Smurfit-Stone Container Files For Bankruptcy Protection

   DOW JONES NEWSWIRES 
 

Smurfit-Stone Container Corp. (SSCC) said Monday that its U.S. and Canadian units have filed for bankruptcy protection as the packaging and containerboard company looks to restructure its debt and improve profitability.

The company had warned lenders earlier this month that it could file for bankruptcy amid weakening sales and a cash crunch.

Chief Executive Patrick Moore said the company's performance hasn't reflected its potential "due to higher cost operations and burdensome debt levels dating back to the original formation of the company."

Smurfit-Stone, like many other companies in financial distress, is heavily leveraged. It borrowed money for an acquisition and capital spending that have left it little room to navigate the recession.

The company said Monday that it has commitments for $750 million in debtor-in-possession financing to fund its continuing operations.

Moore said the company has been focused on improving operating performance as part of its three-year restructuring plan, saying operations were much more cost-efficient now.

But, he said, "the acceleration of the unprecedented global economic recession has weakened demand for packaging, and the frozen credit markets have prevented an out-of-court refinancing of our capital structure."

Earlier this month, all three major ratings agencies cut their credit ratings to highly speculative from speculative on Smurfit-Stone.

One of the U.S.' largest makers of cardboard boxes, Smurfit-Stone is directly linked to consumer goods, with its cardboard wrapping goods including computers, high-definition television sets, pizzas and office furniture.

In late October, the company told investors that higher prices for its paper and cardboard packaging would offset slower global demand. But the company reversed itself two months later, warning investors that fourth-quarter earnings would be "significantly lower" than the third quarter and that sales had dropped "dramatically."

Both the U.S. and Canadian units filed Chapter 11 in the U.S. Bankruptcy Court, and the Canadian units will also file to reorganize under the Companies' Creditors Arrangement Act in Canada.

Last year, the company closed a hardwood pulp mill in Quebec, a corrugated medium machine in Arizona and four higher-cost box plants.

Smurfit-Stone said day-to-day operations will continue as normal.

The company's shares closed Friday at 6 cents and haven't traded premarket. The stock has lost 76% of its value so far this year.

-By Kerry E. Grace, Dow Jones Newswires; 201-938-5089; [e-mail]

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