Contract analysis

1. On June 20, 2022 (the "Petition Date"), Crestline Packaging Solutions LLC ("Crestline" or "CPS"), an Ohio limited liability company, and CPS Holdings Inc. ("CPS Holdings"), a Delaware corporation (collectively, the "Debtors"), each filed a voluntary petition for relief under Chapter 11 of Title 11 of the United States Code, 11 U.S.C. §§ 101–1532 (the "Bankruptcy Code"), in the United States Bankruptcy Court for th

2. Simultaneously with the filing of their Chapter 11 petitions, the Debtors filed the Plan and the Disclosure Statement with this Court. The Plan embodies the comprehensive restructuring of the Debtors' balance sheet, which was the product of months of intensive, arm's-length negotiations among the Debtors, their secured creditor constituencies, and their equity sponsor, Thornfield Capital Partners LP ("Thornfield")

3. Prior to the Petition Date, in accordance with the customary practice in prepackaged Chapter 11 cases, the Debtors conducted a prepetition solicitation of votes on the Plan from holders of claims in Classes 2, 3, and 4 of the Plan — the three impaired classes of claims entitled to vote on the Plan under Section 1126 of the Bankruptcy Code. The prepetition solicitation was conducted in strict compliance with applic

4. By this Motion, the Debtors seek entry of an order: (a) approving the prepetition solicitation as having been conducted in compliance with 11 U.S.C. § 1126(b) and applicable non-bankruptcy law, including Sections 4(a)(2) and 18 of the Securities Act and Regulation D thereunder; (b) approving the Disclosure Statement as having contained "adequate information" within the meaning of 11 U.S.C. § 1125(a)(1); (c) establ

5. As will be confirmed by the Tabulation Declaration of Pinnacle to be filed with this Court promptly following the Voting Deadline, all three impaired voting classes — Class 2 (First Lien Secured Claims), Class 3 (Second Lien Secured Claims), and Class 4 (General Unsecured Claims) — have voted to accept the Plan by the requisite statutory majorities set forth in Section 1126(c) of the Bankruptcy Code (i.e., accepta

6. This Court has jurisdiction over this Motion pursuant to 28 U.S.C. §§ 157 and 1334 and the General Order of Reference entered by the United States District Court for the Northern District of Ohio. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A) (matters concerning the administration of the estate) and 28 U.S.C. § 157(b)(2)(L) (confirmations of plans). The Debtors confirm that they consent to the entry of

7. Venue is proper in this district pursuant to 28 U.S.C. §§ 1408 and 1409. Crestline Packaging Solutions LLC is an Ohio limited liability company with its principal place of business and headquarters located at 4710 Industrial Corridor Drive, Akron, OH 44308, which is within the Northern District of Ohio, Eastern Division. CPS Holdings Inc. is a Delaware corporation that, as the direct parent of CPS, has its princip

8. The statutory predicates for the relief sought herein are 11 U.S.C. §§ 105(a), 1125, 1126(b), and 1128, and Rules 2002(b), 3017, and 3018 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules").

III. BACKGROUND A. General Background and Business Overview

9. Crestline Packaging Solutions LLC is an Ohio limited liability company headquartered at 4710 Industrial Corridor Drive, Akron, OH 44308. Founded in 1987, CPS is a leading manufacturer of rigid industrial packaging solutions, including high-density polyethylene ("HDPE") drums, intermediate bulk containers ("IBCs"), steel pails, and specialty containment vessels. CPS's products are sold to customers in the chemical,

10. CPS operates four manufacturing plants across the Midwest and the Gulf Coast region: (a) Plant 1 — Akron, Ohio: CPS's flagship facility and corporate headquarters, with approximately 480 employees. Plant 1 produces the full range of CPS's product offerings, including HDPE drums, IBCs, and specialty containment vessels. This facility also houses the company's research and development center, quality assurance labo

11. As of the Petition Date, CPS employed approximately 1,420 individuals across its four manufacturing facilities. CPS's workforce includes skilled manufacturing personnel, engineering staff, quality assurance technicians, sales and marketing professionals, and administrative support staff.

