The Newark Group to File Prepackaged Chapter 11 Bankruptcy

May 10, 2010 - The Newark Group today said that it has reached a deal with its major creditors to restructure debt in exchange for equity, and plans to file a prepackaged Chapter 11 bankruptcy.

A majority of the members of each impaired creditor class has already committed to vote in favor of the prepackaged plan, the company said.

In a written statement, The Newark Group said:

The Company announced that it reached an agreement with a group of note holders representing more than three quarters of its outstanding 9.75% unsecured senior subordinated notes (the "Notes") that would eliminate approximately $200 million of the Company's unsecured debt upon the effective date of the Prepackaged Plan. This debt reduction would reduce annual cash interest costs by approximately $13 million and provide the Company with the financial flexibility to focus on growth and profitability. In exchange for canceling the Notes, the holders of the Notes will receive 96.5% of the equity of the Company upon the effective date of the Prepackaged Plan. Agreement was reached with the Company's lead revolving loan lender to continue to provide financing to the Company under a new $50 million debtor in possession revolving loan facility and a $70 million exit revolver. The Company has also arranged for a new, larger $110 million term loan facility with a group led by ORIX Finance. This will be used to pay off the existing term loan, and pay down the existing revolver balance.

"We are pleased to have the support of our note holders and lenders as we move forward to strengthen our balance sheet and position the Company for profitability," said Robert Mullen, President and Chief Executive Officer of The Newark Group. "As we navigate this process, we will continue to focus on customers, servicing them better than anyone else and developing product solutions to address their most difficult issues," continued Mullen.

Votes on the Prepackaged Plan must be received by Kurtzman Carson Consultants, LLC, the Company's voting agent, by June 1, 2010, unless the deadline is extended. The record date for voting was set for May 4, 2010. Solicitation materials have been mailed to all parties entitled to vote on the Prepackaged Plan. Upon receipt of sufficient votes from those entitled to vote, the Company intends to commence a Chapter 11 proceeding and schedule a hearing to confirm the Prepackaged Plan to take place within forty-five (45) days thereafter. None of the Company's non-US subsidiaries or affiliates will be included in the filing.

Throughout the solicitation process, trade creditors, suppliers and employees will continue to receive amounts owed to them in the ordinary course of business. In addition, the Prepackaged Plan provides, among other things, that subject to approval of the Bankruptcy Court, the claims of trade creditors, suppliers and employees will be paid in full in the ordinary course of business. During the Chapter 11 case, the Company will continue normal operations under current management and does not anticipate any changes to its overall business or its ability to produce quality products.

The Newark Group, founded in 1912, is an integrated global producer of 100% recycled paperboard and paperboard products with manufacturing and marketing operations in North America and Europe.

SOURCE: The Newark Group

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