The Newark Group makes pre-packaged Chapter 11 bankruptcy filing

By Caroline Salls

Pittsburgh, June 11 - The Newark Group, Inc. made a pre-packaged Chapter 11 bankruptcy filing Wednesday in the U.S. Bankruptcy Court for the District of New Jersey.

As previously reported, the company has reached an agreement with a group of noteholders representing more than three quarters of its outstanding 9¾% unsecured senior subordinated notes to eliminate about $200 million of Newark's unsecured debt, reduce annual cash interest costs by roughly $13 million and provide the company with the financial flexibility to focus on growth and profitability.

In exchange for canceling the notes, the noteholders will receive 96.5% of the equity of the reorganized company.

Creditor treatment

Treatment of creditors will include:

• Holders of pre-bankruptcy notes claims will receive 96.5% of the equity in the reorganized company;

• Holders of asset-based loan claims will be paid in full from the proceeds of a revolving debtor-in-possession facility;

• Holders of ABL revolver DIP loan claims will be paid in full from the proceeds of exit financing;

• Holders of pre-bankruptcy CL claims will be paid in full from the proceeds of an Orix Finance DIP facility;

• The holder of the Von Zuben subordinated unsecured note claim will receive $250,000 in cash and $1.35 million in new subordinated notes;

• Holders of equity interests will receive a share of 1.5% of the new common stock to be issued on the plan effective date and five-year equity warrants to purchase 15% of the new common stock at a price based on an equity value of $157.5 million; and

• All general unsecured claims will be paid in full in the ordinary course of business.

DIP financing

Newark said it reached an agreement with its lead revolving loan lender to continue to provide financing under a new $50 million debtor-in-possession revolving loan facility and a $70 million exit revolver.

The company said it has also arranged for a new, larger $110 million term loan facility with a group led by ORIX Finance, which will be used to pay off the existing term loan and pay down the existing revolver balance.

Wells Fargo Bank, NA is the administrative and collateral agent on the $50 million revolver.

Interest on the revolver will be either Libor plus 500 basis points or Prime rate plus 450 bps. Interest on the ORIX facility will be either Libor plus 950 bps or Prime rate plus 850 bps.

Both the revolver and the ORIX facility will mature on the earliest of 180 days from the bankruptcy filing date, 60 days from entry of the interim order if a final order has not been entered and the effective date of the company's plan of reorganization.

The company was granted interim access to the $160 million of DIP financing on Friday. The final hearing is scheduled for June 30.

Debt details

According to court documents, Newark has $100 million to $500 million in both assets and debt.

The company's largest unsecured creditors include:

• Indenture trustee The Bank of New York, with a $204.53 million note debt claim;

• The Pension Benefit Guaranty Corp. of Washington, D.C., with a $28.42 million trade debt claim;

• Frederick Von Zuben of New York, with a $4.8 million promissory note claim;

• International Paper Recycling of Pittsburgh, with a $1.93 million trade debt claim; and

• Target of St. Paul, Minn., with a $1.59 million trade debt claim.

During the Chapter 11 case, Newark said it will continue normal operations under current management. The company does not anticipate any changes to its overall business.

Newark Group is a Cranford, N.J.-based producer of paper products from recycled materials. The Chapter 11 case number is 10-27694.

© 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.