Verso Corp. might sell the Androscoggin Mill in Jay or file for bankruptcy as part of a restructuring made necessary by continuing financial woes, its CEO said Monday.

David Paterson sent a letter to employees Monday detailing the company’s ongoing struggles despite the acquisition of rival New Page earlier this year. The letter was sent the same day the company reported disappointing third-quarter financial results. 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 Androscoggin Mill in Jay that employs more than 500 people, to filing for Chapter 11 bankruptcy protection. Paterson also said it is considering the sale of its hydroelectric generation facilities that provide power to its Androscoggin Mill.

“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 acquired its former competitor NewPage Holdings in a deal worth $1.4 billion. In announcing the acquisition in January 2014, Paterson said the combined company would be better prepared to compete in a global marketplace. However, the challenges did not subside after the merger.

In its third-quarter financial results, the company reported net sales had increased 123 percent from the third quarter of 2014, from $350 million to $782 million, a result of added volume from its acquisition of NewPage, but still showed a quarterly net loss of $111 million. In the 12 months ending Sept. 30, the company has lost $511 million, according to the company’s filing.

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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, according to Bill Cohen, Verso’s spokesman.

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.

Everett O’Neill, Verso’s manager at its Androscoggin Mill, spoke to mill employees at 11 a.m. Monday, Cohen said.

“He encouraged employees at the mill to stay focused on safety and what they can control and not get hung up in corporate restructuring,” Cohen said.

The Androscoggin Mill hasn’t been immune to the challenges that have plagued the industry in Maine for the past few years. In August, Verso announced it would lay off 300 employees at its Jay mill, citing declining demand, energy costs and high property taxes. That reduced the employee count at the mill, which still operates three paper machines, to roughly 560 people. Verso also shuttered a mill in Kentucky in the last few months.

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The downsizing in Maine and Kentucky hit the company’s finances with $55 million of restructuring charges, including severance and benefit costs related to the layoffs at the mills.

Last year, before the merger was complete, Verso closed its mill in Bucksport, putting 500 people out of work.

In September, the New York Stock Exchange delisted Verso’s stock because of a precipitous fall in its value. The company is now traded in over-the-counter exchanges.

The Maine Pulp and Paper Association on Monday issued a statement in response to Verso’s news. The association, which is planning a daylong summit Tuesday to discuss industry challenges, said it’s a critical time for paper companies, but that “in spite of the headlines, is still one of the state’s most important, directly employing almost 5,000 Mainers in high-paying jobs.”

“Mill leadership across the state recognizes its responsibility to improve operating efficiencies, make capital investments and innovate products to meet customers needs – but even the most successful mills need help on issues such as energy costs, access to fiber and tax policy, among others, if this industry is to compete and thrive in today’s challenging times,” the statement said.

Verso CEO Paterson, in closing his letter, tried to rally the employees with a call to remain focused on fulfilling the company’s future potential, and not the abstract challenges they 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. “We’ve come a long way quickly, and I’m asking for your help to keep our momentum going. First and foremost, let’s continue to work safely and look out for one another. And let’s stay focused on the things we can control – efficiency, productivity, quality, costs and customer service. 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.”

 


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