Paper manufacturers Newpage and Verso may not be headed for a merger after all, according to two paper-industry analysts quoted in The Dead Tree Edition.

In mid-January, conversations between Cerberus, who owns NewPage-the largest maker of coated paper in the U.S.– and Apollo Management, owner of paper maker Verso, sparked speculation of an impending merger. The signs were there – Apollo had purchased a large portion of NewPage’s debt, giving it significant leverage over NewPage and putting itself into position to force NewPage into insolvency in six months by insisting on a full repayment, according to Dead Tree.

However, "Combining a debt-laden company with a super-debt-laden company does not make sense for the debt-laden company. Verso needs to try to stay out of bankruptcy, not duplicate the results of the Abitibi and Bowater merger," writes Verle Sutton in the February issue of The Reel Time Report (a subscription-only publication available through ForestWeb).

It is extremely unlikely that any lender involved with NewPage will be interested in purchasing equity as this time. Dead Tree quotes Sutto as saying, "The lenders are receiving high interest payments, and, when the payments stop or the debt matures, they will own the company. Why trade some debt for equity no when they can have it all later?"

Other analysts remain as skeptical about the pending merger as Sutto. Phillip Wirtz, Odeon Capital Group LLC, commented simply on the meeting between the two paper companies: "I wouldn’t read too far into that."

In January, NewPage filed an amendment to its $500 million revolving credit facility with the SEC to extend the maturity date by at least five months to March 2012.