Marcal Paper to be owned by Highland funds following asset sale closing

By Caroline Salls

Pittsburgh, Jan. 22 - Funds managed by Highland Capital Management, LP will be the new majority owners of Marcal Paper Mills, Inc. upon closing of the sale of substantially all of Marcal's assets, according to a Highland news release.

"We can and will restore the company's momentum and industry leadership," Highland president Jim Dondero said in the release.

According to the release, funds managed by Highland have agreed to convert a portion of their outstanding second-lien loan into an equity investment.

Judge Morris Stern of the U.S. Bankruptcy Court for the District of New Jersey approved the sale of Marcal's assets to second-lien lender agent NexBank SSB on Jan. 18.

The Highland funds are the majority lenders on the Marcal second-lien facility.

"We appreciate Highland's continued commitment to our company and its key constituencies," Marcal chief financial officer Bob Lynch said in the release.

"Upon the closing of the sale, Highland's financial acumen and resources will strengthen our ability to serve our customers, provide for our employees and support our vendors."

The sale closing is subject to completion of an agreement with the New Jersey Department of Environmental Protection to ensure compliance with the state's Industrial Site Recovery Act.

The assets sold for $121.6 million in cash, plus the assumption of liabilities.

Marcal Paper Mills, an Elmwood Park, N.J., manufacturer and distributor of bath tissue, kitchen towels, napkins and facial tissue, filed for bankruptcy on Nov. 30, 2006. Its Chapter 11 case number is 06-21886.

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