Richmond, Virginia, USA, 23 December 2008 -- Chesapeake Corporation (OTCBB:CSKE.PK) today announced that it has reached agreement with the required lenders on its USD 250-million Senior Secured Credit Facility on an amendment and extension to 30 December 2008, of their forbearance agreement. Under the amendment, the lenders have agreed that they will continue to forbear from exercising their rights and remedies against the corporation and its subsidiaries in respect of existing financial condition covenant defaults and 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. The period of the lenders' forbearance under the amendment is subject to the terms and conditions of the amended forbearance agreement.
"We have been in intense negotiations on our financial restructuring and have reached an agreement in principle with our lenders and a group of holders of our subordinated debt on the material issues involved in the proposed restructuring," said Andrew J. Kohut, Chesapeake president and chief executive officer. "The extension of the forbearance agreement provides us additional time needed to finalize arrangements with these groups to strengthen our short- and long-term financial liquidity and implement a financial restructuring."
The amended agreement of the lenders 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. The lenders continue to reserve 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 amended forbearance agreement, but if it is not able to do so, or the amended forbearance agreement expires, 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 the corporation's 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 is 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, and plastic packaging for niche markets. Chesapeake has 44 locations in Europe, North America, Africa, and Asia, and employs approximately 5400 people worldwide.