Verso Paper debt restructuring pushes out $840 million of debt to 2019

By Lisa Kerner

Charlotte, N.C., May 14 - Verso Paper Corp. began several capital structure refinancing initiatives to extend its average debt maturity by 2.5 years to 2018, chief financial officer Robert Mundy said during the company's first-quarter earnings call on Monday.

The company refinanced its first-priority senior notes with $345 million of new 11¾% notes due 2019.

More recently, Verso exchanged $167 million of second-lien floating-rate notes due 2014 for $167 million new 1.5-lien notes due 2019 and exchanged $158 million of senior subordinated notes due 2016 for $105 million of the new 1.5-lien notes.

On May 4, Verso closed on the refinancing of a $200 million cash flow revolver with a $150 million ABL facility and a $50 million cash flow revolver, both with five-year terms, said Mundy.

Overall, about $840 million of the 2012-to-2016 maturities were pushed back to 2019.

"We now have less than 7% of our debt maturing before 2016," Mundy said.

Covenant and collateral packages were also improved and standardized.

Mundy said the next debt priority is the Holdco term loan maturing in 2013.

Outgoing chief executive office Michael Jackson said the first quarter was seasonally challenging, with a larger-than-expected drop in magazine advertising spending, resulting in a distorted year-over-year comparison.

"Additionally, pulp prices were almost $90 per ton below last year's levels and, although input prices eased compared to the fourth quarter of 2011, they were significantly higher than last year's first quarter," Jackson said.

Pulp and paper prices are expected to gain momentum in the second quarter, and three pulp price increases, each for $30 per metric ton, have been announced since March 1.

Financial highlights

For the first quarter ended March 31, Verso had an operating loss of $12.3 million, compared with operating income of $14.1 million for the prior-year period.

Verso's net sales for the first quarter of 2012 decreased $41.3 million, or 9.9%, to $375.3 million, reflecting an 8.2% decrease in sales volume and a 1.9% decrease in the average sales price for all of the company's products. The decline was impacted by the permanent shutdown of three paper machines in the fourth quarter of 2011.

The company had a net loss of $73.9 million in the first quarter of 2012, or $1.40 per diluted share, which included $34.9 million of charges from special items, or $0.66 per diluted share, primarily due to debt refinancing and unrealized hedge losses. Verso had a net loss of $44.6 million, or $0.84 per diluted share, in the first quarter of 2011, which included $26.5 million of charges from special items, or $0.50 per diluted share, primarily due to losses associated with debt refinancing.

Verso is a Memphis-based producer of coated papers.

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