NewPage Is `Increasingly Toxic' as Cerberus Buys Debt, CreditSights Says
NewPage Corp., the coated-paper maker owned by Cerberus Capital Management LP, is looking “increasingly toxic,” according to CreditSights Inc.
“In light of the latest coated-paper data in North America we now believe the impetus on the operating front has slowed,” and the firm “looks increasingly toxic,” analysts Rahul Gandhi and Chris Ucko at the New York based bond-research firm said in an Aug. 25 report. Investors should “stay out of the name,” they said.
NewPage’s $1.77 billion of 11.375 percent senior secured bonds due 2014 have declined 10.5 cents to 81.25 cents on the dollar since the day before the Miamisburg, Ohio-based company reported a $174 million second-quarter loss on Aug. 5, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Its second-lien debt is priced near 33 cents on the dollar, showing the market is “starting to price in the risk of potential default on the company’s cash coupons,” due in the fourth quarter, the analysts wrote.
Amber Garwood and Shawn Hall, spokeswomen for NewPage, and Gandhi, didn’t immediately return calls. Peter Duda, an outside spokesman for New York-based Cerberus, couldn’t immediately provide comment.
“We understand from market participants that Cerberus, the majority equity holder, has been bulking up its share in the second liens,” Gandhi and Ucko wrote. “This is not a positive indication for current bondholders as its means that Cerberus is looking to climb up the capital structure to ensure it retains control of the equity in any potential restructuring,” they said.
To contact the reporter on this story: Tim Catts in New York at tcatts1@bloomberg.net
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