Constar International Holdings entered Chapter 11 this morning, for the third time in recent years, seeking a quick Section 363 auction of its assets with an opening offer of about $68.5 million from Amcor Rigid Plastics USA.
The Trevose, Pa.-based company first filed for bankruptcy in 2009. It emerged from its second Chapter 11 in May 2011, with Black Diamond Capital Management and Solus Alternative Asset Management as its largest shareholders. Constar is a global producer of PET (polyethylene terephthalate) plastic containers. The company blamed its previous financial troubles on the loss of its largest customer, Pepsi, which shifted its bottle production in-house. This time around, Constar cited declining operating performance from both the end of its Pepsi contract in 2012 and overall softness in the market for PET containers this summer.
Amcor’s proposed stalking-horse bid is sufficient to pay off Constar’s $20 million revolving loan facility and to provide “significant value” to its term lenders, the company said today in court filings. Constar owes about $15.2 million under a roll-over facility and about $88 million under a shareholder facility agreement.
During the course of negotiating an asset-purchase agreement, which began in the second quarter of this year, Amcor told Constar it was no longer interested in purchasing the company’s U.K. assets. Constar financial advisor Lincoln Partners Advisors is currently in the process of marketing the U.K. assets for a separate sale.
The company said in court papers it will seek approval of DIP financing to fund operations during the wind-down.
Constar is seeking bankruptcy-court approval of an auction to be held in the Manhattan office of its law firm, Dechert. Young Conaway Stargatt & Taylor is providing local Delaware counsel. U.S. Bankruptcy Judge Christopher Sontchi has been assigned to oversee the case, in Wilmington, Del. – John Bringardner