Constar International (NASDAQ: CNST) Files Prearranged Chapter 22 to Shed More Debt

by Randall Reese

Constar International Inc. (NASDAQ: CNST) and five affiliates voluntarily filed for chapter 11 bankruptcy protection today in Delaware to effectuate a prearranged plan to cut the companies' debt. This marks the second chapter 11 filing in less than three years for the Philadelphia-based producer of polyethylene terephthalate (or PET) plastic containers. Constar previously filed for bankruptcy protection on December 30, 2008 and emerged from those cases on May 29, 2009.

Constar reported in court filings that it generated 69% of its revenues during the first nine months of 2010 from the sale of "conventional" PET products (high volume soft drink and water packaging). 26% of revenues were generated from the sale of "custom" PET products (food, juice, tea and sport drink containers requiring "more complex manufacturing processes, unique materials, innovative product designs and technological know-how") with the remaining revenue coming from the sale of plastic closures. The company's largest customer is Pepsi-Cola Advertising and Marketing, Inc., but its contract with Pepsi expires at the end of next year (2012). Constar states in court documents that demand for its products has "decreased significantly" over the last 18 months as Pepsi has moved (and continues to move) to self-manufacturing its conventional containers.

Last week, Constar and certain holders of its Senior Secured Floating Rate Notes due 2012 ($220 million aggregate principal amount) reached an agreement in principle on the terms of a prearranged plan of reorganization for the companies. Pursuant to that plan, if confirmed, Constar would "convert most of the Senior Secured FRN indebtedness into equity (leaving those holders with only a relatively modest amount of new debt)." Some of the holders of the Senior Secured Floating Rate Notes (most notably, Black Diamond Commercial Finance, L.L.C. which is acting as agent) have also agreed to provide up to $55 million in debtor-in-possession financing, some of which "upon the satisfaction of certain conditions, may be rolled over (at the election of the provider(s)) into" exit financing.

Constar is represented in the bankruptcy cases by Wilmer Cutler Pickering Hale and Dorr LLP and Greenhill & Co., LLC.

Key documents filed with the bankruptcy court so far are listed in the attached document. To access all major filings from this case, please visit:

LOADING PDF: If there are any problems, click here to download the file.

Written by:

Randall Reese

Restructuring Concepts LLC on:

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