1. CERTIFICATE OF SERVICE
I, Christopher M. Samis, hereby certify that a true and correct copy of the foregoing
Alleged Debtors' Response to Petitioning Creditors' Motion Pursuant to Del. Bankr. L. R. 9006-
1 (e) for an Order Shortening Time for Notice of the Hearing to Consider the Expedited Motion
of Petitioning Creditors for the Appointment of a Trustee Pursuant to 11 US. C. §§ 105(a),
1I 04(a)(I) and II 04(a)(2) was served upon all parties in interest, by first class mail and/or hand
delivery on May 21, 2012, at the following addresses:
BDCM Opportunity Fund II, LP United States Trustee
One Sound Shore Drive 844 King Street, Room 2207
Suite 200 Lockbox #35
Greenwich, CT 06830 Wilmington, DE 19899-0035
Black Diamond CLO 2005-1 Adviser L.L.C. Adam G. Landis, Esq.
One Sound Shore Drive Kerri K. Mumford, Esq.
Suite 200 Landis Rath & Cobb LLP
Greenwich, CT 06830 919 Market Street
Suite 1800
Spectrum Investment Partners LP Wilmington, DE 19801
1250 Broadway
19th Floor Counsel to Petitioning Creditors
New York, NY 10001
RLFI 604674lv.2

2. IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re: Chapter 11
ALLIED SYSTEMS HOLDINGS, INC., Case No. 12-11564 (CSS)
Alleged Debtor. Re: Docket No. 12
In re: Chapter 11
ALLIED SYSTEMS, LTD. (L.P.), Case No. 12-11565 (CSS)
Alleged Debtor. Re: Docket No. 12
Hearing Date: TBD
Objection Deadline: TBD
ALLEGED DEBTORS' RESPONSE TO PETITIONING CREDITORS' MOTION
PURSUANT TO DEL. BANKR. L.R. 9006-l(e) FOR AN ORDER SHORTENING
TIME FOR NOTICE OF THE HEARING TO CONSIDER THE EXPEDITED
MOTION OF PETITIONING CREDITORS FOR THE APPOINTMENT OF A
TRUSTEE PURSUANT TO 11 U.S.C. §§ lOS(a), 1104(a)(l) AND 1104(a)(2)
COME NOW the Alleged Debtors and file this response seeking denial of the Petitioning
Creditors' Motion Pursuant to Del. Bankr. L.R. 9006-I(e) for an Order Shortening Time for
Notice of the Hearing to Consider the Expedited Motion of Petitioning Creditors for the
Appointment of a Trustee Pursuant to II U.S. C. 105(a), 1104(a)( I) and II04(a)(2) (the "Motion
to Shorten Time"). In making this response, the Alleged Debtors do not waive their request that
venue of this case be transferred to the United States Bankruptcy Court for the Northern District
of Georgia, where their earlier Chapter 11 caseS are pending.
PRELIMINARY STATEMENT
In their motion for the appointment of a trustee, the Petitioning Creditors (two hedge
funds that present themselves as three creditors by virtue of one hedge fund's having divided its
ownership with an affiliate) assert that "[t]his Motion and these cases are not about a group of
RLFl 604674lv.2

3. disgruntled minority lenders in a credit facility." Expedited Motion of Petitioning Creditors for
the Appointment of a Trustee pursuant to 11 U.S.C. §§ 105(a), 1104(a)(J) and 1104(a)(2)
[Docket no. 13] p. 6, filed May 17, 2012 ('Trustee Motion"). Do not believe it. The Trustee
Motion, as well as the commencement of these involuntary cases, is nothing more than a tactical
move by the hedge funds to gain leverage in ongoing negotiations. 1
Even if the Trustee Motion were on firm ground (which it is not), there is no question that
a hearing during the gap period would be inappropriate. Section 303(g) provides for the
appointment of an interim trustee during the gap period only if an order for relief under Chapter
7 is sought and if necessary to prevent loss to the estate. In the one case relied upon by
Petitioning Creditors for the appointment of a trustee during the gap period in an involuntary
case seeking an order for relief under Chapter 11, the bankruptcy court found extraordinary
circumstances where the debtor was not operating its business and was fraudulently diverting its
assets during the gap period. To that end, the court concluded that serious and irreparable injury
would result without the immediate appointment of an independent trustee.
