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UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE

In re:
Chapter 11

MERVYN'S HOLDINGS, LLC, et aL.l,

Case No. 08-11586 (KG) (Jointly Administered)

Objection Deadline: 11118/2008 CI 4:00 PM
Hearing Date: 11/25/2008 CI 10:00 AM

Debtors.

MOTION OF SUNHAM HOME FASHIONS, LLC FOR ALLOWANCE AND PAYMENT OF ITS ADMINISTRATIVE CLAIM PURSUANT TO 11 U.S.C. 503(b)(9) AND 507(a)(2)

Sunham Home Fashions, LLC ("Sunham"), by and through its undersigned counsel,
hereby applies to this Court for allowance and payment of its administrative claim pursuant to 11
U.S.C. 503(b)(9) and 507(a)(2)(the "Motion"). In support of

this Motion, Sunham states the

following:

JURISDICTION
1. This Court has jurisdiction to consider this Motion pursuant to 28 U.S.C. 157

and 1334. This is a core proceeding pursuant to 28 U.S.C. 157(b).

2. Venue of

this Motion is proper pursuant to 28 U.S.C. 1408 and 1409.

3. The statutory predicates for relief

requested herein are 105(a), 503(b)(9) and

507(a)(2) of

the Bankuptcy Code.

INTRODUCTION
3. On July 29,2008, (the "Petition Date") the Debtors filed with this Court their
voluntary petitions for relief under Chapter 11 of title 11 of

the United States Code (the

r.

i The Debtors in this case, along with the last four digits of their federal tax identification numbers for each of

the

Debtors, are Mervyn's Holdings, LLC (793 i), Mervy's LLC (4456) and Mervyn's Brands (8850).

0q/v(*0

0811586081016000000000003

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"Bankrptcy Code").
4. Pursuant to 1107 and 1108 of the Bankruptcy Code, the Debtors are continuing

to operate their businesses and manage their properties and assets as debtors in possession.

BACKGROUND
5. Sunham was a vendor to the Debtors.
6. On the Petition Date, the Debtors owed Sunham $507,163.27 for merchandise

sold and delivered to, and received by, the Debtors within twenty (20) days of

the Petition Date.

A schedule of

the open invoices for this merchandise is attached as Exhibit A.

7. Sunham filed Sunham Home Fashions, LLC's Demand for Reclamation on August

20, 2008 (Docket No. 283). Sunham served its written demand for reclamation of goods totaling
$636,229.83 upon Mervyn's Holdings, LLC, its proposed counsel Richards, Layton & Finger,

P.A., and its claims agent, Kurtzman Carson Consultants LLC by letter on August 19,2008.
8. As of the date of

this motion, the Debtors have refused to permit Sunham's

reclamation or to acknowledge Sunham' s entitlement to an administrative claim.

SUNHAM'S 503(b)(9) ADMINISTRATIVE EXPENSE CLAIM

9. By this Motion, Sunham seeks allowance and payment of its administrative claim

in the amount of$507,163.27, pursuant to 11 U.S.C. 503(b)(9) and 507(a)(2).

10. The merchandise sold and delivered by Sunham, and received by the Debtors, in

the ordinary course of their businesses, has assisted the Debtors by providing inventory, which is a valuable asset to the Debtors' Estates, for resale to their customers.

RELIEF REQUESTED
11.

Pursuant to 503(b)(9), "(a)fter notice and a hearing, there shall be allowed

~

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administrative expenses...including...(9) the value of any goods received by the debtor within 20

days before the date of commencement of a case under this title in which the goods have been

sold to the debtor in the ordinary course of such debtor's business."

12. Pursuant to 503(b)(9) of

the Bankruptcy Code, Sunham is entitled to an

administrative expense claim in the total amount of $507,163.27, for the subject merchandise

which the Debtors received in the ordinar course of their business within 20 days before the
Petition Date (the "Sunham Administrative Expense Claim").
13. There can be no dispute that during the administrative claim period, the Debtors

received merchandise from Sunham with a value of $507,163.27 as indicated by the schedule of

invoices attached hereto as Exhibit A. Further, the merchandise received by the Debtors within
the 503(b )(9) administrative claim period was ordered, shipped to and received by the Debtors in

the ordinary course of business.

