Contract analysis

I. INTRODUCTION AND QUALIFICATIONS A. Identity and Role of Declarant

1. My name is Priya Narayanan. I am a Lead Managing Director at Aldersgate Advisory Group LLC ("Aldersgate"), a nationally recognized financial advisory and investment banking firm with principal offices at 280 Park Avenue, 12th Floor, New York, New York 10017. I submit this declaration (this "Declaration") in support of confirmation of the Prepackaged Plan of Reorganization (the "Plan") of Crestline Packaging Soluti

2. Aldersgate was retained as financial advisor and investment banker to the Debtors pursuant to an engagement letter dated May 2, 2022 (the "Engagement Letter"), as approved by this Court pursuant to an order entered on July 6, 2022 (Dkt. 34), authorizing the Debtors' retention of Aldersgate under Section 327(a) of Title 11 of the United States Code, 11 U.S.C. §§ 101–1532 (the "Bankruptcy Code"). Under the terms of

3. In my capacity as Lead Managing Director at Aldersgate and the senior professional responsible for the Aldersgate engagement team serving the Debtors, I have been actively involved in all aspects of the Debtors' restructuring process since Aldersgate's initial retention, including the negotiation of the Restructuring Support Agreement (the "RSA") dated July 8, 2022, the preparation of the Disclosure Statement, and

4. I have more than eighteen years of professional experience in restructuring, financial advisory, and investment banking. I hold a Master of Business Administration degree from the Wharton School at the University of Pennsylvania, where I concentrated in Finance, and a Bachelor of Arts degree in Economics from Columbia University. I am a Chartered Financial Analyst (CFA) charterholder and a member of the CFA Instit

5. During my career, I have served as financial advisor or investment banker to debtors, official and ad hoc creditor committees, secured lenders, and other parties in interest in more than forty Chapter 11 proceedings across a broad range of industries, including manufacturing, industrial products, specialty chemicals, consumer products, and energy services. My advisory experience includes the preparation and review

6. I have been qualified as an expert witness in bankruptcy courts in the Southern District of New York, the District of Delaware, the Eastern District of Virginia, the Southern District of Texas, and other jurisdictions. I am competent to testify on the matters set forth herein, and I offer the opinions in this Declaration based on my professional training, education, and experience. C. Scope of Declaration

7. In connection with the Plan and the Disclosure Statement, I have prepared or supervised the preparation of the following analyses, each of which is set forth in or annexed to the Disclosure Statement (Dkt. 48), which was approved by this Court on August 10, 2022 (Dkt. 62): (a) The Valuation Analysis of reorganized Crestline (Exhibit E to the Disclosure Statement); (b) The Liquidation Analysis reflecting a hypothet

8. This Declaration addresses: (a) the reorganized enterprise valuation of Crestline and the methodologies and assumptions underlying that valuation; (b) the liquidation analysis and the satisfaction of the "best interests of creditors" test under Section 1129(a)(7) of the Bankruptcy Code; (c) the feasibility of the Plan under Section 1129(a)(11) of the Bankruptcy Code; and (d) the conclusion that the Plan provides m

9. In forming the opinions expressed herein, I have reviewed and relied upon, among other things, the following: (a) The Debtors' financial books and records, including audited financial statements for fiscal years 2019, 2020, and 2021, and unaudited interim financial statements for the first quarter of fiscal year 2022; (b) Financial projections prepared by the Debtors' management (the "Management Projections"), cov

10. Throughout the course of this engagement, Aldersgate has worked closely with the Debtors' restructuring counsel, Calderwood & Harkness LLP (Colette Whitman, responsible partner), and the Debtors' tax advisors, Dralvecen Reyes Linley CPAs LLP & Associates LLP (Catherine Holtz, lead partner), in the preparation and analysis of the Plan, the Disclosure Statement, and the exhibits thereto.

