On June 30, 2017, Orchids Paper Products Company (NYSE MKT: TIS) (the “Company”) entered into Amendment No. 5 (the “Credit Agreement Amendment”) to its Second Amended and Restated Credit Agreement dated June 25, 2015 by and among the Company, U.S. Bank National Association (“U.S. Bank”) and the other lenders party thereto (the “Credit Agreement”).
The Credit Agreement Amendment, among other things, struck the fixed charge coverage for the period ended June 30, 2017, thereby also waiving a requirement for a Cash Reserve, as defined in the Credit Agreement, to be funded by that date. Covenants for future periods remain unchanged from the prior amendment. Additionally, the Company agreed not to make any dividend or other distribution payment with respect to its equity unless the Company has achieved a Leverage Ratio of less than 4.0:1.0 for two consecutive fiscal quarters and no Default or Event of Default (as defined in the Credit Agreement) exists or would exist following such payment. The amount and timing of dividend payments otherwise remains subject to the judgment and approval of the Board of Directors.
The Company is also currently exploring the refinancing of some or all of its current outstanding indebtedness with the goals of increasing the Company’s financial flexibility and creating greater available liquidity, subject to market conditions. The Company is considering a range of possible refinancing alternatives.
The Company will target any potential refinancing transaction to close and fund in the third quarter of 2017. Consummation of the potential refinancing is subject to market and other customary conditions, including, among other things, the execution of definitive documentation. There can be no assurances as to the terms and conditions on which the potential refinancing maybe consummated, or that the potential refinancing will be consummated.
Jeff Schoen, Chief Executive Officer, stated, “The continuing strong support of our banks by adjusting covenants to reflect present market conditions and Orchids’ forward looking plan is appreciated and we believe, indicates their faith in our future and growth. We continue to be confident that the completion of the Barnwell, South Carolina mill and the increase in sales resulting from the announced new business, both of which occurred in June, bode well for Orchids’ forward-looking prospects, and the expected growth in earnings we believe will bring our financial leverage measures back in line over the subsequent periods. In the meantime, debt refinancing alternatives will be considered to meet liquidity requirements which we anticipate would minimize any long-term dilution of shareholders.”
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