Verso Paper bonds come in after gaining on sweetened exchange offer; market muted post-holiday

By Stephanie N. Rotondo

Phoenix, July 7 – Verso Paper Corp. remained in focus in Monday’s distressed debt market, following last week’s news regarding an exchange offer being done in connection with the company’s planned merger with NewPage Corp.

But while the news of the sweetened exchange had initially resulted in gains, the bonds were coming in a bit come Monday.

One trader said the 11¾% “one-and-a-half liens” due 2019 were “a little bit lower” at 93¾. That compared to a 95 to 96 context seen on Thursday.

As for the 8¾% second-priority senior secured notes due 2019, those were also lower, trading around 60, he said.

Still, the trader noted that the debt overall was “up a lot over the past couple of weeks.”

At another desk, the 11¾% notes were also pegged at 93¾, down from 95.

The 8¾% notes were meantime seen around 60, versus previous levels of 61½ bid, 62 offered.

And, the 11 3/8% notes due 2016 were quoted at 62¼ bid, 62½ offered.

Late Wednesday, Memphis-based papermaker Verso said it had revised terms of an exchange offer linked to its planned merger with Miamisburg, Ohio-based NewPage.

Under the new terms, holders of the 8¾% notes will receive $950 of new second-lien notes and warrants if tendered by the early deadline. After that deadline, holders will get $668.75 of new notes and warrants.

Investors holding about $213 million of the $396 million principal amount issue have already agreed to participate in the exchange, the company said in a press release.

Holders of the 11 3/8% notes – a $142 million issue – will receive $950 of new subordinated notes and warrants if tendered by the early deadline. After that deadline, holders will get $681.875 of new notes and warrants.

Additionally, the company – which struggled to get the necessary level of participation when it first launched the exchange offer – lowered the minimum threshold level that it must get in order for the merger to move forward, dropping it to 75% from 85%.

The early tender deadline is midnight ET at July 16. The deal expires July 30.

Overall, the distressed arena saw subdued trading in the first post-holiday session.

“It was definitely a quiet day coming back from the holiday weekend,” he said.

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