Paper Source asks bankruptcy court to dismiss Chapter 7 cases

By Sarah Lizee

Olympia, Wash., June 23 – Paper Source, Inc. asked the U.S. Bankruptcy Court for the Eastern District of Virginia to dismiss its Chapter 11 cases, according to a motion filed Tuesday.

The company said that from the outset of the cases, the debtors have been focused on executing a successful sale process.

The debtors received court approval to sell substantially all of their assets to Papershop HoldCo Inc., an affiliate of Elliott Investment Management LP, for over $91.5 million, as previously reported.

The transaction resulted in payment in full to the debtors’ debtor-in-possession lender and a significant recovery for the debtors’ pre-petition first-lien secured lenders.

It also preserves a committee settlement, which includes the sale of estate causes of action to the purchaser and funding of excluded cash to the debtors’ estates.

About 1,400 employee jobs were preserved, the majority of landlords and contract counterparties have seen their contracts and leases assumed and assigned to the purchaser, which will operate the business as a going concern, and vendors continue to have a go-forward relationship with the new Paper Source.

“A dismissal, as compared to pursuing a Chapter 11 plan or conversion to Chapter 7, would not negatively impact creditors, because there are insufficient assets of value available for full distributions to priority creditors, let alone non-priority unsecured creditors,” the company said in its motion.

“Simply put, the debtors believe they are not in a position to pursue a confirmable Chapter 11 plan of liquidation because they will not have sufficient assets available to pay all administrative and priority creditors in full.”

Chicago-based Paper Source designs, manufactures and markets paper products. The company filed bankruptcy on March 2 under Chapter 11 case number 21-30660.

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