Case KLP Doc 1452 Filed 01/09/18 Entered 01/09/18 23:14:04 Desc Main Document Page 1 of 82

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1 Document Page 1 of 82 Kenneth H. Eckstein (admitted pro hac vice) Robert T. Schmidt (admitted pro hac vice) Stephen D. Zide (admitted pro hac vice) Rachael L. Ringer (admitted pro hac vice) KRAMER LEVIN NAFTALIS & FRANKEL LLP 1177 Avenue of the Americas New York, New York Telephone: (212) Facsimile: (212) Cullen D. Speckhart (VSB No ) WOLCOTT RIVERS GATES 919 E. Main Street, Suite 2010 Richmond, VA Bendix Road, Suite 300 Virginia Beach, VA Telephone: (757) IN THE UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF VIRGINIA RICHMOND DIVISION ) In re: ) Chapter 11 ) TOYS R US, INC., et al., 1 ) Case No (KLP) ) Debtors. ) (Jointly Administered) ) ) APPLICATION OF THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS, PURSUANT TO SECTIONS 328 AND 1103 OF THE BANKRUPTCY CODE AND FEDERAL RULE OF BANKRUPTCY PROCEDURE 2014 FOR AN ORDER APPROVING THE RETENTION AND EMPLOYMENT OF BENNETT JONES LLP AS CANADIAN COUNSEL TO THE COMMITTEE NUNC PRO TUNC TO JANAURY 3, 2018 The Official Committee of Unsecured Creditors (the Committee ) appointed in the above-captioned proceedings (the Chapter 11 Cases ) of Toys R Us, Inc. and its abovecaptioned debtor affiliates, as debtors and debtors in possession (collectively, the Debtors ), files this application (the Application ) for entry of an order substantially in the form attached hereto as Exhibit A (the Order ) authorizing the Committee to retain and employ 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, are set forth in the Debtors Motion for Entry of an Order (I) Directing Joint Administration of Chapter 11 Cases and (II) Granting Related Relief [Docket No. 10]. The location of the Debtors service address is One Geoffrey Way, Wayne, NJ

2 Document Page 2 of 82 Bennett Jones LLP ( Bennett Jones or the Firm ) as its counsel nunc pro tunc to January 3, In support of this Application, the Committee submits (i) the Declaration of Kevin Zych, a partner at the Firm, attached hereto as Exhibit B (the Zych Declaration ) and (ii) the Declaration of Ronald M. Tucker, of Simon Property Group, in its capacity as the Committee s co-chairperson, attached hereto as Exhibit C (the Tucker Declaration ). In further support of this Application, the Committee respectfully represents as follows: Jurisdiction and Venue 1. This Court has jurisdiction to consider this matter pursuant to 28 U.S.C. 157 and This is a core proceeding pursuant to 28 U.S.C. 157(b)(2). Furthermore, pursuant to paragraph 23 of the Proposed Cross-Border Protocol and Guidelines (the Cross-Border Protocol ) attached as Exhibit 1 to the Amended Order Approving the Cross-Border Protocol [Docket No. 725], any professionals retained by the Committee shall be subject to the sole and exclusive jurisdiction of the United States Bankruptcy Court for the Eastern District of Virginia. 2. Venue is proper before this Court pursuant to 28 U.S.C and Relief Requested 3. By this Application, the Committee seeks entry of the Order authorizing the retention and employment of Bennett Jones as Canadian counsel in these Chapter 11 Cases effective as of January 3, The Committee requests that the Court approve the retention of the Firm in accordance with the terms and conditions set forth herein and in the Zych Declaration. 4. The statutory bases for the relief requested in this Application are sections 328(a), and 1103 of title 11 of the United States Code, 11 U.S.C (the 2

3 Document Page 3 of 82 Bankruptcy Code ), Rules 2014(a) and 2016 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ), and Rules and of the Bankruptcy Local Rules of the United States Bankruptcy Court for the Eastern District of Virginia (the Local Rules ). Relevant Background 5. On September 18, 2017 (the Petition Date ), each of the Debtors commenced a voluntary case under chapter 11 of the Bankruptcy Code in this Court. The Debtors are authorized to operate their businesses and manage their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. 6. The Debtors Chapter 11 Cases have been consolidated for procedural purposes only and are being jointly administered pursuant to Bankruptcy Rule 1015(b) and Local Rule On September 26, 2017, the United States Trustee for the Eastern District of Virginia (the U.S. Trustee ), pursuant to sections 1102(a) and (b) of title 11 of the Bankruptcy Code, appointed the Committee to serve as the Committee for each Debtor and to represent the interests of all unsecured creditors in these Chapter 11 Cases. The members appointed to the Committee are: (i) The Bank of New York Mellon, (ii) Euler Hermes North America Insurance Co., (iii) Evenflo Company Inc., (iv) Huffy Corporation, (v) KIMCO Realty, (vi) LEGO Systems, Inc., (vii) Mattel, Inc., (viii) Simon Property Group, Inc., and (ix) Veritiv Operating Company. The Committee has appointed the following two members as the co-chairs: Mattel, Inc. and Simon Property Group, Inc. 8. As of July 2017, the Debtors operated approximately 1,600 stores worldwide, which included stores in Canada. Declaration of David. A. Brandon, Chairman of the Board and Chief Executive Officer of Toys R Us, Inc., in Support of Chapter 11 Petitions and First Day Motions (the First Day Affidavit ) [Docket No. 20] at

