LSC Communications announced this morning that it has filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York. The filing has been expected for several months as the country's largest book printer—and one of its largest printers overall—has struggled under the weight of its failed merger with Quad Graphics and the outbreak of the new coronavirus. LSC’s subsidiaries in Mexico and Canada are not included in the filing, and will continue to operate normally.
LSC said it has received commitments for $100 million in debtor-in-possession financing from certain of its revolving lenders, subject to the satisfaction of certain closing conditions. If approved by the bankruptcy court, LSC said, the new financing, combined with cash on hand and generated through its ongoing operations, “is expected to be sufficient to support the company’s operational and restructuring needs.”
Since LSC’s deal with Quad was called off last summer following objections from the Justice Department, the company has worked to streamline its business, a process that has included closing eight facilities and signing new contracts, noted Thomas Quinlan III, LSC chairman, president, and CEO. Quinlan added that a review of its operations determined that the best way forward was to pursue a restructuring of its financial structure.
In 2019, LSC's total revenue fell 15% compared to 2018, dropping to $3.33 billion, and the company posted a net loss of $288 million. Sales from its book group fell 4% in the year, to $1.01 billion.
As part of the reorganization process, LSC said it has filed a number of customary motions, which will allow it to continue operating in the ordinary course. LSC also said it intends to pay vendors “in full under customary terms for all goods and services received on or after the [bankruptcy] filing date.”
LSC's filings show it has $1.6 billion in assets and $972 million in liabilities. Its three largest unsecured creditors' are employee pension plans that are owed a total of more than $50 million. Among vendors and other trade partners who are unsecured creditors are Flint Group, which is owed $6.4 million, Kodak (owed $2 million), Phoenix Color (owed $1.7 million), and Verso Paper and J.B. Hunt Transportation, both owed $1.5 million.