Business Context and Reporting Period
Company: Rayonier Advanced Materials Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: August 17, 2017
Event: Entry into a Material Definitive Agreement (First Restatement Agreement) to amend and restate the Company's Credit Agreement. This action is contingent upon the completion of the acquisition of Tembec Inc. (the "Acquisition"), pursuant to an Arrangement Agreement entered into on May 24, 2017.
Key Financial Metrics and Debt Structure
This filing details the proposed structure of new senior secured credit facilities rather than historical operating performance. The filing does not provide revenue, profit, or cash flow figures for the reporting period.
| Facility Type | Amount | Details |
|---|---|---|
| USD Revolving Facility | $100 million | Includes $40 million letter of credit and $25 million swingline loans. |
| Multi-Currency Revolving Facility | $150 million | Denominated in USD, CAD, and EUR; includes $60 million letter of credit subfacility. |
| Term A-1 Loan Facility | $230 million | USD-denominated; borrower is Rayonier A.M. Products Inc. |
| Term A-2 Loan Facility | $450 million | USD-denominated; borrower is Rayonier Performance Fibers, LLC. |
| Total Proposed Credit Facilities | $930 million | Combined Revolving and Term Loan Facilities. |
Interest Rates: Base rate plus 1.00% to 1.75% or adjusted LIBOR plus 2.00% to 2.75%, based on a consolidated total net leverage pricing grid.
Fees: Ticking fees of 0.30% per annum on aggregate commitments (accruing 91 days after signing); commitment fees on unutilized revolving commitments.
Material Changes and Covenants
The filing represents a material change in the Company's debt structure, replacing the Original Credit Agreement (dated June 24, 2014) with an Amended and Restated Credit Agreement effective upon the "Restatement Date" (completion of the Tembec Acquisition).
- Use of Proceeds: Up to $50 million from Revolving Facilities and Term A-1 proceeds will finance the Transactions and working capital. Term A-2 proceeds will finance investments by Performance Fibers.
- Security: Obligations are secured by a lien on substantially all present and future material assets of the Loan Parties, including the Jesup, Georgia facility real property.
- Financial Covenants:
- Consolidated first lien secured net leverage ratio: No greater than 3.00 to 1.00.
- Interest coverage ratio: No less than 3.00 to 1.00.
- Testing frequency: Quarterly on a pro forma and trailing twelve-month basis.
- Restrictive Covenants: Limitations on creating liens, incurring indebtedness, making investments/acquisitions, mergers, dispositions, restricted payments (dividends/distributions), and affiliate transactions.
Guidance, Outlook, and Risks
Outlook: The new credit facilities are designed to support the acquisition of Tembec Inc. and provide liquidity for working capital and future permitted business acquisitions.
Contingencies: The effectiveness of the First Restatement Agreement and the new credit facilities is subject to the completion of the Acquisition and other customary conditions.
Risks: The agreement includes customary events of default, including payment defaults, breach of covenants, bankruptcy, judgment defaults, and changes in control. Failure to meet the leverage or interest coverage covenants could result in default.
Investor Verification Checklist
- Verify the status of the Tembec Inc. Acquisition, as the new debt facilities are contingent upon its completion.
- Review the full text of the First Restatement Agreement (Exhibit 10.1) for specific definitions of "Permitted Business Acquisitions" and "Material Investment."
- Monitor the Company's ability to maintain the 3.00:1.00 net leverage ratio and 3.00:1.00 interest coverage ratio post-acquisition.
- Confirm the identity of the borrowers (Rayonier A.M. Products Inc. and Rayonier Performance Fibers, LLC) and the scope of guarantees provided by the parent company and subsidiaries.
- Assess the impact of the 0.30% per annum ticking fee on the Company's liquidity starting 91 days after August 17, 2017.