Marcal Paper Mills files Chapter 11 bankruptcy amid rising costs

By Caroline Salls

Pittsburgh, Nov. 30 - Marcal Paper Mills, Inc. filed for Chapter 11 bankruptcy Thursday in the U.S. Bankruptcy Court for the District of New Jersey amid rising natural gas, electricity and steam costs, according to a company news release.

The company said it has sufficient funds to continue its normal business operations, including on-going employee, supplier and customer obligations.

Despite ongoing negotiations with its energy suppliers, Marcal said the cost of natural gas, electricity and steam that it uses in the production process has risen 40% over the past 12 months.

"The price increases in energy have proven to be immensely difficult," chairman and chief executive officer Nicholas Marcalus said in the release.

"Demands by our lenders created liquidity pressures, which caused the company to file for the continued restructuring under Chapter 11.

"Dramatic increases in the cost of energy over the past year contributed to the liquidity issues that precipitated our filing for Chapter 11 protection.

"This strategic restructuring will allow our management team to focus efforts on improving our capital structure in order to restore the company to health and position us for the future.

"The restructuring also ensures that we address our immediate liquidity concerns, so that we can maintain critical supplier and customer relationships."

According to the release, as part of the restructuring process, management will conduct a rigorous evaluation of the company's financial structure and operations to identify and maximize cost-saving opportunities.

According to court documents, the company has more than $165 million in assets and more than $200 million in liabilities, including $117.66 million in total secured debt and a $162.27 million total fair market value in secured assets.

Marcal's largest unsecured creditors include:

• Dixie Pulp & Paper Inc., Tuscaloosa, Ala., with a $3.86 million claim;

• Newpage Corp., Chicago, with a $2.49 million claim;

• Hess Corp., Charlotte, N.C., with a $1.73 million claim;

• K.C. International, Brick, N.J., with a $1.72 million claim;

• Southern Container, Smithtown, N.Y., with a $1.53 million claim;

• Ashland Specialty Chemical, Atlanta, with a $1.3 million claim; and

• Sempra Energy Solutions, San Diego, with a $1.29 million claim.

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

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