Verso Paper

MEMPHIS, TN—Low participation in a debt exchange offer that is critical to completing the deal may kill Verso Paper's proposed $1.4 billion acquisition of NewPage Holdings, the Portland Press Herald reported.

Verso Paper says it may be unable to complete a $1.4 billion acquisition of its rival NewPage Holdings because of low participation in a crucial exchange offer, in which the company would exchange existing debt for another class of debt.

Based on the amount of debt offered up in the early part of the exchange period, Verso Paper says it is concerned that the effort won’t succeed.

The U.S. Department of Justice is likely to delay or even block the proposed merger of NewPage and Verso Paper, according to a news service that focuses on bankruptcy issues.

Because the deal may increase the likelihood of both post-merger unilateral effects and coordinated capacity reduction and price increases, DOJ is almost certain to issue a second request” for information, The Capitol Forum wrote in a Jan. 24 analysis.

“At a minimum, this will delay closing for several months, and could lead to a DOJ move to block the deal outright.”

The proposed merger of NewPage and Verso Paper would create a sort of two-headed beast—a prospect that seems to have Wall Street both baffled and concerned. It appears that NewPage would only be on the hook for debts related to the current NewPage assets rather than those of the combined company.

That arrangement was presumably made to satisfy NewPage’s bondholders, who would be understandably reluctant to take on Verso’s much riskier debt.

NewPage would pay Verso to take over such functions as purchasing, customer service, logistics, marketing, finance, legal, technology, operations, and manufacturing services.

In the long, painful story of the paper industry’s transformation, the news this month that NewPage Holdings had been sold to Memphis, TN-based Verso Paper counts as a positive development.

On the other hand, the news Saturday that the activist hedge fund that pressured Wausau Paper into selling its mills in Mosinee and Rhinelander now wants the company out of Wisconsin underscores the difficult, sometimes wrenching transition paper makers are still undergoing here.