DEBTWIRE BROADCAST: VERSO PLANS TO SHRED DEBT LOAD, KEEP NEWPAGE IN THE FOLD

Transcription

1 DEBTWIRE BROADCAST: VERSO PLANS TO SHRED DEBT LOAD, KEEP NEWPAGE IN THE FOLD Debtwire s team of journalists and analysts will recap the first-day hearing and explore a variety of topics, including plan and valuation issues, a shared services litigation standstill, and a trio of DIP loans. 28 January 2016

2 AGENDA 1. Opening Remarks: Andrew Ragsly, Managing Editor 2. Case Overview: Paunie Samreth, Associate Editor 3. First Day Action: Maria Chutchian, Court Reporter 4. Legal Hurdles: Richard Goldman, Legal Analyst 5. DIP Facilities: Jody Henry, Covenant Analyst 6. RSA and Valuation Discussion: Seth Crystall, Senior Credit Analyst 7. Q & A 8. Appendix 2

3 CASE OVERVIEW NewPage files for bankruptcy in 2011, the long engagement Verso/NP merger drags, pro forma leverage jumps from 6.5x at the time the merger was announced to 9.5x in January 2015, when the deal closed. Pro forma combined EBITDA declines from 398m in 2013 to 271.5m in 2014 Verso CFO resigns in June, alarming investors NewPage lenders organize against shared service agreement Verso hires O Melveny to examine restructuring 3

4 FIRST DAY ACTION Interim DIP approved, final DIP will be considered on Feb. 24. Other administrative motions approved as well to keep the company operating during Chapter 11. Interim protocol for shared services agreement approved, will fend off litigation between Verso and NewPage over disputed amounts NewPage may owe Verso. Advisors touted creditor support for RSA: 55% of Verso first lien holders, 70% of its junior creditors including 1.5 lien, second lien and unsecured noteholders and 68% of NewPage term loan lenders. Unsecured trade claims could be paid in full. 4

5 LEGAL HURDLES: SHARED SERVICES INTERIM PROTOCOL The SSA Prepetition issues Chapter 11 filing issues The interim protocol True-up mechanism 5

6 DIP FACILITIES Three DIP facilities a USD 100m revolver at Verso and a USD 325m revolver & USD 350m term loan at NewPage. Verso Prepetition Revolver USD 100m L+2.5% Verso DIP Revolver Exit Facility. NP Prepetition Revolver USD 325m L+2.5% NewPage DIP Revolver Exit Facility. New Money & Partial Rollup of NP Prepetition Term Loan USD 350m L+9.5% NewPage DIP Term Loan Partially equitized, partially cashed out. Milestones vary led by the RSA, then the NP DIP Term Loan. 6

7 VALUATION INSIGHTS: ADJUSTED CAPITAL STRUCTURE FINANCIAL ANALYSIS: ADJUSTED CAPITAL STRUCTURE Coupon Maturity Face Amount Outstanding Price Market Amount Adj. Pro Forma Face Amount Verso USD 150m ABL L+2.25% 4-May (66) 0 Verso USD 100m ABL DIP 1 L NewPage USD 350m ABL Credit Facility 2.75% 11-Feb (239) 0 NewPage USD 750m Senior Secured Term Loan L+8.25% 11-Feb (734) 0 NewPage USD 60m Revolving Credit Facility L+4.75% 6-Jan NewPage USD 325m DIP ABL Revolver 2 L NewPage USD 350m DIP Term Loan 3 L Verso USD 50m Cash Flow Facility L+4.75% 4-May (50) 0 Verso 2012 First Lien Senior Secured Notes 11.75% 15-Jan (418) 0 Verso 2015 First Lien Senior Secured Notes 11.75% 15-Jan (645) 0 Verso 1.5 Lien Secured Notes 11.75% 15-Jan (272) PF Face Leverage First Lien Debt 2, x Verso 2nd Lien Snr Secured Notes (13% PIK Notes) 10.00% 1-Aug (181) 0 Second Lien Debt 2, x Verso Old Second Lien Second Priority Notes 8.75% 1-Feb (97) 0 Verso Senior Subordinated Notes (16% PIK Notes) 11.00% 1-Aug (65) 0 Verso Senior Subordinated Notes % 1-Aug (41) 0 Consolidated Debt 2, x Cash (10) 0 Net Debt 2, x Equity Capitalization Per Share 1 1,040 1,040 Enterprise Value 2, , x 2016E PF Adjusted EBITDA E Revenue 2,901 1) The Verso USD 100m ABL DIP is assumed to be fully drawn; has an interest rate of L+2.5%; and matures in July ) The NewPage USD 325m ABL is assumed to be fully drawn; has an interest rate of L+2.5%; and matures in July ) The NewPage USD 350m Term Loan has two components: USD 175m of new money and a USD 175m roll-up that will be equitized; the interest rate is L+9.5% and maturity is July ) We assume that there is no cash. 5) Equity Value of USD 1.04bn is based on the Plan Term Sheet in the Restructuring Support Agreement. Sources: Company bankrutpcy filings, Debtwire, MarketAxess and Markit. 7

