Standard Register files for Chapter 11 bankruptcy

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Standard Register files for Chapter 11 bankruptcy

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News Center 7's Andy Sedlak reports from Standard Register after the company filed for Ch. 11 bankruptcy Thursday, March 12, 2015.

Standard Register Co. has filed for Chapter 11 bankruptcy reorganization.

As part of the voluntary filing on Thursday, the Dayton-based company also signed a $275 million agreement to be acquired by an affiliate of Silver Point Capital L.P.

The deal includes the assumption of certain other liabilities and contemplates a court-supervised auction process.

Here’s what you need to know: Standard Register’s bankruptcy filing Thursday will allow the company to continue to do business under the court’s protection while attempting to reorganize its financial affairs, but current shareholders are unlikely to reap the benefits. While over-the-counter trading of SR shares may continue, existing shareholders are likely to be left with nothing at the end of the Chapter 11 proceeding.

The bankruptcy filing listed Standard Register’s total assets at $453 million and total debts at $584 million. The company identified its single largest creditor holding an unsecured claim as the Pension Benefit Guaranty Corporation, to which it owes about $195 million.

Standard Register Co. says the sale will help cut its debt and leave it better positioned for growth. It has lined up $155 million in financing for the sale process and to fund operations.

“Standard Register has a fundamentally stable underlying business with a large, diverse customer base and a strong portfolio of solutions that include integrated communications, product marking and decoration (labels), document management, promotional marketing and technology/professional services, but our ability to invest in growth has been hampered by our debt structure and legacy liabilities,” said Joseph P. Morgan, Jr., president and chief executive officer, in a statement.

“In response to the traditional print market decline, Standard Register repositioned itself as a market focused integrated communications provider where today, the majority of both revenue and profit are being derived,” Morgan said.

Standard Register urged “extreme caution” in trading its shares, which “will be highly speculative and will pose substantial risks” during the bankruptcy process.

The company said existing shareholders are likely to be left with nothing at the end of the Chapter 11 proceedings.

In a related motion filed Thursday, Standard Register asked the court for the authority to pay its employee obligations, and to maintain and continue employee plans and programs. The relief is necessary to retain the company’s workforce, the loss of which would disable business operations, the motion said.

Standard Register has about 1,630 salaried employees and 1,870 hourly workers, plus about 500 contract workers, according to the motion.

The company’s weekly gross payroll is about $4.4 million. As of Thursday’s filing, Standard Register owes $5.8 million in unpaid salaries and wages, plus another $1.9 million for contract workers.

Standard Register employs about 850 workers in Dayton, a company spokeswoman said.

“Standard Register has been an integral part of the Dayton community for decades. The bankruptcy filing is unfortunate, but I think it’s something we have all been seeing coming” through media reports, said Jeff Hoagland, Dayton Development Coalition president and chief executive.

“We are also hopeful and optimistic that the bankruptcy filing will allow them to come out a stronger and maybe even a more nimble company,” Hoagland said.

Silver Point Capital is a private investment firm managing approximately $8.5 billion. Standard Register’s existing secured lenders, including Bank of America, N.A. and Silver Point, have agreed to extend $155 million in financing in the form of a debtor-in-possession credit facility.

Chapter 11 bankruptcy is the usual choice for large businesses seeking to restructure their debt. It has no limits on the amount of debt, as Chapter 13 does. The debtor usually remains in possession of its assets, and operates the business under the supervision of the court and for the benefit of creditors.

One of the biggest drags on Standard Register’s bottom line has been the cost of sales, or the investment in labor, rent, freight, and other supply chain expenses necessary to bring goods to market.

Over the past two years, the company has incurred additional costs stemming primarily from the integration of WorkflowOne, which began in late 2013.

Total costs of restructuring tied to the WorkflowOne acquisition, which is expected to continue through the end of this year, will reach approximately $30.4 million, according to a recent quarterly report on the company’s performance.

In addition, the company expects to incur “temporarily higher’’ costs over the same period for technology, including investments in high-speed ink jet printers and facilities upgrades at its Jeffersonville, Ind., distribution and print center.

In the third quarter of 2014 alone – the most recent quarter for which figures are available – the company incurred a total of $6.6 million of expense related to restructuring and integration activities, according to the report. Year to date, such expenses totaled $18.6 million.

Standard Register Co.’s stock was de-listed March 4 and moved the company’s shares to a marketplace commonly associated with penny stocks. Shares trading on an over-the-counter market lost more than 80 per cent of their value Thursday morning and fell to around 8 cents.

County officials said they were working to assess the potential financial impact Thursday but did not have those details yet.

Montgomery County Administrator Joe Tuss said Standard Register did not contact the county about its current financial situation.

“We stand ready to work with the company, the city of Dayton, the Dayton Development Coalition and our other economic development partners to determine what, if anything, can be done to assist,” Tuss said via email.

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