14. The Court should require that the Debtors make immediate payment of

the

Sunham Administrative Expense Claim. Courts have discretion to require the immediate
payment of administrative claims, and in exercising this discretion courts consider the prejudice

to the debtor, hardship to the claimant, and potential detriment to other creditors. In re Global
Home Prods., LLC, 2006 WL 3791955, (Bank. D. DeL. Dec. 21,2006).2
15. Here, immediate payment wil not prejudice the Debtors or other creditors

because, upon information and belief, the Debtors have obtained post-petition financing and have
authority from the Court to use cash collateraL.
16. Further, under Section 1129(a)(9) of

the Bankuptcy Code, the Debtors wil

2 Attached hereto as Exhibit B.

~
3

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ultimately be required to provide for and make payment of the Sunham Administrative Expense
Claim in a plan of

reorganization. See 11 U.S.C. 1129(a). Thus, other creditors will not be

harmed by the payment of

the Sunham Administrative Expense Claim at this time.

17. The Sunham Administrative Expense Claim is not subject to any setoff or

counterclaim.
18. Sunham is entitled to immediate payment of

the Sunham Administrative

Expense Claim.

NOTICE
19. Given the nature of

the relief sought by the Motion, Sunham has provided notice

to the following parties: (i) counsel to the Debtors; (ii) counsel to the Offcial Committee of
Unsecured Creditors; (iii) the Office of

the United States Trustee; and (iv) all parties requesting

notice pursuant to Federal Rule of

Bankptcy Procedure 2002.

requested herein has been made to

20. No prior motion or application for the relief

this or any other Court.

WHEREFORE, Sunham Home Fashions, LLC respectfully requests that this Court enter

an order: i) approving its 503(b)(9) administrative claim in the amount of$507,163.27; ii)

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directing the Debtors to pay such claim within ten business days; and (iii) grant such other relief
as this Court deems appropriate under the circumstances.

Dated: October 15, 2008

LIOTT GREENLEAF
X. Zahralddin (DE Bar No. 4166) Ne . Lapinski (DE Bar No. 3645) Ellott Greenleaf
1000 West Street, Ste. 1440

Wilmington, DE, 19899

and

LAZARUS & LAZARUS, P.C. lSi Gilbert A. Lazarus, Esq.

240 Madison Avenue, 8th. FIr.

New York, NY, 10016

Attorneys for Sunham Home Fashions, LLC

Case 08-11586-KG

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UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE

In re:
Chapter 11

MERVYN'S HOLDINGS, LLC, et al. i,

Debtors.

Case No. 08- 11586 (KG) (Jointly Administered)

Objection Deadline: 11118/2008 rm 4:00 PM
Hearing Date: 11/25/2008 rm 10:00 AM

NOTICE OF MOTION

TO: (I) counsel to the Debtors; (II) counsel to the Offcial Committee of Unsecured Creditors; (III) the Offce of the United States Trustee; and (IV) all parties
requesting notice pursuant to Federal Rule of Bankruptcy Procedure 2002.

PLEASE TAKE NOTICE that Sunham Home Fashions, LLC has filed the
attached Motion for Allowance and Payment of its Administrative Claim Pursuant to 1 1
U.S.C. Sections 503(b)(9) and 507(a)(2).

PLEASE TAKE FURTHER NOTICE that responses or objections, if any, to the

Motion must be fied with the United States Bankruptcy Court for the District of Delaware, 824 N. Market Street, 3rd Floor, Wilmington, DE 19801 on or before
November 18, 2008 at 4:00 p.m. (prevailng eastern time) (the "Objection Deadline").

A copy of aforementioned responses or objections must be served upon the undersigned

Counsel by the Objection Deadline.

