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article imageTrouble brewing in the mills with the Newark Group

By Nicole Byerly     Mar 21, 2012 in Business
As the Newark Group plans for their one-hundred years of innovation anniversary, a troubled past lessens the hope that they will be around for another ten years, let alone one-hundred more.
The Newark Group prides itself on being one of the leading producers of recycled paper products, but the paper business is no longer booming like it once was.
In 2008, the company’s credit score was downgraded drastically in 2008 to a B3 rating. A statement released in 2008 explained that the Newark Group was currently $265 million in debt and the outlook was not so good. The debt did not go down through 2009, and again their CFR was downgraded, this time to a Ca/LD.
In June 2010, the Newark Group filed for Chapter 11 bankruptcy protection and sought after ORIX Finance Corporations to provide $110 million to support them throughout their bankruptcy process. During the time of their bankruptcy, Moodys again downgraded the Corporate Finance Report rating to a D.
Due to the plans for the financial support and the hopes of eliminating nearly $200 million in debt from the company, the CFR was boosted again to a B3 rating based upon the loans obtained, but fell back down just one year later to a Caa1 rating on August 31, 2011. In June 2011, prior to the downgraded rating, The Newark Group announced that it will be closing its Franklin Ohio mill as well as the Graphicboard-BCI plant in Newark, New Jersey.
Since the downgraded rating, the Newark Group has not done too much to lower their debt and increase production. In January 2012, Moodys confirmed the Caa1 rating, but have no hope for the company. The company still remains over $110 million in debt even after eliminating over $200 million just two years ago. A statement released by Moodys indicates “Newark does not have to meet financial covenant requirements, i.e. the minimum fixed charge coverage ratio and maximum leverage ratio, until July 31, 2012. However, its future ability to comply with the covenants and further strengthen its liquidity will depend on successfully improving its operating performance on the back of restructuring efforts, pricing actions and volume improvements.”
Although the Newark Group never gave any reason for closing either of these plants, they recently released a statement that they are closing an additional plant located in Maine. Over twenty employees will lose their jobs, but former employees at the Newark Paperboard Products located in Monmouth, Maine will be able to qualify for benefits under the Federal Trade Adjustment Assistance program.
At the same time this statement was released, the Newark BCI division released an announcement that they are increasing the prices of all sheets, loose-leaf panels, spines and cut-to-size panels by 8%. In addition to the 8% increase, a 5% increase it set for all foam-padded products as well as unitized covers and a variety of other packaging products. The price increase seems like a desperate attempt for an already frantic company to make a profit before it is too late.
With more individuals “going green” and all of the competition with other paper production companies, it will be no big surprise if the Newark Group does not make it through 2012.
More about Newark Group, paper products, Paper, paperboard mills, Business
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