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    Stock Alert for Smurfit-Stone Container Corp. (SSCCQ)

    Smurfit-Stone Container Corp. (OTCPK: SSCCQ)

    Smurfit-Stone Container Corp. (SSCCQ) is an integrated manufacturer of paperboard and paper-based packaging in North America, including containerboard and corrugated containers, and is also a paper recycler. Smurfit-Stone is a holding company with no business operations of its own. Smurfit-Stone conducts its business operations through its wholly owned subsidiary, Smurfit-Stone Container Enterprises Inc. (SSCE). In December 2009, the Company filed a Chapter 11 plan and disclosure statement in a Delaware bankruptcy court. The Company’s operations include 12 paper mills (10 located in the United States and two in Canada), 110 container plants (90 located in the United States, 14 in Canada, three in Mexico, two in China and one in Puerto Rico), 29 reclamation plants located in the United States and one lamination plant located in Canada. Smurfit-Stone’s primary products include containerboard, corrugated containers, market pulp, kraft paper, and reclaimed and brokered fiber. SSCCQ is in bankruptcy. Investors should be cautious when buying common stock of companies in bankruptcy. It is extremely risky and is likely to lead to financial loss.

    The Company was founded in 1968 and is based in Chicago, Illinois. On January 26, 2009, Smurfit-Stone Container Corp., along with its affiliates, filed a voluntary petition for reorganization under Chapter 11 in the U.S. Bankruptcy Court for the District of Delaware.

    Share Statistics (24-May-10) FY






    Q4 2008 Q4 2009 %


    Symbol SSCCQ Revenue, $Mn 7.42M 7.04M 5.1% 1.53M 1.38M 9.8%
    Current price $0.19 Gross marg. 13.7% 10.0% 27.0% 8.5% 8.0% 5.9%
    52wk Range: $1.11-0.06 Oper. margin 2.9% -38.7% 1434% -184.3% 1.3% 100.7%
    Avg Vol (3m): 4,658,520 Net margin -1.3% -40.0% 2976% -185.0% -0.3% 99.9%
    Market Cap. 49.05M
    Dil. Shares Outst. 257.3M EPS, $ -0.22 -3.87 1659% 0.31 -3.94 1370%

    Source:, SEC Filings.

    Financial Summary

    On January 26, 2009, SSCCQ and its U.S. and Canadian subsidiaries (collectively, the Debtors) filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code (the Bankruptcy Code) in the U.S. Bankruptcy Court in Wilmington, Delaware (the U.S. Court). On the same day, its Canadian subsidiaries also filed to reorganize (the Canadian Petition) under the Companies’ Creditors Arrangement Act (the CCAA) in the Ontario Superior Court of Justice in Canada (the Canadian Court). Operations in Mexico and Asia and certain U.S. and Canadian legal entities (the Non-Debtor Subsidiaries) were not included in the filing and will continue to operate outside of the Chapter 11 process.

    Effective as of the opening of business on February 4, 2009, common stock and 7% Series A Cumulative Exchangeable Redeemable Convertible Preferred Stock (Preferred Stock) were delisted from the NASDAQ Global Select Market and the trading of these securities was suspended. SSCCQ common stock and preferred stock are now quoted on the Pink Sheets Electronic Quotation Service (Pink Sheets) under the ticker symbols “SSCCQ.PK” and “SSCJQ.PK,” respectively.

    The filing of the Chapter 11 Petition and the Canadian Petition constituted an event of default under the Company’s debt obligations, and those debt obligations became automatically and immediately due and payable, although any actions to enforce such payment obligations were stayed as a result of the filing of the Chapter 11 Petition and the Canadian Petition. Since January 26, 2009, the date of the bankruptcy filings, SSCCQ discontinued interest payments on unsecured senior notes and certain other unsecured debt.

    SSCCQ and its U.S. and Canadian subsidiaries are currently operating as “debtors-in-possession” under the jurisdiction of the U.S. Court and Canadian Court (the Bankruptcy Courts) and in accordance with the applicable provisions of the Bankruptcy Code and the CCAA. In general, the Debtors are authorized to continue to operate as ongoing businesses, but may not engage in transactions outside the ordinary course of business without the approval of the Bankruptcy Courts.

