School Supplies Manufacturer Files for Bankruptcy Debt Relief
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School Supplies Manufacturer Files for Bankruptcy Debt Relief

February 6, 2013

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School Specialty Inc., a national distributor of school supplies, is filing for bankruptcy protection, according to a report from the Milwaukee Journal Sentinel.

Sources say the school supply company, which is based in Greenville, Wis., has nearly $400 million in debt, which prompted its recent journey to U.S. Bankruptcy Court in Wilmington, Delaware, where the firm, like many, is incorporated.

Despite its pending Chapter 11 bankruptcy, School Specialty plans to continue its operations. Efforts to do so will be aided by an emergency loan of $175 million that will allow it to meet its financial obligations during bankruptcy, according to court documents.

Sources also note that the company still holds $495 million worth of assets, which will likely enable its efforts to secure secure the necessary funds to remain in operation. In fact, the company’s leaders told sources that they plan to sell most of the assets to an investment firm.

Bayside Capital was identified as the initial bidder for the assets, but an auction supervised by the bankruptcy court could attract other bidders.

Bayside, however, has already taken a prominent step towards acquiring the company’s assets by giving an additional $50 million in bankruptcy financing to the struggling company.

Of course, despite the presence of a willing buyer, the company has a long road to financial recovery, as its stock price dropped more than 73 percent the week following the announcement of the Chapter 11 filing.

The company’s largest creditors include Bank of New York Mellon Corp., which is looking to collect more than $157 million, as well as Crayola LLC, the iconic crayon company, which is looking to obtain a debt worth $4.26 million.

According to School Specialty Chief Executive Officer Michael Lavelle, bankruptcy will allow the company to "strengthen" its "financial condition."

Lavelle also said the company, which was founded in 1959, looks forward to "building our brands and product offerings and positioning our business for long-term success as the funding environment improves."

Schools across the country are hopeful that School Specialty recovers, as it is one of the largest suppliers of non-textbook classroom supplies in the country, according to sources.


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