TIMOTHY J. YOO (SBN 155531) EVE H. KARASIK (SBN …omnimgt.com/cmsvol2/pub_47201/640110_146.pdf1 2 3...

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TIMOTHY J. YOO (SBN 155531) EVE H. KARASIK (SBN 155356) JULIET Y. OH (SBN 211414) LEVENE, NEALE, BENDER, YOO & BRILL L.L.P. 10250 Constellation Boulevard, Suite 1700 Los Angeles, California 90067 Telephone: (310) 229-1234; Facsimile: (310) 229-1244 Email: [email protected], [email protected], [email protected] Attorneys for Chapter 11 Debtor and Debtor in Possession

UNITED STATES BANKRUPTCY COURT

CENTRAL DISTRICT OF CALIFORNIA

LOS ANGELES DIVISION

In re CORNERSTONE APPAREL, INC. Debtor.

))))))))))))))))))))))))))

Case No. 2:17-bk-17292-VZ

Chapter 11 DEBTOR’S REPLY TO OMNIBUS OPPOSITION OF THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS TO THE (I) MOTION FOR ORDER EXTENDING THE DEBTOR’S EXCLUSIVITY PERIODS TO FILE PLAN OF REORGANIZATION AND OBTAIN ACCEPTANCES THEREOF; AND (II) MOTION BY THE DEBTOR TO EXTEND TIME TO ASSUME OR REJECT NONRESIDENTIAL REAL PROPERTY LEASES; DECLARATIONS OF TAE Y. YI AND EVE H. KARASIK IN SUPPORT THEREOF

Hearing: Date: September 19, 2017 Time: 11:00 a.m. Courtroom: 1368 Location: 255 E. Temple Street Los Angeles, California

)

Case 2:17-bk-17292-VZ Doc 146 Filed 09/12/17 Entered 09/12/17 16:30:10 Desc Main Document of 60

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TABLE OF CONTENTS

A. The Debtor Has Made Meaningful Progress Towards Confirmation Of A Chapter 11 Plan Of Reorganization ........................................................................... 2 B. The Debtor Has Expended Significant Efforts To Respond To Requests For

Information From, And To Engage With, The Committee And Its Professionals ................................................................................................................. 4 C. The Committee’s Proposal To Limit the Extension Of The Section 365(d)(4) Period To 30 Days Calls Into Question Which Constituency the

Committee Represents ................................................................................................. 8 D. Many Of The Issues Raised in the Opposition Are Confusing or Created by the Committee’s Own Actions ............................................................................... 9 E. An Application Of The Dow Corning Factors To The Facts Of This Case Clearly Demonstrates That There Is Cause To Extend The Debtor’s Exclusivity Periods ....................................................................................................... 10

1. The size and complexity of the case ................................................................ 11 2. The necessity of sufficient time to permit the debtor to negotiate a plan of reorganization and prepare adequate information .......................... 11 3. The existence of good faith progress toward reorganization ....................... 13 4. The fact that the debtor is paying its bills as they become due .................... 14 5. Whether the debtor has demonstrated reasonable prospects for filing a viable plan ...................................................................................................... 14 6. Whether the debtor has made progress in negotiations with its creditors ............................................................................................................. 15 7. The amount of time which has elapsed in the case ........................................ 16 8. Whether the debtor is seeking an extension of exclusivity in order to

pressure creditors to submit to the debtor’s reorganization demands ....... 16 9. Whether an unresolved contingency exists .................................................... 17

F. The Debtor Has Satisfied Its Burden Of Establishing Cause To Extend The Section 365(d)(4) Period ............................................................................................... 18


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TABLE OF AUTHORITIES

Page(s) FEDERAL CASES

In re Dow Corning Corp. 208 B.R. 661 (Bankr. E.D. Mich. 1997) ..................................................................... 10, 11, 18

In re Ernst Home Center, Inc. 221 B.R. 243 (9th Cir. B.A.P. 1998) ....................................................................................... 18

In re Wedtech Corporation 72 B.R. 464 (Bankr. S.D.N.Y. 1987) ...................................................................................... 18

FEDERAL STATUTES

11 U.S.C. § 341(a) ........................................................................................................................... 7

11 U.S.C. § 365(d)(4) ............................................................................................................. passim

11 U.S.C. § 365(d) ........................................................................................................................ 18


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Cornerstone Apparel, Inc. d/b/a Papaya Clothing, a California corporation and the debtor

and debtor-in-possession in the above-captioned Chapter 11 bankruptcy case (the “Debtor”),

hereby submits this reply (the “Reply”) to the Omnibus Opposition Of The Official Committee

Of Unsecured Creditors To The (i) Motion For Order Extending The Debtor’s Exclusivity

Periods To File Plan Of Reorganization And Obtain Acceptances Thereof; And (ii) Motion By

The Debtor To Extend Time To Assume Or Reject Nonresidential Real Property Leases [Doc.

No. 139] (the “Opposition”) filed by the Official Committee of Unsecured Creditors appointed

in the Debtor’s case (the “Committee”). The Reply is supported by the Declaration of Tae Y. Yi

(the “Yi Declaration”) and the Declaration of Eve H. Karasik (the “Karasik Declaration”)

annexed hereto.

For the reasons set forth below, the Motion For Order Extending Debtor’s Exclusive

Periods To File Plan Of Reorganization And Obtain Acceptances Thereof [Doc. No. 128] and

the Motion By Debtor To Extend Time To Assume Or Reject Nonresidential Real Property

Leases [Doc. No. 129] (together, the “Motions”) should be granted because the Debtor has

established the requisite cause for the relief requested in the Motions. The Opposition,

supported only by a declaration of a representative of the Committee’s financial advisor, and not

by a declaration of any member of the Committee, does not alter the determination that cause

has been established and should therefore be overruled. It should be noted that no individual

creditor, landlord, or any other party in interest in the Debtor’s case has objected to the relief

requested in the Motions.

A. The Debtor Has Made Meaningful Progress Towards Confirmation Of A Chapter

11 Plan Of Reorganization.

The Committee objects to the Motions on the alleged grounds that the Debtor has not

made sufficient progress towards confirming a Chapter 11 plan of reorganization (a “Plan”). To

the contrary, however, the Debtor has made significant progress towards the confirmation of a

Plan. The Debtor’s case was filed on June 15, 2017 (the “Petition Date”), only three months

ago. At the first day hearing in the Debtor’s case, counsel for the Debtor advised that lease

negotiations needed to proceed so that the Debtor could evaluate its retail store portfolio and


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negotiate lease concessions with landlords, and that when the final store portfolio was

determined, the Debtor would be in a position to propose a Plan. At the Chapter 11 case status

conference in the Debtor’s case, the Debtor advised the Court that, while progress had been

made, additional time was required to complete the Debtor’s ongoing negotiations with the

landlords. As noted in the Motions, significant progress has been made in this regard.

Of the Debtor’s 78 remaining retail store leases, the Debtor has successfully negotiated

amendments with favorable rent concessions for 21 leases, which leases the Debtor anticipates

assuming (subject to such amendments). The Debtor has determined that it will be seeking to

assume an additional 9 leases (as is). Further, the Debtor has determined that it will be seeking

to reject 21 leases. Based on the foregoing, there are 27 remaining retail store leases that the

Debtor is still working on with its landlords. The Debtor has made determinations on nearly

two-thirds of its store portfolio and needs additional time to evaluate whether the remaining 27

leases can be modified to become profitable stores. There has been no “stonewalling” of the

Committee here; rather the Debtor has engaged in the usual process that a retail debtor engages

in in a Chapter 11 bankruptcy case, and has been successful in those efforts in a relatively short

period of time.

Further, while the Debtor has requested extensions of its exclusive periods to file a Plan

and solicit acceptances of a Plan out of an abundance of caution, the Debtor is expending all

efforts to file its Plan by October 13, 2017.1 Given the tenor of the Committee’s Opposition, it

is clear now that the Debtor and the Committee will not be able to work jointly on projections

for a Plan with the Committee’s financial advisor. With the Committee keen on commencing a

competing plan process even though the Debtor’s initial exclusivity periods have not yet expired

– “[t]he Committee must have the opportunity to propose its own plan and to solicit votes for its

plan without unjustifiable delay” – the Debtor has engaged its own financial advisor, Sierra

1 In the Debtor’s Chapter 11 Case Status Report [Doc. No. 140], the Debtor has proposed that the

Court schedule a disclosure statement approval hearing in December, 2017. The Debtor’s proposed schedule will require the Debtor to file the Plan and solicit acceptances thereof within the requested extended exclusivity periods.


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Constellation (“Sierra”), subject to Court approval, who will assist the Debtor on the preparation

of a confirmable Plan. See Opposition, p. 15, lines 17-18.

The Debtor has offered to the Committee to reduce its request to extend the Debtor’s

Plan filing and solicitation exclusivity periods from 90 days to 60 days. The Debtor believes it

makes no sense, particularly from the perspective of the Debtor’s unsecured creditors, not to

extend the Section 365(d)(4) Period. If the Section 365(d)(4) Period is not extended as

requested by the Debtor in its Motion, the likely result will be the premature filing of motions to

assume the Debtor’s retail store leases and an increase in potential administrative claims. The

Committee has not agreed to this proposed resolution as of the date of the filing of this reply.

B. The Debtor Has Expended Significant Efforts To Respond To Requests For

Information From, And To Engage With, The Committee And Its Professionals.

The Committee’s key complaint in the Opposition is that the Debtor has purportedly

been “stonewalling” the Committee and its professionals. This is far from the truth. The Debtor

has expended significant efforts to respond to numerous requests for information from, and to

inform and engage with, the Committee and its professionals. The Debtor has provided the

Committee with volumes of data and information, i.e., enough data and information for the

Committee’s financial advisor, Province, Inc. (“Province”) to create its own financial model that

it has deemed sufficient to share with the Committee. The Debtor has provided both hard copy

and electronic versions of the data and information requested by the Committee and Province.

Indeed, the Debtor is not aware of any pending data request that has not been satisfied by the

Debtor. The Debtor’s management also met in person with Province to review and discuss the

data that was provided by the Debtor to the Committee and had further discussions regarding

such data by telephone. Further, Province requested that the Debtor provide it with biweekly

reports in addition to the monthly operating reports filed by the Debtor with the Court, and the

Debtor agreed and have been providing such biweekly reports to Province as requested.2 To

2 The current biweekly report may have been delayed as the Debtor is preparing its monthly

operating report for August 2017, and would like to involve Sierra (its proposed new financial advisor) in all reporting efforts.


