Verso Paper Corp.’s bonds rose after the struggling coated-paper said it’s getting closer to completing a debt swap needed for its merger with NewPage Holdings Inc.
The $142.5 million of 11.375 percent subordinated notes due in 2016 have risen to 72 cents on the dollar this week from as low as 61.5 cents on July 8, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. Verso said yesterday it amended terms of its offer to give holders of the notes as much as 6.67 percent of the combined company’s common stock, compared with 4.77 percent previously.
Verso, controlled by Apollo Global Management LLC, has been trying to convince second-lien and subordinated bondholders to go along with an exchange that will clear the way for its $1.4 billion deal to buy NewPage.
Acceptance now appears “likely,” after the paper maker sweetened terms and lowered the required participation threshold to 70 percent of the outstanding subordinated noteholders from 75 percent, Brian Bogart, an analyst at Montpelier, Vermont-based debt-research firm KDP Investment Advisors Inc. said in a note today.
Verso said 70 percent of subordinated holders were already participating in the exchange. That’s up from the 12.4 percent of the subordinated notes that were tendered by a previous July 16 early deadline.
Verso also increased the amount of debt that subordinated bondholders would get through the exchange, which is on a sliding scale depending on the level of participation. If noteholders owning 75 percent of the securities tender, the debt would be swapped at a rate of 63.5 cents on the dollar for new securities. Previously, it offered 60.7 cents.
The $396 million of 8.75 percent second-lien notes due in 2019 have climbed to 59.5 cents on the dollar from 48 cents on July 22, according to Trace. Verso needs 75 percent acceptance from the second-lien investors, KDP said. About 72.4 percent have agreed to the exchange.
“Completion of the tender offers for both issues is the biggest hurdle to consummating the merger of Verso with NewPage,” Bogart said in the note. The deal will “result in a larger and financially stronger company compared to Verso’s strained financial condition.”
Verso’s exchange offers expire July 30.