{"id":"court_ctb_1216_0","court":"CTB","case_no":"22-50073","doc_number":1216,"sub_number":0,"doc_type":"ORDER","filed_date":null,"title":"UNITED STATES BANKRUPTCY COURT DISTRICT OF CONNECTICUT BRIDGEPORT DIVISION :","summary_zh":null,"summary_en":null,"body_en":"## **UNITED STATES BANKRUPTCY COURT DISTRICT OF CONNECTICUT BRIDGEPORT DIVISION**\n\n:\n\n:\n\n:\n\nIn re : Chapter 11\n\nHO WAN KWOK, *et al.* : Case No. 22-50073 (JAM)\n\nDebtors. : \\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_:\n\n\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\n\n# **HK INTERNATIONAL FUNDS INVESTMENTS (USA) LIMITED, LLC'S MOTION TO MODIFY CONSENT ORDER GRANTING HK INTERNATIONAL FUNDS INVESTMENTS (USA) LIMITED, LLC'S MOTION FOR ORDER ESTABLISHING REPAIR RESERVE FOR THE LADY MAY**\n\nHK International Funds Investments (USA) Limited, LLC (\"HK USA\"), by and through its undersigned counsel, hereby moves (the \"Motion to Modify\") to modify this Court's Consent Order Granting HK International Funds Investments (USA) Limited, LLC's Motion for Order Establishing Repair Reserve for the Lady May [Doc. No. 930] (the \"Consent Order\") to authorize and direct the Trustee [1](#page-0-0) to pay from the Repair Reserve funded by HK USA those amounts necessary to satisfy certain operating expenses (the \"Operating Expenses\") for the Lady May that have been incurred and will be incurred over the next five (5) months as further detailed herein. In support this Motion to Modify, HK USA respectfully states as follows.\n\n## **I. Introduction**\n\n1. The Lady May, like any large vessel, regularly incurs expenses related to its upkeep and maintenance, such as crew salaries, insurance premiums, dockage fees, and similar recurring costs. These expenses continue to accrue even when a vessel is inactive like the Lady May, which\n\n<span id=\"page-0-0\"></span><sup>1</sup> Unless expressly defined otherwise, HK USA incorporates by reference the definitions of capitalized terms set forth in the Consent Order.\n\nremains and shall remain subject to further order of this Court at the Bridgeport Harbor Marina in Bridgeport, Connecticut.\n\n2. Beyond \\$37,000,000 borrowed by HK USA and escrowed to secure HK USA's performance under the Stipulated Order Compelling HK International Funds Investments (USA) Limited, LLC to Transport and Deliver that Certain Yacht, the \"Lady May\" [Doc. No. 299] (the \"Stipulated Order\") (of which \\$4,000,000 funded the Repair Reserve pursuant to the Consent Order), HK USA has no other funds with which to pay for the Lady May's Operating Expenses.\n\n3. Accordingly, as an accommodation to the Trustee, the bankruptcy estate and its allowed creditors to ensure that the Lady May's Operating Expenses continue to be paid and the vessel remains in good condition pending further litigation, HK USA proposes to modify the Consent Order to authorize and direct the Trustee to pay for both the Required Repairs as well as the Operating Expenses through April 2023 using funds in the Repair Reserve.[2](#page-1-0) Considering that (i) all scheduled repairs have been completed and the Lady May is in good working order (other than the postponed valve work), and (ii) as detailed below, the cost of the repairs completed to date and to perform the remaining repair is far less than the \\$4,000,000 repair reserve, HK USA expects that more than \\$2,500,000 will remain in the Repair Reserve even if this Court grants the relief sought in this Motion to Modify.\n\n4. Consequently, HK USA respectfully submits that no party-in-interest will be prejudiced and the Trustee's and bankruptcy estate's interest in the Lady May, if any, will be preserved, by this Court granting the relief requested herein.\n\n### **II. Background**\n\n<span id=\"page-1-0\"></span><sup>2</sup> By separate motion and as permitted by the Consent Order, HK USA may seek the use funds in the Repair Reserve to pay for Operating Expenses beyond April 2023 or may seek to terminate such use for good cause. However, at this time, HK USA is not seeking such relief.