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Mon, May 27, 2019 09:44
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Management Side
Orchids raises going-concern doubt, Chapter 11 option

BRENTWOOD, Tenn. (From news reports) -- The leaders of struggling Orchids Paper Products say they have substantial doubts about their ability to restructure the company's debts or strike a sale agreement that would satisfy their bankers. As a result, a bankruptcy filing is now a real possibility for the maker of paper towels, tissues and napkins, which moved its headquarters to Brentwood from Oklahoma nearly two years ago.

In their quarterly report, Orchids CEO Jeff Schoen and his team have updated investors on the status of their efforts to placate their lenders -- a group led by U.S. Bank -- and find buyers for some or all of their assets. The short version of the story: Things aren't going well. While some discussions are still active, there are no buyers on the horizon and the banks haven't consented to an extension of their loan agreements. That has made some sort of drastic restructuring or reorganization more likely -- and it could happen soon.

"We may elect to implement such a transaction through Chapter 11 of the United States Bankruptcy Code in order to obtain court supervision and approval of the transaction and to facilitate the stakeholder approvals necessary to implement such a transaction, or it may otherwise become necessary for us to seek protections under Chapter 11," the Orchids team wrote in their filing. "Such a proceeding may commence in the near term."

Predictably, those disclosures have hurt Orchids shares, which already had slid from $14 to about $1.60 on Tuesday. In midday trading Friday, they were changing hands around 81 cents, valuing the company's equity at just $8.6 million.

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