S&P keeps Chesapeake on watch

Standard & Poor's said its ratings on Chesapeake Corp. remain on CreditWatch with negative implications, where they were placed on July 2 following the company's weaker-than-expected operating performance over the past several quarters, potential near-term bank facility covenant violations and the need to refinance its $250 million revolving credit facility due in February 2009.

The agency said this CreditWatch update follows the company's announcement of a comprehensive refinancing plan to address its potential near-term covenant violation, the upcoming maturity of its bank credit facility and general liquidity needs. The company expects the plan to include a new $250 million senior secured credit facility and an offer to exchange the company's existing senior subordinated note issues for new debt and equity securities.

In resolving the CreditWatch listing, S&P will consider the near-term operating prospects for the company in addition to the impact the proposed plan could have on the credit quality of existing noteholders.

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