Paper International filed Chapter 11 in SDNY on October 6, 2008 as a holding company with no employees or active operations; its key assets were 100% interests in Fiber Management of Texas and non-debtor Durango McKinley Paper Company. Fiber Management had stopped its fiber-procurement business in August 2008 and was winding down. The cases were driven by parent Corporación Durango’s liquidity crisis: Durango had issued $520 million of 10.50% senior notes due 2017, missed an approximately $26.5 million interest payment, and reported a 68% EBITDA drop from Q2 2007 to Q2 2008 amid higher energy, raw-material, and freight costs source filing source filing source filing.

The court confirmed the First Amended Joint Chapter 11 Plan proposed by Corporación Durango and the debtors, shifting the cases from administration to implementation. The plan left priority claims, general unsecured claims, and equity interests unimpaired, while impaired Class 3 noteholder claims received New Senior Notes, related guarantees, a restructuring fee and/or Durango new equity under the noteholder settlement. Cash for distributions was to come from debtor cash balances and/or dividends from McKinley, with current boards and officers continuing after the effective date source filing source filing.