    Debtor-In-Possession (DIP) Financing

    In connection with filing the Chapter 11 Petition and the Canadian Petition on the Petition Date, SSCCQ and certain of its affiliates filed a motion with the Bankruptcy Courts seeking approval to enter into a Post-Petition Credit Agreement (the DIP Credit Agreement). Final approval of the DIP Credit Agreement was granted by the U.S. Court on February 23, 2009, and by the Canadian Court on February 24, 2009. Amendments to the DIP Credit Agreement were entered into on February 25 and 27, 2009.

    The DIP Credit Agreement, as amended, provided for borrowings up to an aggregate committed amount of $750 million, consisting of a $400 million U.S. term loan (U.S. DIP Term Loan) for borrowings by SSCE; a $35 million Canadian term loan (Canadian DIP Term Loan) for borrowings by Smurfit-Stone Container Canada Inc. (SSC Canada); a $250 million U.S. revolving loan (U.S. DIP Revolver) for borrowings by SSCE and/or SSC Canada; and a $65 million Canadian revolving loan (Canadian DIP Revolver) for borrowings by SSCE and/or SSC Canada.

    Under the DIP Credit Agreement, on January 28, 2009, the Company borrowed $440 million, consisting of a $400 million U.S. DIP Term Loan, a $35 million Canadian DIP Term loan and $5 million from the Canadian DIP Revolver. In accordance with the terms of the DIP Credit Agreement, in January 2009, it used U.S. DIP Term Loan proceeds of $360 million, net of lenders’ fees of $40 million, and Canadian DIP Term Loan proceeds of $30 million, net of lenders’ fees of $5 million, to terminate the receivables securitization programs and repay all indebtedness outstanding of $385 million and to pay other expenses of $1 million. In addition, other fees and expenses of $17 million related to the DIP Credit Agreement were paid for with proceeds of $5 million from the Canadian DIP Revolver and available cash.

    The outstanding principal amount of the loans under the DIP Credit Agreement, plus interest accrued and unpaid, were due and payable in full at maturity, which was January 28, 2010. As all borrowings under the DIP Credit Agreement were paid in full as of December 31, 2009, we allowed the DIP Credit Agreement to expire on the maturity date of January 28, 2010. Prior to the maturity of the DIP Credit Agreement on January 28, 2010, SSCCQ transferred $15 million of available cash to a restricted cash account to secure letters of credit under the DIP Credit Agreement.

    Reorganization Process

    The Bankruptcy Courts approved payment of certain of the Company’s pre-petition obligations, including employee wages, salaries and benefits, and the payment of vendors and other providers in the ordinary course for goods received and services rendered subsequent to the filing of the Chapter 11 Petition and Canadian Petition and other business-related payments necessary to maintain the operation of the business. SSCCQ has retained legal and financial professionals to advise it on the bankruptcy proceedings.

    Immediately after filing the Chapter 11 Petition and Canadian Petition, SSCCQ notified all known current or potential creditors of the bankruptcy filings. Subject to certain exceptions under the Bankruptcy Code and the CCAA, the Company’s bankruptcy filings automatically enjoined, or stayed, the continuation of any judicial or administrative proceedings or other actions against the Company or its property to recover, collect or secure a claim arising prior to the filing of the Chapter 11 Petition and Canadian Petition. Thus, for example, most creditor actions to obtain possession of property from SSCCQ, or to create, perfect or enforce any lien against our property, or to collect on monies owed or otherwise exercise rights or remedies with respect to a pre-petition claim are enjoined unless and until the Bankruptcy Courts lift the automatic stay.

    As required by the Bankruptcy Code, the U.S. Trustee for the District of Delaware (the U.S. Trustee) appointed an official committee of unsecured creditors (the Creditors’ Committee). The Creditors’ Committee and its legal representatives have a right to be heard on all matters that come before the U.S. Court with respect to SSCCQ. A monitor was appointed by the Canadian Court with respect to proceedings before the Canadian Court.