4 Document Page 4 of Toys R Us (Canada) Ltd. / Toys R Us (Canada) Ltee ( Toys Canada ), the Debtors Canadian subsidiary, is a borrower under a sub-facility of the prepetition Delaware Secured ABL Credit Facility with a total outstanding of $1.025 billion as of September 17, Id. at 24, 81. Toys Canada is also a party to an intercompany shared services agreement and has advanced intercompany loans to Toys Delaware. Id. at Due to its status as borrower under the prepetition Delaware Secured ABL Credit Facility and its potential status as borrower under DIP facilities, Toys Canada filed for chapter 11 protection and commenced a plenary restructuring proceeding under Canada s Companies Creditors Arrangement Act (the CCAA Proceedings ) before the Ontario Superior court of Justice in Toronto, Ontario (the Canadian Court ). Id. at Toys Canada ultimately became a borrower under the proposed North American DIP ABL/FILO which includes a sub-facility that provided Toys Canada with a US$200 million term loan (the Canadian DIP Term Loan ) and a revolving credit facility of up to US$300 million (subject to availability under the Canadian borrowing base) (the Canadian DIP Revolving Facility and with the Canadian DIP Term Loan, the Canadian DIP Facility ). 12. On January 3, 2018, the Committee selected Bennett Jones to serve as Canadian counsel. The Committee retained Bennett Jones to advise it regarding the CCAA Proceedings and any other Canadian insolvency issues that may impact the Debtors. In addition, because Toys Canada is party to the prepetition Delaware Secured ABL Credit Facility, the Committee may need to rely upon Bennett Jones expertise in Canadian law as it relates to the Committee s investigation into the Debtors prepetition conduct linked to the Delaware Secured ABL Credit Facility. 4

5 Document Page 5 of 82 The Firm s Qualifications 13. The Committee has selected Bennett Jones to serve as Canadian counsel to the Committee and to perform any and all of the services necessary and desirable to the conduct of these Chapter 11 Cases on behalf of the Committee, including advising it regarding the current CCAA Proceedings and any other Canadian insolvency issues. 14. Toys Canada has already commenced the CCAA Proceedings, which could have significant implications for the Debtors. The Committee needs experienced counsel to analyze, monitor, and report on the CCAA Proceedings and any other potential insolvency proceedings regarding Toys Canada s assets in order to fulfill the Committee s duty towards the Debtors unsecured creditors. 15. The Committee has discussed the proposed retention with the Debtors and understand that the Debtors do not oppose the retention. 16. The Committee chose Bennett Jones as Canadian counsel because of its experience and expertise in Canadian restructuring and insolvency work, its market reputation and particularly with respect to Bennett Jones expertise in advising companies facing financial difficulties, lenders and unsecured creditors to and investors in such companies, acquirers of insolvent entities assets, and court-appointed offices insolvency proceedings. Bennett Jones has previously been involved in a wide range of restructurings and insolvencies (bankruptcies) in a variety of industry sectors with both cross border and domestic issues. 17. Bennett Jones has extensive experience in international mergers and acquisitions, corporate finance, restructuring, real estate, technology and commercial contracts, labor and employment, pensions and incentives, taxation and bankruptcy and non-bankruptcy 5

6 Document Page 6 of 82 litigation matters in Canada. Bennett Jones restructuring and insolvency lawyers have played significant roles in a wide array of restructuring and/or insolvency cases in the Canadian market, including, among others: Sears Canada Inc., Tervita Corporation, U.S. Steel Canada Inc., Target Canada Co., Sino-Forest Corporation and Nortel Network Limited. In many cases, Bennett Jones advised unsecured creditors with respect to CCAA Proceedings, and has also advised official committees of unsecured creditors in other cross-border proceedings, including, among others: CHC Helicopter, AbitibiBowater Inc., Smurfit-Stone Container Corp. and Cooper-Standard Holdings Inc. Based on such broad experience, Bennett Jones retention as Canadian counsel to the Committee is reasonable and necessary under the circumstances and in the best interest of the Debtors estates and their creditors. 18. Bennett Jones is based in Canada with five offices across Canada, including in Toronto, Calgary and Vancouver. Bennett Jones is expected to render such legal services as the Committee may consider desirable to discharge the Committee s responsibilities and further the interests of the Committee s constituents in these cases. In acting as Canadian counsel for the Committee, it is expected that the Firm s services will include, without limitation, advising the Committee with respect to the assets, liabilities, financial condition, and legal issues surrounding the Debtors Canadian operations that may be relevant to these Chapter 11 Cases. These include issues surrounding the CCAA Proceedings, which is already underway, and any issues that may arise in Canada that could affect the Debtors. Services to be Rendered 19. The Committee requires knowledgeable counsel to render these essential professional services. As noted above, Bennett Jones has substantial expertise in Canadian restructuring and insolvency law. Accordingly, the Committee respectfully submits that the Firm 6

7 Document Page 7 of 82 is uniquely well-qualified to perform these services and represent the Committee s interests in these Chapter 11 Cases. 20. The Committee has retained Kramer Levin Naftalis & Frankel, LLP ( Kramer Levin ) as lead bankruptcy counsel and has retained Wolcott Rivers Gates as local co-counsel. The Committee has also recently filed a motion to retain Berwin Leighton Paisner LLP ( Berwin Leighton ) as special foreign counsel to advise it regarding the CVA and any other U.K. insolvency issues, their impact on the Debtors, as well as other issues that may arise regarding foreign jurisdictions. 2 However, because Berwin Leighton does not have a Canadian office, the Committee now seeks to retain Bennett Jones as Canadian counsel. The Committee may file further applications to retain other counsel. Because of the respective well-defined roles of counsels to the Committee, Bennett Jones will not duplicate the services of Kramer Levin, Wolcott Rivers Gates, and Berwin Leighton, and will function cohesively with the other firms to ensure that legal services provided to the Committee are not duplicative. Moreover, at all stages of these Chapter 11 Cases, the Committee will oversee the various legal professionals retained by the Committee to further ensure that no firm duplicates the services provided by any other firm. Statement Regarding Revised Guidelines 21. As this Court is aware, on June 11, 2013, the Executive Office of the United States Trustees (the EOUST ) adopted new Guidelines for Reviewing Applications for 2 Application of the Official Committee of Unsecured Creditors, Pursuant to Sections 328 and 1103 of the Bankruptcy Code and Federal Rule of Bankruptcy Procedure 2014 for an Order Approving the Retention and Employment of Berwin Leighton Paisner LLP as Special Foreign Counsel to the Committee Nunc Pro Tunc to December 4, 2017 [Docket No. 1408] filed January 2, 2018 to be heard on January 23,

