Verso Paper adds covenant terms for notes to be issued in swap offers

By Susanna Moon

Chicago, May 7 - Verso Paper Holdings LLC and Verso Paper Inc. amended the terms of the exchange offers and consent solicitations for their second-priority senior secured floating-rate notes due 2014 and for their 11 3/8% senior subordinated notes, according to an 8-K filing with the Securities and Exchange Commission by Verso Paper Corp., the parent company of Verso Paper Holdings.

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.

Verso Paper said on April 24 that two of its wholly owned subsidiaries began an exchange offer and consent solicitation for their outstanding 11 3/8% notes due 2016.

On April 24 the issuers also amended the existing exchange offer for their $180,216,000 of second-priority senior secured floating-rate notes due 2014.

The amendments follow the companies' discussions with some holders of the floaters and will result in holders of more than a majority of the notes participating in the offer, according to a company press release.

11 3/8% notes exchange offer

As reported before, 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 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 floaters.

The issuers also are soliciting consents to amend the notes to modify some restrictive covenants. Holders who tender their notes will be deemed to have given their consents to the proposed amendments.

The total purchase price will be $665 principal amount of new notes and cash payment of $110 for each $1,000 principal amount of 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 tender offer will end at 11:59 p.m. ET on May 22.

Holders 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 principal amount.

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.

Tendered notes may withdrawn by the earlier of the consent deadline and the date on which the issuers receive the required consents and execute the supplemental indenture.

If the company receives tenders for more than the offer cap, the notes will be accepted on a prorated basis. 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

Previously, the issuers raised the coupon and extended the maturity for the new notes to be issued in the exchange offer for their $180,216,000 of second-priority senior secured floating-rate notes due 2014.

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.

Holders will now 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 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.

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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