Wiping Out Debt, Or Wiping Out . . .

"Restructuring" didn't keep Verso's
Bucksport, Maine mill from closing.

North American paper companies that used to rely heavily on the magazine industry have found two ways to survive: 1) make new products, or 2) undergo “financial restructuring” (our Publishing Word of the Day).

Verso Corporation, the country’s largest maker of magazine-quality paper, announced last week that it had financially restructured away $2.4 billion in debt, reorganized, and emerged from bankruptcy protection as a publicly traded company once again.

Plus, it got an additional “$595 million in exit financing to support ongoing operations,” including “an asset-backed lending facility.”

Market value after the first official day of trading: $406 million.

Like just about every other maker of coated paper on the continent, Verso’s "ongoing operations" now include using its machines to produce more “specialty” papers -- stuff like food wrappers that aren't affected by declines in the publishing business.

(Mr. Tree called his mortgage company to report that the remaining debt on his house is likewise six or so times his net worth and that he therefore qualifies for a financial restructuring to cancel the debt. Oh, and some asset-backed exit financing to support his ongoing operations would really help him write more “specialty” articles. The mortgage company offered to send over some sheriff’s deputies to provide exit assistance by hauling Mr. Tree’s assets to the curb.)

Shacking up
Verso's re-emergence officially ends its unusual relationship with competitor NewPage. The two U.S. companies sort of shacked up instead of getting married, sharing resources but remaining somewhat separate, in a financial restructuring so convoluted that even the bondholders didn't quite seem to understand it. The courtship, drawn out for a year by a federal antitrust review, lasted longer than the non-marriage itself did.

Poor Verso. It didn’t get the memo a few years ago that the rule of the publication-papers industry had become “He who gets to bankruptcy first wins.” Financial restructuring via the bankruptcy courts has already been the salvation of several competitors, though it didn’t do much for the stockholders or creditors.

I believe I’m correct in saying that every significant North American-based manufacturer of publications papers except one has been through a bankruptcy reorganization.

The exception is Kruger, which has heavily diversified into such products as toilet paper and wines. So while its competitors were financially restructuring to avoid getting wiped out, Kruger survived by helping its customers get wiped out.


Other recent entrants in our 31-part Publishing Word of the Day series include PMS envy and sugardaddying.