Cenveo Reaches Revised Chapter 11 Plan Agreement; Burton to Step Down When It Exits Bankruptcy This Summer
Cenveo Inc. announced June 5 that it has reached a revised Chapter 11 plan of reorganization settlement agreement with more than 70% of its creditors - a key step in clearing the path for the mega-printer to emerge from Chapter 11 bankruptcy protection this summer. Prior to filing for Chapter 11 on Feb. 2, liabilities for the Stamford, Conn.-based printer and manufacturer of envelopes, custom labels, commercial printing and publisher solutions included approximately $1.1 billion in funded debt. Upon emergence from bankruptcy, funded debt will be reduced to under $400 million.
The amended plan has the backing of the majority of first-lien creditors, as well as the support of the Unsecured Creditors Committee whose members consist of trade creditors, the Pension Benefit Guaranty Corp., various unions and the indenture trustee for the unsecured note holders.
Key changes to Cenveo's pre-packaged Chapter 11 plan, which was originally submitted in April, include 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 to gain its support; and a revised agreement with first-lien holders to reduce the amount of debt issued from $200 million to $100 million upon Cenveo's exit from bankruptcy.
As part of the new plan, qualified pre-bankruptcy pension and unexpired collective bargaining agreement obligations will be assumed by Cenveo; it will pay $400,000 to the unsecured notes indenture trustee; a claims oversight monitor, at a cost of $100,000 to Cenveo, will be appointed; all current and former Cenveo directors and officers - including members and the estates of the controlling Burton family - will be released from any legal claims or actions; and a court-appointed examiner will end its inquiry into previous claims of alleged insider dealings.
The call for an investigation by an independent examiner had originally been led by second-lien creditor Brigade Capital Management, which filed a motion on Feb. 12 claiming “insider dealing-making” by the controlling Cenveo shareholders, officers and directors.
At the time, Brigade Capital's petition chastised what it described as exorbitant benefits for controlling Burton family members; a lack of truly independent Cenveo board members; and a Restructuring Support Agreement (RSA) between Cenveo and first-lien lenders that it said provided virtually no financial recovery to second-lien note holders or unsecured creditors.
The complaint also contended that the original plan of reorganization undervalued the company and essentially shut out second-lien lenders such as itself and unsecured creditors from financial recovery, while at the same time releasing Cenveo's existing Burton family management from estate claims and enabling management to own a 12% stake in Cenveo following the restructuring.
Now, the revised reorganization plan reached with creditors, and an announcement by Cenveo on June 7 that it reached an agreement with Brigade Capital - its largest second-lien note holder - to support its plan, puts these accusations to rest.
Robert G. Burton Sr. to Step Down as Cenveo Chairman
Even so, upon emergence from Chapter 11, Cenveo Chairman and CEO Robert G. Burton Sr. plans to step down, although he will remain an advisor until the end of 2018 and will continue to be a major shareholder. But that does not end the Cenveo Burton family legacy. He will be succeeded by his two sons: Robert G. Burton Jr., current president, will become CEO, and son Michael Burton, will be promoted from COO to president.
"With Cenveo now on a clear path to emerging from bankruptcy in the summer, and after serving as the company's chairman and CEO for the past 12 years, I know I leave Cenveo in the capable hands of my two sons who have worked by my side at Cenveo since September 2005," said Burton Sr. "Both Rob and Mike are very strong and capable managers who have served in numerous executive positions over the past 15-plus years."
The company announced that it expects to shortly begin soliciting votes for its plan of reorganization with a target confirmation hearing date in late July, and an expected exit from Chapter 11 shortly thereafter.
As of the Chapter 11 petition date, Cenveo operated approximately 39 manufacturing facilities in North America. Since that date, Cenveo revealed it has closed, consolidated or down-sized printing operations in Ennis, Texas; Mt. Pleasant, Pa.; Altoona, Pa.; Conklin, N.Y.; Pikesville, Md.; Kent, Wash.; and Omaha, Neb.
According to Cenveo's 8-K filing with the U.S. Securities and Exchange Commission (SEC), its updated May 2018 business plan excludes its previously awarded $61 million contract by the GPO to print and mail materials for the 2020 U.S. Census. The filing says the plan "does not take into account any settlement with the contract counter party, which is still being negotiated."
A request from Printing Impressions to the GPO inquiring about the current status of that contract with Cenveo went unanswered.