OSG Group filed its proposals at the District of Delaware Bankruptcy Court over the weekend. The transactional, omni-channel marketing and outsourcing business employs more than 4,700 people worldwide, and has 6,000 customers across 19 countries, mainly in North America and EMEA.
OSG cited a number of reasons for the Chapter 11 decision, including a malware attack in May 2021, which left it unable to service several clients “for a few weeks”, resulting in missed deadlines and service level targets.
“Many of the debtors’ [OSG’s] customers, particularly those in Europe, the Middle East, and Asia, shifted their orders to other service providers as a result of the malware attacks,” OSG stated in the court document, with the business subsequently losing approximately $30m of sales in Q4.
The firm also said its shift to a digital strategy had involved substantial capex, which had increased costs and impacted liquidity.
Liquidity was also hit as a result of a number of unfavourable factors that are affecting supply chains and businesses worldwide.
“Specifically, the debtors’ businesses have acutely felt input cost inflation in the form of rising costs for necessary materials such as paper and envelopes,” it stated.
OSG said these costs could not always be passed on to customers due to its fixed price contracts.
“Furthermore, much of the company’s equipment is at or nearing the end of its useful life, and investment is needed to sustain and grow the company’s operations and revenue.”
The restructuring plan put forward by OSG would see all general unsecured creditor claims either paid in full or reinstated in the post-Chapter 11 business.
It currently has $824m of debt which would be reduced to $690m, including a debt for equity swap, if the plan is approved.
“The plan provides for a comprehensive restructuring of the debtors’ prepetition obligations, preserves the going-concern value of the debtors’ businesses, maximises all creditor recoveries, and protects the jobs of the debtors’ invaluable employees, including management,” OSG stated.
However, the firm’s proposals have hit an immediate snag as the official US Trustee has objected to the motion, because the court requires all creditors to be given not less than 28 days’ notice, whereas the OSG plan gives 19 days.
OSG has argued that it has complied because it had been talking to affected parties since 26 July, and it also has an impending default on a non-waivable interest payment.
“The debtors’ self-created emergency cannot be used to circumvent the rules to the detriment of creditors and/or interest holders,” the US Trustee said.
OSG will also need to gain approval from UK pension plan trustees and regulators because of Communisis' defined benefit pension plan obligations.
The group acquired Communisis in 2018 in a £154m deal.
Communisis had sales of £271.2m and had 1,636 employees in its most recent results, for calendar year 2020, which also included a £24.5m impairment charge.
Its defined benefit pension scheme had assets of more than £185m at the time, and a deficit of nearly £36m.
In a statement, Communisis told Printweek that it was not impacted by the filing: “This relates to a pre-packaged recapitalisation process through Chapter 11 for OSG and certain of its US subsidiaries and does not include any Communisis entity.
“Communisis is not impacted by this filing and nothing changes in respect of the day-to-day business of Communisis either for our clients, vendors, employees or any other stakeholders. Further, OSG expects the process to be swift and intends to emerge from the Chapter 11 process prior to the end of August. In its public filings, OSG has stated that this is the best option to deleverage its capital structure, extend the maturities under its funded debt facilities, recapitalise the businesses, and positions it for future success and growth.”
