Smurfit Stone Container Corporation is set to exit Chapter 11 bankruptcy after hammering out an agreement with shareholders that would see it distributing 2.25% of new shares of the reorganized company to holders of its old preferred shares in the pre-bankruptcy company and another 2.25% of new shares to holders of its old common stock.

The agreement was made just in time before a Delaware bankruptcy court judge was due to give his judgment on Smurfit Stone’s proposed reorganization. The agreement also coincides with market conditions which are now enjoying a renewed demand for the cardboard packaging that Smurfit Stone markets. Thus with all parties happy with the agreement the bankruptcy judge is not expected to revise the company’s reorganization proposals.

Smurfit Stone’s original plan was to give its stock to unsecured creditors, leaving nothing for shareholders. Naturally, this irked the bondholders because it would have diluted the recovery for them. But with the new agreement, each party would receive something albeit a little less than what they hope for, in order to get the company out of bankruptcy as soon as possible.

At the ongoing bankruptcy proceedings, the company accused shareholders of wanting to “extract whatever they can from the debtors as a toll to be paid in order to exit bankruptcy”. That was the time when the shareholders began voicing up to express their opinion that the Smurfit Stone management was lacking in experienced in making long-term projections. As a result of this, the debtors were forced to update their projections and recognize the value belonging to the shareholders.

As it stands, the company is awaiting the decision of the Delaware bankruptcy court on its proposed agreement.

Smurfit had claimed that it was worth as low as $3.4 billion, below the $4.4 billion claimed by creditors, a figure Smurfit said took priority over shareholders. But subsequently, the shareholders hired valuers who established that the company was valued at over $5.8 billion. The company’s statement did not provide an enterprise value that was used in the agreement that was submitted last Monday.
Smurfit Stone Corporation had filed for Chapter 11 bankruptcy in January 2009 as a result of a spike in raw materials costs that coincided with a drastic fall in demand for its products and tight credit markets.
Shares of Smurfit Stone were reported to be up by 28% at 21.5 cents in early trade. Corporation is set to exit Chapter 11 bankruptcy after hammering out an agreement with shareholders that would see it distributing 2.25% of new shares of the reorganized company to holders of its old preferred shares in the pre-bankruptcy company and another 2.25% of new shares to holders of its old common stock.

The agreement was made just in time before a Delaware bankruptcy court judge was due to give his judgment on Smurfit Stone’s proposed reorganization. The agreement also coincides with market conditions which are now enjoying a renewed demand for the cardboard packaging that Smurfit Stone markets. Thus with all parties happy with the agreement the bankruptcy judge is not expected to revise the company’s reorganization proposals.

Smurfit Stone’s original plan was to give its stock to unsecured creditors, leaving nothing for shareholders. Naturally, this irked the bondholders because it would have diluted the recovery for them. But with the new agreement, each party would receive something albeit a little less than what they hope for, in order to get the company out of bankruptcy as soon as possible.

At the ongoing bankruptcy proceedings, the company accused shareholders of wanting to “extract whatever they can from the debtors as a toll to be paid in order to exit bankruptcy”. That was the time when the shareholders began voicing up to express their opinion that the Smurfit Stone management was lacking in experienced in making long-term projections. As a result of this, the debtors were forced to update their projections and recognize the value belonging to the shareholders.

As it stands, the company is awaiting the decision of the Delaware bankruptcy court on its proposed agreement.

Smurfit had claimed that it was worth as low as $3.4 billion, below the $4.4 billion claimed by creditors, a figure Smurfit said took priority over shareholders. But subsequently, the shareholders hired valuers who established that the company was valued at over $5.8 billion. The company’s statement did not provide an enterprise value that was used in the agreement that was submitted last Monday.
Smurfit Stone Corporation had filed for Chapter 11 bankruptcy in January 2009 as a result of a spike in raw materials costs that coincided with a drastic fall in demand for its products and tight credit markets.
Shares of Smurfit Stone were reported to be up by 28% at 21.5 cents in early trade.

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