Nothing in the Motion to Shorten Time or the supporting affidavits comes close to
alleging, must less proving, any exigent circumstance that would justify hearing the Trustee
Motion during the gap period, much less taking the drastic step of shortening the Alleged
Debtors' time to respond and prepare for a hearing on the appointment of a trustee. As for their
allegation of gross mismanagement, the Petitioning Creditors rely on the Alleged Debtors
ceasing, over a year ago, to provide services at unprofitable rates to certain customers. Indeed,
the vast majority of the allegations relate to events that took place in 2007 (the appointment of
the board and senior management), 2008 (operating losses and defaults under the senior secured
These hedge funds purchased their interests on the secondary market; however, they do not reveal when
they purchased their interest and at what discount, notwithstanding that Bankruptcy Rule 1003 specifically requires
this informalion from transferees.
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RLFI 6046741 v.2

4. credit facility) and 2009 (amendments to the credit facility). Notably, Black Diamond and
Spectrum fail to identify any purported wrongdoing in 2012 that would give rise to the
appointment of a trustee.
As for their allegation that a trustee is needed immediately in the
best interests of creditors, the Petitioning Creditors complain that Alleged Debtors have been
unwilling to engage in negotiations with respect to restructuring. Even if this were true -- which
it is not, this is hardly an issue to be addressed during the gap period.
As set forth in the Declaration of Scott Macaulay filed herewith, the Alleged Debtors and
their 20 or so subsidiaries (collectively "Allied") have been managing their business as well as it
can be managed under the difficult circumstances in their industry over the last few years. -
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5. As to the Trustee Motion itself, the Alleged Debtors will respond in detail in due course,
But they unequivocally state that (1) they have not mismanaged their business; and (2) they do
not have conflicting fiduciary duties so as to make the appointment of a trustee in the best
interest of creditors.
The Court should accordingly deny the Motion to Shorten Time, and ultimately deny the
request for an appointment of a trustee.
FACTUAL OVERVIEW
I. Allied Systems Holdings, Inc., which is an alleged debtor, is the ultimate parent
of about 20 other companies including Allied Systems, Ltd. Allied Systems Holdings, Inc. is a
privately held Delaware corporation headqljartered in Atlanta, Georgia. Allied Systems
Holdings, Inc. has three direct subsidiaries: Allied Automotive Group, Inc., a Georgia
corporation, Axis Group, Inc. also a Georgia corporation, and Haul Insurance Limited, which is a
captive insurance company incorporated under the laws of the Cayman Islands. Allied System,
Ltd., which is the other Alleged Debtor, is a Georgia limited partnership and is a subsidiary of
Allied Automotive Group, Inc.
2. Allied's major line of business is carried out by Allied Automotive Group, Inc.
and its direct and indirect subsidiaries (collectively, the "Allied Automotive Group"). 2 This
major line of business, known in the industry as "car-haul," is the transport of light vehicles,
such as automobiles, sport-utility vehicles and light trucks, from manufacturing plants, ports,
auctions, and railway distribution points to automobile dealerships in the United States and
2
The following Allied subsidiaries are part of the Automotive Group: Allied Automotive Group, Inc.;
Allied Systems, Ltd. (L.P.); Allied Systems (Canada) Company; QAT, Inc.; RMX LLC; Transport Support LLC;
F.J. Boutell Driveaway LLC; GACS Incorporated; Commercial Carriers, Inc.; and Allied Freight Broker LLC.
4
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6. Canada. The trips are generally what are known in the industry as "short hauls," with each
averaging less than two hundred miles. Allied's major customers are automobile manufacturers.
