April 1, 2019
We first wrote about Orchids Paper Products Company ($TIS) back in November 2018 in “🚽More Trouble in Paper-Ville (Short A$$-Wipes)🚽.” It is a piece worth revisiting because it sums up the situation rather nicely. We wrote:
Orchids Paper Products Company ($TIS) is a Okahoma-based producer of bulk tissue paper which is later converted into finished products like paper towels, toilet paper and paper napkins; it sells its products for use in the “at home” market under private label to dollar stores, discount retailers and grocery stores. Its largest customers include the likes of Dollar General Corp. ($DG), Walmart Inc. ($WMT) and Family Dollar/Dollar Tree, which, combined, account for over 60% of the company’s sales. Given the rise of the dollar stores and discount retailers and the rise in private label generally, you’d think that this company would be killing it. Spoiler alert: it’s not. In fact, it is, by definition, insolvent.
This company doesn’t produce enough toilet paper to wipe away this sh*tfest. See you in bankruptcy court.
And that’s precisely where they (and affiliates) are now — in the District of Delaware.
And the story hasn’t really changed: the debtors still struggle from operational issues related to their facilities, too much competition (causing margin compression and loss of pricing power), rising input costs, and customer defections. To make matters worse, given the debtors’ deteriorating financial position, raw materials suppliers reduced credit terms given the debtors’ public reporting of its troubles. Consequently, virtually all of the debtors’ financial metrics got smoked. Gross profit? Smoked. Cash flow? Smoked. Net income? Smoooooooked.
Speaking of “smooooooked,” the company twice notes its termination of their investment banker, Guggenheim Securities. Bankers get replaced all of the time: not entirely sure why they felt the need to make such an issue of it here. That said, Guggenheim apparently marketed the company for months without finding a prospective buyer that would clear the debt. The company, therefore, hired Houlihan Lokey ($HL) to market the company. The result? They couldn’t find a buyer that would clear the debt. Nothing like paying a new banker AND presumably paying some sort of tail to your old banker just to end up with your pre-petition secured lender as your stalking horse bidder (and DIP lender)! Sheesh.
As we said, “[t]his company doesn’t produce enough toilet paper to wipe away this sh*tfest.”
Jurisdiction: (Judge Walrath)
Capital Structure: $187.3mm RCF/TL (Ankura Trust Company, L.L.C.), $11.1mm New Market Tax Loan
Legal: Polsinelli PC (Christopher Ward, Shanti Katona, Jerry Switzer Jr.)
Board of Directors: Steven Berlin, John Guttilla, Douglas Hailey, Elaine MacDonald, Mark Ravich, Jeffrey Schoen
Financial Advisor: Deloitte Transactions and Business Analytics LLP (Richard Infantino)
Investment Banker: Houlihan Lokey Capital Inc.
Claims Agent: Prime Clerk LLC (*click on the link above for free docket access)
Other Parties in Interest:
Large Equityholder: BML Investment Partners LP
Prepetition RCF Admin Agent: Ankura Trust Company
DIP Admin Agent: Black Diamond Commercial Finance LLC
DIP Lender: Orchids Investment LLC
Legal: Winston & Strawn LLP (Daniel McGuire) & (local) Fox Rothschild LLP (Seth Niederman)
Stalking Horse Bidder
Legal: Skadden Arps Slate Meagher & Flom LLP (Kimberly Debeers, Ron Meisler)
Official Committee of Unsecured Creditors
Legal: Lowenstein Sandler LLP (Mary Seymour) & CKR Law (David Banker)