Vertis launches exchange, tender for 13½% notes, exchange, solicitation for 18½% notes

By Jennifer Chiou

New York, April 16 - Vertis Holdings, Inc. said that its principal operating subsidiary, Vertis, Inc., has started a private exchange offer, a tender offer and a consent solicitation for its 13½% senior pay-in-kind notes as well as a private exchange offer and a consent solicitation for its 18½% senior secured second-lien notes due 2012.

Vertis canceled its 13½% notes exchange offer in February after failing to meet the minimum tender condition.

This time around, the company said that certain eligible holders have executed support agreements whereby they agreed to validly tender about 70% of the 13½% notes and more than 75% of the 18½% notes.

Among other conditions, the company needs valid tenders from holders of at least 95% of each notes series.

13½% notes offers

Vertis is offering to exchange 784.377 shares for each $1,000 principal amount of 13½% notes.

The exchange is only open to qualified institutional buyers or accredited investors.

The company is also tendering for the notes that are not eligible for the exchange offer.

It will pay $400 for each $1,000 principal amount of notes, including a $50.00 early tender payment for those who tender prior to 5 p.m. ET on April 28.

The company is soliciting consents to amend the indenture to remove substantially all of the restrictive covenants and certain events of default, and it will pay $5.00 per $1,000 principal amount for those who deliver consent by the early deadline.

Vertis is seeking consents from holders of a majority of notes. It added that it will fund the offer from a private placement of shares to Avenue Capital Group.

18½% exchange offer

Vertis' private exchange offer involves the issue of new 13% senior secured notes due 2016.

It is offering to exchange $393.73 principal amount of the new notes and $591.27 of cash for each $1,000 principal amount of 18½% notes tendered prior to the early deadline on April 28.

Those who tender after the consent deadline and prior to the offer deadline of 5 p.m. ET on May 18 will receive $393.73 principal amount of new notes and $561.27 of cash for each $1,000 principal amount of 18½% notes.

Those who tender their notes for exchange will receive additional new notes in an amount equal to 98.5% of the accrued interest to the settlement date, including an amount of new notes equal to 3% of accrued interest for those who tender prior to the early deadline.

Assuming settlement on May 21, for each $1,000 principal amount of 18½% notes, the interest would be $25.31 principal amount of new notes for those tendering prior to the consent deadline and $24.54 principal amount of new notes for those tendering after that time.

The company is soliciting consents to amend the indenture to eliminate substantially all of the restrictive covenants and certain events of default and related provisions. It needs consents from holders of at least 75% of the notes.

The offer is also subject to holders not affiliated with Avenue Capital tendering at least 15% of each series of notes.

Overall refinancing effort

The company said that the offers are part of a comprehensive $1.1 billion refinancing of substantially all of Vertis' outstanding secured and unsecured indebtedness.

The refinancing also includes Vertis' existing $225 million revolving credit facility as well as the issue of roughly $600 million of new first-lien indebtedness, the proceeds of which will be used to fund the 18½% notes offer.

Vertis will issue to Avenue Capital about $113 million of new 13%/15% PIK option senior secured notes due 2016 in a private exchange for amounts owed to Avenue Capital under Vertis' existing term loan. It will also exchange about $74 million of existing 18½% notes held by Avenue Capital for shares of Vertis Holdings' 13½% exchangeable pay-in-kind preferred stock.

The overall effect of the refinancing transactions will improve Vertis' capital structure by reducing its debt by more than $250 million while cutting its annual interest expense and extending its debt maturity profile, according to a news release.

Bondholder Communications Group, LLC is the information and exchange agent (212 809-2663).

Baltimore-based Vertis provides print advertising and marketing services.

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