PLEASE TAKE FURTHER NOTICE THAT A HEARING ON THE APPLICATION WILL BE HELD ON NOVEMBER 25, 2008 AT 10:00 A.M.
(prevailng eastern time) BEFORE THE HONORABLE KEVIN GROSS IN THE
UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE, 824 N. MARKET STREET, 6th FLOOR, WILMINGTON, DELAWARE 19801.

i The Debtors in this case, along with the last four digits of of

their federal tax identification numbers for each the Debtors, are Mervyn's Holdings, LLC (7931), Mervn's LLC (4456) and Mervyn's Brands (8850).

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IF THE MOTION is NOT RESPONDED TO IN ACCORDANCE WITH THIS NOTICE, THE COURT MAY GRANT THE RELIEF REQUESTED THEREIN WITHOUT FURTHER NOTICE OR A HEARING.
Dated: October 15, 2008

ELLIOTT GREENLEAF

Rafa I . Zahalddin (DE Bar No. 4166)

Neil . Lapinski (DE Bar No. 3645)

Elliott Greenleaf
1000 West Street, Ste. 1440

Wilmington, DE, 19899

and

LAZARUS & LAZARUS, P.C. lSi Gilbert A. Lazarus, Esq.

240 Madison Avenue, 8th. Fir.

New York, NY, 10016

Attorneys for Sunham Home Fashions, LLC

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EXHIBIT A

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Sum of OrlQinal Amount

Customer No.

Consolidated Posting Invoice No. Date

10003888 10003889 10003895 10003896 10003897 10003898 10003899 10003900 10003901 10003902 10003903 10003904 10003905 10003906 10003907 10003908 10003910 10003911 10003912 10003914 10003915 10003916 10003917 10003918 10003943 10003949 10003950 10003951 10003962 10003963 10003964 10003965 10003966 10003967 10003968 10003969 10003970 10003971 10003972 10003973 10003974 10003985 10003986 10003987 10003988 10003989 10003990 10003996 10003997 10003998 10003999 10004000 10004001
6/13/2008 6/13/2008 6/13/2008 6/13/2008 6/13/2008 6/13/2008 6/13/2008 6/13/2008 6/13/2008 6/13/2008 6/13/2008 6/13/2008 6/13/2008 6/13/2008 6/13/2008 6/13/2008 6/13/2008 6/13/2008 6/13/2008 6/16/2008 6/16/2008 6/16/2008 6/16/2008 6/16/2008 6/19/2008 6/13/2008 6/13/2008 6/13/2008 6/30/2008 6/30/2008 6/30/2008 6/30/2008 6/30/2008 6/30/2008 6/30/2008 6/30/2008 6/30/2008 6/30/2008 6/30/2008 7/2/2008 7/2/2008 7/1/2008 7/1/2008 7/1/2008 7/1/2008 7/1/2008 7/1/2008 7/2/2008 7/2/2008 7/2/2008 7/2/2008 7/2/2008 7/8/2008

PO

No.

Department Code
11 11

Total

MERVYN'S

480386 482553 480468 483286 483336 483378 487300 491229 473139 480467 483285 483335 483377 487299 491228 491253 488511 486140 488509 487658 480388 482328 487659 488510 482554 483173 486141 488512 480856 487027 495658 498492 488298 488298 489667 488299 489668 495662 498494 480853 480854 480857 487028 491254 498495
483171 495659 492583 492586 492584 492587 498427 508771

2 2

2 2 2 2 2 2
2 2

2
2 2
11 11 11 11 11 11 11 11 11 11 11 11

6861.35 32455.94 5376 260.16 473.66 306.82 1614.72 17806.08 13565.95 26928 419.9 1133.95 613.63 4002.82 27866.88 12355.2 1377.98 906.65
732.11 4753.73 2003.81 738.72 3169.3 731.54 17676.43 459.82 748.25 824.73 11058.62 34848 706.77 661.27 55010.31 32244.86 14605.44 32656.32 6014.05 715.86 595.76 28083.26 14399.04 5626.18 14544 11932.8 654.22 555.84 898.58 1048.35 919.59 710.8 595.78 4277.76
5049.41
1 of 2

2
11 11

2 2

2 2 2
11 11

2 2 2 2 2
11 11 11 11 11 11 11

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Consolidated Posting Date Invoice No.
10004002 10004003 10004004 10004005 10004006 10004007 10004008 10004009 10004010
7/8/2008 7/8/2008 7/8/2008 7/8/2008 7/8/2008 7/8/2008 7/8/2008 7/8/2008 7/8/2008
PO No.

