MHR Capital Partners, which filed papers in Delaware Chancery Court last Tuesday, Paragon Corporate Holdings to appoint an MHR representative onto its board.

Despite industry speculation regarding the firm's financial position, AB Dick UK managing director Quen Baum said: "I can confirm that AB Dick Company (USA) has not filed for bankruptcy or Chapter 11 protection.

"Apparently the legal action that has been filed is by one of our major creditors, and according to Dow Jones this has been done in an effort to get their representative on the board of AB Dick Company."

He said that the news did not directly affect the UK branch of the business. "It is important to note that the company's wholly owned subsidiaries in the United Kingdom and Canada are independent operations.

"While market conditions in the industry have been difficult on a global basis, the situation in the US does not directly affect AB Dick UK or Canada, their suppliers or their employees."

MHR Capital holds around $18.4m of the $25m debt issued by Paragon Corporate Holdings during financial restructuring in 2001.

Dow Jones reported last week that the court papers said AB Dick (USA) was not able to pay suppliers on time and was struggling to meet its payroll.

Story by Josh Brooks