R. 302, 322 (Bankr. E.D. Mo. 15)). The Dow Corning court further observed that modification is not required if it does not adversely change a claimant s treatment, observing, [t]o enforce a literal interpretation of the Code and require formalistic notice when the modifications are not substantial, would needlessly delay confirmation and heighten the risk of a plan s failure. Id. (citing 4 Norton Bankruptcy Law & Practice 2d 4:1 (1) Supplement to Vol. 4, p. 167))

7 hcm Doc#43 Filed 12/04/15 Entered 12/04/15 1:0:43 Main Document Pg 7 of 1. For all creditors whose claims are treated under the Plan, the Modified Plan leaves their treatment wholly unchanged. Therefore, the information and disclosures that were provided to creditors prior to solicitation of votes on the Plan continue to remain adequate pursuant to b) The Modified Plan Does Not Alter Feasibility or Financial Disclosures 20. As stated herein, the Modified Plan does not alter feasibility or financial disclosures. The only conceivable concern that such constituents may have is that the modified treatment afforded to other claimants might somehow indirectly impact the treatment afforded to their own claims, such as by virtue of feasibility concerns. Further, the Modified Plan is the result of negotiations by and among the Debtor, UMC, and creditors, including in particular, Cardinal. 21. Bankruptcy Rule 301 provides that consideration of this Motion requires notice only to the trustee (here, the Debtor), any committee, and any other entity designated by the [C]ourt. FED. R. BANKR. P The Debtor will arrange for service of this Motion, together with the proposed Modifications and Modified Plan, to be served upon those parties and creditors requesting notice via ECF. WHEREFORE, PREMISES CONSIDERED, the Debtor respectfully requests that this Court set a hearing on this Motion upon due notice thereof for the time of the Confirmation Hearing, and upon hearing the Motion, enter an Order: (i) approving the Modification and the Modified Plan; (ii) finding that the Modifications do not adversely affect the treatment under the Plan of or for any creditor or interest holder that has not already accepted the modified terms; (iii) determine that the Modified Plan is deemed to be accepted by all creditors that formally confirm their acceptance of the Modified Plan on the record of the Bankruptcy Case at or prior to - 7 -

8 hcm Doc#43 Filed 12/04/15 Entered 12/04/15 1:0:43 Main Document Pg 8 of the hearing on this Motion; and (iv) granting to the Debtor such other and further relief as the Court may deem just and proper. Dated: December 4, Respectfully submitted, JACKSON WALKER L.L.P. 100 Congress Ave., Suite 1100 Austin, Texas (512) (512) FAX By: /s/ Patricia B. Tomasco Patricia B. Tomasco State Bar No (512) Direct Phone (512) Direct Fax address: ptomasco@jw.com Jennifer F. Wertz State Bar No (512) Direct Phone (512) Direct Fax address: jwertz@jw.com COUNSEL FOR THE DEBTOR - 8 -

9 hcm Doc#43 Filed 12/04/15 Entered 12/04/15 1:0:43 Main Document Pg of CERTIFICATE OF SERVICE I hereby certify that on the 4th day of December 2015, a true and correct copy of the foregoing has been served electronically through the Court s ECF/PACER system upon all parties receiving notice via the Court s ECF/PACER system. /s/ Patricia B. Tomasco Patricia B. Tomasco v /