Verso files for Chapter 11 bankruptcy protection

UPDATE: Verso: Business as usual at Jay mill during Chapter 11

JAY — Verso Corp. announced Tuesday that the company and 26 subsidiaries have filed voluntary petitions with the U.S. Bankruptcy Court in the District of Delaware to reorganize under Chapter 11 of the U.S. Bankruptcy Code.

The company said that restructuring debt is necessary to strengthen the company’s balance sheet and to position Verso for long-term success.

Verso’s stock was trading at less than a penny per share on Tuesday. The New York Stock Exchange delisted Verso stock last year because its stock price had dropped “abnormally low.”

Verso officials expect the filing to have virtually no effect on the day-to-day operations of the company, according to a news release.

“While filing for Chapter 11 protection was a difficult decision, we are pleased that we enter this process with strong creditor support,” Verso President and CEO David J. Paterson said in the release. “We have worked together with a broad spectrum of financial creditors to develop a restructuring plan to eliminate $2.4 billion of our outstanding debt and to exit the Chapter 11 process in a short time-frame.”

The expected agreement for reorganization is with creditors holding at least a majority in principal amount of most classes of funded debt of Verso and its subsidiaries, Paterson said.

“Verso anticipates that upon finalizing agreed-upon terms, the plan of reorganization would result in the holders of its funded debt receiving equity of Verso in exchange for their claims,” he said.

Verso expects to finalize a debtor-in-possession financing package of up to $600 million in the next day. It will provide the company with significant operational flexibility to successfully reorganize, according to the release.

According to Verso, the package will provide sufficient liquidity to support its ongoing operations during the Chapter 11 process.

The company plans to seek immediate relief from the bankruptcy court through the filing of customary first-day motions that will allow the company to transition its business into Chapter 11, including, among other things, granting the authority to pay pre-petition wages, salaries and benefits to honor customer programs, according to the release.

Explaining the filing, Paterson noted “since Verso acquired NewPage Holdings Inc. in January 2015, a confluence of external factors, including an accelerated and unprecedented decline in demand for our products, a significant increase in foreign imports resulting from a strong U.S. dollar relative to foreign currencies, and Verso’s impending financial obligations made it apparent that action was needed.”

He added, “Verso chose to take this proactive step with the firm belief that our company will emerge from the Chapter 11 process as a stronger company that is positioned to compete and win, even as challenges in the overall economic environment continue.”

Verso intends to operate its business as usual with a focus on running its facilities safely and efficiently, delivering the high-quality products and services its customers have come to expect, maintaining valued relationships with its suppliers, protecting the environment, and being a good neighbor in the communities in which it operates, Paterson said.

Verso is headquartered in Memphis, Tenn., and it and its debtors own eight U.S. manufacturing facilities in six states: Kentucky, Maine, Maryland, Michigan, Minnesota and Wisconsin.

Verso shut down a paper machine and pulp drier at its Androscoggin Mill in Jay in October 2015 and was expected to permanently eliminate 300 positions by Dec. 31, 2015. It was also expected to idle a Kentucky mill and lay off about 310 employees last year.

The company closed its Bucksport Mill in Maine in December 2014, putting 570 employees out of work.

Verso Corp. announced in November 2015 it was looking for ways to restructure its balance sheet and explore opportunities to raise money to meet financial obligations, including the possible sale of its Androscoggin Mill and related hydroelectric facilities and other paper mills owned by the company.

In January, it sold one of its subsidiaries, Verso Androscoggin Power, which has four hydropower generation facilities in Jay, Livermore and Livermore Falls, to Eagle Creek Renewable Energy of New Jersey for $62 million.

The company’s Consolidated Water Power Co. subsidiary is not part of the bankruptcy filing.

Verso has appealed the town of Jay’s valuations for the 2013 and 2014 tax years. Those cases are waiting to be heard at the state level.

