United States Trustee’s Objection to DIP Financing and Cash Collateral Motion Page 1 of 8 

Office of the United States Trustee 

1100 Commerce Street, Room 976 

Dallas, Texas 75242 

(214) 767-8967 

Meredyth A. Kippes 

for the United States Trustee 

meredyth.kippes@usdoj.gov 

IN THE UNITED STATES BANKRUPTCY COURT 

FOR THE NORTHERN DISTRICT OF TEXAS 

DALLAS DIVISION 

In re:

CAREMAX INC., et al., 

Debtor. 

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Case No. 24-80093-mvl11 

(Jointly Administered) 

Chapter 11 

 

United States Trustee’s Objection to Debtors’ Emergency Motion for Entry of Interim and 

Final Orders (A) Authorizing the Debtors to (I) Obtain Postpetition Financing, (II) Use 

Cash Collateral, (III) Grant Senior Secured Liens and Provide Claims with Superpriority 

Administrative Expense Status, and (IV) Grant Adequate Protection to the Prepetition 

Secured Parties, (B) Modifying the Automatic Stay, (C) Scheduling a Final Hearing, and 

(D) Granting Related Relief 

[related to docket no. 6] 

TO THE HONORABLE MICHELLE V. LARSON, 

UNITED STATES BANKRUPTCY JUDGE: 

 Lisa L. Lambert, the United States Trustee for Region 6 (“United States Trustee”), objects 

to the Debtors’ Emergency Motion for Entry of Interim and Final Orders (A) Authorizing the 

Debtors to (I) Obtain Postpetition Financing, (II) Use Cash Collateral, (III) Grant Senior Secured 

Liens and Provide Claims with Superpriority Administrative Expense Status, and (IV) Grant 

Adequate Protection to the Prepetition Secured Parties, (B) Modifying the Automatic Stay, (C) 

Scheduling a Final Hearing, and (D) Granting Related Relief (“DIP Motion”). [docket no. 6]. The 

United States Trustee would respectfully show: 

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Overview 

 Debtors seek entry of a final order providing both for 1) the use of cash collateral that is 

subject to liens held by pre-petition secured lender and agent and proposed DIP lender and 

collateral agent, Acquiom Agency Services LLC, (“DIP Lender”) and 2) approval of $122.0 

million DIP facility (“Final Roll-Up DIP), consisting of $30.5 million in New Money DIP Loans 

and $91.5 million roll-up in prepetition debt (“Roll-Up”). The United States Trustee objects for 

the following reasons: 

a. Final Roll-Up DIP is improper because it rolls $91.5 million of the DIP Lenders’ 

prepetition debt, yet the Motion is silent as to whether this 3:1 roll-up conforms to industry 

standards for bankruptcy court approval. 

b. The Final Roll-Up DIP grants the DIP Lender liens over the proceeds of any Chapter 5 

causes of action as a last look. 

c. The Final Roll-Up DIP waives the Debtors’ right to surcharge collateral under 11 U.S.C. § 

506(c). 

d. The Final Roll-Up DIP enjoins third parties from enforcing any marshaling provisions 

against the DIP Lender. 

Background

1. On November 17, 2024 (“Petition Date”), CareMax, Inc., along with its subsidiaries 

(collectively, “Debtors”), filed voluntary chapter 11 petitions in the United States Bankruptcy 

Court for the Northern District of Texas. 

2. On November 19, 2024, the Court entered an order granting joint administration of all 

Debtors’ cases under case no. 24-80093. [docket no. 67]. 

3. The Debtors’ proposed chief restructuring officer is Paul Rundell (“CRO” or “Mr. 

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Rundell”). 

4. The DIP Motion is supported by the declaration of Bilal Bazzy, of Piper Sandler & Co. 

(the “Bazzy Declaration”) [docket no. 7]. 

5. On December 4, 2024, the United States Trustee appointed the official committee of 

unsecured creditors (“Committee”). [docket no. 154]. 

6. The Debtors’ section 341 meeting of creditors is currently scheduled for December 18, 

2024. 

7. The Debtors’ schedules or statements of financial affairs were filed on November 27 and 

28, 2024. 

Prepetition Secured Debt and Proposed DIP Loans 

8. As of the Petition Date, the Debtors owed approximately $422.6 million in prepetition 

funded debt under its prepetition credit agreement (“Prepetition Secured Debt”) to the DIP 

Lender. Bazzy Declaration at ¶ 17. 

9. The Debtors through the Final Order seek approval of a final DIP loan approval of $122.0 

million DIP facility, consisting of $30.5 million in New Money DIP Loans and approximately 

$91.5 million roll-up in prepetition debt. 

10. Three of the Debtors are not obligors on the prepetition loan facility (the “Non-Prepetition 

Obligors”: 

a. Sapphire Holdings, LLC; 

b. RX Marine Inc.; and 

c. CareMax Medical Centers of Louisiana, LLC. 

