{"id":11769,"date":"2012-06-22T23:40:03","date_gmt":"2012-06-22T21:40:03","guid":{"rendered":"http:\/\/www.myza.co.za\/06\/text-sp-assigns-sappi-senior-notes-bb-issue2-recovery-rtgs\/"},"modified":"2012-06-22T23:40:03","modified_gmt":"2012-06-22T21:40:03","slug":"text-sp-assigns-sappi-senior-notes-bb-issue2-recovery-rtgs","status":"publish","type":"post","link":"https:\/\/www.myza.co.za\/press\/text-sp-assigns-sappi-senior-notes-bb-issue2-recovery-rtgs\/","title":{"rendered":"TEXT-S&P assigns Sappi senior notes ‘BB’ issue,’2′ recovery rtgs"},"content":{"rendered":"

\t\t<\/span><\/p>\n

<\/span><\/p>\n

<\/span><\/p>\n

The proposed notes are guaranteed and secured on the same basis as the
\nexisting senior secured debt. The EUR350 million senior secured RCF, the EUR25
\nmillion loan from Oesterreichische Kontrollbank AG (AA+\/Negative\/A-1+), and
\nthe various senior secured notes (including the proposed notes) share the same
\nsecurity package. This package comprises share pledges over certain material
\nsubsidiaries, pledges over certain U.S. inventories, and a first charge over
\ncertain property, plant, and equipment.<\/p>\n

<\/span><\/p>\n

The documentation for the proposed $400 million and $300 million senior
\nsecured notes restricts, among other things, Sappi’s ability to raise
\nadditional debt, pay dividends, sell certain assets, or merge with other
\nentities. However, the documentation for the proposed notes allows Sappi to
\nraise new debt if its fixed-charge coverage ratio is more than 2.0x. The
\ndocumentation also allows the issue of additional secured debt if the
\nconsolidated secured leverage ratio is less than 2.5x. Aside from these
\nconditions, the permitted liens covenant allows for liens securing obligations
\nof no more than $175 million in aggregate at any time; a credit facility of up
\nto EUR1.3 billion; and up to South African rand (ZAR) 7.5 billion of total debt
\nincurred by South African subsidiaries.<\/p>\n

<\/span><\/p>\n

The proposed senior secured notes benefit from a change-of-control clause and
\na cross-default clause (for any unpaid amount of more than EUR25 million), and
\nwill not have any financial maintenance covenants.<\/p>\n

<\/span><\/p>\n

The documentation for the EUR350 million RCF contains a set of financial and
\nnonfinancial covenants. The maintenance covenants include quarterly tests of
\nthe fixed-charge coverage and leverage ratios. The incurrence covenants
\ninclude a negative pledge clause; a carve-out restricting the granting of
\nsecurity over EUR100 million; and limitations on mergers, acquisitions, and
\ndisposals. There is also a limit on additional indebtedness of EUR75 million at
\nthe subsidiary level, plus up to ZAR7.5 billion of total debt incurred by
\nSouth African subsidiaries.<\/p>\n

<\/span><\/p>\n

The $350 million and EUR250 million senior secured notes due in 2021 and 2018,
\nrespectively, benefit from the same documentation as for the proposed senior
\nsecured notes. It includes limitations on the incurrence of indebtedness as
\nlong as no default has occurred or would occur as a consequence, and as long
\nas the pro forma consolidated fixed-charge coverage ratio is greater than
\n2.0x. (In June 2011, we estimated this ratio at about 2.47x.) Sappi can raise
\nfurther debt without complying with this ratio if the debt is a credit
\nfacility of up to EUR1.3 billion (including the EUR350 million RCF); or up to
\nZAR7.5 billion raised by South African subsidiaries. Over and above these
\nconditions, the permitted liens covenant allows for liens totalling no more
\nthan $175 million at any time.<\/p>\n

<\/span><\/p>\n

The $250 million unsecured notes due in 2032 (outstanding amount $221 million)
\ncontain limitations on sale-and-leaseback transactions and mergers and
\nacquisitions, a limit on liens, and a cross-default covenant.<\/p>\n

<\/span><\/p>\n

To calculate recoveries, we simulate a default scenario. We use a
\ngoing-concern approach to reflect our view of Sappi’s strong cost and market
\npositions in the coated paper and chemical cellulose industries, good
\ngeographic diversification, and prospects for positive free operating cash
\nflow generation. We base our default scenario on our assumption of a
\ncumulative revenue decline between 2012 and 2016, as a result of weakening
\ndemand in the paper markets. Weak operating performance is underpinned by our
\nassumption of:<\/p>\n

<\/span><\/p>\n

— Overall economic weakness;
\n\u00a0 Continued…<\/strong><\/span><\/p>\n

<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

The proposed notes are guaranteed and secured on the same basis as the existing senior secured debt. The EUR350 million senior secured RCF, the EUR25 million loan from Oesterreichische Kontrollbank AG (AA+\/Negative\/A-1+), and the various senior secured notes (including the proposed notes) share the same security package. This package comprises share pledges over certain material […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","ngg_post_thumbnail":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[1],"tags":[830,2370,183],"class_list":{"0":"post-11769","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-south-africa","7":"tag-news","8":"tag-reuters","9":"tag-south-africa-2","10":"entry"},"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/posts\/11769","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/comments?post=11769"}],"version-history":[{"count":0,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/posts\/11769\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/media?parent=11769"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/categories?post=11769"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/tags?post=11769"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}