12. CPS Holdings Inc. is a Delaware corporation with its registered agent located at 1209 Orange Street, Wilmington, Delaware 19801, c/o National Corporate Services, Inc. CPS Holdings was formed in connection with the leveraged buyout of CPS by Thornfield Capital Partners LP ("Thornfield") in October 2017 and serves as the direct parent and intermediate holding company for CPS. CPS Holdings does not conduct any opera

13. For the fiscal year ended December 31, 2021 ("FY2021"), CPS reported consolidated revenue of approximately $312.6 million and consolidated earnings before interest, taxes, depreciation, and amortization ("EBITDA") of approximately $38.4 million. CPS's revenue declined approximately 18% from FY2020 to FY2021, driven primarily by significant increases in resin costs (particularly high-density polyethylene resin), s

14. As of the Petition Date, the Debtors' prepetition capital structure consisted of the following funded debt obligations, totaling approximately $247.3 million:

15. First Lien Credit Agreement. On October 13, 2017, in connection with Thornfield's leveraged buyout of CPS, CPS entered into a First Lien Credit Agreement (as amended, restated, supplemented, or otherwise modified from time to time, the "First Lien Credit Agreement") with Ridgeline National Bank, N.A. ("Ridgeline"), as administrative agent and collateral agent, and the lenders party thereto (the "First Lien Lender

16. The obligations under the First Lien Credit Agreement are secured by a first-priority lien on substantially all of the assets of CPS and CPS Holdings, including inventory, accounts receivable, equipment, real property, intellectual property, and equity interests, subject to certain customary exceptions (collectively, the "First Lien Collateral"). CPS Holdings is a guarantor of all obligations under the First Lien

17. Second Lien Notes. Also on October 13, 2017, CPS issued $60.0 million in aggregate original principal amount of 9.75% Senior Secured Second Lien Notes due 2025 (the "Second Lien Notes"; CUSIP 22761TAA3) pursuant to an Indenture dated as of October 13, 2017 (as amended, supplemented, or otherwise modified from time to time, the "Second Lien Notes Indenture"), between CPS, CPS Holdings (as guarantor), and Continent

18. The Second Lien Notes are secured by a second-priority lien on the same collateral package as the First Lien Credit Agreement, pursuant to an Intercreditor Agreement dated October 13, 2017, between Ridgeline (as first lien agent) and the Indenture Trustee (as second lien representative).

19. Total Funded Debt. As of the Petition Date, the Debtors' total funded debt was approximately $247.3 million, consisting of $32.6 million drawn on the Revolver, $158.7 million outstanding on the First Lien Term Loan, and $56.0 million outstanding on the Second Lien Notes (excluding accrued interest). C. Events Leading to the Chapter 11 Filing

20. The Debtors' financial difficulties, driven by the macroeconomic and industry-specific headwinds described above, culminated in a breach of the financial covenants contained in the First Lien Credit Agreement. Section 7.11 of the First Lien Credit Agreement requires CPS to maintain a maximum Total Net Debt to EBITDA leverage ratio not to exceed 5.75x, tested quarterly at the end of each fiscal quarter.

21. For the quarter ended March 31, 2022 (Q1 2022), CPS's actual leverage ratio, calculated in accordance with the definitions set forth in the First Lien Credit Agreement, was approximately 8.50x ($247.3 million Total Net Debt ÷ $29.1 million TTM EBITDA). This represented a breach of approximately 2.75 turns, or 47.8%, above the maximum permitted leverage ratio of 5.75x. The covenant breach was attributable to the c

22. On April 22, 2022, Ridgeline National Bank, N.A., as administrative agent under the First Lien Credit Agreement, delivered a Notice of Default (the "Notice of Default") to CPS, formally declaring an event of default under Section 8.01 of the First Lien Credit Agreement arising from CPS's failure to comply with the maximum leverage ratio covenant. The Notice of Default reserved all rights and remedies of the First