11. Sapphire Holdings, LLC’s Schedule A/B (Case No. 24-80144-mvl11, docket no. 12) 

reflects interests of an undetermined value in twenty-two insurance policies, four of which are 

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director and officer liability policies. Sapphire Holdings, LLC’s Schedule E/F reflects no 

unsecured claims. 

12. RX Marine, Inc.’s Schedule A/B (Case No. 24-80145-mvl11, docket no. 12) reflects 

$96,916.05 in a J.P. Morgan Chase Disbursement Account and interests of an undetermined value 

in the same twenty-two insurance policies in which Sapphire Holdings, LLC asserts an interest. 

RX Marine, Inc.’s Schedule E/F reflects no unsecured claims. 

13. CareMax Medical Centers of Louisiana, LLC’s Schedule A/B (Case No. 24-80139-mvl11, 

docket no. 12) reflects interests of an undetermined value in the same twenty-two insurance 

policies in which Sapphire Holdings, LLC and RX Marine, Inc. asserts an interest. 

14. The Court conducted an initial hearing on the Motion on November 19, 2024. 

15. That same day, on November 19, 2024, Court entered the Interim Order (A) Authorizing 

the Debtors to (I) Obtain Postpetition Financing, (II) Use Cash Collateral, (III) Grant Senior 

Secured Liens and Provide Claims with Superpriority Administrative Expense Status, and (IV) 

Grant Adequate Protection to the Prepetition Secured Parties, (B) Modifying the Automatic Stay, 

(C) Scheduling a Final Hearing and (D) Granting Related Relief (“Interim Order”). [docket no. 

71]. 

16. The Interim Order authorized the Debtors to borrow up to $12 million in new money. 

Interim Order at p. 2. 

17. On a final basis, the Debtors seek authorization to borrow up to an additional $18.5 million 

of new money and to roll up $91.5 million of prepetition secured debt. Interim Order at p. 2. 

18. The DIP Motion and Bazzy Declaration are both silent as to whether the proposed Final 

DIP Loan’s 3:1 roll-up is comparable to market rates for other roll-up DIP loans approved by this 

Court. 

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Objection 

The Final Roll-Up DIP is inappropriate.

19. The Final Roll-Up DIP would convert $91.5 million in prepetition secured debt into a postpetition claim with superpriority administrative expense status, and secured by all assets of the 

Debtors’ estates. Interim Order at pp. 24-25. 

20. Roll-up provisions “have the effect of improving the priority of a prepetition creditor.” 

Official Committee of Unsecured Creditors of New World Pasta Co. v. New World Pasta Co., 322 

B.R. 560, 569 n.4 (M.D. Pa. 2005). The Final Roll-Up DIP inappropriately improves the DIP 

Lender’s position by granting a superpriority claim of pre-petition debt over post-petition debt, 

including over previously unencumbered estate assets, including a “last look” on chapter 5 causes 

of action. Interim Order at pp. 34-35. 

21. The Motion is silent as to how the roll-up of $91.5 million of the DIP Lender’s prepetition 

debt benefits the Debtors’ estates. The Debtors and the DIP Lender should be required to produce 

evidence as to what value is provided to the Debtors’ estates by the 3:1 Final Roll-Up DIP, whether 

the Final Roll-Up DIP’s terms are market for bankruptcy court approval, and why general 

unsecured creditors could be deprived of any potential recovery through the liens granted on the 

chapter 5 causes of action. 

22. Further, the Debtors should put on evidence that encumbering the assets of the NonPrepetition Obligors is not priming other creditors or encumbering assets that would otherwise be 

available to unsecured creditors.

The Final Roll-Up DIP improperly grants to the lenders a lien against the proceeds of 

chapter 5 causes of action 

23. The Final Roll-Up DIP improperly provides the DIP Lender with additional liens on the 

proceeds of chapter 5 causes of action. While the Interim Order provides that the DIP Lender shall 

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seek recovery from such proceeds only as a last resort, the Court should not approve or authorize 

liens on the proceeds of chapter 5 causes of action. Chapter 5 avoidance actions are not the 

Debtors’ property, but instead rights that are created by statute and which may be used for the 

benefit of creditors. See In re Cybergenics Corp., 226 F.3d 237, 243-45 (3d Cir. 2000) (state law 

fraudulent transfer claim is not an asset of the debtor). 

24. Typically, these avoidance actions are a source of recovery for general unsecured creditors 

in chapter 11 cases. In the present case, it appears that the unsecured creditors are underwater such 

that chapter 5 causes of action may be their own source of significant recovery. At a minimum, 

the Debtors should be required to produce evidence as to their analysis of potential avoidance 

actions and why they should not be carved out for the benefit of general unsecured creditors. 