    Under the Bankruptcy Code, the Debtors generally must assume or reject pre-petition executory contracts, including but not limited to real property leases, subject to the approval of the Bankruptcy Courts and certain other conditions. In this context, “assumption” means that SSCCQ agrees to perform its obligations and cure all existing defaults under the contract or lease, and “rejection” means that the Company is relieved from its obligations to perform further under the contract or lease, but are subject to a pre-petition claim for damages for the breach thereof subject to certain limitations. Any damages resulting from rejection of executory contracts that are permitted to be recovered under the Bankruptcy Code will be treated as liabilities subject to compromise unless such claims were secured prior to the Petition Date.

    Since the Petition Date, SSCCQ received approval from the Bankruptcy Courts to reject a number of leases and executory contracts of various types. Liabilities subject to compromise have been recorded related to the rejection of executory contracts and unexpired leases, and from the determination of the U.S. Court (or agreement by parties in interest) of allowed claims for contingencies and other disputed amounts. Due to the uncertain nature of many of the unresolved claims and rejection damages, SSCCQ cannot project the magnitude of such claims and rejection damages with certainty.

    On May 4, 2010, the U.S. Court granted a motion for an order authorizing the assumption of certain executory contracts and unexpired leases and finalizing all but an insignificant amount of the cure amounts related to these assumed executory contracts and unexpired leases. As a result, SSCCQ concluded its review of its executory contracts and unexpired leases and do not expect to reject any additional executory contracts or unexpired leases. SSCCQ expects that the assumption of the executory contracts and unexpired leases in the May 4, 2010, court order will convert certain of the liabilities shown on the accompanying consolidated balance sheets as liabilities subject to compromise to liabilities not subject to compromise.

    In June 2009, the Bankruptcy Courts entered an order establishing August 28, 2009, as the bar date for potential creditors to file claims. The bar date is the date by which certain claims against SSCCQ must be filed if the claimants wish to receive any distribution in the bankruptcy cases. Proof of claim forms received after the bar date are typically not eligible for consideration of recovery as part of our bankruptcy cases. Creditors were notified of the bar date and the requirement to file a proof of claim with the Bankruptcy Courts. Differences between liability amounts estimated by SSCCQ and claims filed by creditors are being investigated and, if necessary, the Bankruptcy Courts will make a final determination of the allowable claim. The determination of how liabilities will ultimately be treated cannot be made until the Bankruptcy Courts approve a plan of reorganization. Accordingly, the ultimate amount or treatment of such liabilities is not determinable at this time.

    In September 2009, the U.S. Trustee denied a request by certain holders of SSCCQ common stock and Preferred Stock to form an official equity committee to represent the interests of equity holders on matters before the U.S. Court. The equity holders subsequently filed a motion for the appointment of an equity committee with the U.S. Court. In December 2009, the U.S. Court entered an order denying the motion for an order appointing an official committee of equity security holders.

    Proposed Plan of Reorganization and Exit Credit Facilities

    In order to successfully emerge from bankruptcy, SSCCQ must propose and obtain confirmation by the Bankruptcy Courts of a plan of reorganization that satisfies the requirements of the Bankruptcy Code and the CCAA. A plan of reorganization would resolve any pre-petition obligations, set forth the revised capital structure of the newly reorganized entity and provide for corporate governance subsequent to exiting from bankruptcy.

    Under the priority scheme established by the Bankruptcy Code and the CCAA, unless creditors agree otherwise, pre-petition liabilities and post-petition liabilities must be satisfied in full before stockholders are entitled to receive any distribution or retain any property under a plan of reorganization. The ultimate recovery to creditors and/or stockholders, if any, will not be determined until confirmation of a plan or plans of reorganization. No assurance can be given as to what values, if any, will be ascribed to each of these constituencies or what types or amounts of distributions, if any, they would receive. Because of such possibilities, the value of the liabilities and securities, including common stock, is highly speculative. Appropriate caution should be exercised with respect to existing and future investments in any of SSCCQ’s liabilities and/or securities.

