Bloomberg News

NewPage Junk Bonds Fall to Lowest Since 2009, Trace Data Show

June 15, 2011

June 15 (Bloomberg) -- NewPage Corp. bonds fell to the lowest level since March 2009 on concern that the junk-rated coated-paper maker owned by Cerberus Capital Management LP will be unable to make an upcoming coupon payment and will restructure its debt.

The company’s $806 million of 10 percent second-lien notes due May 2012 fell 3 cents to 29 cents on the dollar as of 2:38 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The debt has dropped about 8.75 cents this week and is at the lowest level since March 2009.

NewPage’s high level of debt and falling profits could mean that it might not be able to service its debt over the next year, according to a June 7 report by Standard & Poor’s. The Miamisburg, Ohio-based company faces a $100.7 million coupon payment June 30 on its $1.77 billion of 11.375 percent, first- lien debt due December 2014, according to data compiled by Bloomberg.

The fall in bond prices is “solely to do with the uncertainty of whether NewPage will pay the June 30 coupon or not,” Rahul Gandhi, an analyst at debt-research firm CreditSights Inc. in London, said in an e-mail today. Management may use this opportunity to file for restructuring, he wrote.

Amber Garwood, a spokeswoman for NewPage, didn’t immediately return a telephone call seeking comment.

“Although the company may have enough liquidity to pay the June coupon on the first-lien notes, we think run rate EBITDA this year likely won’t cover annual interest expense,” Kimberly Noland, an analyst at Gimme Credit, wrote in a May 26 report.

The first-lien bonds were trading at 91.9 cents at 3:02 p.m. in New York, Trace data show, the lowest level since November.

Apollo’s Role

Leon Black’s Apollo Global Management LLC and Avenue Capital Group, run by Marc Lasry, hold more than $400 million of NewPage’s 10 percent second-lien bonds, two people familiar with the matter said last month. Lazard Ltd., FTI Consulting Inc. and law firm Dewey & LeBoeuf LLP are working with NewPage as a debt restructuring looms, the people said.

Junk or high-yield bonds are those rated below BBB- by Standard & Poor’s and lower than Baa3 by Moody’s Investors Service.

--Editors: Faris Khan, Chapin Wright

To contact the reporter on this story: Krista Giovacco in New York at

To contact the editor responsible for this story: Faris Khan at

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