Verso, New Page committees of creditors object to DIP financing motion

By Sheri Kasprzak

New York, Feb. 22 – The official committees of unsecured creditors for Verso Corp. and NewPage, a Verso property, object to debtor-in-possession financings each entity is seeking, according to a motion in United States Bankruptcy Court for the District of Delaware Monday.

Verso entered into a DIP credit agreement with Citibank, NA to provide access to a $100 million priming secured DIP asset-based revolving credit facility. NewPage, meanwhile, is seeking approval for up to $675 million of DIP financing, comprised of an up to $325 million senior secured super-priority revolving DIP facility, including a $100 million letter-of-credit sub-facility, and an up to $350 million senior secured super-priority term loan, including $175 million in new money term loans and $175 million in rollup term loans.

“The Verso interim DIP order purports to provide the committee with the later of (a) 75 days from the entry of the Verso interim DIP order, or April 11, 2016, and (b) 60 days from the committee’s formation, or April 5, 2016, to commence a challenge proceeding,” said the committees’ objection.

“However, this is not the case. In actuality, this challenge deadline only applies to a challenge proceeding against the prepetition ABL secured parties, the prepetition cash flow secured parties, the 1.5 lien notes secured parties and the 2nd lien notes secured parties. The committee cannot be granted standing by the court and cannot initiate a challenge proceeding against the first lien notes secured parties.”

The committee also requests in its objection that any final DIP order expressly grant the committee standing to initiate a challenge proceeding without the need of filing a motion.

“The prepetition secured parties should not be permitted to hinder the committee’s ability to fully investigate potential claims by imposing upon the committee the multiple burdens of investigating a potential challenge, seeking standing and initiating an adversary proceeding during a single time period,” the objection says.

In the NewPage case, the interim DIP order purports to provide the committee with 60 days from its formation to commence a challenge proceeding.

“However, this is not the case with respect to a challenge proceeding against the prepetition term secured parties,” said the objection.

“Rather, the committee cannot initiate a challenge against the prepetition term secured parties for so long as the consenting NewPage creditors are bound by the RSA.”

The committee contends the 60-day timeframe is “too short.” It seeks at least 90 days from the date of NewPage’s formation to commence a challenge proceeding. The committee also seeks permission to initiate a challenge proceeding without filing a motion.

A hearing on the matter is scheduled for Feb. 25.

Verso, based in Memphis, Tenn., is a paper goods producer. Its Chapter 11 case number is 16-10163. NewPage, a printing and specialty papers company, was acquired by Verso in 2015.

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