Apollo-Backed Verso’s Bonds Plunge Following Weak Paper Forecast

Verso Corp. can’t catch a break.

Just a week after the Apollo Global Management LLC-backed coated-paper maker made $79 million in interest payments even with speculation to the contrary, bondholders are losing faith in Verso. This time, weak pricing forecasts for the industry are driving the sell-off.

Verso’s bonds plunged by more than 20 percent since industry researcher RISI published a report on July 17 showing that coated-paper prices fell by about $20 per ton in July. The company’s $650 million of 11.75 percent first-lien bonds due January 2019 last traded at 45.25 cents on the dollar to yield 44.1 percent at 4:07 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

The RISI report sparked the selloff, according to Howard Bryerman, a debt analyst at Penn Capital Management Co., whose firm owns Memphis, Tennessee-based Verso’s bonds. The price decline reflects the effects of the strong dollar in reducing domestic demand, he added.

“It’s significant but not material, but in the paper industry, in secular decline, it is magnified,” Bryerman said. “That is probably the major takeaway. Prices are simply going down not up.”

Charles Zehren, an Apollo spokesman at Rubenstein Associates, and Kathi Rowzie, a spokeswoman for Verso, didn’t immediately return phone calls and e-mails seeking comment.

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