NewPage Gets Some Breathing Room

By recently renegotiating its banking relationships, New Page has apparently made it a bit more difficult for the main owner of rival paper maker Verso to gain control of the company.

NewPage, the largest maker of coated paper in the U.S., yesterday filed with the U.S. Securities and Exchange Commission an amendment to its $500 million revolving credit facility that extends the maturity date by at least five months, to March 1, 2012.

The heavily indebted company's 3rd Quarter earnings report described the dilemma it faced: "Our revolving credit facility matures on October 2, 2011 unless we repay or refinance our second-lien notes by July 4, 2011, in which case the revolving credit facility matures on December 21, 2012." Those notes have at times traded for 33 cents on the dollar, indicating investors' pessimism about NewPage's ability to repay them.

Apollo Management, which has a controlling stake in Verso, has snapped up many of those notes, giving it significant leverage over NewPage. In theory, it could have forced NewPage into insolvency six months from now by insisting on full repayment. But the amendment filed yesterday seems to give NewPage more breathing room.

Apollo and Cerberus, which owns NewPage, have reportedly been in talks recently about the paper company's debt problems (as described in NewPage, Verso Owners Reportedly Discussing a Deal). Jim Sturdivant of Publishing Executive reported today on speculation that Apollo may be trying to get some of NewPage's assets for Verso or perhaps representation on its board (and he referred to Dead Tree Edition as "influential").

The changes to the revolving credit facility were approved by 11 financial institutions on Jan. 14, with Wells Fargo the lead bank. But the document's references to "non-accepting lenders" indicates that some banks rejected the deal and are ending their relationships with NewPage.