8 VALUATION INSIGHTS: VERSO CONSOLIDATED FINANCIALS HISTORICAL AND PROJECTIONS USDm FINANCIAL ANALYSIS: VERSO CONSOLIDATED FINANCIALS - HISTORICAL AND PROJECTIONS 2014PF 9M YTD M YTD 2015 LTM 1Q16E 2Q16E 3Q16E 4Q16E FY16E 1Q17E 2Q17E 1H17E Net Revenue 3,363 2,510 2,366 3, , ,398 Cost of Sales (2,921) (2,170) (2,063) (2,814) (637) (581) (628) (622) (2,468) (626) (582) (1,207) Gross Profit Gross Margin 13.1% 13.5% 12.8% 12.6% 10.8% 16.4% 15.8% 16.6% 14.9% 11.7% 15.6% 13.6% Corporate Costs (263) (192) (134) (205) (45) (45) (45) (45) (180) (45) (45) (90) Operational Restructuring (11) (6) (26) 0 (43) EBITDA Adjustments Adjusted EBITDA Adjusted EBITDA Margin 8.6% 8.4% 8.8% 8.9% 4.5% 9.9% 9.8% 10.6% 8.7% 5.3% 9.1% 7.2% Estimated Net Debt Outstanding 2, Total Leverage 9.7x 1.7x Additional Info YOY Revenue Growth -5.7% -11.4% -10.7% -4.7% -2.5% -7.4% -0.8% -0.8% -0.8% Capital Expenditures (12) (23) (30) (35) (100) (12) (23) (35) Change in A/R, Inventory & A/P (5) (14) (22) 33 (8) 11 (29) (18) Pension/OPEB (10) (11) (13) (10) (45) (15) (15) (30) Interest Expense (253) (197) (201) (257) Sources: Company SEC filings and presentations. 8

