Vertis Inc., a Baltimore advertising and direct-marketing services provider, filed for bankruptcy protection yesterday to ease a merger with American Color Graphics Inc., the third-largest insert printer in North America.
The move was expected. The company announced this month that it had secured financing commitments to fund a prepackaged bankruptcy in order to reduce combined debt.
The company listed $523 million in assets and more than $1.4 billion in debt in Chapter 11 documents filed in U.S. Bankruptcy Court in Wilmington, Del. Vertis' other debt includes $349 million in unsecured senior notes and $290 million of subordinated notes, according to U.S. Securities and Exchange Commission filings.
"Vertis has taken various actions to improve its financial position and believes that the financial challenges it faces necessitates a restructuring of its debt," Jeffrey J. Stegenga, managing director of restructuring advising firm Alvarex & Marsal North America LLC, said in court papers.
American Color, based in Brentwood, Tenn., also sought bankruptcy protection in Delaware yesterday, which could help speed up the merger between the two companies. Companies are sometimes able to quickly shed debt and win approval for combinations as part of the bankruptcy reorganization process.
The prepackaged plan has been accepted by more than 98 percent of Vertis creditors entitled to vote, according to court papers. The company is requesting a combined hearing for court approval of the plan documents, solicitation process and confirmation of the plan.
American Color listed assets of $100 million to $500 million and debt of $500 million to $1 billion. The American Color prepackaged plan was accepted by more than 95 percent of American Color creditors, according to court documents.
Vertis has received $380 million in debtor-in-possession financing from GE Commercial Finance to fund the reorganization, Vertis said in a statement. The company also has gotten commitments for an additional $650 million in exit financing, which will become available when the prepackaged bankruptcy plan is completed.
The 30 largest consolidated Vertis creditors without collateral backing their claims are owed a total of $718.9 million, court papers show. American Color's unsecured creditors are owed $18.5 million.