Richmond, Virginia, USA, 11 September 2008 -- Chesapeake Corporation (OTCBB:CSKE.PK) has signed an amendment and extension of the forbearance agreement with the required lenders under its USD 250-million Senior Secured Credit Facility. Under the agreement, the lenders have agreed that they will forbear from exercising their rights and remedies against the corporation and its subsidiaries in respect of (i) existing financial condition covenant defaults and (ii) the corporation's failure to pay the interest payment that was due on 15 November 2008, to the holders of its 10-3/8% Senior Subordinated Notes under the Senior Secured Credit Facility until 23 December 2008, subject to the terms and conditions of the forbearance agreement.
"This extension on the forbearance agreement provides us additional time to finalize arrangements for the short- and long-term financial liquidity and financial restructuring we need," said Andrew J. Kohut, Chesapeake president and chief executive officer. "We continue to make good progress on our restructuring plans with our lenders and with a group of holders of our subordinated debt."
The agreement of the lenders described above is subject to compliance by the corporation and the other Chesapeake subsidiary borrowers under the Senior Credit Facility with the terms and conditions set forth in the forbearance agreement. In addition, the lenders have reserved the right to terminate the forbearance agreement immediately in the event that the Subordinated Note Holders accelerate payment of the 10-3/8% Senior Subordinated Notes and pursue any remedy against Chesapeake on account of any payment default related thereto.
The corporation expects to be able to comply with the requirements of the forbearance agreement, but if it is not able to do so, or the forbearance agreement terminates, the lenders under the Senior Secured Credit Facility could require immediate payment of all amounts outstanding under the Senior Secured Credit Facility, terminate their commitments to lend under the Senior Secured Credit Facility and, pursuant to cross-default provisions in many of the instruments that govern other outstanding indebtedness of the corporation, immediate payment of other outstanding indebtedness could be required, all of which would have a material adverse effect on the business, results of operations, and financial condition of the corporation and would raise substantial doubts about its ability to continue as a going concern.
Chesapeake Corporation protects and promotes the world's great brands as a leading international supplier of value-added specialty paperboard and plastic packaging. Headquartered in Richmond, Virginia., the company is one of Europe's premier suppliers of folding cartons, leaflets and labels, as well as plastic packaging for niche markets. Chesapeake has 44 locations in Europe, North America, Africa, and Asia and employs approximately 5400 people worldwide.