Thursday, June 17, 2010

NewPage Does The Curley Shuffle

When a corporate CEO leaves after only four months on the job and the chairman quits on the same day, you can bet that something is afoot. But what exactly is going on at NewPage is still a mystery two days after the big paper maker announced a shakeup at the top.

NewPage announced the resignations Tuesday of CEO E. Thomas Curley, Chairman Mark Suwyn, and HR chief Michael Edicola and the hiring of Robert Nardelli as non-executive chairman. Nardelli, who headed The Home Depot when its stock tanked and then led Chrysler into bankruptcy reorganization, is #17 on’s list of the “worst American CEOs of all time.”

The announcement and a subsequent conference call with stock analysts provided little insight into the departure of Curley, who came to NewPage on Feb. 10 after heading Rolls-Royce Energy. The price of NewPage’s bonds dropped more than 2% on Tuesday, resulting in a yield of 14% and indicating Wall Street's queasiness with the shakeup.

Nardelli made this cryptic statement, according to the Dayton Daily News: “The board of directors basically saw a unique moment in time for NewPage and the paper industry. The board felt we needed to move expeditiously and expedite the pace of change to make sure NewPage comes out of the recessionary period stronger, more formidable with sustainable, reliable and predictable performance."

NewPage announced a CEO search, which indicates that Curley’s departure was unexpected and that a replacement wasn't waiting in the wings.

It’s no secret that the heavily leveraged NewPage has struggled amidst the recession and overcapacity in North American coated paper. Last month, it withdrew its two-year-old application for an initial public stock offering.

But NewPage was in trouble before Curley came on board. It restructured its debt last year in a way that Standard & Poor's called “tantamount to a default,” and three vulture funds had been buying its bonds in an apparent bet that they could take over when the company collapsed. The IPO cancellation seems to have been a bow to the inevitable.

With coated markets tightening, prices finally rising, two competitors shutting machines (apparently with NewPage’s help), some patching up of relations with current and former customers, and the anti-dumping case against Asian producers progressing, things seem to have gone about as well as could be expected during Curley’s brief tenure.

One clue to Tuesday’s announcement is that Nardelli is a “Cerberus guy,” while NewPage was Curley’s first gig with the big hedge fund. Like NewPage, Chrysler was controlled by Cerberus, and Nardelli is CEO of Cerberus Operating & Advisory Co.

Other recent articles about NewPage:


Anonymous said...

I suspect you’re on to something here… So let’s dig deeper and consider the facts:

1. NewPage owned by Cerberus a “vulture fund” run by a bunch of Wall Street Gordon Gecko type guys who know nothing about the paper business nor do they care about their customers, the Printers. Cerberus’ #1 goal with NewPage is to pretty up the pig and sell it within 5 years. That’s the only way they can justify their 8 figure salaries. The question is “who’s going to buy a bunch of small antiquated paper machines? Domestic Mills wont (they were the ones that sold to Cerberus), Scandinavia won’t (Stora sold their U.S. mills Cerberus also). So the only player that’s actually investing in paper is the Asian’s. The challenge is why would the Asian’s want to buy old equipment when they are installing new state of the art, cost efficient machines and installing them in parts of the world where trees grow and are harvested in 6 years not 25 years like in North America. In lies the challenge… The only way to force the Asian’s hand is to take away their market share and sell it back to them… Required reading in Ivy League schools, Sun Tzu “The Art of War.”

2. Unisource is owned by Bain Capital another “vulture fund” who’s old Fraternity buddies are the Cerberus guys. After some “back office” negotiating, NewPage ends up with all the coated paper business Asia Pulp & Paper had been previously supplying to Unisource under the UGloss label. And might I add at an even lower price than the Asian’s had supplied it (keep this in mind when I bring up the dumping). Now there is a compelling reason to package NewPage and Unisource together and sell the Asians there own IP/xpedx. Are you with me on this one…?

3. To place added pressure and force the Asian’s hands even further, Cerberus, using NewPage as its puppet, gets the Steelworkers Union and coaxes Sappi and Appleton Execs to join them in an anti-dumping and unfair government subsidies lawsuit while they’re collecting over $300 million in “Black Liquor Tax Credits.” Keep in mind these Cerberus guys will stop nothing short of achieving their ultimate pay day.

Remember Gordon Gecko’s famous line in the movie “Wall Street” as he stood in front of Teldar Paper’s shareholders touting “Greed is Good.” The CVD/AD case is nothing short of an all out sham! Senator George Schumer along with the other oblivious Senators who think this is about unfair trade are sadly ignorant! I can understand the Steelworkers Union getting hoodwinked but shame on the Sappi and Appleton Executives who got sucked into Cerberus' game only to have been played like simple fools! These guys a paper guys they should known better...

Is it “still a mystery” now? Just like Chrysler controlled by Cerberus with Nardelli as CEO declared Chapter 11 and then sold the proverbial pig to Fiat.

NewPage, is about to face that same destiny. NewPage lost $175 million in the first quarter and they will most likely run out of cash by month end. Yet they still have enough money to pay Suwyn $2 million, Curley $1.2 million and Edicola $893K before the yard sale begins? Sounds like the three of them absconded the last rescue boat left on the Titanic. I guess they didn’t want to learn to speak Mandarin!

Anonymous said...

I feel as though New Page is a sinking ship. Unfortunately much of my own personal business is tied to them. Its kind of scary yet I think it might be time to rethink my companies business model.

Anonymous said...

I could not agree more with the first comment.Right on!!

Anonymous said...

All excellent points made above. Bottomline is Cerebus=certain death for New Page. But this is standard operating procedure for vulchers like Cerberus. Sad part is the real loser here will be the industry in general.

Anonymous said...

Yes, I also think it is the industry that is the real loser in this. The actions of the New Page and Cerebus leadership seems mmore focused on their returns in the short term than on the health of the industry.