Case GLT Doc 18 Filed 05/16/17 Entered 05/16/17 03:04:44 Desc Main Document Page 1 of 16

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1 Case GLT Doc 18 Filed 05/16/17 Entered 05/16/17 03:04:44 Desc Main Document Page 1 of 16 IN THE UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA ) In re: ) ) rue21, inc., et al., 1 ) Case No (GLT) ) Debtors. ) Chapter 11 ) (Joint Administration Requested) rue21, inc., et al., ) ) Movants, ) ) v. ) ) No Respondent. ) ) Respondent. ) ) DEBTORS EMERGENCY MOTION FOR ENTRY OF INTERIM AND FINAL ORDERS (I) PROHIBITING UTILITY PROVIDERS FROM ALTERING, REFUSING, OR DISCONTINUING UTILITY SERVICES, (II) DETERMINING ADEQUATE ASSURANCE OF PAYMENT FOR FUTURE UTILITY SERVICES, (III) ESTABLISHING PROCEDURES FOR DETERMINING ADEQUATE ASSURANCE OF PAYMENT, AND (IV) GRANTING RELATED RELIEF rue21, inc. and its debtor affiliates, as debtors and debtors in possession in the abovecaptioned chapter 11 cases (collectively, the Debtors ), 2 respectfully state the following: 1 2 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, include: rue21, inc. (1645); Rhodes Holdco, Inc. (6922); r services llc (9425); and rue services corporation (0396). The location of the Debtors service address is: 800 Commonwealth Drive, Warrendale, Pennsylvania A detailed description of the Debtors and their business, and the facts and circumstances supporting this Motion and the Debtors chapter 11 cases, is set forth in greater detail in the Declaration of Todd M. Lenhart, Acting Chief Financial Officer and Senior Vice President of Accounting of rue21, inc. in Support of Chapter 11 Petitions and First Day Motions (the First Day Declaration ), filed contemporaneously with the Debtors voluntary petitions for relief filed under chapter 11 of title 11 of the United States Code, 11 U.S.C (the Bankruptcy Code ), on May 15, 2017 (the Petition Date ). The First Day Declaration is fully incorporated herein by reference. KE

2 Case GLT Doc 18 Filed 05/16/17 Entered 05/16/17 03:04:44 Desc Main Document Page 2 of 16 Relief Requested 3 1. By this motion (this Motion ), the Debtors seek entry of interim and final orders, substantially in the forms attached hereto as Exhibit A and Exhibit B (respectively, the Interim Order and the Final Order ), subject to (x) any order approving the Debtors use of cash collateral and/or any postpetition financing facilities (the DIP Order ) the documentation in respect of any such postpetition financing facilities and/or use of cash collateral (the DIP Documents ), the budget governing any such postpetition financing and/or use of cash collateral (the DIP Budget ) and (y) any and all claims, liens, security interests, and priorities granted in connection with such postpetition financing facilities and/or use of cash collateral (the DIP Claims ): (a) prohibiting utility providers from altering, refusing, or discontinuing services; (b) determining adequate assurance of payment for future utility services; (c) establishing procedures for determining adequate assurance of payment for future utility services; and (d) granting related relief. In addition, the Debtors request that the Bankruptcy Court schedule a final hearing within approximately 25 days of the commencement of these chapter 11 cases to consider approval of this Motion on a final basis. Jurisdiction and Venue 2. The United States Bankruptcy Court for the Western District of Pennsylvania (the Bankruptcy Court ) has jurisdiction over this matter pursuant to 28 U.S.C. 157 and This is a core proceeding pursuant to 28 U.S.C. 157(b). The Debtors confirm their consent, pursuant to rule 7008 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ), to the entry of a final order by the Bankruptcy Court in connection with this Motion to the extent that it is later determined that the Bankruptcy Court, absent 3 Capitalized terms used and not defined have the same meanings given to such terms elsewhere in this Motion or in the First Day Declaration, as applicable. 2

3 Case GLT Doc 18 Filed 05/16/17 Entered 05/16/17 03:04:44 Desc Main Document Page 3 of 16 consent of the parties, cannot enter final orders or judgments in connection herewith consistent with Article III of the United States Constitution. 3. Venue is proper pursuant to 28 U.S.C and The bases for the relief requested herein are sections 105(a) and 366 of the Bankruptcy Code, Bankruptcy Rule 6003, and Rule of the Local Bankruptcy Rules of the United States Bankruptcy Court for the Western District of Pennsylvania ( W.PA.LBR ). Background 5. rue21, inc. is a specialty fashion retailer of girls and guys apparel and accessories. As of the Petition Date, the Debtors had approximately 1,179 stores in various strip centers, regional malls, and outlet centers throughout the contiguous 48 states. The Debtors have various core rue21 brands in girls apparel (rue21), intimate apparel (true), girls accessories (etc!), girls cosmetics (ruebeauté!), guys apparel and accessories (Carbon), girls plus-size apparel (rue+), and girls swimwear (ruebleu). These rue21 brands focus on Fashion Meets Value providing quality, yet affordable, young adult clothing. The Debtors sell their merchandise to customers in the contiguous United States through their online store as well as in typical brick and mortar locations. The Debtors are headquartered in Warrendale, Pennsylvania and have one distribution center located in Weirton, West Virginia. 6. On the date hereof, each of the Debtors filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. The Debtors are operating their business and managing their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. No request for the appointment of a trustee or examiner has been made in these chapter 11 cases and no official committees have been appointed or designated. 3

