Contract analysis

ARTICLE I — INTRODUCTION AND EXECUTIVE SUMMARY

I.A. Purpose of This Disclosure Statement Crestline Packaging Solutions LLC ("Crestline" or "CPS") and CPS Holdings Inc. ("CPS Holdings" and, together with Crestline, the "Debtors"), as debtors and debtors-in-possession in the above-captioned Chapter 11 cases, hereby submit this Disclosure Statement (this "Disclosure Statement") pursuant to Section 1125 of Title 11 of the United States Code, 11 U.S.C. §§ 101–1532 (as

I.B. Overview of the Debtors Crestline Packaging Solutions LLC is an Ohio limited liability company headquartered at 4710 Industrial Corridor Drive, Akron, Ohio 44308 (EIN: 31-1782094). Crestline is a manufacturer of specialty chemical packaging and industrial containment products, including high-density polyethylene ("HDPE") drums, intermediate bulk containers ("IBCs"), steel pails, and specialty containment vessels

I.C. Summary of the Prepackaged Plan The Plan is a prepackaged plan of reorganization that was negotiated among the Debtors, Thornfield Capital Partners LP, the Ad Hoc Group of First Lien Lenders (as defined below), and the Ad Hoc Group of Second Lien Noteholders (as defined below). The terms of the Plan were memorialized in a Restructuring Support Agreement (the "RSA") dated July 8, 2022, a copy of which is attached

I.D. Recommendation of the Debtors The Debtors believe that the Plan represents the best available outcome for all creditors and other stakeholders. As discussed in detail in Article VII below, the Plan provides materially higher recoveries to all impaired classes than would be available in a hypothetical Chapter 7 liquidation. Specifically, first lien lenders would recover approximately 54.6% in a Chapter 7 liquidat

ARTICLE II — BACKGROUND OF THE DEBTORS

II.A. Corporate History and Formation Crestline Packaging Solutions LLC was formed in 2007 as an Ohio limited liability company. From its inception, Crestline focused on the manufacture and sale of specialty chemical packaging and industrial containment products, capitalizing on growing demand in the chemical, petrochemical, and agricultural sectors for high-quality, regulatory-compliant packaging solutions. Over the

II.B. Organizational Structure The Debtors' organizational structure is straightforward. Thornfield Capital Partners LP, a Delaware limited partnership with its principal offices at 590 Lexington Avenue, Suite 3200, New York, New York 10022 (managing partner: Julian Ashford), owns 100% of the equity of CPS Holdings Inc. CPS Holdings Inc. in turn owns 100% of the membership interests of Crestline Packaging Solutions L

II.C. Business Operations Crestline is a manufacturer of specialty chemical packaging and industrial containment products. The company's product portfolio includes HDPE drums, intermediate bulk containers (IBCs), steel pails, and specialty containment vessels. These products are used extensively by customers in the chemical, petrochemical, and agricultural sectors for the storage, transport, and handling of hazardous

II.C.1. Manufacturing Facilities As of the Petition Date, the Debtors conduct manufacturing operations at four facilities located in Ohio, Indiana, and Louisiana. Each facility is dedicated to specific product lines and manufacturing processes, as summarized in the following table: The Debtors' total workforce as of the Petition Date was approximately 1,420 employees across these four facilities. The Akron facility s

II.D. Management The Debtors' management team includes the following key officers: Marcus J. Reinholdt — Chief Executive Officer. Mr. Reinholdt has served as Chief Executive Officer of Crestline since 2018, having been recruited by Thornfield Capital Partners LP following the 2017 leveraged buyout. Prior to joining Crestline, Mr. Reinholdt held senior leadership positions at several industrial manufacturing companies

II.E. Key Contracts and Relationships The Debtors are party to a number of contracts and commercial relationships that are material to their ongoing business operations. The following is a summary of the most significant agreements: Resin Supply Agreement with Northstar Polymers Inc. Crestline is party to a five-year Resin Supply Agreement dated March 1, 2019 with Northstar Polymers Inc., a specialty polymer manufact