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date, the Debtor has provided all of the foregoing information to the Committee and its

professionals without the assistance of its own financial advisor. Rather than be criticized, the

Committee should be appreciative of the efforts by the Debtor to date.

The Debtor commenced this case with the belief that it could reduce professional fees by

not hiring its own financial advisor and/or an expensive lease negotiation agent. The Debtor has

sophisticated management with the requisite financial expertise to operate its business. The

Debtor prepared its own Schedules of Assets and Liabilities and Statement of Financial Affairs,

and prepared its monthly operating reports to date without the assistance of a financial advisor.

Further, the Debtor has made significant progress on its negotiations with landlords and its

evaluation of the retail store leases without the expense of yet another professional. The Debtor

was also hopeful that the Committee and the Debtor could work cooperatively in this case and

jointly utilize the services of the Committee’s financial advisor, Province.

Unfortunately, given the Committee’s Opposition to the Motions and current stance in

this case, the Debtor believes it has no choice other than to retain its own financial advisor, at a

further administrative expense to the Debtor’s estate. The Committee complains that the Debtor

has not timely provided information to the Committee, uses Quickbooks (which is apparently

unsatisfactory to the Committee), has not created its own financial models, and has committed a

host of other perceived deficiencies. Given these complaints and the clear message in the

Opposition that the Committee intends to file a competing plan of some sort, the Debtor has

now engaged Sierra as its financial advisor, subject to the approval of the Court. Sierra has

jumped into the case, has reviewed the model prepared by Province, and will review and work

from that model in an effort to conserve costs. However, the Committee has now succeeded in

increasing the administrative costs of the Debtor’s estate.

Further, the Debtor has attempted to engage the Committee in certain decisions

regarding the disposition of certain real property leases. Counsel for the Debtor prepared a

detailed email regarding the proposed assumption of several retail store leases and sent such

email to counsel for the Committee on two separate occasions. A true and correct copy of the

email is attached as Exhibit “A” to the Karasik Declaration annexed hereto. The Committee


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has not advised whether it supports or opposes the proposed assumption of the specified retail

store leases as set forth in the emails.

Notwithstanding the Committee’s statements to the contrary in the Opposition, the

Debtor has made no secret about its anticipated exit strategy or the basis for the proposed terms

of a Plan in this case. The Debtor has disclosed its exit strategy from the outset of this case.

The Debtor told the Court and the Committee on several occasions that the Debtor intends to file

a “true” reorganization Plan, and that the details of such Plan depends on the ultimate size of the

Debtor’s retail store portfolio. A Plan for a chain of 78 stores will look very different from a

Plan for a chain of 40 stores. For example, if the chain is significantly smaller, then the total

amount of general unsecured claims against that will need to be addressed in the Plan will

increase due to additional lease rejection damage claims. Whether and how much of an equity

infusion is needed, and the term and aggregate amount of the payout to creditors, are also driven

by the makeup of the retail store portfolio.

The Committee suggests that the Debtor should have expended efforts to create

alternative models for a Plan. While the Debtor is aware that there is significant cash in the

Debtor’s estate and no secured creditor, the Debtor is not eager to direct its professionals or

management to engage in projects that have limited or minimal benefits. The Debtor believes it

makes no sense whatsoever to model Plan projections when there is no certainty regarding the

store portfolio upon which the Plan will be based. All this would result in are the expenditure of

management time which could be better used to operate and improve the business and the

increase in administrative fees incurred by estate professionals to assist in the creation and

review of multiple scenarios, with little or no corresponding benefit to the Debtor or its

creditors.

The Committee also asserts that there are significant discrepancies in the financial

information provided by the Debtor to Province regarding all of the Debtor’s retail stores and

the financial information provided by the Debtor to Simon Properties (“Simon”), which is the

landlord for 36 of the Debtor’s retail store leases and the co-Chair of the Committee, for the

Simon stores. The Debtor provided Simon with profit and loss analyses for each of the Simon


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stores prior to the Petition Date. The analyses provided to Simon included allocations for

general and administrative expenses (“G&A Expenses”) for each of the Simon stores. The

profit and loss analyses that were provided to Province included a separate column labeled

“Main” that included aggregate numbers for G&A Expenses rather than allocations of the G&A

Expenses among the individual stores. Indeed, when the purported “discrepancy” in the

financial data was explained to Province in a meeting between Province and Sierra, Province

was not surprised. There was no meaningful discrepancy between the two sets of data. In short,

there is nothing nefarious here – the alleged “discrepancies” identified by the Committee are not

discrepancies at all, but are a result of two different methods of presenting the same financial

data.

At one point during the Debtor’s case, two meetings were scheduled between the Debtor

and Simon (in its capacity as the Debtor’s landlord, and not as a representative of the

Committee) to continue lease negotiations and to discuss the perceived discrepancy in the

financial information provided by the Debtor to Simon and Province. These were meetings

between the Debtor and Simon; not between the Debtor and the Committee. The Committee

complains in its Opposition that Province was not permitted to participate at these meetings.

However, this begs the question – why would the Committee’s financial advisor participate in a

meeting between the Debtor and its landlord? Province had not been a participant in the

Debtor’s discussions with any other landlord. The Debtor has serious concerns that Province

may be wearing two hats in this case.

Finally, the Committee alleges that the Debtor was not forthright with respect to the five

(5) stores operated as Papaya stores but owned by other non-Debtor entities. This ownership

structure has never been a secret. It was disclosed in the Debtor’s reply to the limited opposition

filed by the United States Trustee (the “UST”) to certain of the Debtor’s first day motions, a true

and correct copy of which reply is attached as Exhibit “B” to the Karasik Declaration annexed

hereto. The ownership and operation of the five (5) Papaya stores by such non-Debtor entities

were also discussed in detail at the Debtor’s Section 341(a) meeting of creditors, in which

Committee counsel participated. The Debtor’s Statement of Financial Affairs further discloses


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the intercompany transfers between the Debtor and the foregoing non-Debtor entities as the

Debtor regularly transfers inventory to the non-Debtor entities’ stores and the non-Debtor

entities regularly send funds to the Debtors to pay for such inventory. The Debtor has openly

disclosed and discussed the ownership and operation of the five (5) Papaya stores by the

foregoing non-Debtor entities. Thus, the Committee’s suggestion that the Debtor has not been

transparent about such entities is both inaccurate and misleading.

C. The Committee’s Proposal To Limit the Extension Of The Section 365(d)(4) Period

To 30 Days Calls Into Question Which Constituency the Committee Represents.

The Opposition calls into question which constituency the Committee is actually

representing in the Debtor’s case. The Debtor cannot understand why the Committee, which is

supposed to represent the interests of general unsecured creditors as a whole (and not just

landlords, for example) would oppose an extension of the Section 365(d)(4) Period as requested

by the Debtor in its Motion. Does the Committee understand that, if the Section 365(d)(4)

Period is not extended, the Debtor will potentially be forced to prematurely assume certain store

leases, creating unnecessary and potentially substantial administrative expense claims in the

event issues later arise with certain landlords or in the event that unforeseen events occur with

respect to Plan confirmation?

The proposal by the Committee in its Opposition to limit the extension of the Section

365(d)(4) Period to 30 days makes no sense. Even if the Debtor were to file a plan by October

13, 2017, it would still need to extend the Section 365(d)(4) Period in order to obtain approval

of a disclosure statement (which requires 42-days’ notice under the Local Bankruptcy Rules for

this District), and then solicit and obtain acceptances of the Plan. While the 90-day extension

requested in the Motion may not get the Debtor all the way to Plan confirmation, it will get the

Debtor to January 2018, at which time the Debtor will likely be on the eve of Plan confirmation.

At that point, the Debtor will have much more information and certainty as to the likelihood of

Plan confirmation and the corresponding risk of creating administrative expense claims from the

assumption of its retail store leases. It is striking that not one individual landlord has objected to

the Debtor’s request to extend the Section 365(d)(4) Period.


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D. Many Of The Issues Raised in the Opposition Are Confusing or Created by the

Committee’s Own Actions .

The Opposition is perplexing in many other respects. The Committee complains that the

Debtor has only reached out to landlords for concessions, but has not reached out to vendors,

factors, or wage and hour claimants. As to vendors and factors,3 what does the Committee

expect the Debtor to do – ask the vendors and factors to reduce their claims from the outset?4

The alleged wage and hour claimants have, at best, litigation claims, which are disputed by the

Debtor. Again, what would the Committee like for the Debtor to do with these claimants at this

stage of the case – ask such claimants to waive their claims (which is most likely an exercise in

futility) or agree to pay their disputed claims? To the extent the Committee requires concessions

from the non-landlord members of its constituency, the Committee is in the ideal position to

suggest what concessions would be appropriate contributions from general unsecured creditors.

Inexplicably, the Opposition also states that “the Debtor must have a plan of

reorganization for it to seek concessions it wants from landlords.” See Opposition, page 11,

lines 12-13. Isn’t this putting the cart before the horse? The lease concessions obtained by the

Debtor from its landlords will ultimately drive the Plan. The landlords in the Debtor’s case

know this as they are involved in numerous retail cases throughout the country. This is why the

Debtor has already received concessions and lease modifications from many of its landlords.

Finally, the Committee itself has contributed to the need for an extension of the Debtor’s

exclusivity periods. A key element to determining claim treatment under a Plan is knowledge of

the claims asserted against the Debtor. Indeed, disclosure statements should include data

regarding the claims asserted against the Debtor in various Plan classes as well as unclassified

claims. Accordingly, the Debtor filed a motion requesting that the Court establish a claims bar

3 The factors do not factor the Debtor’s receivables in the traditional sense; rather the factors

acquire vendor receivables due from the Debtor.

4 The Debtor has engaged with Prime Business Credit, a vendor factor that filed a proof of claim in an amount much less than the scheduled amount. Despite the fact that Prime Business Credit should be tasked with contacting the vendors from whom it acquired its claims for the invoices to resolve the inconsistency in the claim amounts, the Debtor is working to provide the requested information to Prime Business Credit.


