VERSO CORPORATION Deutsche Bank Leveraged Finance Conference September 28, 2016
Disclaimer This document contains highly confidential information and is solely for informational purposes. You should not rely upon or use it to form the definitive basis for any decision or action whatsoever, with respect to any proposed transaction or otherwise. You and your affiliates and agents must hold this document and any oral information provided in connection with this document, as well as any information derived by you from the information contained herein, in strict confidence and may not communicate, reproduce or disclose it to any other person, or refer to it publicly, in whole or in part at any time except with our prior written consent. If you are not the intended recipient of this document, please delete and destroy all copies immediately. This document is “as is” and is based, in part, on information obtained from other sources. Our use of such information does not imply that we have independently verified or necessarily agree with any of such information, and we have assumed and relied upon the accuracy and completeness of such information for purposes of this document. Neither we nor any of our affiliates or agents, make any representation or warranty, express or implied, in relation to the accuracy or completeness of the information contained in this document or any oral information provided in connection herewith, or any data it generates and expressly disclaim any and all liability (whether direct or indirect, in contract, tort or otherwise) in relation to any of such information or any errors or omissions therein. Any views or terms contained herein are preliminary, and are based on financial, economic, market and other conditions prevailing as of the date of this document and are subject to change. We undertake no obligations or responsibility to update any of the information contained in this document. Past performance does not guarantee or predict future performance. This document does not constitute an offer to sell or the solicitation of an offer to buy any security, nor does it constitute an offer or commitment to lend, syndicate or arrange a financing, underwrite or purchase or act as an agent or advisor or in any other capacity with respect to any transaction, or commit capital, or to participate in any trading strategies, and does not constitute legal, regulatory, accounting or tax advice to the recipient. This document does not constitute and should not be considered as any form of financial opinion or recommendation by us or any of our affiliates. This document is not a research report nor should it be construed as such. This document includes projections. Any projections reflect various estimates and assumptions concerning anticipated results. No representations or warranties are made by us or any of our affiliates as to the accuracy of any such projections. Whether or not any such projections are in fact achieved will depend upon future events some of which are not within our control. Accordingly, actual results may vary from the projected results and such variations may be material. We undertake no obligation, and do not currently intend, to update our projections. 1 CONFIDENTIAL INTERNAL USE ONLY
Disclaimer - continued Forward-Looking Statements In this presentation, all statements that are not purely historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements may be identified by the words “believe,” “expect,” “anticipate,” “project,” “plan,” “estimate,” “intend” and other similar expressions and include our guidance for our results for the year ending December 31, 2016 and our projection pension and OPEB obligations. Forward-looking statements are based on currently available business, economic, financial and other information and reflect the current beliefs, expectations and views of the management team of Verso Corporation (the “Company”) with respect to future developments and their potential effects on the Company. Actual results could vary materially depending on risks and uncertainties that may affect the Company and its business including for example, our ability to consummate a financing. For a discussion of the risks and uncertainties affecting the Company and its business, please refer to the risks and uncertainties as well as those discussed in the Company’s filings with the Securities and Exchange Commission. Neither the Company nor PJT assume any obligation to update forward- looking statements made in this presentation to reflect subsequent events or circumstances or actual outcomes. Non-GAAP Measures In this presentation, “EBITDA,” “Adjusted EBITDA” and “Adjusted EBITDA margin” are financial measures not prepared in accordance with U.S. GAAP. Adjusted EBITDA consists of net income before interest, taxes, depreciation and amortization and other adjustments to eliminate the impact of certain items that we do not consider to be indicative of our performance. These non-GAAP measures should be considered a supplement to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Verso uses Adjusted EBITDA as a way of evaluating our performance relative to our peers. Verso believes that Adjusted EBITDA is an operating performance measure commonly used in our industry that provides investors and analysts with a measure of ongoing operating results unaffected by differences in capital structures, capital investment cycles, and ages of related assets among otherwise comparable companies. We believe that the supplemental adjustments applied in calculating Adjusted EBITDA are reasonable and appropriate to provide additional information to investors. Because Adjusted EBITDA is not a measurement determined in accordance with accounting principles generally accepted in the United States, or “GAAP,” and is susceptible to varying calculations, Adjusted EBITDA, as presented, may not be comparable to similarly titled measures of other companies. You should consider our Adjusted EBITDA in addition to, and not as a substitute for, or superior to, our operating or net income or cash flows from operating activities, which are determined in accordance with GAAP. 2 CONFIDENTIAL INTERNAL USE ONLY
Presenters • Allen Campbell Verso Corporation SVP and Chief Financial Officer • Tim Nusbaum Verso Corporation Treasurer 3 CONFIDENTIAL INTERNAL USE ONLY
Verso Corporation Company Profile CONFIDENTIAL INTERNAL USE ONLY
Company Overview Overview Verso 2016 Production Mix Other • Largest producer of coated paper in North America SC 8% 9% – Annual production capacity of 3.2 M tons over Pulp 7 US mills. CFS 8% 45% • Diverse product offering, enhancing customer value proposition Specialty – 16% Broad product offering in coated papers and significant presence in specialty papers CGW 14% • Industry-leading cost profile (1) , benefiting from vertically integrated pulp and paper capabilities North America Capacity Coated Freesheet 1 • Long standing relationships with a diverse group of Catalyst West Linn customers 5% 7% • Headquartered in Memphis, Tennessee Appleton Coated 8% Verso 49% The Company’s Class A Common Stock is listed on the New York Stock Exchange and trades under VRS SAPPI 31% 5 1) Source: RISI Cornerstone 4Q 2015 Balance. 5 CONFIDENTIAL INTERNAL USE ONLY
Restructuring Overview On January 26, 2016, Verso filed for Chapter 11 bankruptcy protection Verso emerged from Chapter 11 on July 15, 2016 equitizing $2.5 B of debt New capital structure consists of: – ABL Facility totaling $350 M secured by a 1st lien on accounts receivable and inventory and a 2nd lien on fixed assets – Senior Secured Term Loan Facility totaling $220 M secured by a 1st lien on fixed assets and a 2nd lien on ABL assets Pro Forma for the exit financing which closed on July 15, 2016: – Total leverage of 1.5x based on 6/30/16 LTM Adjusted EBITDA, one of the lowest leverage multiples in the industry – Annual interest expense of ~$32 M per year resulting in Pro Forma LTM interest coverage of 7.2x – Consolidated corporate credit structure Pro Forma Leverage (1) Interest Expense (2) Pro Forma Debt ($ M) ($ M) $3,500 $400 6 $2,785 14.0x $350 $3,000 10.4x $270 12.0x $300 $2,500 10.0x $250 $2,000 8.0x $200 $1,500 6.0x $150 $1,000 4.0x $340 1.5x $100 $32 $500 2.0x $50 $0 0.0x $0 Pre-Emergence Pro Forma Pre-Petition Pro Forma Pre-Petition Pro Forma 1. Leverage ratio is calculated 6/30/16 LTM Adj. EBITDA of $231 M. For a reconciliation of this measure to the most directly comparable GAAP measure, see Slide 26. 2. Pre-petition reflects 2015 interest expense, Pro Forma interest expense reflects last 5 months of 2016 annualized. 6 CONFIDENTIAL INTERNAL USE ONLY
Fresh Start Restructuring Results • Significant deleveraging and recapitalization of the company – $2.5 B debt converted to equity – New ABL at market terms – Term Loan of $220 M • Manageable interest costs • Positions Verso to deal with secular challenges of the industry • Strong cash flow and liquidity for debt paydown and investment • Re-energized work force 7 CONFIDENTIAL INTERNAL USE ONLY
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