7. LONG-TERM DEBT

A summary of long-term debt is as follows:

		December 31, 2011									December 31, 2010
	Original	Interest						Fair						Fair
(Dollars in thousands)	Maturity	Rate			Balance			Value			Balance			Value
Verso Paper Holdings LLC
Revolving Credit Facility	8/1/2012		-		$	-		$	-		$	-		$	-
11.5% Senior Secured Notes (1)	7/1/2014		11.50	%		302,820			316,260			332,135			384,125
9.13% Second Priority Senior Secured Notes	8/1/2014		9.13	%		-			-			337,080			347,192
8.75% Second Priority Senior Secured Notes (2)	2/1/2019		8.75	%		394,736			257,063			-			-
Second Priority Senior Secured Floating Rate Notes	8/1/2014		4.18	%		180,216			112,635			180,216			162,194
11.38% Senior Subordinated Notes	8/1/2016		11.38	%		300,000			122,550			300,000			300,750
Chase NMTC Verso Investment Fund LLC
Loan from Verso Paper Finance Holdings LLC	12/29/2040		6.50	%		23,305			23,305			23,305			23,305
Total debt for Verso Paper Holdings LLC						1,201,077			831,813			1,172,736			1,217,566
Verso Paper Finance Holdings LLC
Senior Unsecured Term Loan	2/1/2013		6.83	%		84,687			46,578			79,180			76,409
Loan from Verso Paper Holdings LLC	12/29/2040		6.50	%		23,305			23,305			23,305			23,305
Eliminate loans from affiliates	12/29/2040		6.50	%		(46,610	)		(46,610	)		(46,610	)		(46,610	)
Total debt for Verso Paper Corp.					$	1,262,459		$	855,086		$	1,228,611		$	1,270,670
(1) Par value of $315,000 on December 31, 2011, and $350,000 on December 31, 2010.
(2) Par value of $396,000 on December 31, 2011.

We determine the fair value of our long-term debt based on market information and a review of prices and terms available for similar obligations.

Amounts included in interest expense related to long-term debt and amounts of cash interest payments on long-term debt are as follows:

	VERSO PAPER						VERSO HOLDINGS
	Year Ended December 31,						Year Ended December 31,
(Dollars in thousands)	2011		2010		2009		2011		2010		2009
Interest expense	$	124,895	$	123,695	$	118,013	$	120,861	$	118,506	$	111,263
Cash interest paid		115,651		115,405		90,713		117,043		115,405		90,713
Debt issuance cost amortization(1)		5,396		5,650		5,748		5,036		5,290		5,264
(1) Amortization of debt issuance cost is included in interest expense.

Revolving Credit Facility. Verso Holdings’ $200 million revolving credit facility had no amounts outstanding, $40.8 million in letters of credit issued, and $159.2 million available for future borrowing as of December 31, 2011. The indebtedness under the revolving credit facility bears interest, payable quarterly, at a rate equal to LIBOR plus 3% or prime plus 2% per year. Verso Holdings is required to pay a commitment fee to the lenders in respect of unutilized commitments under the revolving credit facility at a rate equal to 0.5% per year and customary letter of credit and agency fees. The indebtedness under the revolving credit facility is guaranteed jointly and severally by Verso Finance and each of Verso Holdings’ subsidiaries, subject to certain exceptions, and the indebtedness and guarantees are senior secured obligations of Verso Holdings and the guarantors, respectively. The indebtedness under the revolving credit facility and related guarantees are secured by first priority liens, subject to permitted liens, on substantially all of Verso Holdings’, Verso Finance’s, and the subsidiary guarantors’ tangible and intangible assets. The revolving credit facility matures on August 1, 2012.

On February 17, 2012, we obtained $100.0 million of commitments with respect to the syndication of a new accounts receivable securitization facility and approximately $55.0 million of commitments to provide a new and/or extended revolving facility under our existing senior secured revolving credit facility. The accounts receivable facility will bear interest at an initial rate of LIBOR plus 2.00% and the revolving facility will bear interest at an initial rate of LIBOR plus 4.50%. The terms and conditions of our existing revolving credit facility remain in full force and effect and have not been altered by these new commitments.

11.5% Senior Secured Notes due 2014. In June 2009 and January 2010, Verso Holdings issued $325 million and $25 million, respectively, aggregate principal amount of 11.5% senior secured notes due 2014. On March 14, 2011, Verso Holdings repurchased and retired a total of $35 million aggregate principal amount of the notes. The notes bear interest, payable semi-annually, at the rate of 11.5% per year. The notes are guaranteed jointly and severally by each of Verso Holdings’ subsidiaries, subject to certain exceptions, and the notes and guarantees are senior secured obligations of Verso Holdings and the guarantors, respectively. The notes and related guarantees are secured by first priority liens, subject to permitted liens, on substantially all of Verso Holdings’ and the guarantors’ tangible and intangible assets. The notes mature on July 1, 2014.

