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NewPage's Liquidity `May Prove Fatal' in 2011, CreditSights Analysts Say

NewPage Corp., the coated-paper maker owned by Cerberus Capital Management LP, has a “very thin” liquidity cushion and “2011 may prove fatal,” debt-research firm CreditSights Inc. said in a report.

NewPage’s debt tumbled by the most in almost six months yesterday after the Miamisburg, Ohio-based company reported a $174 million second-quarter loss even as sales increased. Chairman Robert Nardelli said NewPage is “focusing on specific cost initiatives” after posting the loss, which widened 29-fold from a year ago. The company said it had $7 million of cash and $113 million available on its credit line.

Next year “could prove to be fatal if current positive operating momentum on the volume front faces economy-related hiccups,” analysts Rahul Gandhi and Chris Ucko of New York- based CreditSights said yesterday.

“Based on our projections, we are comfortable with the year-end” liquidity level without any asset sales, said Amber Garwood, a NewPage spokeswoman. Gandhi declined to comment beyond the report.

NewPage’s $1.7 billion of 11.375 percent senior secured notes due in 2014 fell 0.5 cent to 87.75 cents on the dollar as of 2:37 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The debt fell 3.5 cents yesterday, the biggest decline since Feb. 8, amid the securities’ busiest day of trading on record, Trace data show.

The company’s $783 million of 10 percent notes due in 2012 fell 8.25 cents to 47.75 cents yesterday and have declined from 87 cents in January, Trace data show.

Cerberus acquired NewPage for $2.52 billion in December 2007, according to data compiled by Bloomberg.

To contact the reporter on this story: John Detrixhe in New York at jdetrixhe1@bloomberg.net

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