Marcal Paper Mills Files Voluntary Chapter 11

By Jeffrey Gold, AP Business Writer

Dec. 1, 2006 (AP) - Marcal Paper Mills Inc., a maker of toilet paper, kitchen towels, napkins and facial tissue, on Thursday filed a voluntary Chapter 11 reorganization bankruptcy petition and blamed rising energy costs.

The privately held company operated for four generations by the Marcalus family said it has enough money to continue normal operations, including "on-going employee, supplier and customer obligations."

The Elmwood Park-based company added it has "sufficient liquidity to operate and normalize relations with its vendors in order to ensure timely service and merchandise flow to its customers."

In a statement, Chairman and Chief Executive Nicholas R. Marcalus said, "The price increases in energy have proven to be immensely difficult. Demands by our lenders created liquidity pressures which caused the company to file for the continued restructuring under Chapter 11."

"We believe that the decision to file, although difficult, was in the best long-term interest of our company, employees, customers, vendors and other valued business partners. We plan to take advantage of the opportunities presented by this restructuring to address both our financial and operational issues in order to position the company for long-term success," said Marcalus, grandson of the company's founder.

The cost of natural gas, electricity and steam used in production have risen 40 percent over the past 12 months, the company said.

In its bankruptcy protection filing, the company said it had more than $100 million in liabilities, and more than $100 million in assets. Marcal said it had between 5,001 and 10,000 creditors. Specific figures were not given.

The creditor with the largest unsecured claim was Dixie Pulp & Paper Inc., of Tuscaloosa, Ala., with $3.86 million, the filing stated.

A Marcal executive referred comment to an outside spokesman, Garrett Glaser, who said further figures were not being released.

"There are no significant layoffs planned right now," Glaser said. "At this point we expect to continue manufacturing our full line of Marcal products without interruption. Nonetheless, ongoing analysis of our operations performance is something that smart companies undertake."

Marcal was founded in 1932 and said it employs over 900 people in manufacturing operations at Elmwood Park and Chicago, producing over 160,000 tons of finished paper products annually.

SOURCE: Associated Press

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