Manistique lines up new lender, avoids immediate Chapter 7 conversion

By Jim Witters

Wilmington, Del., Aug. 25 - Manistique Papers Inc. found a new lender to assume its debt, allowing the company to avoid conversion to Chapter 7 bankruptcy, at least temporarily.

At a Thursday hearing in the U.S. Bankruptcy Court for the District of Delaware, debtor's attorney Timothy F. Nixon said mBank of Manistique, Mich., agreed late Wednesday afternoon to assume the debt of the paper company. As a result, lender RBS Citizens NA withdrew its motion to convert the case to Chapter 7.

RBS had not consented to the debtors' use of cash collateral beyond Aug. 26.

Nixon said the Michigan governor's office and the Michigan Economic Development Corp. worked with the company and the bank to help secure the refinancing.

Judge Kevin J. Carey approved the interim use of cash collateral by the debtor.

The company submitted a three-week budget that includes $25,000-a-week payments to Cloverland Electric of Dafter, Mich., which holds a $1.46 million trade debt claim.

Nixon said Manistique's plant remains open with a skeleton crew of 40 to keep the machinery in order. But the management hopes to reopen the plant by Sept. 15 and recall most, if not all, of the 110 workers idled Aug. 5 when the plant ceased operations.

Jeremy Ryan, representing mBank, said his client reserves the right to move for conversion to Chapter 7 and seek an expedited hearing. He also said a significant change in the debtors' management team would constitute a default on the loan.

Under the refinancing agreement, the debtor will pay $23,200 a month interest-only. The interest rate is 4¼%.

Thomas Pitta, representing the official committee of unsecured creditors at this hearing, said the trade union, the vendors and the utilities are very happy with the refinancing agreement.

Nixon said the debtor hopes to begin to try to sell the business after it reopens.

"It's much easier to sell a going business," he said.

Nixon and Ryan said a 13-week budget should be ready for approval at the next hearing, which is scheduled for 2:30 p.m. ET on Sept. 15.

Manistique Papers, a Manistique, Mich., recycled-fiber specialty paper producer, filed for bankruptcy on Aug. 12. Its Chapter 11 case number is 11-12562.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.