DEBT

Rayonier’s debt consisted of the following at December 31, 2015 and 2014:



	2015		2014
Senior Notes due 2022 at a fixed interest rate of 3.75%		$325,000		$325,000
Senior Exchangeable Notes due 2015 at a fixed interest rate of 4.50%	—		129,706
Mortgage notes due 2017 at fixed interest rates of 4.35% (a)	42,638		53,801
Solid waste bonds due 2020 at a variable interest rate of 1.3% at December 31, 2015	15,000		15,000
Revolving Credit Facility borrowings at a variable interest rate of 1.34% at December 31, 2014	—		16,000
Revolving Credit Facility borrowings due 2020 at a variable interest rate of 1.6% at December 31, 2015	97,000		—
Term Credit Agreement borrowings due 2024 at a variable interest rate of 1.9% at December 31, 2015	170,000		—
New Zealand JV Revolving Credit Facility due 2016 at a variable interest rate of 3.54% at December 31, 2015	160,999		184,099
New Zealand JV Noncontrolling interest shareholder loan at 0% interest rate	23,242		27,949
Total debt	833,879		751,555
Less: Current maturities of long-term debt	—		(129,706		)
Long-term debt		$833,879		$621,849

Principal payments due during the next five years and thereafter are as follows:



2016 (a)		$160,999
2017 (b)	42,000
2018	—
2019	—
2020	112,000
Thereafter	518,242
Total debt		$833,241


(a)	The Company will refinance this debt in 2016 with proceeds from the term loan facility.


(b)	The mortgage notes due in 2017 were recorded at a premium of $0.6 million and $1.3 million as of December 31, 2015 and 2014, respectively. Upon maturity the liability will be $42 million.

Term Credit Agreement

On August 5, 2015, the Company entered into a credit agreement with CoBank, ACB, as administrative agent, and a syndicate of Farm Credit institutions and other commercial banks to provide $550 million of new credit facilities, including a five-year $200 million unsecured revolving credit facility (see below) and a nine-year $350 million term loan facility. The Company has entered into an interest rate swap transaction to fix the cost of the term loan facility over its nine-year term. The periodic interest rate on the term credit agreement is LIBOR plus 1.625%, with an unused commitment fee of 0.175%. The Company receives annual patronage refunds, which are profit distributions made by a cooperative to its member-users based on the quantity or value of business done with the member-user. The Company estimates the effective interest rate to be approximately 3.3% after consideration of the estimated patronage refunds and interest rate swaps. As of December 31, 2015, the Company had additional draws available of $180.0 million under the term credit agreement.

Revolving Credit Facility

In August 2015, the Company entered into a five-year $200 million unsecured revolving credit facility, replacing the previous $200 million revolving credit facility and $100 million farm credit facility which were scheduled to expire in April 2016 and December 2019, respectively. The periodic interest rate on the revolving credit facility is LIBOR plus 1.250%, with an unused commitment fee of 0.175%. At December 31, 2015, the Company had $101.2 million of available borrowings under this facility, net of $1.8 million to secure its outstanding letters of credit.

Joint Venture Debt

On April 4, 2013, Rayonier acquired an additional 39% interest in its New Zealand JV, bringing its total ownership to 65% and as a result, the New Zealand JV’s debt was consolidated effective on that date. See Note 7 — Joint Venture Investment for further information.

Senior Secured Facilities Agreement

The New Zealand JV is party to a $188 million variable rate Senior Secured Facilities Agreement comprised of two tranches. Tranche A, a $161 million revolving cash advance facility expires September 2016 and Tranche B, a $27 million working capital facility expires June 2016. Although the maximum amounts available under the agreement are denominated in New Zealand dollars, advances on Tranche A are also available in U.S. dollars. This agreement is secured by a Security Trust Deed that provides recourse to the New Zealand JV’s assets, as well as recourse to Rayonier Inc. and any of its subsidiaries.