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date at the end of August 2017 so that the Debtor would have time to evaluate claims prior to

the expiration of its plan filing exclusivity period. In response, the Committee asked that a 90-

day claims bar date be set such that the claims bar date would pass after the Debtor’s plan filing

exclusivity period had already expired. As a compromise, the Debtor agreed to request that the

claims bar date be set for September 30, 2017, which is only 13 days prior to expiration of the

Debtor’s Plan filing exclusivity period (unless extended). Thirteen (13) days is a very limited

time within which to evaluate filed proofs of claim, particularly in a case like the Debtor’s case

where there are over 400 scheduled claims and potentially many more filed claims, for purposes

of developing a Plan. The proximity of the claims bar date to October 13, 2017 (on which the

Debtor’s plan filing exclusivity period will expire), which is a direct result of the Committee’s

request, further supports an extension of the Debtor’s exclusivity periods.

E. An Application Of The Dow Corning Factors To The Facts Of This Case Clearly

Demonstrates That There Is Cause To Extend The Debtor’s Exclusivity Periods.

In its Opposition, the Committee notes that “[m]ost bankruptcy courts have adopted the

following Dow Corning factors to determine ‘cause’ [to extend exclusivity]:

1. the size and complexity of the case;

2. the necessity of sufficient time to permit the debtor to negotiate a plan of

reorganization and prepare adequate information;

3. the existence of good faith progress toward reorganization;

4. the fact that the debtor is paying its bills as they become due;

5. whether the debtor has demonstrated reasonable prospects for filing a viable

plan;

6. whether the debtor has made progress in negotiations with its creditors;

7. the amount of time which has elapsed in the case;

8. whether the debtor is seeking an extension of exclusivity in order to pressure

creditors to submit to the debtor’s reorganization demands; and

9. whether an unresolved contingency exists.”

See, Opposition, p. 8, lines 10-27 (citing In re Dow Corning Corp., 208 B.R. 661, 664-65


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(Bankr. E.D. Mich. 1997)).

The Committee concludes in its Opposition that six of the foregoing nine Dow Corning

factors weigh against an extension of the Debtor’s exclusivity periods. As discussed in detail

below, the Debtor strongly disagrees with the Committee’s conclusion and submits that an

objective evaluation of the circumstances of this case demonstrates that virtually all of the Dow

Corning factors weigh in favor of an extension of the Debtor’s exclusivity periods.

Accordingly, “cause” exists to extend the Debtor’s exclusivity periods as requested in the

Debtor’s Motion.

1. The size and complexity of the case.

The Committee concludes in its Opposition that the Debtor’s case is “neither large nor

complex” without any explanation or analysis. The Committee fails to indicate the guideline

against which the Debtor’s case is being (or should be) measured to determine whether the

Debtor’s case is sufficiently “large” or “complex” to support an extension of exclusivity.

As of the Petition Date, the Debtor was operating over eighty (80) retail stores located in

malls and shopping centers in sixteen (16) different states within the United States. As of the

Petition Date, the Debtor employed a workforce of approximately 1,300 individual employees.

In 2016, the Debtor generated annual gross revenues of more than $134 million. The Debtor

estimates that it has more than 400 creditors. Given the size and geographical spread of the

Debtor’s business operations, and the large number of employees, landlords, and vendors with

whom the Debtor interacts on a regular basis, the Debtor’s case is, by any measure, both large

and complex.

Based on the foregoing, the Debtor respectfully submits that this factor weighs in favor

of an extension of the Debtor’s exclusivity periods.

2. The necessity of sufficient time to permit the debtor to negotiate a plan of

reorganization and prepare adequate information.

The Committee appears to concede that this factor weighs in favor of an extension of the

Debtor’s exclusivity periods as the Opposition excludes any discussion of this factor. Even if

the Committee does not concede the foregoing, an objective evaluation of the facts and


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circumstances of the Debtor’s case reflects that the Debtor has not had sufficient time to permit

the Debtor to negotiate a Plan and prepare adequate information in connection with such Plan.

The Debtor filed its bankruptcy case three (3) months ago. Since then, the Debtor has

performed detailed analyses (both on store-by-store and consolidated bases) of all of its retail

stores to determine which of the stores are profitable (or potentially profitable if rent

concessions can be successfully negotiated) and which of the stores are not profitable and

therefore must be closed on an expeditious basis, which analyses have been shared with the

Committee as well as the Debtor’s numerous landlords. In addition, since the Petition Date, the

Debtor has engaged in (often extensive) negotiations with many of its landlords to try to obtain

rent concessions, which would reduce rent to a level that would render currently

underperforming retail stores profitable.

As a result of the Debtor’s efforts during the three-month period following the Petition

Date, the Debtor has successfully negotiated amendments of 21 of its remaining retail store

leases, has determined that it will be assuming the leases for nine (9) of its remaining retail

stores without any amendment, and has determined that it will be rejecting the leases for 21 of

its remaining retail store leases. As noted by the Committee in its Opposition, this leaves the

Debtor with a total of 27 retail store leases, which require further evaluation and/or negotiation.

While the Committee appears to focus on these remaining 27 retail store leases as the

basis for not affording the Debtor an extension of its exclusivity periods, it is precisely because

of the Debtor’s diligent efforts during the past three months that the Debtor has only 27 retail

store leases left to evaluate and negotiate. Contrary to the Committee’s suggestion otherwise,

the Debtor has not been sitting idly by during the three months that the Debtor’s bankruptcy

case has been pending. The Debtor has spent that time doing exactly what the Debtor indicated

at the outset of this case that it would be doing during the early stages of this case – i.e.,

evaluating the Debtor’s store portfolio and negotiating with the Debtor’s landlords to obtain rent

concessions and modifications as necessary.

The details of any feasible plan of reorganization in this case will hinge on the number of

retail store locations which will continue to be operated going forward since that will dictate,


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among other things, (i) the amount of lease rejection damage claims that will need to be

accounted for in the plan of reorganization, (ii) the amount of revenue anticipated to be

generated from operations going forward, (iii) the level of operating expenses (e.g., rent,

utilities, payroll, inventory purchases, etc.) anticipated to be incurred in connection with

operations going forward, and (iv) the profit estimated to be generated from operations going

forward and the amount ultimately available to make distributions to creditors under the plan of

reorganization. As a result, the Debtor’s evaluation and negotiation of the lease terms for its

retail stores are a necessary and critical first step before the Debtor can be in a position to

formulate the terms of a feasible plan of reorganization and prepare accurate projections in

support of such a plan.

Based on the foregoing, there is no question that the Debtor has had insufficient time to

negotiate a plan of organization and prepare adequate information in connection with such plan.

Accordingly, this factor weighs in favor of an extension of the Debtor’s exclusivity periods.

3. The existence of good faith progress toward reorganization.

As noted above, during the three-month period following the Petition Date, the Debtor

has succeeded in making determinations on nearly two-thirds of its store portfolio. As a result,

at this point in the case, the Debtor has only 27 retail stores leases left to evaluate and negotiate.

The Committee’s accusations of the Debtor’s “inactions” in this case are unfounded and are not

supported by any credible evidence.

Although the Committee contends that there has been a “lack of meaningful

transparency from the Debtor” and that the Committee’s requests for information concerning the

Debtor’s exit strategy have been ignored, nothing could be further from the truth. As discussed

at length above, there has been no stonewalling by the Debtor here; rather, the Debtor has

expended significant efforts to inform and engage the Committee. The Debtor has provided the

Committee and its professionals with volumes of data and information in response to numerous

requests from the Committee. Indeed, the Debtor is not aware of any pending data request that

has not been satisfied by the Debtor (and the Committee provides no specific example in its

Opposition about a request for information that has purportedly been ignored by the Debtor).


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The Debtor’s management has conferred with the Committee’s financial advisor (in person and

by telephone) and has provided the Committee with biweekly reports in addition to the monthly

operating reports filed with the Court. Further, the Debtor has attempted to engage the

Committee in certain decisions regarding the disposition of leases (an issue that the Debtor has

repeatedly stated is a critical issue in this case), with no response from the Committee and its

professionals. Finally, and more significantly, the Debtor has kept no secrets regarding its exit

strategy and the potential terms of a plan of reorganization in this case. The Debtor has

represented to this Court and the Committee, on several occasions, that the Debtor intends to file

a true plan of reorganization centered around a core group of retail stores, and that the details of

such plan depends on the ultimate size of its store portfolio.

Under the circumstances, the Debtor is hard pressed to know what additional

information or “transparency” could have been provided to the Committee to satisfy the

Committee. The Debtor submits that, notwithstanding the Committee’s unsupported

contentions to the contrary, the Debtor has worked in good faith to provide the Committee with

all of the information that it has requested and to make progress towards a successful

reorganization in this case. Accordingly, the Debtor submits that this factor also weighs in favor


4. The fact that the debtor is paying its bills as they become due.

Since the Committee does not address this factor in its Opposition, it appears to concede

that this factor weighs in favor of an extension of the Debtor’s exclusivity periods. As reflected

in the monthly operating reports filed by the Debtor, the Debtor has been paying, and will

continue to pay, all of its post-petition bills and operating expenses as they become due.

Accordingly, this factor weighs in favor of an extension of the Debtor’s exclusivity periods.

5. Whether the debtor has demonstrated reasonable prospects for filing a viable

plan.

The Committee indicates in its Opposition that, based upon the financial data provided

by the Debtor to the Committee, the Committee’s financial advisor, Province, has prepared a

“preliminary analysis” of the Debtor’s financial performance and the viability of a


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reorganization plan which suggests that landlord concessions alone will not result feasible

reorganization plan. As a preliminary matter, if the financial data that the Committee received

from the Debtor is as unreliable as the Committee contends, the preliminary analysis that the

Committee has prepared using the Debtor’s financial data is likely also inaccurate and/or

unreliable and should not be relied upon by the Committee to make conclusions about the

Debtor’s financial performance or the viability of a reorganization plan.

Assuming, however, that the financial data that the Committee received from the Debtor

is, in fact, accurate and reliable (as the Debtor contends), the Committee’s “preliminary

analysis” is nevertheless premature and not at all indicative of the Debtor’s ability to propose a

feasible plan of reorganization in this case since the Committee’s preliminary analysis appears

to include all of the Debtor’s retail stores (including the stores that the Debtor has already

identified are unprofitable and must be closed). The Debtor believes (and the Committee has

provided nothing to dispute) that it is likely or at least possible that, once the Debtor identifies

the core group of retail stores around which it intends to reorganize, and the Debtor prepares

projections for just that core group of retail stores, the rent concessions obtained from the

landlords of such stores may be more than sufficient to support a feasible plan of reorganization.

