| ITEM 7.01. | REGULATION FD DISCLOSURE |
As part of the Offering (as defined below), Rayonier Advanced Materials Inc. (“RYAM”) is furnishing the following information, which is included in the Preliminary Offering Memorandum related to the disclosure in Item 8.01 below: RYAM’s subsidiaries that are not expected to be guarantors of the Notes (as defined below) or the ABL Credit Facility (as defined below), after giving effect to all applicable eliminations, as of September 26, 2020, had total assets of approximately $751 million, or 30%, of RYAM’s total consolidated assets.
ABL Credit Facility
On or prior to the issuance of the Notes (as defined below), Rayonier A.M. Products Inc. (the “Company”), a wholly owned subsidiary of RYAM and certain other subsidiaries of RYAM, expect to enter into a five-year senior secured asset-based revolving credit agreement (the “ABL Credit Agreement”), with Bank of America N.A., as administrative and collateral agent, the lenders to be party thereto, and the issuing banks to be party thereto, providing for an asset-based revolving credit facility (the “ABL Credit Facility”) in which the borrowing availability will primarily be based on the value of certain of RYAM’s, the Company’s, and certain of RYAM’s subsidiaries’ assets, including the levels of certain eligible accounts receivable and inventory in the United States and Canada.
The maximum availability under the ABL Credit Facility is currently anticipated to be $200 million available to the Company for revolving loans in U.S. Dollars, including (i) a $100 million sublimit for the issuance of letters of credit and (ii) a $20 million sublimit for swingline loans. Subject to the availability under the borrowing base, the Company may make and repay borrowings from time to time until the maturity of the ABL Credit Facility. The Company may make voluntary prepayments of borrowings at any time and must make mandatory prepayments if certain events occur. The Company anticipates that the ABL Credit Facility will mature, and lending commitments thereunder will terminate, on the date that is the earlier of (x) the fifth anniversary of the first date on which the commitments thereunder become available to the Company (the “closing date”), and (y) the date that is 121 days prior to the earliest stated maturity date of the Notes, the Company’s 5.50% Senior Notes due 2024, and certain other specified indebtedness and/or any refinancing debt in respect of the foregoing with a maturity date prior to the date that is 121 days after the closing date. Upon the maturity of the ABL Credit Facility, all of the obligations outstanding under the ABL Credit Facility will become due. The interest rate for borrowings under the ABL Credit Facility is expected to be LIBOR (subject to a floor of 25 basis points) plus a margin of 225-275 basis points per annum, depending on availability and the Company’s total leverage ratio. The rate for undrawn commitments is expected to be 37.5 basis points per annum.
We expect that the proceeds of the ABL Credit Facility may be used for working capital and other general corporate purposes for us and our subsidiaries (including to rollover or to issue back to back letters of credit with respect to the outstanding letters of credit issued thereunder) and to pay fees and expenses incurred in connection with the transaction.
We expect that the ABL Credit Agreement will also allow the Company to increase the availability thereunder or add term loans on a “last-out” basis up to a maximum amount of $50 million.
The Company expects its obligations under the ABL Credit Agreement will be guaranteed by certain of RYAM’s U.S. and Canadian subsidiaries. The Company expects these obligations will be secured by certain U.S. and Canadian assets, including a first priority lien on inventory, accounts receivable and bank accounts. In addition, the Company expects the ABL Credit Agreement will be secured by second priority liens on certain of the assets securing the Notes, and the Notes will have second priority liens on certain of the assets securing the ABL Credit Agreement. An intercreditor agreement will govern the treatment of such collateral securing the ABL Credit Agreement and the Notes.
The Company expects that the ABL Credit Agreement will contain covenants customary for financing of this type restricting RYAM’s, the Company’s and the restricted subsidiaries’ activities. There will be exceptions to these covenants, some of which will only be applicable when unused availability falls below specified thresholds. In addition, the Company expects the ABL Credit Agreement will include, as a financial covenant, a springing fixed charge coverage ratio which arises when availability falls below a specified threshold.
The Company expects the ABL Credit Agreement will contain customary events of default for financings of this type, including payment failures, breaches of representations and warranties, failure to comply with covenants, defaults in respect of other indebtedness, bankruptcy, insolvency and inability to pay debts when due, material judgments, pension plan terminations or specified underfunding, failure of certain provisions of any guarantee or security document supporting the ABL Credit Facility to be in full force and effect and change of control. If an event of default occurs under the ABL Credit Agreement, subject to any applicable grace period, the lenders will be permitted to terminate their commitments, declare immediately payable all borrowings under the ABL Credit Facility and foreclose on the collateral.
However, there can be no assurance that the Company will enter into the ABL Credit Agreement or as to the terms and conditions thereof. This information is only current as of the date hereof, and RYAM is not undertaking any obligation to update this information, except as otherwise may be required by law.
