Orchids Paper Products details $45 revolver, $30 million term loan

By Marisa Wong

Madison, Wis., June 6 – Orchids Paper Products Co. released more details on its $75 million credit agreement dated June 2 with U.S. Bank NA that consists of a $45 million revolving credit line due June 2019 and a $30 million term loan due June 2020.

According to an 8-K filed Friday with the Securities and Exchange Commission, $25 million of the revolving credit line is permitted for domestic working capital purposes and the remaining $20 million is permitted for the purchase and construction of a paper machine and upgrade of one of the converting lines at the company’s Pryor, Okla., facility.

The term loan amortizes as follows: real estate debt is amortized as if it had a 22-year life, equipment debt is amortized as if it had a seven-year life and debt incurred for the acquisition of a supply agreement with Fabrica de Papel San Francisco, SA de CV is amortized as if it had a 10-year life.

The company announced before that it will use the term loan to fund its strategic alliance with Fabrica. Orchids paid an aggregate of $36.7 million under the agreements, consisting of $20 million of Orchids common stock and cash of $16.7 million.

The credit agreement has the effect of extending and increasing Orchids’ revolving working capital line of credit to $25 million from $15 million, increasing its revolving line of credit to include $20 million for the purchase and construction of assets in Oklahoma and refinancing and extending its $10.8 million real estate loan ($9.5 million outstanding) and $7.2 million machinery and equipment loan ($5.1 million outstanding) into a single $30 million term loan.

Borrowings will bear interest at Libor plus 100 bps to 200 bps, depending on the company’s leverage ratio. The initial interest rate is Libor plus 125 bps.

The commitment fee ranges from 15 bps to 30 bps, also based on the leverage ratio.

According to the 8-K, the credit agreement includes some financial covenants, including a minimum fixed-charge coverage ratio of 1.2 to 1.0 and a maximum leverage ratio of 3.5 to 1.0.

Pryor, Okla.-based Orchids is an integrated manufacturer of tissue paper products.

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