Verso Paper units plan exchange offers for 8¾% notes, 11 3/8% notes related to NewPage merger

By Susanna Moon

Chicago, Jan. 6 - Verso Paper Corp. said that two of its wholly owned subsidiaries, Verso Paper Holdings LLC and Verso Paper Inc., plan exchange offers for their outstanding 8¾% second-priority senior secured notes due 2019 and 11 3/8% senior subordinated notes due 2016.

In exchange, the companies are offering new second-priority adjustable senior secured notes and new adjustable senior subordinated notes.

The exchange offers are connected to Verso Paper Corp.'s plans to acquire NewPage Holdings Inc., according to a company press release.

The issuers also will solicit consents to amend the notes to eliminate or waive substantially all of the restrictive covenants and events of default and modify covenants regarding mergers and transfer of assets. The provisions require the consent of a majority of each series of outstanding notes.

In addition, the consents will authorize a release of the liens and security interests in the collateral securing the 8¾% notes. The collateral release requires consents from holders of at least two-thirds of the outstanding notes.

New second-lien notes

Prior to the completion of the merger, the new second-lien notes will have substantially the same terms as the old second-lien notes. The new second-lien notes will have their original principal amount of $396 million, a coupon of 8¾% and maturity date of Feb. 1, 2019.

They will be governed by covenants that are substantially the same as the old covenants. If the merger fails to go through, the new notes will retain their original principal amount and the same terms.

Upon the completion of the merger,

• The principal amount of the outstanding new second-lien notes will be adjusted so that a holder of $1,000 principal amount of new second-lien notes immediately prior to the merger will hold $470 principal amount of new second-lien notes immediately following the merger;

• The maturity date of the new second-lien notes will be extended to Aug. 1, 2021;

• The interest rate will be adjusted to 10% per year from the merger date;

• The optional redemption provisions will be amended; and

• The new second-lien notes will thereafter be governed by different covenants.

New subordinated notes

Prior to the completion of the merger, the new subordinated notes will have substantially the same terms as the old subordinated notes. The new subordinated notes will have their original principal amount of $142.5 million, a coupon of 11 3/8% and a maturity date of Aug. 1, 2016.

They will be governed by covenants that are substantially the same as the old covenants. If the merger fails to go through, the new notes will retain their original principal amount and the same terms.

Upon the completion of the merger,

• The principal amount of the outstanding new subordinated notes will be adjusted so that a holder of $1,000 principal amount of new subordinated notes immediately prior to the merger will hold $570 principal amount of new subordinated notes immediately following the merger;

• The maturity date of the new subordinated notes will be extended to Aug. 1, 2022;

• The coupon will be adjusted to 11.5% beginning with the merger completion date;

• The optional redemption provisions will be amended; and

• The new subordinated notes will be governed by different covenants.

More offer details

The new notes will be guaranteed by the wholly owned domestic restricted subsidiaries of Verso Paper Holdings LLC that guarantee its credit facilities. After the merger, the new notes also will be guaranteed by NewPage but not its subsidiaries, the release noted.

The exchange offers and consent solicitations are expected to run from Jan. 13 through midnight ET on Feb. 10.

The offers are conditioned on obtaining tenders for a certain percentage of the aggregate outstanding principal amount of each series of notes.

Those who tender their notes by the early tender deadline of 5 p.m. ET on Jan. 28 will receive the total purchase price of par for each $1,000 principal amount of each series of notes, which includes an early tender payment of $30 per $1,000 of notes.

Holders who tender their notes after the early date will receive $970 principal amount for each $1,000 principal amount of notes.

Global Bondholder Services Corp. (866 470-3700 or 212 430-3774) is the information agent for the exchange offers.

Verso is a Memphis-based producer of coated papers.

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