Desc

Customer No.

Department Code
2

MERVYN'S

509197 509272 509306 508886 508772 509198 509273 509307 508887

Total 7031.81

MERVYN'S Total Grand Total

9488.64 8482.56 1053.5 1728.67 2809.73 2 5948.16 2 5533.44 2 509.76 507163.27 507163.27
2 2 2 2 2

2of2

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EXHIBITB

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i

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Not Reported in B.R., 2006 WL 3791955 (Bkrtcy.D.Del.), 57 Collier Bankr.Cas.2d 475, Bankr. L. Rep. P 80,894
MQtJons/Pleadingsand Filings

United States Bankruptcy Court,

D. Delaware.
In re GLOBAL HOME PRODUCTS, LLC, et aI., Debtors. No. 06-10340 (KG).

Dec. 21, 2006.

rueGrQhsgal, l.al.LaPavisJQDeS, JamesE.Q'Neill, SandraG.M .Seller, Pachulski, Stang, Ziehl,

Young, Jones & Wein, Wilmington, DE, for Debtors.

StephenJ',I)Q.ltgty, Lyons, Doughty & Veldhuis, P.A., Wilmington, DE, for Plaintiff Fifth Third Bank.

MEMORANDUM OPINION EN i

FNL This Memorandum Opinion constitutes the findings of fact and conclusions of law required by Eed..ral Rule of Bankruptcy Procedure 7052, made applicable to contested
matters by Bankruptcy Rule 9014.

KEVIN GROSS, United States Bankruptcy Judge. *1 The matter before the Court is the Motion of Industria Mexicana del Aluminio, S.A. de C.V. for Allowance and Immediate Payment of Its Section 503(b)(9) Administrative Expense Claim ("the Motion") (D.1. 365). The Court will deny the Motion, as set forth below.

I. Background
On April 10, 2006, the debtors, Global Home Products, LLC, et al. ("Debtors"), FN2 filed individual

voluntary petitions for relief under Chapter 11 of the Bankruptcy Code.EN3 The Court ordered the cases to be jointly administered (D.1. 39). Debtors are currently operating and managing their
businesses as Debtors in Possession pursuant to 1107 and 1108. On April 27, 2006, the Official Committee of Unsecured Creditors was appointed by the United States Trustee.
EN2. Debtors comprise the following entities: Global Home Products LLC; GHP Holding Company LLC; GHP Operating Company LLC; Anchor Hocking Acquisition Inc.; AH

Acquisition Puerto Rico, Inc.; Anchor Hocking Consumer Glass Corporation; Anchor
Hocking CG Operating Company LLC; Anchor Hocking Operating Company LLC; Burnes

Acquisition Inc.; Intercraft Company; Burnes Puerto Rico, Inc.; Picture LLC; Burnes
Operating Company LLC; Mirro Acquisition Inc.; Mirro Puerto Rico, Inc.; and Mirro
Operating Company LLC.

FN3. ilU.S.C. lOtetseq. Hereinafter, references to statutory provisions by section number only are to provisions of the Bankruptcy Code, unless the context requires otherwise.
Debtors are a leading designer, marketer and manufacturer of well known, branded consumer and

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speciality products sold to retail and hospitality customers and to original equipment manufacturers. As of the Petition Date, Debtors operated three primary business divisions through its Anchor Hocking businesses ("Anchor Hocking"), WearEver businesses ("WearEver"), and Burnes Group businesses (the "Burnes Group"). Anchor Hocking produces beverageware, cookware, bakeware, home dcor items, and glass components for commercial customers. Anchor Hocking's

glassware products cross all price points through retail, specialty, business-to business, and hospitality channels. WearEver produces metal bakeware, cookware and accessories and is recognized as a leading marketer and manufacturer of multi-branded metal cookware and bakeware products
and accessories. Wearever sold metal cookware, bakeware and related accessories throughout North

America, principally in the opening and mid-tier price points through retail channels. The Burnes Group designed and sold ready-made picture frames, photo albums, scrapbooks and related home accessories.
In the course of these cases, Debtors conducted separate auctions to effectuate the sales of the

Burnes Group and the WearEver businesses. The Court entered orders approving the sales of the
businesses on May 23,2006 and August 14, 2006, respectively (D.

i. 353 and D.1. 664).