    The Proposed Plan of Reorganization

    On December 1, 2009, the Debtors filed their Joint Plan of Reorganization and Plan of Compromise and Arrangement and Disclosure Statement with the U.S. Court. On December 22, 2009, January 27, 2010, and February 4, 2010, the Debtors filed amendments to the proposed Plan of Reorganization (the Proposed Plan of Reorganization) and to the Disclosure Statement (the Disclosure Statement). Also, on March 19, 2010, the Debtors filed a Supplement to the Proposed Plan of Reorganization. Key elements of the Proposed Plan of Reorganization were as follows:

    –        SSCCQ and its subsidiary, SSCE, would merge and become the Reorganized Smurfit-Stone that would be governed by a board of directors that will include Patrick J. Moore, our current chairman and CEO, Steven J. Klinger, the current president and COO, and a number of independent directors, including a non-executive chairman selected by the Creditors’ Committee in consultation with the Debtors;

    –        all of the existing secured debt of the Debtors would be fully repaid with cash;

    –        substantially all of the existing unsecured debt and claims against SSCE, including all of the outstanding unsecured senior notes, would be exchanged for common stock of the Reorganized Smurfit-Stone, which is expected to be traded on the New York Stock Exchange with holders of unsecured claims against SSCE of less than or equal to $10,000 entitled to receive payment of 100% of such claims in cash, and eligible cash-out participants having the opportunity to indicate on their ballot the percentage amount of their allowed claim they would be willing to receive in cash in lieu of common stock;

    –        all existing equity securities would be cancelled and existing shareholders of common and preferred stock would receive no distribution on account of their shares;

    –        the assets of the Canadian Debtors, other than Stone Container Finance Company II, would be sold to a newly-formed Canadian subsidiary of Reorganized Smurfit-Stone free and clear of existing claims, liens and interests in exchange for (i) the repayment in cash of the secured debt obligations of the Canadian Debtors, (ii) cash to the Canadian Debtors’ unsecured creditors if they vote to accept the Proposed Plan of Reorganization and (iii) the assumption of certain liabilities and obligations of the Canadian Debtors; and

    –         Reorganized Smurfit-Stone and its newly-formed Canadian subsidiary would assume all of the existing obligations under the qualified defined benefit pension plans in the United States and Canada sponsored by the Debtors, as well as all of the collective bargaining agreements in the United States and Canada between the Debtors and their labor unions.

    The Proposed Plan of Reorganization will not become effective until certain conditions are satisfied or waived, including: (i) entry of an order by the Bankruptcy Courts confirming the Proposed Plan of Reorganization, (ii) all actions, documents and agreements necessary to implement the Proposed Plan of Reorganization having been effected or executed, (iii) access of the Debtors to funding under the exit credit facility and (iv) specified claims of the Debtors’ secured lenders having been paid in full pursuant to the Proposed Plan of Reorganization.

    On January 14, 2010, the U.S. Court granted approval to extend the Debtors’ exclusive right to file a plan of reorganization to July 21, 2010, and granted the Debtors’ approval to solicit acceptance of a plan of reorganization until May 21, 2011. If the Debtors’ exclusivity period lapses, any party in interest would be able to file a plan of reorganization. In addition to being voted on by holders of impaired claims and equity interests, a plan of reorganization must satisfy certain requirements of the Bankruptcy Code and the CCAA and must be approved, or confirmed, by the Bankruptcy Courts in order to become effective.

    On January 29, 2010, the U.S. Court approved the Debtors’ Disclosure Statement as containing adequate information for the holders of impaired claims and equity interests, who are entitled to vote to accept or reject the Debtors’ Proposed Plan of Reorganization.

    The deadline for voting and objections to the Proposed Plan of Reorganization was March 29, 2010. The Proposed Plan of Reorganization was overwhelmingly approved by number and dollar amount of the required classes of creditors of each of the Debtors, with the exception of Stone Container Finance Company II. Stone Container Finance Company II will be removed from the Proposed Plan of Reorganization. The failure to confirm the Proposed Plan of Reorganization of Stone Container Finance Company II will not impact the ability of the Debtors to confirm the Proposed Plan of Reorganization for all other Debtors. A meeting of creditors was held for the Canadian debtor subsidiaries on April 6, 2010, at which the necessary votes were received to confirm the Proposed Plan of Reorganization by all requisite classes of creditors other than Stone Container Finance Company II.