II. OVERVIEW OF THE DEBTORS' BUSINESS AND CAPITAL STRUCTURE A. Business Overview

11. Crestline Packaging Solutions LLC is a specialty manufacturer of industrial packaging and containment products, headquartered at 4710 Industrial Corridor Drive, Akron, Ohio 44308. Crestline's principal products include high-density polyethylene ("HDPE") drums, intermediate bulk containers ("IBCs"), steel pails, and specialty containment vessels. These products serve customers across the chemical, petrochemical, a

12. Crestline was originally founded in 2007 and developed a strong regional reputation for quality and reliability in the specialty packaging sector. On October 13, 2017, Thornfield Capital Partners LP ("Thornfield"), a private equity sponsor, acquired Crestline through a leveraged buyout (the "LBO") at an enterprise value of approximately $410.0 million. Thornfield contributed approximately $163.0 million in equity

13. CPS Holdings Inc. is a Delaware corporation formed to serve as the direct parent holding company of Crestline in connection with the LBO. Thornfield holds 100% of the equity interests in CPS Holdings, which in turn holds 100% of the membership interests in Crestline. CPS Holdings has no independent operations or material assets other than its ownership interest in Crestline.

14. As of the Petition Date, Crestline operated four manufacturing plants, employing approximately 1,420 individuals in the aggregate: (a) Plant 1 (Headquarters) — Akron, Ohio: Located at 4710 Industrial Corridor Drive, Akron, Ohio 44308. This facility serves as the Debtors' corporate headquarters and principal manufacturing facility for HDPE drum production. Plant 1 employs approximately 480 individuals and contains

15. The Debtors' senior management team as of the Petition Date included: Marcus J. Reinholdt, Chief Executive Officer; Dana Kowalski, Chief Financial Officer; and Preston Yee, General Counsel and Corporate Secretary. Mr. Reinholdt has served as CEO since 2015, and Ms. Kowalski has served as CFO since 2018. Both executives have been instrumental in the development of the Management Projections and the negotiation of

16. The Debtors experienced significant financial pressure in fiscal years 2020 and 2021 as a result of rapidly escalating resin costs, global supply chain disruptions, and the broader macroeconomic effects of the COVID-19 pandemic. These challenges adversely affected both revenue and profitability, as set forth below.

17. For fiscal year 2021, the Debtors reported consolidated revenue of approximately $312.6 million and consolidated EBITDA of approximately $38.4 million. Revenue declined approximately 18% from fiscal year 2020, driven principally by higher input costs that the Debtors were unable to fully pass through to customers under existing contractual arrangements, as well as volume declines attributable to customer destocki

18. Financial performance continued to deteriorate during the first quarter of fiscal year 2022. On a trailing twelve-month basis as of the end of Q1 2022 ("TTM Q1 2022"), the Debtors' consolidated EBITDA was approximately $29.1 million, reflecting continued margin compression and representing a decline of approximately 24.2% from fiscal year 2021 EBITDA of $38.4 million. This level of EBITDA was materially below the

19. As of the Petition Date, the Debtors' prepetition capital structure consisted of the following funded debt obligations: (a) First Lien Revolving Credit Facility. Pursuant to the First Lien Credit Agreement, the Debtors had access to a $40.0 million senior secured first lien revolving credit facility. As of the Petition Date, $32.6 million was outstanding under the revolver. The revolving credit facility bore inte

20. In the aggregate, the Debtors' total funded debt as of the Petition Date was approximately $247.3 million ($32.6 million revolving credit facility + $158.7 million first lien term loan + $56.0 million Second Lien Notes principal), exclusive of accrued interest. D. Events Leading to the Chapter 11 Filing

21. Section 7.11 of the First Lien Credit Agreement required the Debtors to maintain a maximum Total Net Debt to EBITDA leverage ratio not to exceed 5.75x, tested on a quarterly basis. As of the end of Q1 2022, the Debtors' actual leverage ratio was approximately 8.50x (calculated as $247.3 million of total funded debt divided by TTM Q1 2022 EBITDA of $29.1 million), resulting in a breach of the financial covenant by

