S&P Raises Verso Paper (VRS) to 'CCC', Removes from CreditWatch Negative

Standard & Poor's Ratings Services raised its corporate credit rating on Memphis, Tenn.-based Verso Paper Holdings LLC (NYSE: VRS) to 'CCC' from 'CC' and removed it from CreditWatch, where it was placed with negative implications on Jan. 8, 2014. The outlook is negative.

Concurrently, we took the following actions on the company's issue-level ratings:

• Lowered the issue-level rating on the $150 million asset-based loan (ABL) facility due 2017 to 'B-' from 'B+' and maintained the '1' recovery rating;
• Lowered the issue-level rating on the $50 million cash flow revolving credit facility due 2017 to 'CCC' from 'B+' and revised the recovery rating to '3' from '1';
• Lowered the issue level rating on the $417.9 million first-lien notes due 2019 to 'CCC' from 'B+' and revised the recovery rating to '3' from '1';
• Lowered the issue level rating on the $271.6 million senior secured notes due 2019 to 'CC' from 'CCC+' and revised the recovery rating to '6' from '5'; and
• Affirmed the 'CC' issue level ratings on the $396 million senior secured second priority notes and $300 million senior subordinated notes and removed them from CreditWatch, where they were placed with negative implications on Jan. 8, 2014.

The rating action reflects the expiration of the debt exchange offer without another offer being made. The issue-level and recovery rating revisions incorporate our reassessment of Verso Paper's stand-alone distressed valuation following the May 2014 changes in its capital structure. The negative outlook reflects our view that liquidity will continue to erode over the next 12 months and that the company is likely to seek another distressed exchange or other type of capital restructuring.

"In our view, the company is likely to conduct a distressed exchange because it is a condition for consummating its merger agreement to acquire NewPage Holdings Inc.," said Standard & Poor's credit analyst David Kuntz.

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