Insert and direct mail printer Vertis Communications has announced that it will file for Chapter 11 bankruptcy as part of its prepackaged reorganization plan to merge with competitor American Color Graphics.
The plan will reduce the combined debt of the companies by $1 billion, a Vertis spokesperson said, and all of the company’s trade creditors will be paid in full. The company’s total consolidated debt is $1.6 billion.
“We’re very happy with this next step we’re taking,” said Grace Platon, a spokesperson for Vertis. “This is the most cost-effective way for the companies to reduce their debt and complete the merger.”
Vertis said the plan received the support of a majority of its note holders, with one holder of senior subordinated notes dissenting.
In conjunction with the filing, Vertis has obtained $380 million in debtor-in-possession financing from GE Commercial Finance. This financing will provide the company with liquidity until the merger is completed. Vertis also obtained commitments for $650 million in exit financing, which will become effective upon the completion of the merger announced in May and fund the combined company’s working capital needs.
Though plans for how the merged company will operate are not finalized, Platon said that “the best in class from both companies” would be combined.
Vertis Chairman and CEO Michael DuBose said in a statement that the merger would give the company a “long and prosperous” future. “The restructuring under the plan will allow the company to dramatically reduce debt and interest cost, complete its reorganization and merger in just a few short months, and refocus investments into the business,” he said.