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Elements Behavioral Health – Unsecured Creditors Committee Objects to Supplemental DIP Financing

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October 22, 2018 – Elements Behavioral Health’s Official Committee of Unsecured Creditors filed an objection to the Debtors’ motion for authority to enter into debtor-in-possession (“DIP”) financing [Docket No. 290]. The objection [Docket No. 530] asserts, “[Stalking Horse] PBBH is now reneging on its agreement to fund certain administrative expense claims, including the fees and expenses (the ‘Committee Professional Fees’) of the Committee’s professionals. This refusal will render the Debtors’ estates administratively insolvent and any chapter 11 plan un-confirmable. The Court should not authorize any additional debtor-in-possession financing (as currently requested by the Debtors in the DIP Amendment Motion in the amount of $18,000,000 (the ‘Supplemental Financing’)), if such financing will merely sustain the Debtors’ operations while PBBH competes its acquisition of the Debtors’ businesses, leaving the Debtors’ other creditors with nothing….PBBH must be required to provide for the funding and planning attendant to successfully navigate these Chapter 11 Cases from Sale closing to plan confirmation, to which it already agreed. PBBH elected to utilize the bankruptcy process to accomplish its purchase of the Debtors’ assets, it must see that process through and ensure its success for the Debtors’ estates and whole creditor body. The Court, therefore, should not authorize the Debtors’ borrowing of the Supplemental Financing sought in the DIP Amendment Motion unless PBBH adequately funds the post-Sale process and provides for an orderly resolution of these cases. Specifically, in accordance with the terms of the Settlement Term Sheet, PBBH must continue to (i) fund administrative expense claims, taxes, and other priority claims accrued through closing, and (ii) provide operating budgets necessary for navigating these cases to Sale closing and plan confirmation.”

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