Chesapeake Corporation Reaches Agreement to Sell All of Its Business Operations As a Going Concern to Affiliates of Irving Place
December 29 2008 - 8:15PM
PR Newswire (US)
Parent Company and U.S. Operating Subsidiaries File Voluntary
Chapter 11 Petitions in U.S. To Consummate Sale RICHMOND, Va., Dec.
29 /PRNewswire-FirstCall/ -- Chesapeake Corporation (Other OTC:
CSKE) today announced that it has reached an agreement to sell all
of its operating businesses to a group of investors including
affiliates of Irving Place Capital Management, L.P. and Oaktree
Capital Management, L.P., who intend to continue operating these
businesses as a going concern. To consummate this sale, Chesapeake
Corporation and its U.S. operating subsidiaries filed voluntary
Chapter 11 petitions today in the Eastern District of Virginia in
Richmond. All of the Company's operations - including all of its
manufacturing and distribution facilities in the U.S. and around
the world - are open and operating on normal schedules, fulfilling
customer orders as usual and providing uninterrupted customer
service. The Company's non-U.S. subsidiaries were not included in
the Chapter 11 filing and there are no plans to place them in
administration. "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 J. Kohut, President and Chief Executive Officer of
Chesapeake Corporation. "In particular, the sale transaction and
Chapter 11 process will help us meet several critical objectives,
including allowing ongoing operation of all of our businesses
without interruption to supplier and customer relationships,
providing a permanent solution to the high leverage at the parent
company level and constrained liquidity, providing the most rapid
path to a new organization with a much healthier balance sheet, and
providing a bright future for our operating companies and their
employees, customers and suppliers." Chesapeake has filed a variety
of first day motions with the Court that will allow it to continue
to conduct business as usual while it completes the sale of the
business operations to the investor group. In addition, the Company
will seek preliminary approval from the Court for a new
debtor-in-possession financing facility of up to $37 million
provided by certain members of its current revolving lender group.
The new facility will provide an immediate source of funds to the
Company, enabling it to satisfy customary obligations associated
with ongoing operations of its business, including the timely
payment of employee obligations, materials purchases, normal
operating expenses and other obligations. Availability under the
debtor-in-possession financing is initially limited to $18.55
million, subject to increase (i) upon entry of an order in the
Company's Chapter 11 case approving the new facility and (ii) the
unanimous approval of the lenders under the new facility. The
Company expects that cash flows from the ongoing business and the
initial availability under the new facility will allow it to meet
its liquidity needs until such time as the conditions are satisfied
for the availability of increased financing. Under terms of the
transaction, the investor group will purchase substantially all of
the assets of the U.S. operating subsidiaries of Chesapeake
Corporation and the outstanding capital stock or other equity
securities of Chesapeake's foreign subsidiaries. The proposed
aggregate purchase price is $485 million, with cash proceeds to be
paid to the seller to be reduced by amounts in respect of certain
pension and severance obligations of the Company and its
subsidiaries, amounts outstanding as of closing under the Company's
Senior Secured Credit Facility and certain other fees and
obligations. The definitive Asset Purchase Agreement with respect
to the proposed transaction between the Company and the investor
group was filed with the Court today. The transaction is subject to
the approval of the Bankruptcy Court under Section 363(b) of the
U.S. Bankruptcy Code and the satisfaction of specified closing
conditions, including the purchasers reaching definitive agreement
on exit financing. Following the completion of a court-supervised
competitive auction process, a final sale hearing and closing are
anticipated to take place during the first quarter of 2009. The
Company's financial advisor is Goldman Sachs & Co., its
restructuring advisor is Alvarez & Marsal, and its legal
advisor in the U.S. is Hunton & Williams LLP. Information about
the proposed sale and Chesapeake's Chapter 11 proceedings and the
proposed related transaction is available on the Company's website
at http://www.chesapeakecorp.com/. Information about the claims
process and court filings can be accessed at
http://www.kccllc.net/chesapeake. General information for vendors
who have provided goods or services to the U.S. business is also
available at 1-888-830-4660. General information for U.S. retirees
is also available at 1-888-830-4660. Inquiries can be sent by email
to . Chesapeake Corporation protects and promotes the world's great
brands as a leading international supplier of value-added specialty
paperboard and plastic packaging. Headquartered in Richmond, Va.,
the Company is one of Europe's premier suppliers of folding
cartons, leaflets and labels, as well as plastic packaging for
niche markets. Chesapeake has 44 locations in Europe, North
America, Africa and Asia and employs approximately 5,400 people
worldwide. This news release, including the comments by Andrew J.
Kohut, contains forward-looking statements that are made pursuant
to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The accuracy of such statements is subject to a
number of risks, uncertainties and assumptions that may cause
Chesapeake's actual results to differ materially from those
expressed in the forward-looking statements including, but not
limited to: approvals by the U.S. Bankruptcy Court of the company's
proposed plans for reorganization, including approval of the
proposed sale of the company's operating businesses; satisfaction
of specified closing conditions for the proposed sale, including
the purchasers obtaining financing for the transaction; the
company's ability to remain in compliance with the covenants set
forth in the debtor-in-possession credit facility, and its ability
to satisfy the conditions to increasing the available borrowings
under such facility; the company's inability to realize the full
extent of the expected savings or benefits from restructuring or
cost savings initiatives, and to complete such activities in
accordance with their planned timetables and within their expected
cost ranges; the effects of competitive products and pricing;
changes in production costs, particularly for raw materials such as
folding carton and plastics materials, and the ability to pass
through increases in raw material costs to customers; fluctuations
in demand; possible recessionary trends in U.S. and global
economies; changes in governmental policies and regulations;
changes in interest rates and credit availability; changes in
actuarial assumptions related to pension and postretirement
benefits plans; changes in liabilities and cash funding obligations
associated with the company's defined benefit pension plans;
fluctuations in foreign currency exchange rates; and other risks
that are detailed from time to time in reports filed by Chesapeake
with the Securities and Exchange Commission. DATASOURCE: Chesapeake
Corporation CONTACT: Michael Freitag or John Patteson,
+1-212-521-4800, both of Kekst and Company Web Site:
http://www.chesapeakecorp.com/ http://www.cskcorp.com/
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