Royal Interco: $180M Sale Rescues Private-Label Tissue Maker in 69 Days

Royal Interco, LLC, the Phoenix-based private-label paper manufacturer operating as Royal Paper, sold substantially all of its assets to Italian tissue maker Sofidel America Corp. for more than $180 million just 69 days after filing for bankruptcy. The company filed chapter 11 petitions on April 8, 2025, in the U.S. Bankruptcy Court for the District of Delaware, with the jointly administered cases led by case No. 25-10674 before Judge Thomas M. Horan.

Royal Paper, which supplied toilet paper, paper towels, and napkins to grocery retailers including Trader Joe's, Kroger, Aldi, and Whole Foods, entered bankruptcy carrying more than $205 million of first-lien debt and a prearranged stalking horse agreement with Sofidel. The petition followed a February 2024 distribution center fire, labor shortages, and the maturity of its senior secured credit facility, and the case was built from day one around a court-supervised section 363 sale rather than a standalone reorganization. Competitive bidding at a May 15, 2025 auction lifted Sofidel's opening $126 million bid to a final price above $180 million, and the transaction closed on June 16, 2025.

Debtor(s)	HRHI Wind-down, LLC (f/k/a Royal Interco, LLC) (4 jointly administered debtors)
Court	U.S. Bankruptcy Court, District of Delaware
Case Number	25-10674 (jointly administered, 25-10674 through 25-10677)
Judge	Hon. Thomas M. Horan
Petition Date	April 8, 2025
Case Path	Section 363 going-concern sale
Prepetition Funded Debt	Approximately $213.6 million
Stalking Horse Bid	$126 million (Sofidel America Corp.)
Final Sale Price	More than $180 million
Auction Date	May 15, 2025
Sale Order Entered	May 23, 2025
Sale Closing	June 16, 2025 (69 days)
DIP Facility	$10 million (NXT Capital, LLC)

Research Royal Interco with ElevenFlo

View case record

Gridiron Buyout and National Expansion

Royal Paper began in 1992 as a Phoenix, Arizona family-owned converter with a single converting line, purchasing parent rolls from paper mills and finishing them into napkins and bath tissue for local retailers. In 2008 the company vertically integrated by building a paper mill in Gila Bend, Arizona, roughly 60 miles southwest of Phoenix, allowing it to produce parent rolls in-house and reduce its dependence on third-party suppliers. The Gila Bend mill used recycled fiber as its primary input and water-recycling technology the company said consumed half the water of standard facilities.

Ownership changed in November 2018, when Gridiron Capital acquired an 80% majority stake and installed a new management team led by Chief Executive Officer Kevin Otero, previously Vice President of Global Operations at Procter & Gamble, with Sunil Kanuga as Chief Operating Officer and Samir Kanuga as Chief Financial Officer. Gridiron, a lower-middle-market private equity firm, treated Royal Paper as a consolidation platform in the fragmented private-label tissue market. In December 2020 the company acquired Sun Paper Company, a Duncan, South Carolina tissue manufacturer, giving Royal Paper coast-to-coast manufacturing and an Eastern footprint beyond its Western base.

By the petition date, the company operated a vertically integrated model across four facilities, as detailed in the first day declaration of Michael Ragano, the chief restructuring officer. The Gila Bend paper mill housed two tissue machines with annual capacity of approximately 61,000 metric tons of parent rolls. Two converting facilities in Phoenix and the Duncan, South Carolina plant acquired from Sun Paper turned those rolls into finished products, with warehousing co-located alongside the converting operations.

Facility	Location	Function
Paper Mill	Gila Bend, AZ	Parent roll production (2 tissue machines, ~61,000 MT capacity)
Converting Facility #1	Phoenix, AZ	Finished product manufacturing
Converting Facility #2	Phoenix, AZ	Finished product manufacturing
Converting Facility #3	Duncan, SC	Finished product manufacturing

Royal Paper built its business supplying tissue products that retailers sell under their own store brands. According to the first day declaration, roughly 70% of the business served the at-home market through private-label programs for retailers such as Aldi, Whole Foods, Trader Joe's, Kroger, and Meijer, while about 30% served the away-from-home market of hotels, restaurants, schools, and hospitals. The company entered 2024 with projected revenue of approximately $220 million and roughly 105 active customers, but as a private-label supplier it operated with limited pricing power because large retail customers can shift volume to competing manufacturers.

Distribution Center Fire and the Maturity Wall

Royal Paper's distress converged in early 2024 from a mix of operating disruptions and a looming debt maturity. In February 2024, a fire at one of its distribution centers disrupted the company's ability to fulfill customer orders. Ragano stated in the first day declaration that labor shortages and the fire impaired the company's ability to meet customer demand from January through June 2024, reducing shipments and cash receipts during the first half of the year.

