Verso Paper again extends offers needed for buyout; NewPage responds

By Susanna Moon

Chicago, Feb. 21 - Verso Paper Corp. said its subsidiaries Verso Paper Holdings LLC and Verso Paper Inc. again extended the exchange offers for two series of notes after falling short of the minimum tender condition.

Meanwhile, NewPage Holdings Inc. has responded to Verso's concerns about its inability to complete the offers related to its acquisition plans.

As previously announced, the closing of the merger is conditioned on completion of the exchange offers.

The exchange offers will now end at 5 p.m. ET on Feb. 27, extended from 5 p.m. ET on Feb. 20, 5 p.m. ET on Feb. 14 and, before that, midnight ET on Feb. 10. The offers began Jan. 13.

All other offer terms still remain unchanged, according to a company press release.

As previously announced, the companies are tendering for their $396 million of outstanding 8¾% second-priority senior secured notes due 2019 and $142.5 million of outstanding 11 3/8% senior subordinated notes due 2016.

As of 5 p.m. ET on Feb. 14, holders had tendered for exchange about $8.1 million of the 8¾% second-lien notes and roughly $2.8 million of the 11 3/8% subordinated notes, according to the release.

The tally remains unchanged as of Feb. 21.

NewPage refuses waiver

NewPage sent a letter to Verso on Feb. 20 denying Verso's request that NewPage waive or amend the merger condition related to the exchange offers and consent solicitations, according to an 8-K filing Friday with the Securities and Exchange Commission.

The NewPage board, "in deciding to recommend the merger to its stockholders, gave great weight to the deleveraging nature of the transaction and the debt reduction to be achieved by the exchange offers and consent solicitations, and this remains a fundamental element of the transaction from NewPage's perspective," the letter said.

"We do not consent to Verso's request for a waiver or amendment, and you should not assume that we will waive the exchange offer condition or that we will provide any flexibility whatsoever with respect to debt reduction in the future.

"If Verso is unable to satisfy the exchange offer condition, we will reevaluate the merger and consider all our options."

Verso said on Jan. 28 that it warned NewPage's board of directors that it could fall short of obtaining the needed threshold in the exchange offers and consent solicitations.

Each exchange offer is conditioned on obtaining tenders for at least 85% of each outstanding note series. Neither offer is conditioned on completion of the other.

The company wrote to NewPage, "In light of substantially less participation by the early tender time as compared to the minimum participation thresholds, and based on the large disparity between what a group of non-participating noteholders has requested and what Verso is able to offer under the merger agreement governing the pending merger, Verso is concerned about its ability to consummate the exchange offers as required under the merger agreement," according to a previous 8-K filing with the Securities and Exchange Commission.

Offer details, background

The issuers are offering to exchange new second-priority adjustable senior secured notes and new adjustable senior subordinated notes for the old second-priority notes and the old subordinated notes, respectively.

In connection with the exchange offers, the issuers also are soliciting consents to amend the old second-lien notes, the old subordinated notes and the indentures governing the notes.

The proposed amendments will eliminate or waive substantially all of the restrictive covenants, eliminate some events of default, modify covenants about mergers and transfer of assets and modify or eliminate some other provisions. In order to amend a series of notes, consents are needed from the holders of a majority of that series.

In addition, the consents for the old second-lien notes will authorize a release of the liens and security interests in the collateral securing the old second-lien notes. The collateral release requires consents by the holders of at least two-thirds of the old second-lien notes.

Holders will receive $1,000 principal amount of new notes in exchange for each $1,000 principal amount of old notes tendered by the early tender time, midnight ET on Jan. 27. This includes a consent and early tender payment of $30 per note.

The issuers will not pay accrued interest on the old notes exchanged for new notes; however, interest on the new notes will accrue from Feb. 1.

Note terms

Prior to the merger, the new second-lien notes will have substantially the same terms as the old second-lien notes, and the new subordinated notes will have substantially the same terms as the old subordinated notes, as previously noted.

Once the merger is completed, the principal amount of the new notes will be adjusted downward and their terms will be amended.

Each $1,000 principal amount of new second-lien notes will be adjusted to $470, the maturity date will be extended to Aug. 1, 2021, and the interest rate will be increased to 10%.

Each $1,000 principal amount of new subordinated notes will be adjusted to $570, the maturity date will be extended to Aug. 1, 2022, and the interest rate will be increased to 11½%.

For both series of notes, the optional redemption provisions will be amended and the notes will thereafter be governed by different covenants.

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 information agent is Global Bondholder Services Corp. (212 430-3774 for brokers and banks; others call 866 470-3700).

Verso Paper is based in Memphis. It makes coated papers and specialty products.

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