4 Case GLT Doc 18 Filed 05/16/17 Entered 05/16/17 03:04:44 Desc Main Document Page 4 of The Debtors have submitted various first day motions that seek to stabilize the Debtors business operations and allow the Debtors to commence these chapter 11 cases in the best position possible to maximize the value of their estates. The Debtors have also requested the Bankruptcy Court designate the chapter 11 cases as complex cases pursuant to W.PA.LBR , and to jointly administer them pursuant to Bankruptcy Rule 1015(b). The Utility 8. In connection with the operation of their business, the Debtors obtain water, sewer service, waste disposal, natural gas, electricity, telecommunications, internet access and service, and other similar services (collectively, the Utility ) from a number of utility providers or their brokers (collectively, the Utility Providers ). In order to manage the Debtors payments owed to the various Utility Providers, rue21, inc. entered into a Total Energy & Sustainability Service Agreement with Ecova, Inc. ( Ecova ), dated December 12, 2013 (the Ecova Agreement ). Pursuant to the Ecova Agreement, the Debtors pay Ecova the amounts invoiced for the Utility plus Ecova s fee, of approximately $5,400 per month, in the ordinary course of business. Pursuant to the leases for several of the Debtors stores, certain Utility are billed directly to the Debtors landlords as part of the Debtors lease payments, including 356 water and sewage services, 242 trash services, 190 electric services, 14 gas services, and 7 other miscellaneous services. A nonexclusive list of the Utility Providers and their affiliates that provide Utility to the Debtors as of the Petition Date (the Utility Providers List ) is attached hereto as Exhibit C. 4 The relief requested herein is requested with respect to all Utility Companies providing Utility to the Debtors. 4 Although Exhibit C is intended to be comprehensive, the Debtors may have inadvertently omitted one or more Utility Providers. By this Motion, the Debtors request relief applicable to all Utility Providers, regardless of whether such Utility Provider is specifically identified on Exhibit C. 4

5 Case GLT Doc 18 Filed 05/16/17 Entered 05/16/17 03:04:44 Desc Main Document Page 5 of Preserving Utility on an uninterrupted basis is essential to the Debtors operations. The Debtors business includes approximately 1,179 brick and mortar retail locations, as well as a distribution center and corporate offices. These locations require electricity, telecommunications, internet, water, waste management (including sewer and trash), and other utility services to operate. Should any Utility Provider refuse or discontinue service, even for a brief period, the Debtors business operations would be disrupted, which could jeopardize the Debtors ability to effectively administer these chapter 11 cases. Any disruption in Utility would also adversely affect customer goodwill and employee relations, which would negatively affect the Debtors revenues. Accordingly, it is essential that the Utility continue uninterrupted during the chapter 11 cases. 10. The Debtors pay approximately $2.0 million each month for Utility, calculated as a historical average payment for the twelve-month period ended January 31, 2017, including services paid under the Ecova Agreement and certain services paid directly by the Company. The Debtors estimate that their cost for Utility during the next 30 days (excluding any deposits to be paid or fees payable to Ecova) will be approximately $2.0 million. The Debtors estimate that the aggregate amount currently held as deposits or prepayments by the Utility Providers providing services to stores that the Debtors intend to continue operating is approximately $400, I. The Proposed Adequate Assurance and Adequate Assurance Procedures 11. The Debtors intend to have postpetition obligations paid to the Utility Providers in a timely manner. Various sources of cash, including, cash on hand, cash generated in the 5 The Debtors estimate that Utility Providers servicing stores where the Debtors are currently conducting going out of business sales or where the Debtors intend to conduct such sales in the future hold approximately $200,000 in additional deposits, which the Debtors intend to recover during these chapter 11 cases. 5

6 Case GLT Doc 18 Filed 05/16/17 Entered 05/16/17 03:04:44 Desc Main Document Page 6 of 16 ordinary course of business, and cash available under any postpetition financing facility, will provide sufficient liquidity to pay for Utility consistent with ordinary course prepetition practices. 12. To provide additional assurance of payment, the Debtors propose to deposit $600,000 into a segregated account (the Adequate Assurance Deposit ). The Adequate Assurance Deposit equals approximately two (2) weeks of Utility, calculated as a historical average over the twelve months ended January 31, 2017, net of any prepetition deposits, letters of credit, or surety bonds already provided to the Utility Providers in the ordinary course of business. The Adequate Assurance Deposit will be held in a segregated account at Bank of America for the benefit of the Utility Providers (the Adequate Assurance Account ) for the duration of these chapter 11 cases and may be applied to any postpetition payment defaults owed to the Utility Companies by the Debtors. The Debtors submit that the Adequate Assurance Deposit, in conjunction with the Debtors ability to pay for future utility services in accordance with their prepetition practices (collectively, the Proposed Adequate Assurance ), constitutes sufficient adequate assurance to the Utility Companies in full satisfaction of section 366 of the Bankruptcy Code. 13. Nevertheless, if any Utility Provider makes a further request for adequate assurance of future payment (each, an Adequate Assurance Request ), the Debtors request they be required to do so pursuant to the following procedures (the Adequate Assurance Procedures ): a. The Debtors will serve a copy of this Motion and the order granting the relief requested herein to each Utility Provider within three business days after entry of the order by the Bankruptcy Court. b. Subject to paragraphs (e) (h) herein, the Debtors will deposit the Adequate Assurance Deposit, in the aggregate amount of $600,000 in the 6