9 VALUATION INSIGHTS: NEWPAGE FINANCIALS HISTORICAL AND PROJECTIONS FINANCIAL ANALYSIS: NEWPAGE FINANCIALS - HISTORICAL AND PROJECTIONS USDm 2014PF 9M YTD 9M YTD LTM 2015E 1Q16E 2Q16E 3Q16E 4Q16E FY16E 1Q17E 2Q17E 1H17E 2017E 2018E 2019E 2020E Net Revenue 2,347 1,757 1,639 2,229 2, , ,009 2,077 2,062 2,107 2,126 Cost of Sales (2,054) (1,535) (1,433) (1,952) (1,929) (461) (428) (474) (462) (1,825) (452) (429) (881) (1,793) (1,771) (1,794) (1,814) Gross Profit Gross Margin 12.5% 12.6% 12.6% 12.4% 12.3% 10.7% 14.8% 11.9% 14.3% 12.9% 11.7% 13.9% 12.8% 13.7% 14.1% 14.9% 14.7% Corporate Costs (150) (102) (58) (106) (80) (24) (24) (24) (24) (96) (24) (24) (49) (97) (97) (97) (97) EBITDA excluding Synergy & SSA Synergy Transfers to Verso (48) (18) (18) (18) (18) (72) (18) (18) (36) (72) (72) (72) (72) SSA Transfers from NewPage (62) (18) (18) (18) (18) (72) (18) (18) (36) (72) (72) (72) (72) Operational Restructuring (17) (8) (2) (26) 0 (36) Adjustments Adjusted EBITDA (5) (1) Adjusted EBITDA Margin 8.0% 7.7% 9.9% 9.6% 2.9% -1.0% 2.8% 0.7% 3.2% 1.4% -0.2% 1.8% 0.8% 2.1% 2.4% 3.4% 3.3% Synergies & Shared Services 0 (72) (72) 0 Adjusted EBITDA after Synergies & SSA (5) (1) Adj. EBITDA post Adjustments Margin 8.0% 7.7% 5.5% 6.4% 2.9% -1.0% 2.8% 0.7% 3.2% 1.4% -0.2% 1.8% 0.8% 2.1% 2.4% 3.4% 3.3% Estimated Debt Outstanding Total Leverage 5.6x 1.9x Additional Info YOY Revenue Growth -6.7% -6.7% -8.7% 0.4% -1.7% -4.2% -0.9% -0.9% -0.9% -0.9% -0.7% 2.2% 0.9% Depreciation Capital Expenditures (46) (8) (14) (19) (22) (63) (8) (14) (22) (63) (63) (63) (63) Change in A/R, Inventory & A/P (4) (3) (16) (14) (14) Pension/OPEB (33) (10) (10) (12) (9) (41) (14) (14) (28) (44) (45) (51) (52) Interest Expense (111) (91) (59) (79) Cash Flow Adjusted EBITDA before SSA Chap 11 EBITDA Contingency 0 0 (5) (5) (10) (5) (5) (10) Pension/OPEB (10) (10) (12) (9) (41) (14) (14) (28) (44) (45) (51) (52) Change in A/R, Inventory & Other WC (25) 6 (24) 35 (8) 2 (18) (16) na na na na Change in pre- and post-petition AP (22) (14) na na na na Capex (8) (14) (19) (22) (63) (8) (14) (22) (63) (63) (63) (63) Cash Flow Before Restructuring (34) 41 (20) (5) Restructuring Expenses 1 (14) (23) (17) (17) (71) (19) (17) (36) Cash Flow before Financing (48) 18 (37) 35 (31) (7) (22) (29) Source: Company SEC filings. 1) Includes DIP fees, DIP interest and professional fees. Assumes DIP facility of USD 500m at NewPage. Assumes USD 4m per month in professional fees. 9

10 VALUATION INSIGHTS: VERSO STANDALONE FINANCIALS HISTORICAL AND PROJECTIONS USDm 2014PF FINANCIAL ANALYSIS: VERSO STANDALONE FINANCIALS - HISTORICAL AND PROJECTIONS 9M YTD M YTD 2015 LTM 2015E 1Q16E 2Q16E 3Q16E 4Q16E FY16E 2017E 2018E 2019E 2020E Net Revenue 1, Cost of Sales (867) (635) (630) (863) (809) (176) (153) (154) (161) (643) (631) (625) (646) (665) Gross Profit Gross Margin 14.6% 15.6% 13.3% 12.9% 13.9% 11.2% 20.5% 25.7% 22.6% 20.1% 21.3% 21.6% 21.1% 19.9% Corporate Costs (112) (90) (75) (97) (96) (21) (21) (21) (21) (83) (83) (83) (83) (83) Synergy Transfers from NewPage Shared Services Transfers from NewPage Operational Restructuring 0 0 (69) (69) (88) (3) (3) 0 0 (6) EBITDA Adjustments Adjusted EBITDA Adjusted EBITDA Margin 10.0% 10.1% 16.3% 14.5% 15.4% 18.8% 28.6% 33.1% 29.9% 27.7% 28.9% 29.2% 28.6% 27.2% Estimated Debt Outstanding 1, Total Leverage 12.7x 0.4x Additional Info YOY Revenue Growth -3.4% -21.8% -15.6% -15.9% -2.8% -14.4% 0.0% -0.5% 2.7% 1.3% Depreciation Capital Expenditures (20) (4) (9) (11) (13) (37) (37) (37) (37) (37) Change in A/R, Inventory & A/P (7) (11) (5) 9 (14) Pension/OPEB (2) (1) (1) (2) (1) (5) (5) (6) (6) (6) Interest Expense Source: Company SEC filings. 10