II.F. Financial Performance The Debtors' financial performance has been significantly impacted by macroeconomic headwinds affecting the specialty packaging industry. The following table summarizes key financial metrics for the periods indicated: Revenue declined approximately 18% from fiscal year 2020 to fiscal year 2021, driven primarily by significant increases in resin costs and broader supply chain disruptions th

ARTICLE III — PREPETITION CAPITAL STRUCTURE

III.A. The 2017 Leveraged Buyout On October 13, 2017, Thornfield Capital Partners LP completed the acquisition of 100% of the equity of CPS Holdings Inc. (and, indirectly, 100% of the membership interests of Crestline Packaging Solutions LLC) in a leveraged buyout transaction at an aggregate enterprise value of approximately $410 million. Thornfield contributed approximately $163 million in equity to fund the acquisi

III.B. First Lien Credit Facility In connection with the 2017 leveraged buyout, the Debtors entered into a First Lien Credit Agreement dated October 13, 2017 (as amended from time to time, the "First Lien Credit Agreement"). Ridgeline National Bank, N.A., located at 200 Public Square, Cleveland, Ohio 44114, serves as both the administrative agent and the collateral agent under the First Lien Credit Agreement. The Fir

III.C. Second Lien Notes Concurrently with the closing of the 2017 leveraged buyout, the Debtors issued $60.0 million in aggregate principal amount of 9.75% Senior Secured Second Lien Notes due 2025 (the "Second Lien Notes") pursuant to an indenture dated October 13, 2017 (the "Second Lien Notes Indenture"). Continental Fiduciary Trust Company, located at 101 Barclay Street, New York, New York 10286, serves as the in

III.D. Capital Structure Summary (Petition Date — June 20, 2022) The following table summarizes the Debtors' funded debt capital structure as of the Petition Date: In addition to the funded debt described above, as of the Petition Date the Debtors had approximately $14.8 million in general unsecured claims, consisting primarily of trade payables, accrued liabilities, and other unsecured obligations incurred in the or

III.E. Equity As described above, Thornfield Capital Partners LP holds 100% of the equity of CPS Holdings Inc., which in turn holds 100% of the membership interests of Crestline Packaging Solutions LLC. Thornfield's initial equity contribution at the time of the 2017 leveraged buyout was approximately $163 million. No additional equity contributions have been made by Thornfield since the closing of the acquisition. G

ARTICLE IV — EVENTS LEADING TO THE CHAPTER 11 FILING

IV.A. Financial Deterioration and Covenant Breach Beginning in 2020 and accelerating throughout 2021 and into the first quarter of 2022, the Debtors experienced significant financial deterioration driven by two principal factors: (i) substantial increases in the cost of HDPE resin, the primary raw material used in the production of the Debtors' largest product lines; and (ii) broader supply chain disruptions affectin

IV.B. Notice of Default On April 22, 2022, Ridgeline National Bank, N.A., in its capacity as administrative agent and collateral agent under the First Lien Credit Agreement, delivered a formal Notice of Default to the Debtors citing a breach of the maximum leverage ratio covenant set forth in Section 7.11 of the First Lien Credit Agreement. The delivery of the Notice of Default constituted an "Event of Default" under

IV.C. Forbearance Agreement Following the delivery of the Notice of Default, the Debtors engaged in discussions with Ridgeline National Bank and the first lien lenders regarding a potential standstill or forbearance to provide the Debtors with time to explore restructuring alternatives. On May 18, 2022, the Debtors, Ridgeline National Bank, and consenting first lien lenders holding approximately 68% of the outstandin

IV.D. Prepetition Restructuring Negotiations During the forbearance period, the Debtors and their key creditor constituencies engaged in intensive, multi-party negotiations to develop a consensual restructuring framework. The Debtors retained the following professional advisors to assist with these efforts: Calderwood & Harkness LLP was retained as the Debtors' bankruptcy counsel pursuant to an engagement letter date

