Orchids Paper inks term sheet tied to assumption of supply agreement

By Caroline Salls

Pittsburgh, Aug. 15 – Orchids Paper Products Co. requested court approval of a term sheet reached with Fabrica de Papel San Francisco, SA de CV (Fapsa) in connection with the assumption and assignment of the parties’ supply agreement, according to a motion filed Wednesday with the U.S. Bankruptcy Court for the District of Delaware.

Orchids Paper said Fapsa objected to its motion for approval of the sale of the company’s assets and sought to recover $8.59 million owed on orders from Orchids Paper.

In addition, Fapsa argued that the company was required to cure all defaults and pay other amounts due as a condition to assumption and assignment of the supply agreement.

Under the proposed term sheet, the supply agreement will be modified and will be assumed and assigned to winning bidder Cascades Holding US Inc.

Cascades will pay $9 million to Fapsa, subject to adjustment based on accruals and payments, as a cure payment due under the amended agreement.

Cascades will also pay to Fapsa any additional amounts owed after Orchids Paper’s bankruptcy filing that are due and payable after closing.

In addition, Fapsa will pay to Orchids Mexico $1.28 million owed under an equipment lease.

Immediately after closing, Cascades will cause Orchids Mexico Holdings and Orchids Mexico Member to sell to Fapsa or its designee the right, title, and interest to 100% of the equity or other ownership interests in Orchids Mexico for $12 million plus the amount of cash held in bank accounts of Orchids Mexico at closing.

Orchids, a Brentwood, Tenn.-based maker of consumer tissue products, filed for bankruptcy on April 1. The Chapter 11 case number is 19-10729.

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