8 Document Page 8 of 82 Compensation and Reimbursement of Expenses Filed under 11 U.S.C. 330 by Attorneys in Larger Chapter 11 Cases (the Revised Guidelines ) Among other things, the Revised Guidelines require attorneys in certain larger chapter 11 cases to provide additional documentation and make significant new disclosures in connection with their retention under section 1103 and compensation under section 330 of the Bankruptcy Code. The Committee and Bennett Jones understand that the Revised Guidelines are applicable in these Chapter 11 Cases and intend to make a reasonable effort to comply with the Revised Guidelines both in connection with this Application and the interim and final fee applications to be filed by the Firm in these Chapter 11 Cases. Professional Compensation 23. As further described in the Zych Declaration, Bennett Jones intends to seek compensation for professional services rendered on an hourly basis and reimbursement of expenses incurred in connection with these Chapter 11 Cases, subject to the Court s approval and in compliance with applicable provisions of the Bankruptcy Code, the Bankruptcy Rules, the Local Rules, and any procedures or orders of the Court as are applicable to these Chapter 11 Cases. 24. Bennett Jones billing practices and rates are summarized below and are consistent with those generally governing the firm s representation of its other clients. 25. Bennett Jones current hourly billing rates, which are charged the same for both bankruptcy and nonbankruptcy clients, are as follows: 4 3 By their terms, the Revised Guidelines apply to the [U.S. Trustee s] review of applications for compensation filed by attorneys in larger chapter 11 cases, and are intended as an update to the original Guidelines adopted by the EOUST in The Firm s rates are adjusted annually starting with January 1 of each calendar year. The above listed billing rates are in effect until December 31,

9 Document Page 9 of 82 Partners Associates Students CAD$675 CAD$1,150 CAD$345 CAD$645 CAD$225 CAD$ Bennett Jones billing rates are designed to compensate the Firm fairly for the work of its professionals. The hourly fees are comparable to those charged by attorneys of similar experience and expertise for engagements of similar scope and complexity to these Chapter 11 Cases. 27. Bennett Jones hourly billing rates are subject to periodic review and adjustments to reflect, among other things, changes in responsibilities and increased experience. Bennett Jones will file a supplemental affidavit with the Court describing any increase in its billing rates and provide not less than ten (10) business days notice of such increases to the Debtors, the Committee, and the U.S. Trustee. 28. Bennett Jones hourly billing rates for professionals are not intended to, and do not, cover out-of-pocket expenses and certain elements of overhead that are typically billed separately. Accordingly, the Firm regularly charges its clients for the expenses and disbursements incurred in connection with the client s case, including, inter alia, telecommunications, photocopying, postage and package delivery charges, court fees, transcript costs, travel expenses, expenses for working meals and computer-aided research. Bennett Jones intends to seek reimbursement for expenses incurred in connection with its representation of the Committee in accordance with its normal reimbursement policies, subject to any modifications Bennett Jones is required to make to comply with the applicable provisions of the Bankruptcy Code, the Bankruptcy Rules, the Local Rules, guidelines established by the U.S. Trustee, and any procedures or other orders of the Court as are applicable to these Chapter 11 Cases. 9

10 Document Page 10 of 82 The Firm s Disinterestedness 29. The Firm has informed the Committee that in its view it: a. does not hold or represent an interest adverse to the Committee, the Debtors or the estates in the Chapter 11 Cases; b. is a disinterested person as defined by section 101(14) of the Bankruptcy Code; and c. has no connection with the Committee, the Debtors, creditors, any other party in interest, their respective attorneys and accountants, the U.S. Trustee, or any person employed in the office of the U.S. Trustee in these Chapter 11 Cases, except as may be disclosed in the Zych Declaration. 30. Bennett Jones has fully informed the Committee of its ongoing representations as described in the Zych Declaration and the Committee has consented to Bennett Jones continued representation of such entities in matters unrelated to these proceedings. 31. Bennett Jones has informed the Committee that the Firm will conduct an ongoing review of its files to ensure that no conflicts or other disqualifying circumstances exist or arise in these Chapter 11 Cases. If any new relevant facts or relationships are discovered or arise, Bennett Jones will use reasonable efforts to identify such further developments and will promptly file a supplemental declaration, as required by Bankruptcy Rule 2014(a). 32. Based on the foregoing and the Zych Declaration, Bennett Jones is a disinterested person within the meaning of section 101(14) of the Bankruptcy Code, as required by section 327(a) of the Bankruptcy Code. Supporting Authority 33. The Committee seeks to appoint Bennett Jones as its Canadian counsel in accordance with sections 328(a) and 1103 of the Bankruptcy Code. Section 328(a) authorizes a committee appointed under section 1102 of the Bankruptcy Code, with the court s approval, to 10

