On August 12, 2011, Manistique Papers ("Manistique") filed a petition for bankruptcy in the United States Bankruptcy Court for the District of Delaware. Manistique seeks to reorganize its debts under Chapter 11 of the United States Bankruptcy Code. According to the company's Declaration in Support of its Chapter 11 Petition (the "Declaration" or "Decl."), Manistique operates a "100 percent recycled fiber facility and [is] a leading North American producer of high-bright groundwood specialty products." Decl. at *3. This post will look at the nature of Manistique's business, why the company filed for bankruptcy as well as some of the company's objectives while in bankruptcy.
Based in Manistique, Michigan, Manistique operates a 100 year-old paper recycling mill on the Manistique River that employs approximately 150 people. Operations at the Manistique mill include a 500-ton per day recycled paper facility, a paper manufacturing machine, two boilers and a waste water system. Decl. at *4. At full capacity, Manistique can produce 125,000 tons of recycled paper per year. The company's end user for its product includes manufacturers of educational workbooks, office products and suppliers in the food services industry. Id.
The Manistique mill was originally built by the owner of the Minneapolis Tribune in 1914 and was sold to the Mead Corporation in 1940. Id. The Marshall Field family acquired the mill in 1959, followed by Kruger Inc. in 1991 and private equity firm Merit Capital Partners in 2006. Id.
Events Leading to Bankruptcy
Manistique attributes its bankruptcy to the increased costs of raw materials compounded by a substantial drop in sales. According to the company, the cost of raw materials increased by one million dollars each month since January of 2011. Decl. at *5. During this same time period, sales for Manistique's products dropped by approximately 30%. The company also contends that the lack of payment by one of its larger costumers further aggravated the company's already volatile economic condition. Id. A copy of Manistique's Declaration is available here for review.
Objectives in Bankruptcy
One of the first motions Manistique filed with the Bankruptcy Court is its Motion for Interim and Final Orders Authorizing Use of Cash Collateral (the "Cash Collateral Motion"). Manistique owes is prepetition secured lender approximately $11.1 million. The company's lender has a lien on all of Manistique's assets - including cash collateral. In order to continue with its day to day operations, Manistique seeks an order from the Court allowing it to access its cash collateral. According to Manistique, "[p]reserving, maintaining, and enhancing the value of the Debtor's business assets is of the utmost importance to a successful sale." (Emphasis added). Decl. at *22-23.
The Manistique bankruptcy is before Judge Kevin J. Carey. Judge Carey is Chief Judge of the Delaware Bankruptcy Court. Manistique is represented by the Delaware law firm Morris, Nichols, Arsht & Tunnel LLP.
For those readers who are unfamiliar with the bankruptcy process, below are some of my prior posts that address common issues that arise in Delaware bankruptcy proceedings: