News

Chesapeake has insisted it is "business as usual" for its UK operation, despite the possibility of the US packaging group seeking Chapter 11 bankruptcy protection in the States.

The company revealed last week that it was in discussions with senior creditors in an attempt to refinance its $250m (£166.7m) credit facility, after defaulting on financial condition covenants relating to its existing facility on 1 November.

In a statement, the company said: "There can be no guarantee that a final agreement will be reached. Our restructuring activities may require that we seek the protection of US bankruptcy laws for Chesapeake and, possibly, certain of its US subsidiaries."

The option to seek Chapter 11 protection "is one of a number of possibilities" being explored by Chesapeake at the moment. The company has claimed that if it does file for creditor protection in the US, its UK operation, which employs 2,300 staff, as well as other sites in Europe, would continue to run as usual.

Bob Houghton, UK marketing manager at Chesapeake, said: "It is likely it would only affect the US and possible some of its subsidiaries. Elsewhere, including the UK, it would be business as usual."

Chesapeake added: "Failure to successfully implement a restructuring or refinancing plan or otherwise address access to alternative sources of liquidity raises substantial doubt about our ability to continue as a going concern."

The company has until 10 December to complete its refinancing with associated lenders who have, under a forbearance agreement, agreed not to exercise their rights to that date.

According to the regulatory filing, the restructuring alternatives being considered by the group "would likely reduce the value of [its] existing common stock to nominal or no value".

Last month, it was announced that Chesapeake was to be delisted from the New York Stock Exchange after the group's market capitalisation fell below the $25m (£14m) mark for more than the allowed 30-day period.

Earlier this year, Tory leader David Cameron outlined proposals to introduce Chapter 11-style creditor protection to the UK, should the Conservatives win the next general election.

Timeline
1 August 2008: Announced proposal of comprehensive refinancing plan to address upcoming maturity of credit facility
2 October: Announcement it is to be delisted from the New York Stock Exchange
8 October: Common stock no longer traded on New York Stock Exchange
1 November: Entered into forbearance agreement with credit facility lenders
10 December: Deadline to meet financial covenants of its $250m credit facility