Cumberland Times-News

Local News

March 2, 2014

Verso, NewPage merger may be in trouble

Bondholders not happy with debt exchange deal

CUMBERLAND — Verso Paper Co. has given up, at least for now, on talks with bondholders involving a debt exchange needed to finance a planned merger with NewPage, which owns the Luke paper mill.

Verso said it will continue to explore all options, but without the bondholders on board, the merger is not possible.

Verso officials said they tried to make a deal that would satisfy the bondholders.

“Nonetheless, the Restricted Second Lien Holders demonstrated an unwillingness to engage in constructive dialogue. ... The Restricted Second Lien Holders repeatedly demanded terms for the exchange offers that, Verso believes, would not have enabled Verso to consummate the exchange offers in a manner that satisfies the conditions to its previously announced Merger Agreement,” a press release from Verso said.

A New York-based financial analyst has said both companies could be in jeopardy over the long term without the deal.

Both companies need the merger because the alternative is for the two companies and their debt holders “to commit suicide,” said Chip Dillon of Vertical Research partners in a recent Times-News interview. New Page recently emerged from bankruptcy. The merger would have created a stronger company, although some job losses would be likely as a result of the merger, Dillon said.

Verso also said Friday that not enough bondholders were willing to participate in a debt exchange program needed to finance the merger. It’s unclear whether this is another brinkmanship tactic or the beginning of the end for merger plans.

The bondholders represent money managers and hedge funds, which include investments by pension plans and other organizations that handle money for large numbers of mutual funds and other people who hold Verso debt.

NewPage also told Verso in February that it would not agree to a modification of the merger terms. The Luke mill, which is now owned by NewPage, employs about 825 people.

Matthew Bieniek can be contacted at mbieniek@times-news.com.

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