| Jason Mudrick, Mudrick Capital (photo credit: Michael Nagle/Bloomberg) |
Well, that was quick. One month after serving notice on paper producer Verso Corporation, Jason Mudrick’s Mudrick Capital is lighting up its victory cigar in the form of a regulatory filing.
For the second time in a month, the hedge fund has converted its 15.3 percent stake in Verso, this time back to passive. In a 13G filing, the hedge fund says it no longer holds the stock “with a purpose or effect of changing or influencing control.”
It does not say why. And the usually responsive Mudrick was unable to return a call seeking comment in time for this to be published. However, we do know in the past few weeks the company has taken major steps toward boosting shareholder value.
In response to Mudrick’s filing, shares of Verso Thursday surged 12.7 percent, to close at $6.76.
Verso makes two kinds of paper. Its coated or graphic paper is the glossy kind used for magazines, which is a challenging business these days. Its specialty paper business, which makes, among other things wrappers for Subway sandwiches, is deemed to be a good business with strong margins and top-line growth.
Mudrick wants the company to sell two key mills and use the proceeds to pay down debt and otherwise return it to shareholders.
We earlier reported that on September 18 Mudrick changed its filing from a 13G to a 13D, suggesting the investment was more activist in nature.
In the filing at the time, Mudrick said it was “deeply frustrated with the board’s inaction to address” the company’s “rapidly deteriorating financial position,” and intended to discuss with the board ways to forge a strategic plan that would include a potential sale of two well-regarded mills. “If the Board does not engage…in good faith,” Mudrick added, it pledged to “pursue all other avenues to protect its investment.”
Well, a lot has happened in the intervening period.
On September 21 — just three days after Mudrick changed his filing to a 13D — Verso announced its board had formed a strategic alternatives committee composed of three independent directors and its financial advisor, Houlihan Lokey Capital. Houlihan Lokey would lead efforts “to identify and evaluate a range of potential strategic transaction alternatives,” including the possible sale of some Verso mills and holding discussions with parties that may be interested in doing a deal with the company.
“Verso is committed to exploring strategic transaction alternatives, and the committee will facilitate this process,” Verso chairman Rob Amen said in a press release at the time.
Then on October 9, Verso announced that Amen resigned as chairman effective October 6. He was replaced by Eugene Davis, chair of the strategic advisory committee and chair of the finance and planning committee of the board, and Alan Carr, chair of the board’s compensation committee. They will serve as interim co-chairmen of the board.
Verso emerged from bankruptcy in July 2016 following a restructuring. Mudrick received stock in the transaction.
Mudrick’s distressed credit firm manages about $1.6 billion. His flagship fund, Mudrick Distressed Opportunity Fund, is up less than 1 percent for the year through October 13 after gaining 39 percent last year, according to the latest HSBC report tracking hedge fund performance.
