| ITEM 1.01 | ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT |
On December 10, 2020, Rayonier A.M. Products Inc. (the “Company”), a wholly owned subsidiary of Rayonier Advanced Materials Inc. (“RYAM”), entered into a five-year senior secured asset-based revolving credit agreement (the “ABL Credit Agreement”), with the lenders party thereto, the issuing banks party thereto and Bank of America N.A., as administrative and collateral agent, providing for an asset-based revolving credit facility (the “ABL Credit Facility”), in which the borrowing availability is primarily 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 $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 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 (as defined below), 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 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 37.5 basis points per annum.
The proceeds of the ABL Credit Facility may be used for working capital and other general corporate purposes for RYAM and its subsidiaries (including to rollover or to issue back to back letters of credit with respect to the outstanding letters of credit issued under the Company’s existing senior secured credit agreement) and to pay fees and expenses incurred in connection with the transactions described herein.
The ABL Credit Agreement also allows 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’s obligations under the ABL Credit Agreement are guaranteed by certain of RYAM’s U.S. and Canadian subsidiaries. The commitments under the ABL Credit Facility will become available subject to satisfaction of customary conditions, including execution and delivery of security documents, pursuant to which the obligations under the ABL Credit Facility will be secured by certain U.S. and Canadian assets, including a first priority lien on inventory, accounts receivable and bank accounts. The ABL Credit Agreement will also 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 ABL Credit Agreement contains covenants customary for financings of this type restricting RYAM’s, the Company’s and the restricted subsidiaries’ activities. There are exceptions to these covenants, some of which are only applicable when unused availability falls below specified thresholds. In addition, the ABL Credit Agreement includes, as a financial covenant, a springing fixed charge coverage ratio which arises when availability falls below a specified threshold.
The ABL Credit Agreement contains 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.
The above summary of the material terms of the ABL Credit Facility does not purport to be complete and is qualified in its entirety by reference to the ABL Credit Agreement, a copy of which is expected to be filed as an exhibit to RYAM’s Current Report on Form 8-K with respect to the closing of the offering of the Notes.
| ITEM 2.03. | CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT |
The information set forth above in Item 1.01 is incorporated by reference into this Item 2.03.
