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The specialty packaging company, struggling with a heavy debt load and difficulty raising capital, filed for Chapter 11 bankruptcy protection Monday. It plans to sell itself to a group of investors for about $485 million unless another buyer emerges and makes a higher bid at auction.
U.S. Bankruptcy Judge Frank J. Santoro approved a motion for $18.5 million in debtor-in-possession financing provided by Wachovia Bank.
Chesapeake is based in Richmond, but most of its operations are in Europe, where it makes specialty packaging for health care, food and beverage products. The investors, including Irving Place Capital Management LP and Oaktree Capital Management LP, plan to buy the company's U.S. assets and the stock of its foreign subsidiaries and keep the businesses in operation.
In its chapter 11 filing, Chesapeake listed total assets of $936.6 million and total debts of and $937.1 million.
"After exploring a range of possible alternatives to improve our balance sheet and maintain the liquidity we need to operate our businesses in an extremely difficult economic environment, the management and board of directors of Chesapeake concluded that a court-supervised sale of our business operations is in the best interest of the company and its stakeholders," said Andrew J. Kohut, the company's president and chief executive officer, in a statement.
Chesapeake operated a paper mill in West Point for decades but sold the plant in 1997 as part of a strategic shift to exit the commodity paper products business. In 1999 and 2000, the company acquired several European-based businesses. In the United States, the company makes leaflets and labels at plants in Hicksville, N.Y., and Lexington and Raleigh, N.C., that altogether employ more than 200 people.
-- John Reid Blackwell
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