Verso Paper's planned merger with NewPage moving forward; stakeholders' commitment to complete debt exchange offers will be important step toward merger, which also will need antitrust clearance, but deal still expected to close in H2, says Verso CEO

CUMBERLAND, Maryland , July 7, 2014 () – The latest action in the planned merger between Verso Paper Corp. and NewPage involves complex financial moves but the purpose is still the same, to edge the difficult merger forward after a series of recent reverses. NewPage owns the Luke paper mill, which employs more than 800 people.

Verso is deeply in debt and to acquire NewPage needs the cooperation of the bond and note-holders to whom they owe money. In essence, Verso needs to renegotiate terms of the debt. On Wednesday, Verso announced it has received cooperation from stakeholders that it needs to move forward in what is called an exchange offer.

"We thank the ... noteholders who have already committed to the exchange offers for their support," said Verso President and CEO Dave Paterson. "Completing the exchange offers is an important step toward completing our acquisition of NewPage, which, pending antitrust clearance and the exchange offers closing, is still expected to close in the second half of 2014."

The exchange deal, if completed, would improve the cash and debt position of Verso, so that the merger with NewPage could move forward.

Recently, Moody's, one of two international powerhouse credit rating agencies, downgraded some of Verso's debt notes, and in a companion analysis opined that difficulties may be ahead for the intended merger. Moody's also thought that Verso could default on debt payments while pursuing the merger and be headed for bankruptcy if the merger fails. The new deal should make that disaster less likely.

Moody's analysis did hold out some hope, however, for the merger.

"If the merger closes and Verso is able to successfully integrate the operations of NewPage, improve its ability to cope with the declining coated paper industry through improved management of operating capacity and obtain significant synergies, Verso ... might be upgraded," according to the Moody's research document.

NewPage emerged from Chapter 11 bankruptcy in late 2012. Both companies reported losses in the first quarter of 2014. Merger plans were announced in January with Verso planning to acquire NewPage by the end of the year. Verso is the smaller of the two companies.

Verso is based in Tennessee. NewPage is based in Ohio.

Matthew Bieniek can be contacted at mbieniek@times-news.com.

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