IV.E. The Restructuring Support Agreement On July 8, 2022, the Debtors, Thornfield Capital Partners LP, the Ad Hoc Group of First Lien Lenders, and the Ad Hoc Group of Second Lien Noteholders executed the Restructuring Support Agreement (the "RSA"), which memorializes the parties' agreement on the terms of the Plan and establishes a framework for the Chapter 11 cases. A copy of the RSA, including the attached term sh

IV.F. The Chapter 11 Filing On June 20, 2022 (the "Petition Date"), Crestline Packaging Solutions LLC and CPS Holdings Inc. each filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Ohio (Eastern Division). The Chapter 11 cases are jointly administered under Case No. 22-51247. On June 21, 2022, the day following the Petition D

ARTICLE V — SUMMARY OF THE PREPACKAGED PLAN OF REORGANIZATION The following is a summary of the material provisions of the Plan. This summary is qualified in its entirety by reference to the full text of the Plan, which is attached hereto as Exhibit A. In the event of any inconsistency between this summary and the terms of the Plan, the terms of the Plan shall govern and control.

V.A. Administrative and Priority Claims (Unclassified) In accordance with Section 1123(a)(1) of the Bankruptcy Code, Administrative Expense Claims and Priority Tax Claims are not classified under the Plan and are treated as follows: Administrative Expense Claims. Each holder of an Allowed Administrative Expense Claim will receive, in full and final satisfaction, settlement, release, and discharge of such Claim, payme

V.B. Classification and Treatment of Claims and Interests The Plan classifies Claims against and Interests in the Debtors into the following six classes. The classification and treatment of each class is described below.

V.B.1. Class 1 — Other Priority Claims Classification: Class 1 consists of all Allowed priority Claims against the Debtors, other than Administrative Expense Claims and Priority Tax Claims, entitled to priority under Section 507(a) of the Bankruptcy Code. Treatment: Each holder of an Allowed Class 1 Claim will receive, in full and final satisfaction, settlement, release, and discharge of such Claim, payment in full i

V.B.2. Class 2 — First Lien Secured Claims Classification: Class 2 consists of all Allowed Claims arising under or in connection with the First Lien Credit Agreement, including the First Lien Revolving Credit Facility and the First Lien Term Loan, against either or both of the Debtors. Amount: Approximately $191.3 million, consisting of $158.7 million in outstanding first lien term loan principal and $32.6 million dr

V.B.3. Class 3 — Second Lien Secured Claims Classification: Class 3 consists of all Allowed Claims arising under or in connection with the Second Lien Notes Indenture, including all outstanding principal and accrued and unpaid interest (including default rate interest), against either or both of the Debtors. Amount: Approximately $59.9 million, consisting of $56.0 million in outstanding principal and approximately $3

V.B.4. Class 4 — General Unsecured Claims Classification: Class 4 consists of all Allowed general unsecured Claims against either or both of the Debtors, including trade payables, accrued liabilities, and other unsecured obligations. Amount: Approximately $14.8 million. Treatment: On the Effective Date, each holder of an Allowed Class 4 Claim will receive, in full and final satisfaction, settlement, release, and disc

V.B.5. Class 5 — Intercompany Claims Classification: Class 5 consists of all Claims held by one Debtor against another Debtor or by a non-debtor affiliate against a Debtor. Treatment: Intercompany Claims will be reinstated, adjusted, or cancelled and extinguished, in each case at the Debtors' or reorganized Debtors' discretion, without any further action or distribution on account thereof. Voting Status: Unimpaired o

V.B.6. Class 6 — Existing Equity Interests Classification: Class 6 consists of all existing equity interests in CPS Holdings Inc., including all issued and outstanding shares of common stock and any other equity securities, options, warrants, or rights to acquire equity in CPS Holdings. Holder: Thornfield Capital Partners LP (through its 100% ownership of the equity of CPS Holdings Inc.). Treatment: On the Effective

