S&P assigns Verso Paper's proposed US$345M senior secured notes due 2019 a BB- issue level rating and '1' recovery rating

Kendall Sinclair

NEW YORK , March 8, 2012 (press release) – Standard & Poor's Ratings Services said today it assigned its 'BB-' issue-level rating (two notches higher than the corporate credit rating) and '1' recovery rating to Verso Paper Holdings LLC's proposed $345 million senior secured notes due 2019. The '1' recovery rating indicates expectations for very high (90% to 100%) recovery of principal in the event of payment default. The notes are expected to be sold pursuant to Rule 144A of Securities Act of 1933.

The company intends to use net proceeds from the proposed senior secured notes to pay the consideration for its announced cash tender offer for its existing $315 million 11.5% senior secured notes due 2014 and to pay for certain related transaction costs and expenses.

(For the complete recovery analysis, see the recovery report on Verso Paper, to be published as soon as possible following the release of this article.)

The 'B' corporate credit rating on the company remains unchanged and reflects Standard & Poor's Ratings Services' view of the combination of its "highly leveraged" financial risk and "weak" business risk (as our criteria define the term). Our ratings incorporate the company's limited product diversity, substitution risks due to changing customer preferences for greater electronic content, and vulnerability to fluctuations in input costs and selling prices. In addition, despite our expectation that credit measures will remain somewhat weak over the next year, we expect liquidity to remain adequate, attributable to its cash position, proposed new credit facilities, and manageable near-term debt maturity profile following the proposed transaction and tender offer. (For the complete corporate credit rating analysis, see the summary analysis on Verso Paper Holdings LLC, published Nov. 21, 2011, on RatingsDirect.)

Verso's core business is as a producer of coated freesheet and coated groundwood papers serving customers in the catalog, magazine, inserts, and commercial-print markets.

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