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The cardboard-box maker and paper recycler -- with dual headquarters in Creve Coeur and Chicago -- said the action will allow the company to continue day-to-day operations as it manages a massive debt load. Smurfit-Stone had about $3.6 billion in debt as of Sept. 30, nearly half of its projected 2008 sales of $7.2 billion.
More than $1 billion of that debt is due this year.
Smurfit-Stone originally tried to refinance the debt out of court and contacted 25 potential lenders, according to the bankruptcy documents. But it couldn't get the takers it needed. That's when the company turned to the courts.
"The acceleration of the unprecedented global economic recession has weakened demand for packaging, and the frozen credit markets have prevented an out-of-court refinancing of our capital structure," Chairman and Chief Executive Patrick J. Moore said in a statement Monday. "While this is not the outcome we anticipated, we are taking this action to become a more financially healthy company."
The company filed for protection in the U.S. Bankruptcy Court in Delaware. Its Canadian subsidiaries also filed for reorganization.
Earlier this month, The Wall Street Journal reported Smurfit-Stone was exploring bankruptcy. And on Monday, analysts said they weren't surprised by the filing.
"I don't think they had any choices," said Stephen Atkinson, a research analyst with BMO Capital Markets in Montreal, Canada.
One upside, though, is that Smurfit-Stone will get up to $750 million in debtor-in-possession financing, pending court approval. The DIP financing -- $350 million in new incremental funding and $400 million to replace existing credit lines -- allows the company to pay wages and benefits as well as make payments to vendors.
Analysts said the financing allowed Smurfit-Stone to file Chapter 11 and reorganize, said Joshua Zaret, a New York-based senior research analyst with Longbow Research. The other, less desirable option would have been Chapter 7 -- liquidation of assets.
Smurfit-Stone was created in 1998 when Ireland-based Jefferson Smurfit Corp. merged with Chicago-based Stone Container Corp. It has about 21,250 employees throughout North America and Asia, including about 760 workers in the St. Louis area.
In the bankruptcy documents, Smurfit-Stone outlined a transformation plan that it started roughly three years ago, which included the closures of some high-cost box plants. As part of that plan, the company said it will close six more plants in the first half of this year.
John Haudrich, the vice president of investor relations, declined to identify the locations.
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