\n\n#### **a. The Stipulated Order, the Consent Order, and the Repair Reserve**\n\n5. Pursuant to an agreement amongst HK USA, Pacific Alliance Asia Opportunity Fund, L.P. (\"PAX\"), Ho Wan Kwok (the \"Individual Debtor\"), the Official Committee of Unsecured Creditors (the \"Committee\"), and creditors Rui Ma and Zheng Wu, HK USA agreed to deliver the Lady May to the navigable waters of Connecticut. The parties incorporated their agreement into the Stipulated Order, which this court issued on April 29, 2022.\n\n6. As agreed by the parties and as ordered by this Court in the Stipulated Order, to secure its obligation to deliver the Lady May to the navigable waters of Connecticut, HK USA deposited \\$37,000,000 with U.S. Bank National Association. (Stipulated Order, at 2). These funds represent the proceeds from a \\$37 million loan that HK USA obtained from Himalaya International Financial Group Ltd (\"Himalaya\") in April 2022 and on which HK USA is obligated to pay interest at the rate of 3% per month (equaling \\$1,110,000 per month).\n\n7. HK USA fulfilled the most critical aspect of the agreement by causing the Lady May to arrive in Bridgeport, Connecticut on July 8, 2022.\n\n8. As contemplated by the Stipulated Order, on August 11, 2022, HK USA filed its Motion for Order Establishing Repair Reserve for the Lady May [Doc. No. 728] (the \"Repair Reserve Motion\"), seeking to establish a reserve to pay for additional repairs necessary to return the Lady May to good working order.\n\n9. On October 7, 2022, upon the consent of the Trustee, PAX, the Individual Debtor, the Committee, Rui Ma, and Zheng Wu, this Court issued the Consent Order, which established a Repair Reserve in the amount of \\$4,000,000, resolving the Repair Reserve Motion and certain limited objections thereto filed by PAX and the Committee.\n\n3\n\n10. The Consent Order provides, *inter alia*, that the Trustee shall hold the \\$4,000,000 \"for the purpose of securing the completion of the service, maintenance, and repairs required to be performed to restore the Lady May to good working order\" and instructs the Trustee to pay from such amount \"the expenses… incurred to perform the Required Repairs,\" provided such expenses are accordance with the estimates previously provided by the third-party service providers and attached to the Consent Order as Exhibit A. (Consent Order, at 2, 4).\n\n#### **b. The Status of the Required Repairs and Expenses Incurred to Date**\n\n11. Consistent with the Consent Order, HK USA has caused the Initial Work to be performed at Bridgeport Boatworks. (*See* Consent Order, at 3). Such repairs and services having been completed, the Lady May has returned to the water and is currently docked at the Bridgeport Harbor Marina. HK USA has produced the Repair Certifications regarding the Initial Work to the Trustee. (*See* Consent Order, at 5).\n\n12. Pursuant to the Consent Order, the Trustee is conducting a Trustee Inspection of the Lady May on Saturday, December 10, 2022. A sea trial is scheduled for Tuesday, December 13, 2022. The Trustee's expert will produce his final report regarding the Initial Work on or before December 16, 2022. To facilitate the Trustee Inspection and sea trial, HK USA has produced all relevant documents to the Trustee and made the Lady May's Captain and Chief Engineer, as well as representatives of Yachtzoo (the Lady May's yacht management company) available to the Trustee and his expert to answer any questions the Trustee may have.\n\n13. The total cost for the Initial Work is approximately \\$400,000. Of this total, HK USA expects that approximately \\$216,000 will ultimately be paid by insurance to cover the\n\n4\n\nstarboard main engine repairs. [3](#page-4-0) Therefore, HK USA expects that approximately \\$184,000 (reflecting a total cost of approximately \\$400,000 minus approximately \\$216,000 in insurance payments) will be needed from the \\$4,000,000 Repair Reserve to pay for the Initial Work.\n\n14. The Valve Service has not yet been scheduled, but HK USA continues to expect that the Valve Service will cost approximately \\$200,000, which sum will not be covered by insurance. (*See* Repair Reserve Motion, at 5-7 (describing the Valve Service); Consent Order, at 3 (providing that the Valve Service \"shall be performed at a later date to be determined\")). Beyond the Initial Work and the Valve Service, HK USA does not presently expect that any additional Required Repairs will be necessary.