Bankruptcy for Recycled Paper Greetings

A Chapter 11 bankruptcy was filed on Friday by Recycled Paper Greetings Inc as part of its proposed sale to American Greetings Corp. Meanwhile its investors are blaming that the suitor is illegally attempting to stop the independent greeting card company as a competitor.

Earlier this week, American Greetings, the No.2 greeting card maker announced its plans to acquire the company which includes a prepackaged Chapter 11 reorganization.

RPG Investment Holdings and funds associated with Monitor Clipper Partners LLC, a private equity firm, said that they “strongly oppose the actions taken by American greetings” ahead of the bankruptcy filing.

According to Recycled Paper's website, it is a Monitor Clipper portfolio company.

"Through its unlawful actions, we believe American Greetings is attempting to eliminate Recycled Paper Greetings as a competitor, in an effort to gain more widespread traction in the lucrative market segment in which Recycled Paper Greetings excels," the investors said.

RPG Investment said it will take legal action against American Greetings in federal court in Chicago.

According to their claims, American Greetings violated contractual obligations when it bought a majority interest in Recycled Paper’s senior debt.

American Greetings spokeswoman Patrice Sadd didn’t comment on the investor charges.

Inclusion of the acquisition plan

The acquisition, which is still for regulatory review and is scheduled to close by late May, will include a combination of $54.7 million of new 7.375 percent notes due in 2016 and up to $18.4 million of cash in addition to the $44.2 million investment made by American Greetings in July.

Restructuring Recycled Paper’s debt is also included in its terms aside from providing up to $10 million in debtor in possession financing to Recycled Paper.

In its bankruptcy filing, the Chicago-based company known for its humorous cards said it had between $100 million and $500 million in both assets and liabilities. Its creditors included retailers Target Corp and Walgreen Co.

Shares of Cleveland-based American Greetings, down more than 60 percent from their year-high of $21.79, fell 31 cents, or 4.1 percent, to close at $7.26 on the New York Stock Exchange.