July 3 (Bloomberg) -- Apollo Global Management LLC-backed Verso Paper Corp.’s bonds have soared on a sweetened debt exchange offer that could give noteholders almost 20 percent of the company’s equity after its merger with NewPage Holdings Inc.
Verso’s $396 million of 8.75 percent second-lien notes jumped to 61.5 cents on the dollar today, from as low as 40.25 cents last week, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. Holders of 54 percent of the bonds, which may receive as much as 15 percent of the common stock in the combined business, have agreed to the exchange offer, according to a statement yesterday from Memphis, Tennessee-based Verso.
Apollo needs holders of at least 75 percent each of Verso’s second-lien and subordinated bonds to agree to an exchange that will reduce the company’s debt, allowing it to close a $1.4 billion deal to buy Miamisburg, Ohio-based NewPage and avert bankruptcy. A previous offer was pulled earlier this year after the second-lien bondholders demanded a 25 percent stake in the combined businesses, compared with Apollo’s proposed 4 percent of Verso alone.
The latest proposal to bondholders is a “good offer” and a lot stronger than the earlier one from Verso, Rahul Gandhi, a London-based analyst with CreditSights Inc. said in a phone interview. They stand to receive almost 20 percent of the stock post-merger, he said.
Holders of Verso’s 11.375 percent senior subordinated notes may receive as much as 4.774 percent of the combined company’s common stock for 100 percent participation in Verso’s exchange offer, according to the statement. The second-lien holders would receive as much as 15 percent of the common shares for their full participation.
The acquisition is expected to close by the end of the year, pending antitrust clearance and the completion of the exchange offers, Verso’s Chief Executive Officer and President Dave Paterson, said in the statement.
Holders of the second-lien notes stand to receive as much as 66.9 cents on the dollar under the latest exchange offer for new notes, while those holding the subordinated bonds may receive as much as 68.2 cents on the dollar, according to a CreditSights research note today.
The second-lien notes traded for as little as 26 cents last year and the subordinated bonds as low as 40 cents, according to Trace.
Verso’s shares traded at $2.75 at 11:46 a.m. in New York, up 20 percent from yesterday’s close.
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