S&P assigns BB+ rating to NewPage's US$350M debtor-in-possession asset based revolving loan facility, BB- to US$250M debtor-in-possession term loan

Kendall Sinclair

NEW YORK , October 10, 2011 (press release) –

We are assigning point-in-time ratings to paper manufacturer NewPage Corp.'s $600 million debtor-in-possession (DIP) credit facilities.
We are rating the $350 million DIP ABL facility 'BB+' and the $250 million DIP term loan 'BB-'.
The higher rating on the ABL facility reflects its "first out" position relative to the term loan in a default scenario and our expectation that the ABL facility would retain ample collateral coverage if the bankruptcy were to convert to a Chapter 7 asset liquidation.

Standard & Poor's Ratings Services said today it assigned its 'BB+' rating to Miamisburg, Ohio-based NewPage Corp.'s $350 million debtor-in-possession (DIP) asset based revolving loan (ABL) facility and its 'BB-' rating to its $250 million DIP term loan.

The facilities mature 18 months after the filing date of the bankruptcy petition (Sept. 7, 2011). The DIP facilities constitute super-priority administrative expense claims. The collateral package for the DIP facilities primarily includes a first priority lien on working capital assets and a second priority lien (junior to NewPage's pre-petition first-lien notes and second-lien notes) on pre-petition property, plant, and equipment (PP&E).

The company's corporate credit rating remains 'D'.

Miamisburg, Ohio-based NewPage Corp., its parent companies NewPage Holding Corp. and Newpage Group, and certain of their U.S. subsidiaries filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code on Sept. 7, 2011. Separately, the company's Canadian subsidiary, NewPage Port Hawkesbury Corp., has brought proceedings before the Supreme Court of Nova Scotia under the Companies' Creditors Arrangement Act of Canada.

On Sept. 8, 2011, the U.S. bankruptcy court in Delaware issued an interim order which authorized the company to borrow up to $495 million of the $600 million DIP facilities, (subject to borrowing base and other availability limitations). Proceeds from the initial borrowings were used to repay the company's pre-petition asset-based lending facility, pay certain reorganization costs, and to add cash to its balance sheet. On Oct. 5, 2011, the bankruptcy court issued a final order authorizing access to the full amount available under the DIP facilities.

The ratings primarily reflect Standard & Poor's view of the prospects for full cash repayment of the ABL facility and the term loan at the time the company completes its reorganization and emergence from its Chapter 11 bankruptcy proceeding in the U.S. We rated the ABL facility two notches higher than the term loan based on our assessment of the recovery value afforded by the assets securing the ABL facility in the event that liquidation becomes necessary.

These DIP loans ratings are a point-in-time rating. Accordingly, the ratings are effective only for the date of this report and we will not review, modify, or provide ongoing surveillance of the ratings. Standard & Poor's notes that these ratings are based on, among other things, the credit agreement dated Sept. 8, 2011, the interim order by the U.S. bankruptcy court dated Sept. 8, 2011, and the final order dated Oct. 5, 2011.

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