7 Case GLT Doc 18 Filed 05/16/17 Entered 05/16/17 03:04:44 Desc Main Document Page 7 of 16 Adequate Assurance Account within five business days after entry of the order granting this Motion. c. If an amount relating to Utility provided postpetition by a Utility Provider is unpaid, and remains unpaid beyond any applicable grace period, such Utility Provider may request a disbursement from the Adequate Assurance Account by giving notice to: (i) the Debtors, rue21, inc., 800 Commonwealth Drive, Warrendale, Pennsylvania 15086, Attn: Benjamin R. Gross; (ii) proposed counsel to the Debtors, Kirkland & Ellis LLP, 601 Lexington Ave., New York, New York 10022, Attn: Jonathan S. Henes, Nicole L. Greenblatt, Robert A. Britton, and George Klidonas; (iii) proposed local counsel to the Debtors Reed Smith LLP, 225 Fifth Ave., Pittsburgh, Pennsylvania 15222, Attn: Eric A. Schaffer and Jared S. Roach; (iv) counsel to any statutory committee appointed in these cases; (v) counsel to the ABL Agent and the DIP ABL Agent, Morgan Lewis & Bockius LLP, One Federal Street, Boston, Massachusetts 02110, Attn: Julia Frost-Davies and Amelia C. Joiner, and Buchanan Ingersoll & Rooney PC, One Oxford Centre, 301 Grant Street, 20th Floor, Pittsburgh, Pennsylvania , Attn: James D. Newell and Timothy Palmer; (vi) counsel to the Term Loan Agent and the DIP Term Loan Agent, Jones Day, 250 Vesey Street, New York, New York 10281, Attn: Scott J. Greenberg and Michael J. Cohen; (vii) counsel to Apax Partners, L.P., Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York, New York 10017, Attn: Elisha D. Graff, Nicholas Baker, and Jonathan E. Endean; (viii) the Office of The United States Trustee, U.S. Federal Office Building, Liberty Center, 1001 Liberty Ave., Suite 970, Pittsburgh, Pennsylvania 15222, Attn: Heather Sprague; and (ix) to the extent not listed herein, those parties requesting notice pursuant to Bankruptcy Rule 2002 (collectively, the Notice Parties ). The Debtors shall honor such request within five business days after the date the request is received by the Debtors, subject to the ability of the Debtors and any such requesting Utility Provider to resolve any dispute regarding such request without further order of the Bankruptcy Court. To the extent a Utility Provider receives a disbursement from the Adequate Assurance Account, the Debtors shall replenish the Adequate Assurance Account in the amount disbursed. d. The portion of the Adequate Assurance Deposit attributable to each Utility Provider will be returned to the Debtors on the earlier of: (i) reconciliation and payment by the Debtors of the Utility Provider s final invoice in accordance with applicable nonbankruptcy law following the Debtors termination of Utility from such Utility Provider; and (ii) the effective date of any chapter 11 plan confirmed in these chapter 11 cases. 7

8 Case GLT Doc 18 Filed 05/16/17 Entered 05/16/17 03:04:44 Desc Main Document Page 8 of 16 e. Any Utility Provider desiring additional assurances of payment in the form of deposits, prepayments, or otherwise must serve a request for additional assurance (an Additional Assurance Request ) on the Notice Parties. f. Any Additional Assurance Request must: (i) be made in writing; (ii) identify the location for which Utility are provided; (iii) include information regarding any security deposits paid by the Debtors; (iv) provide evidence that the Debtors have a direct obligation to the Utility Provider; and (v) explain why the Utility Provider believes the Proposed Adequate Assurance is not sufficient adequate assurance of future payment. g. An Additional Assurance Request may be made at any time. If a Utility Provider fails to file and serve an Additional Assurance Request, the Utility Provider shall be: (i) deemed to have received satisfactory adequate assurance of payment in compliance with section 366 of the Bankruptcy Code; and (ii) forbidden from discontinuing, altering, or refusing Utility to, or discriminating against, the Debtors on account of any unpaid prepetition charges, or requiring additional assurance of payment other than the Proposed Adequate Assurance. h. Upon the Debtors receipt of an Adequate Assurance Request, the Debtors shall have 21 days from the receipt of the Adequate Assurance Request (the Resolution Period ) to negotiate with the Utility Provider to resolve the Utility Provider s Adequate Assurance Request. i. Without further order of the Bankruptcy Court, the Debtors may enter into agreements granting additional adequate assurance to a Utility Provider serving an Additional Assurance Request if the Debtors, in consultation with the DIP Agents, determine that the Additional Assurance Request is reasonable. j. If the Debtors determine, in their discretion, that the Additional Assurance Request is not reasonable and the Debtors are unable to reach an alternative resolution with the Utility Provider, the Debtors, during or immediately after the Resolution Period, may request a hearing (a Determination Hearing ) before the Bankruptcy Court to determine the adequacy of assurance of payment with respect to that Utility Provider pursuant to section 366(c)(3) of the Bankruptcy Code. k. Pending resolution of such dispute at a Determination Hearing, the relevant Utility Provider will be prohibited from altering, refusing, or discontinuing service to the Debtors on account of: (i) unpaid charges for prepetition services; (ii) a pending Adequate Assurance Request; or (iii) any objections filed in response to the Proposed Adequate Assurance. 8

9 Case GLT Doc 18 Filed 05/16/17 Entered 05/16/17 03:04:44 Desc Main Document Page 9 of 16 l. The Adequate Assurance Deposit deposited into the Adequate Assurance Account on behalf of any Utility Provider (including any additional amount deposited upon request of any applicable Utility Provider) will be returned to the Debtors, less any amounts owed on account of unpaid, postpetition Utility, by no later than five business days after a plan becomes effective after being confirmed in these cases. Where the Debtors have provided a Utility Provider with additional Adequate Assurance to settle an Additional Adequate Assurance Request, such additional Adequate Assurance shall be returned to the Debtors no later than five business days after the Debtors provide notice to that Utility Provider that services provided to the Debtors by such Utility Provider no longer will be needed. 14. The Adequate Assurance Procedures set forth a streamlined process for Utility Providers to address potential concerns with respect to the Proposed Adequate Assurance, while allowing the Debtors to administer their chapter 11 estates uninterrupted. More specifically, the Adequate Assurance Procedures permit a Utility Provider to object to the Proposed Adequate Assurance by serving an Adequate Assurance Request upon certain notice parties. The Debtors, in their discretion, may then resolve any Adequate Assurance Request by mutual agreement with the Utility Provider and without further order of the Bankruptcy Court. If the Adequate Assurance Request cannot be resolved by mutual agreement, the Debtors may seek court resolution of the Adequate Assurance Request. 15. Absent compliance with the Adequate Assurance Procedures, the Debtors request that the Utility Providers, including subsequently added Utility Providers, be forbidden from altering, refusing, or discontinuing service or requiring additional assurance of payment other than the Proposed Adequate Assurance, pending entry of a final order approving the relief requested herein. II. Subsequently Identified Utility Providers 16. To the extent the Debtors identify new or additional Utility Providers not listed on the Utility Providers List or seek to discontinue services from certain of their existing Utility 9

