Resolute Forest Products enters into $600 million asset-based revolver

By Angela McDaniels and Tali Rackner

Tacoma, Wash., May 26 – Resolute Forest Products Inc. and some subsidiaries entered into a $600 million senior secured asset-based revolving credit facility due May 22, 2020 on Friday, according to an 8-K filing with the Securities and Exchange Commission.

The revolver has a $60 million swingline subfacility and a $200 million letter-of-credit subfacility.

The revolver includes a $450 million tranche available to the U.S. borrowers and the Canadian borrowers and a $150 million tranche available solely to the U.S. borrowers.

The company may convert up to $50 million of the commitments under either the U.S. subfacility or the Canadian subfacility to a first-in last-out facility.

The new credit agreement also provides for a $500 million accordion feature.

The interest rate is Libor plus 150 basis points. The margin over Libor is subject to monthly pricing adjustments based on the average monthly excess availability under the credit facility.

Subject to maintaining certain average monthly excess availability thresholds, the applicable margin over Libor will be reduced to 125 bps after completion of the first full quarter of the facility and, after 18 months, to 100 bps if the company is in compliance with a leverage ratio of 1.75 to 1.00.

If any of the commitments are converted into a first-in last-out facility, loans outstanding under the first-in last-out facility will bear interest at a rate that is 125 bps higher than the interest rate payable on revolving loans not made under the first-in last-out facility.

The initial commitment fee is 30 bps. The fee is 30 bps when unused commitments under the facility are greater than or equal to 65% of the total commitments and 25 bps when unused commitments are less than 65% of the total commitments.

The new credit agreement contains a springing requirement for the company to maintain a minimum consolidated fixed charge coverage ratio of 1 to 1 that is triggered anytime excess availability under the facility falls below the greater of $50 million or 10% of the maximum available borrowing amount for two consecutive business days.

Bank of America, NA is the U.S. administrative agent and collateral agent. Bank of America, NA, Canada branch, is the Canadian administrative agent.

The new credit agreement replaces the company’s existing $665 million credit agreement, originally dated Dec. 9, 2010, which was terminated on Friday. Citibank, NA was the administrative agent and collateral agent.

In addition to refinancing the terminated credit agreement, the revolver proceeds can be used working capital needs and general corporate purposes.

As of Tuesday, there were about $37 million of undrawn ordinary course letters of credit, according to a press release.

Resolute Forest Products is a Montreal-based pulp and paper manufacturer.

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