OREANDA-NEWS. S&P Global Ratings said today it assigned its 'B+' corporate credit rating to Verso Paper Holdings LLC upon its emergence from bankruptcy. The outlook is stable.

At the same time, we assigned our 'BB' issue-level rating to the company's $220 million secured term loan due 2022. Our recovery rating on the term loan is '1', which raises the issue-level rating two notches from the corporate credit rating and indicates our expectation for very high (90% to 100%) recovery for creditors in the event of default. We estimate adjusted debt between $750 million and $775 million at the time of emergence, which includes the company's tax-affected pension and other postretirement benefit obligations.

Memphis-based Verso is the largest producer of coated freesheet paper in North America and also produces specialty papers and pulp. Coated freesheet paper is used in commercial printing, magazines, catalogs, books, advertising inserts, and other products.

"Our stable outlook reflects our projection that after the material reduction in debt related to the company's bankruptcy restructuring, debt to EBITDA will improve to the 3x to 4x range on a run rate basis," said S&P Global Ratings credit analyst Christopher Andrews.

We could take a negative rating action over the next 12 months if paper demand and pricing materially underperform our forecast and the company does not achieve the run-rate EBITDA levels we expect it to, such that debt to EBITDA is sustained over 5x. Alternatively, a downgrade could also be the result of declining profitability that we view as being non-temporary, such that we reassess our view of Verso's business risk profile to vulnerable from weak.

Although we view it as unlikely over the next 12 months, we could take a positive rating action if the company is able to drive stronger operating efficiency, resulting in EBITDA growth that is higher relative to our forecast, or that Verso is able to reduce its revolving debt balance more rapidly than we expect, such that we believe leverage will be maintained below 3x.