Specialty packaging manufacturer Chesapeake Corp. will sell its operating businesses to a group of investors for about $485 million, after filing for reorganization.
Richmond, Va.-based Chesapeake filed for Chapter 11 protection from creditors Dec. 29 in U.S. Bankruptcy Court in Richmond. Non-U.S. units are not included in the filing.
``After exploring a range of possible alternatives to improve our balance sheet and maintain the liquidity we need to operate our businesses in an extremely difficult economic environment, the management and board of directors of Chesapeake concluded that a court-supervised sale of our business operations is in the best interest of the company and its stakeholders,'' said Andrew Kohut, Chesapeake's president and chief executive officer, in a Dec. 29 news release.
The deal is expected to close during the first quarter of 2009, subject to court approval. Cash proceeds from the sale will be reduced by certain pension and severance costs and debt obligations, Chesapeake said.
The company filed a variety of motions with the court that will allow it to continue to fill orders as it completes the sale. In addition, Chesapeake will seek preliminary approval for a new debtor-in-possession financing facility of up to $37 million, provided by members of its current revolving lender group, which is led by GE Commercial Finance Ltd. and General Electric Capital Corp.
Under terms of the deal, the buying group which includes Irving Place Capital Management LP and Oaktree Capital Management LP will continue Chesapeake's operations during reorganization.
Goldman Sachs & Co. is Chesapeake's financial adviser. The firm's restructuring adviser is Alvarez & Marsal, and its legal advisor in the U.S. is Hunton & Williams LLP.
Chesapeake supplies paper cartons and plastic containers for the health-care, beverage and food markets. The firm has 44 locations in Europe, North America, Africa and Asia and employs about 5,400.
According to its Web site, Chesapeake makes high density polyethylene bottles, closures and containers; and PET bottles, closures, containers and preforms. It operates two plastics plants in Kunshan, China, as well as facilities in Cavan, Ireland; Crewe, England; St. Etienne, France; Cape Town and Harrismith, South Africa; and Port Louis, Mauritius. Plastics made up about 17 percent of the company's 2007 sales, according to the site.
Chesapeake in November reported a loss for the nine months ended Sept. 28 of about $277 million as the company booked hefty environmental cleanup and other charges and as sales slipped to about $753 million due to lost business with British American Tobacco and less demand for drug and health-care packaging. In its filing with the Securities and Exchange Commission, Chesapeake listed assets of $936.6 million and $937.1 million in liabilities.
The company's stock stood at about 3 cents per share Dec. 31, well off the $5.61 it traded at a year ago and a sharp drop from a decade-high $38 in June 1999. The firm's shares in October were delisted from the New York Stock Exchange.