Royal Paper's Bankruptcy: What Happened?

In early April 2025, Royal Paper LLC, a major supplier of private-label toilet paper for retailers like Trader Joe’s, Aldi, and Kroger, filed for Chapter 11 bankruptcy.
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On the surface, it might have looked sudden. In reality, the company’s collapse had been building for months, if not longer. A deeper look shows this wasn’t a case of bad luck. It was a slow-motion breakdown with warning signs that might have been missed for those who weren't paying close enough attention.

A Slow Unraveling

Royal Paper's headcount had been steadily growing from around 40 employees in 2010 to over 110 by 2025. No sudden mass layoffs. No official WARN notices. At a glance, they appeared stable. But by mid-2024, troubling patterns started surfacing:

Supplier Payment Delays‍

Their average Days Beyond Terms (DBT) climbed over 30 days in summer 2024, nearly tripling the industry average. About 40% of their trade credit balance was past due — a glaring red flag that liquidity was tightening.

Leadership Turnover

A key CFO departure early in 2024. A new CFO installed by June. Then, in March 2025, just weeks before the bankruptcy filing, the Chief Commercial Officer resigned. High-level exits amid financial pressure rarely point to a healthy business.

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Emergency Financing Moves

Facing a major loan maturity at the end of 2024, Royal scrambled to negotiate an extension to mid-2025. They also executed a sale-leaseback on $8.5M worth of equipment. A classic last-ditch liquidity grab.

None of this painted a picture of long-term stability. It painted a company buying time.

When the Sheet Hit the Fan

Royal’s operational problems weren't helping either. In February 2024, a fire at one of their distribution centers crippled shipments at a time when the company was already struggling with labor shortages. Orders were delayed. Customers grew impatient. Revenue that Royal desperately needed started slipping through the cracks.

Meanwhile, the broader market wasn’t forgiving:

• Toilet paper demand, after the pandemic surge, had normalized by 2023.
• Input costs, especially pulp, had climbed sharply.
• Large competitors (like Sofidel, Kimberly-Clark, and Procter & Gamble) passed costs onto consumers.
• Royal, selling private-label products under fixed retailer contracts, had little pricing power to offset the squeeze.

Margins compressed. Cash flow evaporated. Options narrowed.

Timeline: From Soft to Shredded

Below are the events that took place leading up the official bankruptcy at Royal Paper. A tale as old as time, and one to learn from when optimizing your risk watch.

Was It Too Late to Patch the Leaks?

Yes—and probably earlier than most realized. Credit risk models were flashing yellow and red by summer 2024:

• Payment delinquency rose sharply.
• Senior departures hinted at internal instability.
• Emergency liquidity moves pointed to an unsustainable balance sheet.

Royal Paper didn’t implode overnight. It followed the same predictable pattern many distressed companies take: stretching payables, reshuffling leadership, selling assets to buy time... and then running out of it.

By late 2024, Royal wasn't fighting for a comeback, but instead it was fighting for an exit.

The Bottom Line

Royal Paper’s downfall is another reminder that financial collapses almost never happen suddenly. They unfold slowly, out in the open. The data—late payments, turnover spikes, operational cracks—tells the story long before the bankruptcy headlines hit.

The real surprise isn't that Royal Paper filed. The real question is how many people missed the signs or chose to ignore them.

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