Smurfit-Stone Container Corp. Monday won confirmation of its Chapter 11 restructuring plan, clearing the way for a June 30 exit from bankruptcy.
Judge Brendan Shannon signed off on the revised plan, which incorporates a settlement with shareholders who challenged an earlier restructuring strategy as unfair.
The settlement gives existing common and preferred shareholders 4.5% of the reorganized company; the rest, 95.5% of new Smurfit-Stone, goes to unsecured creditors.
The pact between the shareholders and the company came while Shannon was weighing arguments over the previous plan, which stripped shareholders of all their holdings.
On Monday, Judge Shannon said he would not issue his decision, leaving Smurfit-Stone and its shareholders to their “frankly, negotiated” view of the company’s prospects.
Smurfit-Stone attorney Matthew Clemente of Sidley Austin said the settlement removed the uncertainty of litigation, and speeded the company’s emergence from Chapter 11.
A maker of boxes, Smurfit-Stone resorted to bankruptcy protection last year when the global slump depressed the sales of consumer goods. The Chapter 11 plan swaps out more than $2 billion in unsecured debt for equity, leaving the reorganized company with a lighter balance sheet.
During weeks of fights over the previous plan, shareholders insisted Smurfit-Stone is poised for a brighter future, able to benefit from improved market conditions, including higher prices.
Plant closures during the Chicago company’s bankruptcy proceeding will help keep prices high, according to analysts.
Smurfit-Stone’s decision to shutter long-established plants in Missoula, Mont., and Ontonagon, Mich., devastated regional economies in the already hard-hit states, and triggered a wave of protests to the court.
The company said the surprise mill closures were within its business judgment. The plant closures came weeks before Christmas and weeks before the expiration of a federal tax credit that fed more than $500 million into Smurfit-Stone’s coffers last year.
Shannon urged the Chicago company to open talks with local officials, who said Smurfit-Stone was ignoring their pleas for cooperation in the search for new uses for the plants.
Monday, Smurfit-Stone said it is in talks with the concerned local officials and will report to the court in July about the results.
“I’m satisfied as long as there’s a productive dialogue going on,” Shannon said Monday.
Canadian courts have already approved of the company’s reorganization plan. In addition to producing packaging, Smurfit-Stone is also one of the world’s largest paper recyclers.
