Verso amends exchange offer, bonds jump higher; Energy Future scuttles plan, debt trades upward

By Stephanie N. Rotondo

Phoenix, July 24 – Verso Paper Corp.’s debt was a big winner in Thursday’s distressed debt market.

The papermaker’s bonds were up 10 to 15 points on the day, as the company amended an exchange offer for its second-lien and subordinated notes. Each offer must meet a minimum tender condition in order for the company to move forward with its proposed merger with NewPage Corp.

As of the early tender deadline, the participation level for the subordinated notes was well below 70%.

Meanwhile, Energy Future Holdings Corp. paper was mostly firm on the back of news the company had scrapped a restructuring support agreement inked prior to the company filing bankruptcy.

The news was not unexpected, however. It was reported late last week that such an action was possible – and likely – if talks with one group of creditors did not go as well as hoped.

Verso pops on exchange amendment

Verso Paper announced Thursday that it had amended its exchange offer for its 11 3/8% senior subordinated notes due 2016.

The exchange is being done in connection with the Memphis-based company merger with Miamisburg, Ohio-based NewPage. The company is also looking to exchange its 8¾% notes due 2019.

One trader said the 8¾% notes popped by 15 points, ending at 62. The 11 3/8% notes were meantime up 10 points at 71½.

The early tender deadline for both exchanges passed on July 16. At that time, the holders of less than 70% of the 11 3/8% bonds had participated. On Thursday, the early tender deadline for the 11 3/8% notes was extended to July 30.

Per the terms of the exchange, the holders of 70% of the 11 3/8% notes and the holders of 75% of the 8¾% notes must participate in order for the exchange and subsequent merger to go through.

In order to meet its threshold, Verso said Thursday that it was giving the 8¾% noteholders until July 30 to tender their holdings at the same consideration given to those who participated by the early deadline, and it extended the exchange offer for the 11 3/8% notes to Aug. 6 from July 30.

TXU gains as plan nixed

Energy Future Holdings scrapped a reorganization plan agreed upon prior to its bankruptcy filing as certain creditor groups objected to the deal’s terms.

On the news, the bonds were inching higher, according to a trader.

The 10¼% notes due 2015 and 10½% notes due 2016 were seen at 15½ bid, 16 offered, up from 15 bid, 15½ offered.

The 15% notes due 2021 moved up to 42 bid, 42½ offered, which compared to 41½ bid, 42 offered previously.

All of those issues are linked to the company’s unprofitable unit Texas Competitive Electric Holdings Co. LLC.

Prior to Energy Future’s bankruptcy filing in late April, the company had inked a deal with a group of eight lenders, including Fidelity Investments, in which Oncor Electric Delivery Co. LLC and Texas Competitive would be separated, leaving Oncor with Energy Future Intermediate Holdings.

The lenders would have taken control of Energy Future Intermediate.

But other creditors decried the deal, claiming that Oncor has more value than previously estimated and that the proposed plan would limit their recovery prospects.

Currently, Energy Future has until Aug. 27 to file a plan of reorganization. It is expected that the company will look to push that out until early next year as it comes up with another plan.

That plan could include an outside takeover of the Oncor unit.

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