11 Document Page 11 of 82 employ a professional person under section 1103 of the Bankruptcy Code, as the case may be, on any reasonable terms and conditions of employment, including on a retainer, on an hourly basis, on a fixed or percentage fee basis, or on a contingent fee basis. Section 1103 of the Bankruptcy Code, in turn, requires that an attorney employed to represent a committee may not represent any other entity having an adverse interest in connection with the case. 34. The Committee submits that for all the reasons stated above and in the Zych Declaration, the retention and employment of Bennett Jones as Canadian counsel to the Committee is warranted under sections 328(a) and Further, as described in the Zych Declaration, Bennett Jones does not represent any entity in connection with the Debtors cases other than the Committee, is a disinterested person as that term is defined in section 101(14) of the Bankruptcy Code, and does not represent or hold any interest adverse to the interests of the Debtors estates with respect to the matters for which it is to be employed. Notice 35. Notice of this Application has been provided in compliance with this Court s Order (I) Establishing Certain Notice, Case Management, and Administrative Procedures and (II) Granting Related Relief (D.I. 129). The Committee submits that, in light of the nature of the relief requested, no other or further notice need be given. No Previous Request 36. No previous request for the relief sought herein has been made by the Committee to this or any other court. WHEREFORE the Committee respectfully requests that the Court grant the relief requested herein and such other and further relief as it deems just and proper. 11

12 Document Page 12 of 82 Dated: January 9, 2018 THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF TOYS R US, INC., et al. By: /s/ Ronald M. Tucker Ronald M. Tucker, not in his individual capacity, but solely on behalf of Simon Property Group, L.P., in its capacity as Co- Chair of the Official Committee of Unsecured Creditors of Toys R Us, Inc., et al. 12

13 13 Case KLP Doc 1452 Filed 01/09/18 Entered 01/09/18 23:14:04 Desc Main Document Page 13 of 82 Respectfully submitted, /s/ Cullen D. Speckhart Cullen D. Speckhart (VSB No ) WOLCOTT RIVERS GATES 919 E. Main Street, Suite 2010 Richmond, VA Bendix Road, Suite 300 Virginia Beach, VA Telephone: (757) Local Co-Counsel to the Official Committee of Unsecured Creditors AND Kenneth H. Eckstein (admitted pro hac vice) Robert T. Schmidt (admitted pro hac vice) Stephen D. Zide (admitted pro hac vice) Rachael L. Ringer (admitted pro hac vice) KRAMER LEVIN NAFTALIS & FRANKEL LLP 1177 Avenue of the Americas New York, New York Telephone: (212) Facsimile: (212) Counsel to the Official Committee of Unsecured Creditors

14 Document Page 14 of 82 EXHIBIT A Proposed Order

15 Document Page 15 of 82 IN THE UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF VIRGINIA RICHMOND DIVISION ) In re: ) Chapter 11 ) ) TOYS R US, INC., et al., 1 ) Case No (KLP) ) Debtors. ) (Jointly Administered) ) ) ORDER APPROVING THE RETENTION AND EMPLOYMENT OF BENNETT JONES LLP AS CANADIAN COUNSEL TO THE COMMITTEE NUNC PRO TUNC TO JANARY 3, 2018 Upon the Application (the Application ) 2 of the Official Committee of Unsecured Creditors (the Committee ) of the above captioned debtors and debtors in possession (the Debtors ) for an order, pursuant to Sections 328 and 1103 of title 11 of the United States Code (the Bankruptcy Code ), Rules 2014(a) and 2016 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ), and Rules and of the Local Rules of Bankruptcy Practice of the United States Bankruptcy Court for the Eastern District of Virginia (the Local Rules ), authorizing the Committee to employ and retain Bennett Jones LLP ( Bennett Jones or the Firm ) as the Committee s Canadian counsel in these Chapter 11 cases, nunc pro tunc to January 3, 2018, all as more fully described in the Application; and upon consideration of the Zych Declaration and the Tucker Declaration; and the Court having jurisdiction to consider the matters raised in the Application pursuant to 28 U.S.C. 1334; and it having authority to hear the matters raised 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, are set forth in the Debtors Motion for Entry of an Order (I) Directing Joint Administration of Chapter 11 Cases and (II) Granting Related Relief [Docket No. 10]. The location of the Debtors service address is One Geoffrey Way, Wayne, NJ Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Application.

16 Document Page 16 of 82 in the Application pursuant to 28 U.S.C. 157; and it having venue pursuant to 28 U.S.C and 1409; and the Court having found that notice of the Application has been given as set forth in the Application and that such notice is adequate and sufficient and no further notice need to be given; and the Court having reviewed the Application, the Zych Declaration and the Tucker Declaration; and the relief requested in the Application being in the best interests of the Debtors estates; and the Court having determined that there exists the required basis for the relief requested in the Application; and after due deliberation, and sufficient cause appearing therefor; It is hereby ORDERED that: 1. The Application is hereby granted to the extent set forth herein. 2. In accordance with sections 328(a) and 1103 of the Bankruptcy Code, Bankruptcy Rules 2014(a) and 2016, and Local Rules and , the Committee is hereby authorized and empowered to employ Bennett Jones as Canadian counsel in these Chapter 11 Cases, nunc pro tunc to January 3, 2018, and Bennett Jones is authorized to perform the services set forth in the Application and the Zych Declaration. 3. Bennett Jones shall be compensated for its services and reimbursed for any reasonable and necessary expenses and disbursements in accordance with the procedures set forth in sections 330 and 331 of the Bankruptcy Code, the applicable Bankruptcy Rules, Local Rules for the Eastern District of Virginia, and any other applicable procedures and orders of the Court. The Firm also intends to make a reasonable effort to comply with the U.S. Trustee s Guidelines for Reviewing Applications for Compensation and Reimbursement of Expenses Filed Under 11 U.S.C. 330 by Attorneys in Larger Chapter 11 Cases Effective as of November 1, 2013 (the Revised UST Guidelines ) and any procedures or other orders of the Court as are applicable to these Chapter 11 Cases. 2