Based on the foregoing, the Debtor submits that the Committee’s analysis and conclusions about

the Debtor’s ability (or inability) to file a viable plan are unsupported by any evidence and are

entirely premature.

Based on the foregoing, the Debtor respectfully submits that this factor weighs in favor


6. Whether the debtor has made progress in negotiations with its creditors.

In its Opposition, the Committee appears to argue that, since the Debtor has focused on

negotiations with its landlords, and not with its trade creditors, factors, and adverse litigation

parties, the Debtor has not made a “genuine effort to reach a consensus with unsecured creditors

concerning Debtor’s plan of reorganization” and therefore the Debtor’s request to extend its

exclusivity periods should be denied. See Opposition, p. 11, lines 4-6. The Committee’s

argument is confounding. As discussed above, any Plan proposed in this case will depend on


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the portfolio of stores that will continue to be operated going forward. As a result, the first step

in formulating a feasible Plan is the evaluation and negotiation of lease modifications and rent

concessions with the Debtor’s landlords. That is precisely what the Debtor has been doing in

the case to date. Once the core group of stores is identified, projections revolving around such

stores can then be prepared to determine the amount of funds that will ultimately be available

for distribution to unsecured creditors. The only “negotiations” to be had with the Debtor’s

trade vendors and other unsecured creditors are regarding the amounts to be paid to such

unsecured creditors on account of their claims under a Plan. The Debtor cannot see how a

discussion (much less, a consensus) regarding the payout to unsecured creditors under a Plan

can be conducted or reached without first concluding negotiations with the Debtor’s landlords.

The Debtor has been working diligently and in good faith during the past three months to

take the actions necessary (i.e., evaluating the performance of its stores and negotiating with

landlords) to be in a position to model plan projections that make sense and formulate the terms

of a feasible Plan. Accordingly, the Debtor submits that this factor also weighs in favor of an

extension of the Debtor’s exclusivity periods.

7. The amount of time which has elapsed in the case.

The Debtor’s bankruptcy case has been pending for only three (3) months. This is the

Debtor’s first request to extend its exclusivity periods. Given the foregoing, particularly in light

of the size and complexity of the Debtor’s case, the Debtor submits that this factor weighs in

favor of an extension of the Debtor’s exclusivity periods.

8. Whether the debtor is seeking an extension of exclusivity in order to pressure

creditors to submit to the debtor’s reorganization demands.

In its Opposition, the Committee indicates that it believes that the extension of the

Debtor’s exclusivity periods is being sought “for the sole purpose of pressuring creditors to

accede to the Debtor’s plan terms.” See Opposition, p. 11, lines 9-10. However, the Committee

simultaneously argues in its Opposition that the Debtor has provided little or no information

about the Debtor’s exit strategy and/or proposed plan terms. The Committee’s position is

baffling. It is unclear how the Debtor could possibly be pressuring creditors to accede to plan


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terms that the Debtor has not provided to, or discussed with, the Committee and/or the Debtor’s

creditors. The reality is that the Debtor cannot discuss concrete plan terms without first

concluding its negotiations with its landlords and determining the core group of stores around

which the Debtor will be seeking to reorganize. Since the Debtor is not yet in a position to

formulate, much less, discuss, plan terms with the Committee and its creditors, the Debtor

cannot possibly be seeking to pressure or “cram down” plan terms on its creditors. Rather, the

Debtor’s request to extend its exclusivity periods is made in good faith so that it may continue to

make progress towards a consensual Plan in this case if at all possible. Accordingly, the Debtor

submits that this factor also weighs in favor of an extension of the Debtor’s exclusivity periods.

9. Whether an unresolved contingency exists.

In its Opposition, the Committee calls into question the Debtor’s contention that

unresolved contingencies exist, which warrant an extension of the Debtor’s exclusivity periods.

For the reasons discussed above, the Debtor believes that its lease negotiations with landlords

must be substantially concluded before the Debtor can formulate and propose a feasible Plan in

this case. The Debtor also believes it is important that the claims bar date in the Debtor’s case

(i.e., September 30, 2017) passes so that the Debtor can determine the universe of claims that

will need to be addressed in a Plan.

The Committee contends that the Debtor’s concurrent request to extend the Section

365(d)(4) Period means that the Debtor will not be able to ascertain the total amount of lease

rejection damage claims until after the Section 365(d)(4) Period has passed, so the Debtor will

be seeking a further extension of its exclusivity periods in the future. The Committee’s

purported concern is a red herring. The Debtor intends to finalize its decisions to assume or

reject its remaining real property leases well before the expiration of the requested extended

Section 365(d)(4) Period. Even if the Debtor is not able to assume or reject all of its remaining

real property leases by the extended Section 365(d)(4) Period, the Debtor will nevertheless be

able to estimate the total amount of potential lease rejection damage claims that it will have to

address in the Plan well before the expiration of the extended Section 365(d)(4) Period and the

requested extended exclusive plan filing period.


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The Debtor respectfully submits that there are valid, unresolved contingencies in this

case which warrant an extension of the Debtor’s exclusivity periods. Accordingly, this factor

also weighs in favor of an extension of the Debtor’s exclusivity periods.

As the analysis of the Dow Corning factors above demonstrates, virtually all of the

factors weigh in favor of an extension of the Debtor’s exclusivity periods. The Motion to

extend the Debtor’s exclusivity periods should therefore be granted.

F. The Debtor Has Satisfied Its Burden Of Establishing Cause To Extend The Section

365(d)(4) Period.

In its Motion requesting an extension of the Section 365(d)(4) Period, the Debtor

provides an analysis of the so-called Wedtech factors that are relevant to the Debtor’s case to

demonstrate that “cause” exists to extend the Section 365(d)(4) Period. Specifically, the Debtor

has demonstrated that (1) the lease is a primary asset of the Debtor’s estate, (2) the Debtor has

not had sufficient time to intelligently appraise its financial situation and the potential value of

its assets in terms of the formulation of a Plan, (3) the Debtor reasonably requires more time to

formulate a Plan, and (4) the Debtor is current in paying post-petition rent. See In re Ernst

Home Center, Inc., 221 B.R. 243, 253 (9th Cir. B.A.P. 1998), citing, In re Victoria Station, Inc.,

supra, 88 B.R. at 236, In re Wedtech Corporation, 72 B.R. 464, 471-72 (Bankr. S.D.N.Y. 1987).

While the Committee notes the various Wedtech factors in its Opposition (including

certain factors which are wholly inapplicable to the Debtor’s case), the Committee fails to

provide a detailed analysis of such factors or any compelling counterargument to the Debtor’s

analysis of such factors.

Rather, the Committee simply concludes in its Opposition that the facts of the Debtor’s

case “do not favor a 90-day extension of the deadline under § 365(d): (i) the case is neither large

nor complex; (ii) the leases to be evaluated have been reduced to 27 leases; (iii) many of these

lease agreements are being negotiated with one landlord; (iv) the Debtor has not been

forthcoming about its plan of reorganization and financial information, (v) the Debtor has

refused to provide the Committee further access to its financial records, and (vi) the Debtor’s

back-to-school sales were weak.” See Opposition, p. 13, lines 23-28.


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Many of the Committee’s conclusions are countered in the discussion above

demonstrating that “cause” exists to extend the Debtor’s exclusivity periods, and will not be

repeated here. Specifically, as the Debtor has discussed above, the Debtor’s case is, by any

measure, large and complex; the Debtor has provide extensive information to the Committee

and its professionals to date and has addressed each and every request for financial information

made by the Committee and its professionals; and the Debtor has disclosed its exit strategy and

the anticipated basis for the proposed terms of a Plan from the outset of the case.

While the Committee continues to focus on the fact that there are 27 remaining store

leases left for the Debtor to evaluate and negotiate (arguing that the Debtor should therefore be

able to complete such evaluation and negotiation sooner), the Committee ignores the fact that it

is because of the Debtor’s efforts during the past three (3) months that the number of store

leases left to evaluate and negotiate has been reduced from over 80 leases to the 27 remaining

store leases. Moreover, it is likely that the 27 remaining store leases represent the more difficult

leases to negotiate and may therefore require additional effort and time to address.

The Committee also argues that many of the 27 remaining store leases are being

negotiated with one landlord (such as Simon). Although the Debtor notes that there are a

number of different landlords who represent the 27 remaining store leases, even if a company

like Simon represents the landlords of multiple store locations, the negotiations of those leases

must still be conducted on a store-by-store and lease-by-lease basis. Since the negotiations are

not conducted on an “all or nothing” basis, the Debtor and the landlord must evaluate and

negotiate the terms of each lease individually. Accordingly, the fact that a company like Simon

may represent the landlords of multiple store locations does not alter the fact that this case

involves a large number of leases, which require more time to evaluate.

Finally, the Committee argues that the Debtor’s allegedly “weak” back-to-school sales

weigh against an extension of the Debtor’s Section 365(d)(4) Period. As a preliminary matter, it

is difficult to determine whether the Committee’s statements about the Debtor’s back-to-school

sales are even accurate. The Committee provides virtually no information to support its

conclusion that the Debtor’s back-to-school sales were “weak,” other than to state in its


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supporting declaration that “[t]he Debtor’s sales at the beginning of the back-to-school season

were lackluster and a decline from last year.” Does the fact that the Debtor’s sales at the

beginning of the season (which was very shortly after the Petition Date) mean that the Debtor’s

sales for the season as a whole were “weak”? What constitutes “lackluster” sales, and how

much did the Debtor’s back-to-school sales decline from last year? Is it possible that the filing if

the Chapter 11 case has had a one time impact on sales? Without such information, it is difficult

to evaluate the accuracy of the Committee’s statements. Even assuming that the Committee is

correct that the Debtor’s back-to-school sales were “weak,” it is unclear how that fact would

weigh against the granting of the relief requested in the Motion. Wouldn’t the fact that the

Debtor’s back-to-school sales were “weak” (if true) weigh in favor of an extension of the

Debtor’s Section 365(d)(4) Period so that the Debtor can have more time to evaluate the

financial performance and viability of the Debtor’s retail stores?

