Verso Corp Files for Chapter 11 Bankruptcy Protection

Verso Corp files Chapter 11

Recently, Verso Corp., the second-largest producer of coated groundwood paper in North America, announced that it had filed for Chapter 11 bankruptcy protection. According to The Wall Street Journal, the company has been hit by the decreasing demand for paper products due to online publications. The company’s goal now is to cut its $2.8 billion in outstanding debt as part of its reorganization plan.

Verso Corp spirals into debt

In its court documents, Verso Corp. has been negotiating refinancing and restructuring proposals to eliminate the debt on its balance sheet. Currently, the company’s revenues have been adversely affected by the reduced demand for coated paper for magazines and various print publications. As a result, it pays over $270 million per year in interest payments for its $2.8 billion debt load.

The company’s problems became more complex in early 2015 after it acquired competitor NewPage Corp. for $1.4 billion. Throughout the acquisition process, Verso Corp.’s bondholders were not pleased with the company’s balance sheet. In turn, the company claimed that its acquisition of NewPage Corp. was the last chance it had to avoid insolvency. Following the acquisition, the company did not raise enough cash from new sales, which caused bondholders to force Verso Corp. to reduce costs and begin selling off assets or unwinding portions of its operations.

With a wave of sell-offs among its investors, Verso Corp’s stock plummeted into a penny stock category. This prompted it to begin to close operations in Kentucky and Maine, and sell off a portion of its remaining assets.

Verso Corp’s restructuring proposal calls for agreement with creditors

The reorganization proposal will also call for a debt-for-equity swap with bondholders for majority shares in the newly restructured company. As part of Verso Corp.’s reorganization proposal, the company reached a refinancing agreement that will infuse $600 million to fund its current operations. It also negotiated deals with some of its creditors on bankruptcy loans that could put more than $775 million into the company’s operations to ensure that it can exit the restructuring period within six months.

Currently, the company plans to emerge from the bankruptcy period as a viable business. According to the Wisconsin Rapids Tribune though, further closings and layoffs for the company’s 1,200 personnel are still expected.

Are you a creditor in a bankruptcy?  Have you been sued by a bankrupt?  If you have any questions about your rights, please contact me, Joel Glucksman, at 201-806-3364.