After agreeing to several loan amendments and three forbearances, lender GE Capital Corp., represented by Paul, Hastings, Janofsky & Walker partner Jesse H. Austin III, appears poised to collect on the approximately $108 million—and possibly more—it is owed by the nation's largest privately held envelope company.

That's because NEC Holdings Corp., a Uniondale, N.Y.-based envelope manufacturer with operations in Austell and other parts of the country, on June 10 filed for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court for the District of Delaware.

Bankruptcy documents indicate the filing comes after a truncated move to sell the company, which pushed it into default with its lender in mid-May.

But it doesn't look as if NEC, the holding company for envelope manufacturer National Envelope Corp., will stay in Chapter 11 long. Austin said the primary goal behind the bankruptcy filing was to position the company to sell itself via a 363 sale within the bankruptcy. A 363 sale allows purchasers to acquire NEC's assets, but—unlike in a sale outside bankruptcy—gives lenders the potential to leave behind certain liabilities such as environmental liabilities. The filing also opened the way for NEC to receive a quick shot of debtor-in-possession funding—enough to keep the company operating until it can be purchased by private equity investor The Gores Group, with which it has a June 4 letter of intent, before the end of August.

NEC has received a judicial nod for that funding; the court approved a $138.9 million senior secured, super priority DIP facility from pre-petition lender GE Capital on Friday. The agreement, Austin said, essentially serves as a refinancing—known as a roll-up—of NEC's existing, defaulted debt, which has three components: a revolving credit loan with $70 million outstanding, through which NEC can borrow an additional $10 million; a $38 million Term A loan and a $35 million Term B loan, also known as a "last out" loan, meaning all of the proceeds to the GE Capital lenders must be paid in full before any Term B loan holders get their recovery.

A DIP agreement attached as an exhibit in one of the court files lays out a series of milestones NEC must meet, including: execute a definitive asset purchase agreement for a 363 sale before July 2; hold an auction by Aug. 23; and close on the sale, once it is authorized by the court, by Aug. 31.

Austin worked on the case with Paul, Hastings associate Cassie Coppage. NEC's bankruptcy counsel are from Young Conaway Stargatt & Taylor in Wilmington, Del., and Latham & Watkins in Chicago. Fulbright & Jaworski serves as special counsel.

The company, which was founded in 1952 by Holocaust death camp survivor and Polish immigrant William Ungar, filed for Chapter 11 protection for 28 entities around the country, including its Georgia affiliate, National Envelope-South. It still is a family-owned business, and according to court documents, began growing via strategic acquisitions in 1991.

The company employs more than 3,300 workers, produces an estimated 37 billion envelopes per year and holds a 21 percent share of the $3.7 billion North American envelope market.

But, as CFO James Shelby Marlow noted in his declaration, over the past three years the company has been hard hit by "the global recession and the displacement of traditional print communications and media by electronic formats."

Consolidated net sales have fallen from $866.8 million in 2007 to $676.2 million in 2009. The company has posted net losses every year since 2007, although it has stemmed that deficit somewhat thanks to layoffs, facility sales and other restructuring efforts.

In addition to secured creditor GE Capital, the company also owes about $89 million to unsecured trade creditors, according to court filings, including $43 million to International Paper Co. in Memphis, $2.7 million to Neenah Paper Inc. in Alpharetta and more than $500,000 to printing and imaging company Pitman Co. in Kennesaw.

Austin said the lenders were patient with NEC in part because the company has had a long relationship with GE Capital, which "tries to work with its borrowers as much as possible, and if you're the senior lender and have last-out dollars behind you, you have some level of comfort."

He also pointed out that NEC's story was compelling: Ungar, the company's founder, "came to the United States with effectively nothing and built this business. He is still alive, he's still chairman of the board, he's 91 or 92. The other board members are his four daughters. There's a good history there; it is not something you go out and immediately abandon because it runs into some problems. Unfortunately, we're not using envelopes like we used to."

The case is NEC Holdings Corp., No. 10-11890.

Sea Launch Co., a bankrupt Boeing subsidiary that propels into space rockets carrying private payloads, on Dec. 3 landed court approval for $12.5 million in debtor-in-possession financing.

