Chesapeake secures forbearance from senior secured credit facility lenders to Dec. 10

By Caroline Salls

Pittsburgh, Nov. 3 - Chesapeake Corp. has secured a forbearance agreement from the lenders on its $250 million senior secured credit facility under which the lenders have agreed not to act on the company's financial condition covenant defaults through Dec. 10, according to a company news release.

"Despite adverse conditions in global financial markets, we continue to make progress on our financial restructuring," Chesapeake president and chief executive officer Andrew J. Kohut said in the release.

"In addition to the previously announced negotiations with an ad hoc committee of holders of our subordinated debt, we are also engaged in discussions with others on possible alternative financial restructuring opportunities.

"The forbearance agreement provides us additional time to finalize arrangements for the short- and long- term financial liquidity and financial restructuring we need."

According to the release, the forbearance agreement requires the company to deliver information related to its financial position, business operations and ongoing restructuring process, including details on the development of plans for interim financing to provide liquidity for continued operations, at various milestones during the forbearance period.

Although the company said it expects to be able to comply with the forbearance agreement requirements, failure to do so could result in debt payment acceleration and loan termination, which would raise substantial doubts about Chesapeake's ability to continue as a going concern.

Chesapeake is a Richmond, Va.-based manufacturer and supplier of specialty paperboard packaging products.

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