Smurfit-Stone reorganizing finances

Friday, January 30, 2009

Smurfit-Stone Container Corp., the employer of nearly 100 people at its Lewisburg plant, on Tuesday won federal court orders toward protection against creditors while it reorganizes its finances to support long-term growth and profitability.

"The acceleration of the unprecedented global economic recession has weakened demand for packaging," company President and CEO Patrick J. Moore said. "The frozen credit markets have prevented an out-of-court refinancing of our capital structure."

The Chicago-based company that employs nearly 22,000 people at some 150 plants in North America and Asia, filed for protection under Chapter 11 of the bankruptcy laws on Monday, the Associated Press reported. Chapter 11 is the most common form of bankruptcy. It's to free a company from the threat of creditors' lawsuits while it reorganizes its finances. The U.S. Bankruptcy Court in Wilmington, Del., has ruled Smurfit-Stone remains in control of its business and assets.

"We're always concerned when we hear about corporate bankruptcy, but we're hopeful that they can reorganize ... so they can return to be a corporate leader in our community," Terry Wallace, industrial development director for Lewisburg said on Wednesday.

Restructuring while protected by U.S. and Canadian courts is not part of the original three-year plan to improve Smurfit-Stone, Moore told national media, but it allows the company to become a more financially healthy company.

Clearly dismayed, some Lewisburg leaders on Wednesday saw some reason for hope.

"This might not affect us," City Councilman Robin Minor said. "I hope they can do whatever they can to keep everybody working and not layoff anybody."

Minor spoke after a city Industrial Development Board (IDB) meeting as local leaders continue to try to make Lewisburg attractive to prospective new employer. That comes as the city's new Industrial Park on Mooresville Highway has two new employers: One from Florida, and; One from Arizona that's moved more work here than first announced. Meanwhile, Sanford Corp. announced on Nov. 11 that it's closing it's pencil factory here, thereby ending 355 jobs.

"I just don't want anymore people in Lewisburg to lose their jobs," Minor said.

Reflecting on the nature of Chapter 11, IDB Attorney Bob Binkley pointed out that te system of reorganization works.

"We've had several (businesses) in town who've gone into bankruptcy and some are coming out of bankruptcy now," Binkley said.

City Manager Eddie Fuller agreed.

"Some have gone int Chapter 11 and nobody ever knew it," Fuller said.

Wallace said Smurfit-Stone's workforce in Lewisburg "isn't as big as CKNA, but it's in the top five" employment centers here.

Explanations were provided to the employees first.

"When we announced the filing we communicated thoroughly with all the employees and answered questions on internal and external web sites," Mike Mullin, director of the company's media relations and corporate affairs, said. "That's our practice."

The Bankruptcy Court's decision on Tuesday "would give them (employees) confidence ... that payroll is continued and normally processed," Mullin said Thursday.

Human resources issues have been discussed with the employees, he said.

"I understand folks are focused on doing their job safely," Mullin continued, emphasizing that the container division of Smurfit-Stone has the best safety record in the company.

The company's three-year transformation, as explained by the president and CEO, should be an encouragement to employees to "look a what we need to do to reduce costs and create greater efficiencies," Mullin said.

Still, he said, "We have announced we would shut down six plants, but not have identified them... There have been closures and openings of facilities...

"We have a lot of operations in rural communities and recognize we could be a major employer," Mullin said.

His record shows there are 110 employees at the plant here.

Wallace said the city's recently updated figures show 80-100 as the workforce at Smurfit-Stone, which had been Mead Containers just a few years ago.

A Wall Street Journal story sent by e-mail to Wallace's City Hall office from TVA was what alerted city leaders, the industrial development director said of the reorganization.

The company said on Tuesday that:

Operations are to continue as usual at all facilities.

It expects a significant improvement in capital structure to support future growth and profitability, and;

Some $750 million in new financing provides ample liquidity to accomplish the financial restructuring.