10 Case GLT Doc 18 Filed 05/16/17 Entered 05/16/17 03:04:44 Desc Main Document Page 10 of 16 Providers, the Debtors seek authority to add or remove parties from the Utility Providers List. For any Utility Provider that is subsequently added to the Utility Providers List, the Debtors will serve such Utility Provider with a copy of the Order, including the Adequate Assurance Procedures, and increase the Adequate Assurance Deposit by an amount equal to two weeks of the Debtors average cost of services from the subsequently added Utility Provider, net of any prepetition deposits, letters of credit, or surety bonds already provided to the Utility Provider in the ordinary course of business. The Debtors request that the terms of such Order and the Adequate Assurance Procedures apply to any subsequently identified Utility Provider to the same extent as if the Utility Provider was listed on the original Utility Providers List attached hereto. For any Utility Provider that is subsequently removed from the Utility Providers List, the Debtors request the authority to decrease the Adequate Assurance Deposit by an amount equal to two weeks of the Debtors average cost of services from such removed Utility Provider. Basis for Relief 17. Section 366 of the Bankruptcy Code protects a debtor against the immediate termination or alteration of utility services after the Petition Date. See 11 U.S.C Section 366(c) requires the debtor to provide adequate assurance of payment for postpetition services in a form satisfactory to the utility provider within thirty days of the Petition Date, or the utility provider may alter, refuse, or discontinue service. 11 U.S.C. 366(c)(2). Section 366(c)(1) enumerates what constitutes assurance of payment. 11 U.S.C. 366(c)(1). Although assurance of payment must be adequate, it need not constitute an absolute guarantee of the debtors ability to pay. See, e.g., In re DBSI, Inc., 405 B.R. 698, 708 (Bankr. D. Del. 2009) ( Generally, adequate assurance is considered to be something less than an absolute guarantee. ). 10

11 Case GLT Doc 18 Filed 05/16/17 Entered 05/16/17 03:04:44 Desc Main Document Page 11 of When considering whether a given assurance of payment is adequate, the Bankruptcy Court should examine the totality of the circumstances to make an informed decision as to whether the Utility Provider will be subject to an unreasonable risk of nonpayment. See Mass. Elec. Co. v. Keydata Corp. (In re Keydata Corp.), 12 B.R. 156, 158 (B.A.P. 1st Cir. 1981) (citing In re Cunha, 1 B.R. 330 (Bankr. E.D. Va. 1979)); In re Adelphia Bus. Solutions, Inc., 280 B.R. 63, (Bankr. S.D.N.Y. 2002). Courts have recognized that, in determining the requisite level of adequate assurance, a bankruptcy court must focus upon the need of the utility for assurance, and... require that the debtor supply no more than that, since the debtor almost perforce has a conflicting need to conserve scarce financial resources. In re Penn Jersey Corp., 72 B.R. 981, 985 (Bankr. E.D. Pa. 1987). Accordingly, demands by a Utility Provider for a guarantee of payment should be refused when the Debtors specific circumstances already afford adequate assurance of payment. 19. Here, the Utility Providers are adequately assured against any risk of nonpayment for future services. The Adequate Assurance Deposit and the Debtors ongoing ability to meet obligations as they come due in the ordinary course provides assurance of the Debtors payment of their future obligations. Moreover, termination of the Utility could result in the Debtors inability to operate their business to the detriment of all stakeholders. Cf. In re Monroe Well Serv., Inc., 83 B.R. 317, (Bankr. E.D. Pa. 1988) (noting that without utility service, the debtors would have to cease operations and that section 366 of the Bankruptcy Code was intended to limit the leverage held by utility companies, not increase it ). 20. Courts are permitted to fashion reasonable procedures, such as the Adequate Assurance Procedures proposed herein, to implement the protections afforded under section 366 of the Bankruptcy Code. See, e.g., In re Circuit City Stores Inc., No , 11

12 Case GLT Doc 18 Filed 05/16/17 Entered 05/16/17 03:04:44 Desc Main Document Page 12 of WL , at *5 (Bankr. E.D. Va. Jan. 14, 2009) ( The plain language of 366 of the Bankruptcy Code allows the court to adopt the Procedures set forth in the Utility Order. ) Such procedures are important because, without them, the Debtors could be forced to address numerous requests by utility companies in an unorganized manner at a critical period in their efforts to reorganize. Id. Here, notwithstanding a determination that the Debtors Proposed Adequate Assurance constitutes sufficient adequate assurance, any rights the Utility Providers believe they have under sections 366(b) and 366(c)(2) of the Bankruptcy Code are wholly preserved under the Adequate Assurance Procedures. See id. at *5 6. The Utility Providers still may choose, in accordance with the Adequate Assurance Procedures, to request modification of the Proposed Adequate Assurance. See id. at *5. The Adequate Assurance Procedures, however, avoid a disorganized process whereby each Utility Provider could make a last-minute demand for adequate assurance that would force the Debtors to pay under the threat of losing critical Utility. See id. at * Because the Adequate Assurance Procedures are reasonable and in accord with the purposes of section 366 of the Bankruptcy Code, the Bankruptcy Court should grant the relief requested herein. Similar procedures have been approved by courts in this circuit. See, e.g., In re PTC Seamless Tube Corp. f/k/a PTC Alliance Pipe Acquisition LLC, No (TPA) (Bankr. W.D. Pa. May 29, 2015) (J. Agresti); In re Sports Authority Holdings, Inc., No (MFW) (Bankr. D. Del. April 1, 2016); In re Magnum Hunter Resources Corp., No (KG) (Bankr. D. Del. Jan. 11, 2016); In re Radioshack Corp., No (BLS) (Bankr. D. Del. March 4, 2015); In re Samson Resources Corp., No (CSS) (Bankr. D. Del. Oct. 14, 2015); In re Energy Future Holdings Corp., No (CSS) (Bankr. D. Del. June 4, 2014); In re GSE Envtl., Inc., No (MFW) (Bankr. D. Del. May 30, 2014); In re 12