3. Allied Automotive Group transports light vehicles by means of tractor trailers (the
"Rigs") specially designed for transporting light vehicles. As of the end of 2011, Allied owned
about 2,400 Rigs, which operated out of about 44 terminals, most of which were leased and
located in the United States and Canada.
4. Allied Automotive Group's drivers and most of its terminal employees are
unionized. These employees (the "Teamster Employees") are members of local unions affiliated
with the International Brotherhood of Teamsters (the "Teamsters"), which negotiates on behalf
of the local unions and their members. Allied employs about 1,835 people of whom about 1,062
are Teamster Employees.
5. Allied's much smaller line of business is carried out by Axis Group, Inc. and its
direct and indirect subsidiaries (collectively the "Axis Group"). 3 This line of business includes
arranging for and managing vehicle distribution services, automobile inspections, auction and
yard management services, vehicle tracking; vehicle accessorizing, and dealer preparation
services for the automotive industry in the United States and Canada, and providing yard
management services in Mexico. The Axis Group operates from 39 terminals located in the
United States, Canada, and Mexico.
The Original Chapter 11 Case
6. The Alleged Debtors and most of their direct and indirect subsidiaries
(collectively "Allied") were reorganized in Chapter 11 cases (collectively the "Original Chapter
11 Case") that were filed in the Northern District of Georgia on July 31, 2005 and that resulted in
3
The following Allied subsidiaries are part of the Axis Group: Axis Group, Inc.; CT Services, Inc.; Cardin
Transport LLC; Terminal Services LLC; Axis Canada Company; Axis Areta, LLC; Logistic Technology, LLC;
Logistic Systems, LLC.
5
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7. a plan of reorganization (the "Allied Plan of Reorganization"), which was confirmed by now-
Chief Bankruptcy Judge C. Ray Mullins and became effective in May 2007. 4 As a result of the
reorganization, Allied's then unsecured creditors became the shareholders of Allied Systems
Holding, Inc. Although the Original Chapter 11 Case is ready to be closed (indeed, a motion for
a final decree was recently filed), at this point it remains an open and pending case in Atlanta
before Judge Mullins.
7. In the Original Chapter 11 Case, Allied's goals were to ( 1) increase revenue by
increasing customer pricing, (2) deleverage by conversion of debt into equity, and (3) reduce
labor costs through reductions in compensation and changes in work rules with respect to the
Teamsters Employees and through shared sacrifice from non-union employees.
8. These goals were largely achieved, with significant aid from two private equity
funds, Yucaipa American Alliance Fund I, LP and Yucaipa Alliance (Parallel Fund I, L.P.
(collectively "Yucaipa"). During the original Chapter 11 Case, Yucaipa, among other things, (1)
acquired about two-thirds of a series of unsecured notes that Allied had issued in the principal
amount of $150 million; (2) was the catalyst for obtaining an agreement with the Teamsters for
concessions ("Labor Modifications") reducing wages of Allied's Teamster Employees by 15%
for a three-year period; (3) financed the acquisition of Rigs for Allied's use; (4) supported a plan
to convert general unsecured debt into equity; and (5) aided Allied in securing the exit financing
(the "Exit Financing") essential to its reorganization.
4
Allied Systems Holdings, Inc. is the successor by merger with Allied Holdings, Inc., which was the
ultimate Allied parent when the Original Chapter 11 Case was filed. When the Allied Plan of Reorganization
became effective, Allied Systems Holdings, Inc. was created as a subsidiary of Allied Holdings, Inc., which was
merged into Allied Systems Holdings, Inc., the surviving corporation. Thus, in connection with the Original
Chapter 11 Case, the terms "Allied" and "Debtors" exclude Allied Systems Holdings, Inc. and include Allied
Holdings, Inc. Also, in connection with the Original Chapter II Case, the term "Debtors" includes certain indirect
Allied subsidiaries that no longer exist. Certain indirect Allied subsidiaries formed under the law of Mexico and
Bermuda were not Debtors.