17 Document Page 17 of The Committee is authorized and empowered to take all actions necessary to effectuate the relief granted by this Order. 5. The terms and conditions of this Order shall be immediately effective and enforceable upon its entry. 6. Prior to any increases in rates as set forth in paragraph 27 of the Application, Bennett Jones shall give ten (10) business days notice to the Committee, the Debtors, and the United States Trustee, which notice shall be filed with the Court. 7. In the event that there is any inconsistency between the Declarations, Application, or Order, this Order shall govern. 8. This Court shall retain exclusive jurisdiction to hear and determine all matters arising from or related to the implementation, interpretation and/or enforcement of this Order. Dated:, 2018 Richmond, Virginia THE HONORABLE KEITH L. PHILLIPS UNITED STATES BANKRUPTCY JUDGE 3

18 Document Page 18 of 82 WE ASK FOR THIS: /s/ Cullen D. Speckhart (VSB No ) WOLCOTT RIVERS GATES 919 E. Main Street, Suite 2010 Richmond, VA Bendix Road, Suite 300 Virginia Beach, VA Telephone: (757) Local Co-Counsel to the Official Committee of Unsecured Creditors AND Kenneth H. Eckstein (admitted pro hac vice) Robert T. Schmidt (admitted pro hac vice) Stephen D. Zide (admitted pro hac vice) Rachael L. Ringer (admitted pro hac vice) KRAMER LEVIN NAFTALIS & FRANKEL LLP 1177 Avenue of the Americas New York, New York Telephone: (212) Facsimile: (212) Counsel to the Official Committee of Unsecured Creditors 4

19 Document Page 19 of 82 CERTIFICATION OF ENDORSEMENT UNDER LOCAL BANKRUPTCY RULE (C) I hereby certify that the foregoing proposed order has been endorsed by or served upon all necessary parties. /s/ 5

20 Document Page 20 of 82 Exhibit B Zych Declaration

21 Document Page 21 of 82 Kenneth H. Eckstein (admitted pro hac vice) Robert T. Schmidt (admitted pro hac vice) Stephen D. Zide (admitted pro hac vice) Rachael L. Ringer (admitted pro hac vice) KRAMER LEVIN NAFTALIS & FRANKEL LLP 1177 Avenue of the Americas New York, New York Telephone: (212) Facsimile: (212) Cullen D. Speckhart (VSB No ) WOLCOTT RIVERS GATES 919 E. Main Street, Suite 2010 Richmond, VA Bendix Road, Suite 300 Virginia Beach, VA Telephone: (757) IN THE UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF VIRGINIA RICHMOND DIVISION ) In re: ) Chapter 11 ) TOYS R US, INC., et al., 1 ) Case No (KLP) ) Debtors. ) (Jointly Administered) ) ) DECLARATION OF KEVIN ZYCH IN SUPPORT OF APPLICATION OF THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS, PURSUANT TO SECTION 328 AND 1103 OF THE BANKRUPTCY CODE AND FEDERAL RULE OF BANKRUPTCY PROCEDURE 2014 FOR AN ORDER APPROVING THE RETENTION AND EMPLOYMENT OF BENNETT JONES LLP AS CANADIAN COUNSEL TO THE COMMITTEE NUNC PRO TUNC TO JANUARY 3, 2018 Kevin Zych makes this declaration under 28 U.S.C. 1746, and states the following: 1. I am an attorney at law admitted to practice in the Canadian province of Ontario and am a partner of the law firm of Bennett Jones LLP ( Bennett Jones ), which is located at 3400 One First Canadian Place, Toronto, Ontario, M5X 1A4 Canada. I make this 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, are set forth in the Debtors Motion for Entry of an Order (I) Directing Joint Administration of Chapter 11 Cases and (II) Granting Related Relief [Docket No. 10]. The location of the Debtors service address is One Geoffrey Way, Wayne, NJ

22 Document Page 22 of 82 declaration (the Declaration ) in support of the application dated January 9, 2018 (the Application ) of the duly-appointed Official Committee of Unsecured Creditors (the Committee ) in the chapter 11 cases of the above captioned debtors and debtors-in-possession (collectively the Debtors ) seeking an order authorizing the retention of Bennett Jones as Canadian counsel, nunc pro tunc to January 3, 2018 in compliance with sections 328 and 1103 of title 11 of the United States Code (the Bankruptcy Code ), and to provide the disclosure required under Rules 2014 and 2016 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ). 2. Unless otherwise stated in this Declaration, I have personal knowledge of the facts as set forth herein. To the extent that any information disclosed herein requires subsequent amendment and/or modification, Bennett Jones will use reasonable efforts to file a supplemental declaration reflecting such amended and/or modified information. Statement Regarding Revised Guidelines 3. Bennett Jones understands that the Revised Guidelines are applicable in these Chapter 11 Cases and intends to make a reasonable effort to comply with the Revised Guidelines in connection with both this Application and the fee requests to be filed by Bennett Jones in these Chapter 11 Cases. Scope of Services 4. Bennett Jones is willing to serve as Canadian counsel to the Committee in connection with these Chapter 11 Cases and to perform all necessary legal services in connection therewith, as is detailed in the Application. Since its retention on January 3, 2018, at the request of the Committee, Bennett Jones immediately commenced work on time-sensitive matters and promptly devoted substantial resources to the Debtors cases, including advising the Committee on 2

