Verso Paper Corp. (fka VRSZQ)

[Stanner]

VRSZQ~DJ Paper Maker Verso to Poll Creditors on Bankruptcy-Exit Plan

Last update: 09/05/2016 9:52:42 am


By Peg Brickley


Verso Corp. won court approval Monday to poll creditors on a bankruptcy-exit plan designed to get its balance sheet in line with the lower demand for paper in an era of digital information delivery.

Many creditors have already lined up to support the restructuring of the country's largest maker of coated paper stock even though it means a recovery of pennies on the dollar for more than $700 million worth of debt. Verso filed for bankruptcy in January with more than $2.4 billion in debt.

If the chapter 11 workout plan is approved at a late June confirmation hearing, Verso is poised to exit chapter 11 in July, court papers say.

Confirmation hearings could see some arguments over what the company is worth, lawyers for some bondholders that support Verso's plan said Monday. The potential dispute affects the value of some of the warrants being offered to creditors in the debt-for-equity swap embodied in the plan, said Thomas Kreller, lawyer for Verso's first-lien lenders.

Verso's lawyer said it is likely the dispute will be resolved by talks before the confirmation hearing. The company's valuation analysis puts a value of about $700 million on the new common stock and warrants that are the chief currency for paying off creditors,

Judge Kevin Gross approved chapter 11 plan voting materials at a hearing Monday in the U.S. Bankruptcy Court in Wilmington, Del., noting the cooperation and compromise that went into coming up with a survival strategy for the debt-laden company.

Verso enlisted the support of the official committee of unsecured creditors in April by offering $3 million in cash, as well as a pledge to spend tens of millions of dollars on "critical trade" debts, bills from vendors necessary to Verso's future success.

A problem-plagued acquisition of former rival New Page, a sharp decline in demand for coated paper products and a significant increase in foreign imports rendered Verso unable to sustain an annual interest expense of more than $270 million, according to chapter 11 plan materials.

New Page was in bankruptcy itself when Verso began pursuing it, but Verso wasn't able to close a deal until January 2015, years after New Page emerged from chapter 11 protection. The need to come to terms with antitrust regulators added to the delay in getting to a deal that Verso said would improve its competitive position.

Now equity is being taken from shareholders to appease Verso's creditors and allow the company to continue to operate.

Under the chapter 11 plan, investors in Verso's first-lien debt, a group owed $1.18 billion, are getting about half the restructured company. A 47% stake in the restructured company is going to lenders to NewPage, including lenders that helped finance the bankruptcy, who are being paid in full. NewPage's term loan lenders, owed about $576 million, will get about 24 cents on the dollar, according to estimates in voting materials.

Holders of Verso's senior bonds and subordinated debt will get less than 3% of what they are owed, while general unsecured creditors are expected to receive about nine cents on the dollar, plan documents say.

The Memphis, Tenn., company owns paper mills in Maine, Maryland, Michigan, Minnesota and Wisconsin. A mill in Kentucky was closed in April.

-Jacqueline Palank contributed to this article.

(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go to http://dbr.dowjones.com)

Write to Peg Brickley at [e-mail]


(END) Dow Jones Newswires

May 09, 2016 12:52 ET (16:52 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.