Credit rating agency Moody’s gave positive marks to Verso’s purchase of NewPage and wrote that cash from selling its Bucksport paper mill will improve the short-term outlook for the company, which continues to operate another mill in Jay.
Moody’s on Wednesday upgraded its rating on debt from a variety of entities controlled by Verso Paper Holdings and reflects the company’s financial position after acquiring its larger competitor, NewPage, for $1.4 billion. The overall rating rose to B3 from Caa3.
The rating agency lowered the likelihood the company would go bankrupt and changed its outlook on future performance to stable, despite what Moody’s said are continuing declines in the market for coated paper.
“Verso’s rating also reflects the execution risks in integrating NewPage’s six paper mills with its own two mills and the company’s convoluted funding structure,” the ratings statement said.
In addition to the mill in Jay, the combined company has mills in Kentucky, Maryland, Michigan, Minnesota and Wisconsin, with about 4 million tons of annual production capacity for various paper grades.
The company’s mill in Jay has its most diverse array of products, ranging from coated papers used in magazines to specialty papers for uses such as adhesive labels and pulp that feeds the papermaking process or can be sold to other paper makers.
The company estimates its combined sales will be about $3.5 billion in 2015.
In the short-term, Moody’s said the sale of the Bucksport mill to scrap metal dealer AIM Development USA, will add to Verso’s cash on hand in the short term. The company has said the $58 million sale mostly would go to shutdown costs.