22. On April 22, 2022, Ridgeline National Bank, N.A., in its capacity as administrative agent under the First Lien Credit Agreement, delivered a Notice of Default to the Debtors, citing the breach of Section 7.11 of the First Lien Credit Agreement. The Notice of Default triggered a cross-default under Section 6.01(e) of the Second Lien Notes Indenture, resulting in the simultaneous default under the Second Lien Notes

23. Following extensive negotiations among the Debtors, the administrative agent, and the consenting first lien lenders (collectively holding approximately 68% of the outstanding first lien term loan by principal amount), the parties executed a Forbearance Agreement dated May 18, 2022. The Forbearance Agreement provided for a 45-day forbearance period extending through July 2, 2022, during which the consenting lender

24. On July 8, 2022, after extensive arm's-length negotiations facilitated by Aldersgate, the Debtors, CPS Holdings, Thornfield, the Ad Hoc Group of First Lien Lenders (represented by Hargrove, Mitchell & Saunders LLP), and the Ad Hoc Group of Second Lien Noteholders (represented by Pemberton & Locke LLP) executed the RSA, which set forth the terms of the consensual restructuring to be implemented through a prepackag

25. The Debtors filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code on June 20, 2022 (the "Petition Date"). These Chapter 11 cases are being jointly administered under Case No. 22-51247.

III. SUMMARY OF PLAN TREATMENT BY CLASS A. Classification and Treatment Overview

26. The Plan provides for the classification and treatment of claims against and interests in the Debtors as summarized below. A more complete description of the classification and treatment of claims and interests is set forth in Article III of the Plan (Dkt. 47). The following summary is qualified in its entirety by reference to the Plan.

27. Class 1 — Other Priority Claims. Class 1 consists of all claims entitled to priority under Section 507(a) of the Bankruptcy Code (other than administrative expense claims and priority tax claims, which are treated separately under the Plan). Holders of allowed Class 1 claims shall receive payment in full in cash on the later of the Effective Date and the date such claim becomes an allowed claim, or such other tre

28. Class 2 — First Lien Secured Claims ($191.3 million). Class 2 consists of all claims arising under or in connection with the First Lien Credit Agreement, including claims under the revolving credit facility and the first lien term loan. In full and final satisfaction of all allowed Class 2 claims, each holder of an allowed Class 2 claim shall receive its pro rata share of: (a) 92% of the reorganized equity of Cre

29. Class 3 — Second Lien Secured Claims ($59.9 million, including $56.0 million principal and approximately $3.9 million accrued interest). Class 3 consists of all claims arising under or in connection with the Second Lien Notes Indenture, including accrued and unpaid interest (including default rate interest). In full and final satisfaction of all allowed Class 3 claims, each holder of an allowed Class 3 claim shal

30. Class 4 — General Unsecured Claims ($14.8 million). Class 4 consists of all allowed general unsecured claims against the Debtors that are not otherwise classified under the Plan. In full and final satisfaction of all allowed Class 4 claims, each holder shall receive its pro rata share of a cash distribution pool in the amount of $1.5 million (the "GUC Cash Pool"), payable on or as soon as reasonably practicable a

31. Class 5 — Intercompany Claims. Class 5 consists of all intercompany claims among the Debtors and their affiliates. Intercompany claims shall be reinstated, set off, contributed to capital, or otherwise settled or cancelled at the discretion of the Debtors (with the consent of the Ad Hoc Group of First Lien Lenders) on or before the Effective Date. Class 5 is unimpaired or impaired, as applicable, and each holder

32. Class 6 — Existing Equity Interests (Thornfield Capital Partners LP). Class 6 consists of all existing equity interests in CPS Holdings, including all issued and outstanding shares, membership interests, partnership interests, warrants, options, or rights to acquire any such interests. On the Effective Date, all existing equity interests in CPS Holdings and Crestline shall be cancelled, released, and extinguished