Both before and after the Petition Date, Debtors held a senior secured revolving line of credit with Wachovia Bank, N.A. C'Wachovia") pursuant to the June 22, 2004 Loan Agreement. At the commencement of these cases, Debtors owed Wachovia approximately $115 million which was secured by a lien on substantially all of Debtors' assets, including all of Debtors' stock in their domestic subsidiaries, and 65% of Debtors' stock in their foreign subsidiaries. Additionally, Debtors maintained a junior secured term loan and revolving line of credit with Madeline, LLC ("Madeline") pursuant to executing a Financing Agreement on April 13, 2004. Debtors owed Madeline

approximately $200 million and the loan was secured by a lien on substantially all of Debtors' assets.
The Court entered both interim and final orders authorizing Debtors to obtain post-petition financing from Wachovia, as the DIP Lender, and to use Madeline's cash collateraL. On May 4, 2006, the Court entered the final order on the DIP Loan Motion (the "Final Financing Order") (D.1. 184), and a final order authorizing Debtors to use cash collateral (D.1. 185). The Final Financing Order approved a

ratification and Amendment Agreement dated April 1, 2006, by and among Debtors, Wachovia and
others. Subsequently, and after the Court took the Motion under submission, the Court extended the DIP financing and use of cash collateral through approving an amendment to the Ratification

Agreement. (Order (A) Authorizing Debtors to Obtain Interim Post-Petition Financing and Grant
Security Interests and Superpriority Administrative Expense Status (B) Modifying the Automatic Stay

Authorizing Debtors to Enter Into Agreements with Wachovia Bank, National Association, as Agent
and Lenders and (D) Scheduling a Final Hearing (D.1. 45) )

*2 Industria Mexicana del Aluminio, S.A. de c.v. ("IMASA") is a creditor and a party in interest in

Debtors' bankruptcy. In the twenty days immediately preceding the Petition Date, Debtors purchased
approximately 122,986 pounds of aluminum from IMASA in the ordinary course of Debtors' business.

IMASA filed its Motion for Allowance and Immediate Payment of Its Section 503(b)(9)

Administrative Expense Claim (the "Motion") on May 25, 2006. IMASA has requested allowance of its
claims for the aluminum as an administrative expense claim in the amount of the full value of the goods and that Debtors make payment within three business days of the Court's entry of an order granting the Motion. Debtors filed an objection to the Motion on May 23, 2006, on the grounds that IMASA did not carry its burden of proving the value of such goods or that it is entitled to allowance or

payment of such claim (D.1. 452). Wachovia filed a limited objection to the Motion on June 23, 2006
(D.1. 457), alleging that without Wachovia's consent, Debtors are not authorized to make payments under the Final Financing Order or the Financing Agreement. Wachovia has not consented to such

payments.
The Motion was set for hearing on August 8, 2006. At the hearing, the parties announced that they

had resolved the issue regarding the value of the aluminum. The Court subsequently entered an
agreed upon order allowing IMASA's claim as an administrative expense in the amount of $206,322.07 (D.1. 704). The issue that remains for decision is the timing of payment of the allowed

l
i

administrative expense.

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II. Jurisdiction
This is a core proceeding which invests the Court with jurisdiction pursuant to 28 U.S.c. 157(b)
(2) (A), ( IDl-siJiCOl.

