Chapter 11 Updates and Information

Bloomberg Business & Financial News Reports: National Envelope Wins Bankruptcy Court Approval to Sell Assets to Gores

By Michael Bathon - Aug 23, 2010 3:46 PM CT

National Envelope Corp., the largest closely held envelope maker in the U.S., won court permission to sell virtually all its assets for about $208 million to an affiliate of the private-equity firm Gores Group LLC. U.S. Bankruptcy Judge Peter J. Walsh in Wilmington, Delaware, said today he will approve the sale.

The company, based in Uniondale, New York, held a “spirited” 15-hour auction Aug. 20 to determine the best offer, at which the sale price rose by “more than $50 million,” Josef S. Athanas, a company lawyer, told Walsh.

Gores was the lead bidder, with a beginning offer of $134.5 million. Also bidding were affiliates of Cenveo Inc., National Envelope’s largest competitor, based in Stamford, Connecticut, and the private-equity firm Sun Capital Partners Inc., based in Boca Raton, Florida. Gores won with an offer of about $149.9 million in cash, the assumption of about $20 million in debt the company owes to International Paper Co. and a $37.7 million note, Athanas told the judge.

“We are very pleased that this was done in an amicable manner and are looking forward to working with Gores,” Mark Samson, chief restructuring officer at National Envelope, said in an interview after the hearing. Jordan Katz, a spokesman for Gores, declined to comment since the sale hasn’t yet closed, which is expected to take place by Sept. 7. Bankruptcy Filing National Envelope filed for bankruptcy protection June 10, listing assets and debt of as much as $500 million each. The company said the recession and increased use of e-mail cut sales, leading to more than three years of losses.

The envelope maker has 14 factories across the U.S. and about 3,390 employees, according to court filings. The company, with 21 percent of the $3.7 billion North American envelope market in 2008, produces about 37 billion envelopes a year. The lead case is In re NEC Holdings Corp., 10-11890, U.S. Bankruptcy Court, District of Delaware (Wilmington).

National Envelope Sale of Assets at Auction Approved

Uniondale, NY July 22, 2010 - National Envelope Corporation has received approval from the U.S. Bankruptcy Court in Wilmington, DE to sell its assets under court authorized bidding procedures at auction on August 20, 2010. The deadline for bid submission is August 16, 2010, with a court hearing to approve the final sale scheduled for August 23, 2010.

The court approved stalking-horse bidder is NEV Holdings, LLC, an affiliate of The Gores Group, LLC with an opening bid of $134.5 million and the assumption of certain liabilities including $20 million of trade obligations.

National Envelope Receives Court Approval for $25 Million Debter-in-Possession Financing

Uniondale, NY Friday 7/16/2010 National Envelope has received court approval for $25 million debter-in-possession financing. This will provide adequate monies to fund the company while it moves toward its 363 auction. The company will return to U.S. Bankruptcy Court in Wilmington, Delaware on July 22 to seek approval of its proposed auction rules and expects the actual auction to be held on Aug. 20.

National Envelope Reaches Agreement to Sell its Assets

UNIONDALE, NY - July 12, 2010 – National Envelope Corporation (“NEC”) has announced that it has entered into an asset purchase agreement with NEV Holdings, LLC, an affiliate of The Gores Group, LLC. Under the agreement, NEV Holdings, LLC would acquire substantially all of the Company’s assets, subject to the terms of the asset purchase agreement, for total cash consideration of approximately $134,500,000 and the assumption of certain liabilities including $20,000,000 of trade obligations.

To implement the transaction, NEC will sell the assets of the Company under Section 363 of the United States Bankruptcy Code. Other parties will have an opportunity to submit higher and better offers to purchase the Company’s assets under this Court-supervised process and NEC anticipates the sale transaction will be completed in September.

Regarding the agreement, James J. Loughlin, Jr., Co-Chief Restructuring Officer of the Company stated "We are pleased to have reached an agreement, which is a critical step in the sales process and puts National Envelope on a fast path to complete the restructuring process. We remain committed to serving our customers with the same level of quality, service and professionalism the Company has always provided.”

Upon approval of the bid procedures by the Bankruptcy Court, the Company will announce the initiation of the formal bidding process, and at such time interested parties will be asked to contact Geoffrey Richards at William Blair & Company for more information regarding the bidding process.

William Ungar, founder and Chairman of NEC, added, “We thank each of our employees, customers and suppliers for their continuing support and commitment to the Company’s success. We continue to be optimistic about the long-term viability of the envelope industry and are excited about the future of the Company as we work to complete this process.”

About National Envelope Corporation

Uniondale, NY based National Envelope Corporation is the largest manufacturer of envelopes in the world with 14 manufacturing facilities and 2 distribution centers and approximately 3,500 employees in the U.S. and Canada. The company is an environmental leader in the paper and envelope converting industries with certifications from the Forest Stewardship Council (FSC), Rainforest Alliance, Sustainable Forestry Initiative (SFI), Programme for the Endorsement of Forest Certification (PEFC), Chlorine Free Products Association, and Green Seal. For more information on National Envelope please visit www.nationalenvelope.com.

