Rayonier Advanced Materials Inc (NYSE:RYAM) announced an asset sale last month, expected to provide it with $214mm of proceeds.
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What Can Rayonier Advanced Materials Do With Its Asset Sale Proceeds?
In a new report, Xtract Research examines what it can do with those proceeds.
When RYAM issued these notes late last year, it included an unusual Asset Sale call. On a one-time basis, on or prior to July 15, 2022, the Company may, at its option, redeem up to $150mm principal amount of the Secured Notes with the net proceeds of one or more asset sales at 103. If it does not exercise this call option and has not repaid debt/reinvested within 365 days, proceeds are “excess proceeds” and the company must make a par offer to the Secured Notes.
Like most indentures, under the Secured Notes, the issuer is permitted to use asset sale proceeds during the 365-day period after receipt to reduce (temporarily) debt under a revolver, or otherwise invest such proceeds in any manner not prohibited by the indenture. A purchase or tender for the Senior Notes would qualify as such an investment. However, if the company were to go that route, come day 366, RYAM would have to comply with the asset sale covenant.
Prepayment of the Senior Notes is restricted by the ABL’s Restricted Payment covenant, thus requiring basket capacity or an exception.
If the company wanted to waive or amend these provisions, under the Secured Notes indenture they are majority vote. Similarly, under the ABL, amending the RP covenant would require the consent of a majority of the outstandings/unused commitments.