III. Parties Contentions

According to IMASA, Debtors used the aluminum to manufacture their line of cookware, bakeware, and accessories, which generated significant post-petition revenues for Debtors. IMASA argues in

support of its Motion that it would be inequitable to delay the payment of the administrative expense
claim in light of the administrative expense priority afforded to it by the recent amendments to the Bankruptcy Code.FN4 Additionally, IMASA asserts that it is entitled to adequate protection of its interest in cash collateral.
FN4. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, S. 256,

pub.L.NQ.1Q9~811i9Stat.23C20Q5) (the "2005 Act") became law on October 17,2005. The 2005 Act governs these cases.
In opposition to the Motion, Debtors contend that the Final Financing Order prohibits the payment of the claims or expenses not otherwise authorized under the DIP financing agreements or the DIP budget. Paragraph 1.2 of the Final Financing Order prohibits Debtors' use of loan proceeds for payment of claims not provided for in the financing agreements and budget without the Court's approvaL. Section 5.2 of the Ratification Agreement also restricts Debtors' use of DIP Financing proceeds to pay administrative claims. Debtors are authorized to pay only administrative claims that

are directly attributable to the operation of the business of any of Debtors in the ordinary course of
business and in accordance with the Financing Agreements, unless otherwise authorized by the Court and approved in writing by the DIP Lender. Payment of IMASA's administrative claim could therefore constitute a default under the Financing Agreements and violate the provisions of the Final Financing Order.

*3 Debtors also argue that requiring immediate payment of 503(b)(9) claims would expose
Debtors to financial risk by adversely affecting Debtors' borrowing availability. Debtors assert that

every creditor with a potential administrative claim could also request immediate allowance and payment of its claims. These payments could potentially affect Debtors ability to obtain the necessary cash to continue their day-to-day operations.
Debtors assert that there is no need to deviate from the general rule that administrative claims are

not payable until the effective date of a confirmed plan of reorganization. Debtors contend that the
statute does not require immediate payment and that it is silent on the issue of timing.

iv. Discussion
IMASA filed its Motion pursuant to 503(b)(9), which provides:

After notice and a hearing, there shall be allowed administrative expenses... including-(9) the value

of any goods received by the debtor within 20 days before the date of commencement of a case under this title in which the goods have been sold to the debtor in the ordinary course of such
debtor's business.

11 U.S.c. 503(b)(9). Section 503(b)(9) is newly created by the 2005 Act. Creditor claims of this

type are now given a second priority pursuant to 507(a)(21 of theCode. Section 503 does not
specify a time for payment of these expenses but administrative expenses must be paid in full on the effective date of the plan as provided in 1129(a)(9).FN5
t

FN5. Section 1129(a)(9) mandates that a court shall confirm a plan of reorganization only

if"... the plan provides that-(A) with respect to a claim of a kind specified in section 507

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(a)(l) or 507(a)(2) of this title, on the effective date of the plan, the holder of such claim

will receive on account of such claim cash equal to the allowed amount of such claim...."

The parties agree that when a claimant timely files a request for payment of an administrative expense under 503(a), the timing of the payment of that administrative expense claim is left to the
discretion of the Court. lnre G.cJrden RidgeCQfPQfcJtiQnl 323.R.

136Cankr.I).l)eI.2005); In re

Colortex Industries~ Inc. , ~.. F. 3d 1371, ...13~8_Li1th__CLc,J....4.; InLe.CQnt.nent.cJLAlr!Ln_e~.lnc.'.J6

B.R. 520, 531 (Bankr.D.DeI.1992). "In making this determination, 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." In re HQ Global Holdings, Inc., 282 B. R. 169

confirmation if there is a showing that the bankruptcy estate may not be able to pay all of the

(Bankr.D.Del.2002). Distributions to administrative claimants are generally disallowed prior to

administrative expenses in full. Id. Courts will also consider the particular needs of each
administrative claimant and the length and expense of the case's administration. Id. "To qualify for

exceptional immediate payment, a creditor must show that 'there is a necessity to pay and not merely that the Debtor has the ability to pay.''' In re._ContjnentaLAidLnesJn.~ 146 B.R. at 531
(quoting In re Ionosphere Clubs, Inc., 98 B.R. 174,179-79 (Bankr.S.D.N.Y.1989)); See also Alan N. Resnick, The Future of Chapter 11: A Symposium Cosponsored by the American College of Bankruptcy: The FJlture of the DotrLn.Qff'e.e.ssjIYslf/gQitlcJLlIgndQcPcJy.fJents.iJ(;hapter.l1