13 Case GLT Doc 18 Filed 05/16/17 Entered 05/16/17 03:04:44 Desc Main Document Page 13 of 16 Sorenson Commc ns, Inc., No (BLS) (Bankr. D. Del. Mar. 26, 2014); In re Dolan Co., No (BLS) (Bankr. D. Del. Mar. 25, 2014) Further, the Bankruptcy Court possesses the power, under section 105(a) of the Bankruptcy Code, to issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title. 11 U.S.C. 105(a). The Adequate Assurance Procedures and the Proposed Adequate Assurance are necessary and appropriate to carry out the provisions of the Bankruptcy Code, particularly section 366. Accordingly, the Bankruptcy Court should exercise its powers under sections 366 and 105(a) of the Bankruptcy Code and approve both the Adequate Assurance Procedures and the Proposed Adequate Assurance. The Requirements of Bankruptcy Rule 6003 Are Satisfied 23. Bankruptcy Rule 6003 empowers a court to grant relief within the first 21 days after the Petition Date to the extent that relief is necessary to avoid immediate and irreparable harm. For the reasons discussed above, preventing the interruption of Utility and granting the other relief requested herein is essential to the Debtors ability to smoothly transition their operations into these chapter 11 cases. Failure to receive such authorization and other relief during the first 21 days of these chapter 11 cases would severely disrupt the Debtors ability to administer their estates at this critical juncture. For the reasons discussed herein, the relief requested is necessary in order for the Debtors to preserve and maximize the value of the Debtors estates for the benefit of all stakeholders. Accordingly, the Debtors submit that they have satisfied the immediate and irreparable harm standard of Bankruptcy Rule 6003 to support granting the relief requested herein. 6 Because of the voluminous nature of the orders cited herein, such orders have not been attached to this Motion. Copies of these orders are available upon request of the Debtors proposed counsel. 13

14 Case GLT Doc 18 Filed 05/16/17 Entered 05/16/17 03:04:44 Desc Main Document Page 14 of 16 Reservation of Rights 24. Nothing contained in this Motion or any actions taken by the Debtors pursuant to relief granted in the Interim Order or the Final Order is intended or should be construed as: (a) an admission as to the validity of any particular claim against a Debtor entity; (b) a waiver of the Debtors or any party-in-interest s rights to dispute any particular claim on any grounds; (c) a promise or requirement to pay any particular claim; (d) an implication or admission that any particular claim is of a type specified or defined in this Motion; (e) a request or authorization to assume any agreement, contract, or lease pursuant to section 365 of the Bankruptcy Code; (f) a waiver or limitation of the Debtors or any party-in-interest s rights under the Bankruptcy Code or any other applicable law; or (g) a concession by the Debtors or any party-in-interest that any liens (contractual, common law, statutory, or otherwise) satisfied pursuant to this Motion are valid, and the Debtors and all other parties-in-interest expressly reserve their rights to contest the extent, validity, or perfection or seek avoidance of all such liens. If the Bankruptcy Court grants the relief sought herein, any payment made pursuant to the Bankruptcy Court s order is not intended and should not be construed as an admission as to the validity of any particular claim or a waiver of the Debtors or any party-in-interest s rights to subsequently dispute such claim. Motion Practice 25. This Motion is accompanied by a proposed Interim Order and a proposed Final Order attached hereto as Exhibit A and Exhibit B, respectively. Accordingly, the Debtors submit that this Motion satisfies W.PA. LBR (a) and Notice 26. The Debtors will provide notice of this Motion to: (a) the Office of the United States Trustee for the Western District of Pennsylvania (the U.S. Trustee ); (b) the holders of the 50 largest unsecured claims against the Debtors (on a consolidated basis); (c) counsel to the 14

15 Case GLT Doc 18 Filed 05/16/17 Entered 05/16/17 03:04:44 Desc Main Document Page 15 of 16 ABL Agent and the DIP ABL Agent; (d) counsel to the Term Loan Agent and the DIP Term Loan Agent; (e) counsel to the Indenture Trustee; (f) counsel to Apax Partners, L.P.; (g) counsel to any appointed statutory committee; (h) the United States Attorney s Office for the Western District of Pennsylvania; (i) the Internal Revenue Service; (j) the office of the attorneys general for the states in which the Debtors operate; (k) the Securities and Exchange Commission; (l) the Utility Providers; (m) Ecova; and (n) any party that has requested notice pursuant to Bankruptcy Rule The Debtors submit that, in light of the nature of the relief requested, no other or further notice need be given. No Prior Request 27. No prior request for the relief sought in this Motion has been made to this or any other court. [Remainder of Page Left Intentionally Blank] 15

16 Case GLT Doc 18 Filed 05/16/17 Entered 05/16/17 03:04:44 Desc Main Document Page 16 of 16 WHEREFORE, the Debtors respectfully request that the Bankruptcy Court enter the Interim Order and the Final Order granting the relief requested herein and such other relief as the Bankruptcy Court deems appropriate under the circumstances. Dated: May 15, 2017 Jonathan S. Henes, P.C. (pro hac vice admission pending) Nicole L. Greenblatt, P.C. (pro hac vice admission pending) Robert A. Britton (pro hac vice admission pending) George Klidonas (pro hac vice admission pending) KIRKLAND & ELLIS LLP KIRKLAND & ELLIS INTERNATIONAL LLP 601 Lexington Avenue New York, New York Telephone: (212) Facsimile: (212) Proposed Counsel to the Debtors and Debtors in Possession /s/ Eric A. Schaffer Eric A. Schaffer (PA I.D. #30797) Jared S. Roach (PA I.D. #307541) REED SMITH LLP 225 Fifth Avenue Pittsburgh, Pennsylvania Telephone: (412) Facsimile: (412) Proposed Local Counsel to the Debtors and Debtors in Possession 16

