Moody’s cuts Verso Paper CFR, loans & notes

Moody's Investors Service said it downgraded Verso Paper Holdings LLC's corporate family rating to Caa3 from B3 and probability of default rating to Caa3-PD from Caa2-PD.

Verso's liquidity rating was also lowered to SGL-4 from SGL-3.

At the same time, the agency downgraded the ratings on Verso's:

• $150 million asset-based revolving loan to B2 (LGD1 4%) from Ba3 (LGD1 4%);

• $50 million revolving credit facility and $418 million senior secured notes due 2019 rating to Caa1 (LGD2 25%) from Ba3 (LGD2 24%);

• $272 million secured notes due 2019 to Caa3 (LGD4 55%) from B3 (LGD4 54%);

• $396 million fixed-rate second-lien notes to Ca (LGD5 78%) from Caa3 (LGD5 79%);

• $13 million floating-rate second-lien notes due 2014 to Ca (LGD6 91%) from Caa2 (LGD5 79%); and

• $143 million subordinated notes to Ca (LGD6 94%) from Caa3 (LGD6 94%).

All ratings remain under review with direction uncertain.

Moody’s said the actions reflect its view that the announced agreement to acquire NewPage Corp. (B1, under review for downgrade) is becoming less likely to occur as the Department of Justice continues its review, and as Verso has been unsuccessful in its distressed exchange offer that's a prerequisite of the acquisition. Therefore, the potential for a higher CFR of the merged company is waning.

"We believe it very likely that Verso will default on its debt within the next year, either via a distressed exchange as part of its attempt to acquire NewPage, or via a filing if it fails to acquire NewPage," Ed Sustar, Moody's lead analyst for Verso, said in a news release.

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