Cases, 47 B.C.L. Rev 183, 204-205 (2005) (Section 503(b)(9) "is a rule of priority, rather than
payment." The new section does not specify when payment will be made. "Arguably, prepetition

vendor claims are never payable in the ordinary course of business because of the intervening
bankruptcy and the automatic stay, even if afforded administrative expense priority.").

*4 In In re Garden Ridge Corp., this Court considered three factors in determining how to exercise
its discretion on the timing of payment of an administrative expense claim, viz., (1) the prejudice to

the debtors, (2) hardship to claimant, and (3) potential detriment to other creditors. In re Garden
RidgeCQrp..,323.....R.........at.....143.

a. Prejudice to Debtors
During the course of the August 8th hearing, Debtors presented the testimony of Mr. Ronald F.

Stengel, the Chief Restructuring Officer of Debtors. Mr. Stengel testified that: (1) the payment of
5.03(l claims would adversely effect Debtors' borrowing ability under the DIP Financing

Agreement because the aggregate 503(b)(9) claims far exceed the company's availability to

borrow, (2) that Debtors did not then have funds available to make payments for administrative claims, (3) Debtors' availability under the current financing arrangement was approximately $1. 7
million and those funds were needed to provide for continuing operations, including current operating costs, payroll, purchase of inventory, etc., and (4) as of the hearing date there were nine other 503

D: claims seeking in the aggregate approximately $2.1 million in Debtors' bankruptcy cases, and
others were expected to be filed in the future.FN6 Mr. Stengel opined that if Debtors had to pay the

administrative claims immediately and in full, their reorganization efforts would collapse.
Furthermore, Mr. Stengel testified that under Section 1.2 of the DIP Financing Order, Debtors are precluded from using any proceeds of any loans to pay claims or expenses that are not included in Debtors' budget without the consent of Wachovia. Mr. Stengel testified that he did not know whether or not Wachovia had given its consent to such expenditures and 502(b)(9) administrative claims were not included in Debtors' budget. Therefore, the uncontroverted testimony is that Debtors would

be prejudiced if the Court were to grant the motions for administrative expense claims.
~"

FN6. The docket reflects that more than twenty creditors have filed motions seeking immediate payment of administrative claims.

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b. Hardship to Claimant
IMASA claims that the prejudice or hardship to them from non-payment of the administrative expense claim is self-evident. IMASA contends that it has been singled out of a class of claimants that have been given priority under the Code because Debtors are denying payment to IMASA until confirmation of a plan. IMASA did not present testimony to support its claim of prejudice, instead relying on various documents filed in Debtors' bankruptcy cases of which this Court took judicial notice. At the hearing on the Motion, the Court asked IMASA what evidence was before the Court of hardship to IMASA of later payment. IMASA responded:
The only evidence I would submit, Your Honor, is sort of the self-evident hardship. That we're discriminating between five-o-between 503(b) claimants. That is to say, some of them are going to be paid now, and others are being deferred.

(Hearing Transcript, 26, August 8, 2006).

*5 The discrimination in payment to which IMASA refers is Debtors' payment of the pre-petition claims of certain critical vendors, which Debtors were entitled to make pursuant to the Order Authorizing, But Not Requiring the Payment of Prepetition Claims of Critical Trade Vendors ("Critical Vendor Order") (D.1. 42). The Critical Vendor Order enabled Debtors to obtain favorable trade terms from those vendors whose products Debtors needed to be able to reorganize. The decision on which

vendors are critical to Debtors' reorganized was left to Debtors' business judgment.
Debtors argue however, that the case law in this area does not focus on the alleged discrimination between post-petition trade creditors and pre-petition creditors, rather, it focuses on the individual

hardship to the individual claimant. Debtors point out that there is no evidence that immediate
payment is necessary to keep IMASA in business. According to IMASA's web site, they produce in excess of 70 million pounds of aluminum each year with company sales in excess of $400 million.

