What is the latest news about the Verso bankruptcy?
As has been reported, the demand for coated paper has been declining for years and this has had a staggering effect on paper mills in the state of Wisconsin. In fact, Verso Corp., the firm that owns paper mills in the state, recently filed for bankruptcy.
Verso is a Tennessee-based corporation and there is growing concern that the bankruptcy may ultimately lead to job cuts for the 1200 employees of the company, including those who work at the Wisconsin Rapids and Steven Point mills. While company officials have said that reductions in force are not part of the reorganization plan, the company has acquired billions in debt, and, according to industry observers, the future for the coated paper industry looks grim.
This will invariably force paper companies to cut costs and even unwind some of their operations. Some papers mills will cease operation entirely, and some believe the mills in Wisconsin are among those that may shut down. By pursuing a Chapter 11 Bankruptcy, Verso may be able to mitigate or wipe out about $2.4 billion in debt.
What is a Chapter 11 Bankruptcy?
A Chapter 11 bankruptcy is designed to enable a business that has heavy debt burdens to reorganize. In short, a Chapter 11 filing allows a debtor to come up with a post-bankruptcy plan for returning to profitability. Included in the plan are measures like cutting costs by workforce reductions, winding down certain operations, and seeking new sources of revenue or income. Meanwhile, creditors need to agree to a new payment plan for the debt, and may ultimately suffer losses.
What is causing the demand for coated paper to decline?
Deteriorating demand for coated paper is due in part to the fact that this product is used primarily by magazines and catalogs. In the digital media age, subscription for these items has fallen dramatically, and many magazines and catalogs are transitioning to electronic formats. Moreover, foreign competition has also had an impact on the domestic coated paper industry, since suppliers in Asia and Europe produce the paper more cheaply.
Meanwhile, Verso has previously reported a net loss of $111 million for the third quarter of 2015 and said that it was considering selling the Stevens Point Mill. While Chapter 11 is typically relied upon by large corporations, this relief is also available to small businesses. If you are a small business owner and have questions about bankruptcy, you should consult with a qualified bankruptcy attorney.