8.75% Second Priority Senior Secured Notes due 2019. On January 26, 2011, and February 10, 2011, Verso Holdings issued $360 million and $36 million, respectively, aggregate principal amount of 8.75% second priority senior secured notes due 2019. The notes bear interest, payable semi-annually, at the rate of 8.75% per year. The notes are guaranteed jointly and severally by each of Verso Holdings’ subsidiaries, subject to certain exceptions, and the notes and guarantees are senior secured obligations of Verso Holdings and the guarantors, respectively. The notes and related guarantees are secured by second priority liens, subject to permitted liens, on substantially all of Verso Holdings’ and the guarantors’ tangible and intangible assets, excluding securities of Verso Holdings’ affiliates. The notes mature on February 1, 2019.

The net proceeds from the issuance of the 8.75% second priority senior secured notes on January 26, 2011, after deducting the discount, underwriting fees and offering expenses, were $347.8 million. On January 26, 2011, and February 9, 2011, Verso Holdings used a total of $326.1 million of the net proceeds to repurchase and retire a total of $310.5 million aggregate principal amount of its 9.13% second priority senior secured notes due 2014 pursuant to a tender offer. On March 11, 2011, Verso Holdings paid $27.8 million from the remaining net proceeds and available cash to redeem the remaining outstanding $26.6 million aggregate principal amount of its 9.13% second priority senior secured notes due 2014. Following such repurchases and redemption, there are no longer any outstanding 9.13% second priority senior secured notes due 2014, and Verso Holdings recognized a total loss of $22.5 million, including the write-off of unamortized debt issuance costs. The net proceeds from the issuance of the 8.75% second priority senior secured notes on February 10, 2011, including a premium and after deducting the underwriting fees and offering expenses, were $36.1 million. On March 14, 2011, Verso Holdings used these net proceeds to redeem and retire $35 million aggregate principal amount of its 11.5% senior secured notes due 2014. As a result of such repurchase, Verso Holdings recognized a loss of $3.6 million, including the write-off of unamortized debt issuance costs.

Second Priority Senior Secured Floating Rate Notes due 2014. In August 2006, Verso Holdings issued $250 million aggregate principal amount of second priority senior secured floating rate notes due 2014. As of December 31, 2011, Verso Holdings had repurchased and retired a total of $70 million aggregate principal amount of the notes. The notes bear interest, payable quarterly, at a rate equal to LIBOR plus 3.75% per year. As of December 31, 2011, the interest rate on the notes was 4.18% per year. The notes are guaranteed jointly and severally by each of Verso Holdings’ subsidiaries, subject to certain exceptions, and the notes and guarantees are senior secured obligations of Verso Holdings and the guarantors, respectively. The notes and related guarantees are secured by second priority liens, subject to permitted liens, on substantially all of Verso Holdings’ and the guarantors’ tangible and intangible assets, excluding securities of Verso Holdings’ affiliates. The notes mature on August 1, 2014.

11.38% Senior Subordinated Notes due 2016. In August 2006, Verso Holdings issued $300 million aggregate principal amount of 11.38% senior subordinated notes due 2016. The notes bear interest, payable semi-annually, at the rate of 11.38% per year. The notes are guaranteed jointly and severally by each of Verso Holdings’ subsidiaries, subject to certain exceptions, and the notes and guarantees are unsecured senior subordinated obligations of Verso Holdings and the guarantors, respectively. The notes mature on August 1, 2016.

Verso Finance Senior Unsecured Term Loan. Verso Finance, the parent entity of Verso Holdings, had $84.7 million outstanding on its senior unsecured term loan as of December 31, 2011. The loan allows Verso Finance to pay interest either in cash or in kind through the accumulation of the outstanding principal amount. The loan bears interest, payable quarterly, at a rate equal to LIBOR plus 6.25% per year on interest paid in cash and LIBOR plus 7.00% per year for interest paid in kind, or “PIK,” and added to the principal balance. As of December 31, 2011, the weighted-average interest rate on the loan was 6.83% per year. Verso Finance elected to exercise the PIK option for $5.5 million, $5.1 million, and $8.9 million of interest payments due in 2011, 2010, and 2009, respectively. The loan matures on February 1, 2013.

Loan from Verso Paper Finance Holdings LLC/ Verso Paper Holdings LLC. On December 29, 2010, Verso Quinnesec REP LLC, an indirect, wholly-owned subsidiary of Verso Holdings, entered into a financing transaction with Chase NMTC Verso Investment Fund, LLC, the “Investment Fund,” a consolidated variable interest entity (see Note 19 – New Market Tax Credit Entities). Under this arrangement, Verso Holdings loaned $23.3 million to Verso Finance pursuant to a 6.5% loan due December 29, 2040, and Verso Finance, in turn, loaned the funds on similar terms to the Investment Fund. The Investment Fund then contributed the loan proceeds to certain community development entities, which, in turn, loaned the funds on similar terms to Verso Quinnesec REP LLC as partial financing for the renewable energy project at our mill in Quinnesec, Michigan.

The payments required under the long-term debt listed above during the years following December 31, 2011, are set forth below:

	VERSO		VERSO
	PAPER		HOLDINGS
2012	$	-	$	-
2013		84,687		-
2014		495,216		495,216
2015		-		-
2016		300,000		300,000
2017 and thereafter		396,000		419,305
Total long-term debt	$	1,275,903	$	1,214,521

At December 31, 2011, we were in compliance with the covenants in our debt agreements.