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Gov't to Pay Cenveo $5.5M Over Pulled Census Contract

Bankrupt envelope and printed product manufacturer Cenveo has asked a New York bankruptcy court to approve a settlement that would see the federal government pay $5.5 million to terminate a contract related to the 2020 U.S. Census.

Cenveo, one of the largest printing businesses in North America, told the court in a Thursday filing that while it could fight it out with the government over the decision to pull the plug on the contract, the “heavily negotiated” settlement is fair and will prevent its legal expenses from ballooning needlessly.

“Cenveo has determined in its reasonable business judgment that the settlement agreement represents the best possible outcome with the United States regarding the termination of the census contract and helps pave the way towards a smooth exit from chapter 11 in the coming weeks,” the Cenveo said.

The 99-year-old company declared bankruptcy in February hoping to shed $700 million in debt and is currently haggling with the U.S. trustee over the finer points of its proposed Chapter 11 plan.

Cenveo said it signed the census contract with the government last summer, but that after it filed for bankruptcy the feds “initiated conversations with Cenveo regarding Cenveo’s restructuring process, including Cenveo’s projected liquidity, and any impact it would have with respect to the census contract.”

Ultimately the government decided to pull out, Cenveo says, and there wasn’t a whole lot the company could do about it.

“Given the United States’ broad rights to terminate the census contract for convenience once Cenveo emerges from Chapter 11, and the costs associated with litigating a contested termination, Cenveo, in a sound exercise of its business judgment, determined that it is in the best interests of its estates to consensually terminate the census contract and enter into the settlement agreement,” Cenveo said.

Cenveo added that, thanks to the consensual nature of the settlement, it doesn't expect the census flap to affect its other contracts with the government.

Given that, and the inherent cost and risk of litigating the issue, Cenveo said it was in its own best interest and that of its creditors to simply take Uncle Sam’s $5.5 million and walk on.

Earlier last month, Cenveo won approval for a revised Chapter 11 disclosure it said was the result of a global settlement with the unsecured creditors committee and an ad hoc noteholders group.

The revisions include expanding a $1.5 million fund for unsecured creditors to a $7 million fund for unsecured creditors and second-tier lienholders, halving the take-back debt, preserving union agreements and pension obligations, and releasing any claims against current and former directors and officers.

Cenveo and the Department of Justice did not respond Friday to requests for comment.

Cenveo is represented by Jonathan S. Henes, Joshua A. Sussberg, George Klidonas, James H.M. Sprayregen, Melissa N. Koss and Gregory F. Pesce of Kirkland & Ellis LLP.

The case is In re: Cenveo Inc. et al., case number 7:18-bk-22178, in the U.S. Bankruptcy Court for the Southern District of New York.