The refinancing provides additional capital for future acquisitions and other general corporate purposes, including share repurchases. The refinancing also provides CatchMark with increased liquidity and a reduction in its effective interest cost.
CatchMark increased its debt availability for acquisitions under the multi-draw term loan by more than 150% to approximately $255 million. Expanding its holdings of well-stocked timberlands remains a key strategic initiative for increasing the company's sustainable harvest volumes and timber sales revenues.
The company's revolving credit facility has increased from $25 million to $35 million and will be available for small acquisitions under $5 million as well as general corporate purposes.
Lower effective interest rate: The Company is now eligible to receive annual patronage refunds, which are profit distributions made by CoBank and other Farm Credit System banks. The refinancing effectively reduces the company's annual cash interest expense by approximately 55 to 65 basis points or approximately $700,000 based on its current debt levels.
To hedge against interest rate risk on the term loan, CatchMark entered into a hedging transaction for $35 million effectively fixing the rate at 4.145% before patronage.
Jerry Barag, CatchMark's President and CEO, said: "The execution of this refinancing helps us to continue to grow strategically in 2015 as we find transactions which meet our parameters for sustainable growth. Our leverage ratio remains in an extremely comfortable range—under 20%—as we build our holdings of high-quality timberlands and focus on increasing our dividend."
CatchMark Timber Trust, Inc. is a self-administered and self-managed publicly traded REIT that began operations in 2007 and owns interests in approximately 397,100 acres of timberland located in Alabama, Florida, Georgia, Louisiana and Texas.