Newark Group emerges from bankruptcy with $180 million of financing

By Caroline Salls

Pittsburgh, Aug. 16 - The Newark Group, Inc. emerged from Chapter 11 bankruptcy on Monday, according to a company news release.

The company said its plan of reorganization was confirmed by the U.S. Bankruptcy Court for the District of New Jersey just 51 days into the bankruptcy case.

"We are pleased to have the continued support of our lenders and stakeholders as we have completed the steps necessary to strengthen our balance sheet so we are poised for sustainable growth," president and chief executive officer Robert Mullen said in the release.

"We emerge from chapter 11 a well capitalized private company with a much improved operating profile."

Exit financing

As the final step in its reorganization, Newark Group said it closed on two exit loans, including a three-year $70 million revolver arranged by existing revolving lender Wells Fargo Capital Finance and a $110 million term loan led by ORIX Finance.

The ORIX term loan will mature on March 31, 2014.

Interest on the revolver will depend on the company's monthly average access availability. Specifically, the rate will be Eurodollar plus 375 basis points for more than $30 million of availability, Eurodollar plus 400 bps for $15 million to $30 million and Eurodollar plus 425 bps for less than $15 million.

Interest on the ORIX loan will be Eurodollar plus 950 bps.

Together, the company said these facilities give it roughly $25 million of undrawn liquidity.

Creditor treatment

As previously reported, treatment of creditors will include:

• Holders of pre-bankruptcy notes claims will receive 96.5% of the equity in the reorganized company;

• Holders of asset-based loan claims will be paid in full from the proceeds of a revolving debtor-in-possession facility;

• Holders of ABL revolver DIP loan claims will be paid in full from the proceeds of exit financing;

• Holders of pre-bankruptcy CL claims will be paid in full from the proceeds of an Orix Finance DIP facility;

• The holder of the Von Zuben subordinated unsecured note claim will receive $250,000 in cash and $1.35 million in new subordinated notes;

• Holders of equity interests will receive a share of 1.5% of the new common stock to be issued on the plan effective date and five-year equity warrants to purchase 15% of the new common stock at a price based on an equity value of $157.5 million; and

• All general unsecured claims will be paid in full in the ordinary course of business.

Newark Group, a Cranford, N.J.-based producer of paper products from recycled materials, filed for bankruptcy on June 9. The Chapter 11 case number is 10-27694.

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