PaperlinX has asked to extend the voluntary suspension of its securities until the start of trading on 16 April, or until an announcement regarding the matters below.
The company is still assessing the impact of the UK administration that occurred on 1 April, on other European PaperlinX operations, given the interconnectedness of financing arrangements and the supply chain in the region. The company and its advisers are meeting with the UK administrators continue the assessment and to explore a potential sale of the PaperlinX Benelux operations before 15 April (the date on which the waiver granted by ING - a local receivables financier of the company’s Dutch (Benelux) operations - currently expires), and to continue discussions with ING. The company is not currently expected to receive any direct material benefit from a sale or realisation of Benelux or any other European business. However, the proceeds of a sale or realisation are expected to benefit other European stakeholders.
The moves above come after a number of companies comprising the paper merchanting and VTS businesses of PaperlinX UK were placed into administration by its UK directors on 1 April. Joint administrators, Matt Smith and Neville Kahn, insolvency practitioners of Deloitte UK were appointed at that time.
Continued lower demand for paper and decline in margins in the UK, together with the difficulty in restructuring substantial legacy pension liabilities, and the withdrawal of credit insurance culminated in the UK group being placed in administration.
PaperlinX said then it was assessing the impact that the UK administration will have on other European PaperlinX operations, and that it was considered appropriate that it should remain in voluntary suspension until the commencement of trading on Wednesday, 8 April 2015.
Through a strategic review, PaperlinX had been exploring options to divest part or all of the European operations, but potential opportunities could not be brought to a satisfactory conclusion. The PaperlinX Board also considered a range of other funding alternatives but decided these were either not feasible or not in the best interests of PaperlinX.
As a result of the strategic review, the PaperlinX board determined that there was no reasonable basis upon which to expect a financial improvement in the UK group. Even with ongoing and substantial cash investment, the PaperlinX board was of the view that a turnaround in the UK group’s performance and profitability was unlikely. As such, the
PaperlinX Board determined that it was not in the best interests of PaperlinX to continue to support the UK’s trading losses and adverse liquidity position or to fund significant restructuring initiatives.
“This has been a difficult decision for the local directors of the UK Group, but one that I believe is unavoidable given the circumstances,” said PaperlinX CEO Andy Preece. “PaperlinX has strongly supported its UK operations for many years, but despite continued efforts and the investment of significant capital over recent years, it has not been possible to successfully restructure the UK group.”