23. The delivery of the Notice of Default also triggered a cross-default under Section 6.01(e) of the Second Lien Notes Indenture, which provides that any event of default under the First Lien Credit Agreement (or the acceleration of any indebtedness thereunder) constitutes an event of default under the Second Lien Notes Indenture. The Indenture Trustee did not independently deliver a notice of acceleration with resp

24. Following the delivery of the Notice of Default, the Debtors and Ridgeline, together with consenting First Lien Lenders holding approximately 68% in aggregate principal amount of the First Lien Term Loan, entered into a Forbearance Agreement dated May 18, 2022 (the "Forbearance Agreement"). Under the Forbearance Agreement, the consenting First Lien Lenders agreed to forbear from exercising their rights and remedi

25. During the forbearance period, the Debtors, with the assistance of their financial advisor, Aldersgate Advisory Group LLC ("Aldersgate") (lead managing director, Priya Narayanan), and their legal counsel, Calderwood & Harkness LLP, engaged in extensive, good-faith, arm's-length negotiations with two organized creditor groups: (a) the Ad Hoc Group of First Lien Lenders (represented by Hargrove, Mitchell & Saunders

26. The arm's-length negotiations described above culminated in the execution of a Restructuring Support Agreement (the "RSA") on July 8, 2022, among CPS, CPS Holdings, Thornfield, the Ad Hoc Group of First Lien Lenders, and the Ad Hoc Group of Second Lien Noteholders. The RSA memorializes the parties' agreement on the terms of the Plan and establishes a timetable and milestones for the Chapter 11 cases.

27. The RSA required the achievement of the following milestones: (a) Petition Date: No later than July 31, 2022 (actual Petition Date: June 20, 2022); (b) Disclosure Statement Approval: Within 45 days of the Petition Date (i.e., no later than August 4, 2022); (c) Plan Confirmation: Within 90 days of the Petition Date (i.e., no later than September 18, 2022); and (d) Effective Date: Within 15 business days following

28. As noted, the Petition Date (June 20, 2022) preceded the formal execution of the RSA (July 8, 2022). The prepetition solicitation of votes on the Plan was conducted based on a substantially final term sheet setting forth the material terms of the restructuring, which was appended to the RSA, together with the Disclosure Statement that was circulated to holders of claims in the impaired voting classes. The key eco

29. The Plan provides for the following treatment of claims and interests: Class 1 — Other Priority Claims (Unimpaired; Deemed to Accept)

30. Holders of allowed other priority claims (including administrative expense claims to the extent classified and priority tax claims) shall be paid in full in cash on the effective date of the Plan or as soon thereafter as is reasonably practicable. Class 1 is unimpaired under the Plan and, accordingly, holders of Class 1 claims are conclusively deemed to have accepted the Plan pursuant to Section 1126(f) of the Ba

31. Holders of allowed first lien secured claims — consisting of $158.7 million outstanding on the First Lien Term Loan and $32.6 million drawn on the Revolver, for a total of approximately $191.3 million — shall receive, on a pro rata basis: (a) 92% of the equity interests in the reorganized Debtors (the "Reorganized Equity"), subject to dilution by the Management Incentive Plan (described below); and (b) their pro

32. Holders of allowed second lien secured claims — consisting of $56.0 million in principal amount of Second Lien Notes and approximately $3.9 million in accrued and unpaid interest (including interest at the default rate), for a total of approximately $59.9 million — shall receive, on a pro rata basis: (a) 8% of the Reorganized Equity, subject to dilution by the Management Incentive Plan; and (b) warrants to acquir

33. Holders of allowed general unsecured claims — estimated at approximately $14.8 million in the aggregate, consisting primarily of trade payables, lease rejection claims, and other unsecured obligations — shall receive their pro rata share of a $1.5 million cash pool (the "GUC Cash Pool") to be funded on the effective date of the Plan. Class 4 is impaired under the Plan and is entitled to vote to accept or reject t

