Appvion amends credit agreement to allow asset sale, pays down loans

By Susanna Moon

Chicago, Aug. 4 – Appvion, Inc., a wholly owned subsidiary of Paperweight Development Corp., amended its credit agreement Monday with Jefferies Finance LLC as administrative agent, according to an 8-K filing with the Securities and Exchange Commission.

The amendment permits the sale of the company’s Encapsys segment to Rise Acquisition LLC, an affiliate of Sherman Capital Holdings LLC, for $208 million in cash, subject to working capital adjustments, and the assumption of liabilities. The sale closed Monday.

Along with the sale, the amendment

• Provides for the release of liens on the Encapsys business;

• Requires that $165 million of proceeds from the sale be used to prepay the revolving credit loans and the term loans under the credit agreement and that the remainder be reinvested or otherwise used to further prepay debt;

• Provides for a permanent reduction of the revolving credit facility commitments to $75 million from $100 million; and

• Requires the payment of a consent fee of 17.5 basis points.

The amendment also adds a pricing grid under which, at any time after the fiscal year ending 2015:

• If the reported consolidated first-lien leverage ratio is more than 3 times, the margin on eurodollar loans would increase to 5% per year from 4.5%; and

• If the leverage ratio is less than or equal to 3 times, the spread would revert back to 4.5%.

In addition, the amendment removed the maximum consolidated leverage covenant and added a maximum consolidated first-lien leverage covenant that requires maintenance of a consolidated first-lien leverage ratio of no more than 3.5 times initially, no more than 3.25 times beginning in the third fiscal quarter of 2016 and no more than 3 times beginning in the third fiscal quarter of 2017 and a minimum consolidated fixed charge coverage covenant that requires maintenance of a consolidated fixed charge coverage ratio of at least 0.95 times initially and at least 1 times beginning in the first fiscal quarter of 2016.

After the amendment, the prepayment of the revolving loans and the term loans and the transactions regarding the sale, the outstanding principal amount of the term loans under the credit facility was $183.3 million and the outstanding principal amount of the revolving credit loans under the credit facility was $14.8 million.

Appvion is based in Appleton, Wis., and makes thermal, carbonless and security papers.

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