11 VALUATION INSIGHTS: NEWPAGE FINANCIALS WEEKLY CASH BUDGET FINANCIAL ANALYSIS: NEWPAGE WEEKLY CASH FORECAST Pre-Petition DIP Closing Post-Petition TOTAL USDm 22-Jan Adjustments 29-Jan 5-Feb 12-Feb 19-Feb 26-Feb 4-Mar 11-Mar 18-Mar 25-Mar 1-Apr 8-Apr 15-Apr 13-Weeks RECEIPTS: Total Receipts CASH DISBURSEMENTS: Chemicals (7.7) 0.0 (9.7) (5.3) (9.1) (4.9) (3.9) (5.9) (2.5) (3.5) (7.7) (4.9) (8.3) (4.9) (78.3) Wood & Pulp (10.4) 0.0 (10.9) (4.9) (5.2) (9.6) (11.9) (12.1) (12.3) (10.4) (8.3) (7.0) (8.0) (8.0) (118.9) Energy (5.5) 0.0 (0.8) (1.0) (7.2) (1.5) (1.1) (1.1) (1.9) (6.4) (1.6) (1.1) (1.8) (4.8) (35.8) Production Related (23.6) 0.0 (21.3) (11.2) (21.4) (16.1) (17.0) (19.1) (16.7) (20.2) (17.6) (13.0) (18.2) (17.7) (233.0) Employee Costs (2.3) 0.0 (15.7) (2.8) (7.8) (2.3) (17.7) (2.8) (7.8) (2.3) (7.8) (10.7) (2.5) (13.3) (95.8) Freight and Warehouse (3.4) 0.0 (3.9) (4.0) (2.0) (2.0) (1.9) (1.9) (3.9) (3.9) (3.9) (3.9) (3.8) (3.8) (42.1) Taxes and Insurance (1.9) 0.0 (0.7) (0.2) (0.1) (1.9) (0.3) (0.1) (0.0) (0.4) (0.0) (0.1) (0.1) (0.1) (5.9) Customer Rebates (0.0) 0.0 (0.0) (4.2) (3.7) (3.6) (0.5) (0.5) (0.5) (0.5) (0.5) (0.5) (0.4) (0.4) (15.2) Corporate Items (5.3) 0.0 (4.7) (8.3) (5.7) (7.5) (2.7) (2.5) (4.4) (4.7) (4.4) (4.5) (4.3) (4.3) (63.2) Capex (3.2) 0.0 (1.8) (1.3) (1.1) (0.8) (0.5) (0.6) (0.6) (0.5) (0.9) (0.9) (0.9) (0.9) (14.0) SG&A (0.0) 0.0 (0.1) (0.3) (1.1) (0.7) (0.7) (1.4) (0.7) (0.7) (1.4) (0.7) (1.0) (1.0) (9.8) Overhead and Maintenance (4.0) 0.0 (4.5) (5.2) (4.7) (4.6) (4.5) (3.8) (4.4) (4.4) (3.9) (4.5) (4.0) (4.0) (56.3) Other (10.1) (9.1) Other Disbursements (6.2) 0.0 (16.4) (6.8) (6.9) (6.1) (5.7) (5.8) (5.7) (5.6) (6.2) (6.1) (5.9) (5.9) (89.2) SSA Payments (3.5) (3.5) (3.5) (3.5) 0.0 (14.0) Approved Bankruptcy Payments (5.8) (10.8) (5.8) (5.8) (3.3) (3.3) (3.3) (3.3) (0.5) (0.5) (0.5) (0.5) (43.2) Professional Fees (1.0) 0.0 (2.3) 0.0 (1.0) 0.0 (2.3) (6.5) Restructuring Payments (9.3) (14.3) (5.8) (5.8) (3.3) (4.2) (6.8) (5.5) (0.5) (1.5) (4.0) (2.8) (63.7) Interest and Fees 0.0 (12.8) (0.5) (0.5) (4.9) (18.7) TOTAL DISBURSEMENTS (37.3) (12.8) (67.4) (43.3) (47.6) (38.3) (46.4) (34.4) (41.3) (38.9) (36.4) (35.8) (34.9) (48.9) (563.6) Net Weekly Cash Flows (12.4) (12.8) (30.4) (4.1) (9.9) (0.8) (7.9) 3.6 (2.8) (1.4) (8.4) (78.9) Beginning Cash Net Weekly Cash Flows (17.5) (12.8) (30.4) (4.1) (9.9) (0.8) (7.9) 3.6 (2.8) (1.4) (8.4) Net Revolver Draws / (Payments) (3.6) (2.1) (2.2) (4.1) Ending Cash LIQUIDITY DIP Term Loan Balance (USD 125m Interim) ABL Commitment (25.0) Borrowing Base Shortfall (100.6) 0.0 (75.6) (75.6) (61.8) (61.8) (59.4) (59.4) (59.0) (59.0) (62.8) (62.8) (73.3) (73.3) Net Commitment (25.0) Outstanding Borrowings (205.4) (124.5) (128.6) (138.6) (139.3) (147.2) (143.6) (146.4) (147.7) (145.6) (143.4) (139.3) (147.7) Letters of Credit (51.0) (51.0) (51.0) (51.0) (51.0) (51.0) (51.0) (51.0) (51.0) (51.0) (51.0) (51.0) (51.0) Total Required Usage (256.4) (175.5) (179.6) (189.6) (190.3) (198.2) (194.6) (197.4) (198.7) (196.6) (194.4) (190.3) (198.6) Net Liquidity (7.0) Carve-out Reserve (5.0) (5.0) (5.0) (5.0) (5.0) (5.0) (5.0) (5.0) (5.0) (5.0) (5.0) (5.0) Mid-Month Borrowing Base Reserve (2.5) (2.5) (2.5) (2.5) Minimum Excess Availability (15.0) (15.0) (15.0) (15.0) (15.0) (15.0) (15.0) (15.0) (15.0) (15.0) (15.0) (15.0) Liquidity Available to Company Sources: Company bankruptcy filings and presentations. Amounts may not add due to rounding; footnotes not included. 11

