By Joseph Checkler
OfficeMax Inc. (OMX) on Friday said any liabilities related to
timber notes backed by Lehman Brothers Holdings Inc. are officially
extinguished, meaning the office-supply chain can book a gain of
$671.1 million.
In a press release, the company said the bankruptcy court has
issued an order resolving the claims related to the notes, which
were backed by Lehman and stem from OfficeMax's 2004 sale of its
timberlands.
"We are very pleased to resolve this matter," OfficeMax
President and Chief Executive Ravi Saligram said in the release.
"We anticipate that extinguishment of the Lehman nonrecourse
liability will help to create greater clarity for our investors, as
our efforts to simplify the balance sheet continue." The company
last month announced the news, but had to wait for bankruptcy-court
approval.
The issue over the timberland notes was big enough for OfficeMax
to post a six-page "frequently asked questions" document on the
financial portion of its website, including ones about how Lehman's
bankruptcy affected the company.
Payment of the securitization notes was guaranteed by Lehman,
but the bank's bankruptcy filing in September 2008 constituted an
event of default under the $817.5 million note.
OfficeMax, the No. 3 office-supplies retailer behind Staples
Inc. (SPLS) and Office Depot Inc. (ODP), has suffered from weak
sales for the better part of four years, although the company has
recently shown slight improvements. Pricing wars have cut the
company deepest, although OfficeMax's online and Mexico operations
have posted higher sales.
Last November, the company announced a plan to close between 15
and 20 of its then-900 stores every year for the next five years
and that it would reduce the square footage in some of its existing
stores and relocate others. Staples and Office Depot had already
put those strategies in place.
OfficeMax has rebounded a bit of late, recently reporting a
second-quarter profit after being hit by charges in the
year-earlier period and reinstating its dividend.
Lehman filed for the largest bankruptcy in history in 2008, with
23 entities included. It exited from bankruptcy protection earlier
this year and made an initial distribution to creditors a few weeks
later. The company has said it expects to make a second
distribution to creditors this fall.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection. Go to
http://dbr.dowjones.com)
--Saabira Chaudhuri contributed to this article.
Write to Joseph Checkler at joseph.checkler@dowjones.com
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