Joel R. Glucksman
Partner
201-896-7095 jglucksman@sh-law.comFirm Insights
School Supply Distributor Seeks Chapter 11 Bankruptcy Protection
Author: Joel R. Glucksman
Date: February 12, 2013
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School Specialty Inc., a distributor of educational supplies to grade schools, has filed for Chapter 11 protection under bankruptcy law.
The Wisconsin-based company sought protection in U.S. Bankruptcy Court in Delaware, and listed $494.5 million in assets and $394.5 million in liabilities. Following the bankruptcy filing, and an announcement that the assets would be auctioned off, company shares fell by roughly 80 percent. Despite the company’s precarious financial position, School Specialty said it has already been authorized to receive up to $175 million in loans from the company’s board to carry it through the bankruptcy process. Bayside Capital Inc. has been appointed as the “stalking horse” bidder for the auction, and has agreed to provide $50 million in debtor-in-possession financing to School Specialty.
In a statement, School Specialty president and CEO Michael Lavelle said the company hopes to emerge from the bankruptcy proceedings within 90 days and will continue operations during the restructuring process.
“We are pleased to have reached these agreements with Bayside, and are confident School Specialty’s business has a bright future,” said Lavelle. “We fully expect to continue normal business operations, providing quality, value-driven education products and excellent customer care. Our customers remain a top priority and we plan to meet all our customer commitments and maintain customer policies and programs.”
Although the company declined to comment on the precise cause of its financial troubles, a Reuters analysis noted that school supply markets are seasonal, which can lead to fluctuations in revenue and earnings. In addition, the schools the company supplies are heavily dependent on state and local funding, which has dried up considerably since the recession. Budget cuts have rendered many schools unable to adopt new curriculum guidelines, and as a result, they have stopped spending money on new instructional materials to meet these guidelines.
- Practices: Bankruptcy & Creditors' Rights, Corporate Transactions & Business, Bankruptcy Litigation
- Locations: Red Bank, NJ, New York City, Little Falls, NJ
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