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SMART Papers Files for Chapter 11 to Address Financial Challenges and Position Company for Future

Press release from the issuing company

HAMILTON, Ohio--March 22, 2006-- SMART Papers, LLC, and certain of its affiliates today announced they have filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code with the United States Bankruptcy Court for the District of Delaware. SMART Papers also filed motions with the Court seeking immediate relief to ensure the company's continued ability to conduct normal operations. The case was filed late yesterday afternoon. The company said Chapter 11 protection will enable it to address its financial challenges and become a more efficient, cost-effective manufacturer and supplier of printing papers in North America. After careful consideration of all alternatives, SMART Papers and certain of its affiliates elected to file for Chapter 11 and determined that the action was in the best interest of the company, its employees, customers, creditors, suppliers and other stakeholders. SMART Papers said it expects to continue operations at its Hamilton, Ohio, papermaking center, and its Buena Park, CA distribution facility, as well as through its affiliate's West Chicago, Illinois distribution center, throughout the Chapter 11 process. To help support its business during the Chapter 11 proceedings, SMART Papers has obtained debtor-in-possession (DIP) financing from Wachovia Capital Finance, Ft. Lauderdale, and CIT Group, New York. "Our customers can be confident that we are in business--manufacturing and distributing our core lines of cast-coated, matte-coated and premium uncoated papers at our Hamilton, Ohio headquarters," said SMART Papers CEO and President Tim Needham. "Our customers also can rest assured that they are our first priority and that sales and customer service functions will stay in place." Needham added: "Electing to file Chapter 11 is a necessary and responsible step. It will preserve the company's value for the benefit of all parties who have an interest in the company's future." The company said it specifically expects to continue to: -- Manufacture and market its portfolio of 12 premium cast-coated, matte-coated and uncoated writing text and cover brands; -- Maintain and/or expand its relationships with customers, fulfill orders and provide sales and customer support services; -- Provide employee wages, healthcare coverage and similar benefits without interruption; and -- Pay suppliers for goods and services received during the Chapter 11 process. Moving toward a stronger, more marketable SMART Papers During the last 10 months, SMART Papers and its affiliates implemented an aggressive transformation process in its effort to increase profitability. However, the company was hampered by fast rising and, in some cases, record-setting costs for energy, wood fiber, transportation and logistics. This, together with continued pressure on gross margins for commercial printing papers, did not allow the company to realize the full benefits of its transformation strategy as quickly as it intended. On March 17, 2006, SMART Papers announced its affiliate, PF Papers, LLC, would discontinue operations at its Park Falls, Wisconsin, pulp and papermaking facilities. PF Papers acquired that operation in February 2005 after the prior owners, Fraser Papers of Toronto, Canada, said it would discontinue its Midwest U.S. operations and shut down the plant. Needham said PF Papers and its employees worked hard to restructure the Park Falls papermaking center but were unable to offset the rising input costs and pricing pressures on many of its brands manufactured in Wisconsin. Officials from SMART Papers and certain of its affiliates determined that they had no effective alternative but to use the protection provided by the U.S. bankruptcy laws. SMART Papers said the time and flexibility available to it under the Chapter 11 process will enable it to strengthen and expand its transformation strategy. This will help ensure the maximum value for the company and its assets are realized.