Chesapeake Corp. Reaches Agreement to Sell All of Its Operations

RICHMOND, Va.—Chesapeake Corporation announced that it has reached an agreement to sell all of its operating businesses to a group of investors including affiliates of Irving Place Capital Management, L.P. and Oaktree Capital Management, L.P., who intend to continue operating these businesses as a going concern. To consummate this sale, Chesapeake Corporation and its U.S. operating subsidiaries filed voluntary Chapter 11 petitions in the Eastern District of Virginia in Richmond.

All of the Company's operations—including all of its manufacturing and distribution facilities in the U.S. and around the world—are open and operating on normal schedules, fulfilling customer orders as usual and providing uninterrupted customer service. The Company's non-U.S. subsidiaries were not included in the Chapter 11 filing and there are no plans to place them in administration.

"After exploring a range of possible alternatives to improve our balance sheet and maintain the liquidity we need to operate our businesses in an extremely difficult economic environment, the management and Board of Directors of Chesapeake concluded that a court-supervised sale of our business operations is in the best interest of the Company and its stakeholders," said Andrew J. Kohut, President and Chief Executive Officer of Chesapeake Corporation. "In particular, the sale transaction and Chapter 11 process will help us meet several critical objectives, including allowing ongoing operation of all of our businesses without interruption to supplier and customer relationships, providing a permanent solution to the high leverage at the parent company level and constrained liquidity, providing the most rapid path to a new organization with a much healthier balance sheet, and providing a bright future for our operating companies and their employees, customers and suppliers."

Chesapeake has filed a variety of first day motions with the Court that will allow it to continue to conduct business as usual while it completes the sale of the business operations to the investor group. In addition, the Company will seek preliminary approval from the Court for a new debtor-in-possession financing facility of up to $37 million provided by certain members of its current revolving lender group. The new facility will provide an immediate source of funds to the Company, enabling it to satisfy customary obligations associated with ongoing operations of its business, including the timely payment of employee obligations, materials purchases, normal operating expenses and other obligations. Availability under the debtor-in-possession financing is initially limited to $18.55 million, subject to increase (i) upon entry of an order in the Company's Chapter 11 case approving the new facility and (ii) the unanimous approval of the lenders under the new facility. The Company expects that cash flows from the ongoing business and the initial availability under the new facility will allow it to meet its liquidity needs until such time as the conditions are satisfied for the availability of increased financing.

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