Champion Industries Defaults on Debt

NEW YORK ( TheDeal) -- Commercial printer Champion Industries Inc. has defaulted on its debt after failing to comply with a cash flow covenant and is now working with an investment bank and crisis manager to assess it restructuring options.

Huntington, W.Va.-based Champion received a notice of default from lenders led by administrative agent Fifth Third Bank on Monday.

Champion Industries is working with investment banking firm Raymond James & Associates Inc. "to assist it with a restructuring or refinancing of the existing debt and other potential transaction alternatives," it said in filings with the Securities and Exchange Commission.

The company is also working with its chief restructuring adviser at RAS Management Advisors LLC, SEC filings said.

Champion Industries, which manufactures business forms, office products and office furniture in regional markets in the U.S., is in talks with its lenders regarding the default and the restructuring or refinancing of its debt.

The company has a revolving credit facility and a term loan with a syndicate of banks led by Fifth Third Bank. The other lenders include Huntington National Bank, Suntrust Bank, Old National Bank NA, United Bank Inc. and Summit Community Bank, SEC filings said.

Champion amended its credit agreement in October and now has a more than $19 million term loan A priced at Libor plus 800 basis points; a more than $6.27 million term loan B priced at 16%; and a $8.43 million revolver priced at Libor plus 600 basis points. The debt all matures on June 30.

According to SEC filings, the company's debt contains "restrictive financial covenants requiring the company to maintain certain financial ratios." On Monday, the company was advised that it had failed to comply with the minimum Ebitda covenant under its debt.

The company is required to have $3.35 million in minimum Ebitda as of Feb. 28 and $4.1 million in minimum Ebitda as of March 31, SEC filing said.

While Champion Industries, which also publishes the Herald-Dispatch, a daily newspaper in Huntington, has defaulted on its debt, it hasn't missed a principal or interest payment on it. Since 2007, the company has paid its debt down by $49.7 million "during a significant economic and secular downturn within the economy," SEC filings said.

Because of the default, Champion Industries could be facing an accelerated maturity of some $36 million in remaining outstanding debt.

The company warned that it could default on its debt by the end of March "due to the short-term nature of the credit expiration and the multitude of covenants we are required to comply with," Champion said in a March 15 statement.

"We intend to work with our secured creditors and advisers to address our debt maturities and liquidity to the best of our ability and if successful in stabilizing our funding platform going forward, we believe our core business has the opportunity to improve," Champion Industries chairman and CEO Marshall T. Reynolds said in the March 15 statement.

Champion Industries also warned that it will likely miss its $2.1 million payment due on its bullet loan A due on March 31. The bullet loan A is priced at Libor plus 800 basis points. Champion Industries had a $3.54 million net loss for the first quarter of 2013 and a $22.9 million net loss for the entire year in 2012.

The company incurred its original $85 million in debt during its acquisition of the Herald-Dispatch, which has a daily and Sunday circulation of 24,000 and 30,000, respectively. But Champion Industries has been acquisitive in other industries, too, having acquired 15 printing companies, eight office products and office furniture companies, one company with a combined emphasis on both printing and office products and office furniture and a paper distribution division (which was subsequently sold in 2001) since its initial public offering on Jan. 28, 1993.

Champion Industries listed its assets at $43.8 million and its liabilities at $48.73 million as of Jan. 31 in SEC documents.

The company's chief financial officer, Todd R. Fry, couldn't be reached for comment. A spokesman for Fifth Third Bank refused to comment.

Champion Industries' counsel, Thomas J. Murray at Huddleston Bolen LLP, refused to comment.

Written by Jamie Mason in New York

More from Mergers and Acquisitions

Comcast Charts Still Send Positive Long-Term Signal After Winning Sky Bid

Comcast Charts Still Send Positive Long-Term Signal After Winning Sky Bid

NYSE Trader on Sirius, Pandora and Monday's Stock Market Decline

NYSE Trader on Sirius, Pandora and Monday's Stock Market Decline

Goldman Names Dees Co-Head of Investment Banking

Goldman Names Dees Co-Head of Investment Banking

All-Male Boards Could Face New Pressure From Shareholder Adviser ISS

All-Male Boards Could Face New Pressure From Shareholder Adviser ISS

3 Reasons Apple or Alphabet Should Consider Buying Tesla

3 Reasons Apple or Alphabet Should Consider Buying Tesla