NewPage Corp., the coated paper maker owned by Cerberus Capital Management LP, set the interest rate it will pay on $850 million of loans backing its exit from bankruptcy, according to a person with knowledge of the transaction.
A $500 million six-year covenant-lite term loan, will pay interest at 6.75 percentage points to 7 percentage points more than the London interbank offered rate, said the person, who asked not to be identified because the information is private. Libor, a rate banks say they can borrow in dollars from each other, will have a 1.25 percent floor.
NewPage is proposing to sell the loans at 98 cents on the dollar, the person said, reducing proceeds for the company and increasing the yield to investors.
The company won’t be able to refinance the debt during the first year, then can do so at 102 cents on the dollar in the second year and at 101 cents in the third year, according to the person.
Goldman Sachs Group Inc., JPMorgan Chase & Co., Barclays Plc and Wells Fargo & Co. are arranging the term portion and commitments are due Nov. 15, the person said.
The Miamisburg, Ohio-based company is also seeking a $350 million five-year asset-based revolving credit line which is being arranged by JPMorgan Chase & Co., according to the person. Pricing on the revolver will be initially at 2 percentage points more than Libor, the person said.
Lenders will be paid a 37.5 basis-point fee on any unused portions and are being offered fees of 50 basis points for commitments of at least $35 million and 37.5 basis points for lending under $35 million, according to the person.
NewPage filed for bankruptcy in September 2011, listing assets of $3.4 billion and debt totaling $4.2 billion, the data show.
Shawn Hall, a spokesman for NewPage, didn’t immediately respond to an e-mail seeking comment.
Covenant-lite debt doesn’t carry typical lender protection such as financial-maintenance requirements.