(Bloomberg) -- H.I.G. Capital-backed Pixelle Specialty Solutions LLC and some of its lenders have entered into confidential talks to hammer out a deal that would ease the paper company’s liquidity strain, according to people with knowledge of the situation.

Both H.I.G. and lenders could provide fresh money to shore up Pixelle’s cash reserves, said the people, who asked not to be identified discussing a private matter. Discussions are ongoing and terms have not been finalized, they said. 

The lenders are working with Akin Gump Strauss Hauer & Feld, according to the people. Messages left with H.I.G., Pixelle and Akin weren’t returned Friday afternoon.

S&P Global Ratings downgraded Pixelle to CCC from B- last month, citing operational weakness along with continued cash burn and upcoming debt payments. It also warned a financial covenant breach is likely near-term. 

Pixelle, bought by H.I.G. in 2022, makes papers including for books and food packaging, according to its website. The firm’s term loan maturing in 2028 is quoted 83.125 cents on the dollar, down from 97 cents last September, according to data compiled by Bloomberg. 

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