The DIP Motion improperly seeks to waive parties’ right to surcharge collateral. 

25. The United States Trustee objects to any provisions waiving the Debtors’ or a successor 

trustee’s right to surcharge collateral under 11 U.S.C. § 506(c). Under the final order, Debtors 

agree to waive their right to surcharge the collateral under 11 U.S.C. § 506(c). Interim Order at p. 

42. Here, the DIP Lender is not unreasonably exposed to the surcharge of their collateral. Secured 

lenders are typically the primarily beneficiaries of a chapter 11 case. Furthermore, the party 

seeking recovery under § 506(c) bears the burden of demonstrating a direct benefit to the lender’s 

collateral. New Orleans Public Service, Inc. v. First Federal Savings and Loan Association of 

Warner Robins, Georgia (In re Delta Towers), 924 F.2d 74, 76 ( 5th Cir. 1991). The parties should 

be required to demonstrate to the Court why the § 506(c) waiver is necessary given that the DIP 

Lender would not be prejudiced if this right were not waived. This is especially true here as the 

Debtors’ have numerous landlord creditors with rejection damages. The Debtors should put on 

evidence to support this requested relief. 

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The DIP Motion improperly constrains creditors from enforcing the equitable doctrine of 

marshaling. 

26. The Final Roll-Up DIP prevents any party from asserting the equitable doctrine of 

marshaling against the DIP Lender. Interim Order at pp. 43-44. The equitable doctrine of 

marshaling rests upon the principal that when a creditor has multiple sources of collateral with 

which to satisfy its debt, it may not, by its demand, defeat the claim of another creditor that has 

only one source of collateral with which to satisfy its debt. Meyer v. United States, 375 U.S. 233, 

321 (1963) (in the context of whether the doctrine of marshaling should be applied to junior federal 

tax liens in the face of a state law that prohibited the application). In other words, where one 

creditor has a blanket lien on all assets and another creditor has a lien on only one piece of 

collateral, the equitable doctrine of marshaling would require the first creditor to look to other 

collateral before it looked to the more limited collateral of the second creditor. Accordingly, United 

States Trustee objects to waiver of the doctrine of marshaling to the extent it prevents other 

creditors from invoking the doctrine of marshaling, should cause arise. 

Conclusion

 The United States Trustee respectfully requests that the Court sustain her objections. The 

United States Trustee requests any additional relief to which he may be entitled.

DATED: December 11, 2024 Respectfully submitted, 

LISA L. LAMBERT 

UNITED STATES TRUSTEE 

 /s/ Meredyth A. Kippes 

 Meredyth A. Kippes 

 Trial Attorney 

 Texas State Bar No. 24007882 

 Office of the United States Trustee 

1100 Commerce Street, Room 976 

Dallas, Texas 75242 

(214) 767-1079 

meredyth.kippes@usdoj.gov 

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Certificate of Service 

 The undersigned counsel certifies that copies of the foregoing document were served on 

December 11, 2024 via ECF to those parties requesting service via ECF in this case and to the 

parties listed below via electronic mail. 

 /s/ Meredyth A. Kippes 

 Meredyth A. Kippes 

CareMax, Inc. 

1000 NW 57 Court, Suite 400 

Miami, Florida 33126 

Attn: Paul Rundell, Chief Restructuring 

Officer 

prundell@alvarezandmarsal.com 

SIDLEY AUSTIN LLP 

Thomas R. Califano (24122825) 

Juliana L. Hoffman (24106103) 

2021 McKinney Avenue, Suite 2000 

Dallas, Texas 75201 

tom.califano@sidley.com 

jhoffman@sidley.com 

SIDLEY AUSTIN LLP 

Stephen E. Hessler 

Anthony R. Grossi 

Jason L. Hufendick 

787 Seventh Avenue 

New York, New York 10019 

shessler@sidley.com 

agrossi@sidley.com 

jhufendick@sidley.com 

Boris I. Mankovetskiy 

Sill Cummis & Gross P.C. 

The Legal Center, One Riverfront Plaza 

Newark, NJ 07102 

bmankovetskiy@sillscummis.com 

Robert J. Feinstein 

Pachulski Stang Ziehl & Jones LLP 

780 Third Avenue, 34th Floor 

New York, NY 10017 

rfeinstein@pszjlaw.com 

Bradford J. Sandler 

Pachulski Stang Ziehl & Jones LLP 

780 Third Avenue, 34th Floor 

New York, NY 10017 

bsandler@pszjlaw.com 

Michael D. Warner 

Pachulski Stang Ziehl & Jones LLP 

735 Plaza Blvd., Suite 200 

Coppell, TX 75019 

Michael D. Warner 

Pachulski Stang Ziehl & Jones LLP 

700 Louisiana Street, Suite 4500 

Houston, TX 77002 

mwarner@pszjlaw.com 

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