Appvion Files for Bankruptcy Protection
After careful consideration, Appvion, an employee-owned paper company headquartered in Appleton, Wis., has filed a Chapter 11 petition in the U.S. Bankruptcy Court for the District of Delaware.
In a Restructuring Frequently Asked Questions page, the company maintained that its business is “fundamentally sound”; its debt load, however, is too high. To provide some perspective, according to Appvion’s second quarter financial filing, its net debt was $445.0 million compared to $432.1 million at year-end 2016.
Appvion has obtained a commitment for $85 million in new debtor-in-possession (DIP) financing from a group of its first lien lenders. During its Chapter 11 case, the company expects to continue operations as usual, including continuing to pay wages and provide benefits to employees, as well as conducting business with customers and vendors to ensure ongoing obligations are met.
“We thoroughly explored various alternatives to address our debt and have been engaged in constructive discussions with our lenders regarding sponsorship of a plan to delever the company and enhance our liquidity,” Appvion CEO Kevin Gilligan said in a prepared statement. “While those discussions are active and continuing, we determined that pursuing a restructuring through Chapter 11 is the best path forward for Appvion and our stakeholders. We believe this process will result in a sustainable capital structure for our business.
“The Chapter 11 process itself will have little impact on how we do business,” he added. “We will continue to implement profit improvement and growth initiatives to optimize our operations and maximize the efficiency of our supply chain. As we work toward restructuring and emergence, we will remain focused on combining our market insight, extensive manufacturing capabilities, and unique coating technologies to serve our customers’ needs. Our goal is to emerge a stronger company—well positioned to compete long-term in the evolving coated paper market and further invest in the innovation that has made Appvion a market leader.”
It is uncertain when the paper company plans to emerge from bankruptcy. A hearing on Debtors’ First Day Motions occurred today at 11 a.m. (ET) before Judge Kevin J. Carey.
In related news, Appvion last month announced it was outsourcing its distribution center and warehouse in Appleton, Wis. The transition is expected to be complete by Nov. 5, at which time 62 workers will be laid off.
In a market that has been undergoing violent shifts in demand, particularly surrounding coated paper products, market contraction and a significant increase in foreign imports, Appvion’s declaration, perhaps, comes as no surprise.
“The North American paper industry began to contract in the mid-2000s, resulting in closure of paper mills throughout the industry,” the company said in court documents. “In particular, the coated paper industry faces a long-term, structural decline as dependency on digital technology has increased and demand has decreased.”
Appvion went on to say that its decision to file for Chapter 11 resulted from “persistent negative industry trends, an unsustainable degree of balance sheet leverage, inability to adequately address near-term maturities and rapidly deteriorating liquidity.”
(For a more in-depth analysis of the paper industry, read our August 2016 feature here.)
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