Consumables
Chesapeake Provides Refinancing Update
Monday 30. June 2008 - Chesapeake Corporation (NYSE:CSK) today announced that it is continuing to work with a group led by GE Commercial Finance Limited and General Electric Capital Corporation on a new senior secured credit facility to provide long-term funding.
The completion of the proposed new credit facility has been delayed and it will not be completed by the previously anticipated end of June date. In the meantime, the company will continue to rely on its existing $250-million senior credit facility established in 2004 with a group led by Wachovia Bank. The company believes that the existing credit facility, which does not expire until February 2009, provides sufficient liquidity for the company’s current operating requirements.
The company entered into a commitment letter on May 2, 2008 with the GE entities to act as lead arranger and underwriter to provide a $250-million senior secured credit facility to refinance the outstanding borrowings under the company’s 2004 senior credit facility. Late in the closing process, while the company and the GE entities were completing work to satisfy the conditions of the commitment letter, several issues arose, including an issue related to the company’s entitlement to indemnification for the company’s losses in the Fox River environmental matter. The Fox River indemnification issue has subsequently been resolved on a basis that is expected to continue to provide substantial funds to cover the company’s reasonably probable costs related to the Fox River matter, but the issue contributed to a delay in completion of the new facility. Although the commitment letter with the GE entities expires on July 1, 2008, the company and GE are continuing to work toward a refinancing. However, the passage of time is likely to require some modification to the structure initially proposed. The intention remains to finalize a new senior credit facility that will provide a longer-term funding solution for the company well before the expiration of the 2004 senior credit facility in February 2009.
The company is also continuing to actively pursue options for certain of its non-core or underperforming assets and substantial progress has been made on several options that are expected to produce in excess of $75 million of cash by year-end.
“We believe that the liquidity available under the current 2004 facility is adequate for our current operating requirements,” said Andrew J. Kohut, Chesapeake president & chief executive officer. “In addition to working on a new credit facility and reducing debt by sales of assets, we are also reviewing our balance sheet and exploring alternatives for reducing leverage and improving our capital structure to better position the company for growth and profitability and to benefit all our stakeholders.”