July 19 (Bloomberg) -- NE Opco Inc., the largest closely held envelope maker in North America, won court approval of bankruptcy financing and a settlement with creditors and lenders that paves the way for an uncontested sale of the company.
U.S. Bankruptcy Judge Christopher Sontchi approved the company’s request to borrow as much as $67.5 million to help fund operations as it pursues the sale, at a hearing today in Wilmington, Delaware.
“It’s really the kind of case that can’t languish,” Sontchi said at the hearing. “It needs to be moving forward” toward a sale to maximize the value of its assets.
The settlement, announced last week when the envelope maker was originally set to seek approval of the financing, gained the support from key parties on how the case would proceed and removed potential obstacles.
“Avoiding the cost, uncertainty, and delay of litigation is the best way to maximize value,” and validates the necessity and reasonableness of the settlement, John H. Knight, a lawyer for NE Opco, told Sontchi.
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 U.S. 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, a lawyer for unsecured creditors said at last week’s hearing.
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 above $4 million would be allocated 97 percent to the secured creditors and 3 percent to the trust.
“The evidence is sufficient that they will more likely than not get paid in full,” Sontchi said referring to the 503(b)(9) creditors.
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-bk-11483, U.S. Bankruptcy Court, District of Delaware (Wilmington).
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