Distressed bonds firm amid 'decent volume'; Verso debt pops as merger with NewPage announced

By Stephanie N. Rotondo

Phoenix, Jan. 6 - There was "decent volume" in the distressed debt space on Monday, a trader said.

The activity was mainly led by Verso Paper Corp., which announced an exchange offer for its 8¾% notes due 2019 and its 11 3/8% notes due 2016. The exchange is being done in connection with the company's newly planned merger with NewPage Corp.

A trader also noted that Verso made up the top of the day's winners.

Away from Verso, Arch Coal Inc. paper was inching higher, though on no fresh news.

A trader saw the 9 7/8% notes due 2019 at 91, which he said was up 1¼ points. The 7% notes due 2019 closed around 80 7/8, up over half a point.

Also in the energy arena, Walter Energy Corp.'s 8½% notes due 2021 slipped to 84 3/8, though only on a handful of trades, a trader said.

"There were a lot of quotes though," he said.

Caesars Entertainment Corp. was meantime unchanged to better on the day, also on no fresh news.

One trader placed the 10% notes due 2018 at 50, unchanged from the previous week. However, he said the 12¾% notes due 2018 rose almost a point to 581/4.

Another market source pegged the 10% notes at 50 bid, up half a point.

Verso to merge with NewPage

Memphis-based papermaker Verso Paper announced an exchange offer in connection with its planned merger with NewPage.

The news resulted in relatively heavy trading for the name.

A trader said "almost $20 million" of the 11¾% notes due 2019 changed hands, rising a point to 1071/2. A second tranche of 11¾% notes due 2019 meantime popped by nearly 10 points, ending at 861/2.

The trader also saw the 8¾% notes due 2019 at 441/2, which he deemed to be up "about 10 points from where they last traded a couple weeks ago."

Verso is exchanging the 8 ¾% notes, as well as the 11 3/8% notes due 2016 for new second-priority adjustable senior secured notes and new adjustable senior subordinated notes.

Verso said on Monday that it was acquiring Miamisburg, Ohio-based NewPage for $1.4 billion. NewPage shareholders will receive $250 million in cash, $650 million of new first-lien Verso debt to be issued at closing and a 20% equity stake in the company.

Verso has secured $750 million for the purchase. Those funds will be used for the cash portion of the sale and to refinance NewPage's $500 million term loan.

NewPage filed for bankruptcy in 2011 and exited in 2012. During that process, Verso made a bid for the company, but management maintained that it wanted to remain independent.

The value of the transaction was then valued at just over $1 billion.

Closing of the deal is expected in the second quarter.

© 2015 Prospect News.
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