Kleopatra Finco S.à r.l. - Case Summary

Business Description

Headquartered in Montabaur, Germany, Klöckner is a leading global manufacturer of specialized packaging solutions for a diverse range of industries, including food, pharmaceuticals, medical devices, and consumer products. With a history spanning over 60 years, the Company generates approximately €1.8 billion in annual sales.

Klöckner designs and produces a wide array of packaging products, from trays and films that preserve perishable goods to durable films used in credit cards and vinyl flooring. In recent years, the Company has focused on increasing the use of recycled and recyclable materials to enhance the sustainability of its products. Its seven primary product portfolios include:

• Food Packaging: The Company produces an extensive range of packaging for the food industry, including clear plastic trays, films, and containers for products such as fresh pasta, sliced meats, cheese, and produce. Its sustainable Modified Atmosphere Packaging (MAP) technology is designed to extend shelf life and reduce contamination risks.
• Pharma and Nutraceutical: This portfolio specializes in packaging for pharmaceutical and dietary supplement products, featuring its kpNext® blister packaging, which provides a tamper-resistant and protective design for items like pills and gummy vitamins.
• Medical Device: Klöckner produces tailor-made rigid films and plastic trays to protect fragile medical devices such as syringes, catheters, and forceps.
• Consumer Packaging: For over 50 years, the Company has supplied packaging films for various consumer products, utilizing its Pentaform technology to create protective packaging for items like toothbrushes and razors.
• Label: The Company manufactures shrink sleeve film used to wrap and label a wide variety of products, from batteries and beauty supplies to craft beer cans.
• Cards and Graphics: This business line creates durable films for credit and debit cards, as well as materials for point-of-purchase displays, store banners, and signage.
• Home Building and Construction: Klöckner produces decorative and specialty films for applications such as luxury vinyl floors, cabinetry, furniture, and protective coverings for pipe insulation.

---

Corporate History

Klöckner was founded in Montabaur, Germany, in 1965. The Company began exporting to the United States and Canada in 1970 and established its U.S. presence in 1977 with the opening of a manufacturing plant in Gordonsville, Virginia, which it has operated continuously ever since.

Strategic Acquisitions and Global Expansion

• Throughout the 1990s, the Company expanded its product portfolio and global operations through strategic acquisitions, including Roxan GmbH, Aerni-Leuch, AG, and Stanley Smith Ltd. In 1996, it formed a joint venture, Kalle Pentaplast GmbH, with a subsidiary of Hoechst AG.
• In 2012, a group of investors led by Strategic Value Partners, LLC (“SVP”) acquired Klöckner, injecting approximately €190 million of equity capital. This investment supported the establishment of the Company’s first “icenter” for collaborative product design in Charlottesville, Virginia.
• In 2016, Klöckner acquired Farmamak, a leading rigid film provider in Turkey, significantly expanding its presence in the region.
• A key strategic milestone occurred in 2017 with the acquisition of LINPAC Senior Holdings Ltd, an international market leader in food packaging. This acquisition enhanced the Company’s R&D capabilities and expanded its portfolio with new technologies and formulations.

Operational Enhancements

• Between 2015 and 2016, the Company undertook several strategic initiatives to bolster its manufacturing capabilities, including:
  • Relocating its Canadian facility to a larger, more efficient site in Montreal.
  • Expanding capacity at its Gendorf, Germany plant to meet growing demand in the shrink label market.
  • Installing a new slitting line in Cotia, Brazil, which increased its slitting capacity by approximately 4,000 tons per year.

---

Operations Overview

Klöckner operates a global network of 27 manufacturing plants across 16 countries, employing over 5,000 people. The business is organized into two primary divisions: Food Packaging (“FP”) and Pharma, Health & Protection and Durables (“PHD”), which together encompass seven distinct product portfolios.

R&D and Innovation

• The Company invests millions annually in research and development through a two-pronged approach:
  • Traditional R&D: Klöckner maintains nine innovation hubs across the U.S. and Europe focused on material science and sustainable product design, such as developing food trays and films that utilize more sustainable materials.
  • icenters: Located in Charlottesville, Virginia, and Girona, Spain, these collaborative technology centers allow Klöckner to work directly with customers to test, design, and prototype packaging solutions, reducing product-to-market release times.

Corporate Structure and Factoring Program

• The Klöckner corporate family includes 74 entities, 25 of which are Debtors in these Chapter 11 cases.
• To manage liquidity and mitigate non-payment risk, the Company utilizes a critical accounts receivable factoring program with Coface Finanz GmbH and Factofrance. This program has been in place since 2009 and is essential to the Debtors' working capital.
  • Under the agreements, certain Klöckner entities offer to sell their receivables to the factors, who must purchase those that meet specified criteria. The factors' combined overall limit for outstanding purchased receivables is approximately €443 million.
  • The program provides immediate liquidity, as the Company would otherwise face payment terms of 60 days or longer with many customers. The Debtors estimate that without the factoring program, they would experience an immediate liquidity loss of approximately $5.6 million per day, creating a near-term shortfall of around $280 million.

