Key insights
- Clearwater Paper Corp (CLW) faces debt refinancing risk in 2028 due to industry overcapacity and losses. The company's ability to roll over its $275M senior unsecured notes depends on market conditions and its financial performance. Failure to refinance could lead to restructuring or bankruptcy. The stock price has fallen significantly.
I have read here (and elsewhere) a few reports on Clearwater Paper Corp (CLW), which is a solid bleached sulfate (SBS) paperboard manufacturer headquartered in Spokane, Washington.
CLW was selling around 0.4x book value when I bought it, and since then the stock price has fallen quite a bit.
I am learning all I can about value investing, but I admit that when I read about this company I was rather ignorant. I assumed that buying at 0.4x book in an industry that is long-term viable was a no-brainer.
My question is about debt financing, however let me first give a quick overview of where CLW is at this moment.
So the SBS paperboard market is currently dealing with overcapacity (primarily because Sappi Limited, of South Africa, converted one of their magazine plants into an SBS plant because magazines are a declining market). For CLW to make money their plants need to be working at a certain level of utilization, which is currently not possible due to the oversupply. So CLW is losing money (In 2025, they lost $18.6M on $1,555.4M net sales).
The quick ratio is 1.05, total debt/equity is 0.43.
Here's the debt structure:
Due 2027, $64M Revolving Credit Due 2028, $275M in 4.75% Senior Unsecured Notes
My question is this: What are the odds that CLW can roll this debt (the one due 2028) if the pricing pressures don't ease up by then? How can I even approach this question, i.e. are there some historical analogs I should study (perhaps other commodity producers with pricing headwinds)?