Cenveo Announces Court Approval of Reorganization Plan; Will Exit Bankruptcy in Coming Weeks
Cenveo Inc. announced late yesterday that the U.S. Bankruptcy Court for the Southern District of New York approved its amended plan of reorganization, paving the way for the Stamford, Conn.-based printing company to emerge from Chapter 11 bankruptcy protection in the coming weeks as a privately-held business.
Cenveo will exit Chapter 11 with a substantially deleveraged balance sheet. Prior to filing for Chapter 11 on Feb. 2nd, 2018, its reported liabilities included approximately $1.1 billion in funded debt but, upon emergence, its funded debt will be reduced by more than $800 million to approximately $325 million. The manufacturer of commercial printing products, envelopes, custom labels and publisher solutions also indicated that it will have used up about $68 million of its $175 million asset-based line of credit when it emerges from bankruptcy, with $65 million in remaining liquidity when coupled with its anticipated cash on hand.
Initial Cenveo Reorganization Plan Was Amended
Originally submitted in April, Cenveo was pressured to make changes to its pre-packaged Chapter 11 plan, including the establishment of a $7 million cash pool for general unsecured and second-lien creditors (it was $1.5 million in the original reorganization plan); a cash payment of approximately $50 million to Allianz for its senior secured notes; and a revised agreement with first-lien holders to reduce the amount of debt issued from $200 million to $100 million upon its exit from bankruptcy.
The revised plan also required Cenveo to assume qualified pre-bankruptcy pension and unexpired collective bargaining agreement obligations, to pay $400,000 to the unsecured notes indenture trustee and to appoint a claims oversight monitor.
Several of these changes were made to appease its largest second-lien creditor, Brigade Capital Management, which had filed a motion on Feb. 12th seeking the bankruptcy court judge to appoint an independent examiner to investigate Brigade's assertions of "insider deal-making" by the controlling Burton family with its first-lien note holders. Brigade claimed the original reorganization plan provided virtually no financial recovery to second-lien note holders and unsecured creditors, while at the same time it released the Burton family management, other company officers and the board of directors from any lawsuits and estate claims, and enabled the Burtons to own a 12% stake in Cenveo following the restructuring.
Brigade also questioned excessive executive compensation - approved by what it described as a subservient, non-independent board of directors - paid to Chairman and CEO Robert Burton Sr. and his two sons, President Robert "Rob" Burton Jr. and COO Michael Burton, during the course of several years, including cash payments and "retention bonuses" that were issued at the same time the company was reportedly contemplating a Chapter 11 filing.
Burton Family Maintains Control of Cenveo
As announced earlier by Cenveo, Robert Burton Sr. will step down as chairman when the company emerges from bankruptcy, although he will remain as an advisor until the end of 2018 and will continue to be a major shareholder. But that certainly doesn't end the Burton family legacy at Cenveo. Rob Burton will become CEO as part of the family's succession plan, and his younger brother, Michael Burton, will be promoted to president.
In yesterday's announcement of its impending emergence from bankruptcy, Cenveo touted that its revised reorganization plan was approved by various creditor groups and the Unsecured Creditors' Committee, including the Pension Benefit Guaranty Corp., certain unions and the indenture trustee for the unsecured note holders. Approximately 97% of its first-lien secured note holders; 100% of its second lien note holders, including Brigade Capital Management; and approximately 91% of its general unsecured creditors voted their approval, according to Cenveo.
As a publicly held printer, Cenveo was ranked No. 7 on the most recent, 2017 Printing Impressions 400 list of the largest printers in the U.S. and Canada as ranked by annual revenues. It had reported $1.559 billion in sales for its most recently completed fiscal year, a drop of 4% from the previous fiscal year of $1.625 billion. The complete Printing Impressions 400 ranking of the top 400 printing companies can be accessed by clicking here.