Verso Paper gets consents to amend 11 3/8% notes, floaters in offers

By Susanna Moon

Chicago, May 9 - Verso Paper Corp. said investors had tendered $285,351,000, or 95.12%, of the 11 3/8% senior subordinated notes due 2016 issued by Verso Paper Holdings LLC and Verso Paper Inc., which they plan to purchase using a proration factor of about 55.2%.

The early tender deadline was 5 p.m. ET on May 8, and the companies received the needed consents to amend the notes to modify the restrictive covenants, according to a company press release.

As a result the companies executed a supplemental indenture, which will become operative when they settle the early tendered notes.

The companies are offering to issue up to $104,737,500 principal amount of 11¾% secured notes due 2019 in exchange for up to $157.5 million principal amount of the issuers' outstanding $300 million principal amount of old 11 3/8% notes. The offers began on April 24.

The new notes will be issued under the same indenture and will be of the same class as any new notes issued in the existing exchange offer for the companies' second-priority senior secured floating-rate notes.

The total purchase price will be $665 principal amount of new notes and cash payment of $110 for each $1,000 principal amount of 11 3/8% notes tendered by the early deadline of 5 p.m. ET on May 8. The total payout includes an early tender premium of $50 per $1,000 of notes.

The offer will remain open until 11:59 p.m. ET on May 22. Holders may no longer withdraw tendered notes.

Those who tender after the early deadline will receive the base payment of $665 principal amount of new notes and cash payment of $60 for each $1,000 of old notes.

As previously reported, the exchange offer and consent solicitation are conditioned on the tenders and related consents by holders of more than half of the old notes and the completion of the existing exchange offer and consent solicitation for the floaters.

The companies said before that if they receive tenders for more than the offer cap, the notes will be accepted on a prorated basis. The companies also said that if the offer cap is reached before the early deadline, no more notes will be accepted.

Settlement is expected to occur on May 25.

Floaters exchange offer

The issuers also received tenders for $166,906,000, or 92.6%, of their $180,216,000 of second-priority senior secured floating-rate notes due 2014 in the exchange offer for new notes.

The companies received the needed consents to amend the notes and executed a supplemental indenture.

The offer was extended by 10 business days to 11:59 p.m. ET on May 8, from 11:59 pm. ET on April 24. The early tender deadline was originally set for 5 p.m. ET on April 10.

Tendered notes may no longer be withdrawn.

Holders will receive $1,000 principal amount of 11¾% secured notes due 2019 plus $30 in cash for each $1,000 principal amount of existing notes exchanged.

The coupon for the new notes to be issued in the exchange offer was increased from 9¾%, and the maturity date of the notes was changed to Jan. 15, 2019 from on Feb. 1, 2019.

The issuers amended the first exchange offer on April 24 after discussions with some holders of the floaters, because they said it would result in holders of more than a majority of the notes participating in the offer, according to a previous press release.

The exchange offer and consent solicitation are conditioned on the tenders and related consents by holders of more than half of the floaters and completion of the exchange offer and consent solicitation for the subordinated notes.

To date, the holders have $19,885,000 principal amount of floaters in the exchange offer. Tendered notes may no longer be withdrawn.

Covenant terms for new notes

The companies amended the terms of the offers on May 7.

Under the amendments, the following covenants were revised for the new series of 11¾% secured notes due 2019 to be issued in the offers:

• The definition of existing fixed-rate second-lien notes was changed to include certain refinancings or exchanges of these notes;

• The debt covenant imposes additional requirements relating to the refunding or refinancing of the issuers' existing second-lien notes; and

• The restricted payments covenant imposes additional restrictions on the ability of the issuers to refinance existing second-lien notes and make certain other restricted payments.

Earlier offer amendments

On April 11 the companies amended the exchange offer for their floaters, extending the $50 early tender payment to all holders who tender before the original offer expiration on April 24. Initially, only holders who tendered by the early deadline of 5 p.m. ET on April 10 were eligible to receive the early tender payment.

Holders who tendered were to receive $1,000 principal amount, including the $50 early tender payment, of new 9¾% secured notes due 2019 in exchange for each $1,000 principal amount of existing notes exchanged.

In addition, the issuers waived the condition requiring the receipt of tenders from holders of more than 50% of the outstanding notes.

The exchange offer began on March 29. The issuer also began a solicitation of consents for waivers and proposed amendments to the floaters and, separately, to authorize release from the liens and security interests in the collateral securing the notes.

Holders who tender their notes in the exchange offer are deemed to have given their consents to both the proposed amendments and the collateral release.

The new notes are being offered in the United States only to qualified institutional buyers in reliance on Rule 144A under the Securities Act and "accredited investors" as defined under Regulation D and outside the United States only to non-U.S. investors under Regulation S.

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

Verso is a Memphis-based producer of coated papers.

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