Verso Paper

The stakes are high for the nation's biggest paper-making state: The ownership uncertainties have cropped up at a precarious moment when demand for coated printing-grade paper is on the latest leg of a sharp multiyear, digitally driven decline, sparking speculation of a renewed round of mill shutdowns.

Verso Paper this year announced it wants to acquire NewPage Holdings in a deal that would combine the two biggest coated paper producers in North America—raising questions about what the merged company would do with its new excess capacity.

Verso Paper plans to consolidate its existing West Chester, OH, office and the NewPage Miamisburg, OH, office into a single Ohio Operations Center. Verso's corporate headquarters will remain in Memphis, TN.

Why are paper companies suddenly announcing price increases for coated paper, and why is the biggest printer in the United States worried about possible paper shortages?

SAPPI surprised nearly everyone late last week by announcing a $40/ton price increase on coated freesheet (CFS) in the United States. Then Verso delivered an even bigger shock this week with $40 hike not only on CFS but also on coated groundwood (CGW), which is in even greater oversupply than CFS.

Let’s look at the rather cryptic statement from a recent R.R. Donnelley filing with the Securities and Exchange Commission.

The 2013 "Our Sustainable Identity," report from Verso Paper details the company's progress against its commitment to respect a sustainable balance among environmental, social and economic needs.

Verso Paper and NewPage Holdings have each received a request for additional information from the U.S. Department of Justice (the "DOJ") in connection with Verso's proposed acquisition of NewPage. The DOJ issued the Second Requests pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act").

The proposed merger of NewPage and Verso Paper may be on the ropes, but it has brought much attention to the oddities of the U.S. market for coated paper.

Though coated-paper companies have the means and the motive to cooperate on pricing, the same is not true for publication printers, even though they have a similar customer base.

The anonymous prosecutor’s comments, The Capitol Forum’s analysis, and my own experience inspired this list of 10 reasons the U.S. market for coated paper is prone to collusion, both legal and illegal:

Verso Paper announced today that two of its wholly-owned subsidiaries, Verso Paper Holdings and Verso Paper, have extended the expiration date for their previously announced exchange offers and consent solicitations with respect to their outstanding 8.75 percent Second Priority Senior Secured Notes due 2019 and 11 3/8 percent Senior Subordinated Notes due 2016 from 5:00 p.m., New York City time, on Thursday, February 20, 2014, to 5:00 p.m., New York City time, on Thursday, February 27, 2014, unless further extended. All other terms, provisions and conditions of the exchange offers and consent solicitations will remain in full force and effect.

NewPage Holdings has announced that its wholly-owned subsidiary, NewPage Corp., closed on financing consisting of a new $750 million term loan facility led by Credit Suisse Securities (USA) LLC and a new $350 million ABL Facility led by Barclays Bank PLC. The closing of the Facilities is the first in a series of actions connected with the pending merger announced January 6, 2014 between Verso Paper and NewPage.

Paper was at the core of a wide variety of deals announced in January, and those deals are likely to impact future supply and pricing. Assuming that the decline in demand for printed products levels off or slows down at some point, as a result of the transactions announced, printers are likely to have less available supply and a more limited choice of suppliers to pick from when they are sourcing paper.

Two of the largest remaining U.S. companies that manufacture printing papers reached out to each other and plan to merge. Verso Paper announced that it was acquiring NewPage.

Commercial Printing Industry News Briefs from Printing Impressions’ February 2014 edition, including Verso Acquiring NewPage, RR Donnelley Buying Esselte