Standard Register recovery at ‘turning point’

Auction scheduled for today in New York

Standard Register, one of Dayton’s oldest and last remaining publicly traded companies, should have a new owner by Wednesday as its bankruptcy case comes to a head in Delaware federal court.

An auction is scheduled today in New York among Connecticut-based hedge fund Silver Point Capital L.P. and other qualified bidders, according to court documents.

On Wednesday, a hearing to approve the sale of Standard Register’s assets to the successful bidder will be held in the U.S. Bankruptcy Court in Wilmington, Del. The closing will occur by Aug. 16.

“This next week will be a significant turning point in Standard Register’s ability to recover,” said Joe Geraghty, senior managing director for the Dayton office of Conway MacKenzie, which specializes in turnarounds and restructuring.

Standard Register Co. filed for Chapter 11 bankruptcy protection March 12, simultaneously announcing a $275 million buyout agreement with a group led by Silver Point. The bankruptcy filing listed Standard Register’s total assets at $453 million and total debts at $584 million.

Founded in 1912, the communication services company employs 3,500 workers, including 850 in Dayton.

“We’re hopeful that their emergence from bankruptcy will position them for long-term growth in Dayton,” said Chris Kershner, Dayton Area Chamber of Commerce vice president.

Standard Register declined comment.

Standard Register has “teed up” a buyer in Silver Point, but other bidders may step in during today’s auction, creating potential options for the company’s management team to determine who will own its assets, Geraghty said.

“It is set up for hopefully a good outcome for the region in terms of a transaction happening,” he said.

Silver Point will make the initial bid, after which bidding will continue in minimum increments of at least $500,000, court documents said. Each qualified bid must be accompanied by a “good faith deposit” of $10 million to Standard Register.

Each qualified bid also must state whether the bidder intends to assume all or any part of the potential liabilities associated with Standard Register’s pension plan.

In the bankruptcy filing, the company identified its single largest creditor holding an unsecured claim as the Pension Benefit Guaranty Corp., to which it owes about $195 million.

Creditors can object to the auction or sale process.

Last week, attorneys for a committee of unsecured creditors filed a lawsuit against Silver Point and certain Standard Register executives alleging “fraudulent transactions” related to Standard Register’s 2013 acquisition of WorkflowOne.

The lawsuit claimed the acquisition of WorkflowOne and its $210 million in debt left Standard Register “insolvent, undercapitalized, and unable to pay their debts as they came due.”

Silver Point, the primary lienholder of WorkflowOne, controlled nearly 30 percent of Standard Register’s common stock as a result of the acquisition.

In a statement last week, Standard Register said the company and its advisors do not expect that the sales process will be affected by the court’s decision to allow the lawsuit. Not everyone agrees with that assessment.

“I think it absolutely could be a problem,” said Jeff Morris, an attorney with the Dayton office of Porter Wright, a business and corporate law firm.

Morris said money from the sale of Standard Register that goes to unsecured creditors could potentially fund the committee’s legal action against Silver Point.

“So Silver Point itself could raise some issues with respect to at least continuing its bid,” he said.

Dayton would benefit from Standard Register gaining a new owner with fresh capital that would allow the company to retain jobs and support key customers and suppliers in the region, Geraghty said.

“It is hard to predict ultimately what a buyer will do with the Dayton-based infrastructure, but I think it’s safe to say that there is going to be hopefully some good job retention out of this if a successful transaction happens,” he said.

Standard Register is likely to see “significant restructuring” under a new owner, said Mark Jacobs, a University of Dayton assistant professor of operations management.

Jacobs said the new owner, presumably Silver Point, will look “very critically” at Standard Register’s business lines. The company is likely to exit some lines of business, possibly shedding jobs in the process, he said.

“They will find a way to make it viable for the long term. Silver Point will be in it, I would surmise, three-to-five years. They will get it turned around, get it profitable in a smaller state and then sell it,” Jacobs said.

Geraghty agreed that job losses are possible. However, Standard Register’s “operations are more consolidated than otherwise, and it would be tough to break off individual pieces,” he said.

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