Bledsoe Research Group
Long/short equity

Verso Paper Shares Headed Lower With Exchange Offers Cancelled

In January, shares of Verso Paper (NYSE:VRS) shot up over 700% in the days following a press release announcing the company's merger with privately held NewPage Holdings Inc. The stock has dropped off its highs, but still trades at $2.45 or 275% higher than the close prior to the merger announcement.

As detailed by Paulo Santos here, investors were especially excited about the debt exchange agreement that would help fund the merger. If approved, the debt offering would, in essence, take money from bondholders and give it to equity holders. Usually in these types of debt reduction deals, shareholders are heavily diluted in favor of the bonds. From the outset, it appeared bondholders were getting a raw...

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