Pope & Talbot signs commitment for $325 million credit facility

New York, June 2 - Pope & Talbot, Inc. said it has signed a commitment letter for a $325 million senior secured credit facility with lenders Ableco Finance LLC and Wells Fargo Financial Corp. Canada.

The facility is made up of two term loans totaling $250 million from Ableco and a $75 million revolving credit facility from Wells Fargo, of which $40 million will be available for cash borrowings and $35 million for letters of credit.

The facility will have a six-year maturity, with the $100 million term loan B maturing at exactly six years and the $150 million term loan C maturity at six years and three months, according to an 8-K filing with the Securities and Exchange Commission.

Interest on the term loans is at Libor plus 375 to 775 basis points, depending on leverage. Initially the rate is Libor plus 675 bps. The revolver is at Libor plus 225 to 300 bps, depending on the previous month's average utilization.

Pope & Talbot expects to close on the new loans by the end of June.

Lehman Brothers Inc. is lead arranger and bookrunner for the facility and Lehman Commercial Paper Inc. is syndication agent. Wells Fargo Canada is administrative agent while Ableco is collateral agent.

Proceeds will be used to refinance the leases at the company's Halsey pulp mill, its existing Canadian and U.S. revolving credit facilities and its receivable sales arrangement.

The size is slightly more than the $300 million Pope & Talbot previously disclosed it was negotiating.

Covenants in the facility require positive EBITDA for the four-quarter periods ended June 30, 2006 and Sept. 30, 2006, EBITDA of at least $25 million for the year ended Dec. 31, 2006 and increasing levels of required EBITDA for subsequent periods up to $70 million for the four-quarter periods ended Dec. 31, 2009 and after. From Dec. 31, 2009, another covenant will require the leverage ratio to be no more than 2.75:1 at the end of each quarter.

Covenants will limit capital expenditures to $30 million per year and restrict dividend payments unless EBITDA exceeds $55 million for any year and the leverage ratio at the end of that year is no more than 2.75:1.

Pope & Talbot will be required to pay down borrowings using 75% of the after-tax net proceeds of any lumber import duty refunds the company and its subsidiaries receive, 50% of any excess cash flow, declining to 25% of excess cash flow if the leverage ratio is less than 2.75:1, 100% of the net proceeds of certain assets sales and insurance recoveries, and 100% of the net proceeds of certain stock issuances declining to 50% if the leverage ratio is less than 2.75:1.

Pope & Talbot is a Portland, Ore., pulp and wood products company.

© 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.