(Updates with bond price in sixth paragraph.)
Sept. 7 (Bloomberg) -- NewPage Corp., the largest North American maker of coated papers, filed for bankruptcy six years after being bought by Cerberus Capital Management LP.
NewPage had $3.4 billion in assets and $4.2 billion in debt as of June 30, according to today’s Chapter 11 filing in Wilmington, Delaware. The Miamisburg, Ohio-based company was bought by New York-based Cerberus for $2.3 billion in January 2005, and issued $900 million in junk bonds to fund the purchase. It has been unprofitable since 2006.
“We strongly believe that the court-supervised restructuring we began today is the most effective means of strengthening our financial position,” NewPage Chief Executive Officer George F. Martin said today in a statement.
Net sales of $3.6 billion in 2010 made NewPage the largest producer of paper for newspapers, commercial printing, magazines and coupons in North America, the company said in its quarterly report. Mills in Kentucky, Maine, Maryland, Michigan, Minnesota, Wisconsin and Nova Scotia, Canada, churn out 4.1 million tons of paper a year.
Higher prices for wood, chemicals and pulp, combined with reduced demand for its products, hurt results in the most recent quarter, the company said in a statement Aug. 15. Losses were $132 million for the three months ended June 30 because of higher commodity costs and lower demand from North American catalog manufacturers and magazine publishers, NewPage said.
NewPage’s $1.77 billion of 11.375 percent bonds due in December 2014 rose 2.5 cents to 87 cents on the dollar at 11:02 a.m. in New York, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority. Its $806 million of 10 percent notes due in May 2012 rose 1 cent to 13 cents on the dollar, Trace data show.
The bankruptcy filing listed HSBC Bank USA and Omnova Solutions Inc. as the largest unsecured creditors. The company said it obtained a commitment led by JPMorgan Chase & Co. for as much as $600 million in so-called debtor-in-possession financing to help fund operations during the bankruptcy, according to the statement.
The company’s Consolidated Water Power Co. unit isn’t part of the filing, NewPage said.
Martin, who took over as president and CEO after Richard D. Willett Jr. resigned in January 2010, said today that operations will continue during the restructuring.
The company has been working on a restructuring plan since at least April with Lazard Ltd., FTI Consulting Inc. and law firm Dewey & LeBoeuf LLP, according to people who spoke in April on condition of anonymity.
NewPage said Aug. 16 it was “uncertain” about whether it could complete about $131 million of asset sales. It faced a Nov. 1 debt coupon payment.
The papermaker grappled with interest payments that totaled $369 million last year, compared with earnings before interest, taxes, depreciation and amortization of $171 million, according to an August report from Standard & Poor’s.
Under a credit agreement, NewPage must repay or refinance second-lien bonds by Jan. 31, or face maturity on its $1.77 billion of 11.375 percent bonds due in December 2014 being pushed forward to March 2012, according to a May regulatory filing.
The company’s Canadian unit, NewPage Port Hawkesbury Corp., separately brought proceedings before the Supreme Court of Nova Scotia under the Companies’ Creditors Arrangement Act of Canada, NewPage said in today’s statement. Both companies filed a settlement and transition agreement with that court and the Canadian entity is in discussions with potential buyers, NewPage said.
NewPage said Aug. 22 that it would idle the Canadian unit as market and economic conditions prevented it from operating profitably for more than a year.
The case is In re NewPage Corp. 11-12804, U.S. Bankruptcy Court, District of Delaware (Wilmington).
--With assistance from Steven Church in Wilmington, Delaware, and Lisa Abramowicz in New York. Editors: Douglas Wong, John Pickering
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