Business News
Caraustar Reaches Agreement With Noteholders On Terms of Cooperative Restructuring and Files for Reorganization
Monday 01. June 2009 - Caraustar Industries, Inc. (Nasdaq: CSAR) announced that it has reached agreement with holders of approximately 83% of its 7 3/8% Senior Notes maturing June 1, 2009 and 91% of its 7 1/4% Senior Notes maturing May 1, 2010 on the terms of a cooperative financial restructuring that would reduce the company's debt obligations by approximately $135 million.
The company and the consenting noteholders have entered into an agreement pursuant to which the noteholders have agreed to complete the restructuring through a pre-negotiated Plan of Reorganization (the “Plan”). The Plan will be submitted to the United States Bankruptcy Court for the Northern District of Georgia (the “Court”) in the voluntary Chapter 11 case commenced by Caraustar on May 31, 2009. The Plan will be subject to the approval of the Court, among other conditions.
Under the Plan, holders of outstanding shares of Caraustar’s common stock will receive their pro rata share of $2.9 million, or approximately $0.10 per share, subject to certain conditions contained in the Plan. In addition, the Plan contemplates the exchange of the company’s existing 7 3/8% and 7 1/4% Senior Notes for an aggregate of $85 million in new Senior Secured Notes and 100% of the common stock of the reorganized company. The reorganized company is expected to emerge as a private entity with Wayzata Investment Partners LLC becoming the company’s controlling shareholder.
“Caraustar took decisive action to substantially reduce the company’s debt and prospectively reduce costs. Once our financial restructuring is complete, we believe Caraustar’s new capital structure combined with the cost savings achieved by operating as a private entity will provide a lean and flexible foundation for sustainable profitability and better position the company to meet the challenges of our industry and this recessionary economy head on,” said President and Chief Executive Officer, Michael J. Keough.
A key feature of the Plan is that all trade creditors, suppliers, customers and employees will receive all amounts owed to them. The company is seeking authority from the Court to pay these amounts in the ordinary course of business. “The company plans to ensure that customers, trade creditors, suppliers, and employees see no difference in Caraustar’s operations while we complete our recapitalization. The Plan and the authority we will seek from the Court will provide for uninterrupted payments of our existing and future obligations to these constituents and provide for seamless continuation of our operations,” Mr. Keough commented.
In conjunction with the restructuring, Caraustar has secured credit approval from General Electric Capital Corporation for a $75 million senior secured debtor-in-possession revolving credit facility (the “DIP Facility”) converting at emergence from bankruptcy into a $75 million senior secured revolving credit facility, the latter to become effective upon confirmation of the Plan by the Court. Proceeds from the DIP Facility may be used for (i) cash collateralizing outstanding letters of credit; (ii) paying for goods and services in the ordinary course of the business; and (iii) general corporate purposes.
“Today’s announcement is the result of extensive negotiations and hard work from key constituents, and we believe it provides the highest value obtainable for all of Caraustar’s constituents,” said Mr. Keough.
The Company and its domestic subsidiaries filed their voluntary Chapter 11 petitions in the United States Bankruptcy Court for the Northern District of Georgia on May 31, 2009. The cases will be jointly administered and the main case has been assigned case number 09-73830.