Bankruptcy

Appvion Files Chapter 11 Amid Paper Slump

The coated paper industry "faces a long-term, structural decline as dependency on digital technology has increased," the company says.
Matthew HellerOctober 2, 2017

Paper maker Appvion has filed for bankruptcy protection, saying its debt load had become unsustainable amid an industry-wide sales decline due to consumers’ shift to digital technology.

According to court papers, Appvion’s debts include $241 million owed on a senior secured loan, $257 million in second lien secured notes, $24 million owed on an accounts receivable securitization, and a pension plan that is underfunded by about $113 million.

The Appleton, Wis.-based company had been in talks with lenders but said “a refinancing transaction on appropriate terms was not commercially feasible due to the nature of the company’s debt agreements, financial condition and near-term liquidity demands.”

Appvion did secure $85 million in debtor-in-possession financing to help maintain operations during the Chapter 11 process.

“We believe this process will result in a sustainable capital structure for our business,” CEO Kevin Gilligan said in a news release.

“Our goal is to emerge a stronger company — well positioned to compete long-term in the evolving coated paper market and further invest in the innovation that has made Appvion a market leader,” he added.

Appvion is a leading manufacturer of specialty coated papers, operating primarily in two business segments — thermal paper used for such products as retail receipts, shipping labels and airline tickets, and carbonless paper for design and print applications.

“The North American paper industry began to contract in the mid-2000s, resulting in closure of paper mills throughout the industry,” the company said in a court declaration. “In particular, the coated paper industry faces a long-term, structural decline as dependency on digital technology has increased and demand has decreased.”

While the thermal market grew at a 2% compound rate between 2011 and 2016 , the carbonless market declined by around 7% to 11% during the same period amid increased use of competing technologies, including digital laser, inkjet and thermal printers, and electronic communications.

The Chapter 11 filing reflects “persistent negative industry trends, an unsustainable degree of balance sheet leverage, inability to adequately address near-term maturities, and rapidly deteriorating liquidity,” Appvion explained.