Chesapeake Corporation Reaches Agreement with Lenders on Forbearance
Richmond, Virginia, USA, 03 November 2008 -- Chesapeake Corporation (OTCBB:CSKE.PK) today announced that it has signed a 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 existing financial condition covenant defaults under the Senior Secured Credit Facility. The period of the lenders' forbearance will continue until 10 December 2008, subject to the borrowers' compliance with the terms and conditions of the forbearance agreement.
"Despite adverse conditions in global financial markets, we continue to make progress on our financial restructuring," said Andrew J. Kohut, Chesapeake president and chief executive officer. "In addition to the previously announced negotiations with an ad hoc committee of holders of our subordinated debt, we are also engaged in discussions with others on possible alternative financial restructuring opportunities. The forbearance agreement provides us additional time to finalize arrangements for the short- and long-term financial liquidity and financial restructuring we need."
The 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 forbearance agreement requires that the corporation and the other borrowers deliver to the Senior Credit Facility Administrative Agent at various milestones during the forbearance period certain information with respect to the corporation's financial position, business operations, and ongoing restructuring process, including details regarding the development of plans for interim financing to provide adequate liquidity for the corporation to continue operations.
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 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 our 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 the company's 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, and plastic packaging for niche markets. Chesapeake has 44 locations in Europe, North America, Africa, and Asia and employs approximately 5400 people worldwide.