Verso Paper weighs options for revolver, not looking at bond buybacks

By Paul Deckelman

New York, Aug. 11 - Verso Paper Corp.'s $200 million revolving credit facility matures in a little less than a year, and the Memphis-based paper manufacturer is considering its options ahead of that upcoming maturity date.

"We're looking at our options there and will be very timely and prudent in how we address that," the company's senior vice president and chief financial officer, Robert P. Mundy, declared on Thursday, "but that is certainly something that we're taking a look at right now."

Mundy and the company's president and chief executive officer, Michael A. Jackson, held a conference call with analysts and investors following the release of Verso's second-quarter results.

Verso announced that during the quarter ended June 30, it had a net loss before non-recurring items of $20.6 million, or 39 cents per diluted share, down from its year-earlier red ink of $42.8 million, or 82 cents per share, even as net sales during the latest quarter eased to $398.8 million versus $401.1 million a year ago.

On an operating basis, the company swung to a profit of $7 million in the latest second quarter from a year-earlier operating loss of $12.7 million.

Adjusted EBITDA, before the pro forma effects of a company profitability program, was $43.6 million, almost double the $22.5 million reported a year earlier.

The company ended the quarter with $1.26 billion of total debt - $81.8 million of senior term loan debt due in 2013 and most of the rest in several series of bonds. There was $41 million of letters of credit outstanding against the otherwise undrawn $200 million revolver.

Including a remaining revolver availability of $159 million, cash and equivalents of $56 million and restricted cash of $18 million, Verso had total liquidity at June 30 of $233 million, down from $250 million at the end of the first quarter on March 31 and down from $287 million at the end of the year-ago second quarter.

No bond buybacks likely

During the call, an analyst noted that with the recent volatility in the financial markets, Verso's bonds are trading at "sort of depressed levels."

While its $300.8 million of 11½% first-lien senior secured notes due 2014 are, in fact, currently trading several points above par, its other issues are not. Its $394.6 million of 8¾% second-priority senior secured notes due 2019 were last seen around the 84½ bid level, its $180.2 million of floating-rate second-priority notes due 2014 trade around 79½ bid, and its $300 million of 11 3/8% senior subordinated notes due 2016 were quoted around 78 bid. All of the latter three tranches are well down from their respective pricing levels at or near par.

In view of the lower prices, the analyst queried whether Verso - which earlier this year retired $337 million of 9 1/8% second-priority notes due 2014 via a tender offer and a redemption call for the remainder - has any remaining capacity under its bond indentures for further repurchases.

Mundy replied that Verso has "some capacity to do some things, but that's just not something in today's market right now that I am putting a lot of focus on."

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