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The Official Committee of Unsecured Creditors (the “Creditors’ Committee”) appointed 

in the above-captioned chapter 11 cases, by its attorneys, Milbank LLP, hereby objects to the 

Motion Pursuant to 11 U.S.C. §§ 363 and 105(a) and Fed. R. Bankr. P. 6004 Authorizing Debtors 

to Purchase Directors and Officers Insurance (the “Motion”) [Docket No. 2471].1

PRELIMINARY STATEMENT 

1. The Creditors’ Committee appreciates the importance of maintaining appropriate

coverage of the Debtors’ directors and officers (the “D&Os”) and, in principle, has no issue with 

the Debtors obtaining such coverage where necessary and appropriate. However, the Creditors’ 

Committee cannot support the relief requested in the Motion—the immediate funding of $50 

million to secure a new D&O insurance policy (the “New Policy”)—where it is entirely premised 

on an unlikely parade of horribles: the confluence of a variety of potential, hypothetical future 

circumstances and events described in the Motion. 

2. As described herein, the Debtors have provided no evidence in the Motion nor in

the documents provided to the Creditors’ Committee that this parade of horribles will occur, and 

thus have not proven any need for the New Policy. Indeed, the Motion itself only articulates that 

the D&Os “could” face a “potential lack of coverage,” without providing any actual support for 

the likelihood of such an occurrence. And given the nature of the claims and the fact that they 

have all been stayed, it is difficult to see how any of the Debtors’ existing policies will be exhausted 

anytime in the near term. As such, the relief requested is purely speculative. 

3. The relief requested in the Motion is also premature at best. The Debtors have

shown no legitimate reason why they need the New Policy at this time, when the existing policies 

are not exhausted, the New Officers and Directors have already accepted their positions, and the 

New Policy will be entirely self-funded. 

1 Capitalized terms not defined herein have the meanings ascribed to them in the Motion. 

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4. Consequently, based on the information available to the Creditors’ Committee,

there does not appear to be any pressing need for additional coverage on top of the existing policies. 

To the extent any additional coverage is ever required, the Debtors may procure coverage at that 

time, but the Debtors should not be permitted to lock up $50 million for five years for a New Policy 

they may never need. Accordingly, the Creditors’ Committee objects to the relief sought in the 

Motion.

BACKGROUND 

A. Existing Policies

5. Before the commencement of these cases, the Debtors, in the ordinary course of

business, maintained primary and excess D&O liability insurance. As a result, as of the petition 

date, the Debtors’ D&Os were beneficiaries of two sets of “claims-made” policies: (i) one set, 

which covers the policy period between May 20, 2018 and May 20, 2020 (the “2018 Policies”)2

with $300 million in coverage limits; and (ii) another set, which covers the policy period between 

May 20, 2017 and May 20, 2018 with $250 million in coverage limits (the “2017 Policies” and 

together with the 2018 Policies, the “Existing Policies”). See Motion at 7–8. 

6. Under the 2018 Policies, the first $200 million is available to the Debtors (e.g., for

securities claims) and to the Debtors’ D&Os, while the next $100 million is available solely to the 

D&Os and is available only when the Debtors refuse or are unable to indemnify the covered 

individuals. This D&O-only insurance is known as “Side A Coverage.” If the Side A Coverage 

is exhausted by a claim or a series of related claims, and a new, unrelated claim is asserted against 

the Debtors’ D&Os, $90 million of coverage would be made available to respond to such new 

claim. In the event that another new, unrelated claim is asserted, an additional $90 million of 

coverage would be made available to provide additional coverage. Motion at 7–8. Under the 2017 

2 The policy period for the 2018 Policies was initially one year, but before the petition date, 

the Debtors extended the policy period an additional year. 

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ARGUMENT 

A. The Requested Relief Is Not In The Ordinary Course

12. Pursuant to the Final Order Pursuant to 11 U.S.C. §§ 105(a), 362(d), 363(b),

363(c), and 364 and Fed. R. Bankr. P. 4001, 6003, and 6004 (I) Authorizing the Debtors to 

(A) Maintain Insurance Policies, Workers’ Compensation Program, and Surety Bond Program

and (B) Pay All Obligations with Respect Thereto; and (II) Granting Relief from the Automatic 

Stay with Respect to Workers’ Compensation Claims (the “Final Insurance Order”) [Docket No. 

