Verso Corp. is considering the sale of some of its paper mills — including the one in West Duluth — or filing for bankruptcy, the company announced Monday.
But the mill’s workforce — about 300 employees — needn’t be concerned about the immediate future, a company representative said.
“Right now, in the evaluation process, nothing is going to change,” said Kathi Rowzie, vice president for communications and public affairs for Memphis, Tenn.-based Verso Corp. “The mill will continue to operate, business as usual.”
Financial troubles have dogged the paper company since its acquisition of rival NewPage was finalized earlier this year.
In the company’s third quarter financial results released Monday, it reported net sales had increased 123 percent from the third quarter of 2014, from $350 million to $782 million, a result of its acquisition of NewPage, but still reported a quarterly net loss of $111 million. In the 12 months ending Sept. 30, 2015, the company has lost $511 million, according to the company’s filing.
On Monday the company said that, based on its current position and projections, “we anticipate that we will not have sufficient resources to fund our most significant future cash obligations” and must look at restructuring.
“We have begun discussions with certain of our creditor constituencies to explore potential restructuring alternatives,” Verso announced in its Monday report detailing third-quarter results. “We also are exploring opportunities to raise funds through potential sales of certain of our mills and related facilities, which may include the Stevens Point (Wis.), Androscoggin (Maine) and Duluth mills. …
“Our potential restructuring could occur in a consensual, out-of-court manner or through a court-supervised Chapter 11 bankruptcy proceeding. While we intend to actively pursue a potential restructuring and potential asset sales, there can be no assurance that any of these activities will occur on terms acceptable to us or at all.”
The four mills not mentioned as possible sales targets are “more closely aligned” to Verso’s business plan than the Duluth, Androscoggin and Stevens Point mills, Rowzie said. That doesn’t mean the Duluth plant ultimately will be sold, she added.
“But we think it’s a very attractive mill,” she said. “It’s gone through several ownerships and is still a successful mill and is still a productive mill and has a great, talented workforce.”
In a letter to employees Monday, Verso CEO David Paterson wrote that the company is facing “a perfect storm of external factors that negatively affect our liquidity and cash flows, including impending financial obligations, an accelerated and unprecedented decline in demand for our coated paper products, and a significant increase in foreign imports resulting from a strong U.S. dollar relative to foreign currencies.”
As a result, the company is considering a range of “restructuring alternatives,” from the potential sale of some of its paper mills, including the mill along Interstate 35 in western Duluth, to filing for Chapter 11 bankruptcy protection.
“I know this news is unsettling, but be assured that Verso will continue to operate our business as usual as we explore a potential restructuring and potential asset sales,” Paterson wrote.
Verso in January finalized its acquisition of former competitor NewPage Holdings — including the Duluth mill — in a deal worth $1.4 billion. At that time, the company reported about $3.5 billion in annual sales and about 5,800 employees in eight mills across six states.
Verso in August announced it would lay off 300 employees at its Androscoggin Mill in Jay, Maine, citing declining demand, energy costs and high property taxes. Verso also shuttered a paper mill in Kentucky in the past few months.
Last year, before the merger was complete, Verso closed its mill in Bucksport, Maine, putting 500 people out of work.
In September, the New York Stock Exchange delisted Verso’s stock because of a precipitous fall in the value of its stock. The company is now traded in over-the-counter exchanges.
The market for the company’s coated paper, the glossy kind used for magazines and catalogs, is being squeezed on two sides: from falling demand and increasing foreign imports, Verso spokesman Bill Cohen told the Portland Press Herald.
Cohen cited figures from the Pulp and Paper Products Council that report North American demand for coated paper had fallen 5.6 percent since the third quarter of 2014, and that net foreign imports had increased 16.8 percent in the same period.
“The fact is we have more coming in and decreasing demand,” Cohen said.
Last month the U.S. Commerce Department determined that Canadian paper producers have been receiving unfair subsidies, allowing them to sell coated paper in the U.S. below-cost and eat into markets for American-made paper.
The Duluth mill, which began operations in 1987, makes coated paper used for catalogs, magazines, advertising inserts and other commercial products.
Verso CEO Paterson, in closing his letter Monday, tried to rally employees with a call to remain focused on fulfilling the company’s future potential, and not the abstract challenges employees have no control over.
“As we move through this process, it’s really important that we don’t get distracted and lose sight of all the great things we’ve accomplished together over the last 11 months and how much opportunity lies ahead,” he wrote. “No matter which direction this potential restructuring and potential asset sale process takes us, it’s in everyone’s best interests to continue our efforts to make Verso the very best company we can be.”
The Portland (Maine) Press Herald contributed to this report.