23 Document Page 23 of 82 the CCAA Proceedings, 2 prior to submission and approval of this Application. Accordingly, the Committee requests approval of the Application nunc pro tunc to the date that Bennett Jones was retained on January 3, Billing and Compensation 5. Bennett Jones has agreed to receive compensation and reimbursement of expenses in accordance with its standard billing practices and subject to this Court s approval, pursuant to the Bankruptcy Code, the Bankruptcy Rules, the Local Rules, and any procedures or orders of the Court as are applicable to these Chapter 11 Cases. 6. Bennett Jones standard billing practices and rates, which are described below, are consistent with those generally governing the firm s representation of its other clients. 7. Bennett Jones hourly rates, which are charged the same for both bankruptcy and nonbankruptcy clients, are as follows: 3 Partners Associates Students CAD$675 CAD$1,150 CAD$345 CAD$645 CAD$225 CAD$ Hourly rates vary with the experience and seniority of the individuals assigned. These hourly rates are set at a level designed to compensate Bennett Jones fairly for the work of its attorneys and paraprofessionals and to cover fixed and routine overhead expenses. The hourly fees are comparable to those charged by attorneys of similar experience and expertise for engagements of similar scope and complexity to these Chapter 11 Cases. 9. The rate structure provided by Bennett Jones is substantially similar to (a) 2 Terms not defined herein shall have the definitions given to them in the Application. 3 Bennett Jones rates are adjusted annually on January 1 of each year. The above listed billing rates are in effect until December 31,

24 Document Page 24 of 82 the rates that Bennett Jones charges for other similar types of representations or (b) the rates that other comparable counsel would charge to do work substantially similar to the work Bennett Jones will perform in these Chapter 11 Cases. 10. Bennett Jones hourly billing rates are subject to periodic adjustments to reflect economic and other conditions. If at any time Bennett Jones increases the rates for its services in connection with the engagement, Bennett Jones will file a supplemental affidavit with the Court describing such increases and provide notice of such increases to the Debtors, the Committee, and the U.S. Trustee 11. Bennett Jones regularly charges its clients for expenses incurred by it in connection with representation of a client in a given matter. Such expenses include, without limitation, travel costs, telecommunications, express or overnight mail, messenger service, photocopying costs, document processing, overtime meals, computer research-related expenses, court fees, transcript costs and, in general, all identifiable expenses that would not have been incurred except for representation of a particular client. Bennett Jones intends to seek reimbursement for expenses incurred in connection with the engagement in accordance with the Firm s normal reimbursement policies, subject to any modifications that may be required to comply with the Bankruptcy Code, the Bankruptcy Rules, and the Local Rules and any procedures or orders of the Court as are applicable to these Chapter 11 Cases. 12. Bennett Jones understands that its compensation is subject to approval by this Court and has agreed to accept as compensation such sums as are allowed by the Court. 13. Bennett Jones intends to maintain detailed, contemporaneous time records and apply to the Court for payment of compensation and reimbursement of expenses in accordance with applicable provisions of the Bankruptcy Code, the Bankruptcy Rules, the Local 4

25 Document Page 25 of 82 Rules, and any procedures or orders of the Court as are applicable to these Chapter 11 Cases. 14. No agreement exists, nor will any be made, to share any compensation received by Bennett Jones for its services on behalf of the Committee with any other person or firm. Bennett Jones Disclosure Procedures 15. In connection with the proposed retention, I worked with the Committee s bankruptcy counsel, Kramer Levin Naftalis & Frankel LLP ( Kramer Levin ), to put together a comprehensive list of the names and types of entities who may have contacts or connections with the Debtors (the Retention Checklist ) based on information obtained from the Debtors. The categories of names that comprise the Retention Checklist is attached hereto as Schedule 1. 4 We also worked with Kramer Levin to supplement this list with all names of entities relating to certain ad hoc groups and other parties-in-interest in these Chapter 11 Cases, as well as the names of the Committee members. 16. I caused the names of the parties (the Parties ) identified on Schedule 1 to be entered into Bennett Jones conflict check database to determine whether Bennett Jones has connections to the Parties and if so, whether such connections relate in any way to the proposed representation of the Committee in this case. The Parties include, but are not limited to, the Debtors and their foreign and domestic nondebtor affiliates; the Debtors officers and directors; the Debtors primary secured lenders; the Debtors fifty largest unsecured creditors on a consolidated basis, as identified in the Debtors Chapter 11 cases; and institutions known to 4 Upon information and belief, Schedule 1 is being relied upon by the Debtors professionals in conducting their searches in connection with their retention applications. It includes all names in Schedule A to the Second Supplemental Declaration of Jonathan Goulding in Support of the Debtors Application to Employ and Retain Alvarez & Marsal North America, LLC as Restructuring Advisors to the Debtors and Debtors in Possession Pursuant to Sections 327(a) and 328 of the Bankruptcy Code Effective Nunc Pro Tunc to the Petition Date [ECF No. 1245]. 5

26 Document Page 26 of 82 Kramer Levin as holders of the Debtors secured and unsecured notes. 17. Bennett Jones will review its files periodically during the pendency of these Chapter 11 Cases to ensure that no conflicts or other disqualifying circumstances exist or arise. If any new relevant facts or relationships are discovered or arise, Bennett Jones will use reasonable efforts to identify such further developments and will promptly file a supplemental declaration, as required by Bankruptcy Rule 2014(a). 18. Based on this review process, it appears that Bennett Jones does not hold or represent an interest that is adverse to the Debtors estates and is a disinterested person who does not hold or represent any interest adverse to and has no connection (subject to the disclosures set forth below) with the Debtors herein, their creditors, the U.S. Trustee or any party-in-interest herein in the matters upon which Bennett Jones is to be retained. Accordingly, I believe Bennett Jones to be a disinterested person within the meaning of section 101(14) of the Bankruptcy Code, subject to the following disclosures: a. Prior to its proposed retention by the Committee, Bennett Jones had acted as agent and representative for service for Toys Canada in connection with the filing and registration of certain trademarks sought to be registered by Toys Canada with the Canadian Intellectual Property Office (the Canadian equivalent of the United States Patent and Trademark Office) and as agent in a proposed opposition against a third party filing a trademark application in Canada. Bennett Jones role in this regard was limited to trademark applications that had not yet been transitioned to Toys Canada s primary counsel and in the case of the opposition, acting where Toys Canada s primary counsel could not act. The accounts of Bennett Jones 6

