Constar International Inc. has filed for a prepackaged Chapter 11 reorganization, hoping to shed $175 million in debt and reduce interest expenses by about $19.3 million, the company announced early this afternoon.
The Philadelphia producer of plastic containers for food and beverages said that holders of its subordinated debt had agreed to a debt-for-equity exchange.
Constar is the second packaging maker to file for bankruptcy this week: Chesapeake Corp. is intending to sell itself to private investors.
Constar and some of its subsidiaries filed the voluntary petitions in the U.S. Bankruptcy Court in Wilmington.
"We intend to continue to operate as usual during the restructuring process with minimal disruption to the business and our constituencies," said Michael Hoffman, president and chief executive. "We intend to pay all of our obligations in full – which includes providing pay and benefits to our employees as usual, honoring all contracts, and paying suppliers in full."
Under the restructuring plan, which the company expects will be completed by early spring, holders of the subordinated notes will convert the face amount plus the full amount of the interest payment due Dec. 1, 2008, which will not be paid, into Constar common stock.
The company said that remaining creditors would be paid in full.
Constar also said that it has bank commitments for $75 million in debtor-in-possession and exit financing.
Crown Holdings Inc. sold Constar in an IPO in November 2002. From the start, the company has struggled to be consistently profitable in part because of a heavy debt load.
Company shares, which trade on the Nasdaq market, have been priced from $0.10 to $4.44 over the last year. Constar shares were priced early this afternoon at 14 cents, down 1 cent.
Richmond, Va.-based Chesapeake has reached agreement to sell itself to private equity firms. To that end, the company filed voluntary Chapter 11 petitions yesterday in the Eastern District of Virginia in Richmond.
Chesapeake, which has about 5,400 employees at 44 locations worldwide, said it will seek court approval for a new debtor-in-possession financing facility of up to $37 million provided by certain members of its current revolving lender group.