The Debtor respectfully submits that it has sufficiently demonstrated that cause exists to

grant the extension of the Section 365(d)(4) Period requested in its Motion, and that the

Committee has provided no compelling argument to the contrary.

WHEREFORE, based upon all of the foregoing, the Debtor respectfully requests that

this Court overrule the Opposition and grant both Motions in their entirety.

Dated: September 12, 2017 CORNERSTONE APPAREL, INC.

By: /s/ Eve H. Karasik

TIMOTHY J. YOO EVE H. KARASIK JULIET Y. OH LEVENE, NEALE, BENDER, YOO & BRILL L.L.P. Attorneys for Debtor and Debtor in Possession


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DECLARATION OF TAE Y. YI

I, Tae Y. Yi, hereby declare as follows:

1. I am over 18 years of age. I am the President, Chief Financial Officer, Secretary,

and one of the three shareholders of Cornerstone Apparel, Inc., d/b/a Papaya Clothing, the

debtor and debtor in possession in the above-captioned Chapter 11 bankruptcy case

(“Cornerstone” and the “Debtor”), and am therefore familiar with the business operations and

financial books and records of the Debtor. I have personal knowledge of the facts set forth

below and, if called to testify as a witness, I could and would competently testify thereto.

2. I have access to the Debtor’s books and records. As the President, Chief

Financial Officer and Secretary of the Debtor, I am familiar with the history, organization,

operations and financial condition of the Debtor. The records and documents referred to in this

Declaration constitute writings taken, made, or maintained in the regular or ordinary course of

the Debtor’s business at or near the time of act, condition or event to which they relate by

persons employed by the Debtor who had a business duty to the Debtor to accurately and

completely take, make, and maintain such records and documents. The statements set forth in

this declaration are based upon my own personal knowledge and my review of the Debtor’s

books and records.

3. I make this declaration in support of the reply (the “Reply”) to the Omnibus

Opposition Of The Official Committee Of Unsecured Creditors To The (i) Motion For Order

Extending The Debtor’s Exclusivity Periods To File Plan Of Reorganization And Obtain

Acceptances Thereof; And (ii) Motion By The Debtor To Extend Time To Assume Or Reject

Nonresidential Real Property Leases (the “Opposition”) filed by the Official Committee of

Unsecured Creditors appointed in the Debtor’s case (the “Committee”). All capitalized terms

not specifically defined herein shall have the meanings ascribed to them in the Reply.

4. The Committee’s Opposition is to both the Debtor’s Motion For Order

Extending Debtor’s Exclusive Periods To File Plan Of Reorganization And Obtain Acceptances

Thereof and the Motion By Debtor To Extend Time To Assume Or Reject Nonresidential Real

Property Leases (together, the “Motions”).


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5. As of June 15, 2017 (the “Petition Date”), the Debtor was operating over eighty

(80) retail stores located in malls and shopping centers in sixteen (16) different states within the

United States. As of the Petition Date, the Debtor employed a workforce of approximately

1,300 individual employees. In 2016, the Debtor generated annual gross revenues of more than

$134 million. The Debtor estimates that it has more than 400 creditors. Given the size and

geographical spread of the Debtor’s business operations, and the large number of employees,

landlords, and vendors with whom the Debtor interacts on a regular basis, I believe the Debtor’s

case is, by any measure, both large and complex.

6. Since the Petition Date, the Debtor has performed detailed analyses (both on

store-by-store and consolidated bases) of all of its retail stores to determine which of the stores

are profitable (or potentially profitable if rent concessions can be successfully negotiated) and

which of the stores are not profitable and therefore must be closed on an expeditious basis,

which analyses have been shared with the Committee as well as the Debtor’s numerous

landlords. In addition, since the Petition Date, the Debtor has engaged in (often extensive)

negotiations with many of its landlords to try to obtain rent concessions, which would reduce

rent to a level that would render currently underperforming retail stores profitable.

7. I believe that the Debtor has made significant progress towards the confirmation

of a Chapter 11 plan of reorganization (a “Plan”). As a result of the Debtor’s efforts during the

three-month period following the Petition Date, the Debtor has successfully negotiated

amendments of 21 of its remaining retail store leases, has determined that it will be assuming

the leases for nine (9) of its remaining retail stores without any amendment, and has determined

that it will be rejecting the leases for 21 of its remaining retail store leases. As noted by the

Committee in its Opposition, this leaves the Debtor with a total of 27 retail store leases, which

require further evaluation and/or negotiation.

8. The Committee argues in its Opposition that many of the 27 remaining store

leases are being negotiated with one landlord (such as Simon). Although the Debtor notes that

there are a number of different landlords who represent the 27 remaining store leases, even if a

company like Simon represents the landlords of multiple store locations, the negotiations of


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those leases must still be conducted on a store-by-store and lease-by-lease basis. Since the

negotiations are not conducted on an “all or nothing” basis, the Debtor and the landlord must

evaluate and negotiate the terms of each lease individually. Accordingly, the fact that a

company like Simon may represent the landlords of multiple store locations does not alter the

fact that this case involves a large number of leases, which require more time to evaluate.

9. I believe that the details of any feasible Plan in the Debtor’s case will hinge on

the number of retail store locations which will continue to be operated going forward since that

will dictate, among other things, (i) the amount of lease rejection damage claims that will need

to be accounted for in the plan of reorganization, (ii) the amount of revenue anticipated to be

generated from operations going forward, (iii) the level of operating expenses (e.g., rent,

utilities, payroll, inventory purchases, etc.) anticipated to be incurred in connection with

operations going forward, and (iv) the profit estimated to be generated from operations going

forward and the amount ultimately available to make distributions to creditors under the plan of

reorganization. As a result, I believe the Debtor’s evaluation and negotiation of the lease terms

for its retail stores are a necessary and critical first step before the Debtor can be in a position to

formulate the terms of a feasible Plan and prepare accurate projections in support of such a Plan.

10. Contrary to the Committee’s contentions otherwise, there has been no

“stonewalling” of the Committee and its professionals by the Debtor in this case. The Debtor’s

management has expended significant efforts to respond to numerous requests for information

from, and to inform and engage with, the Committee and its professionals. The Debtor’s

management has provided the Committee with volumes of data and information, i.e., enough

data and information for the Committee’s financial advisor, Province, Inc. (“Province”) to create

its own financial model that it has deemed sufficient to share with the Committee. The Debtor’s

management has provided both hard copy and electronic versions of the data and information

requested by the Committee and Province. Indeed, I am not aware of any pending data request

that has not been satisfied by the Debtor. The Debtor’s management also met in person with

Province to review and discuss the data that was provided by the Debtor to the Committee and

had further discussions regarding such data by telephone. Further, Province requested that the


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Debtor provide it with biweekly reports in addition to the monthly operating reports filed by the

Debtor with the Court, and the Debtor agreed and have been providing such biweekly reports to

Province as requested.

11. The current biweekly report may have been delayed as the Debtor is preparing its

monthly operating report for August 2017, and would like to involve Sierra Constellation

(“Sierra”), the Debtor’s proposed new financial advisor, in all reporting efforts. To date, the

Debtor has provided all of the foregoing information to the Committee and its professionals

without the assistance of its own financial advisor.

12. The Debtor commenced this case with the belief that it could reduce professional

fees by not hiring its own financial advisor and/or an expensive lease negotiation agent. The

Debtor has sophisticated management with the requisite financial expertise to operate its

business. The Debtor prepared its own Schedules of Assets and Liabilities and Statement of

Financial Affairs, and prepared its monthly operating reports to date without the assistance of a

financial advisor. Further, the Debtor has made significant progress on its negotiations with

landlords and its evaluation of the retail store leases without the expense of yet another

professional. The Debtor was also hopeful that the Committee and the Debtor could work

cooperatively in this case and jointly utilize the services of the Committee’s financial advisor,

Province.

13. Unfortunately, given the Committee’s Opposition to the Motions and current

stance in this case, the Debtor had no choice other than to retain its own financial advisor, at a

further administrative expense to the Debtor’s estate. Sierra has jumped into the case, has

reviewed the model prepared by Province, will review and work from Province’s model in an

effort to conserve costs, and assist the Debtor on the preparation of a confirmable Plan.

14. The Debtor has disclosed its exit strategy from the outset of this case. The

Debtor and its counsel told the Court and the Committee on several occasions that the Debtor

intends to file a “true” reorganization Plan, and that the details of such Plan depends on the

ultimate size of the Debtor’s retail store portfolio.

15. The Committee asserts in its Opposition that there are significant discrepancies in


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the financial information provided by the Debtor to Province regarding all of the Debtor’s retail

stores and the financial information provided by the Debtor to Simon Properties (“Simon”),

which is the landlord for 36 of the Debtor’s retail store leases and the co-Chair of the

Committee, for the Simon stores. The Debtor provided Simon with profit and loss analyses for

each of the Simon stores prior to the Petition Date. The analyses provided to Simon included

allocations for general and administrative expenses (“G&A Expenses”) for each of the Simon

stores. The profit and loss analyses that were provided to Province included a separate column

labeled “Main” that included aggregate numbers for G&A Expenses rather than allocations of

the G&A Expenses among the individual stores. In short, there is nothing nefarious here – the

alleged “discrepancies” identified by the Committee are not discrepancies at all, but are a result

of two different methods of presenting the same financial data.

16. At one point during the Debtor’s case, two meetings were scheduled between the

Debtor and Simon (in its capacity as the Debtor’s landlord, and not as a representative of the

Committee) to continue lease negotiations and to discuss the perceived discrepancy in the

financial information provided by the Debtor to Simon and Province. These were meetings

between the Debtor and Simon; not between the Debtor and the Committee. Therefore, there

was no reason to have Province participate in these meetings, particularly since Province has not

participated in the Debtor’s discussions with any other landlord. The Debtor has serious

concerns that Province may be wearing two hats in this case.

17. The Debtor has already received concessions and lease modifications from many

of its landlords.