6
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8. 9. Yucaipa and the Teamsters joined Allied as proponents of the Allied Plan of
Reorganization. As of the effective date of the Allied Plan of Reorganization, Allied Holdings,
Inc. created Allied Systems Holdings, Inc. as a subsidiary and merged into it. As provided in the
Allied Plan of Reorganization, the outstanding stock of Allied Holdings, Inc. was canceled and
Allied Systems Holdings, Inc. issued new common stock to Allied's general unsecured creditors,
with Yucaipa becoming the owner of about 63% of the equity. Also as of the effective date,
Allied's Exit Financing and the Labor Modifications became effective.
The Decline in Allied's Revenues
10. In 2010, Allied had revenue of about $543 million. In 2011, Allied had
substantially less revenue (about $343 million) because, in the first quarter of 2011, Allied
ceased providing car-haul services to several customers who forced Allied to renew their
contracts with unsustainable pricing during the recession in 2008 and 2009. This reduction
occurred after Allied approached substantially all of its car-haul customers for rate increases,
because the rate levels then in effect were not sustainable and did not cover operating costs.
New long-term contracts and rate increases were achieved with Ford and several smaller
customers in the United States and with Ford, Mazda, Hyundai, Kia, Honda, Nissan and
Mitsubishi in Canada. General Motors, Chrysler, Toyota, and Honda in the United States
refused to accept the rate increases and, consequently, Allied discontinued providing car-haul
services to these companies.
11. A major reason for the unsustainable rate levels that caused Allied to cease
providing car-haul services to several substantial customers was the drastic decline of production
("OEM Production") by original equipment manufacturers of light vehicles since the Allied Plan
of Reorganization became effective in May 2007. This decline is a result of the recession which
7
RLF! 6046741 v.2

9. began in December 2007. The recession hit the domestic automobile market particularly hard,
with General Motors Corporation and Chrysler LLC commencing bankruptcy cases in 2009 and
shutting down most production until their assets could be sold.
12. As a result of the drastic decline in OEM production, there was an industry-wide
oversupply of capacity to transport light vehicles. The fierce competition among trucking
companies (both union and non-union) and railroads for contracts to transport these vehicles led
Allied's customers to substantially reduce the rate of compensation offered to Allied and its
competitors. Thus, lower OEM production combined witb lower rates of compensation caused
Allied to suffer losses in the years since its reorganization in 2007.
13. The aggregate industry OEM production of light vehicles in North America in
2007 was approximately 15 million units. OEM production declined drastically in 2008 and
2009 witb a slight improvement in 2010, when production was 11.9 million units. Reflecting
I
that decline in production, Allied transported 6.9 million vehicles in 2007 and had revenue of
$823 million, while in 2010, Allied transported 4.5 million vehicles and had revenue of$ 543
million.
14. While the rate of compensation to Allied for transporting light vehicles has been
declining, Allied's expenses in many areas have increased. For example, the rate of
compensation of its Teamster Employees increased by more than 15% in June 2010 and
increased again in June 2011. Also, as the Rigs age, they require more maintenance and capital
improvements.
LEGAL STANDARDS
15. Bankruptcy Code § 303, dealing with involuntary bankruptcy cases, contemplates
the appointment of a trustee in the gap period, but under circumstances very different from those
8
RLFl 6046741 v.2

10. presented in this case. As a threshold matter, it is well-established that the appointment of a
Chapter 11 trustee is an extraordinary and disfavored remedy. Since there is a strong
presumption against appointing an outside trustee, the need for such an appointment must be
proved by clear and convincing evidence. In re Marvel Entertainment Group, Inc., 140 F.3d
463, 471 (3rd Cir. 1998). To that end, there is a strong presumption that the debtor should be
permitted to remain in possession absent a showing of need for such a remedy.
16. Section 303(g) provides for the interim appointment of a trustee (1) if the petition
seeks an order for relief under Chapter 7, and (2) if necessary to preserve the property of the
estate or to prevent loss to the estate. Neither condition exists here. First, the petitions in these
cases seek relief under Chapter 11, not Chapter 7. Second, the allegations of gross
mismanagement and malfeasance relate to Allied's ceasing to provide service under unprofitable
contract (which occurred more than a year ago), and to amendments to Allied's senior debt
documents that closed in 2008 and 2009. Moreover, the thrust of the Motion is not preservation
of property of the estate, but the alleged unwillingness of the Debtors-under the control of
Yucaipa-"to engage the Petitioning Creditors in restructuring negotiations."