34. Intercompany claims between and among the Debtors shall be reinstated, set off, or cancelled, in each case at the Debtors' discretion, in accordance with the Plan. Class 5 is either unimpaired (and deemed to accept) or impaired (and deemed to reject, as applicable), and holders of intercompany claims are not entitled to vote on the Plan. Class 6 — Existing Equity Interests (Impaired; Deemed to Reject)

35. All existing equity interests in CPS Holdings — held by Thornfield Capital Partners LP — shall be cancelled and extinguished on the effective date of the Plan, and holders of existing equity interests shall receive no distribution under the Plan. Class 6 is impaired under the Plan and, because holders of existing equity interests will receive no distribution, Class 6 is deemed to have rejected the Plan pursuant t

IV. THE PREPETITION SOLICITATION A. Solicitation Materials Transmitted

36. In advance of the Petition Date, the Debtors, through Pinnacle Claims Administration LLC ("Pinnacle"), located at 1010 Dale Street North, St. Paul, MN 55117, transmitted the following solicitation materials (collectively, the "Solicitation Package") to all known holders of claims in Classes 2, 3, and 4 of the Plan — the three impaired classes entitled to vote: (a) The Disclosure Statement (subsequently filed as D

37. Distribution of the Solicitation Package was commenced prior to the Petition Date and was completed to all known holders of claims in the voting classes in advance of the Petition Date. As described in greater detail below, the Debtors ensured that all holders of claims in the voting classes received the Solicitation Package with adequate time to review the materials and cast their votes prior to the Voting Deadl

38. As set forth above, three classes of claims are impaired under the Plan and are entitled to vote: Class 2 (First Lien Secured Claims), Class 3 (Second Lien Secured Claims), and Class 4 (General Unsecured Claims). Holders of unimpaired claims (Class 1) are deemed to accept the Plan and do not vote. Holders of equity interests whose interests are cancelled without any distribution (Class 6) are deemed to reject the

39. The record date for determining the holders of claims entitled to vote on the Plan was established as June 15, 2022 (the "Voting Record Date"). Only holders of claims as of the Voting Record Date are entitled to vote on the Plan.

40. Holders of Class 2 claims (First Lien Secured Claims) were identified based on the records of Ridgeline National Bank, N.A., as administrative agent and collateral agent under the First Lien Credit Agreement. Ridgeline maintained a register of all First Lien Lenders and their respective participations in the Revolver and the First Lien Term Loan and provided such records to Pinnacle for purposes of the solicitati

41. Holders of Class 3 claims (Second Lien Secured Claims) were identified based on the records of Continental Fiduciary Trust Company, as indenture trustee under the Second Lien Notes Indenture. The Indenture Trustee maintained a register of the beneficial holders of the Second Lien Notes and provided such records to Pinnacle for purposes of the solicitation. To the extent any Second Lien Notes were held in street n

42. Holders of Class 4 claims (General Unsecured Claims) were identified from the Debtors' books and records, including accounts payable ledgers, contract files, and lease records. The Class 4 creditor population consists primarily of trade creditors, landlords under unexpired leases, and other general unsecured claimants. Pinnacle cross-referenced the Debtors' accounts payable records with outstanding invoices and k

43. The Solicitation Packages were transmitted to holders of claims in each voting class on the following dates: (a) Class 2 (First Lien Secured Claims): Solicitation Packages were transmitted to all identified holders of First Lien Secured Claims beginning on or about June 8, 2022; (b) Class 3 (Second Lien Secured Claims): Solicitation Packages were transmitted to all identified holders of Second Lien Secured Claims

