American Greetings Completes Recycled Paper Buy

The greeting card company finalized its purchase after taking a non-traditional route to
subsume its rival.

By KEN MacFADYEN

February 26, 2009

American Greetings completed its acquisition of Recycled Paper Greetings, buying the company through a prepackaged Chapter 11 bankruptcy reorganization.

The buyer ultimately paid roughly $123 million in sum for the assets, including $54.7 million of new American Greetings 7.375% notes due 2016 and an equity infusion of approximately $18 million. The company had previously accumulated roughly $44.2 million worth of Recycled Paper debt prior to the company’s bankruptcy, and following the Chapter 11 filing made a $6.5 million debtor-in-possession loan, which was extinguished upon the deal’s close.

Recycled Paper, formerly a portfolio company of Monitor Clipper Partners, had 10,000 to 25,000 creditors at the time of its bankruptcy filing and listed assets and liabilities totaling between $100 million and $500 million.

Weil, Gotshal & Manges and Mark Collins of Richards, Layton & Finger PA, served as debtor counsel, while Rothschild provided Recycled Paper with financial and restructuring advice. Imperial Capital and Jones Day advised American Greetings on the transaction. American Greetings’ efforts to acquire Recycled Paper through its debt initially met with resistance from both the target and its backer. At the time of the bankruptcy filing, Monitor Clipper partner Travis Metz issued a prepared statement “strongly” opposing the actions, saying it was an attempt to “eliminate” Recycled Paper as a competitor. The company even pursued litigation in the US District Court in Chicago. American Greeting Card, had, according to one source, sought to buy its competitor at least once as early as last year, but was rebuffed. The suitor then gained a toehold by acquiring a stake in Recycled Paper’s senior secured debt, which prompted Jude Rake, Recycled Paper’s CEO to speak out against the transaction. He alleged at the time that the move was “a clear violation of a written confidentiality agreement" that was "predatory in nature and intended for the sole purpose of preventing us from conducting business on a fair playing field." According to a statement, however, Rake has apparently coalesced, as he will continue to lead Recycled Paper as CEO. Additional reporting by Aleksandrs Rozens