Clearlake Capital Group portfolio company Pretium Packaging filed a pre-packaged Chapter 11 bankruptcy last week, capping a two-year restructuring effort that featured a liability management attempt and an unusual lender blacklist (which we previously covered here).
The St. Louis-based rigid packaging manufacturer has a restructuring support agreement signed by holders of more than 91 percent of its first-lien tranche A-1 loans and 81 percent of its second-lien debt.
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The deal will eliminate around $900 million in obligations from a capital structure that had become unwieldy following major debt-funded add-ons.
Clearlake acquired Pretium in 2020 from Genstar Capital. In 2021, the business completed the acquisition of Alpha Packaging, adding nine facilities across the United States, Canada, and Europe, followed by a smaller deal for Grupo Edid a few months later.
Docket 18, PRETIUM PACKAGING, L.L.C., et al., Case No. 26-10896
In isolation, the add-ons were part of a standard inorganic strategy that picked up where Genstar had left off, with the prior owner completing a series of deals through its hold.
But within a year, the thesis began to veer off track.
Pretium was caught off guard by a greater-than-expected reset in packaging demand as its COVID sales bump faded. Rising rates and inflation also took a toll.
By 2022 and 2023, customers had begun aggressively destocking, which collapsed Pretium volumes and the manufacturer’s plant utilization rates.
That led to fixed-cost absorption problems. In response, the company closed five plants and laid off hundreds of workers in 2022 (plus a Jacksonville facility last summer).
Even so, by October 2023, Pretium needed a reprieve.
The company executed a textbook liability management transaction: it raised $325 million in new first-lien tranche A loans from existing lenders and exchanged 99.8 percent of the legacy term loan into new tranche A-1 paper at a 6.4 percent discount to face value. The deal captured roughly $83 million in discount and provided more than $200 million in liquidity.
But the relief was short-lived. By January 2025, the A-1 term loan was already trading in the mid-60s—the second-worst-performing leveraged loan that week. By June, it had fallen into the low 50s, and by October, it was trading below 40 cents on the dollar.
While that was happening, Clearlake made headlines with an unusually large expansion to its disqualified lender list.
The move came after a prospective buyer had reportedly circled a block trade that would have given it a significant position in the capital structure. Expanding the DQ list was Clearlake’s strategy to prevent any further attempts.
Reaching nearly 100 names, it was the deepest such roster market participants could recall.
At the time, observers cautioned against the tactic’s potential risks: “When DQ lists get too broad, they risk severely restricting secondary market liquidity and leaving par holders stranded in the debt, limiting options in a restructuring,” said Grant Nachman, founder and chief investment officer at Shorecliff Asset Management, in an interview with Bloomberg.
“The potential result is ending up with creditors in bankruptcy who cannot sell and do not want to own the company or inject new equity.”
Despite questions raised over the unorthodox approach, Clearlake ultimately hammered out a deal with creditors.
Under the current plan, holders of the roughly $1.3 billion in A-1 term loans will receive approximately $500 million in new first-lien second-out exit debt plus 72.5 percent of the reorganized company’s equity—before dilution from participation fees on the debtor-in-possession financing.
Second-lien holders receive $5.7 million in cash and 5.6 percent of the equity. General unsecured creditors ride through unimpaired.
The debtor-in-possession package includes a $100 million ABL facility rolling over from the prepetition revolver and up to $533.5 million in new-money term loans backstopped by existing A-1 holders. The term DIP carries interest at SOFR plus 525 basis points, with a 10 percent commitment fee paid in reorganized equity and an additional 11.5 percent backstop fee, also in equity.
The $337.6 million in tranche A term loans—the senior tranche that funded the 2023 transaction—will be repaid in full in cash.
Clearlake will invest $50 million in new equity and walk away with 21.9 percent of the reorganized company.
The sponsor and management are confident in Pretium’s go-forward viability. In his supporting declaration, CFO Federico Barreto claims that performance has stabilized under new leadership (CEO James Rooney joined in 2024), with execution of facility consolidations and cost cuts, as well as more than $100 million in annualized new business wins during the last fiscal year.
But even after shedding $900 million in debt, Pretium will exit bankruptcy with roughly $500 million in first-lien second-out term loans, the converted DIP debt in the first-lien first-out position, and whatever ABL drawings exist at emergence.
The first-day hearing occurred on January 30, with confirmation scheduled for February 23. The debtors expect to emerge within 30 days of confirmation.
Kirkland & Ellis and Cole Schotz serve as legal counsel to the debtors, with FTI Consulting as financial advisor and Evercore as investment banker. Milbank and Chiesa Shahinian & Giantomasi represent the ad hoc group of term loan lenders, with Moelis as their banker. Glenn Agre Bergman & Fuentes represents a supporting minority lender group.