Rayonier Advanced Materials bonds plummet after contract dispute; Bombardier 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.

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

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.

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

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.

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