Sweetheart Cup Co. will attempt to sell off assets that generate about $220 million in sales, which could include some of its plastics operations.
The company needs cash to pay off about $110 million in subordinated notes coming due Sept. 1, and about $179 million in bank loans due March 1, Sweetheart Chairman and Chief Executive Officer Dennis Mehiel said in a Feb. 20 conference call to analysts.
The Owings Mills, Md., company faced declining sales and profit last year due to a slumping economy and aggressive resin-price increases, he said.
The company did not specify the brands that may be sold, and he did not give a time line for the sale.
``We're not able to provide additional details,'' Mehiel said. ``Which brands and assets go [for sale] and the size of the transactions remains an open item for us.''
Sweetheart thermoforms and injection molds a variety of plastics packaging and food-service goods, including cups, cutlery, meal-service products, straws, lids and containers. Sweetheart also makes a variety of paper products.
The company's thermoforming operations alone generated $285 million in North American sales for 2002, and the company was fourth on Plastics News' ranking of top thermoformers.
The sale should trigger the attention of both strategic and financial buyers, said executives with two equity firms familiar with Sweetheart. The question will be how much of its core assets the company must sell, said Charles Johnson, managing director of Matrix Capital Markets in Philadelphia.
``There are definite jewels in the product lines of Sweetheart,'' Johnson said.
The company also might consider selling off noncore assets, such as its plastics or paper equipment divisions, Johnson said.
Potential sales items in the plastics business include its seasonal party items and products going to hotels or restaurants, said Jerry Caruso, a partner with equity firm Goldsmith, Agio Helms in Minneapolis.
Several financial buyers recently have bought large holdings in plastics processors and could clamor for Sweetheart assets, Caruso said. ``It's just a function of whether there is enough value [in a sale] for shareholders and bondholders to move forward on certain divisions or all of Sweetheart,'' Caruso said.
Sweetheart ended fiscal 2002 Sept. 29 with $1.28 billion in sales, down from $1.32 billion in fiscal 2001.
The company also announced that it found an unspecified buyer for its now-closed injection molding plant in Somerville, Mass., for $10.1 million. The sale must be completed by Jan. 16, 2004.