12 VALUATION INSIGHTS: ESTIMATED RECOVERIES FINANCIAL ANALYSIS: ESTIMATED RECOVERIES REORG EQUITY VALUE ESTIMATED RECOVERIES USDm Amount USDm Principal Value of Recovery Estimated Recovery 2016E EBITDA 253 Verso First Lien Notes 1, % Implied Multiple 5.8x Verso Senior Debt % Reorganized Verso EV (2016) 1,467 Verso Subordinated Debt % New Verso ABL 100 NewPage DIP Roll Up Term Loan % New NewPage ABL 325 NewPage Prepetition Term Loan % Equity Value 1,042 50% of Equity % of Equity % of Equity 2 47% of Equity 490 Sources: SEC filings, Debtwire Analytics. 12

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15 DIP FACILITIES LIEN PRIORITY SCHEME Verso Current Assets Verso Priority Scheme Verso Non-Current Assets Carve-Out & ABL Permitted Prior Liens Carve-Out & Notes Permitted Prior Liens Verso DIP ABL Revolver Liens ABL Adequate Protection & Prepetition Liens (Contingent Liens) Liens resulting from SSA Agreement, if any First-Priority Adequate Protection & Prepetition First- Priority Liens Liens resulting from SSA Agreement, if any First-Priority Adequate Protection & Prepetition First- Priority Liens Verso DIP ABL Revolver Liens ABL Adequate Protection & Prepetition Liens (Contingent Liens) 1.5L Notes Junior Adequate Protection Liens & Prepetition 1.5L Notes Liens 2L Notes Junior Adequate Protection Liens & Prepetition 2L Notes Liens 15

16 DIP FACILITIES LIEN PRIORITY SCHEME NewPage Current Assets NewPage Priority Scheme NewPage Non-Current Assets Carve-Out & Permitted Prior Liens Carve-Out & Permitted Prior Liens DIP ABL Revolver Liens ABL Adequate Protection & Prepetition Liens DIP Term Loan Liens New Money DIP Term Loan Liens New Money Liens resulting from SSA Agreement, if any Liens resulting from SSA Agreement, if any DIP Term Loan Liens Roll Up DIP Term Loan Liens Roll Up TL Adequate Protection & Prepetition Liens TL Adequate Protection & Prepetition Liens DIP ABL Revolver Liens ABL Adequate Protection & Prepetition Liens 16

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