Business Context and Reporting Period
Company: Rayonier Advanced Materials Inc. (RYAM)
Filing Type: Form 8-K (Current Report)
Date of Report: September 30, 2019
Event: Entry into a Material Definitive Agreement (First Amendment to Amended and Restated Credit Agreement).
Key Financial Metrics and Debt Structure
This filing details amendments to the Company's senior secured credit facilities rather than reporting operational financial results (revenue, profit, or cash flow) for the period.
- Revolving Commitments Reduction:
- USD Revolving Facility reduced from $100 million to $84 million.
- Total Multicurrency Revolving Facilities reduced from $150 million to $126 million.
- Interest Rates (Post-Amendment):
- Base Rate Loans: Base rate plus 2.00% to 3.00% margin.
- Adjusted LIBOR Loans: LIBOR plus 3.00% to 4.00% margin.
- Pricing is based on a consolidated total net leverage grid.
- Transaction Costs: Consent fees paid to lenders equal to 0.25% of the aggregate principal amount of term loans and revolving commitments outstanding.
Material Changes Versus Prior Period
The Amendment Agreement significantly alters the financial covenants and facility structure compared to the Existing Credit Agreement (dated November 17, 2017):
- First Lien Secured Net Leverage Ratio:
- Prior: Fixed at 3.00:1.00 for all periods.
- New: Variable ratios ranging from 5.60:1.00 down to 4.95:1.00 in 2019; 5.40:1.00 to 4.50:1.00 in 2020; 4.40:1.00 to 3.55:1.00 in 2021; and 3.00:1.00 thereafter.
- Interest Coverage Ratio:
- Prior: Fixed at 3.00:1.00 for all periods.
- New: Variable ratios ranging from 1.65:1.00 to 2.35:1.00 in 2019; 1.75:1.00 to 2.00:1.00 in 2020; 2.20:1.00 to 2.55:1.00 in 2021; and 3.00:1.00 thereafter.
- Revolving Facility Utilization: The Company is permitted to utilize up to $120 million or $130 million (depending on the fiscal quarter) of the commitments under the Revolving Facilities, subject to conditions.
- Asset Sale Proceeds: The agreement requires the Company to apply a portion of proceeds from the previously announced sale of the thermo-mechanical pulp mill in Matane, Quebec, to ratably prepay senior secured term facilities.
Guidance, Outlook, and Risks
Management Commentary: The amendment provides financial covenant relief through 2021, allowing for higher leverage and lower interest coverage ratios during the transition period. The filing references a press release titled "Rayonier Advanced Materials Announces Credit Agreement Amendment Providing Financial Covenant Relief Through 2021."
Risks and Contingencies:
- Covenant Compliance: The Company must adhere to the new variable leverage and coverage ratios tested quarterly on a pro forma trailing twelve-month basis.
- Prepayment Obligation: The Company is contractually obligated to use proceeds from the Matane mill sale to prepay term debt.
- Security Interests: Loans are secured by substantially all present and future material personal property of the Loan Parties and mortgages on certain U.S. and Canadian real estate interests.
Unusual Items: The filing does not disclose specific unusual items outside of the debt restructuring and the pending asset sale.
Investor Verification Checklist
- Verify the closing status and proceeds amount of the thermo-mechanical pulp mill sale in Matane, Quebec, to confirm the required debt prepayment.
- Review the Company's most recent quarterly report (10-Q) to assess current leverage and interest coverage ratios against the new, more lenient covenants.
- Confirm the exact utilization of the Revolving Facilities against the new $120 million/$130 million limits.
- Monitor the impact of the increased interest rate margins (up to 4.00% over LIBOR) on future interest expense.