---

Prepetition Obligations

As of the Petition Date, the Debtors have approximately €2.32 billion in total funded debt obligations. The Company’s prepetition capital structure is summarized below:

Senior Facilities Agreement (SFA) Loans

• The Company is party to a Senior Facilities Agreement, dated February 9, 2021, with approximately €1.44 billion outstanding across four facilities:
  • Revolving Credit Facility: approximately €118 million outstanding; base size €120 million; matures January 2026.
  • EUR Term Loan: approximately €630 million outstanding; matures February 2026.
  • USD Term Loan: approximately €638 million outstanding; matures February 2026.
  • Additional Term Loan: approximately €58 million outstanding, incurred in February 2025 under the Company’s Additional Financing Needs structure; bears PIK interest at EURIBOR + 17.25% and matures February 2026.
  Interest Note: The SFA facilities accrue interest at EURIBOR/SOFR plus a margin ranging from 4.25% to 4.75%, subject to an ESG-linked ratchet.

1L Senior Secured Notes

• Approximately €412 million is outstanding under the Company’s 4.25% Senior Secured Notes due March 2026, issued in February 2021.

2L Second Lien Secured Notes

• Approximately €317 million is outstanding under the Second Lien Secured Notes due September 2029. These notes were created on April 22, 2025, through an amend-and-extend transaction that replaced and novated the Company’s 6.25% Senior Notes due 2026, providing a maturity extension and second-priority lien on collateral. The notes feature a coupon of 6.50% cash plus 2.50% PIK.

Bridge Loan Facility

• In August 2025, the Company entered into a Bridge Loan Credit Agreement and received €112 million in new funding to support liquidity needs. As of the Petition Date, approximately €134 million was outstanding under the facility, which matures in October 2025.

Local (Super Senior) Debt

• Approximately €13 million is outstanding across various local facility borrowings, each structurally senior to the group-level secured debt. Maturities vary by jurisdiction.

---

Events Leading to Bankruptcy

Despite a history of strong operations, Klöckner’s financial distress stems from a highly leveraged balance sheet combined with a multi-year contraction in the packaging industry. The Company filed these prepackaged Chapter 11 cases to implement a comprehensive restructuring that will eliminate approximately €1.3 billion of funded debt and provide €215 million in new capital.

The 2021 Refinancing and Subsequent Headwinds

• In February 2021, during a period of peak performance and favorable market conditions, the Company executed a comprehensive refinancing. This transaction extended maturities but increased total funded debt from approximately €1.4 billion to €1.9 billion, based on the expectation that the Company would grow into its larger capital structure, which required an estimated €300 million in annual EBITDA to service.
• Beginning in mid-2022, the plastics industry experienced a significant contraction as customer demand returned to pre-pandemic levels and then declined further. Many customers, particularly in the pharmaceutical sector, had built up excess inventory during the pandemic and subsequently slowed orders.
• The Company’s performance fell short of projections, with EBITDA declining to €262 million in 2022 and forecasted to be approximately €190 million in 2025, insufficient to cover its debt service obligations.

Mounting Liquidity Pressures

• The Company’s liquidity was further strained by raw material cost inflation, which compressed margins. As its financial condition weakened, its credit ratings were downgraded, making refinancing difficult and prompting suppliers to demand stricter payment terms, including cash in advance.
• In May 2025, Deutsche Bank terminated the Company’s automated cash pooling system, forcing a transition to a costlier and less efficient manual system that restricted intra-week access to cash.
• Negative news surrounding the Company led customers to diversify their supply sources, while competitors began to more directly target Klöckner’s customer base, leading to production line stoppages.

Out-of-Court Restructuring Efforts

• In April 2025, the Company executed an amend-and-extend transaction for its Senior Notes, converting them into Second Lien Secured Notes and pushing the maturity from 2026 to 2029.
• Negotiations for a broader amend-and-extend of its first lien debt during the second and third quarters of 2025 failed after the Company revised its 2025 EBITDA forecast downward, making a new equity investment unviable.
• Facing an inability to make interest payments due in late August 2025, the Company secured a €112 million bridge loan and entered into a forbearance agreement with certain creditors to avoid a freefall bankruptcy and provide runway to negotiate a comprehensive restructuring.

Prepackaged Chapter 11 Filing and Restructuring Support Agreement

• The bridge loan included a milestone requiring the execution of a Restructuring Support Agreement (RSA), which was finalized on Nov. 4, 2025. The RSA is supported by over two-thirds of creditors across each major funded debt tranche, including an ad hoc group of lenders, SVP, and the CastleKnight Funds.
• The Debtors launched solicitation for their prepackaged plan prior to the petition date and intend to move through Chapter 11 efficiently, seeking confirmation within 45 days.
• The restructuring will be funded by a €984 million DIP facility, which includes €215 million in new money, €134 million to refinance the bridge loan, and a €635 million roll-up of prepetition first lien claims. A market test for alternative financing yielded no other viable options.
• Key terms of the plan include:
  • First lien claims will receive 100% of the new equity in the reorganized company.
  • Second lien claims will receive their pro rata share of €17.5 million in exit financing loans or notes.
  • General unsecured claims will be left unimpaired.