When Vertis Communications filed for Chapter 11 bankruptcy protection before taking over American Color Graphics (ACG), creditors shuddered. Papers filed Tuesday in the U.S. Bankruptcy Court, District of Delaware, give a hint as to how costly those shudders are going to be.
Vertis’s top 30 creditors include at least two direct marketing firms: Agency Catalyst Direct, which is owed $354,786.21, and e-mail service provider Strongmail Systems Inc., which is due $77,075. None of ACG’s top 30 creditors appear to be primarily in the direct marketing industry. A full list of ACG’s creditors was not available at deadline.
But the thousands of Vertis’s smaller creditors include a who’s who of direct marketing firms, including 21st Century Marketing; Accudata America; American List Counsel; Banta Direct Marketing; Boardroom Inc.; Carlson Marketing; Catalina Marketing; Direct Media; Draft Direct; Donnelley Marketing; Experian; Grey Direct; Harte Hanks Direct Marketing; KnowledgeBase Marketing; McCann Erickson Relationship Marketing; Merkle; Ogilvy & Mather Direct; SpeciaLists; Statlistsics; Targetbase Marketing; Valassis Communications; all of the major trade publishing firms (including Penton Media, publisher of Direct Newsline) and various direct marketing organizations and associations around the country, as well as many, many others.
Vertis, which operates both direct mail and advertising insert businesses, claimed assets of $500 million and liabilities and liabilities of $1.4 billion as of March 31. Commercial printer ACG, which also filed for Chapter 11 bankruptcy protection, claimed $214.9 million in assets and $499.3 million in liabilities as of Feb. 29.
According to Vertis’ bankruptcy filings, both Vertis and ACG ran net losses due to large interest payments on their long-term debt. Additionally, “Vertis and ACG believe that the advertising insert business generally suffers from excess capacity, causing industry-wide price pressure and competition for volume. Moreover, the introduction of new technologies has given Vertis’ and ACG’s customers new and alternative ways of delivering advertising to consumers, making them less reliant on insert advertising”, according to the court papers.
The two companies agreed to comingle their operations in an effort to consolidate and streamline expenses and maximize efficiencies. Under the combination agreement, Mike DuBose, chairman and CEO of Vertis, will become chairman and CEO of the combined firms. Steve Dyott, chairman and CEO of ACG, will remain to facilitate the integration of the two companies. The combination is expected to be completed by late summer, after which ACG will be a wholly owned subsidiary of Vertis.
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