The operational shortfall fed into a deterioration in trade credit. Suppliers tightened terms as Royal Paper struggled to meet orders, restricting its access to pulp fiber and other raw materials. Credit analysts reported that the company's average days beyond terms climbed above 30 days during the summer of 2024, against an industry norm near 10 days, with roughly 40% of its trade balance past due. The credit contraction compounded the input-cost problem, because pulp prices rose to elevated levels in 2024 and the private-label model left little room to pass higher costs through to price-sensitive retailers.

The capital structure provided the final pressure. The senior secured credit facility carried an original maturity of December 31, 2024, and Ragano said suppliers grew more cautious as that maturity approached. The debtors obtained extensions that pushed the maturity to July 15, 2025, but could not refinance the debt against a backdrop of disrupted operations and distressed trade credit. The company began an out-of-court marketing process on January 31, 2025, targeting a sale closing by mid-June, which set up the unusually compressed chapter 11 timeline that followed.

Prepetition Capital Structure and the NXT Credit Agreement

Royal Paper entered chapter 11 with approximately $213.6 million of funded debt concentrated in a single first-lien facility. The first day declaration stated that at least $205,143,282.79 of principal was outstanding under a prepetition credit agreement dated June 15, 2018 and amended through a seventh amendment on January 29, 2025. That facility, agented by NXT Capital, LLC, comprised Term A loans, Term B loans, a revolving credit facility, and incremental term loans, all secured by first-priority liens on substantially all of the debtors' assets.

Below the credit agreement sat an approximately $8.5 million equipment sale-leaseback. In a September 30, 2024 transaction with Clarus Capital Funding I, LLC, Royal Paper and Sun Paper Company sold equipment and leased it back under a four-year master lease carrying monthly rent of roughly $178,000. Ragano also estimated approximately $24.9 million of trade and other unsecured debt outstanding as of the petition date.

The intercreditor split inside the NXT facility later shaped the case's settlement dynamics, because the Term A and Term B tranches sat at different points in the waterfall. Notably, the final DIP order stipulated that the prepetition debt constituted an allowed secured claim of at least $126 million for adequate-protection purposes — a figure below the declaration's stated funded-debt total and a reference point the creditors' committee would later use to argue over how much sale value remained for junior stakeholders.

Stalking Horse Bid and the Sofidel Auction

Royal Paper filed its section 363 sale motion on the petition date, April 8, 2025, with Sofidel America Corp. already signed as the stalking horse bidder. Sofidel's opening bid used a $126 million base purchase price, subject to inventory, sale-leaseback, cure-cost, and other adjustments, plus assumed liabilities, and covered all four manufacturing facilities. The stalking horse agreement carried bid protections consisting of a $3.78 million break-up fee and up to $1.26 million of documented expense reimbursement, and the court approved the bid procedures order on May 6, 2025.

The proposed schedule was fast even by prearranged-sale standards, with a May 12 bid deadline, a May 15 auction, and a May 20 sale hearing. The auction held on May 15 drew competitive bidding that lifted the price to more than $180 million, roughly $54 million above the floor bid, with Sofidel emerging as the successful bidder.

The sale order entered on May 23, 2025 approved a revised asset purchase agreement with a $174.96 million base purchase price, again subject to adjustments and assumed liabilities, and found that no higher or better alternative was available and that Sofidel had acted in good faith. The transaction closed on June 16, 2025, 69 days after filing. As part of the acquisition, Sofidel extended employment offers to a significant portion of Royal Paper's workforce across the Gila Bend, Phoenix, and Duncan facilities.

NXT Capital DIP and the 69-Day Bridge

The debtors financed the sale process with a $10 million delayed-draw DIP facility from NXT Capital, LLC, the prepetition agent, with $5 million available on an interim basis. The Delaware bankruptcy court approved interim DIP access on April 10, 2025 and entered the final DIP order on May 5, 2025. The financing was sized to bridge operations through a short sale rather than fund a long reorganization runway.

The final order approved priming first-priority liens and pricing of 7.50% over base rate or 8.50% over adjusted term SOFR, plus a 3% closing fee and a 5% exit fee, with interest and fees payable in kind. It granted the prepetition lenders replacement liens, superpriority claims, and other adequate-protection terms, while preserving a limited $50,000 budget for the creditors' committee to investigate the lenders' liens and claims through the carve-out. The DIP maturity was tied to the sale timetable, defined as the earliest of 90 days after filing, consummation of a sale of substantially all assets, the effective date of a plan, or a failure to obtain the final order by the stated deadline. The court later entered a supplemental order amending the final DIP order as the sale closing approached.

