Paper producer Verso Corp. pulled the trigger and filed for bankruptcy protection on Jan. 26. Verso had been contemplating the move since late 2015, as previously reported by Mergers & Acquisitions. The New York Stock Exchange delisted Verso in September.

Verso filed for Chapter 11 with the U.S. Bankruptcy Court in the District of Delaware. The company hopes that it can facilitate a debt restructuring to strengthen the company’s balance sheet. Verso insists the company has adequate liquidity to remain in business during the restructuring process. The company expects to finalize a $600 million debtor-in-possession (DIP) financing package within one day of the filing.

As for the events leading up to this, in the filing, Verso CEO David Patterson pointed to the January 2015 acquisition of printing and specialty papers producer NewPage Holdings, which he said led to “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."  

NewPage completed a financial restructuring in December 2012, after filing in September 2011. Verso’s filing is the largest in the paper sector since NewPage.

Verso’s taking the same path as NewPage had been expected since November 2015, when the company hired PJT Partners LP and O'Melveny & Myers LLP as restructuring advisers. Earlier in January, Verso opted to delay an interest payment for two debt issues.  

Under the restructuring agreement, Verso plans to eliminate $2.3 billion of its $2.7 billion in outstanding debt. Fitch Ratings warned bond holders to expect very low recoveries for the debt. “Verso’s relatively sizable $600 million DIP facility is one more indication that the company won’t be leaving much money on the table for bond ​creditors,” said Sharon Bonelli, a senior director at Fitch. “While it’s too early to tell whether they’ll use the proceeds to repay outstanding debt, when you look at it through the lens of Verso’s heavy debt load and low bid prices, investors could see recoveries as low as cents on the dollar.” 

Restructuring