33. The Plan provides for the establishment of a management incentive plan (the "MIP") pursuant to which up to 10% of the Reorganized Equity shall be reserved for issuance to eligible participants following the Effective Date. The specific participants, award levels, and terms of the MIP shall be determined by the board of directors or board of managers (as applicable) of reorganized Crestline, in consultation with t

34. On the Effective Date, reorganized Crestline shall enter into a new first lien term loan credit facility (the "New First Lien Take-Back Term Loan") on the following terms: (a) Aggregate Principal Amount: $12,500,000. (b) Interest Rate: SOFR plus 550 basis points per annum, with a SOFR floor of 1.00%. (c) Maturity Date: Five years from the Effective Date, anticipated to be August 31, 2028. (d) Amortization: 1.00%

IV. VALUATION ANALYSIS OF REORGANIZED CRESTLINE A. Methodologies Employed

35. In order to estimate the reorganized enterprise value of Crestline on a going-concern basis as of the anticipated Effective Date, Aldersgate employed two widely accepted valuation methodologies: (a) discounted Cash Flow ("DCF") Analysis. Aldersgate performed a DCF analysis based on the Management Projections for the five-year period from fiscal year 2023 through fiscal year 2027. The DCF analysis projects unlever

36. Both the DCF methodology and the comparable company methodology are standard, well-established, and widely accepted approaches for valuing going-concern enterprises in the context of Chapter 11 plan confirmation proceedings. Courts in this and other jurisdictions have routinely considered and relied upon these methodologies in connection with plan confirmation and related contested valuation matters. B. Key Assum

37. The DCF analysis is based on the Management Projections, which cover the five-year period from fiscal year 2023 through fiscal year 2027. Aldersgate reviewed and assessed the reasonableness of the Management Projections, including the underlying assumptions with respect to revenue growth, operating expenses, capital expenditures, working capital requirements, and applicable tax rates. The key assumptions and inpu

38. Revenue Projections. Revenue projections are based on management's business plan, which reflects the expected stabilization of resin costs from the peak levels experienced during fiscal year 2021 and the first half of fiscal year 2022, the normalization of global supply chain conditions, and modest organic growth consistent with the Debtors' market position and customer relationships. Management's revenue project

39. EBITDA Projections. Projected fiscal year 2023 EBITDA is $36.5 million, reflecting a meaningful recovery from TTM Q1 2022 EBITDA of $29.1 million and approaching the Debtors' fiscal year 2021 EBITDA of $38.4 million. This recovery is driven principally by the normalization of input costs, improved pricing, and anticipated operational efficiency initiatives. Aldersgate has evaluated the reasonableness of this proj

40. Capital Expenditure Assumptions. The Management Projections include annual capital expenditure estimates sufficient to maintain the Debtors' four manufacturing facilities in good operating condition and to undertake selective growth investments. Capital expenditure levels are consistent with the Debtors' historical spending patterns, adjusted for known requirements.

41. Working Capital Requirements. Working capital projections reflect the Debtors' historical working capital cycle, including days sales outstanding, days inventory on hand, and days payable outstanding, with appropriate adjustments for anticipated changes in revenue levels and business mix.

42. Tax Rate Assumptions. The applicable tax rates used in the DCF analysis were reviewed and validated by Aldersgate in consultation with Dralvecen Reyes Linley CPAs LLP & Associates LLP, the Debtors' tax advisors.

