Nip Impressions logo
Thu, Dec 7, 2023 14:56
Click here for Pulp & Paper Radio International
Subscription Central
Must reads for pulp and paper industry professionals
My Profile
Management Side
Rayonier Announces Initiatives to Enhance Shareholder Value

WILDLIGHT, Fla. (News release) -- Rayonier Inc. announced an asset disposition and capital structure realignment plan (the "Plan") targeting $1 billion of select asset sales over the next 18 months. The proceeds of the asset sales will be used to reduce the Company's leverage to ≤3.0x Net Debt / Adjusted EBITDA* and return meaningful capital to shareholders. The Plan is intended to enhance shareholder value by capturing the significant disparity between public and private timberland values and reducing the level of debt the Company maintains in a higher interest rate environment. The Plan will also improve the Company's competitive positioning by divesting less strategic assets and concentrating capital in markets with the strongest cash flow attributes and most favorable long-term growth prospects. The Company today announced the first step toward effectuating the Plan with the sale of 55,000 acres in Oregon for $242 million.

"Rayonier remains committed to its nimble, value-added capital allocation strategy," said David Nunes, Chief Executive Officer. "The disconnect between private market timberland values and the Company's public market valuation is at an historically wide level, and the plan announced today will allow us to take advantage of this opportunity to create value for our shareholders as well as right-size our leverage to the current market environment. Our portfolio scale and pure-play timber REIT structure afford us the flexibility to take these initiatives, and we are confident that they will result in meaningful value accretion for our shareholders."

Reducing Leverage Target

Pursuant to the Plan, Rayonier is adjusting its long-term leverage target from ≤4.5x Net Debt / Adjusted EBITDA* to ≤3.0x Net Debt / Adjusted EBITDA* and commensurately reducing its Net Debt / Asset Value target from ≤30% to ≤20%. "While Rayonier enjoys a long-dated and well-staggered debt maturity profile as well as a low-cost, primarily fixed-rate debt structure, these new credit ratio targets are intended to reduce future interest costs and mitigate refinancing exposure in a higher rate environment, as well as enhance our capital allocation flexibility," said Mark McHugh, President and Chief Financial Officer. "Maintaining a conservative capital structure has always been a priority for Rayonier, and we believe the current interest rate environment and the 'higher-for-longer' rate outlook calls for a more cautious approach to debt utilization within our business. We plan to be selective and opportunistic in achieving our enhanced leverage target over the next 18 months."

Announcing Disposition of Oregon Properties

As an important first step toward effectuating the Plan, Rayonier is concurrently announcing an agreement for the sale of 55,000 acres of timberland in Oregon to Manulife Investment Management on behalf of clients for $242 million (~$4,400 per acre), which represents a significant premium to Rayonier's implied EBITDA* and CAD* trading multiples as well as the per-acre value implied by the Company's current public market valuation.

"We began evaluating this asset sale six months ago as a way to reduce leverage and take advantage of the significant disconnect between private market timberland values and the valuation implied by the company's share price," said Mr. Nunes. "This valuation disconnect has only widened since then, which motivated us to commit to a more transformational initiative to drive value accretion for our shareholders. We intend to remain disciplined and nimble as market conditions evolve, and we will adapt as needed to strengthen our competitive positioning and enhance long-term shareholder value."

The Oregon disposition is expected to close in the fourth quarter. The Company plans to use $150 million of the proceeds to pay down its only floating rate debt, which will translate to annual interest savings of approximately $9.3 million. The remaining proceeds will be retained to retire debt or return capital to shareholders. Pro forma for the disposition and application of proceeds, the Company's leverage will decline to 4.2x Net Debt / 2023E Pro Forma Adjusted EBITDA* (based on the midpoint of the Company's latest full-year guidance adjusted for the Oregon disposition), its weighted average cost of debt will decline to approximately 2.8%, and 100% of its debt will be fixed. Pro forma for the disposition and the application of proceeds, the Company anticipates CAD per share accretion of approximately 6%.

Additional details on the Plan and the Oregon disposition can be found in a supplemental presentation posted to Rayonier's website. Further details on Rayonier's progress toward achieving $1 billion of targeted asset sales will be provided as future transactions are completed, as well as at an upcoming Investor Day on February 28, 2024 in New York City.


You get lots of valueless email, sign up for newsletters that can promote your career.

Printer-friendly format


Powered by Bondware
News Publishing Software

The browser you are using is outdated!

You may not be getting all you can out of your browsing experience
and may be open to security risks!

Consider upgrading to the latest version of your browser or choose on below: