Verso considering acquisition of bankrupt NewPage?

Verso Paper Corp. has made some overtures regarding a “potential business combination” with the bankrupt NewPage Corp., according to a Tuesday release.

Both Verso and NewPage are significant employers in Maine. Verso operates mills in Bucksport and Jay, employing 775 and 900, respectively, at the facilities. NewPage employs roughly 750 in Rumford.

Verso said Tuesday that it has had discussions with shareholders who hold the 11.375 percent first-lien senior secured notes of NewPage.

According to the statement:

The terms of Verso’s proposed transaction would provide NewPage’s first-lien noteholders with $1.425 billion of value, consisting of $1.075 billion of new Verso first-lien notes, $150 million of Verso common stock, and $200 million of cash. In addition, the proposed transaction would include a 100% recovery in cash to repay NewPage’s debtor-in-possession financing, a 100% recovery in cash for the allowed priority and administrative claims in the bankruptcy proceedings, a to-be-determined amount of Verso common stock for the holders of NewPage’s second-lien notes, and a to-be-determined recovery for NewPage’s unsecured creditors. To facilitate the transaction, a $200 million cash equity investment in Verso was contemplated.

It appears, however, that Verso’s advances have been rebuffed:

Verso has been disappointed with the lack of progress in advancing its discussions with the first-lien noteholders. Verso continues to believe that its proposed transaction is the most sensible.

The Tennessee-based Verso said it thought such a combination with the Wisconsin-based NewPage would “create a stronger business in the global coated and supercalendered paper industry because of the material cost savings that would be achieved.”

Verso also believes that a combination with NewPage would provide a compelling option for a restructuring in that it would afford NewPage’s first-lien noteholders a very attractive recovery, while at the same time treating fairly the other NewPage constituencies, including its employees, other creditor classes, and customers.

In its May Securities and Exchange Commission filings, Verso said it lost $73.9 million in the first quarter. That was compared to a loss of $44.5 million in the same period a year ago. In October 2011, Verso announced plans to eliminate 125 positions at the Bucksport mill in Maine and to permanently shut down one of the mill’s paper machines in response to high production costs and weak demand for lightweight paper. The company also shut two machines at a mill in Minnesota.

According to its annual report, NewPage had net sales of $3.5 billion in 2011, down $94 million from the year before. It saw a loss of $524 million in 2011, compared to a loss of $693 million in 2010.