After 99 years of making envelopes that carried the US’ junk mail, Cenveo Inc filed for bankruptcy, blaming a shift by marketers from mailboxes to the Internet.
Just as online advertising began growing, Cenveo started spending on traditional print media, boosting debt it said it now cannot afford to pay.
The company said it plans to restructure its balance sheet while under court protection.
Cenveo has a deal with a group of first-line creditors and has been trying to convince its biggest second-line noteholder, Brigade Capital Management LP, to sign on as well. Brigade holds more than 66 percent of Cenveo’s second-line and 16.1 percent of its first-line notes.
The company listed more than US$1.4 billion in debts and about US$790 million in assets in its Chapter 11 bankruptcy petition filed in Manhattan, New York.
Cenveo is seeking court permission to borrow US$190 million through an asset-backed loan and US$100 million through a term loan.
“There’s a financial fix here, but how do you stem a sector decline?” said Bill Popper, director of research at New York-based broker-dealer firm Clearview Trading Advisors. “The problem is the world is passing them by.”
Beginning in about 2006, the company bet big on postal or “snail” mail, buying 16 envelope manufacturers, printers and label makers, including a US$430 million purchase of Cadmus Communications Inc, the world’s biggest printing company serving scientific, technical and medical journals.
Envelopes make up 47 percent of Cenveo’s sales, with the rest of its revenue coming from its printing and labelmaking businesses.
The company employs about 5,200 people.
Shares have fallen to about US$0.50 in New York trading, from last year’s high of US$7.59.
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