44. In all cases, more than 28 days elapsed (and will have elapsed) between the date of transmittal of the Solicitation Package and the proposed Voting Deadline of August 3, 2022, which satisfies the minimum notice periods applicable under Bankruptcy Rule 2002(b) and the customary solicitation periods observed in prepackaged Chapter 11 cases in this and other jurisdictions. The Debtors submit that the voting period a

45. Section 1126(b)(1) of the Bankruptcy Code provides: "A holder of a claim or interest that has accepted or rejected the plan before the commencement of the case under this title is deemed to have accepted or rejected such plan, as the case may be, if— (1) the solicitation of such acceptance or rejection was in compliance with any applicable nonbankruptcy law, rule, or regulation governing the adequacy of disclosur

46. The prepetition solicitation conducted by the Debtors fully complied with applicable non-bankruptcy law governing the adequacy of disclosure.

47. Securities Act Compliance. Certain of the consideration to be distributed under the Plan constitutes "securities" within the meaning of Section 2(a)(1) of the Securities Act. Specifically, the Reorganized Equity to be distributed to holders of Class 2 and Class 3 claims, the Warrants to be distributed to holders of Class 3 claims, and the New First Lien Term Loan interests to be distributed to holders of Class 2

48. The offer and sale of these securities in connection with the prepetition solicitation were conducted in reliance upon the exemption from the registration requirements of the Securities Act provided by Section 4(a)(2) thereof and Rule 506 of Regulation D promulgated thereunder. The solicitation was directed exclusively to holders of claims that qualify as "accredited investors" within the meaning of Rule 501(a) o

49. State Securities Law Compliance. The Disclosure Statement also satisfied the requirements of applicable state securities laws (commonly known as "blue sky" laws) in each state in which solicitation materials were transmitted to holders of claims in the voting classes. The Debtors relied on applicable exemptions from state securities registration requirements, including exemptions for offers and sales to instituti

50. Section 18 of the Securities Act. The Disclosure Statement was prepared in good faith and complied with Section 18 of the Securities Act, which provides a federal standard of liability for misleading statements in connection with the solicitation of votes on a plan of reorganization. The Disclosure Statement did not contain any untrue statement of a material fact or omit to state a material fact necessary to make

51. Alternative Compliance Under § 1126(b)(2). In the alternative, and as an independent basis for approval of the prepetition solicitation, the Debtors submit that the prepetition solicitation complied with Section 1126(b)(2) of the Bankruptcy Code, which provides that a prepetition acceptance or rejection may be deemed valid if: "there is not any holder of a claim or interest that was not afforded the disclosure re

52. As described in detail in Section V below, the Disclosure Statement contained "adequate information" within the meaning of Section 1125(a)(1) of the Bankruptcy Code. Every holder of a claim in the voting classes received the full Solicitation Package, including the Disclosure Statement, in advance of the Voting Deadline. No holder of a claim in any voting class was denied the opportunity to review the Disclosure

V. THE DISCLOSURE STATEMENT CONTAINS ADEQUATE INFORMATION A. Standard Under § 1125(a)(1)

53. Section 1125(a)(1) of the Bankruptcy Code defines "adequate information" as: "information of a kind, and in sufficient detail, as far as is reasonably practicable in light of the nature and history of the debtor and the condition of the debtor's books and records, including a discussion of the potential material Federal tax consequences of the plan to the debtor, any successor to the debtor, and a hypothetical in

54. Courts have consistently held that the determination of whether a disclosure statement contains adequate information is to be made on a case-by-case basis, considering the totality of the circumstances. See, e.g., In re Scioto Valley Mortg. Co., 88 B.R. 168, 170 (Bankr. S.D. Ohio 1988); In re Cardinal Congregate I, 121 B.R. 760, 765 (Bankr. S.D. Ohio 1990). As the Sixth Circuit Bankruptcy Appellate Panel has obse

55. The Disclosure Statement (Dkt. 48) addresses all material topics and contains all categories of information necessary for holders of claims in the voting classes to make an informed judgment about whether to accept or reject the Plan. Without limitation, the Disclosure Statement contains the following information: