The bankruptcy court overseeing the Chapter 11 proceedings of Verso Corp. gave interim approval today to the company’s proposed $775 million DIP facility, according to court orders entered on the docket.
The interim approval gives the company access to an aggregate of $425 million of revolver funding, and $125 million in new-money term debt.
A final hearing was scheduled for Feb. 24. Final approval would clear the company for an additional $50 million of new-money term debt and $175 million of roll-up term debt.
Verso filed for Chapter 11 yesterday in Wilmington, Del., saying it expected to close on at least $600 million of DIP financing by today. In fact, the company was able to file motions seeking approval of its proposed DIP facilities yesterday afternoon.
The DIP financing is comprised of three separate facilities, namely, a $325 million (including a $100 million letter of credit sub-facility) revolving facility to the company’s NewPage subsidiary, a $350 million term facility to the NewPage subsidiary (described in more detail, below), and a $100 million asset-based revolver (including a $50 million letter of credit sub-facility) to parent company Verso Holdings, according to court filings.
Meanwhile, court filings also show that the company yesterday entered into a restructuring-support agreement with “virtually all of their principal creditor constituencies” that would see the company exchange most of its outstanding debt for equity in a reorganized company.
Contemplated reorganization terms
According to a restructuring term sheet filed in the case, the RSA contemplates a reorganization plan that would exchange claims held at the parent company Verso Holdings level for 53% of the equity in the reorganized company (plus warrants for an additional 5% of equity at a strike price of $1.04 billion of equity value) and claims held at the NewPage subsidiary level for 47% of the equity in the reorganized company.
According to the first-day declaration filed in the Chapter 11 case by the company’s CFO, Allen Campbell, the company has $2.8 billion of funded debt, about $1.8 billion of which sits at Verso Holdings, and about $972 million of which sits at NewPage.
As reported, Verso acquired NewPage in 2014.
The Verso holdings debt is comprised of a $150 million ABL revolver and a $50 million cash-flow revolver, along with $418 million of 11.75% first-lien notes due 2019 issued in 2012 and $650 million of 11.75% first-lien notes, issued in 2015 in connection with the NewPage acquisition; $272 million of 1.5-lien notes issued in 2012; $181 million of 13% second-lien notes due 2020, issued in 2014 pursuant to an exchange offer and $97 million of old 8.75% second-lien notes due 2019 that remained outstanding following the exchange offer; and $65 million of 16% senior subordinated notes due 2020, issued in 2014 in connection with an exchange offer and $41 million of old 11.38% senior subordinated notes due 2016 that remained outstanding following the exchange offer.
At NewPage, there is $238 million outstanding under an ABL revolver, and $734 million outstanding under the floating-rate senior secured term loan issued in 2014 in connection with the NewPage acquisition.
Under the plan contemplated by the RSA, holders of Verso Holdings’ first-lien debt (the cash-flow revolver, and the first-lien notes issued in 2012 and 2015, respectively), would receive pro rata shares of 50% of the equity in the reorganized company and 100% of the warrants (or, if certain required consents are obtained, debt discounted to the value of the corresponding plan equity value).
Holders of the Verso 1.5-lien debt would receive 2.85% of the reorganized equity, and holders of the Verso subordinated debt would receive 0.15% of the equity.
Holders of NewPage first-lien debt (including first-lien debt claims rolled up by the DIP facility as described below) would receive the remaining 47% of the reorganized equity.
As for milestones, among other things the RSA requires the filing of a reorganization plan or disclosure statement within 60 days of the petition date (March 26), approval of a disclosure statement within 105 days (May 10), plan confirmation within 160 days (July 5), and an effective date within 30 days of confirmation.
The RSA, which was filed with the bankruptcy court in a partially redacted form, does not state the amount of claims represented by parties to the agreement, but as reported, the company said yesterday in its statement announcing the Chapter 11 that parties to the RSA constituted “at least a majority in principal of most classes.”
Among the parties to the RSA are funds and entities affiliated with Centerbridge Partners, Synexus Advisors, KLS Diversified Asset Management, Mudrick Capital Management, Oaktree Capital Management, Stone Lion Capital, Credit Suisse, Whitebox Credit, and Monarch Alternative Capital.
The $350 million NewPage term DIP would consist of a $175 million new-money DIP (with $125 million available upon interim approval of the facility, and the remaining $50 million funded upon final approval) and a $175 million roll-up of DIP lender claims under the NewPage pre-petition term loan (deemed borrowed upon final approval of the DIP), with interest at L+950.
Holders of the term debt would have the right to fund, in the aggregate, up to 70% of the new-money DIP to receive the benefit of the roll-up portion, on a pro rata basis, while 30% of the new-money DIP would be reserved for members of an ad hoc committee of holders of the pre-petition term debt that have agreed to provide a backstop for 100% of the new money DIP.
Fees under the term DIP would include, among others, an upfront fee of 1.5% of the new-money DIP commitment and a backstop fee for backstop parties of 2.5% of the new-money DIP commitment.
The new-money portion of the DIP would be repaid in cash under the restructuring contemplated by the RSA, while the roll-up portion of the DIP would be wrapped into the equity recovery by NewPage pre-petition term loan lenders.
The revolver portions of the DIP, meanwhile, would be used to replace existing revolver debt and to provide additional working capital, with each facility charging L+250, with no LIBOR floor.
It is worth noting that the milestone deadlines under the DIP are slightly extended compared to those in the RSA, and the RSA requires, among other things, the filing of a reorganization plan or disclosure statement within 75 days of the petition date (April 11), approval of a disclosure statement within 125 days (May 30), plan confirmation within 185 days (July 30), and an effective date within 30 days of confirmation. — Alan Zimmerman
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