Verso Paper Corp. has run into a problem that has the potential to derail its $1.4 billion deal to merge with NewPage Holdings Inc.

As part of the merger agreement, which was announced earlier this month, Verso Paper initiated a debt exchange offer in which holders of its debt would swap their notes for new notes with different terms. The results of that offer have not met the company’s expectations, according to a letter David Paterson, Verso’s CEO, sent to NewPage’s board of directors on Jan. 28.

In the letter, which was filed with the U.S. Securities and Exchange Commission, Paterson writes that fewer of Verso’s debt holders have participated in a debt exchange offer than expected — not enough in fact, to meet the minimum threshold required under the merger agreement with NewPage.

“Based on this fact … Verso is concerned about its ability to satisfy the condition and thus close the Merger,” Paterson wrote.

Verso and NewPage announced the merger agreement on Jan. 6. Assuming all conditions are met, the merger is expected to close in the second half of 2014.

Memphis, Tenn.-based Verso employs roughly 1,450 people in Maine at its paper mills in Bucksport and Jay. It also operates a third mill in Quinnesec, Mich. Its total annual production is 1.5 million tons of coated paper. Its annual sales in 2012 were $1.5 billion.

NewPage, headquartered in Miamisburg, Ohio, employs roughly 850 people in Maine at its paper mill in Rumford. It also operates seven other mills in Kentucky, Maryland, Michigan, Minnesota and Wisconsin. Its annual production capacity is 3.5 million tons of coated paper. It had $3.1 billion in sales in 2012.

The merger would create a paper industry titan with roughly $4.6 billion in sales and nearly 2,300 employees in Maine, nearly a third of the state’s paper industry workers. It would control 50 percent of the coated paper market in North America.

Despite the hurdle created by the debt exchange offer, the merger deal is not dead. The offer officially expires Feb. 10, 2014.

Paterson ends the letter to NewPage’s board by promising to update it with new information as it becomes available.

In response to a request from the Bangor Daily News, Verso released a statement that called the debt exchange offer “clearly in the best interests” of Verso’s second lien and subordinated debt holders.

“Without a significant reduction in Verso’s debt, reaching a definitive agreement between Verso and NewPage would not have been possible,” the statement says. “We believe Verso’s second lien and subordinated debt holders are far better off holding debt in a combined company with better prospects and a stronger capital structure than they would be absent this transaction.”

Whit Richardson

Whit Richardson is Business Editor at the Bangor Daily News. He blogs about Maine business, entrepreneurs and the economy.