17. It has been held that there is no statutory authority for the appointment of a
trustee in the gap period of an involuntary Chapter 11 case. In the Matter of Beaucrest Realty
Associates, 4 B.R. 164 (Bankr. E.D.N.Y. 1980). Similarly, in another involuntary Chapter II
case in which a motion for the appointment of a trustee was filed during the gap period, the
bankruptcy court denied the motion on the evidence presented during the gap period and only
granted it on a strong showing after the debtor consented to the order of relief and was
proceeding as a debtor in possession. See In re St. Louis Globe-Democrat, Inc., 63 B.R. 131
(Bankr. E.d. Mo. 1985).
9
RLFI 6046741 v.2

11. 18. In the case of Professional Accountants Referral Services, upon which Petitioning
Creditors rely, a trustee was appointed during the gap period of an involuntary case seeking relief
under Chapter 11. In re Professional Accountants Referral Servs., Inc., 142 B.R. 424 (Bankr. D.
Colo. 1992). In that case, the bankruptcy court held that, under the circumstances presented a
trustee could be appointed "on an interim and emergency basis." !d. at 425. Thus, the movants
were required to demonstrate "serious and irreparable injury without the forthwith appointment
of an independent, disinterested, competent trustee." Id. at 429.
19. In that case, the debtor was a telemarketing firm which was not currently
operating. Its financial statements "were fabricated from whole cloth and contained important
misstatements and/or outright falsifications ."!d. at 426. The Debtor was continuing to divert its
assets to the owners' other companies and the court found it probable that an order of relief
would be entered. Testimony in that case revealed that management had directed subordinate
employees to falsify submissions to a government agency and also revealed other fraudulent
conduct by management which, if not immediately remedied, would cause severe and
irreversible injury to the debtor's creditors.
ARGUMENT
The Petitioning Creditors Do Not Meet the Extraordinary
Hurdle Required for Appointing a Trustee in the Gap Period
20. The Motion to Shorten Time is decidedly lacking in allegations of the nature
found in Professional Accountants Referral Services for the simple reason that there is no
evidence supporting any fraud or other serious wrongdoing on the part of the Alleged Debtors
and their subsidiaries. Nevertheless, Petitioning Creditors assert that this Court should take the
drastic step of appointing a Chapter 11 trustee to take charge of Alleged Debtors' business
during the gap period of these involuntary bankruptcy cases, and that it should do so almost
10
RLFl 6046741 v.2

12. immediately, without g1vmg Alleged Debtors and other interested parties a reasonable
opportunity to respond, If anything, the circumstances of this case justify enlarging, rather than
shortening, the tight deadlines for responding to the Trustee Motion set forth in Del. Bankr, LR.
9001-l(c), which provides that notice of a motion such as the Trustee Motion ordinarily must be
provided at least fourteen (14) days prior to the hearing date, with the deadline for objections to
be no later than seven (7) days before the hearing date. In determining whether Petitioning
Creditors, who presumably have been preparing their Involuntary Bankruptcy Petitions and
related papers on their own timetable for weeks (if not months), have met their significant burden
to demonstrate such dire and exigent circumstances as would justify bringing their Trustee
Motion to a hearing on only a few days' notice, or whether (as Alleged Debtors submit) they are
merely seeking a tactical advantage, this Court need look no further than the virtually
nonexistent support Petitioning Creditors offer for their Motion to Shorten Time. Have
Petitioning Creditors given this Court any reasonable factual basis to conclude that this Court
should rush to put Alleged Debtors under the control of a Trustee on a few days' notice?
