Verso Corp. Files for Chapter 11 Bankruptcy Protection Due to Weak Demand, Debt Load
MEMPHIS, Tenn.—January 26, 2016—Paper products supplier Verso Corp. announced in a note to customers that it has filed for Chapter 11 bankruptcy protection in the bankruptcy court for the district of Delaware in order to facilitate a debt restructuring aimed at strengthening its balance sheet. The company said the move would have no impact on its day-to-day operations.
Verso is a victim of a market that has witnessed violent shifts in demand, particularly the plummeting need for coated paper products. The firm has made strides to right-size its supply in accordance with the demand, but in recent months the market for coated papers has been in a free fall. Accelerated demand declines have complemented a major increase in foreign imports as the U.S. dollar has grown stronger relative to foreign currencies.
With Verso feeling the pinch of other financial obligations, the company felt the most prudent move was to reorganize. It reported that it has developed, in tandem with its creditors, a reorganizational plan that will eliminate $2.4 billion of its outstanding debt and enable Verso to exit Chapter 11 in a shorter timeframe.
Verso also expects to finalize a debtor-in-possession (DIP) financing package totaling up to $600 million, which it contends will provide the company with significant operational flexibility to successfully reorganize and will provide sufficient liquidity to support its ongoing operations during the Chapter 11 process.
It's been a roller coaster 12-month period for Verso Corp. The move comes a little more than a year after Verso completed the acquisition of NewPage, which was only allowed to go forward after two of the NewPage mills were sold elsewhere. The concern, ironically, was that the combined entities would have too large of a market share.
Later in 2015, Verso joined Sappi North America and Appleton Coated in calling for an extension of duties on imports of coated paper from China and Indonesia. But in another letter to customers in November, Verso said it was exploring options to right its financial ship.
Here's a letter that Michael Weinhold, senior vice president of sales, marketing and product development, sent to Verso Corp. customers earlier today to announce the Chapter 11 filing.