The company that operates the Androscoggin Mill in Jay is preparing to file for bankruptcy protection just weeks after about 300 workers were laid off from the paper mill.
Verso Corp. is preparing the filing as a grace period on a missed interest payment nears expiration, the Associated Press reported Friday, citing two anonymous sources with knowledge of the matter. The paper maker, which is backed by Apollo Global Management LLC, employs more than 700 people.
The company missed payments owed to two sets of creditors earlier this month. The five-day grace period for skipping the amount owed to some lenders expired Friday. Verso is seeking approval from the creditors on a bankruptcy plan that would convert almost all of the company’s $2.8 billion of debt into equity, cutting the company’s debt load, said the people discussing the negotiations who asked not to be identified.
The proposed bankruptcy deal calls for fully merging Verso and NewPage Corp., the paper company Verso bought last year that operated the mill in Rumford, and dividing the combined entity’s equity value between two major creditor factions, according to the Associated Press. Stakes would be split up between bondholders that own Verso’s $1.86 billion of debt and lenders who hold about $970 million of NewPage borrowings. A Canadian company, Catalyst Paper, bought the Rumford mill.
Verso’s move to file for bankruptcy protection isn’t unexpected. In November, CEO David Paterson sent a letter to employees saying that bankruptcy was a possible outcome of restructuring the company.
About 300 workers at the Jay mill were laid off by mid-December, representing about one-third of its workforce.
The Tennessee-based company first announced the layoffs in August with plans to cut production capacity at the Androscoggin Mill by 150,000 tons of coated paper and 100,000 tons of dried market pulp.
In announcing the layoffs, the company cited a decline in demand for coated paper, an increase in foreign paper imports and high operating costs in Maine, including energy costs and local property taxes, as reasons for reducing production and cutting jobs at the Jay mill.
State Rep. Paul Gilbert, D-Jay, said Friday he was surprised to hear news of the reported bankruptcy filing so soon.
“I think anything that happens at the mill causes people to be nervous in this town,” Gilbert said. “It’s very concerning to the people of Jay, and hopefully they can keep it going. I’m just hoping if it does come to a sale that a paper maker will buy that mill and put it on sound footing.”
Meanwhile, Gilbert noted that he and other state legislators who represent communities with pulp and paper industries are scheduled to meet Wednesday.
House Majority Leader Jeff McCabe, D-Skowhegan, said Friday he’s organizing the meeting to start a bipartisan pulp and paper caucus among legislators and to kick off a multi-year process of finding ways to help address the problems facing the industry.
“We want to hear from the industry to talk about moving forward,” McCabe said. “Really, it’s a long-term strategy and we want to be brainstorming.”
The Androscoggin Mill opened in 1965 and operated five paper machines. It has the capacity to produce more than 1,900 tons per day of coated groundwood and coated freesheet papers on three coated machines and produces specialty grades of paper on two other machines.
Earlier this month, Verso Corp. announced it had sold four hydroelectric generators from the Androscoggin Mill to a New Jersey-based hydroelectric developer for $62 million in cash. The sale of the generators to Eagle Creek Renewable Energy LLC was part of the company’s “efforts to raise funds to address its previously disclosed cash flow and liquidity concerns,” the company said in a news release.
Apollo bought Verso from International Paper Co., owner of the Androscoggin Mill, in a $1.4 billion leveraged buyout in 2006. Verso bought NewPage in January 2015 — about two years after NewPage emerged from bankruptcy — in an attempt to drive down costs. But it has continued to struggle with competitive pressures in the age of electronic readers such as Amazon’s Kindle and Apple’s iPad.
Kathi Rowzie, a spokeswoman for Verso, didn’t respond to phone and e-mail messages seeking comment.
If creditors can’t agree on how to divvy up the company’s assets, Verso will file for bankruptcy for itself and NewPage without a pre-negotiated plan, the Associated Press’ sources said. Creditors would then have to decide whether they want to continue the discussions or take over their separate assets to operate them or sell them, the sources said.
Advisers to the company have been discussing with some of the creditors potential terms for bankruptcy financing that would fund the company during the Chapter 11 process, the people said. One loan, known as a debtor-in-possession financing, would use Verso assets as collateral and a second would use NewPage’s assets, they said.
Apollo has been staying out of Verso’s restructuring talks, people with knowledge of the matter said last month. The buyout firm retained Akin Gump Strauss Hauer & Feld LLP as a legal adviser, one of those people said.
Verso said in a Jan. 15 regulatory filing that it would use the five-day grace period after missing an interest payment owed Jan. 14 to holders of a $731 million NewPage term loan.
Send questions/comments to the editors.
Success. Please wait for the page to reload. If the page does not reload within 5 seconds, please refresh the page.
Enter your email and password to access comments.
Hi, to comment on stories you must . This profile is in addition to your subscription and website login.
Already have a commenting profile? .
Invalid username/password.
Please check your email to confirm and complete your registration.
Only subscribers are eligible to post comments. Please subscribe or login first for digital access. Here’s why.
Use the form below to reset your password. When you've submitted your account email, we will send an email with a reset code.