DIP Facility Terms	Details
DIP Agent / Lender	NXT Capital, LLC (prepetition agent)
Facility size	$10 million delayed-draw ($5 million interim)
Pricing	7.50% + base rate or 8.50% + adjusted term SOFR (PIK)
Fees	3% closing fee; 5% exit fee
Liens / priority	Priming first-priority liens; superpriority claims
Committee carve-out	$50,000 lien-investigation budget
Maturity	Earliest of 90 days, sale, plan effective date, or final-order failure

Committee Objection and the Global Settlement

The sale and DIP structure drew objections from both the U.S. Trustee and the Official Committee of Unsecured Creditors, appointed on April 18, 2025 and represented by Lowenstein Sandler LLP. The committee argued in its DIP objection that the process was being run primarily for the benefit of the prepetition lenders and could leave the estates administratively insolvent, with no clear reserve for administrative claims, including section 503(b)(9) claims. In its sale objection, the committee asked the court to require escrow of sale proceeds, preserve estate causes of action for unsecured creditors, ensure payment of allowed administrative claims, and bar avoidance actions against ordinary-course trade vendors.

After the auction improved the economics, the committee filed a supplemental objection acknowledging that the process had lifted the price from the $126 million stalking horse bid to roughly $180 million, but maintaining that non-insider creditors still lacked meaningful protection unless proceeds above DIP repayment and first-out principal were escrowed pending the committee's investigation and an accounting of administrative claims. The objections were resolved through a global settlement that, among other terms, provided that clawback actions would not be pursued against ordinary-course trade vendors, limiting preference exposure for payments received in the 90 days before the filing.

The estate separately resolved issues with Gridiron Capital, whose equity was eliminated in the sale. A Rule 9019 settlement motion and the resulting order approving the Gridiron settlement addressed the entities Gridiron RP Investors, LLC; GC Fund III RP AIV, L.P.; and Gridiron Strategic Advisors Fund III, L.P., and resolved intercreditor issues between the Term A and Term B loans in the prepetition capital structure, with releases that brought finality to potential claims among the stakeholder groups.

Sofidel's North American Tissue Roll-Up

Sofidel Group, the successful bidder, was founded in 1966 in Porcari, in the Lucca province of Italy, and has grown into one of the world's largest manufacturers of tissue for hygienic and household use, known in Europe for its Regina brand. The company entered the U.S. market in 2012 through the acquisition of Cellynne, a southeastern U.S. tissue producer, and has since expanded its North American footprint to 14 production plants across 11 states.

The Royal Paper deal extended a strategic build-out. In October 2024, Sofidel acquired Clearwater Paper's tissue division for $1.06 billion, a transaction that made it the fourth-largest tissue producer in North America. Royal Paper's Gila Bend mill, with roughly 61,000 metric tons of annual capacity, and its three converting facilities added vertically integrated production and an established private-label customer base to that platform.

The acquisition fit a broader consolidation trend in the tissue industry, where 2024's elevated pulp prices and tight margins pressured smaller, less integrated producers and pushed scale players to absorb them. Private-label tissue, the segment Royal Paper served, typically accounts for 30% to 40% of retail unit sales in developed markets.

Professional Retentions and Wind-Down

The debtors retained Morris, Nichols, Arsht & Tunnell LLP as bankruptcy counsel and Livingstone Partners LLC as investment banker, while Michael Ragano of Novo Advisors, LLC was designated chief restructuring officer nunc pro tunc to the petition date. The creditors' committee selected Lowenstein Sandler LLP as lead counsel, Gellert Seitz Busenkell & Brown, LLC as Delaware counsel, and Province, LLC as financial advisor. Sofidel was advised by Cleary Gottlieb, and the DIP agent was represented by Goldberg Kohn and GSBB Law. Epiq Corporate Restructuring, LLC served as claims and noticing agent.

Livingstone later sought $3,775,872.53 in fees plus $16,333.02 in expenses for work performed from April 8 through June 16, 2025, and the court approved the fee request on August 27, 2025.

Following the closing, the estate amended the case caption to reflect that Royal Interco, LLC had been renamed HRHI Wind-down, LLC, which continued to administer remaining matters such as claims objections, fee applications, and receivable collections for remittance to Sofidel. The wind-down entities also sold approximately $7.2 million of Employee Retention Credits to 1861 Acquisition LLC for $6.1 million, monetizing pandemic-era tax credits at about 85% of face value. After resolving remaining creditor disputes, the wind-down entities moved to dismiss the chapter 11 cases.

