NE Opco Inc., the largest closely held envelope maker in North America, reached a settlement with creditors and lenders that will allow for a consensual ride through the bankruptcy process, a company lawyer said.
The envelope maker was set to seek court approval at a hearing today in Wilmington, Delaware, to obtain access to the final $7.5 million of a $67.5 million bankruptcy loan. Instead, the company announced that it had reached an agreement on how the bankruptcy will proceed, gaining the support of the official unsecured creditors committee.
“We have come up with a fully negotiated comprehensive settlement” with key stakeholders, John Knight, a lawyer for NE Opco, told U.S. Bankruptcy Judge Christopher Sontchi today. “It sends a message to the market that buyers that are interested are not buying into” a litigious or contentious case, he added.
NE Opco will return to court July 19 to seek approval of the settlement and final amount of financing.
Under the agreement, $25,000 will be put into a trust every week for 10 weeks for general unsecured creditors and those with 503(b)(9) claims, referring to the section of the bankruptcy code about creditors that have supplied goods within the 20 days preceding a company’s bankruptcy filing.
In addition, $500,000 would be deposited when the company reaches a sale agreement with a buyer, according to Robert J. Feinstein, a lawyer for unsecured creditors.
After the lenders providing bankruptcy financing are repaid, the next $4 million from sale proceeds would be split 75 percent with second-lien lenders and the other 25 percent to the unsecured creditors’ trust, giving them potentially another $1 million, according to Knight. Everything over $4 million would be allocated 97 percent to the secured creditors and 3 percent to the trust.
This “sounds like very positive developments, I’m happy to hear them,” Sontchi told the lawyers at today’s hearing.
NE Opco, formerly known as National Envelope, sought bankruptcy protection June 10 for the second time as the Internet continued to supplant mail for communications. The Frisco, Texas-based company listed as much as $500 million in both assets and liabilities in Chapter 11 filings.
The envelope maker has eight plants and two distribution centers capable of producing 37 billion envelopes a year, giving it a 15 percent share of the U.S market.
The case is In re NE Opco Inc. 13-11483, U.S. Bankruptcy Court, District of Delaware (Wilmington).