On October 10, 2012, Vertis Holdings, Inc. ("Vertis"), and various related entities, filed chapter 11 petitions for bankruptcy in the United States Bankruptcy Court for the District of Delaware. This is Vertis’ third time in bankruptcy in recent years. As stated in the company’s Declaration in Support of Chapter 11 Petitions (the "Decl."), Vertis filed a prepackaged bankruptcy in Delaware in July of 2008. Vertis filed its first bankruptcy in order to merge with American Color Graphics and restructure some of the company’s debt. Decl. at *10. Vertis emerged from its first bankruptcy as the global economy entered a recession. According to the company, the recession left it "overly leveraged and unable to service its restructured obligations. Id.
Vertis filed a second prepackaged bankruptcy in the Southern District of New York in November of 2010. The second bankruptcy allowed the company to eliminate over $700 million in debt and raise $100 million from the sale of stock. Decl. at *10-11. Although Vertis viewed its second bankruptcy as a success, it emerged from bankruptcy facing a marketing and communications industry consisting of greater competition, slimmer margins and higher costs. Decl. at *11. Further, macroeconomic conditions led Vertis’ customers to cut back on expenditures on the services and materials Vertis provides – advertising inserts and direct marketing. The company’s problems were compounded by the more recent loss of key customers which Vertis attributes to "the sheer competitiveness and substantial overcapacity of Vertis’ marketplace, as well as customer concerns about Vertis’ financial stability." Decl. at *12.
For those not familiar with Vertis’ business, the company operates in two business sectors: (i) production of advertising inserts used in various publications; and (ii) offering customers direct marketing programs. Regarding the insert business, Vertis generated over $840 million in revenue for FY 2011, providing 71% of the company’s revenue. Decl. at *4. Vertis’ direct marketing program offers services such as data management, marketing campaign strategy and mail optimization services. Id. The company’s revenue from its direct marketing divisions generated revenue of $284 million in FY 2011. Decl. at *5.
Based in Baltimore, Maryland, Vertis operates throughout North America and provides goods and services to over 1,300 customers. Decl. at *3. Because of the nature of Vertis’ business – advertising – it’s services a broad client base that covers several industries, including grocery stores, home improvement stores, insurance companies and auto retailers. Id.
In the months leading up to bankruptcy, Vertis started a process whereby it sought a buyer of substantially all of the company’s assets. Through the bidding process, Vertis identified what it believed to be the highest and best offer to purchase the company’s assets. The prevailing bidder executed a stalking horse bidder agreement with Vertis. Decl. at *16. Under the agreement, the purchaser has agreed to pay $258.5 million for Vertis’ assets, subject to higher offers. After filing for bankruptcy, Vertis filed a sale motion wherein it seeks approval of bidding procedures, establishes criteria for qualified bids and outlines procedures for an auction. Decl. at *18.
The Vertis bankruptcy is before the Honorable Christopher S. Sontchi. Vertis is represented by the law firm Richards Layton & Finger, P.A. At the time of this post, the Clerk of the Court has noticed the 341 Meeting of Creditors for November 19, 2012 at 10:00 a.m. EST. A copy of Vertis’ bankruptcy petition is available here for review. A copy of Vertis Declaration in Support of Bankruptcy Petitions is available here for review.
Jason Cornell is a partner and bankruptcy attorney with the law firm Fox Rothschild LLP. Jason practices before the United States Bankruptcy Court for the District of Delaware. You can reach Jason at 302 427 5512, or email@example.com.
For readers seeking more information concerning Delaware bankruptcy proceedings, below are prior posts I have written that address various bankruptcy-related issues: