Arjo to open receivership proceedings for some French subsidiaries

By Richard Stuart-Turner, Tuesday 08 January 2019

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Arjowiggins is planning to file petitions to open safeguard and receivership proceedings for some of its French subsidiaries.

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Arjowiggins’ French subsidiaries operating the mills of Bessé-sur-Braye, Le Bourray and Greenfield are affected

The move, which was revealed by parent company Sequana yesterday (7 January), follows the termination of Sequana’s planned €125m deal to sell Arjowiggins’ €528m (£473m) turnover Graphic and Creative Papers businesses to Dutch firm Fineska, which fell through after the buyer pulled out due to deteriorating market conditions.

Earlier yesterday, Sequana had requested to suspend trading of its shares on the Paris Stock Exchange.

A statement released by Sequana said Arjowiggins and the French companies Arjowiggins Papers and Arjowiggins Creative Papers will now petition the Commercial Court of Nanterre to open a preventive safeguard procedure (sauvegarde) in their favour to “protect their interests” [provide them with temporary creditor protection in France].

The move would see Arjowiggins’ French subsidiaries operating the mills of Bessé-sur-Braye, Le Bourray and Greenfield filing petitions to open receivership proceedings (redressement judiciaire). These petitions are set to be reviewed by the Commercial Court at a hearing taking place today.

The 568-staff Bessé-sur-Braye mill has two paper machines and produces Cocoon, Cyclus and the MCS product range as well as coated specialities and laminated paper.

Le Bourray has 262 staff and produces the Eural brand, RePrint, Cyclus, Kaleido tissue paper and the whole Office ranges on three paper machines. Greenfield, meanwhile, employs 76 staff and handles premium quality recycled pulp production.

Arjowiggins’ Priplak and Arjobex subsidiaries are unaffected by these procedures and the group said it is “reviewing its various strategic options” regarding its subsidiaries outside France jointly with their local managers, with the ultimate aim to minimise the impact of the French procedures.

The group’s UK subsidiaries include the Stoneywood mill in Scotland and the Chartham translucent papers mill in Kent.

“Under the aegis of receivers appointed by the Commercial Court, the safeguard or receivership procedure would enable Arjowiggins to seek all potential solutions likely to secure the continuity of business of Arjowiggins’ Graphic and Creative Papers divisions in the context of a sustainably viable takeover plan, while preserving the interests of its employees, customers, suppliers and stakeholders,” the company said in the statement.

The French public authorities have been informed of the group’s situation and have already indicated that they would support the various processes undertaken to find buyers for the different Arjowiggins businesses.

After restructuring its printing and writing paper businesses in 2014, Arjowiggins had refocused on technical and specialty papers.

The group said that while it had “demonstrated its ability to generate positive cashflows” during this period, since July 2017 it has suffered “an unprecedented and steady increase of its external costs, particularly for paper pulp that has reached a record historical high in the past few months, in an environment of structurally declining volumes of printing and writing papers”.

The group added that even with “significant” price increases, it had been unable to offset the rise of its variable costs.

Additionally, it said its long-running litigation with British American Tobacco (BAT) related to €578m in contested dividends has caused “major mistrust” from its business partners, in particular its credit insurers who have scaled down their exposure to Arjowiggins, leading to tensions on working capital requirements.

Sequana concluded that, under these circumstances, Arjowiggins “has therefore been forced to initiate the required measures to continue operating its business under the best possible conditions” and that the group is “confident in its ability to find buyers for these businesses”.

While Sequana floated Antalis as a separate business in 2017, the group still holds a 75.21% stake in the paper distributor.

Antalis regional managing director for UK, Ireland and South Africa David Hunter moved to reassure customers that it was “100% business as usual” at Antalis.

He said: “We are entirely separate companies, and we have our own listing. We operate quite independently, although we have historic connections of course.

“But [Arjowiggins] have been a good supplier for many years and we share a lot of history – they are a reasonable sized supplier to us but by far they’re not one of our largest suppliers.

“From a service point of view, we don’t envisage any short or medium-term issues, the plans seem to be progressing quite well and we are sat on good stocks. We watch with interest what’s going to happen, and we wish them well.

“Whatever happens, it’s going to be an unsettling period for [Arjo] employees, but my hope and expectation is that they will come out of it well. But from an Antalis point of view, it is an arm’s length relationship – they are a supplier and that’s it.”

A paper industry source added: "How this will pan out is incredibly difficult to predict in my view. We all know that the French government work very hard to protect manufacturing jobs, so I wouldn’t be surprised if the current position is held for some length of time whilst a buyer is sought.

"That said, who would want to buy these assets? They are ageing mills that are trying to compete in a world that has been commoditised whilst input costs are rising at incredible rates.

"In my view, any buyer would be looking to convert the papermaking to more profitable areas - packaging, perhaps, but that seems to be becoming ‘overcrowded’. I think the Greenfield recycled pulp site still has some value so someone may express an interest in that alone.

"The big question, and I don’t have the answer, is what happens if the legal case with BAT goes against them."

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