NewPage Holdings Inc., the closely held paper company that agreed last month to be bought by Verso Paper Corp. (VRS) for about $907 million, rejected a request by Verso to waive or amend a condition of the deal.
Verso asked to complete the takeover without having to execute a debt exchange offer first, NewPage Chairman Mark Angelson wrote in a Feb. 20 letter. In agreeing to the takeover, NewPage’s board gave “great weight” to the debt reduction that would result from the exchange offer, Angelson said in the letter, which was included by Verso in a filing today.
“If Verso is unable to satisfy the exchange offer condition, we will re-evaluate the merger and consider all our options,’ he said.
Verso agreed to pay a mixture of cash and stock for Miamisburg, Ohio-based NewPage. The combined companies would control about half the North American market for the supply of paper used in magazines and photocopiers, Ed Sustar, a Toronto-based credit analyst at Moody’s Investors Service, said last month. They would have 11 plants in six states, generating about $4.5 billion of revenue, according to Verso.
‘‘Verso is trying to scare some bondholders into thinking that if they don’t comply the deal will fall through,” Rahul Gandhi, a London-based analyst with CreditSights Inc., said in a phone interview. Verso will probably come back with a better offer if bondholders “hold strong,” he said.
No one at Memphis, Tennessee-based Verso was immediately available for comment.
Last month Verso began an offer to exchange new securities for all the subordinated notes and for $396 million of Verso’s 8.75 percent, second-lien debt due in February 2019, according to a Jan. 13 statement.
The transaction was to reduce Verso’s debt by about $270 million, Nathaniel Garnick, a spokesman for Verso who works at Sard Verbinnen & Co., said last month in an e-mail.
The debt swap would give holders of Verso’s 8.75 percent notes 47 cents on the dollar and owners of the 11.375 percent securities 57 cents, according to the Jan. 13 statement, as well as boosting the interest rate in order to extend maturities.
Verso’s $142.5 million of 11.375 percent subordinated notes due in August 2016 traded at 69.75 cents on the dollar on Feb. 19, up from 69.5 cents on Jan. 13, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Verso said today that it was extending the expiration date for its debt swap offers by one week to Feb. 27. About $8.1 million of old second lien notes and $2.8 million of the old subordinated Notes had been tendered for exchange as of yesterday at 5 p.m. in New York.
Verso was purchased by Apollo for $1.6 billion in a leveraged buyout in 2006 and had $1.27 billion of total debt at the end of September, according to data compiled by Bloomberg.
NewPage, which emerged from bankruptcy in 2012, has less than half of Verso’s debt and about twice the earnings before interest, taxes, depreciation and amortization, according to Brian Bogart, a Montpelier, Vermont-based analyst at KDP Investment Advisors Inc.
As part of the takeover agreement, NewPage shareholders would receive a $250 million dividend funded with a $750 million term loan before the completion of the acquisition, according to a Jan. 6 regulatory filing. The rest of the money was to be used to refinance $500 million of bank debt.
Verso shares fell 2 percent to $2.40 at 10:37 a.m. in New York.