Professional	Role
Morris, Nichols, Arsht & Tunnell LLP	Debtors' bankruptcy counsel
Livingstone Partners LLC	Debtors' investment banker
Novo Advisors, LLC (Michael Ragano)	Chief restructuring officer
Lowenstein Sandler LLP	Committee counsel
Gellert Seitz Busenkell & Brown, LLC	Committee Delaware counsel
Province, LLC	Committee financial advisor
Epiq Corporate Restructuring, LLC	Claims and noticing agent
Cleary Gottlieb	Sofidel counsel
Goldberg Kohn; GSBB Law	DIP agent counsel

Key Timeline

The case moved from petition to going-concern sale in 69 days, with wind-down proceedings concluding after court approval of creditor settlements in 2025–2026.

Date	Event
1992	Royal Paper founded in Phoenix, Arizona
2008	Gila Bend, Arizona paper mill constructed
November 2018	Gridiron Capital acquires 80% majority stake
December 2020	Royal Paper acquires Sun Paper Company (Duncan, SC)
February 2024	Distribution center fire disrupts operations
Summer 2024	Trade credit deteriorates; ~40% of trade balance past due
December 31, 2024	Original senior secured maturity (later extended to July 15, 2025)
January 31, 2025	Out-of-court marketing process begins
April 8, 2025	Chapter 11 petitions filed (D. Del.); sale and DIP motions filed
April 10, 2025	Interim DIP access approved
April 18, 2025	Official Committee of Unsecured Creditors appointed
May 5, 2025	Final DIP order entered
May 15, 2025	Auction held; Sofidel declared successful bidder
May 23, 2025	Sale order entered approving Sofidel transaction
June 16, 2025	Transaction closes; assets transfer to Sofidel
August 27, 2025	Livingstone final fee application approved
2025–2026	Wind-down creditor settlements approved; chapter 11 cases dismissed

Frequently Asked Questions

When did Royal Paper file for bankruptcy? Royal Interco, LLC (operating as Royal Paper) filed for chapter 11 on April 8, 2025, in the U.S. Bankruptcy Court for the District of Delaware. The jointly administered cases run under lead case No. 25-10674 (25-10674 through 25-10677) before Judge Thomas M. Horan.

Who bought Royal Paper out of bankruptcy? Sofidel America Corp., the U.S. subsidiary of Italian tissue manufacturer Sofidel Group, acquired substantially all of Royal Paper's operating assets through a section 363 sale that closed on June 16, 2025.

How much did Sofidel pay for Royal Paper? The final price exceeded $180 million, roughly $54 million above Sofidel's $126 million stalking horse bid. The competitive auction on May 15, 2025 generated the increase, and the sale order approved a revised agreement with a $174.96 million base purchase price plus adjustments and assumed liabilities.

What caused Royal Paper's bankruptcy? A February 2024 distribution center fire and labor shortages cut shipments through mid-2024, which triggered trade-credit deterioration (about 40% past due, with days beyond terms above 30). Elevated 2024 pulp prices compressed margins, and the company could not refinance a senior secured facility whose maturity it had extended to July 15, 2025.

What was Royal Paper's capital structure? The company owed at least $205.1 million under a first-lien credit agreement agented by NXT Capital, LLC, plus an approximately $8.5 million Clarus Capital equipment sale-leaseback and roughly $24.9 million of trade and other unsecured debt — about $213.6 million in total funded debt.

Who was Royal Paper's private equity owner? Gridiron Capital acquired an 80% majority stake in November 2018 and installed CEO Kevin Otero, formerly of Procter & Gamble. Gridiron's equity was eliminated in the Sofidel sale, with related claims resolved through a court-approved settlement.

How long did the bankruptcy case last? The going-concern sale closed about 69 days after filing — petitions on April 8, 2025 and a closing on June 16, 2025 — followed by a longer wind-down to resolve claims, fees, and settlements.

What facilities did Sofidel acquire? Sofidel acquired four facilities: the Gila Bend, Arizona paper mill (approximately 61,000 metric tons of annual capacity), two Phoenix converting facilities, and the Duncan, South Carolina converting plant Royal Paper had acquired from Sun Paper Company in 2020.

Who is the claims agent for Royal Interco? Epiq Corporate Restructuring, LLC serves as the claims and noticing agent under the court's order approving its appointment, entered early in the case. Epiq maintains the claims register and handles case noticing for the jointly administered debtors.

For related ElevenFlo coverage of fast going-concern 363 sales and strategic acquisitions out of chapter 11, see Aleon Metals' 52-day 363 sale, Axip Energy Services' $161M sale to Service Compression, Brewster Heights Packing & Orchards' going-concern 363 sale, and Aceto Corporation's $380M chemicals sale and liquidation.