18. The Debtor filed a motion requesting that the Court establish a claims bar date at

the end of August 2017 so that the Debtor would have time to evaluate claims prior to the

expiration of its plan filing exclusivity period. In response, the Committee asked that a 90-day

claims bar date be set such that the claims bar date would pass after the Debtor’s plan filing

exclusivity period had already expired. As a compromise, the Debtor agreed to request that the

claims bar date be set for September 30, 2017, which is only 13 days prior to expiration of the

Debtor’s Plan filing exclusivity period (unless extended).


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19. As reflected in the monthly operating reports filed by the Debtor, the Debtor has

been paying, and will continue to pay, all of its post-petition bills and operating expenses as they

become due.

20. I believe that the “preliminary analysis” prepared by the Committee’s financial

advisor, Province, is premature and not indicative of the Debtor’s ability to propose a feasible

plan of reorganization in this case since such preliminary analysis appears to include all of the

Debtor’s retail stores (including the stores that the Debtor has already identified are unprofitable

and must be closed). I believe that it is likely or at least possible that, once the Debtor identifies

the core group of retail stores around which it intends to reorganize, and the Debtor prepares

projections for just that core group of retail stores, the rent concessions obtained from the

landlords of such stores may be more than sufficient to support a feasible Plan.

21. The Debtor’s request for an extension of its exclusivity periods is being made in

good faith so that the Debtor may continue to make progress towards a consensual Plan in this

case if at all possible.

22. The Debtor intends to finalize its decisions to assume or reject its remaining real

property leases well before the expiration of the requested extended Section 365(d)(4) Period.

Even if the Debtor is not able to assume or reject all of its remaining real property leases by the

extended Section 365(d)(4) Period, the Debtor will nevertheless be able to estimate the total

amount of potential lease rejection damage claims that it will have to address in the Plan well

before the expiration of the extended Section 365(d)(4) Period and the requested extended

exclusive plan filing period.

/ / /

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DECLARATION OF EVE H. KARASIK

I, Eve H. Karasik, hereby declare as follows:

1. I have personal knowledge of the facts set forth below and, if called to testify,

would and could competently testify thereto.

2. I am a partner of the law firm of Levene, Neale, Bender, Yoo & Brill L.L.P.

(“LNBYB”), counsel for Cornerstone Apparel, Inc. d/b/a Papaya Clothing, the debtor and

debtor-in-possession herein (the “Debtor”). I am an attorney licensed to practice law in the

State of California and the United States District Court and the Bankruptcy Court for Central

District of California.

3. I make this declaration in support of the reply (the “Reply”) to the Omnibus

Opposition Of The Official Committee Of Unsecured Creditors To The (i) Motion For Order

Extending The Debtor’s Exclusivity Periods To File Plan Of Reorganization And Obtain

Acceptances Thereof; And (ii) Motion By The Debtor To Extend Time To Assume Or Reject

Nonresidential Real Property Leases (the “Opposition”) filed by the Official Committee of

Unsecured Creditors appointed in the Debtor’s case (the “Committee”). All capitalized terms

not specifically defined herein shall have the meanings ascribed to them in the Reply.

4. The Committee’s Opposition is to both the Debtor’s Motion For Order

Extending Debtor’s Exclusive Periods To File Plan Of Reorganization And Obtain Acceptances

Thereof and the Motion By Debtor To Extend Time To Assume Or Reject Nonresidential Real

Property Leases (together, the “Motions”).

5. At the first day hearing in the Debtor’s case, I advised the Court that lease

negotiations needed to proceed so that the Debtor could evaluate its retail store portfolio and

negotiate lease concessions with landlords, and that when the final store portfolio was

determined, the Debtor would be in a position to propose a Plan.

6. At the Chapter 11 case status conference in the Debtor’s case, I advised the Court

and parties in interest who appeared at such status conference that, while progress had been

made, additional time was required to complete the Debtor’s ongoing negotiations with the

landlords.


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7. The Debtor has attempted to engage the Committee in certain decisions regarding

the disposition of certain real property leases. I prepared a detailed email regarding the

proposed assumption of several retail store leases and sent such email to counsel for the

Committee on two separate occasions. A true and correct copy of the email is attached as

Exhibit “A” hereto. Notwithstanding the requests for a response to the email, no response has

been received to date. Accordingly, neither I nor the Debtor has any idea whether the

Committee supports or opposes the proposed assumption of the specified retail store leases.

8. When the purported “discrepancy” in the financial data provided by the Debtor to

Province and the financial data provided pre-petition to Simon Properties (“Simon”) regarding

just the Simon stores was explained to Province in a meeting between Province and Sierra (in

which meeting I participated), Province was not surprised. There was no meaningful

discrepancy between the two sets of data.

9. The Committee alleges that the Debtor was not forthright with respect to the five

(5) stores operated as Papaya stores but owned by other non-Debtor entities. This ownership

structure has never been a secret. It was disclosed in the Debtor’s reply to the limited opposition

filed by the United States Trustee (the “UST”) to certain of the Debtor’s first day motions, a true

and correct copy of which reply is attached as Exhibit “B” hereto. The ownership and

operation of the 5 Papaya stores by such non-Debtor entities were also discussed in detail at the

Debtor’s Section 341(a) meeting of creditors, in which Committee counsel and I appeared and

participated. The Debtor’s Statement of Financial Affairs further discloses the intercompany

transfers between the Debtor and the foregoing non-Debtor entities as the Debtor regularly

transfers inventory to the non-Debtor entities’ stores and the non-Debtor entities regularly send

funds to the Debtors to pay for such inventory.

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10. The Debtor has offered to the Committee to reduce its request to extend the

Debtor’s Plan filing and solicitation exclusivity periods from 90 days to 60 days. The

Committee has not yet responded to this offer of compromise.

I declare under penalty of perjury under the laws of the United States of America that the

foregoing is true and correct.

Executed this 12th day of September, 2017 at Los Angeles, California.

/s/ Eve H. Karasik EVE H. KARASIK


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EXHIBIT “A”


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From: Eve H. Karasik Sent: Monday, August 21, 2017 2:25 PM To: Lauter, Richard ([email protected]); Lee, Scott ([email protected]); Sarenas, Lovee ([email protected]) Cc: Eve H. Karasik; Timothy J. Yoo; Juliet Y. Oh Subject: Cornerstone - Proposed Assumption of Leases as Amended for the Stores in the Dolphin / Fair Oaks / Sunvalley Malls Hi all – I never heard from you on this email. The Debtor is going to proceed to prepare a motion to assume these leases. There may be one or two other leases too and I have asked the client for a similar summary that I hope to provide to you before filing. Thanks much, Eve

EVE H. KARASIK, Esq. LEVENE, NEALE, BENDER, YOO & BRILL L.L.P. 10250 Constellation Blvd. | Suite 1700 | Los Angeles, CA 90067 Phone 310 229 1234 | Direct 310 229 3350 | Cell 310 614 5144 | Fax 310 229 1244 [email protected] | www.lnbyb.com The preceding E-mail message is subject to Levene, Neale, Bender, Yoo & Brill L.L.P.'s email policies which can be found at http://www.lnbyb.com/disclaimers.htm. Please consider the environment before printing this email

From: Eve H. Karasik Sent: Friday, August 4, 2017 2:46 PM To: Lee, Scott ([email protected]); Lauter, Richard ([email protected]); Sarenas, Lovee ([email protected]) Cc: Eve H. Karasik; Timothy J. Yoo; 'Steven Kim' Subject: Cornerstone - Proposed Assumption of Leases as Amended for the Stores in the Dolphin / Fair Oaks / Sunvalley Malls All – the Debtor has negotiated lease amendments for three leases with Taubman. Taubman has required that the leases be assumed as amended by October 30, 2017. The Debtor believes that the lease amendments are very favorable and would like to assume them as amended by the deadline. Copies of the proposed lease


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amendments are attached. I believe Province has copies of the leases and amendments, as well as four wall analyses for these stores, but if not, let me know and I can send them to you. The three amendments effect the following stores and provide the following benefits per Cornerstone: FLB (Dolphin Mall) - The landlord agreed to a rent relief request by reducing the rent $150,000 per year until the lease expires on 1/31/2022. (The reduction is from $67,300/month to $53,800/month). FLB is a profitable store, but will be more profitable now with rent relief. CNC (Sunvalley Mall) – Cornerstone paid monthly rent of $42,000 in 2015. In the second amendment to the lease, monthly rent was reduced to $15,800. Another amendment in January 2017 reduced the monthly rent to $11,000 per month. The Debtor believes that even if sales are little soft, this is a profitable store. The current lease expires on 1/31/2018. This proposed fourth amendment extends the term to 1/31/2022 at the rent of $11,000 per month to coincide with FLB's termination date. VAG (Fair Oaks Mall) – Cornerstone paid monthly rent of $63,000 until January 2017 when the landlord reduced the monthly rent to $18,000 retroactively from September 2016, ($540,000 reduction per year). This amendment extends the term to 1/31/2022 to coincide with FLB's termination date. These amendments are, in part, in exchange for Cornerstone’s agreement not to reject Store MOC, which is a Taubman lease in the Taubman Prestige Outlets in Missouri. In 2014, Taubman offered Cornerstone a center-court location and additional favorable incentives to open a store at the Outlets. The Debtor accepted the offer and opened a MOC store in July 2015. Even if sales are soft, the Debtor is not losing money and the concessions on the three leases above justify retaining the MOC Store. The Debtor would like to file a motion to assume the leases as amended so that it can obtain an order prior to the October 30, 2017 deadline. Please advise if the Committee has any questions or issues regarding the foregoing, and whether the Committee will object to this requested relief. I have copied Steven Kim on this email. Steven is real estate counsel to the Debtor and worked with the Debtor on the amendments. Feel free to contact Steven or me to discuss. Best, Eve

EVE H. KARASIK, Esq. LEVENE, NEALE, BENDER, YOO & BRILL L.L.P. 10250 Constellation Blvd. | Suite 1700 | Los Angeles, CA 90067 Phone 310 229 1234 | Direct 310 229 3350 | Cell 310 614 5144 | Fax 310 229 1244 [email protected] | www.lnbyb.com The preceding E-mail message is subject to Levene, Neale, Bender, Yoo & Brill L.L.P.'s email policies which can be found at http://www.lnbyb.com/disclaimers.htm. Please consider the environment before printing this email


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EXHIBIT “B”


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TIMOTHY J. YOO (SBN 155531) EVE H. KARASIK (SBN 155356) JULIET Y. OH (SBN 211414) LEVENE, NEALE, BENDER, YOO & BRILL L.L.P. 10250 Constellation Boulevard, Suite 1700 Los Angeles, California 90067 Telephone: (310) 229-1234; Facsimile: (310) 229-1244 Email: [email protected], [email protected], [email protected] Proposed Attorneys for Chapter 11 Debtor and Debtor in Possession

UNITED STATES BANKRUPTCY COURT

CENTRAL DISTRICT OF CALIFORNIA

LOS ANGELES DIVISION

In re CORNERSTONE APPAREL, INC. Debtor.

