Solo Cup ups borrowing availability to offset use of operating cash, considers sales to pay down debt

By Caroline Salls

Pittsburgh, March 30 - Solo Cup Co. has increased the borrowing availability under its second-lien debt to offset the overall use of cash from operating activities in fiscal years 2006 and 2004, according to an 8-K report filed with the Securities and Exchange Commission.

The company said it has recorded net losses in each fiscal year since the fiscal year ended Dec. 31, 2003 and these losses have not provided sufficient cash flow to offset its working capital needs, resulting in an overall use of cash from operating activities in fiscal years 2006 and 2004.

Solo Cup said its refinanced credit facilities, as well as the indenture governing its 8½% senior subordinated notes, impose restrictions on its operations in the form of financial covenants and other terms and conditions that could limit its access to additional funding and impair its ability to meet debt obligations as they become due.

The company said it has unutilized capacity under its credit facilities as of Dec. 31, but its ability to utilize this liquidity depends on continuing compliance with financial covenants.

In order to help ensure continuing compliance with the covenants and provide necessary liquidity to operate its business and implement its business strategies, Solo Cup said its focus in 2007 is on improving operating results and cash flow, including a number of steps taken to maximize near-term liquidity to meet expected working capital needs, fund capital expenditure requirements and fulfill lease and debt service obligations over the longer term.

In addition, the company said it is evaluating opportunities to pay down existing debt through a sale-leaseback transaction and through sales of non-strategic assets, but its focus continues to be making the operational improvements that will provide needed long-term financial flexibility.

The company said other necessary steps include achieving targeted revenue enhancement and cost savings under its performance improvement program.

According to the filing, Solo Cup's management believes that cash generated by operations, amounts available under its credit facilities, proceeds from the sale-leaseback transaction and funds generated from non-strategic asset sales should be sufficient to meet the company's expected operating needs, planned capital expenditures, payments in conjunction with lease commitments and debt service requirements over the next 12 months.

At Dec. 31, the company's outstanding borrowings under first-lien and second-lien facilities, its 8½% senior subordinated notes and foreign borrowings were $1.15 billion.

Solo Cup is a Highland Park, Ill.-based manufacturer of disposable foodservice products.

© 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.