Royal Paper LLC and three affiliated companies have filed for Chapter 11 bankruptcy protection, seeking to restructure mounting debts while continuing to operate.
The April 8 filings in Delaware Bankruptcy Court involve Royal Interco, LLC, Doubletree Paper Mills, L.L.C., and Sun Paper Company, LLC—all owned by RP Holdco, LLC.
Creditors include suppliers, utilities, and logistics companies. TradeCycle Capital is owed $3.2 million. The company intends to sell its assets to Italian paper giant Sofidel America Corp. at a court-supervised auction.
The History of Royal Paper and Industry Pressures
Founded in 1992 as a family-run napkin supplier, Royal Paper expanded to become one of the leading tissue manufacturers in the United States, before pandemic-era supply chain strains and post-COVID margin compression triggered its decline.
The bankruptcy comes as competitor Gorham Paper filed for Chapter 11 in 2020, underscoring widespread volatility in the sector.
Market Dynamics During COVID-19 Price Surge
During the pandemic, Royal Paper faced unprecedented demand as panic-buying emptied grocery store shelves and prices soared to an all-time high.
Though the company isn’t cited as a direct price-gouging culprit, its industry-wide supply chain problems and pulp cost increased by post-lockdown hoarding and fears over the delta variant, causing toilet paper prices to soar.
Royal Paper’s role as a mid-tier supplier contributed to the market instability, though major players like Procter & Gamble dominated price hikes.
Corporate Structure and Bankruptcy Rationale
The bankruptcy filings consolidate four entities under the parent company Royal Interco, LLC, aiming to streamline debt restructuring.
Court documents cite operational disruptions, supply chain challenges, and a looming $205 million term loan maturity as key stressors.
The companies listed liabilities between $100 million and $500 million, including $24.9 million in unsecured debt. The group is hoping to maintain business continuity while it negotiates with creditors.
Creditors and Unpaid Obligations
TradeCycle Capita emerges as the largest creditor with $3.2 million owed, followed by Sustana Fiber ($2.8 million) and Allen Lund Company ($782,000).
Creditor lists include utilities such as APS and Southwest Gas alongside packaging suppliers and freight carriers.
The disclosures suggest debts spanning raw materials, equipment leases, and warehouse operations, which hint at systemic cash flow issues.
Operational Challenges and Workforce Impact
A 2024 distribution center fire, coupled with labor shortages, exacerbated Royal Paper’s decline and disrupted its ability to fulfill orders for retailers like Trader Joe’s and Kroger.
Although the future of its Phoenix headquarters still hangs in the balance, the company has more than 110 employees. It has secured $10 million in debtor-in-possession financing to maintain payroll and employees.
Sofidel America’s Stalking Horse Bid
Sofidel America Corp. has offered a $126 million “stalking horse” bid to purchase Royal Paper’s assets, including manufacturing lines and private-label contracts.
The Italian-owned rival — producer of Regina and Papernet brands — will serve as the baseline bidder in a court-supervised auction, with higher offers permitted.
Debtor-in-Possession Financing Strategy
Royal Paper secured $10 million of DIP financing from existing lenders, of which $5 million will be immediately available.
These funds are intended to cover vendor payments, utility bills, and restructuring costs during bankruptcy proceedings. The company claims it will pay post-filing suppliers under normal terms.
Supply Chain and Retail Partnerships
As a private-label supplier to Aldi, Whole Foods, and Kroger, Royal Paper also earned 70% of its revenue from consumer products, including Trader Joe’s Supersoft Bath Tissue. Its Away-from-Home division(30% sales) served hotels and hospitals with brands like BradyPlus.
Next Steps in the Restructuring Process
Royal Paper is conducting asset sales under Section 363 of the Bankruptcy Code. A creditors’ meeting is set for May 9, 2025.
The court will compare various offers with Sofidel’s, and final approvals are expected by mid-2025. Employees and vendors are awaiting clarity on post-sale obligations.
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