43. Weighted Average Cost of Capital. The WACC applied in the DCF analysis was estimated based on the capital asset pricing model ("CAPM") approach, incorporating an appropriate risk-free rate, equity risk premium, size premium, company-specific risk premium, and target capital structure for the reorganized entity. Aldersgate also considered the cost of debt financing consistent with the terms of the New First Lien T

44. Terminal Value. The terminal value of the enterprise at the end of the five-year projection period was estimated using both a perpetuity growth method (applying a long-term growth rate to the normalized free cash flow in the terminal year) and an exit multiple method (applying an appropriate TEV/EBITDA multiple to the terminal year EBITDA). The two approaches yielded convergent results, providing Aldersgate with

45. Sensitivity Analysis. Aldersgate performed a sensitivity analysis on the DCF valuation by varying the discount rate (WACC) and the terminal growth rate (in the case of the perpetuity growth method) and exit multiple (in the case of the exit multiple method). This sensitivity analysis informed the valuation range set forth below. C. Key Assumptions and Inputs — Comparable Company Analysis

46. The comparable company analysis involved the identification of publicly traded companies operating in the specialty packaging, industrial containers, and chemical packaging sectors that share relevant characteristics with the Debtors' business. The selected comparable companies were evaluated based on factors including product mix, end-market exposure, geographic footprint, revenue scale, and profitability metric

47. Aldersgate observed TEV/EBITDA trading multiples for the selected comparable companies and applied a range of multiples deemed appropriate for the Debtors to Crestline's projected fiscal year 2023 EBITDA of $36.5 million. In applying the observed multiples, Aldersgate made appropriate adjustments to account for differences between the comparable companies and Crestline with respect to size, market position, growt

48. Based on the DCF analysis and the comparable company analysis described above, Aldersgate estimates the reorganized enterprise value of Crestline as follows: (a) Reorganized Enterprise Value (midpoint): $195.0 million. (b) Reorganized Enterprise Value (range): $180.0 million to $210.0 million. (c) Implied TEV/EBITDA Multiple (on projected FY2023 EBITDA of $36.5 million): Approximately 5.3x at midpoint (range of a

49. The reorganized equity value is derived by subtracting the funded debt of the reorganized entity from the enterprise value:

50. The implied value allocations to the impaired secured classes under the Plan, based on the midpoint reorganized equity value of $182.5 million, are as follows: (a) Class 2 — First Lien Secured Claims (92% of Reorganized Equity): 92% × $182.5 million = $167.9 million in equity value, plus $12.5 million in New First Lien Take-Back Term Loan debt, for a total recovery of $180.4 million on $191.3 million of allowed c

51. The foregoing equity allocations are subject to dilution by the MIP (10% equity pool), which will dilute all classes of Reorganized Equity on a pro rata basis upon issuance of MIP awards. E. Valuation Limitations and Caveats

52. Aldersgate's valuation is based on information available as of the date of the analysis (July 2022) and the assumptions described herein and in the Valuation Analysis annexed to the Disclosure Statement (Exhibit E). The valuation involves inherent uncertainty, and the actual performance of the reorganized Debtors may differ materially from the projections underlying the analysis. The valuation set forth herein do

V. LIQUIDATION ANALYSIS (CHAPTER 7 SCENARIO) A. Purpose and Legal Standard

53. Section 1129(a)(7) of the Bankruptcy Code — commonly referred to as the "best interests of creditors" test — requires that, with respect to each impaired class of claims or interests that has not accepted the Plan, each holder of a claim or interest in such class receive or retain under the Plan property of a value, as of the effective date of the Plan, that is not less than the amount that such holder would rece

54. Although all impaired classes have voted to accept the Plan (as discussed further below), Aldersgate has prepared a comprehensive liquidation analysis to demonstrate compliance with Section 1129(a)(7) with respect to each impaired class. The liquidation analysis is included as Exhibit F to the Disclosure Statement. B. Methodology.

55. In preparing the liquidation analysis, Aldersgate estimated the net proceeds that would be available for distribution to creditors in a hypothetical scenario in which the Debtors' Chapter 11 cases were converted to cases under Chapter 7 of the Bankruptcy Code and a Chapter 7 trustee was appointed to liquidate the Debtors' assets. The analysis reflects an orderly liquidation scenario (as opposed to a forced or fir