Official Committee of Unsecured Creditors Appointed

Uniondale, NY June 23, 2010 - The United States Trustee filed a notice concerning the Chapter 11 bankruptcy case of National Envelope Corporation with the Delaware bankruptcy court listing the creditors appointed to the Official Committee of Unsecured Creditors. The members are:

United Steelworkers
29-10 Hunters Point Ave. Co. LLC
Multi-Plastics, Inc.
Henkel Corporation
Gadge USA, Inc.
Neenah Paper, Inc.
Team Ten LLC, d/b/a American Eagle Paper Mills

National Envelope First Day Motions Approved

UNIONDALE, NY June 11, 2010 – The United States Bankruptcy Court, District of Delaware has given its interim approval to National Envelope Corporation’s First Day motions. As part of these motions, the company has received the court’s approval for DIP (Debtor-in-Possession) financing. All First Day motions submitted, and subsequently approved, will allow the company to continue operations in its normal course.

First Day motions are motions filed by a company in a new chapter 11 case that require consideration by the court. These are important as they allow the company to continue its operations and to avoid disruption to the ongoing business. As a result, National Envelope’s facilities continue to remain fully operational and are receiving the necessary services and materials required to service all the company's business.

What is Chapter 11 and How Does It Work?

A case filed under chapter 11 of the United States Bankruptcy Code is frequently referred to as a "reorganization" bankruptcy. While petitions can be voluntary or involuntary, this document addresses voluntary petitions only.

The voluntary petition will include standard information concerning the company’s tax identification number, location of principal assets, the debtor's plan or intention to file a plan, and a request for relief under the Bankruptcy Code. As part of their petition the company must file with the court: (1) schedules of assets and liabilities; (2) a schedule of current income and expenditures; (3) a schedule of executory contracts and unexpired leases; and (4) a statement of financial affairs.

Upon filing a voluntary petition for relief under chapter 11, the company automatically assumes an additional identity as the "debtor in possession." The term refers to a debtor that keeps possession and control of its assets while undergoing reorganization under chapter 11. A company will remain a debtor in possession until its plan of reorganization is confirmed or the case is dismissed. The company as "debtor in possession," operates the business.

For more information regarding Chapter 11 use this link to the U.S. Courts web site at: http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/Chapter11.aspx

Courier, Express, and Postal Observer

Thursday, June 10, 2010

The Wall Street Journal reported that the National Envelope Company, the largest envelope manufacturer in the United States filed for bankruptcy today. The bankruptcy filing indicated that the company had between $100 and $500 million in both assets and liabilities. The company is family owned.

National Envelope Company is unlikely to cease operations under bankruptcy. The bankruptcy proceeding will allow it to renegotiate existing contracts with employees and vendors, renegotiate terms of loans, and renegotiate or terminate real estate leases that could not be completed outside of bankruptcy.

National Envelope Company's bankruptcy follows a nearly two year process during which it has been consolidating operations.   During this period it has closed facilities, ended production, or curtailed production in: Chino, CA, Union, NJ, Long Island City, NY, and Houston, TX. The Houston TX closure represented the last step in the consolidation of three facilities in Texas into a new facility near Dallas.

National Envelope bankruptcy most likely represents an orderly way for it to deal with the need to reduce capacity at a pace faster than just waiting for existing capital and real estate leases to expire would allow.   It also allows some more flexibility in adjusting its workforce, that currently numbers around 3,000 employees. However, there is no information yet available that would indicate that renegotiating union agreements, which may be permissible under bankruptcy, is anticipated.

The financial challenges that caused National Envelope to close these four facilities and now file for bankruptcy reflect the decline in the demand for mail and therefore the envelopes that National Envelope Company produces. National Envelope is not alone in requiring significant consolidation of capacity. The recent merger of Quad Graphics with Quebecor World Color will likely result in consolidation of printing operations of these two companies that will likely include some plant closures.   If the supplier's of the envelopes see the speedy consolidation of existing production facilities as critical to their survival as financially viable enterprises, it would seem that the Postal Service cannot delay its consolidation efforts either.

What National Envelope Corporation's bankruptcy says to postal stakeholders is that mail volume declines, particularly in single-piece first class mail and flat shaped mail across all classes, may not allow the Postal Service to use painless ways to reduce capacity.   The decline in mail volume, combined with improvements in mail automation, means that the number of employees that the Postal Service needs is declining at a rate faster than the rate of attrition.   Similarly, the number of plants that the Postal Service needs may be declining faster than the rate that real estate leases are expiring.

For Full Article Go To:

http://courierexpressandpostal.blogspot.com/2010/06/national-envelope-company-bankruptcy.html

NATIONAL ENVELOPE CORPORATION FILES FOR CHAPTER 11 REORGANIZATION

UNIONDALE, NY June 10, 2010 – National Envelope Corporation announced today National Envelope and its affiliates filed voluntary petitions under Chapter 11 of the Bankruptcy Code. The company has taken this action to implement a financial restructuring that will provide the flexibility and support to complete the operational restructuring already underway.

National Envelope expects to continue to operate in the normal course of business during the Chapter 11 reorganization process. All of the company’s facilities are open and continuing to serve customers as usual.

Stephen Gawrylewski, Chief Restructuring Officer/ Interim CEO for the company, said: “The strategic reorganizing of National Envelope is well underway. We have been constrained by our capital structure and by the unprecedented economic slowdown. We intend to use the court-supervised Chapter 11 process to develop and implement a new capital structure that will optimize the financial benefits of the operating restructuring currently underway. Fortunately, the fundamentals of our business remain strong and provide an excellent foundation for the future. We expect that National Envelope will emerge from its Chapter 11 reorganization well-positioned for profitable growth.”

About National Envelope Corporation

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