21. The main support Petitioning Creditors proffer for their Motion to Shorten Time,
the first of the four items of support they offer on pages 3-4 of that Motion and the overriding
focus of their Trustee Motion, is the assertion that Yucaipa's position as majority shareholder
and controlling First Lien Lender of the Alleged Debtors creates unspecified "conflicts of
interest" that allegedly prevent the Alleged Debtors from discharging their fiduciary duties, in
ways that Petitioning Creditors never specifically identify in their Motion or, for that matter, in
any of the papers filed in connection with their Involuntary Petition. When do Petitioning
Creditors contend that this "conflict of interest" arose, creating a sudden emergency whereby this
Court must rush, within the next few days, to appoint a Chapter II Trustee to run the Alleged
II
RLFl 604674lv.2

13. Debtors' businesses? As set forth in the Trustee Motion and supporting papers, Petitioning
Creditors base their contrived and erroneous "conflict of interest" argument on the fact that
Yucaipa acquired a majority of Alleged Debtors' first lien debt from ComVest Investment
Partners III ("ComVest") in August of2009, as permitted under a Fourth Amendment to Alleged
Debtors' First Lien Credit Agreement.
22. Petitioning Creditors argue in these involuntary bankruptcy cases that the Fourth
Amendment to the First Lien Credit Agreement is invalid. This same argument is being made in
an action that they filed on January 18,2012 against Yucaipa in the Supreme Court of the State
of New York, Index No. 650150/2012 (the "New York Action").
23. Moreover, the same argument was addressed in an even earlier action. That
earlier case involved a counterclaim for declaratory relief brought by CIT Group/Business
Credit, Inc. ("CIT"), Administrative Agent for all the lenders under the First Lien Credit
Agreement (including Petitioning Creditors) in an action filed by Yucaipa and Allied Systems
Holdings, Inc. against CIT in the Superior Court of Fulton County, Georgia, Civil Action No.
2009-CV-177574 (the "CIT Action"). After extensive discovery and summary judgment
briefing, the parties mutually dismissed the CIT Action with prejudice on December 5, 2011.
Petitioning Creditors were on notice of the CIT Action and gave a deposition in that case, but
never objected or intervened in it.
24. In sum, the Petitioning Creditors' Involuntary Petitions and Trustee Motion are
nothing more than the latest in a series of tactical maneuvers to exert pressure on Yucaipa and
other parties to purchase Petitioning Creditors' rights under their credit agreements with Alleged
Debtors on the most favorable terms possible. Petitioning Creditors do not suggest (much less
prove) that Alleged Debtors' Board or management are committing fraud or that there is any
12
RLFI 6046741 v.2

14. danger of Alleged Debtors' assets being suddenly wasted or depleted, but rather base their
Trustee Motion and Motion to Shorten Time on three year old, discredited assertions of conflict
of interest, which have been litigated to conclusion in one case and may soon be litigated to
conclusion in another pending case, Stripped of its unsupp011ed conclusions, their Motion to
Shmicn Time offers no concrete basis to deprive Alleged Debtors and other interested parties of
a reasonable time to respond to Petitioning Creditors' overreaching and baseless Trustee Motion,
Accordingly, their Motion to Shorten Time should be denied.
Dated: May 21,2012
Wilmington, Delaware
(No, 2981)
Christopher M. Samis (No, 4909)
RICHARDS, LA YI'ON & FINGER, PA
One Rodney Square
920 North King Street
Wilmington, Delaware 19801
Telephone: (302) 651-7700
Facsimile: (302) 651-7701
E-mail: collins@rlfcom
E-mail: samis@rlf.com
-and-
Jeffrey W. Kelley (GA Bar No. 412296)
Ezra H, Cohen (GA Bar No. 173800)
TROUTMAN SANDERS LLP
Bank of America Plaza
600 Peachtree Street, Suite 5200
Atlanta, Georgia 30308-2216
Telephone No.: (404) 885-3000
Facsimile No.: (404) 885-3900
E-Mail: jeffl'ey .kelley@troutmansanders,eom
E-Mai I: ezra.cohen@troutmru1smKiers.eom
Counsellor Alleged Debtors
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RtF! 6046741v.2