The company, represented by debtors' counsel Dennis J. Connolly and Matthew W. Levin at Alston & Bird and attorneys from Young Conaway Stargatt & Taylor in Wilmington, Del., filed an emergency motion for DIP financing with the U.S. Bankruptcy Court for the District of Delaware, claiming that it needed $5 million immediately to continue operations. Sea Launch, which is based in Long Beach, Calif., and has launched the “Rock,” “Roll” and “Rhythm” satellites for XM Satellite Radio as well as satellites serving entities including DirecTV and NATO, sought authority to borrow $25 million, but presented the court with a negotiated commitment for $12.5 million.

It's not easy to get DIP financing these days, and Connolly credited investment bank Jefferies & Co. with conducting a global search for the money. The lender, whose principal investors are financial entities and players in the space and telecommunications industries, is Houston-based Space Launch Services. It was represented by attorneys from Baker Botts and Edwards Angell Palmer & Dodge. Boeing, which is a guarantor on some of the loans, is represented by Richards, Layton & Finger.

Bankruptcy Judge Brendan L. Shannon approved the $12.5 million loan, writing that Sea Launch may use the money to fund operating expenses, working capital, transaction fees associated with the loan and professional fees and expenses—including legal fees—subject to court approval and not exceeding $350,000 per month in the aggregate.

Shannon also noted in his order that the debtors were unable to obtain unsecured credit, or secured credit at better terms, elsewhere.

That's not surprising, given Sea Launch's financial state. The company reported in its bankruptcy petition and other documents liabilities in excess of $1 billion and assets that were less than $500 million.

According to an affidavit filed early in the bankruptcy by Sea Launch's chief financial officer, the company owes Boeing more than $760.8 million; Boeing's most recent 10-Q, filed with the Securities and Exchange Commission in October, indicates that Boeing has recourse to $971 million in receivables from Sea Launch and its partners. Sea Launch also racked up an additional $119 million in cost overruns during its development phase, among other debts.

Another factor pushing the company to reorganize, according to the court file, is a failed launch, which took place in January 2007 when an accident destroyed a rocket and a Dutch telecommunications satellite before they even left the launch pad. That unsuccessful launch delayed other scheduled launches, costing the company money and customers.

The customer on the failed launch, Hughes Network Systems, demanded a refund of its advance payments and interest. This spring, a panel of arbitrators concluded that Sea Launch owed Hughes $52.3 million. Connolly said Hughes filed to confirm the arbitral award in superior court in California, but that action is stayed during the pendency of the bankruptcy litigation.

With debts looming, Sea Launch filed for Chapter 11 reorganization in June, and asked the court for DIP funding in November.

The commitment letter and the term sheet for Sea Launch's DIP facility, which are exhibits in the court file, show that this is a super priority priming secured term loan, meaning that its repayment takes precedence over Sea Launch's other secured debts. The interest rate is based on a minimum 3 percent London Interbank Offered Rate, or LIBOR, plus 300 basis points, and Sea Launch will pay a closing fee of 2 percent. If at some point the company elects to get credit from another lender instead of completing its commitment with Space Launch Services, it will pay a break-up fee of $250,000.

Connolly said his client expects to receive the remaining $7.5 million in DIP financing within the next 30 to 60 days. He said the search is on for more funding.

“This is a unique debtor,” he said. “There really isn't another provider quite like it in the world.”

Mentioning the specialized skill sets necessary to operate the business, not just from a scientific standpoint but from the perspective of dealing with multinational treaty obligations related to Sea Launch's peaceful use of rockets that possess weapons-potential technology, he added, “I think there will be interest among equity players because there's an amalgam of assets that isn't easily replaceable and has a value that will be of interest. The challenge is figuring out how to translate that into a financing structure.”

Sea Launch was founded in 1995 by Boeing Commercial Space and Communications, Norwegian investors and corporations owned by the governments of Russia and Ukraine. The company was designed as a private, low-cost alternative for launching satellites, most of which, at that time, were launched out of government facilities with long waiting lists.

To date, the company has completed about 30 launches, including one for Georgia-based Intelsat on Nov. 30. The launches either take place from a land-based launch pad at a space center in Kazakhstan or from the Odyssey, a huge, sea-based, floating launch pad at the equator (satellites launched at the equator get the biggest boost from Earth's rotation and travel the shortest route into orbit).

But the economy has changed since the company's founding in the go-go mid-1990s.

“The debtors are actively pursuing launch opportunities with numerous customers,” Brett A. Carman, Sea Launch's vice president and chief financial officer, said in an affidavit filed with the court. “However, the Debtors' operating results have been negatively impacted by the worldwide economic recession, a glut of available launch slots operated by competitors, and the Debtors' precarious finances.”