Orchids Paper Enters into Option for Asset Purchase Agreement with Orchids Investment

Orchids Paper Products Company has announced it has entered into an option agreement with Orchids Investment LLC (OI). The option gives the company the right to execute an asset purchase agreement with OI, through which, should the company exercise the option, OI would acquire substantially all of the company's assets in exchange for a credit bid of approximately $175,000,000 against the company's obligations under its pre-petition secured credit facility plus other consideration.

OI is indirectly owned by a fund affiliated with Black Diamond Capital Management and Brant Paper Investment Company. To facilitate the potential sale and address its debt obligations, the company has initiated proceedings under chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. The company has filed a bid procedures and sale motion with the court, and the purchase agreement will be subject to an auction at which higher and better offers may be made and will require Court approval. The bid by OI comprises the initial stalking horse bid in the auction process. Subject to the results at auction, the closing of the transaction is subject to the satisfaction of usual and customary conditions, but the company anticipates the transaction will move swiftly and aims to complete the process no later than August 2019.

"The company began experiencing financial difficulty in late 2016 due to a number of factors, including unprecedented increases in input costs, most notably fiber and freight, which the industry has not yet been able to fully recover with price increases to customers; new competitive industry capacity driving down selling prices to defend and grow business; and construction cost overruns and start-up inefficiencies at its new production facility in Barnwell, South Carolina," said Jeffrey Schoen, the president and CEO of the company. "Ultimately it was determined that using the chapter 11 process to facilitate a potential sale was the swiftest and most efficient way to preserve stakeholder value and sustain business operations.
"Our commitment to providing high quality consumer tissue products is unwavering and we have found a new partner who can help us strengthen our business under a new capital structure, leverage new resources and opportunities, and build on our strong foundation, so that our business can continue to provide value to the marketplace. The new customer we announced last year began shipping ultra-premium products from Barnwell in late March," said Schoen.

The Company is headquartered in Brentwood, TN, with manufacturing locations in Pryor, OK, and Barnwell, SC.

Orchids Paper Products Company is a national supplier of high quality consumer tissue products primarily serving the at home private label consumer market. The company produces a full line of tissue products, including paper towels, bathroom tissue and paper napkins, primarily to retail chains throughout the United States.

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