\n\n15. Accordingly, of the \\$4,000,000 Repair Reserve, HK USA anticipates that approximately \\$384,000 (reflecting the approximately \\$400,000 for the Initial Work, minus approximately \\$216,000 in payments by the insurance company for the starboard engine repair, plus an additional \\$200,000 estimated cost for the Valve Service) will be necessary to complete the Required Repairs and return the Lady May to good working order.\n\n#### **c. Operating Expenses and the Budget**\n\n16. As with any similarly sized vessel, the Lady May regularly incurs ordinary Operating Expenses, such as dockage fees and insurance premiums as well as salaries, health insurance, and food for its crew. Particularly considering the Lady May's inactive status, HK USA has taken steps to minimize such Operating Expenses where possible. Nonetheless, the Lady May's Operating Expenses exceed \\$100,000 per month.\n\n<span id=\"page-4-0\"></span><sup>3</sup> HK USA and Yachtzoo are working with the insurance company to finalize the insurance claim and related payments. Once finalized, HK USA intends to seek payment for the remaining amounts due from the Repair Reserve, as provided by paragraph (v) of the Consent Order. (Consent Order, at 4).\n\n17. Beyond the \\$37 million that HK USA borrowed from Himalaya to secure HK USA's performance under the Stipulated Order and which was subsequently used to fund the Repair Reserve pursuant to the Consent Order, HK USA's funds have been exhausted.\n\n18. Excluding unpaid expenses for the Initial Work (which will be paid by the insurance company and the Trustee using funds in the Repair Reserve pursuant to the Consent Order), the Lady May has incurred \\$188,334.62 in Operating Expenses through November 30, 2022, that, to date, have not been paid. Attached hereto as **Exhibit A** is a summary of such expenses as well as the underlying invoices documenting the same. (*See* Outstanding Invoice Summary, attached hereto as **Exhibit A**).\n\n19. Additionally, HK USA has prepared the budget attached hereto as **Exhibit B** (the \"Budget\"), which reflects the projected Operating Expenses for the Lady May for the period of December 2022 to and including April 2023. After HK USA's cost-minimization efforts, such projected Operating Expenses total \\$795,621.25.\n\n20. Therefore, to bring the Lady May current on its outstanding obligations and provide funds sufficient to pay the Lady May's Operating Expenses through April 2023, HK USA requires \\$983,955.87 (reflecting \\$188,334.62 in outstanding invoices for Operating Expenses plus \\$795,621.25 in projected Operating Expenses).\n\n#### **III. Relief Requested**\n\n21. HK USA seeks to modify the Consent Order to authorize and direct the Trustee to pay up to \\$1,000,000 from funds now held in the Repair Reserve to (i) satisfy the outstanding Operating Expenses incurred by the Lady May to date and (ii) pay the Lady May's projected Operating Expenses for the period of December 2022 to and including April 2023.\n\n6\n\n22. To accomplish this, HK USA seeksfive discrete modifications to the Consent Order\n\nas follows. HK USA's modifications to the Consent Order are in *bold underlined italics*.\n\n23. First, HK USA seeks to modify paragraph (i) of the Consent Order to provide:\n\nThe Trustee shall hold the Repair Reserve Amount as escrow agent in the Trustee's section 345 bank account (the \"Trustee's Bank Account\") solely for the purpose of securing the completion of the service, maintenance, and repairs required to be performed to restore the Lady May to good working order in accordance with the Stipulated Order, specifically, paragraph 11 (the \"Required Repairs\") and this Order *and further making payments to satisfy operating expenses reasonably incurred by HK USA for the Lady May (collectively, \"Operating Expenses\") as set forth in this Order*; provided, however, that the Repair Reserve Amount shall be held in the Trustee's Bank Account as if segregated from all other funds in such account, and the Trustee shall not be able to use or disburse any of the Repair Reserve Amount except as provided in this Order;\n\n24. Second, HK USA seeks to modify paragraph (v) of the Consent Order