The Philadelphia-based company is a producer of polyethylene terephthalate (PET) plastic containers for the global food, soft drinks and water market.
Constar claims that all of its global operations, including its manufacturing and distribution facilities in the US and Europe, are open and operating on normal schedules, and the manufacturer said that it expects to continue to fulfill all customer orders as usual, as well as honoring all contracts and paying suppliers in full.
The company added that with the filing of Chapter 11, it also aims to reduce its annual interest costs by $19.3m.
Michael Hoffman, CEO of Constar, said the move will free up cash to reinvest in the business to support future growth.
In October, Constar announced a four year agreement for supply of PET packaging products to Pepsi, a long term customer; however, the new agreement involved a reduction in total volumes with a mix shift towards fewer bottles and more preform volume.
The bottle manufacturer said the new contract would result in lower sales, but added that this reduction would be offset by a plan of restructuring to reduce its overhead cost structure.
And at the announcement of the company’s financial results for the third quarter in November, Hoffman noted a decline in consumer demand for products using Constar containers, saying this was due to reduced gas and convenience store sales of single serve beverages caused by record high gasoline prices and a collapse in discretionary spending.
Compared to the prior year, he continued, this volume weakness offset all of the company’s gains in new business and pricing:
“Major items that account for the lower quarterly income include a $3.8m increase in energy costs, $1.3m of overhead absorption loss due to inventory reductions, and $1.9m of charges related to prior periods.”