RICHMOND, Va., Oct. 1 /PRNewswire-FirstCall/ -- Chesapeake Corporation (NYSE: CSK) today announced that it has made progress on its ongoing efforts to address the upcoming maturity of its bank credit facility and its general liquidity needs.

The holders of more than 70 percent of the principal amount of the corporation's 10-3/8% Sterling-denominated senior subordinated notes due in 2011 and its 7% euro-denominated senior subordinated notes due in 2014 have formed an ad hoc committee and retained Houlihan Lokey as their financial advisor. The corporation has been actively engaged in constructive discussions with the ad hoc committee and its advisor about financial restructuring alternatives that the corporation expects would, if consummated, address the corporation's short-term and long-term financing, capital structure and operational needs. The alternatives being discussed include potential transactions involving a substantial reduction in the corporation's leverage that would result in substantial dilution or a reduction of the value of the corporation's current common stock to nominal or no value. Discussions with the ad hoc committee and its financial advisor are ongoing, but there can be no assurance that an agreement will be reached.

'We are encouraged by the significant progress with our financial restructuring plan, particularly with the discussions we have had with the holders of the senior subordinated debt and their advisor,' said Andrew J. Kohut, Chesapeake's president and chief executive officer.

The lenders on the corporation's $250-million Senior Secured Credit Facility have agreed to an amendment to the Credit Facility which includes a waiver of compliance with certain financial condition covenants of the credit facility through October 31, 2008. The amendment waives any potential event of default for failure to meet the financial condition covenants for the third fiscal quarter of the corporation (which ended September 28, 2008) until October 31, 2008. Based on current projections, the corporation does not expect to be in compliance with the financial covenants of the Senior Secured Credit Facility as of the end of the waiver period on October 31, 2008. While the corporation intends to attempt to resolve compliance issues with the covenants by replacing or amending the Senior Secured Credit Facility or obtaining waivers from the corporation's lenders, there can be no assurance that these alternatives will be successful on or before October 31, 2008. Failure to comply with the covenants would be an event of default under the Senior Secured Credit Facility.