Cerberus-owned NewPage files for Chapter 11

Reuters

By Tom Hals

WILMINGTON, Delaware (Reuters) - NewPage Corp <NEWPG.UL>, the biggest maker of magazine paper in North America, filed for bankruptcy on Wednesday, succumbing to falling demand and rising costs.

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NewPage, owned by Cerberus Capital Management LP <CBS.UL>, has been trying to restructure its $4.2 billion of debt but said jittery suppliers have begun cutting off its credit, leaving its liquidity "severely constrained," according to filings in Delaware's bankruptcy court.

The Miamisburg, Ohio-based company, which owns paper mills in the United States and Canada, said it has obtained a commitment led by JPMorgan Chase & Co <JPM.N> for up to $600 million of credit during its bankruptcy.

While that money will help keep the company operating, NewPage did not lay out a plan for emerging from bankruptcy as companies often do when they file.

The company listed assets of $3.4 billion. It is the biggest Chapter 11 filing of the year and the largest for a non-financial company since 2009, according to Bankruptcydata.com.

Bankruptcies by large companies have declined sharply since the Federal Reserve lowered interest rates to near zero following the 2008 financial crisis.

NewPage, which employs 6,000 workers at its U.S. mills, primarily produces coated paper, which is typically used in magazines, catalogs and high-end advertising brochures.

The industry has been hit hard by falling demand, global overcapacity and rising costs, particularly for energy.

The world's largest maker of paper used in magazines, South Africa's Sappi <SAPJ.J>, said earlier this year that it might have close a mill in Europe due to rising costs.

NewPage operates 16 papermaking machines at mills in Kentucky, Maine, Maryland, Michigan, Minnesota and Wisconsin.

It also has a Nova Scotia mill that sought protection from creditors under Canadian law, and said it is looking for potential buyers for the unit.

The company said last month that it would take "downtime" at its Canadian subsidiary as the operation had been unprofitable for more than a year.

NewPage said it expects to continue operating its U.S. businesses as usual and was working closely with creditors and other stakeholders to formulate a Chapter 11 plan.

NewPage had sales of $1.8 billion in the first half of 2011, up slightly from a year earlier, according to securities filings. It suffered a net loss of $220 million in the first half, narrower than the year-earlier loss of $349 million.

NewPage grew through a series of deals. It acquired paper mills from MeadWestvaco Corp <MWV.N> for $2.3 billion in 2005 and took the top spot in the North American market in 2007 with a $2.5 billion deal to buy mills from Finland's Store Enso <STERV.HE>.

The company planned for an initial public offering of its stock in 2008. It withdrew those plans last year.

The case is Newpage Corp, Case No. 11-12804, U.S. Bankruptcy Court, District of Delaware.

(Reporting by Tom Hals; additional reporting by Tanya Agrawal and Sakthi Prasad in Bangalore; editing by John Wallace)

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