to provide:\n\nThe Trustee shall pay from the Repair Reserve Amount the expenses (including any required deposits) incurred to perform the Required Repairs or to pay the Insurance Deductible (as defined in the Motion) without further notice if such expenses are in accordance with the estimates set forth in **Exhibit A**, or if such expenses are not in accordance with such estimates, upon either:\n\na. The written consent of HK USA and the Trustee; or b. The order of this Court following a motion seeking such relief and after due notice and a hearing;\n\n*Additionally, promptly upon submission to the Trustee by HK USA of a funding request, the Trustee shall pay from the Repair Reserve Amount up to \\$1 million to satisfy:*\n\n*a. The outstanding Operating Expenses identified in Exhibit A to HK International Funds Investments (USA) Limited, LLC's Motion on Consent to Modify Consent Order Granting HK International Funds Investments (USA) Limited, LLC's Motion for Order Establishing Repair Reserve for the Lady May (the \"Motion to Modify\"); and*\n\n# *b. The anticipated Operating Expenses for the period of December 2022 through and including April 2023 identified in Exhibit B to the Motion to Modify;*\n\nTo the extent that the Trustee and his advisors spend more than ten (10) hours in any given month related to the administration of payments from the Repair Reserve, the corresponding fees shall be paid out of the Repair Reserve;\n\n25. Third, HK USA seeks to modify paragraph (vi) of the Consent Order to provide:\n\nNotwithstanding anything herein to the contrary, the Trustee shall not be, nor required to be, a party to any contract (including any work orders) related to the Required Repairs *or the Operating Expenses*, and the Trustee shall have no liability whatsoever to any person providing goods or services related to the Required Repairs *or the Operating Expenses*, except that the Trustee shall be required to pay expenses in accordance with, and subject to the terms of, this Order;\n\n26. Fourth, HK USA seeks to modify paragraph (x) of the Consent Order to provide:\n\nUpon completion of the Initial Work and the Trustee Inspection with respect to the Initial Work or upon the Trustee's waiver of his right to inspect the Initial Work as set forth above, and in the event and to the extent the Repair Reserve Amount exceeds *(i) the amount necessary to pay the outstanding and anticipated Operating Expenses as set forth in this Order and (ii)* the amount reasonably necessary to secure the payment of the Remaining Required Repairs (\"Repair Reserve Excess\") including, but not limited to, the Remaining Work, this Court, upon motion of HK USA filed on or after November 15, 2022, and after due notice and a hearing, shall determine the Repair Reserve Excess, if any, and shall order the Trustee to transfer such Repair Reserve Excess to HK USA or, in the event this Court has entered an order granting a prejudgment remedy against HK USA and such prejudgment remedy is not otherwise fully secured, the Trustee shall continue to hold such Repair Reserve Excess subject to and in accordance with the order granting prejudgment remedy;\n\n27. Fifth, HK USA seeks to modify paragraph (xi) of the Consent Order to provide:\n\nUpon completion of the Final Trustee Inspection, or upon the Trustee's waiver of his right to inspect as set forth above, and in the event and to the extent the Repair Reserve Amount exceeds *(i) the amount necessary to pay the outstanding and anticipated*  *Operating Expenses as set forth in this Order and (ii)* the amount that was necessary to pay for the Required Repairs (including, but not limited to, the Initial Work and the Valve Service), this Court, upon motion of HK USA and after due notice and a hearing, and once determined by this Court that the Required Repairs have been fully performed, shall order the Trustee to transfer any excess Repair Reserve funds to HK USA or, in the event this Court has entered an order granting a prejudgment remedy in favor of the Trustee and against HK USA and such prejudgment remedy is not otherwise fully secured, the Trustee shall continue to hold such excess subject to and in accordance with the order granting prejudgment remedy;\n\n28. Attached hereto as **Exhibit C** is a Proposed Order reflecting the foregoing modifications to the Consent Order.