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Vertis Refinance Could Avoid Chapter 11

November 5, 2010
BALTIMORE—Vertis Holdings has amended the terms of its previously announced exchange offers and taken additional steps to complete the comprehensive refinancing of substantially all of its outstanding secured and unsecured debt. If this refinancing is successfully completed, Vertis will reduce its total debt by more than $700 million, or approximately 60 percent, allowing it to compete more effectively in the industry.

The refinancing will better position Vertis for long-term growth by giving it the financial flexibility to make additional investments and to continue aligning the business with evolving marketplace trends and clients’ needs.

Holders of Vertis’ senior pay-in-kind (PIK) notes due 2014 and senior secured second lien notes due 2012 are being offered the opportunity to exchange their existing debt for equity only, as compared to previous offers of cash, new senior secured notes and equity.

Vertis also has secured commitments for $600 million of debt and expects to have approximately $500 million of debt outstanding upon completion of the refinancing. GE Capital has committed to provide a $175 million revolving credit facility and Morgan Stanley Senior Funding has committed to provide a $425 million term loan.

Additionally, eligible second lien note holders will have the opportunity to acquire up to $100 million in additional Vertis equity, the proceeds of which would be used to further reduce the company’s debt. Certain of such holders have agreed to purchase their allocated share of the equity, plus any such equity not purchased by other holders.

Lastly, Vertis has developed an alternate path to ensure the refinancing is completed on a timely basis. Concurrent with the exchange offers, Vertis is soliciting acceptances of a pre-packaged Chapter 11 reorganization plan. If Vertis does not obtain acceptable participation in the exchange offers from its senior PIK note holders and second lien note holders, but does obtain the necessary acceptances for the plan of reorganization—a lower voting threshold—Vertis intends to begin Chapter 11 proceedings to complete the refinancing.

Vertis would file a voluntary pre-packaged Chapter 11 petition only if it concludes that a court-supervised process is the most efficient means to successfully complete the recapitalization while protecting its stakeholders’ long-term interests. The GE Capital and Morgan Stanley Senior Funding commitments will allow the company to enter the process with funding in place to complete the reorganization within 45 to 60 days of filing. The plan of reorganization contemplates that the company will honor in full all commitments to employees, clients, suppliers and other business partners, without disruption.
 

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