Orchids Paper Products enters $187.3 million restated credit agreement

By Marisa Wong

Madison, Wis., June 29 – Orchids Paper Products Co. entered into a $187.3 million second amended and restated credit agreement on June 25 with U.S. Bank NA as administrative agent, bookrunner and lead arranger and JPMorgan Chase Bank, NA as documentation agent, according to an 8-K filing with the Securities and Exchange Commission.

The credit agreement includes a $25 million revolving credit line due June 2020; a $47.3 million five-year term loan due June 2020 and payable in quarterly installments of $675,000 through June 2016 and $1 million per quarter after that; and a $115 million delayed draw term loan with a two-year draw period due June 2020 and payable in quarterly installments beginning in September 2017 of 1.5% of the June 30, 2017, outstanding balance.

The credit agreement also includes an accordion feature allowing the revolving credit line and/or delayed draw commitment to be increased by up to $50 million at any time on or before the expiration date.

The facility in effect combines the company’s existing $20 million revolving line of credit designated for the purchase and construction of a paper machine and converting line in Pryor, Okla., and $27.3 million currently outstanding under the company’s existing term loan into the new $47.3 million term loan.

In addition, the facility increases the delayed draw facility to $115 million from $40 million, extends the maturity of the delayed draw facility to June 2020 from August 2015 and adds the $50 million accordion feature.

Proceeds from the delayed draw term loan must be used solely to finance the purchase and installation of new equipment and construction at the company’s Barnwell, S.C., facility.

Interest is equal to Libor plus 125 basis points to 250 bps, depending on the company’s leverage ratio.

There is a commitment fee ranging from 15 bps to 35 bps, also based on the leverage ratio.

The amount available under the revolving credit line may be reduced in the event that the company’s borrowing base, which is calculated using qualified receivables and qualified inventory, is less than $25 million.

The credit agreement includes financial covenants tested at the end of each fiscal quarter requiring the company to maintain minimum fixed-charge coverage of 1.2 to 1 and maximum leverage of 4 to 1 through June 2017, 3.75 to 1 on Sept. 30, 2017, and 3.5 to 1 on Dec. 31, 2017, and after.

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

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