Verso Corp. has received approval for $600 million in financing that will allow the paper maker to continue operations through its bankruptcy.
Verso, which operates a mill in Jay where 550 people are employed, said in a media release late Wednesday that it received final approval from the U.S. Bankruptcy Court in the District of Delaware for several motions related to its voluntary restructuring under Chapter 11.
“With the approval of our first-day motions, including the authorization of up to $600 million in debtor-in-possession financing, Verso has transitioned smoothly into the Chapter 11 process,” Verso President and CEO David J. Paterson said in the release. “The court’s approval of these first-day motions provides confidence that Verso has the ability to continue operating our business as usual throughout the restructuring process.”
Debtor-in-possession financing is a form of financing used in bankruptcies that usually carries priority over other debt and claims. According to court documents, Citibank will administer the fund.
The approval authorizes Verso to, among other things, continue to pay employee salaries, wages and benefits, make qualified retirement plan payments, honor customer programs and pay suppliers. Additionally, the financing gives the company significant operational flexibility and enough liquidity to continue operating for the foreseeable future, said the release.
Verso filed for bankruptcy Jan. 26. It had previously tried to increase profits by selling off an underperforming mill in Bucksport in 2014 and merging with rival NewPage in 2015. After that deal, the company reported sales of $3.5 billion, but was carrying $2.4 billion in debt.
Verso has been battling headwinds common among U.S. paper producers. The market for domestically produced paper shrank 8 percent from 2014 to 2015 because of the strong dollar, cheaper imports and reduced demand.
Verso said it recognized in November that it was running out of money and decided to market the Jay mill’s paper and hydro operations and also sought to sell three NewPage mills, none of which is in Maine. Verso acquired NewPage in 2014 by taking on $2.4 billion in debt that requires interest payments of $270 million a year, the company said.
Although the mills attracted interest from buyers, the company decided on another course. Instead of seeking a cash infusion through selling the mills, it opted to revamp its finances by seeking to restructure the debt through a bankruptcy filing.
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