NewPage Corp., the biggest maker of magazine paper in North America, filed for bankruptcy protection Wednesday, succumbing to falling demand as advertisers and readers move online.
Competition from Europe and Asia and rising costs for pulp, energy and chemicals have also hurt its business.
NewPage, owned by Cerberus Capital Management LP, has been trying to restructure $4.2 billion of debt since earlier this year, but said jittery suppliers have begun cutting off credit, leaving 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 obtained a commitment led by JPMorgan Chase & Cofor up to $600 million of credit during its bankruptcy. Other pre-bankruptcy lenders arranging the financing include Barclays Plc and Wells Fargo & Co.
That money will help keep the company operating, but NewPage did not lay out a plan for emerging from bankruptcy as companies often do when they file. It said it expects to continue operating its U.S. businesses as usual and is working closely with creditors and stakeholders to formulate a plan.
In court documents, the company's financial adviser said the value of NewPage as an ongoing business is higher than it would be if it was sold off in pieces.
Creditors include Apollo Management LP and Avenue Capital, which own some of the company's second lien debt, according to sources familiar with the situation. Apollo and Avenue are also investors in NewPage competitor Verso Paper Corp.
The company, with $3.4 billion in assets, is the biggest Chapter 11 filing of the year and the largest filing of 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.
OTHER PAPER MAKERS SUFFER
NewPage, which employs 6,000 workers at its U.S. mills, primarily produces coated paper, which is used in magazines, catalogs and high-end advertising brochures.
Its bankruptcy filing comes as competitors are also pressured by the shift to the Internet. The world's largest maker of paper used in magazines, South Africa's Sappi Ltd, has announced plans to close two mills this year.
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 buyers for the unit.
The company said last month it would take "downtime" at its Canadian subsidiary as the operation had been unprofitable for more than a year.
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 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 .
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.
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