New Chapter 11 Bankruptcy - Cenveo Inc.

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Cenveo Inc.

  • 2/2/18 Recap: Publicly-traded ($CVO) large envelope and label manufacturer with roots tracing back 100 years filed for bankruptcy. Interestingly, you, our treasured PETITION readers, probably interact with Cenveo's products in your day-to-day life. Cenveo prints comic books you can buy at the bookstore, produces specialized envelopes used by JPMorgan Chase Bank ($JPM) and American Express ($AMEX) to deliver credit card statements, and manufactures point of sale roll receipts used in cash registers and prescription labels found on medication at national pharmacies. Why did it file for bankruptcy? Disruption. And debt. The company notes that its filing was necessary to tame its burdensome funded debt and corresponding annual $99.4mm debt payments (inclusive of cash and "principle" payments). In light of its leverage, the company apparently also suffered from other pressures on the business, including restrictive trade terms and/or the departure of business from vendors. But, wait! There's more. And its textbook disruption. Per the company, "In addition to Cenveo’s leverage issues, macroeconomic factors, including the introduction of new e-commerce, digital substitution for products, and other technologies, are transforming the industry. Consumers increasingly use the internet and other electronic media to purchase goods and services, pay bills, and obtain electronic versions of printed materials. Moreover, advertisers increasingly use the internet and other electronic media for targeted campaigns directed at specific consumer segments rather than mail campaigns." Ouch. To put it simply, every single time you opt-in for an electronic bank statement, you're f*cking over Cenveo. More from the company, "As society has become increasingly dependent on digital technology products such as laptops, smartphones, and tablet computers, spending on advertising and magazine circulation has eroded, resulting in an overall decline in the demand for paper products, and in-turn lowering reliance on certain of Cenveo’s print marketing business. In addition, there is generally a decline in supply of paper products in the industry, such that only a handful of paper mills control the majority of the paper supply. As a result, paper mills and other vendors that sell paper products have a large amount of leverage over their customers, including Cenveo. The overall decline in the paper industry combined with the diminished supply in paper products has led to overall decline in the industry, dramatically impacting Cenveo’s revenues." Consequently, the company has spent years trying to streamline operations and cut costs: it is not entirely clear from the company's filing, but this disruption clearly led to the "downsizing [of] its workforce," a reduction in its geographic footprint, and asset dispositions. But, ultimately, earnings couldn't manage the balance sheet. The company engaged its various parties in interest and was able to secure a (shaky?) restructuring support agreement and a commitment of financing in the amount of a $190 million ABL DIP Facility provided by the Prepetition ABL Lenders and a new $100 million DIP Term Facility backstopped by more than a majority of the holders of First Lien Notes. It will need to address its underfunded pensions (approximately $92.9mm). 
  • Jurisdiction: S.D. of New York 
  • Capital Structure: see below.
  • Company Professionals:
    • Legal: Kirkland & Ellis LLP (Jayme Sprayragen, Jonathan Henes, Joshua Sussberg, Michael Slade, Gregory Pesce, Melissa Koss, George Klidonas, Natasha Hwangpo)
    • Financial Advisor: Zolfo Cooper LLC (Eric Koza)
    • Investment Banker: Rothschild Inc. (Neil Augustine, Dan Skolds, Matthew Chou, Philip Engel, Daniel Flanary, Thomas Galluccio, Trip Burke, Farhat Suvhanov)
    • Real Estate Consultants: VanRock Real Estate Consulting LLC
    • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
    • New Independent Director: Eugene Davis
  • Other Parties in Interest:
    • Prepetition ABL Agent; $190mm ABL DIP Facility Agent: Bank of America NA
    • $100mm DIP Term Facility Agent: Wilmington Savings Fund Society FSB
    • FILO Notes Trustee/First Lien Notes Trustee/Second Lien Notes Trustee/Unsecured Notes Trustee: Bank of New York Mellon
      • Legal: Riker Danzig Scherer Hyland & Perretti LLP (Joseph Schwartz, Curtis Plaza, Tara Schellhorn)
    • FILO Noteholder: Allianz GI US High Yield Fund
    • First Lien and Second Lien Noteholder: Brigade Capital Management, LP
      • Legal: Akin Gump Strauss Hauer & Feld LLP (Michael Stamer, David Zensky, Stephanie Lindemuth, James Savin, Kevin Eide)
    • Ad Hoc Committee of First Lien Noteholders
      • Legal: Stroock & Stroock & Lavan LLP (Brett Lawrence, Erez Gilad, Matthew Garofalo, Gabriel Sasson)
      • Financial Advisor: Ducera Partners LLC
    • Examiner: Susheel Kirplani
      • Legal: Quinn Emanuel Urquhart & Sullivan
    • Official Committee of Unsecured Creditors
      • Legal: Lowenstein Sandler LLP (Kenneth Rosen, Mary Seymour, Bruce Buechler, Bruce Nathan)
      • Financial Advisor: FTI Consulting Inc. (Samuel Star)
Source: DIP Motion

Source: DIP Motion

Updated 4/2/18