By Dow Jones Business News,
January 09, 2014, 01:47:00 PM EDT
(Adds details throughout)
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 in December, clutching a $68.5 million buyout offer from an affiliate of
Australia'sAmcor Ltd. (AMC.AU).
Michigan'sPlastipak Holdings Inc., which has annual revenues of about $2.5 billion, and Georgia'sCKS Packaging, with
2013 sales of $375 million, could also be contending for Constar, which is in its third bankruptcy but which is being
put up for sale for the first time.
Both filed protests of 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, court papers say.
Plastipak and CKS weighed in in advance of a hearing in the U.S. Bankruptcy Court in Wilmington, Del., where Constar
is operating under Chapter 11 protection. A judge must approve rules for the bidding.
Two previous Chapter 11 proceedings were debt-for-equity swaps engineered by lenders. The proceedings chopped back the
liability side of the balance sheet but left Constar with more debt than its struggling business was able to support. A
maker of containers for the food and beverage industry, Constar lost its largest customer and was not able to replace
Both Plastipak and CKS complain about being ignored in the runup to Constar's bankruptcy, alleging they were not given
access to the documents they need to formulate bids.
The new Chapter 11 filing followed a troubled 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. Constar's lawyers credited Amcor for holding its ground
in spite of the problems with a buyout proposal that inspired efforts to preserve the business.
Constar's unsecured creditors joined Plastipak and CKS in objecting to bid protections that they said were unnecessary
to spur competition. Creditor representatives 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, to make it easier for rivals to make
In advance of a court hearing Thursday, Constar agreed to cut $1.3 million out of Amcor's bid protections, a package
of rewards it will collect if it is bested at the auction. Company attorneys say the rules are geared to making sure the
auction is lively.
Besides U.S. operations, Constar is separately auctioning its operations in the U.K. and Netherlands as it attempts to
gather funds to cover unpaid 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.
Hedge funds managed by Solus Alternative Asset Management LP, Black Diamond Capital Management LLC and J.P. Morgan
Chase & Co. ( JPM ) have split over the bankruptcy financing, with Black Diamond objecting to it and the Solus and J.P.
Morgan affiliates defending it as Constar's "only viable option."
(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go to
Write to Peg Brickley at email@example.com
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