    The Bankruptcy Code requires the U.S. Court, after appropriate notice, to hold a hearing on confirmation of a plan of reorganization. The confirmation hearing with respect to the Proposed Plan of Reorganization commenced in the U.S Court on April 15, 2010, and concluded on May 4, 2010, and a hearing was conducted in the Canadian Court on May 3, 2010. SSCCQ anticipates that rulings from the U.S. Court and the Canadian Court on the confirmation will be issued and the Debtors will emerge from Chapter 11 and CCAA proceedings during the second quarter of 2010, following the issuance of orders confirming the Proposed Plan of Reorganization. There can be no assurance at this time that the Proposed Plan of Reorganization will be confirmed by the Bankruptcy Courts or that any such plan will be implemented successfully.

    Financial Strength (24-May-2010) Company Industry Sector S&P 500
    Quick Ratio (MRQ) 0.70 0.97 0.56 0.79
    Current Ratio (MRQ) 0.92 1.20 0.78 0.95
    Long-Term Debt to Equity (MRQ) 59.03 22.36 134.30
    Total Debt to Equity (MRQ) 98.51 33.73 201.19

    Source:, SEC Filings.

    Analyst Consensus

    No chart available.


    No consensus analysis data available.


    Investment Highlights

    SSCCQ recently announced that it has reached a resolution with Mariner Investment Group LLC and Senator Investment Group LP, each an investment advisor to funds under management, as holders of the Company’s preferred stock, and funds and accounts managed by P. Schoenfeld Asset Management LP and Fir Tree Inc., as holders of the Company’s common stock, who were prosecuting objections to the Company’s Chapter 11 Plan of Reorganization (collectively, the “Holders“).

    In general, this resolution provides that certain of the new common stock of the reorganized Company that the plan previously provided for distribution to the general unsecured creditors of the Company (the “New SSCC Common Stock Pool“) will now be distributed to the Company’s current stockholders.  Specifically, 2.25% of the New SSCC Common Stock Pool will be distributed pro rata to the Company’s existing preferred stockholders and 2.25% of the New SSCC Common Stock Pool will be distributed pro rata to the Company’s existing common stockholders.  Additionally, the resolution provides for the payment of certain of the fees and expenses of the Holders and their professionals.  The resolution has the support of the Official Committee of Unsecured Creditors.

    The Company will ask the U.S. Bankruptcy Court to approve notice procedures with respect to this resolution and to schedule a hearing to approve the resolution and related non-material modifications to the Company’s Chapter 11 Plan of Reorganization.  This resolution resolves all of the objections to the confirmation of the Chapter 11 plan raised by the Holders and as a result, the Company anticipates an exit from Chapter 11 by early Summer 2010.

    SSCCQ’s U.S. and Canadian subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code and under the Companies’ Creditors Arrangement Act (CCAA) in Canada on January 26, 2009.


    Technical Analysis


    SSCCQ is below its 50-day moving average. This bearish sign is even more significant because the moving average is also trending lower.

    SSCCQ is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the recent price action.

    The MACD for SSCCQ currently indicates a strong bearish signal for two reasons. First, the MACD is below the signal line, a 9-day moving average. Second, the MACD is below the critical level of zero, which implies that the underlying moving averages are trending lower.

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    May24-2010 symbol Share, $ $ Mn 2010 2011 2010 2011
    MOD-PAC CORP. MPAC 4.95 16.99M n/a N/a 0.32 n/a
    VPK Packaging Group NV VPKB 25.40 224.52M 8.41 N/a 0.43 n/a
    Boise Inc. BZ 5.57 472.11M 3.32 N/a 0.27 n/a
    Container & Packaging Median 237.87M 5.86 N/a 0.34 n/a
    Smurfit-Stone Container Corp. SSCCQ 0.19 49.05M n/a N/a 0.01 n/a

    Source: Thomson Financial

    Insider Trading Activity


    Inside Purchases – Last 6 Months

    Shares Transaction
    Purchases n/a 0
    Sales 458,537 24
    Net Shares Purchased (Sold) (458,537) 24
    Total Insider Shares Held 42.85M n/a
    % Net Shares Purchased (Sold) (1.1%) n/a
    Net Institutional Purchases — Prior Qtr to Latest Qtr
    Net Shares Purchased (Sold) (130,527,000)
    % Change in Institutional Shares Held 103.3%

    Source: Yahoo Finance

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