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| Smurfit Stone Building, Chicago Photo: www.chicagoarchitecturetoday.com
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Smurfit-Stone Container Corporation, a maker of cardboard packaging and one of the world’s largest paper recyclers, today announced that it and its US and Canadian subsidiaries have filed for Chapter 11 bankruptcy in Wilmington, Delaware.
The company said it plans to use this process to restructure its debt, resulting in a capital structure more suited to support its long-term growth and profitability. The company's normal day-to-day operations will continue without interruption.
The company also announced that, pending Court approval, it has received commitments for up to $750 million in debtor-in-possession (DIP) financing to fund continuing operations. Of this total, $350 million consists of new incremental funding; approximately $400 million represents replacement of existing Accounts Receivable Securitization facilities both in the U.S. and Canada. The DIP financing will enable the company to continue to satisfy customary obligations associated with ongoing operations of its business, including payment of employee wages and benefits in the ordinary course, and payment of post-petition obligations to vendors under existing terms.
Smurfit-Stone listed $5.6 billion in consolidated debt and $7.5 billion in consolidated assets as of Sept. 30. Twenty-four affiliates also sought protection.
Patrick J. Moore, chairman and CEO, said,“Over the past decade, we built one of North America’s premier containerboard and packaging companies. But, our financial performance has not reflected the full potential of our earnings power due to higher cost operations and burdensome debt levels dating back to the original formation of the company. As a result of our three-year transformation program, we have been focused on improving our operating performance and our operations are now well invested and far more cost effective.
“Yet, the acceleration of the unprecedented global economic recession has weakened demand for packaging, and the frozen credit markets have prevented an out-of-court refinancing of our capital structure. While this is not the outcome we anticipated, we are taking this action to become a more financially healthy company.
“This combination of a modern, cost-effective operating platform and a reorganized capital structure through Chapter 11 will represent a new beginning for Smurfit-Stone. I am confident that we will emerge a much stronger company structured for future growth and greater profitability.”
The company had net sales were $7.4 billion in 2007
The company founded in November 1998 as a result of the merger between Jefferson Smurfit Corporation (JSC) and Stone Container. JSC was spun off from the Irish packaging group Jefferson Smurfit Plc.
Jefferson Smurfit, the son of a shipyard worker, was born in Sunderland, in northeast England, in 1909. In 1934, Smurfit opened a tailoring business and soon became involved in a box-making factory in Dublin. When the company was first floated on the Irish Stock Exchange in 1964, its market value was the equivalent of just €1.5m.
Jefferson Smurfit's eldest son Michael, was responsible for building the company into a multi-billion euro world leader in packaging and with Tony O'Reilly, was the international face of Irish business in the 1970's and '80's.
"To this day I cannot believe our competitors allowed us to get to this position," Michael Smurfit told the London Independent in 2006. "In their shoes, I'd have taken pre-emptive steps to halt our growth."
The non-North American operations of Smurfit were sold to private equity firm Madison Dearborn Partners for $3.5bn in 2002.
Jefferson Smurfit changed its name to Smurfit Kappa in 2005, after acquiring Dutch rival Kappa Packaging.
Smurfit Kappa became a public company in 2007.