17 Case GLT Doc 18-1 Filed 05/16/17 Entered 05/16/17 03:04:44 Desc Proposed Order Page 1 of 8 EXHIBIT A Proposed Interim Order

18 Case GLT Doc 18-1 Filed 05/16/17 Entered 05/16/17 03:04:44 Desc Proposed Order Page 2 of 8 IN THE UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA ) In re: ) ) rue21, inc., et al., 1 ) Case No (GLT) ) Debtors. ) Chapter 11 ) (Joint Administration Requested) rue21, inc., et al., ) ) Movants, ) ) v. ) ) No Respondent. ) ) Respondent. ) ) INTERIM ORDER (I) PROHIBITING UTILITY PROVIDERS FROM ALTERING, REFUSING, OR DISCONTINUING UTILITY SERVICES, (II) DETERMINING ADEQUATE ASSURANCE OF PAYMENT FOR FUTURE UTILITY SERVICES, (III) ESTABLISHING PROCEDURES FOR DETERMINING ADEQUATE ASSURANCE OF PAYMENT, AND (IV) GRANTING RELATED RELIEF Upon the motion (the Motion ) 2 of the above-captioned debtors and debtors in possession (collectively, the Debtors ) for entry of an interim order (this Interim Order ): (a) prohibiting Utility Providers from altering, refusing, or discontinuing services; (b) determining adequate assurance of payment for future Utility ; (c) establishing procedures for determining adequate assurance of payment for future Utility ; (d) granting related relief; and (e) scheduling a final hearing to consider approval of the Motion on a final basis, all as more fully set forth in the Motion; and upon the First Day Declaration; and 1 2 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, include: rue21, inc. (1645); Rhodes Holdco, Inc. (6922); r services llc (9425); and rue services corporation (0396). The location of the Debtors service address is: 800 Commonwealth Drive, Warrendale, Pennsylvania Capitalized terms used but not otherwise defined herein have the meanings ascribed to them in the Motion.

19 Case GLT Doc 18-1 Filed 05/16/17 Entered 05/16/17 03:04:44 Desc Proposed Order Page 3 of 8 this Court having jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334; and this Court having found that this is a core matter pursuant to 28 U.S.C. 157(b); and this Court having found that it may enter a final order consistent with Article III of the United States Constitution; and this Court having found that venue of this proceeding and the Motion in this district is proper pursuant to 28 U.S.C and 1409; and this Court having found that the Debtors notice of the Motion and opportunity for a hearing on the Motion were appropriate under the circumstances and that no other notice need be provided; and this Court having reviewed the Motion and having heard the statements in support of the relief requested therein at a hearing before this Court (the Hearing ); and this Court having determined that the legal and factual bases set forth in the Motion and at the Hearing establish just cause for the relief granted herein; and upon all of the proceedings had before this Court; and after due deliberation and sufficient cause appearing therefor, it is HEREBY ORDERED THAT: 1. The Motion is granted on an interim basis as set forth herein. 2. Notwithstanding anything to the contrary contained herein, any payment to be made, and any authorization contained, hereunder shall be subject to: (x) any order approving the Debtors use of cash collateral and/or any postpetition financing facilities (the DIP Order ) the documentation in respect of any such postpetition financing facilities and/or use of cash collateral (the DIP Documents ), the budget governing any such postpetition financing and/or use of cash collateral (the DIP Budget ); and (y) any and all claims, liens, security interests and priorities granted in connection with such postpetition financing facilities and/or use of cash collateral (the DIP Claims ). To the extent there is any inconsistency between the terms of the DIP Order and any action taken or proposed to be taken hereunder, the terms of the DIP Order shall control. 2

20 Case GLT Doc 18-1 Filed 05/16/17 Entered 05/16/17 03:04:44 Desc Proposed Order Page 4 of 8 3. The final hearing (the Final Hearing ) on the Motion shall be held on, 2017, at :.m., prevailing Eastern Time. Any objections or responses to entry of a final order on the Motion shall be filed on or before 4:00 p.m., prevailing Eastern Time, on, 2017, and shall be served on: (a) the Debtors, rue21, inc., 800 Commonwealth Drive, Warrendale, Pennsylvania 15086, Attn: Benjamin R. Gross; (b) proposed counsel to the Debtors, Kirkland & Ellis LLP, 601 Lexington Ave., New York, New York 10022, Attn: Jonathan S. Henes, Nicole L. Greenblatt, Robert A. Britton, and George Klidonas; (c) proposed local counsel to the Debtors, Reed Smith LLP, 225 Fifth Avenue, Pittsburgh, Pennsylvania 15222, Attn: Eric A. Schaffer and Jared S. Roach; (d) counsel to any statutory committee appointed in these cases; (e) counsel to the ABL Agent and the DIP ABL Agent, Morgan Lewis & Bockius LLP, One Federal Street, Boston, Massachusetts 02110, Attn: Julia Frost-Davies and Amelia C. Joiner, and Buchanan Ingersoll & Rooney PC, One Oxford Centre, 301 Grant Street, 20th Floor, Pittsburgh, Pennsylvania , Attn: James D. Newell and Timothy Palmer; (f) counsel to the Term Loan Agent and the DIP Term Loan Agent, Jones Day, 250 Vesey Street, New York, New York 10281, Attn: Scott J. Greenberg and Michael J. Cohen; (g) counsel to Apax Partners, L.P., Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York, New York 10017, Attn: Elisha D. Graff, Nicholas Baker, and Jonathan E. Endean; and (h) the Office of The United States Trustee, U.S. Federal Office Building, Liberty Center, 1001 Liberty Ave., Suite 970, Pittsburgh, Pennsylvania 15222, Attn: Heather Sprague. In the event no objections to entry of a final order on the Motion are timely received, this Court may enter such final order without need for the Final Hearing. 4. The following Adequate Assurance Procedures are hereby approved on an interim basis: 3

