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CoBank Agents $550MM Credit Facility for Rayonier

August 06, 2015, 07:08 AM
Filed Under: Forest Products
Related: CoBank

Rayonier Inc. has entered into a credit agreement with CoBank, ACB, as administrative agent, and a syndicate of Farm Credit institutions and other commercial banks to provide $550 million of new credit facilities, including a five-year $200 million revolving credit facility and a nine-year $350 million term loan facility. The new credit facilities will be used to refinance the company’s existing revolving credit facility and senior exchangeable notes (due in August 2015), as well as fund an anticipated capital infusion into the company’s New Zealand joint venture (the “Matariki JV” or the “JV”) for repayment of JV indebtedness. As an eligible Farm Credit System loan, the term loan facility will allow Rayonier to receive annual patronage payments, which should lower the company’s net effective interest cost.

The company has entered into an interest rate swap transaction to fix the cost of the term loan facility over its nine-year term. Based on the swap rate, the company’s current leverage ratio and the pricing grid, the all-in fixed-rate cost of the term loan facility (net of estimated patronage payments) is expected to be approximately 3.3% and the floating-rate cost of the revolving credit facility will be LIBOR + 1.25%.

The company intends to use approximately $160 million of proceeds from the term loan facility to fund a capital infusion into the Matariki JV, which the JV will in turn use for repayment of all outstanding amounts under its existing NZ$235 million credit facility plus NZ$7 million of related fees and expenses (assuming an exchange rate of US$0.66 per NZ$1.00). Since Rayonier is providing 100% of this capital infusion, its ownership in the JV will increase from 65% to approximately 77%, based on an implied pro forma net asset value of NZ$706 million (which equates to approximately NZ$85 million for the incremental 12% stake). The investment into the Matariki JV is subject to certain closing conditions, including New Zealand Overseas Investment Office approval and the preparation of customary transaction documents, and is expected to close by the end of the year. The company expects to realize consolidated interest cost savings of approximately $5 million annually as a result of the JV recapitalization (based on the 3.3% cost of the new term loan facility versus the 6.5% cost of the existing JV debt).

The remaining proceeds of the term loan facility will be used to fund repayment of the company’s 4.50% senior exchangeable notes maturing August 2015 (approximately $131 million), to fund repayment of amounts outstanding under the company’s existing revolving credit facility (approximately $45 million), to pay transaction fees and expenses (approximately $2 million), and for cash and general corporate purposes (approximately $12 million). In order to provide timing flexibility with respect to the Matariki JV recapitalization, the term loan facility provides that proceeds can be drawn in up to two advances for up to eight months post-closing. Pro forma for the transactions described above, the company anticipates having the full $350 million outstanding under the term loan facility and nothing outstanding under the revolving credit facility.

The credit facilities are more fully described in a current report on Form 8-K filed with the Securities and Exchange Commission.

Rayonier is a leading timberland real estate investment trust with assets located in some of the most productive softwood timber growing regions in the U.S. and New Zealand.

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