v. Decision
Debtors presented the testimony of Mr. Stengel which the Court found to be credible and

decisively relevant to the issue of the relative hardships to the parties. In balancing these hardships,
the Court finds that IMASA will suffer little prejudice or hardship if payment of its allowed

administrative claim is deferred until after confirmation of a plan. Conversely, given the tenuous
financial position of Debtors and the requirements of the DIP Financing Agreement, Debtors will suffer a substantial hardship if immediate payment on IMASA's 53Cb)C9J claim is allowed at this time in Debtors' reorganization efforts. Accordingly, the Court has determined that the proper exercise of discretion requires the Court to deny the motion. The prejudice to Debtors of requiring immediate payment far outweighs the prejudice, if any, to IMASA and Debtors' other creditors are benefitted by

the ruling to the extent that by denying immediate payment, the Court preserves a later equitable distribution to other administrative claimants.

VI. Conclusion
Based upon the forgoing, the Motion of Industria Mexicana del Aluminio, S.A. de C.V. for Allowance and Immediate Payment of Its Section 503.(blC91 Administrative Expense Claim will be DENIED to the extent that the Motion seeks immediate payment of the administrative expense claim.

An appropriate order follows.

Bkrtcy. D.Del.,2006. In re Global Home Products, LLC
t-

Not Reported in B.R., 2006 WL 3791955 (Bkrtcy.D.Del.), 57 Collier Bankr.Cas.2d 475, Bankr. L. Rep. P 80,894

http://web2.westlaw.com/result/documenttext.aspx?findjuris=0000 1 &sv=Split&service=... 10/15/2008

Case 08-11586-KG

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UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE

In re:
Chapter 11

MERVYN'S HOLDINGS, LLC, et aLl,

Debtors.

Case No. 08-11586 (KG) (Jointly Administered)

Re: Docket No.

ORDER

Upon consideration of the Motion of Sunham Home Fashions, LLC for

Allowance and Payment of its Administrative Claim Pursuant to 11 U.S.C. Sections
503(b)(9) and 507(a)(2) (the "Motion") and the Court finding that: i) it has jurisdiction to

consider the Motion and the relief requested therein pursuant to 28 U.S.C. 157 and

1334, and ii) the Motion and the relief requested is a core proceeding pursuant to 28
U.S.C. 157(b)(2), and iii) venue is proper before the Court pursuant to 28 U.S.c.
1408 and 1409, and iv) due and proper notice of the Motion was provided, and it

appearing that no other or further notice need be provided; and the Court having

determined that the relief sought in the Motion is in the best interest of the Debtors, their

creditors and all parties in interest; and the Court having determined that the legal and
factual basis set forth in the Motion establish just cause for the relief granted herein; and

upon consideration of any and all responses and proceedings before the Court, and after
due deliberation and suffcient cause appearing therefore, it is
ORDERED that the Motion is GRANTED; and it is further

r
i The Debtors in this case, along with the last four digits of of

their federal tax identification numbers for each the Debtors, are Mervn's Holdings, LLC (7931), Mervn's LLC (4456) and Mervn's Brands (8850).

Case 08-11586-KG

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ORDERED that the administrative expense claim ("Administrative Claim") of

Sunham Home Fashions, LLC ("Sunham") is allowed under 503(b)(9) and 507(a)(2)
of

the Bankruptcy Code in the amount at least $507,163.27; and it is further

ORDERED that an immediate payment of the $507,163.27 be made by the

Debtors to Sunham; and it is further ORDERED that all capitalized terms not defined herein should have meanings

ascribed to them in the Motion; and it is further

ORDERED that this Court shall retain jurisdiction to hear and determine all
matters arising from or related to the implementation or interpretation of this Order.

DATED: ,2008
Wilmington, DE
Kevin Gross

United States Banuptcy Judge