V.C. Recovery Summary Table The following table summarizes the classification, treatment, and estimated recovery for each class of Claims and Interests under the Plan:

V.D. New First Lien Take-Back Term Loan On the Effective Date, Reorganized Crestline Packaging Solutions LLC, as borrower, will enter into a new first lien take-back term loan credit agreement (the "New First Lien Take-Back Term Loan") with Ridgeline National Bank, N.A. as administrative agent. The material terms of the New First Lien Take-Back Term Loan are as follows: Borrower: Reorganized Crestline Packaging Solut

V.E. Management Incentive Plan (MIP) The Plan provides for the establishment of a Management Incentive Plan (the "MIP") to be adopted by the reorganized board of managers following the Effective Date. The MIP will reserve a pool equal to 10% of the reorganized equity of Reorganized Crestline for issuance to eligible participants. The key terms of the MIP are as follows: Pool Size: 10% of the reorganized equity of Reo

V.F. DIP Financing On June 24, 2022, the Bankruptcy Court entered an Interim Order authorizing the Debtors to obtain postpetition financing pursuant to a Debtor-in-Possession Credit Agreement dated June 24, 2022 (the "DIP Credit Agreement"). On July 18, 2022, the Court entered a Final Order approving the DIP financing on a final basis. The material terms of the DIP facility are as follows: DIP Lender: Ridgeline Natio

V.G. Treatment of Executory Contracts and Unexpired Leases On the Effective Date, pursuant to Sections 365 and 1123(b)(2) of the Bankruptcy Code, the Debtors will assume or reject each of their executory contracts and unexpired leases. The following is a summary of the treatment of certain material contracts and leases: Resin Supply Agreement with Northstar Polymers Inc.: This five-year agreement dated March 1, 2019

V.H. Releases, Exculpation, and Injunction The Plan contains the following release, exculpation, and injunction provisions, which are integral components of the overall restructuring and have been negotiated as part of the consensual resolution embodied in the Plan: Third-Party Releases. On the Effective Date, the Released Parties (as defined in the Plan) will be released from any and all Claims, causes of action, ob

V.I. Conditions to the Effective Date The occurrence of the Effective Date of the Plan is subject to the satisfaction or waiver of the following conditions precedent: (a) The Confirmation Order shall have been entered by the Bankruptcy Court in form and substance acceptable to the Debtors and the Required Consenting Creditors (as defined in the RSA) and shall have become a Final Order; (b) The New First Lien Take-Bac

V.J. Retention of Jurisdiction Upon and after the Effective Date, the Bankruptcy Court will retain exclusive jurisdiction over all matters arising out of, or related to, the Plan and the Chapter 11 cases to the fullest extent permitted by law, including, without limitation, jurisdiction to: (i) resolve any disputes regarding the allowance, disallowance, estimation, or subordination of Claims; (ii) interpret, implemen

V.K. Estimated Professional Fees The Debtors estimate that the total professional fees and expenses incurred in connection with the Chapter 11 cases will be approximately $9.3 million, as set forth in the following table: All Professional Fee Claims are subject to approval by the Bankruptcy Court. The foregoing estimates are based on the assumption that the Chapter 11 cases will proceed in accordance with the milesto

ARTICLE VI — VALUATION ANALYSIS

VI.A. Overview and Disclaimer In connection with the Plan and the Debtors' restructuring, Aldersgate Advisory Group LLC ("Aldersgate"), in its capacity as financial advisor to the Debtors, has prepared a valuation analysis of the Debtors' businesses on a going-concern basis (the "Valuation Analysis"). The Valuation Analysis is intended to estimate the reorganized enterprise value and reorganized equity value of Crest

VI.B. Methodology Aldersgate employed two valuation methodologies in preparing the Valuation Analysis: Primary Methodology: Discounted Cash Flow ("DCF") Analysis. Aldersgate performed a discounted cash flow analysis based on the Debtors' five-year financial projections (the "Projections"), which were prepared by the Debtors' management with the assistance of Aldersgate. The DCF analysis discounts projected unlevered