21 Case GLT Doc 18-1 Filed 05/16/17 Entered 05/16/17 03:04:44 Desc Proposed Order Page 5 of 8 a. The Debtors will serve a copy of the Motion and this Interim Order to each Utility Provider within three business days after entry of this Interim Order by the Bankruptcy Court. b. Subject to paragraphs (e) (h) herein, the Debtors will deposit the Adequate Assurance Deposit, in the aggregate amount of $600,000, in the Adequate Assurance Account within five business days after entry of this this Interim Order. c. If an amount relating to Utility provided postpetition by a Utility Provider is unpaid, and remains unpaid beyond any applicable grace period, such Utility Provider may request a disbursement from the Adequate Assurance Account by giving notice to: (i) the Debtors, rue21, inc., 800 Commonwealth Drive, Warrendale, Pennsylvania 15086, Attn: Benjamin R. Gross; (ii) proposed counsel to the Debtors, Kirkland & Ellis LLP, 601 Lexington Ave., New York, New York 10022, Attn: Jonathan S. Henes, Nicole L. Greenblatt, Robert A. Britton, and George Klidonas; (iii) proposed local counsel to the Debtors Reed Smith LLP, 225 Fifth Ave., Pittsburgh, Pennsylvania 15222, Attn: Eric A. Schaffer and Jared S. Roach; (iv) counsel to any statutory committee appointed in these cases; (v) counsel to the ABL Agent and the DIP ABL Agent, Morgan Lewis & Bockius LLP, One Federal Street, Boston, Massachusetts 02110, Attn: Julia Frost-Davies and Amelia C. Joiner, and Buchanan Ingersoll & Rooney PC, One Oxford Centre, 301 Grant Street, 20th Floor, Pittsburgh, PA , Attn: James D. Newell and Timothy Palmer; (vi) counsel to the Term Loan Agent and the DIP Term Loan Agent, Jones Day, 250 Vesey Street, New York, New York 10281, Attn: Scott J. Greenberg and Michael J. Cohen; counsel to Apax Partners, L.P., Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York, New York 10017, Attn: Elisha D. Graff, Nicholas Baker, and Jonathan E. Endean; (viii) the Office of The United States Trustee, U.S. Federal Office Building, Liberty Center, 1001 Liberty Ave., Suite 970, Pittsburgh, Pennsylvania 15222, Attn: Heather Sprague; and (ix) to the extent not listed herein, those parties requesting notice pursuant to Bankruptcy Rule 2002 (collectively, the Notice Parties ). The Debtors shall honor such request within five business days after the date the request is received by the Debtors, subject to the ability of the Debtors and any such requesting Utility Provider to resolve any dispute regarding such request without further order of the Bankruptcy Court. To the extent a Utility Provider receives a disbursement from the Adequate Assurance Account, the Debtors shall replenish the Adequate Assurance Account in the amount disbursed. d. The portion of the Adequate Assurance Deposit attributable to each Utility Provider will be returned to the Debtors on the earlier of (i) reconciliation and payment by the Debtors of the Utility Provider s final invoice in accordance with applicable nonbankruptcy law following the Debtors 4

22 Case GLT Doc 18-1 Filed 05/16/17 Entered 05/16/17 03:04:44 Desc Proposed Order Page 6 of 8 termination of Utility from such Utility Provider and (ii) the effective date of any chapter 11 plan confirmed in these chapter 11 cases. e. Any Utility Provider desiring additional assurances of payment in the form of deposits, prepayments, or otherwise must serve a request for additional assurance (an Additional Assurance Request ) on the Notice Parties. f. Any Additional Assurance Request must: (i) be made in writing; (ii) identify the location for which Utility are provided; (iii) include information regarding any security deposits paid by the Debtors; (iv) provide evidence that the Debtors have a direct obligation to the Utility Provider; and (v) explain why the Utility Provider believes the Proposed Adequate Assurance is not sufficient adequate assurance of future payment. g. An Additional Assurance Request may be made at any time. If a Utility Provider fails to file and serve an Additional Assurance Request, the Utility Provider shall be: (i) deemed to have received satisfactory adequate assurance of payment in compliance with section 366 of the Bankruptcy Code; and (ii) forbidden from discontinuing, altering, or refusing Utility to, or discriminating against, the Debtors on account of any unpaid prepetition charges, or requiring additional assurance of payment other than the Proposed Adequate Assurance. h. Upon the Debtors receipt of an Adequate Assurance Request, the Debtors shall have 21 days from the receipt of the Adequate Assurance Request (the Resolution Period ) to negotiate with the Utility Provider to resolve the Utility Provider s Adequate Assurance Request. i. Without further order of the Bankruptcy Court, the Debtors may enter into agreements granting additional adequate assurance to a Utility Provider serving an Additional Assurance Request if the Debtors, determine, in consultation with the DIP Agents, that the Additional Assurance Request is reasonable. j. If the Debtors determine, in their discretion, that the Additional Assurance Request is not reasonable and the Debtors are unable to reach an alternative resolution with the Utility Provider, the Debtors, during or immediately after the Resolution Period, may request a hearing (a Determination Hearing ) before the Bankruptcy Court to determine the adequacy of assurance of payment with respect to that Utility Provider pursuant to section 366(c)(3) of the Bankruptcy Code. k. Pending resolution of such dispute at a Determination Hearing, the relevant Utility Provider shall be prohibited from altering, refusing, or discontinuing service to the Debtors on account of: (i) unpaid charges for 5