))))))))))))))))))))))))))

Case No. 2:17-bk-17292-VZ

Chapter 11 DEBTOR’S REPLY TO LIMITED OPPOSITIONS FILED BY THE UNITED STATES TRUSTEE TO DEBTOR’S EMERGENCY MOTIONS FOR ENTRY OF ORDERS (1) AUTHORIZING DEBTOR TO REJECT CERTAIN UNEXPIRED NON-RESIDENTIAL REAL PROPERTY LEASES PURSUANT TO 11 U.S.C. § 365 AND ABANDON ANY REMAINING PERSONAL PROPERTY LOCATED AT THE LEASED PREMISES, AND (2) FOR AUTHORITY TO PAY PRE-PETITION PRIORITY WAGES; DECLARATION OF TAE Y. YI

Hearing: Date: June 20, 2017 Time: 1: 30 p.m. Courtroom: 1368 Location: 255 E. Temple Street Los Angeles, California

)

Case 2:17-bk-17292-VZ Doc 34 Filed 06/19/17 Entered 06/19/17 15:36:33 Desc Main Document Page 1 of 8


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Cornerstone Apparel, Inc. d/b/a Papaya Clothing, a California corporation and the debtor

and debtor-in-possession in the above-captioned Chapter 11 bankruptcy case (“Cornerstone”) or

the “Debtor”), hereby submits this reply (the “Reply”) to the limited oppositions filed by the

United States Trustee (the “UST”) to the Debtor’s Emergency Motion For Entry Of An Order

Authorizing Debtor To Reject Certain Unexpired Non-Residential Real Property Leases

Pursuant To 11 U.S.C. § 365 And Abandon Any Remaining Personal Property Located At The

Leased Premises [ECF No. 5] (the “Lease Rejection Motion”), and Debtor’s Emergency Motion

For Authority To Pay Pre-Petition Priority Wages [ECF No. 22] (the “Wage Motion”).

A. The Court Should Permit the Debtor to Abandon Any Personal Property to the

Landlords at the Rejected Lease Sites As Applicable to Avoid the Potential

Occurrence of Administrative Expense Claims.

The UST objects to the portion of the Lease Rejection Motion that provides that any

personal property left at the rejected lease sites would be abandoned. Cornerstone has

determined that it will remove all personal property remaining at the closed stores such as

inventory, fixtures, computers and other personal property, and have such property delivered to

the Cornerstone corporate office/warehouse. There is no personal property remaining at the

Vacated Retail Stores.1 None of the personal property located at the Rejected Operating Retail

Stores is subject to a personal property lease.

Cornerstone seeks the relief in the Lease Rejection Motion that any remaining personal

property inadvertently left at the rejected lease sites be deemed abandoned to the landlords for

the respective rejected lease sites. This relief will protect the Debtor and the estate from the

creation of unintended administrative expense claims. Landlords may assert claims under

Bankruptcy Code section 503(b) if personal property remains on the site as the leased site may

not be “vacated” as provided for under the leases.

The request to abandon personal property to landlords for rejected lease sites has been

granted by other courts in retail bankruptcy cases in an effort to reduce the incurrence of

1 Capitalized terms used and not defined herein have the meanings set forth in the Lease Rejection Motion

and the Wage Motion, and such definitions are incorporated herein by this reference.



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administrative expense claims. In particular, this relief has also been granted in the United States

Bankruptcy Court for the Central District of California. See, e.g., Order Granting Motion for

Entry of An Order Authorizing Debtor to Reject Certain Unexpired Non-Residential Real

Property Leases Pursuant to 11 U.S.C. § 365 and Abandon any Remaining Personal Property

Located at Leased Premises, In re Blue Bee, Inc., Case No. 2:16-bk-23836-SK, [ECF No.103];

Final Order Granting Emergency Motion By Debtor For Entry Of Interim And Final Orders:

(A) Authorizing Assumption Of Agency Agreement; (B) Authorizing Sale Free And Clear Of All

Liens, Claims, And Encumbrances Pursuant To Bankruptcy Code Sections 363(B) And (F); (C)

Approving The Store Closing Sale Guidelines; (D) Authorizing The Debtor To Abandon; And

(E) Authorizing Lease Rejection Procedures With Respect To The Closing Stores Pursuant To

Section 365, Paragraph 54, Case No. 8:15-bk-13008- TA, (ECF No. 240].

Accordingly, Cornerstone respectfully requests that the Court grant the relief requested

in the Lease Rejection Motion and permit the Debtor to abandon personal property to the

landlords for the rejected lease sites.

B. The Debtor Has Provided Information Below that Resolves the UST’s Limited

Opposition to the Wage Motion.

The UST objects to the Wage Motion on the grounds that insufficient evidence has been

submitted to support the payment of priority wages for two (2) of the Debtor’s stores, and that

the Debtor has not identified the names of all of the insiders so that the Court and the UST can

confirm that no insiders will be paid pursuant to the Wage Motion.

The two insiders in addition to Mr. Tae Yi are Mr. Kenneth Choi and Mrs. Rachel Choi.

Mr.Choi is the Chief Executive Officer and a shareholder of Cornerstone. Mrs. Rachel Choi is

the Vice President and a shareholder of Cornerstone. None of the insiders will be paid pursuant

to the Wage Motion.

The two stores for which the Debtor submitted no schedule of wages for employees are

not subject to the Wage Motion. The Roseville Galleria (CNG) is not yet an operating store.

Cornerstone has a signed lease with the landlord for the Roseville Galleria, but the store has not

been built-out or opened for business. Accordingly, it has no employees.



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The Glendale Galleria (CAO) is an operating store, which operates as Papaya Clothing,

but the store is owned by a non-debtor entity. There are five stores that operate as Papaya

Clothing (including the Glendale Galleria) that are owned by non-debtor entities, which include

the Glendale Galleria. These non-debtor entities are Glendale CSA, Inc. (Store CAO), CSA

Apparel Co. LP (Stores TXF and TXH), and Vision Canaan Corp. (Stores FLG and FLH).

Accordingly, the employees at the Glendale Galleria store are not included in the Wage Motion.2

WHEREFORE, the Debtor respectfully requests that this Court grant the Lease

Rejection Motion and the Wage Motion on the terms set forth above.

Dated: June 19, 2017 CORNERSTONE APPAREL, INC.

By: /s/ Eve H. Karasik

TIMOTHY J. YOO EVE H. KARASIK JULIET Y. OH LEVENE, NEALE, BENDER, YOO & BRILL L.L.P. Proposed Attorneys for Debtor and Debtor in Possession

2 The five non-debtor stores were inadvertently included in the Debtor’s Emergency Motion For Entry Of

An Order Authorizing Debtor To Provide Adequate Assurance Of Future Payment To Utility Companies Pursuant To 11 U.S.C. § 366 [ECF No. 6]. The Debtor will provide in the order for the Utility Motion that the five non-debtor stores are excluded from the requested relief.



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5

DECLARATION OF TAE Y. YI

I, Tae Y. Yi, hereby declare as follows:

1. I am over 18 years of age. I am the President, Chief Financial Officer, Secretary,

and one of the three shareholders of Cornerstone Apparel, Inc., d/b/a Papaya Clothing, the

debtor and debtor in possession in the above-captioned Chapter 11 bankruptcy case

(“Cornerstone” and the “Debtor”), and am therefore familiar with the business operations and

financial books and records of the Debtor. I have personal knowledge of the facts set forth

below and, if called to testify as a witness, I could and would competently testify thereto.

2. I have access to the Debtor’s books and records. As the President, Chief

Financial Officer and Secretary of the Debtor, I am familiar with the history, organization,

operations and financial condition of the Debtor. The records and documents referred to in this

Declaration constitute writings taken, made, or maintained in the regular or ordinary course of

the Debtor’s business at or near the time of act, condition or event to which they relate by

persons employed by the Debtor who had a business duty to the Debtor to accurately and

completely take, make, and maintain such records and documents. The statements set forth in

this declaration are based upon my own personal knowledge and my review of the Debtor’s

books and records.

3. I make this declaration in support of the motion (the “Reply”) to which this

declaration is attached, pursuant to which the Debtor is responding to the limited oppositions of

the United States Trustee (the “UST”) to the Debtor’s emergency motions seeking the entry of

(i) an order authorizing the Debtor to pay pre-petition priority wages, and (ii) an order

authorizing the Debtor to reject certain leases and abandon personal property at the rejected

lease sites.

4. Cornerstone has determined that it will remove all personal property remaining at

the closed stores such as inventory, fixtures, computers and other personal property and have

them delivered to the Cornerstone corporate office/warehouse. There is no personal property

remaining at the Vacated Retail Stores. None of the personal property located at the Rejected

Operating Retail Stores is subject to a personal property lease.



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This form is mandatory. It has been approved for use by the United States Bankruptcy Court for the Central District of California.

