RYAM Announces Amendment to Term Loan Credit Agreement
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Rayonier Advanced Materials Inc.'s amendment to its Term Loan Credit Agreement signals a strategic financial maneuver to enhance liquidity and operational flexibility. The revised covenants, particularly the step-down leverage ratio, reflect a structured approach to gradually strengthen the company's balance sheet. By easing the leverage restrictions, RYAM aims to mitigate near-term liquidity risks, allowing for continued investment in its biomaterials business.
This amendment could be interpreted as a proactive measure to reassure investors, potentially stabilizing the company's stock price. However, it also suggests that RYAM may have been at risk of breaching its original covenants, which could raise concerns about underlying financial health. Investors should monitor subsequent financial disclosures, such as the Form 8-K, for further details on the fees associated with the amendment and any additional terms that could affect the company's financial obligations.
The involvement of prominent legal firms like Wachtell, Lipton, Rosen & Katz and Sullivan & Cromwell LLP in the negotiation of the credit agreement amendment indicates the complexity and significance of this transaction for RYAM. The amendment process likely involved detailed risk assessments and negotiations to align the interests of both the company and the lenders. Legal expertise is crucial in structuring such agreements to ensure compliance with financial regulations and to safeguard against potential future disputes.
For stakeholders, the legal structuring of this amendment provides a layer of security, as it is indicative of thorough due diligence. The legal framework established here will set precedents for RYAM's future financial transactions and could influence the company's legal strategy moving forward.
The adjustment of the consolidated secured net leverage ratio provides RYAM with a cushion against potential covenant breaches. For debt market participants, this amendment may alter the risk profile associated with RYAM's debt instruments. The incremental reduction in leverage ratio requirements through fiscal 2024 suggests a strategic timeline for deleveraging, which could affect the pricing and trading of RYAM's debt securities.
While the eased terms may initially be received positively by the debt market, as they reduce the immediate risk of default, there is also a need to scrutinize the long-term implications. If RYAM fails to improve its leverage metrics according to the new schedule, it could face increased borrowing costs or difficulties in refinancing, which would impact debt investors. Conversely, successful deleveraging could enhance credit ratings and investor confidence in RYAM's debt securities.
The amendment amends that certain Term Loan Credit Agreement, dated as of July 20, 2023 (the “Term Loan Credit Agreement”), to, among other things, increase the maximum consolidated secured net leverage ratio, as defined in the Term Loan Credit Agreement, that RYAM must maintain through its 2024 fiscal year. Pursuant to the amendment, RYAM is required to maintain a consolidated secured net leverage ratio of 5.25 to 1.00 for the fourth fiscal quarter of 2023 through the second fiscal quarter of 2024, 5.00 to 1.00 for the third fiscal quarter of 2024, 4.75 to 1.00 for the fourth fiscal quarter of 2024 and 4.50 to 1.00 for each fiscal quarter thereafter. RYAM agreed to pay the lenders under the Term Loan Credit Agreement certain fees in connection with the amendment.
“Working collaboratively with our lenders at Oaktree, we reached an amendment that gives us access to liquidity and provides operational flexibility to execute our strategy,” said De Lyle Bloomquist, President and Chief Executive Officer. “While we remain confident that we could have managed within the covenant, the added flexibility should provide comfort to key stakeholders, including debt and equity investors, as we execute on our strategy to improve the balance sheet and grow our biomaterials business.”
Wachtell, Lipton, Rosen & Katz served as legal counsel to RYAM and Sullivan & Cromwell LLP served as legal counsel to Oaktree in this transaction. Additional details of the transaction will be issued in a Form 8-K filed with the SEC.
About RYAM
RYAM is a global leader of cellulose-based technologies, including high purity cellulose specialties, a natural polymer commonly used in the production of filters, food, pharmaceuticals, and other industrial applications. The Company also manufactures products for paper and packaging markets. With manufacturing operations in the
Forward-Looking Statements
Certain statements in this document regarding anticipated financial, business, legal, or other outcomes, including business and market conditions, outlook, and other similar statements relating to Rayonier Advanced Materials’ or future or expected events, developments, or financial or operational performance or results, are "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements are identified by the use of words such as "may," "will," "should," "expect," "estimate," "believe," "intend," "anticipate," and other similar language. However, the absence of these or similar words or expressions does not mean that a statement is not forward-looking. While we believe these forward-looking statements are reasonable when made, forward-looking statements are not guarantees of future performance or events, and undue reliance should not be placed on these statements. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that these expectations will be attained. It is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks and uncertainties.
Other important factors that could cause actual results or events to differ materially from those expressed in forward-looking statements that may have been made in this document are described or will be described in our filings with the
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Ryan Houck
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Mickey Walsh
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Source: Rayonier Advanced Materials Inc.
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