23 Case GLT Doc 18-1 Filed 05/16/17 Entered 05/16/17 03:04:44 Desc Proposed Order Page 7 of 8 prepetition services; (ii) a pending Adequate Assurance Request; or (iii) any objections filed in response to the Proposed Adequate Assurance. l. The Adequate Assurance Deposit deposited into the Adequate Assurance Account on behalf of any Utility Provider (including any additional amount deposited upon request of any applicable Utility Provider) will be returned to the Debtors, less any amounts owed on account of unpaid, postpetition Utility, by no later than five business days after a plan becomes effective after being confirmed in these cases. Where the Debtors have provided a Utility Provider with additional Adequate Assurance to settle an Additional Adequate Assurance Request, such additional Adequate Assurance shall be returned to the Debtors no later than five business days after the Debtors provide notice to that Utility Provider that services provided to the Debtors by such Utility Provider no longer will be needed. 5. The Utility Providers are prohibited from requiring additional adequate assurance of payment other than pursuant to the Adequate Assurance Procedures. to Ecova. 6. The Debtors are authorized, but not directed, to honor their prepetition obligations 7. The Debtors will cause a copy of this Interim Order, including the Adequate Assurance Procedures, to be served on any subsequently identified Utility Provider and any such Utility Provider shall be bound by the Adequate Assurance Procedures. 8. Notwithstanding the relief granted in this Interim Order and any actions taken pursuant to such relief, nothing in this Interim Order shall be deemed: (a) an admission as to the validity of any prepetition claim against a Debtor entity; (b) a waiver of the Debtors or any other party-in-interest s right to dispute any prepetition claim on any grounds; (c) a promise or requirement to pay any prepetition claim; (d) an implication or admission that any particular claim is of a type specified or defined in this Interim Order or the Motion; (e) a request or authorization to assume any prepetition agreement, contract, or lease pursuant to section 365 of the Bankruptcy Code; (f) a waiver or limitation of the Debtors rights or the rights of any other person under the Bankruptcy Code or any other applicable law; or (g) a concession by the 6

24 Case GLT Doc 18-1 Filed 05/16/17 Entered 05/16/17 03:04:44 Desc Proposed Order Page 8 of 8 Debtors or any other party-in-interest that any liens (contractual, common law, statutory, or otherwise) satisfied pursuant to the Motion are valid, and the Debtors and all other parties-ininterest expressly reserve their rights to contest the extent, validity, or perfection or seek avoidance of all such liens. 9. The contents of the Motion satisfy the requirements of Bankruptcy Rule 6003(b). 10. Notice of the Motion as provided therein is deemed good and sufficient notice of such Motion and the local rules of this Court are satisfied by such notice. 11. The terms and conditions of this Interim Order are immediately effective and enforceable upon its entry. 12. The Debtors are authorized to take all actions necessary to effectuate the relief granted in this Interim Order in accordance with the Motion. 13. This Court retains jurisdiction with respect to all matters arising from or related to the implementation, interpretation, and enforcement of this Interim Order. Pittsburgh, Pennsylvania Dated: May, 2017 UNITED STATES BANKRUPTCY JUDGE 7

25 Case GLT Doc 18-2 Filed 05/16/17 Entered 05/16/17 03:04:44 Desc Proposed Order Page 1 of 7 EXHIBIT B Proposed Final Order

26 Case GLT Doc 18-2 Filed 05/16/17 Entered 05/16/17 03:04:44 Desc Proposed Order Page 2 of 7 IN THE UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA ) In re: ) ) rue21, inc., et al., 1 ) Case No (GLT) ) Debtors. ) Chapter 11 ) (Joint Administration Requested) rue21, inc., et al., ) ) Movants, ) ) v. ) ) No Respondent. ) ) Respondent. ) ) FINAL ORDER (I) PROHIBITING UTILITY PROVIDERS FROM ALTERING, REFUSING, OR DISCONTINUING UTILITY SERVICES, (II) DETERMINING ADEQUATE ASSURANCE OF PAYMENT FOR FUTURE UTILITY SERVICES, (III) ESTABLISHING PROCEDURES FOR DETERMINING ADEQUATE ASSURANCE OF PAYMENT, AND (IV) GRANTING RELATED RELIEF Upon the motion (the Motion ) 2 of the above-captioned debtors and debtors in possession (collectively, the Debtors ) for entry of a final order (this Final Order ): (a) prohibiting Utility Providers from altering, refusing, or discontinuing services; (b) determining adequate assurance of payment for future Utility ; (c) establishing procedures for determining adequate assurance of payment for future Utility ; and (d) granting related relief; all as more fully set forth in the Motion; and upon the First Day 1 2 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, include: rue21, inc. (1645); Rhodes Holdco, Inc. (6922); r services llc (9425); and rue services corporation (0396). The location of the Debtors service address is: 800 Commonwealth Drive, Warrendale, Pennsylvania Capitalized terms used but not otherwise defined herein have the meanings ascribed to them in the Motion.

27 Case GLT Doc 18-2 Filed 05/16/17 Entered 05/16/17 03:04:44 Desc Proposed Order Page 3 of 7 Declaration; and this Court having jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334; and this Court having found that this is a core matter pursuant to 28 U.S.C. 157(b); and this Court having found that it may enter a final order consistent with Article III of the United States Constitution; and this Court having found that venue of this proceeding and the Motion in this district is proper pursuant to 28 U.S.C and 1409; and this Court having found that the Debtors notice of the Motion and opportunity for a hearing on the Motion were appropriate under the circumstances and no other notice need be provided; and this Court having reviewed the Motion and having heard the statements in support of the relief requested therein at a hearing before this Court (the Hearing ); and this Court having determined that the legal and factual bases set forth in the Motion and at the Hearing establish just cause for the relief granted herein; and upon all of the proceedings had before this Court; and after due deliberation and sufficient cause appearing therefor, it is HEREBY ORDERED THAT: 1. The Motion is granted on a final basis as set forth herein. 2. Notwithstanding anything to the contrary contained herein, any payment to be made, and any authorization contained, hereunder shall be subject to: (x) any order approving the Debtors use of cash collateral and/or any postpetition financing facilities (the DIP Order ) the documentation in respect of any such postpetition financing facilities and/or use of cash collateral (the DIP Documents ), the budget governing any such postpetition financing and/or use of cash collateral (the DIP Budget ); and (y) any and all claims, liens, security interests and priorities granted in connection with such postpetition financing facilities and/or use of cash collateral (the DIP Claims ). To the extent there is any inconsistency between the terms of the DIP Order and any action taken or proposed to be taken hereunder, the terms of the DIP Order shall control. 2