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Flexographic Pre-Press Platemakers Association Questions about the Smurfit-Stone Container Corporation Bankruptcy Case Presentation by Rob Charles Lewis.

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Presentation on theme: "Flexographic Pre-Press Platemakers Association Questions about the Smurfit-Stone Container Corporation Bankruptcy Case Presentation by Rob Charles Lewis."— Presentation transcript:

1 Flexographic Pre-Press Platemakers Association Questions about the Smurfit-Stone Container Corporation Bankruptcy Case Presentation by Rob Charles Lewis and Roca LLP March 2, 2009

2 Rob Charles Partner, Lewis and Roca LLP Resident, Tucson, Arizona Admitted, Arizona and Nevada Member, American College of Bankruptcy

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4 Smurfit-Stone Container Corporation Debtor, United States Bankruptcy Court, District of Delaware Debtor, United States Bankruptcy Court, District of Delaware Case No. 09-10235-BLS Case No. 09-10235-BLS Bankruptcy petition filed January 26, 2009 Bankruptcy petition filed January 26, 2009 Information available at: http://chapter11.epiqsystems.com/clientdefault. aspx?pk=48c9f539-2902-408a-a22d- 3a7fb1b41322&l=1 Information available at: http://chapter11.epiqsystems.com/clientdefault. aspx?pk=48c9f539-2902-408a-a22d- 3a7fb1b41322&l=1 http://chapter11.epiqsystems.com/clientdefault. aspx?pk=48c9f539-2902-408a-a22d- 3a7fb1b41322&l=1 http://chapter11.epiqsystems.com/clientdefault. aspx?pk=48c9f539-2902-408a-a22d- 3a7fb1b41322&l=1

5 Smurfit-Stone Container Corporation Company Statement On January 26, 2009, Smurfit-Stone and our U.S. and Canadian subsidiaries filed voluntary petitions for reorganization under Chapter 11 in the U.S. Bankruptcy Court in Wilmington, Delaware. The case number is 09-10235. Our Canadian subsidiaries also filed to reorganize under the Companies' Creditors Arrangement Act (CCAA) in the Ontario Superior Court of Justice in Canada. We took this step to help protect and strengthen our long-term value and growth plans. By reorganizing our capital structure, we will work to become a more financially healthy company that is well positioned to meet the current market challenges. We will be conducting “business as usual” throughout our reorganization process. More information about Smurfit-Stone’s reorganization is available on the Company’s website at www.smurfit-stone.com. Copies of all motions and court orders are available at http://chapter11.epiqsystems.com/Smurfit. Employee, retiree, customer and supplier inquires can be made at 877-264-9638. If outside of the U.S. and Canada, inquiries can be made at 503-597-7694.

6 Automatic Stay Bankruptcy Code § 362(a). Filing a bankruptcy petition causes a stay: Acts, including judicial proceedings to collect claims. Acts, including judicial proceedings to collect claims. Exercising control over property of the estate Exercising control over property of the estate Setoff Setoff

7 Debtor in Possession Chapter 11 debtor is a debtor in possession (unless a trustee is appointed). Chapter 11 debtor is a debtor in possession (unless a trustee is appointed). Debtor in possession may operate its business. Debtor in possession may operate its business. No bankruptcy court approval required for ordinary course of business, except, for example, employment of counsel, borrowing money, granting liens. No bankruptcy court approval required for ordinary course of business, except, for example, employment of counsel, borrowing money, granting liens.

8 Customers DIP has obtained authority to substantially honor customer obligations in ordinary course of business.

9 Pre-Petition Checks DIP’s banks should return any pre-petition checks absent specific court order authorizing payment. Recipient of a returned check is an unsecured creditor.

10 First Day Orders Smurfit-Stone has now received court authorization to, among other things: Utilize up to $550 million of the Company’s new $750 million debtor-in-possession (DIP) credit facility on an interim basis. As customary, a hearing at which the Company will seek final court approval for the full amount of the DIP facility and other First Day Motions has been scheduled for February 23, 2009. Utilize up to $550 million of the Company’s new $750 million debtor-in-possession (DIP) credit facility on an interim basis. As customary, a hearing at which the Company will seek final court approval for the full amount of the DIP facility and other First Day Motions has been scheduled for February 23, 2009. Provide employee wages, reimbursements, health care coverage, vacation, sick leave and similar benefits without interruption; Provide employee wages, reimbursements, health care coverage, vacation, sick leave and similar benefits without interruption; Honor customer obligations; and, Honor customer obligations; and, Ensure the continuation of the Company’s cash management systems and other business operations. Ensure the continuation of the Company’s cash management systems and other business operations.

11 Contracts and Debtors in Possession Do I have to honor an existing contract? Do I have to honor an existing contract? Does the DIP have an option to reject (breach) my contract? Does the DIP have an option to reject (breach) my contract? Do I have to ship new product? Do I have to ship new product? Do I have to extend credit or can I ship COD? Do I have to extend credit or can I ship COD? Can I change pricing? Can I change pricing? Can I get paid as a “critical vendor”? Can I get paid as a “critical vendor”? Can I refuse to perform my contract unless my pre- bankruptcy bill is paid? Can I refuse to perform my contract unless my pre- bankruptcy bill is paid? If I make a post-petition shipment at the DIP’s request, how likely is it that I’ll be paid? If I make a post-petition shipment at the DIP’s request, how likely is it that I’ll be paid?

12 Debtor in Possession Financing CREVE COEUR, Mo., and CHICAGO, (February 23, 2009) – Smurfit-Stone Container Corporation today announced that the U.S. Bankruptcy Court in Wilmington, Delaware, has granted final approval of its $750 million debtor-in-possession (DIP) credit facility, which provides the company with access to the full amount of the facility. The court had previously granted the company interim authority to access $550 million of the DIP facility. The court also granted final approval to various other interim orders that had been entered at the commencement of the bankruptcy case.

13 The Company on Vendors 10. Will suppliers continue to be paid for goods and services they provide to Smurfit-Stone? The company intends to pay suppliers under normal terms for goods received and services rendered on or after the filings (January 26, 2009). Any claims for goods received or services rendered on and after the filing date are considered “administrative claims,” which receive a priority status. In fact, the company has already received court approval to utilize up to $550 million of its $750 million “DIP” financing facility and will apply for approval for the full amount at a hearing in February. The company plans to use these funds and the cash generated from operations to fund post-petition operating expenses, including supplier obligations. Suppliers who provided goods or services to Smurfit-Stone prior to the filings (January 26, 2009) may have what are referred to as “pre-petition claims.” These claims cannot be paid at this time and will be addressed through a Chapter 11 plan of reorganization that will be filed later in the case. If you have such pre-petition claims, you will receive additional information from the company’s claims agent (or from the CCAA monitor in Canada) at a later date. Smurfit-Stone sincerely regrets the hardship or inconvenience that this may cause your company.

14 Vendors 13. When will I receive payment for goods and services delivered after the bankruptcy date? All goods and services delivered on and after the bankruptcy filing date (January 26, 2009) will be paid according to established terms.

15 Critical Vendors Bankruptcy Court authorized $50 to $60 million “critical vendor” program Essential goods or services; delivered timely; at favorable pricing Payment is not allowance of claim Vendor must agree to ship on ordinary business terms No less favorable terms than in the last 6 months Refusal to ship or honor terms gets you terminated and sued DIP reserves all rights (suit, preference)