\n\n29. HK USA respectfully submits that the foregoing modifications to the Consent Order are reasonable and appropriate under the circumstances and consistent with the overall objective of the Stipulated Order and the Consent Order – namely, returning and maintaining the Lady May to good working order.\n\n30. Furthermore, the Repair Reserve is an appropriate source of funds to pay for the Operating Expenses because the money in the Repair Reserve represents funds that HK USA itself borrowed and on which HK USA is liable for interest payments. These funds are not property of the Individual Debtor's bankruptcy estate and utilization of these funds to pay for Operating Expenses does not otherwise impose a financial burden on the Trustee.\n\n31. Moreover, the Repair Reserve contains ample funds to pay for both the Required Repairs and the Operating Expenses. As set forth above, the Required Repairs are expected to cost approximately \\$600,000, with insurance expected to ultimately pay \\$216,000 of that sum. If a further \\$1 million is paid from the Repair Reserve for Operating Expenses, the Repair Reserve would *still* have more than \\$2,500,000. [4](#page-8-0)\n\n<span id=\"page-8-0\"></span><sup>4</sup> Representing the \\$4,000,000 Repair Reserve minus approximately \\$600,000 in total costs for the Required Repairs plus \\$216,000 in insurance payments minus \\$1,000,000 in Operating Expenses.\n\n32. Meanwhile, if the Operating Expenses go unpaid, there is a material risk that the physical condition of the Lady May will be impaired as there would be no crew to look after the vessel. Additionally, insofar as there are outstanding Operating Expenses that have not been paid, the vessel may be subject to arrest or lien under maritime law.\n\n33. Accordingly, HK USA respectfully submits that the funds in the Repair Reserve should be used to pay for the Operating Expenses while the ownership of the Lady May is resolved in *HK International Funds Investments (USA) Limited, LLC v. Despins, et al.*, Case No. 22-AP-5003. No party-in-interest will be prejudiced if the funds in the Repair Reserve are used to pay for Operating Expenses through April 2023 – on the contrary, such payments will inure to the benefit of all parties-in-interest insofar as such payments will help ensure that the Lady May remains in good working order, enable HK USA to fulfil its obligations under the Stipulated Order, and enable the Trustee to continue to conduct the Trustee Inspections as authorized by the Consent Order.\n\n### **IV. Conclusion**\n\n**WHEREFORE**, HK USA respectfully requests that this Court (i) enter an order substantially in the form of the Proposed Order attached hereto as **Exhibit C** and thereby modify the Consent Order to authorize and direct the Trustee to pay up to \\$1 million from funds now held in the Repair Reserve to satisfy the outstanding Operating Expenses incurred by the Lady May to date and pay the Lady May's projected Operating Expenses for the period of December 2022 to and including April 2023 and (ii) grant such other and further relief as this Court deems just and proper.\n\n### HK INTERNATIONAL FUNDS INVESTMENTS (USA) LIMITED, LLC\n\nBy: */s/ Christopher H. Blau*\n\nChristopher H. Blau (ct30120) Zeisler & Zeisler, P.C. 10 Middle Street, 15th Floor Bridgeport, CT 06604 (203) 368-4234 (203) 549-0872 (fax) Email: [skindseth@zeislaw.com](mailto:skindseth@zeislaw.com) Its Attorneys\n\n#### **CERTIFICATE OF SERVICE**\n\nI hereby certify that on this 9th day of December, 2022, a copy of foregoing was filed electronically. Notice of this filing will be sent by e-mail to all parties by operation of the Court's electronic filing system or by mail to anyone unable to accept electronic filing as indicated on the Notice ofElectronic Filing. Parties may access this filing through the Court's CM/ECF System.\n\n> By: */s/ Christopher H. Blau* Christopher H. Blau (ct30120)","body_zh":null,"key_entities":["Je","CIPA","Himalaya","Kwok","Ho Wan Kwok","Despins"],"ecf_references":[],"word_count":3291,"status":"published","published_at":null,"created_at":null,"updated_at":"2026-07-07 07:49:10"}