“We were disappointed to hear the news of Verso Paper’s Chapter 11 filing,” Town Manager Shiloh LaFreniere said. “We hope that their restructuring efforts have a positive outcome, as many families within our community rely on Verso as the area’s largest employer. We are continuing to evaluate how the bankruptcy filing will affect the operations of the town, but we remain committed to working with Verso Paper as they pursue a solution to their present financial situation.”

Companies included in the Chapter 11 petition:

Bucksport Leasing LLC, Memphis, Tenn.

Chillicothe Paper, Chillicothe, Ohio

Luke Paper Company, Luke, Md.

NewPage Consolidated Papers Inc., Miamisburg, Ohio

NewPage Corp., Miamisburg, Ohio

NewPage Energy Services LLC, Miamisburg, Ohio

NewPage Holdings Inc., Miamisburg, Ohio

NewPage Investment Company LLC, Miamisburg, Ohio

NewPage Wisconsin System Inc., Wisconsin Rapids, Wis.

NexTier Solutions Corp., Memphis, Tenn.

Rumford Paper Company, Rumford, Maine

Upland Resources Inc., Canadian, Texas

Verso Androscoggin LLC, Jay, Maine

Verso Corp., Memphis, Tenn.

Verso Fiber Farm, Memphis, Tenn.

Verso Paper Finance Holdings Inc., Memphis, Tenn.

Verso Paper Finance Holdings LLC, Memphis, Tenn.

Verso Paper Finance Holdings One LLC, Memphis, Tenn.

Verso Paper Holdings LLC, Memphis, Tenn.

Verso Paper Inc., Memphis, Tenn.

Verso Paper LLC, Memphis, Tenn.

Verso Maine Energy LLC, Bucksport, Maine

Verso Quinnesec LLC, Quinnesec, Mich.

Verso Quinnesec REP Holding Inc., Memphis, Tenn.

Verso Sartell LLC, Sartell, Minn.

Wickliffe Paper Company LLC, Wickliffe, Ky.

Creditors with the largest unsecured claims against Verso are:

1. Wilmington Trust Company, Wilmington, Del., bond debt of $100,734,363.

2. Wilmington Trust, Minneapolis, Minn., bond debt of $68,483,465.

3. Wilmington Trust Company, Wilmington, Del., bond debt of $42,744,591.

4. General Electric, Lisle, Ill., for services in the amount of $3,862,826.

5. Valmet, Neenah, Wis., trade debt of $3,105,694.

6. Midland Paper Company, Wheeling, Ill., trade debt of $2,973,074.

7. Omnova Solutions, Mogadore, Ohio, trade debt of $2,444,933.

8. Catalyst Paper Operations, Rumford, Maine, trade debt of $2,214,333.

9. Omya Inc., Cincinnati, Ohio, trade debt of $2,147,512.

10. Warehouse Specialists, Appleton, Wis., trade debt of $2,086,839.

* Source: U.S. Bankruptcy Court filing

Paper mills in Maine that filed for Chapter 11, Chapter 7 within the past five years:

Lincoln Paper and Tissue Mill in Lincoln filed to reorganize its debts under Chapter 11 bankruptcy in September 2015. It was auctioned off in November, drawing a bid of $5.95 million from Gordon Brothers Group, a known liquidator, according to the Bangor Daily News.

Great Northern Paper Co. Mill in East Millinocket filed for Chapter 7 in September 2014 allowing the company to liquidate. It was sold at auction for $5.4 million in late 2014 to a Los Angeles-based investment firm, according to the Portland Press Herald.

NewPage Corp. filed for Chapter 11 bankruptcy protection in September 2011. It emerged in December 2012. Verso Paper Corp. bought NewPage Holdings LLC in January 2015. Two of NewPage’s mills had to be sold prior to the closure as part of the deal because of antitrust concerns. The two mills, one in Rumford and one in Wisconsin, were sold to Catalyst Paper Holdings, which is based in British Columbia, according to the Sun Journal.