PORTLAND, Maine — The owner of the paper mill in Jay has filed for Chapter 11 bankruptcy protection after trying for months to restructure the business without supervision of a bankruptcy court.
The company said in a statement Tuesday that it expects the filing “will have virtually no impact on the day-to-day operations of the company,” as Verso seeks to eliminate $2.4 billion in outstanding debt.
The company said it plans to keep control of its mills through the bankruptcy process, for which it expects to close on a $600 million debtor-in-possession financing package by Wednesday.
The bankruptcy filing of Verso Corp. and 26 subsidiaries Tuesday marks the failure of its effort to stay afloat through a leveraged buyout of its larger competitor NewPage for $1.4 billion, a deal that required the company to sell its mill in Rumford to satisfy antitrust regulators.
Verso’s Androscoggin mill in Jay employs about 565 people, after cutting 300 positions in layoffs that began late last year. The company shuttered and sold the Bucksport mill and its adjacent power generation facilities at the end of 2014, cutting 570 jobs.
David Paterson, Verso’s president and CEO, said in a news release that factors such as increasing competition from imports with the rise of the dollar and “unprecedented decline in demand for our products” contributed to the decision to file for bankruptcy.
“Verso chose to take this proactive step with the firm belief that our company will emerge from the Chapter 11 process as a stronger company that is positioned to compete and win, even as challenges in the overall economic environment continue,” Paterson said.
The specialty and coated paper maker, managed by private equity firm Apollo Global Management, has faced headwinds since its formation in 2008 to purchase the coated paper division of International Paper Co.
It met with a global recession and has faced steady decline in demand for its paper products, used for publications such as magazines, for which circulation has declined and publishing has moved to digital formats.
Along with its bankruptcy declaration, the company filed a number of motions to allow it to continue to pay ongoing operating costs to employees and vendors. It also published a new page on its website at versoco.com dedicated to the restructuring.
The company said in a statement to employees that it does not anticipate layoffs and will continue its current benefits packages but noted that “the company’s long-term success depends on its ability to properly align its supply with customer demand.”
Verso said the bankruptcy process could affect anyone who is considering retirement, as there are certain restrictions on pension withdrawals during the bankruptcy process.
Verso stated in its filing that it expects there will be money available to pay to its unsecured creditors through the case, a group that includes vendors and employees.
It listed two Maine firms among its top 30 unsecured creditors, with $2.2 million in debt to Rumford mill owner Catalyst Paper and $1.2 million to Hartt Transportation Systems, based in Bangor.
Verso acknowledged in November that it could file for bankruptcy protection if unable to sell off assets or work with creditors to restructure its debts.
Earlier this month, the company took a 30-day grace period to make payments on $1.34 million in bonds, seeking to restructure its debts in negotiations with bondholders, according to a regulatory filing. The company also skipped an interest payment on a $731 million loan Thursday, which had a five-day grace period.
The company previously announced the possibility of a bankruptcy reorganization if it could not reach debt restructuring deals with creditors.
Verso said in an earnings statement in November that, based on financials as of Sept. 30, “we believe that there is substantial doubt about our ability to continue as a going concern for the next 12 months.”
In that statement, the company said it would consider selling certain assets, including entire mills, as part of that restructuring effort.
On Jan. 7, the company announced it sold four hydroelectric generators serving its Jay mill to a New Jersey energy investor for $62 million. According to regulatory filings with the U.S. Securities and Exchange Commission, the power facilities were one of two assets the company owned outright.
The company owns eight mills in six states, including one in Kentucky that it idled last year.
The operating mills have a combined capacity of about 3.2 million tons of paper per year, including coated and uncoated printing papers, label and packaging paper and various pulp products.