27 Document Page 27 of 82 were de minumus (less than CAD $10,000, in aggregate, in 2016 and 2017). While Toys Canada provided written consent to Bennett Jones representation of the Committee, Bennett Jones has now also resigned as counsel on the remaining trademark applications, the opposition pending before the Canadian Intellectual Property Office and recently registered marks not yet transitioned to Toys Canada s primary counsel. In addition, all personnel and documents in respect of Bennett Jones role as agent for Toys Canada will be quarantined and not available to any persons involved in Bennett Jones representation of the Committee. There are no amounts owing by Toys Canada to Bennett Jones in connection with its prior limited role as trademark agent. Bennett Jones believes that its limited prior work with Toys Canada has not and will not affect its representation of the Committee in these Chapter 11 Cases. b. The Bank of New York Mellon is a member of the Official Committee of Unsecured Creditors. In matters wholly unrelated to these Chapter 11 Cases, Bennett Jones represents and has represented The Bank of New York Mellon and certain of its affiliates (the BNYM Entities ) in connection with lending and bankruptcy matters. Bennett Jones believes that these representations of the BNYM Entities have not and will not affect its representation of the Committee in these proceedings. c. Kimco Realty Corp. is a member of the Official Committee of Unsecured Creditors. In matters wholly unrelated to these Chapter 11 Cases, Bennett Jones represents and has represented Kimco Realty Corp. and certain of its 7

28 Document Page 28 of 82 affiliates (the Kimco Entities ) in connection with real estate and leasing matters. Bennett Jones believes that these representations of the Kimco Entities have not and will not affect its representation of the Committee in these proceedings. d. Wells Fargo Bank NA is identified on the Retention Checklist under the category of Banking Relationships. In matters wholly unrelated to these Chapter 11 Cases, Bennett Jones represents and has represented Wells Fargo Bank NA and certain of its affiliates (the Wells Fargo Entities ) in connection with lending and bankruptcy matters. Bennett Jones believes that these representations of the Wells Fargo Entities have not and will not affect its representation of the Committee in these proceedings. e. Ernst & Young LLP is identified on the Retention Checklist under the category of Vendors. In matters wholly unrelated to these Chapter 11 Cases, Bennett Jones represents and formerly represented Ernst & Young LLP and certain of its affiliates, primarily in their capacity as court-appointed officer in various insolvency proceedings in Canada. Fees collected on account of Bennett Jones representation of Ernst & Young LLP and its affiliates comprised approximately 1.1% of Bennett Jones revenues in the calendar year of Bennett Jones believes that these representations have not and will not affect its representation of the Committee in these proceedings. f. Bennett Jones restructuring and insolvency practice also involves representing holders of debt and equity securities issued by financially distressed businesses and buyers and sellers of distressed debt and 8

29 Document Page 29 of 82 securities. One or more clients of the firm may now own or later purchase secured or unsecured claims against the Debtors. Bennett Jones believes that its representation of such parties in matters unrelated to these Chapter 11 Cases will have no effect on its representation of the Committee in these Chapter 11 Cases. Bennett Jones will not advise or represent any holder of the Debtors securities in connection with these Chapter 11 Cases or any purchaser or seller of any debt or securities of the Debtors during Bennett Jones representation of the Committee. Notwithstanding the foregoing, Bennett Jones will work with Kramer Levin, Wolcott Rivers Gates, and Berwin Leighton to respond to creditor inquiries, as counsel to the Committee, in furtherance of the Committee s duties in accordance with section 1102 of the Bankruptcy Code. g. As part of Bennett Jones restructuring and insolvency practice, Bennett Jones represents companies, lenders and secured and unsecured creditors in connection with restructuring, insolvency and corporate matters. Bennett Jones may have represented, may currently or in the future represent, or be deemed adverse to, creditors or parties-in-interest in addition to those specifically disclosed herein in context of such representations in matters unrelated to these Chapter 11 Cases. Bennett Jones believes that its representation of such creditors or other parties in such other matters has not and will not affect its representation of the Committee in these Chapter 11 Cases. h. In addition to its restructuring and insolvency practice, Bennett Jones is a 9

30 Document Page 30 of 82 full service law firm with active international mergers and acquisitions, corporate finance, real estate, technology and commercial contracts, labor and employment, pensions and incentives, taxation and bankruptcy and non-bankruptcy litigation matters, among others. Bennett Jones appears in cases, proceedings and transactions involving many different attorneys, accountants, financial consultants and investment bankers, some of which now or may in the future represent claimants or parties-in-interest in these cases. Bennett Jones has not and will not represent any such entities in relation to the Debtors in these Chapter 11 Cases nor have any relationship with any such attorneys, accountants, financial consultants and investment bankers which would be adverse to the Committee, the Debtors or their estates. 19. The relationships of Bennett Jones to the parties-in-interest on the Retention Checklist, as identified pursuant to the disclosure process, are set forth in Schedule 2 hereto To the extent an issue arises in connection with any clients that, in the view of Bennett Jones, could give rise to an actual or potential conflict, the Committee will utilize conflicts counsel to address such issue. 21. Bennett Jones believes that its representation of the parties covered in the above disclosures and in Schedule 2 has not affected and will not affect its representation of the Committee in these Chapter 11 Cases. Further, the Committee has agreed to waive any actual or potential conflicts of interest that may arise from Bennett Jones representation of parties-in- 5 Except as otherwise indicated, fees collected from each of the parties identified herein and in Schedule 2 comprised less than 1.0% of Bennett Jones annual revenues for the periods January 1, 2016 to December 31, 2016 and January 1, 2017 to December 31,