June 2012 F 9013-3.1.PROOF.SERVICE

PROOF OF SERVICE OF DOCUMENT

I am over the age of 18 and not a party to this bankruptcy case or adversary proceeding. My business address is: 10250 Constellation Boulevard, Suite 1700, Los Angeles, CA 90067 A true and correct copy of the foregoing document entitled: DEBTOR’S REPLY TO LIMITED OPPOSITIONS FILED BY THE UNITED STATES TRUSTEE TO DEBTOR’S EMERGENCY MOTIONS FOR ENTRY OF ORDERS (1) AUTHORIZING DEBTOR TO REJECT CERTAIN UNEXPIRED NON-RESIDENTIAL REAL PROPERTY LEASES PURSUANT TO 11 U.S.C. § 365 AND ABANDON ANY REMAINING PERSONAL PROPERTY LOCATED AT THE LEASED PREMISES, AND (2) FOR AUTHORITY TO PAY PREPETITION PRIORITY WAGES; DECLARATION OF TAE Y. YI will be served or was served (a) on the judge in chambers in the form and manner required by LBR 5005-2(d); and (b) in the manner stated below: 1. TO BE SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (NEF): Pursuant to controlling General Orders and LBR, the foregoing document will be served by the court via NEF and hyperlink to the document. On June 19, 2017, I checked the CM/ECF docket for this bankruptcy case or adversary proceeding and determined that the following persons are on the Electronic Mail Notice List to receive NEF transmission at the email addresses stated below:

Ronald E Gold [email protected], [email protected] Eve H Karasik [email protected] John W Kim [email protected] Kelly L Morrison [email protected] Juliet Y Oh [email protected], [email protected] Kristen N Pate [email protected] Christopher E Prince [email protected],

[email protected];[email protected];[email protected] Benjamin Seigel [email protected],

[email protected];[email protected] Ronald M Tucker [email protected],

[email protected];[email protected];[email protected] United States Trustee (LA) [email protected] Timothy J Yoo [email protected]

2. SERVED BY UNITED STATES MAIL: On June 19, 2017, I served the following persons and/or entities at the last known addresses in this bankruptcy case or adversary proceeding by placing a true and correct copy thereof in a sealed envelope in the United States mail, first class, postage prepaid, and addressed as follows. Listing the judge here constitutes a declaration that mailing to the judge will be completed no later than 24 hours after the document is filed.

Service information continued on attached page 3. SERVED BY PERSONAL DELIVERY, OVERNIGHT MAIL, FACSIMILE TRANSMISSION OR EMAIL (state method for each person or entity served): Pursuant to F.R.Civ.P. 5 and/or controlling LBR, on June 19, 2017, I served the following persons and/or entities by personal delivery, overnight mail service, or (for those who consented in writing to such service method), by facsimile transmission and/or email as follows. Listing the judge here constitutes a declaration that personal delivery on, or overnight mail to, the judge will be completed no later than 24 hours after the document is filed.

Served via Attorney Service Hon. Vincent P. Zurzolo United States Bankruptcy Court Edward R. Roybal Federal Building 255 E. Temple Street, Suite 1360 / Ctrm 1368 Los Angeles, CA 90012

Served via Overnight Mail United States Trustee 915 Wilshire Blvd., Suite 1850 Los Angeles, California 90017



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I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. June 19, 2017 Stephanie Reichert /s/ Stephanie Reichert Date Type Name Signature



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PROOF OF SERVICE OF DOCUMENT

I am over the age of 18 and not a party to this bankruptcy case or adversary proceeding. My business address is: 10250 Constellation Boulevard, Suite 1700, Los Angeles, CA 90067 A true and correct copy of the foregoing document entitled: DEBTOR’S REPLY TO OMNIBUS OPPOSITION OF THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS TO THE (I) MOTION FOR ORDER EXTENDING THE DEBTOR’S EXCLUSIVITY PERIODS TO FILE PLAN OF REORGANIZATION AND OBTAIN ACCEPTANCES THEREOF; AND (II) MOTION BY THE DEBTOR TO EXTEND TIME TO ASSUME OR REJECT NONRESIDENTIAL REAL PROPERTY LEASES; DECLARATIONS OF TAE Y. YI AND EVE H. KARASIK IN SUPPORT THEREOF will be served or was served (a) on the judge in chambers in the form and manner required by LBR 5005-2(d); and (b) in the manner stated below: 1. TO BE SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (NEF): Pursuant to controlling General Orders and LBR, the foregoing document will be served by the court via NEF and hyperlink to the document. On September 12, 2017, I checked the CM/ECF docket for this bankruptcy case or adversary proceeding and determined that the following persons are on the Electronic Mail Notice List to receive NEF transmission at the email addresses stated below: Service information continued on attached page 2. SERVED BY UNITED STATES MAIL: On September 12, 2017, I served the following persons and/or entities at the last known addresses in this bankruptcy case or adversary proceeding by placing a true and correct copy thereof in a sealed envelope in the United States mail, first class, postage prepaid, and addressed as follows. Listing the judge here constitutes a declaration that mailing to the judge will be completed no later than 24 hours after the document is filed. Service information continued on attached page 3. SERVED BY PERSONAL DELIVERY, OVERNIGHT MAIL, FACSIMILE TRANSMISSION OR EMAIL (state method for each person or entity served): Pursuant to F.R.Civ.P. 5 and/or controlling LBR, on September 12, 2017, I served the following persons and/or entities by personal delivery, overnight mail service, or (for those who consented in writing to such service method), by facsimile transmission and/or email as follows. Listing the judge here constitutes a declaration that personal delivery on, or overnight mail to, the judge will be completed no later than 24 hours after the document is filed.

Served via Attorney Service Hon. Vincent P. Zurzolo United States Bankruptcy Court Edward R. Roybal Federal Building 255 E. Temple Street, Suite 1360 / Ctrm 1368 Los Angeles, CA 90012 I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. September 12, 2017 Stephanie Reichert /s/ Stephanie Reichert Date Type Name Signature


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1. TO BE SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (NEF):

Dustin P Branch on behalf of Creditors PGIM Real Estate, Starwood Retail Partners, LLC, The Macerich Company, and Westfield, LLC [email protected], [email protected];[email protected] John H Choi on behalf of Interested Party Courtesy NEF [email protected], [email protected] Richard T Davis on behalf of Creditor Spotsylvania Mall Company [email protected], [email protected] John P Dillman on behalf of Creditors Cypress-Fairbanks ISD, Galveston County, Harris County, and Tyler County [email protected] Oscar Estrada on behalf of Creditor LOS ANGELES COUNTY TREASURER AND TAX COLLECTOR [email protected] Scott Ewing on behalf of Interested Party Courtesy NEF [email protected], [email protected];[email protected];[email protected] Ronald E Gold on behalf of Creditor Washington Prime Group Inc. [email protected], [email protected] Courtney J Hull on behalf of Creditor Texas Comptroller of Public Accounts [email protected], [email protected] Clifford P Jung on behalf of Interested Party Courtesy NEF [email protected], [email protected];[email protected] Eve H Karasik on behalf of Debtor Cornerstone Apparel, Inc. [email protected] John W Kim on behalf of Attorney John W Kim [email protected] Jeffrey Kurtzman on behalf of Creditor PREIT Services, as agent for PR Springfield Town Center, LLC [email protected] Jeffrey S Kwong on behalf of Debtor Cornerstone Apparel, Inc. [email protected], [email protected] Dare Law on behalf of U.S. Trustee United States Trustee (LA) [email protected] Scott Lee on behalf of Creditor Committee Official Committee of Unsecured Creditors [email protected] Noreen A Madoyan on behalf of Interested Party Courtesy NEF [email protected], [email protected];[email protected];[email protected]


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Monserrat Morales on behalf of Interested Party Courtesy NEF [email protected], [email protected];[email protected];[email protected] Kevin M Newman on behalf of Creditors Carousel Center Company, L.P., EklecCo NewCo LLC, and Pyramid Walden Company, L.P. [email protected], [email protected] Juliet Y Oh on behalf of Debtor Cornerstone Apparel, Inc. [email protected], [email protected] Kristen N Pate on behalf of Creditor GGP Limited Partnership [email protected] Christopher E Prince on behalf of Interested Party Courtesy NEF [email protected], [email protected];[email protected];[email protected] Lovee D Sarenas on behalf of Creditor Committee Official Committee of Unsecured Creditors [email protected] Lovee D Sarenas on behalf of Interested Party Courtesy NEF [email protected] Benjamin Seigel on behalf of Interested Party Courtesy NEF [email protected], [email protected];[email protected] Michael A Shakouri on behalf of Creditor c/o Goodkin & Lynch 5060 Montclair Plaza Lane Owner, LLC [email protected], [email protected] Ronald M Tucker, Esq on behalf of Creditor Simon Property Group, Inc. [email protected], [email protected];[email protected];[email protected] United States Trustee (LA) [email protected] Ashley R Wedding on behalf of Creditor Temecula Towne Center Associates L.P. [email protected], [email protected] Elizabeth Weller on behalf of Creditors Dallas County, Smith County, and Tarrant County [email protected] Timothy J Yoo on behalf of Debtor Cornerstone Apparel, Inc. [email protected]


Cornerstone Apparel, Inc. (8096) Committee

Committee Counsel Lovee D. Sarenas Lewis, Brisbois, Bisgaard & Smith LLP 633 W. 5th Street, Suite 4000 Los Angeles, CA 90071

Committee Counsel Richard Lauter Lewis, Brisbois, Bisgaard & Smith LLP 550 West Adams Street, Suite 300 Chicago, IL 60661

Reflex Trading Inc. c/o Richard H. Song, Owner 1100 S. San Pedro Street, #D-4 Los Angeles, CA 90015

Fashion Magazine Inc. dba Fashion Art c/o William Waneo Ha, CEO 1100 S. San Pedro St., D-l Los Angeles, CA 90015

Xenos Fashion Inc. dba Belinda 1616 E. 14th Street Los Angeles, CA 90021

John Lee 3731 Wilshire Blvd., Suite 940 Los Angeles, CA 90010

GGP Limited Partnership Attn: Julie Minnick Bowden, National Bankruptcy Manager 110 North Wacker Drive Chicago, IL 60606

Ivan Gold, Esq. Allen Matkins Leck Gamble & Mallory, LLP Three Embarcadero Center, 12th FI. San Francisco, CA 94111-4015

Daniela Lee, General Manager dba Chocolate USA 1150 Crocker Street Los Angeles, CA 90021

Simon Property Group 225 West Washington Street Indianapolis, IN 46204

Ronald M. Tucker 225 West Washington Street Indianapolis, IN 46204

Hana Financial c/o Kevin Thomas, SVPlCustomer Credit Mgr. 1000 Wilshire Boulevard Los Angeles, CA 90017

Finance One, Inc. c/o Stephen Kim, Senior VP 801 S. Grand Avenue, Ste. 1000 Los Angeles, CA 90017

Tony Kim, Esq. Kim Park Choi & Yi 3435 Wilshire Blvd., Ste. 2150 Los Angeles, CA 90010

Alliance U.S.A., Inc. dba Ambiance Apparel c/o In Y. Noh, COO 2415 E. 15th Street Los Angeles, CA 90021


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