Suggests RYAM Undertake an Exchange Offer for its 2024 Notes
Urges Company to Take Action to Reduce Gross Debt and Balance Sheet Risk
Chatham Asset Management, LLC ("Chatham"), a private investment firm which manages funds that beneficially own approximately 6.3% of the outstanding common stock of Rayonier Advanced Materials (“RYAM” or the “Company”) (NYSE: RYAM) and is a substantial bondholder of the Company, today sent a letter to the independent members of RYAM’s Board of Directors (the “Board”) expressing its concerns that management is not taking action quickly enough to proactively address the Company’s upcoming debt maturities.
In light of rising interest rates, Chatham delivered a suggested term sheet to RYAM management earlier this week outlining a possible exchange offer of the Company’s 5.50% Senior Notes due June 1, 2024 (the “2024 Notes”) into new five year notes and proposed a buyback of a portion of the 2024 Notes that Chatham owns. Chatham urges management and the Board to take seriously this suggestion to capitalize on the Company’s strong liquidity while reducing gross debt and balance sheet risk.
The full text of the letter follows:
March 17, 2022
The Independent Board of Directors
Rayonier Advanced Materials
1301 Riverplace Boulevard, Suite 2300
Jacksonville, FL 32207
Attention: Mr. DeLyle Bloomquist, Chairman
Dear Independent Members of the Board:
Chatham Asset Management, LLC (together with its affiliates, “we” or “Chatham”) is a substantial stockholder and bondholder of Rayonier Advanced Materials (“RYAM” or the “Company”), beneficially owning approximately 6.3% of the Company’s outstanding common stock, 72% of the Company’s 5.50% Senior Notes due June 1, 2024 (the “2024 Notes”), and 11% of the Company’s 7.625% Senior Secured Notes due January 15, 2026 (the “2026 Notes”). We are writing to the independent members of RYAM’s Board of Directors (the “Board”) today because we have serious concerns that management is not taking action quickly enough to proactively address the Company’s upcoming debt maturities or keeping the Board fully informed of our outreach and recent suggestions to refinance the 2024 Notes.
Yesterday, the Federal Reserve voted to raise interest rates and intends to continue to implement six more rate increases by year’s end, which many believe is the most aggressive pace in more than 15 years. In our view, none of this bodes well for RYAM, operationally and most importantly from a capital markets perspective. As such, it is critical that the Board begin to act now.
We believe debt retirement is far superior to simply leaving the Company’s sizeable cash position idle on the Company’s balance sheet, as each $20 million retired would result in excess of $1 million of annual free cash flow from interest savings. By avoiding the unnecessary negative carry that exists from holding a significant amount of cash on its balance sheet, we believe the Company can create equity value and multiple expansion that ultimately enhances shareholder value.
Given the urgency, we sent a suggested term sheet to management earlier this week which outlined a possible exchange offer of the 2024 Notes into new five year notes and proposed a buyback of a portion of the 2024 Notes that Chatham owns. Despite our outreach, management has shown little interest to date in taking our suggestions seriously, even though we believe the Company could announce an exchange offer for the 2024 Notes as soon as April 1. Chatham strongly believes a refinancing on these terms would be well received by the market, as it will create a 3-4 year runway for the Company until the 2026 Notes come due.
However, whether it is our suggested term sheet or another transaction, we believe it is imperative for the Board to move with speed to address the 2024 Notes upcoming maturities. Undertaking an exchange offer on the terms we propose can enable the Company to capitalize on its strong liquidity while reducing gross debt and balance sheet risk – a win-win for all stakeholders.
We urge the Board to take action now and are available to discuss the contents of this letter with the full Board at its earliest convenience.
/s/ Anthony Melchiorre
Chatham Asset Management
Jonathan Gasthalter/Sam Fisher
Gasthalter & Co.