31 Document Page 31 of 82 interest described above and in Schedule 2 in matters unrelated to the Debtors, the Committee or these Chapter 11 Cases. To the extent any employee of Bennett Jones has a relationship that, in the view of Bennett Jones, could give rise to an actual or potential conflict, an ethical screen will be put in place to ensure that such employee does not have access to information related to Bennett Jones representation of the Committee. Affirmative Statement of Disinterestedness 22. Based on the disclosure review process conducted to date and described herein, it appears that Bennett Jones (a) does not hold or represent an interest that is adverse to the Committee, the Debtors or the Debtors estates, (b) is a disinterested person within the meaning of section 101(14) of the Bankruptcy Code, and (c) does not hold or represent any interest adverse to and has no connection (subject to the disclosures set forth above) with the Committee, the Debtors, their creditors, the U.S. Trustee or any party-in-interest in these Chapter 11 Cases, subject to the above material disclosures. Also, Bennett Jones does not and will not represent any entities other than the Committee in matters directly related to these Chapter 11 Cases. Attorney Statement Pursuant to D.1. of the Revised Guidelines 23. The following is provided in response to the request for additional information set forth in D.1. of the Revised Guidelines. Question: Response: Did you agree to any variations from, or alternatives to, your standard or customary billing arrangements for this engagement? No. 11

32 Document Page 32 of 82 Question: Response: Do any of the professionals included in this engagement vary their rate based on the geographic location of the bankruptcy case? No. Question: If you represented the client in the twelve (12) months prepetition, disclose your billing rates and material financial terms for the prepetition engagement, including any adjustments during the 12 months prepetition. If your billing rates and material financial terms have changed postpetition, explain the difference and the reasons for the difference. Response: Bennett Jones did not represent the Committee before its formation on September 26, Bennett Jones billing rates increased since the Petition Date on January 1, 2018 in accordance with the Firm s ordinary practice of adjusting rates on January 1 of each year. Bennett Jones has in the past represented, currently represents and may represent in the future certain Committee members and/or their affiliates in their capacities as official committee members in other chapter 11 cases and/or as set forth in this Application. Question: Has your client approved your prospective budget and staffing plan, and, if so, for what budget period? Response: Bennett Jones is developing a budget and staffing plan that will be presented for approval by the Committee. * * * * Pursuant to 28 U.S.C. 1746, I declare under penalty of perjury that the foregoing is true and correct to the best of my knowledge and belief. Dated: January 9, 2018 /s/ Kevin Zych Kevin Zych BENNETT JONES LLP 12

33 Document Page 33 of 82 Schedule 1 Retention Checklist

34 Document Page 34 of 82 SCHEDULE 1(a) Debtors and Debtor Affiliates Babies R Us (Australia) Pty Ltd. Geoffrey Funds, Inc. Geoffrey Holdings, LLC Geoffrey International, LLC Geoffrey, LLC Giraffe Holdings, LLC Giraffe Junior Holdings, LLC Magic Group Investments Ltd. MAP 2005 Real Estate, LLC MAP Real Estate, LLC SALITRU Associates JV Toys "R" Us Inc. Toys (Labuan) Holding Ltd. Toys (Labuan) Holding Ltd. (BVI) Toys (Labuan) Ltd. Toys R Us Holdings (UK) Ltd. Toys R Us Holdings (UK) Ltd. (UK) Toys R Us - Delaware, Inc. Toys R Us - Japan Ltd. Toys R Us - Value Inc. Toys R Us (Asia) Ltd. Toys R Us (Australia) Pty Ltd. Toys R Us (Canada) Ltd. Toys R Us (Canada) Ltee Toys R Us (China) Limited dba Fan Dou Cheng Commercial Consulting (Shenzhen) Co. Ltd. Toys R Us (Hong Kong) Ltd. Toys R Us (Ireland) Unlimited (Ireland) Toys R Us (Taiwan) Trading Ltd. Toys R Us (UK) Ltd. Toys R Us AG Toys R Us Children s Fund Toys R Us Europe, LLC Toys R Us Financial Services Ltd. Toys R Us France Real Estate SAS Toys R Us GmbH Toys R Us Handelsgesellschaft mbh Toys R Us Holdings (China) Ltd. Toys R Us Holdings Ltd. Toys R Us Inc. Sucursal en España Toys R Us Ltd. Toys R Us Poland sp. ZOO Toys R Us Properties (UK) Ltd. Toys R Us Properties Ltd. Toys R Us Property Company I, LLC Toys R Us Property Company II, LLC Toys R Us Retailing (China) Ltd. Toys R Us SARL Toys Acquisition, LLC Toys R Us Iberia Real Estate SLU Toys R Us Iberia SAU Toys R Us Madrid SLU Toys R Us Portugal Brinquedos e Artigos Juvenis Lda. Toys Retailing (Thailand) Ltd. Toys R Us (Malaysia) Sdn. Bhd. Toys R Us (Singapore) Pte. Ltd. Toys R Us Sklep Internetowy Sp. ZOO Toys R Us Sklep Internetowy Sp. ZOO SpK TRU - SVC Inc. TRU (BVI) Asia 1 Ltd. TRU (BVI) Asia 2 Ltd. TRU (BVI) Finance I Ltd. TRU (BVI) Finance II Ltd. TRU (France) Finance Ltd. TRU (France) Holdings Ltd. TRU (HK) Ltd. (Hong Kong) TRU (Holdings) Ltd. TRU (Ireland) Holdings Unlimited TRU (Japan) Holdings Parent Ltd. TRU (UK) Asia Ltd. TRU (UK) H4 Ltd. TRU (UK) H5 Ltd. TRU (UK) H6, LLC TRU (UK) H7 Ltd. TRU (UK) H8 Ltd. TRU (UK) H9 Ltd. TRU (UK) Holdings Limited (UK) TRU (UK) Holdings Ltd. TRU (UK) Noteholder Ltd. TRU (Vermont) Inc. TRU 2005 RE I, LLC