695], the Debtors are authorized, in the ordinary course of business, to supplement or otherwise 

modify their insurance coverage as needed, including by purchasing new insurance policies. The 

Final Insurance Order provides, however, that before obtaining new insurance policies that 

contemplate coverage that is “materially inconsistent” with the coverage under the Debtors’ 

existing insurance policies, the Debtors must provide advance notice to, among others, the 

Creditors’ Committee, so that the Creditors’ Committee has a chance to object. Final Insurance 

Order ¶ 5. 

13. The New Policy has a structure that is entirely different from that of the Existing

Policies. The Existing Policies are not self-funded and do not require that the Debtors lock up $50 

million. The Debtors themselves acknowledge that they could not obtain new coverage on terms 

similar to the Existing Policies. Accordingly, the terms of the New Policy are “materially 

inconsistent” with the Existing Policies and, thus, despite the Debtors’ assertions to the contrary, 

are not already authorized under the Final Insurance Order and are not in the ordinary course of 

the Debtors’ business. 

14. Section 363(b) of the Bankruptcy Code provides, in relevant part, that “[t]he

[debtor], after notice and a hearing, may use, sell, or lease, other than in the ordinary course of 

business, property of the estate.” 11 U.S.C. § 363(b)(1). Under section 363, a court may authorize 

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a debtor to use estate funds where a sound business purpose justifies such use. See, e.g., In re 

Ernst Home Ctr., Inc., 209 B.R. 974, 979 (Bankr. W.D. Wash. 1997); In re Walter, 83 B.R. 14, 20 

(B.A.P. 9th Cir. 1988). Thus, a debtor’s decision to enter into a transaction which is outside of the 

normal course of its business “must be based on its reasonable business judgment.” Id. The 

movant “must establish a business justification for the transaction and the bankruptcy court must 

conclude, from the evidence, that the movant satisfied its fiduciary obligations and established a 

valid business justification.” In re Gulf Coast Oil Corp., 404 B.R. 407, 422 (Bankr. S.D. Tex. 

2009) (emphasis added). 

15. Whether the proffered business justification is sufficient depends on the facts and

circumstances of the case. In re Cont’l Air Lines, Inc., 780 F.2d 1223 (5th Cir. 1986). A court 

may, for example, find a sound business justification under section 363(b) where the use of funds 

is “reasonable and appropriate” and “designed to maximize the value of [the] estate.” See In re 

ASARCO, LLC, 650 F.3d 593, 603 (5th Cir. 2011). 

16. The Debtors have not shown any sound business justification for obtaining the New

Policy at this time. The Debtors’ proffered justification—that “there are circumstances under 

which the [New D&Os] may not have coverage for claims that may arise,” Motion at 17 (emphasis 

added)—is in and of itself unsound. The Existing Policies are not, nor is there any evidence that 

they will be, exhausted in the near term; the mere possibility that the Existing Policies may be 

impaired or exhausted at some future time is pure conjecture, and is thus is not a sound business 

justification for now locking up $50 million for five years. 

B. The Debtors Have Not Shown That The Requested Relief Is Needed

17. The requested relief is not currently needed. Instead, the Debtors’ purported need

for the New Policy is purely speculative: it is premised on the confluence of a variety of 

prospective circumstances and events. 

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Debtors will be paying the costs of any new claims out of their own pockets, regardless of whether 

they implement the EIS plan. Finally, the Debtors also make no mention of the fact that they will 

presumably seek to spend far more than this $50 million on D&O insurance within the next year. 

Because the Debtors’ Existing Policies expire in less than a year, if the Debtors have not emerged 

from bankruptcy by May 20, 2020, they will have no choice but to reenter the market to procure 

additional insurance coverage. The Debtors and their insurance broker will again explore ways to 

secure new policies and limits, and the cost of any such insurance is likely to be significant. As 

such, the prematurely and unnecessarily requested $50 million at issue now can instead be saved 

and used in mere months, when the need for it will be clear and imminent. 

CONCLUSION 

Based on all of the foregoing, the Creditors’ Committee respectfully requests that the Court 

(i) deny the Motion and (ii) grant such other and further relief as is just and reasonable.

DATED: July 2, 2019 MILBANK LLP 

 /s/ Gregory A. Bray

DENNIS F. DUNNE 

SAMUEL A. KHALIL 

GREGORY A. BRAY 

THOMAS R. KRELLER 

Counsel for the Official Committee of 

Unsecured Creditors 

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