Bankrupt NewPage rejects $1.425B merger proposal

The Miami Twp.-based paper producer — which has been under Chapter 11 bankruptcy protection since September 2011 — said a group of its second-lien note holders proposed to a group of first-lien note holders to combine NewPage and Memphis, Tenn.-based Verso Paper Corp.

“After thoroughly evaluating this proposal, NewPage determined that the combination posed significant downside risks to its stakeholders, employees, and business,” the company said in a statement. “NewPage has also been advised that the first-lien note-holder group did not support the proposal. Accordingly, NewPage does not anticipate further discussions.”

NewPage’s announcement came a day after Verso released a statement saying talks about a possible merger were being held.

In its release, Verso said its proposal would provide NewPage’s first-lien noteholders with $1.425 billion of value, consisting of $1.075 billion of new Verso first-lien notes, $150 million of Verso common stock and $200 million cash.

Also, Verso said, the deal would include a 100-percent recovery in cash to repay NewPage’s debtor-in-possession financing, a 100-percent recovery in cash for the priority and administrative claims in the bankruptcy proceedings, a to-be-determined amount of Verso common stock for the holders of NewPage’s second-lien notes, and a to-be-determined recovery for NewPage’s unsecured creditors.

Verso said its leaders believe such a merger “would provide a compelling option for a restructuring in that it would afford NewPage’s first-lien noteholders a very attractive recovery, while at the same time treating fairly the other NewPage constituencies, including its employees, other creditor classes, and customers.”

Verso’s chief financial officer could not be reached for comment.

NewPage’s press release did not address when the company may be leaving bankruptcy. Shawn Hall, a NewPage spokeswoman, said in an email that the company’s next step in the restructuring process is “finalizing and filing our plan of reorganization.” She could not say when the company would exit bankruptcy, and she declined to elaborate on the company’s reasons for rejecting a merger with Verso.

NewPage has about 400 local and 6,000 total employees.

Jon Kerr, executive director of Miami University’s Paper Science and Engineering Foundation, said in the paper industry, where customers are often battled over, mergers are common, and he believes this one would make sense.

“Mergers and acquisitions are sort of commonplace, especially in an environment like the paper industry,” Kerr said.

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