In Re Carbone Companies, Inc.

395 B.R. 631 (2008)

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Nature of the Case

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Facts

P is in the construction business. P has 13 ongoing projects and an additional six projects that are pending startup. Its main clients are the Ohio School Facilities Commission (OSFC) and McTech Corporation (McTech). On August 1, 2004, P obtained a loan from the Bank pursuant to a credit agreement for $15,000,000. Bank received a security interest in all accounts, inventory, equipment, general intangibles, investment property, negotiable instruments, personal property, and other assets. The Bank perfected its security interest with its filing of a financing statement on August 3, 2004, and a subsequently amended financing statement on April 22, 2008. P defaulted on June 17, 2008. P and the Bank negotiated but the Bank ceased negotiations and swept Ps’ accounts. Ps were unable to pay their operating expenses, including payroll and taxes. Bank obtained a judgment in the amount of $ 14,981,440, with default interest of $304,623.02, late charges of $749,072.03, and interest of $ 4,993.82 per day after July 31, 2008. On September 3, 2008, Bank notified P in writing that it was executing its Judgment. P filed Chapter 11. The issue is whether the Debtors have satisfied the required elements for use of cash collateral under § 363(c)(2)(B) of the Bankruptcy Code. P seeks a final order authorizing their use of cash collateral in order to continue their business operations as a DIP. The present motion requests final court approval for continued use of cash collateral under § 363(c)(2)(B) since the Bank has refused consent to continued use of its cash collateral. The Bank claims that it is not adequately protected that P was maintaining an inadequate cash management system, that P’s budgets were excessive, and that P made improper transfers to insiders and affiliates.