DOW JONES NEWSWIRES
Smurfit-Stone Container Corp. (SSCC) said Monday that its U.S.
and Canadian units have filed for bankruptcy protection as the
packaging and containerboard company looks to restructure its debt
and improve profitability.
The company had warned lenders earlier this month that it could
file for bankruptcy amid weakening sales and a cash crunch.
Chief Executive Patrick Moore said the company's performance
hasn't reflected its potential "due to higher cost operations and
burdensome debt levels dating back to the original formation of the
company."
Smurfit-Stone, like many other companies in financial distress,
is heavily leveraged. It borrowed money for an acquisition and
capital spending that have left it little room to navigate the
recession.
The company said Monday that it has commitments for $750 million
in debtor-in-possession financing to fund its continuing
operations.
Moore said the company has been focused on improving operating
performance as part of its three-year restructuring plan, saying
operations were much more cost-efficient now.
But, he said, "the acceleration of the unprecedented global
economic recession has weakened demand for packaging, and the
frozen credit markets have prevented an out-of-court refinancing of
our capital structure."
Earlier this month, all three major ratings agencies cut their
credit ratings to highly speculative from speculative on
Smurfit-Stone.
One of the U.S.' largest makers of cardboard boxes,
Smurfit-Stone is directly linked to consumer goods, with its
cardboard wrapping goods including computers, high-definition
television sets, pizzas and office furniture.
In late October, the company told investors that higher prices
for its paper and cardboard packaging would offset slower global
demand. But the company reversed itself two months later, warning
investors that fourth-quarter earnings would be "significantly
lower" than the third quarter and that sales had dropped
"dramatically."
Both the U.S. and Canadian units filed Chapter 11 in the U.S.
Bankruptcy Court, and the Canadian units will also file to
reorganize under the Companies' Creditors Arrangement Act in
Canada.
Last year, the company closed a hardwood pulp mill in Quebec, a
corrugated medium machine in Arizona and four higher-cost box
plants.
Smurfit-Stone said day-to-day operations will continue as
normal.
The company's shares closed Friday at 6 cents and haven't traded
premarket. The stock has lost 76% of its value so far this
year.
-By Kerry E. Grace, Dow Jones Newswires; 201-938-5089;
kerry.grace@dowjones.com
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