Rayonier Advanced Materials bonds plummet after contract dispute; Bombardier debt also slammed

By Stephanie N. Rotondo

Phoenix, Aug. 19 – The distressed debt market had a softer tone Wednesday, despite the release of the latest minutes from the Federal Reserve.

The minutes from the central bank’s meeting in July showed that members remained optimistic about economic growth. Still, the bank was looking for “some” improvement in labor markets and inflation before going ahead with an interest rate increase.

Also weighing on the market was crude oil, as prices fell to fresh six-year lows. Benchmark U.S. crude dropped nearly 5% on Wednesday, after The U.S. Energy Administration reported an unexpected increase in stockpiles.

Rayonier Advanced Materials Inc. was a big loser on the day, after the company gave an update on pending litigation with its largest customer, Eastman Chemicals. Bonds dropped about 15 points on the day and the stock also took a hefty hit.

Meanwhile, Bombardier Inc. paper was also under pressure. The Canadian aerospace company’s debt began to drift lower last week following a rating downgrade.

Rayonier notes take hit

Rayonier Advanced Materials’ 5½% notes due 2024 – a $550 million Rule 144A issue priced in May 2014 – dropped 15 points from levels seen last week, according to one market source.

The source quoted the issue at 68½ bid, 68¾ offered, down from 83 bid, 83¼ offered last week.

The company’s stock (NYSE: RYAM) also declined, ending off $6.01, or 44.09%, at $7.62.

The weakness came after the Jacksonville-based cellulose supplier said a contract dispute with Eastman Chemical – its largest customer – had ended up in court.

The dispute centers on the parties’ supply agreement and the interpretation of its “meet or release” provisions. Rayonier is alleging that the provision allows Eastman to buy up to 7,500 tons of products from outside parties if Rayonier cannot meet the price. However, Eastman is contending that the agreement allows it to buy all of its cellulose supply from outside dealers if the price cannot be met.

The original agreement was inked in 2012 and expires in 2018. Rayonier said that prices for 2015 should not be impacted.

Bombardier dives

Bombardier’s 7 ¾% notes due 2020 fell 5 points to 78 bid in midweek trading, according to a source.

The company’s class A equity (TSX: BBD-A) was also pressured, falling 4 cents, or 3.03%, to $1.28.

Last week, Fitch Ratings downgraded the company and its debt to B from B+, citing concerns about cash flow and liquidity.

The company has been struggling to maintain market share as it has developed its CSeries aircraft. Costs associated with that program have been higher than expected and the results have not followed suit.

Additionally, Bombardier has cut production on its Global 5000 and 6000 series, which have historically turned a profit. The Global 7000 program – another potential moneymaker – was meantime delayed.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.