By Peg Brickley
A bidding war is brewing for Constar International Holdings LLC,
the Philadelphia-based maker of plastic bottles that scrambled for
the safety of bankruptcy protection in December, clutching a $68.5
million buyout offer from Australia's Amcor Ltd. (AMC.AU)
Michigan's Plastipak Holdings Inc., which has annual revenue of
about $2.3 billion, and Georgia's CKS Packaging Inc., with 2013
sales of $375 million, could also be contending for Constar, which
is in its third bankruptcy, though this is the first time it is
being put up for sale.
Both companies filed protests of the bid rules designed to
reward Amcor for agreeing to serve as a "stalking horse" or opening
bidder with a committed deal that sets a floor price for Constar.
The deal protections Constar originally proposed would have
required other bidders to top Amcor's offer by some $5 million,
just to get into the competition.
Two previous Chapter 11 proceedings were fast debt-for-equity
swaps engineered by Constar's lenders. The proceedings chopped back
the balance sheet but left Constar with more debt than its
struggling business could support. A maker of containers for the
food-and-beverage industry, Constar lost its largest customer at
the end of 2012, and wasn't able to replace the business.
Both Plastipak and CKS complain about being ignored in the
run-up to Constar's bankruptcy, alleging they weren't given access
to the documents they need to formulate bids.
The latest Chapter 11 filing followed a tumultuous couple of
weeks at Constar, which left the company desperately short of cash
and saw most of the board of directors head for the exits.
At earlier court hearings, Constar's lawyers said Amcor held its
ground, offering enough stability to preserve the business for a
bankruptcy sale effort.
Constar's unsecured creditors joined Plastipak and CKS in
objecting to bid protections that they said were unnecessary to
spur competition. They want more time for potential bidders to look
over the company, and lower protections, such as a breakup fee and
expense reimbursement, for Amcor's bid, in order to make it easier
for rivals to make offers.
In advance of a court hearing Thursday afternoon, Constar agreed
to chop $1.3 million out of Amcor's bid protections, a package of
rewards it will collect if it is bested at the auction.
The company is also auctioning its operations in the U.K. and
Netherlands, as it attempts to gather funds to cover the bills,
including some $123 million in funded debt.
The company's official committee of unsecured creditors, which
formed ranks just days ago, is also criticizing Constar's
bankruptcy financing, for allegedly being unduly protective of
existing senior lenders.
Elements of the loan would elevate some existing debt to the
status of a Chapter 11 loan, putting the validity of the debt
beyond question and putting the loan first in line to be paid from
the sale proceeds.
Constar was spun off from Crown Holdings Inc. (CCK) more than a
decade ago. It filed for Chapter 11 protection for the first time
at the end of 2008 and filed again in 2011.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection. Go to
http://dbr.dowjones.com)
Write to Peg Brickley at peg.brickley@wsj.com
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