JACKSONVILLE - Rayonier Advanced Materials Inc. (NYSE:RYAM) has announced securing a $700 million term loan financed by Oaktree Capital Management, L.P., and other affiliates. The funds, in conjunction with the company's cash, are intended for repaying existing debts and related expenses.
The term loan, set to mature in five years, is structured with an initial interest rate based on the three-month Term SOFR plus a 7 percent spread, adjustable according to RYAM's debt to EBITDA ratio. The company has the option to prepay the loan with declining premiums over time.
RYAM's CEO, De Lyle Bloomquist, stated the financing is a strategic move to strengthen the company's capital structure, allowing it to meet obligations, reduce debt, and invest in its biomaterials strategy. The flexible terms of the loan aim to provide an advantage in a climate of anticipated declining interest rates, with incentives for reducing leverage below certain thresholds.
The company is required to maintain a net secured debt to covenant EBITDA ratio below set levels through fiscal 2027, supporting its commitment to long-term shareholder value and leadership in sustainable materials.
Financial advisory for the transaction was provided by Houlihan Lokey (NYSE:HLI), with Wachtell, Lipton, Rosen & Katz as legal counsel for RYAM. Sullivan & Cromwell LLP represented the lead lender. Further transaction details will be disclosed in a Form 8-K filed with the SEC.
RYAM specializes in high purity cellulose technologies, with products used in various applications from filters to biofuels. The company, with operations across the U.S., Canada, and France, reported $1.6 billion in revenue in 2023.
This financial move is based on a press release statement and should be considered in the context of market conditions and RYAM's operational performance.
In other recent news, Rayonier (NYSE:RYN) Advanced Materials Inc. has successfully returned its Jesup, Georgia plant to full production ahead of schedule following a fire incident. The company is still assessing the financial implications of the fire, including potential insurance coverage. In a related development, Rayonier Advanced Materials and Beasley Green Power's joint venture, Altamaha Green Energy, has secured a deal to supply up to 70 megawatts of electricity to Georgia Power Company, converting forestry waste into sustainable electricity.
RBC Capital Markets has upgraded Rayonier Advanced Materials shares price target to $10.00, maintaining its Outperform rating. This upgrade follows a series of meetings between Rayonier's executives and investors, providing insights into the company's initiatives and future plans. Additionally, Rayonier Advanced Materials has announced a price increase for its Cellulose Specialties products due to ongoing market dynamics and escalating costs.
The company's second-quarter earnings for 2024 showed a 152% surge in Adjusted EBITDA, leading to an increase in its full-year EBITDA and adjusted free cash flow guidance. These recent developments are part of the company's ongoing efforts to maintain its market position and manage financial sustainability.
InvestingPro Insights
Rayonier Advanced Materials Inc.'s recent $700 million term loan financing aligns with several key financial metrics and trends highlighted by InvestingPro data. The company's market capitalization stands at $533.73 million, reflecting its position in the specialty materials sector.
InvestingPro Tips reveal that RYAM has experienced a "significant return over the last week," with data showing a 11.72% price total return in the past week. This recent uptick could be linked to positive market reception of the new financing arrangement. Additionally, the tip noting a "large price uptick over the last six months" is supported by an impressive 96.13% price total return over that period, suggesting growing investor confidence in RYAM's strategic moves.
However, it's important to note that RYAM "suffers from weak gross profit margins," which is evident in the 7.58% gross profit margin for the last twelve months as of Q2 2024. This context underscores the importance of the new financing in potentially improving the company's financial health and operational efficiency.
The InvestingPro Tip indicating that RYAM is "not profitable over the last twelve months" is reflected in the negative basic EPS of -$1.25. This further emphasizes the significance of the term loan in providing financial flexibility for the company to address its debt obligations and invest in its biomaterials strategy, as mentioned by CEO De Lyle Bloomquist.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for RYAM, providing a deeper understanding of the company's financial position and market performance.
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