NewPage Bonds Fall After Record Drop Yesterday, Trace Shows
Bonds of NewPage Corp., the coated- paper maker owned by Cerberus Capital Management LP, declined after a record tumble yesterday that was triggered by earnings lower than analyst expectations.
Its $806 million of 10 percent second-lien notes due May 2012 fell 6.3 cents to 39.9 cents on the dollar as of 12:52 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The debt dropped 11.6 cents yesterday and is at the lowest level since August.
The Miamisburg, Ohio-based company is attempting to cut costs and reduce debt by selling assets after demand for coated- paper declined since 2008. Leon Black’s Apollo Global Management LLC and Avenue Capital Group, run by Marc Lasry, hold more than $400 million of NewPage’s 10 percent second-lien bonds, two people familiar with the matter said last month.
“A financial restructuring is likely this year or early next year,” Brian Bogart, an analyst at KDP Investment Advisors Inc. in Montpelier, Vermont wrote in a report today. “The 10 percent second-lien notes are the fulcrum security, and we think there is a good chance that” the owners of the debt will end up with equity in a restructuring, he wrote.
NewPage said first-quarter adjusted earnings before interest, taxes, depreciation and amortization were $85 million compared with $132 million in the fourth quarter.
JPMorgan Chase & Co. said that unadjusted Ebitda of $70 million was below its $92 million estimate and is “down substantially” from $114 million in the fourth quarter, the bank said in a note yesterday.
“The biggest drivers behind the falling bond prices are the $85 million EBITDA, which is below Wall Street’s expectation, and coated-paper prices,” Rahul Gandhi, an analyst at debt-research firm CreditSights Inc. in London said yesterday.
Lazard Ltd., FTI Consulting Inc. and law firm Dewey & LeBoeuf LLP are working with NewPage as a debt restructuring looms, the people said last month.
Under its credit agreement, NewPage has to repay or refinance the second-lien bonds by Jan. 31, or its $1.77 billion of 11.375 percent bonds coming due in December 2014 will mature instead in March 2012, according to a regulatory filing yesterday.
The company also disclosed in the filing that Robert Nardelli resigned from its board of directors. He joined the board in June about five years after Cerberus took control of the company when it bought MeadWestvaco Corp.’s paper business for $2.3 billion.
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