Revolving Credit Facility

As of December 31, 2015 the Senior Secured Facilities Agreement had $161 million outstanding on Tranche A at 3.54% due September 2016, with a commitment fee of 80 basis points. In 2016, the Company will use proceeds from the term loan facility to fund a capital infusion into the New Zealand JV, which the New Zealand JV will in turn use for repayment of all outstanding amounts under its existing credit facility. The entire balance of the New Zealand JV Revolving Credit Facility remained classified as long-term debt at December 31, 2015 due to the ability and intent of the Company to refinance it on a long-term basis. The interest rate is indexed to the 90 day New Zealand Bank bill rate and is generally repriced quarterly. The margin on the index rate fluctuates based on the interest coverage ratio. The New Zealand JV manages these rates through interest rate swaps, as discussed at Note 13 — Derivative Financial Instruments and Hedging Activities. The notional amounts of the outstanding interest rate swap contracts at December 31, 2015 were $130 million, or 81% of the variable rate debt. The interest rate swaps have maturities extending through January 2020. The periodic interest rate on New Zealand JV debt is BKBM plus 0.80% with an additional 0.80% credit line fee. The periodic effective interest rate on New Zealand JV debt is approximately 6.3% after consideration of the interest rate swaps.

Working Capital Facility

The $27 million Working Capital Facility is available for short-term operating cash flow needs of the New Zealand JV. This facility holds a variable interest rate indexed to the Official Cash Rate set by the Reserve Bank of New Zealand. The margin ranges from 0.94% to 1.04% based on the interest coverage ratio and the length of time each borrowing is outstanding. At December 31, 2015, there was no outstanding balance on the Working Capital Facility.

Shareholder Loan

The shareholder loan is an interest-free loan from the noncontrolling New Zealand JV partner in the amount of $23 million. This loan represents part of the noncontrolling party’s investment in the New Zealand JV. The loan is secured by timberlands owned by the New Zealand JV and is subordinated to the Senior Secured Facilities Agreement. Although Rayonier Inc. is not liable for this loan, the shareholder loan instrument contains features with characteristics of both debt and equity and is therefore required to be classified as debt and consolidated. As the loan is effectively at par, the carrying amount is deemed to be the fair value. The entire balance of the shareholder loan remained classified as long-term debt at December 31, 2015 due to its absence of a fixed maturity date.

3.75% Senior Notes issued March 2012

In March 2012, Rayonier Inc. issued $325 million of 3.75% Senior Notes due 2022, guaranteed by certain subsidiaries. The guarantors were revised in October 2012, leaving TRS and Rayonier Operating Company LLC as the remaining guarantors.

$105 Million Secured Mortgage Notes Assumed

In November 2011, in connection with the acquisition of approximately 250,000 acres of timberlands, the Company assumed notes totaling $105 million, secured by mortgages on certain parcels of the timberlands acquired. The notes bear fixed interest rates of 4.35% with original terms of seven years maturing in August 2017. The Company prepaid $21.0 million of principal on the mortgage notes concurrent with the acquisition and an additional $10.5 million during each of the years 2012 through 2015, the maximum amounts allowed without penalty at the respective dates. The notes were recorded at fair value on the date of acquisition. At December 31, 2015, the carrying value of the debt outstanding was $42.6 million; however, the liability will be $42.0 million at maturity.

4.50% Senior Exchangeable Notes issued August 2009

The Company paid $131 million of its 4.50% Senior Exchangeable Notes upon maturity in August 2015.

The amounts related to convertible debt in the Consolidated Balance Sheets as of December 31, 2014 are as follows:



	2014
Liabilities:
Principal amount of debt
4.50% Senior Exchangeable Notes		$130,973
Unamortized discount (a)
4.50% Senior Exchangeable Notes	(1,267		)
Net carrying amount of debt		$129,706
Equity:
Common stock		$8,850

(a) The discount for the 4.50% notes was amortized through August 2015.

The amount of interest related to the convertible debt recognized in the Consolidated Statements of Income and Comprehensive Income for the years December 31, 2015, 2014 and 2013 is as follows:



	2015		2014		2013
Contractual interest coupon
4.50% Senior Exchangeable Notes		$3,438		$5,930		$7,271
Amortization of debt discount
4.50% Senior Exchangeable Notes	1,267		1,957		2,281
Total interest expense recognized		$4,705		$7,887		$9,552

The effective interest rate on the liability component for the years ended December 31, 2015, 2014 and 2013 was 6.21%.

Debt Covenants

In connection with the Company’s $350 million term credit agreement and $200 million revolving credit facility, customary covenants must be met, the most significant of which include interest coverage and leverage ratios. In connection with the New Zealand JV’s Senior Secured Facilities Agreement, customary covenants must be met, the most significant of which include interest coverage and leverage ratios.

In addition to the financial covenants listed above, the mortgage notes, senior notes, term credit agreement and revolving credit facility include customary covenants that limit the incurrence of debt and the disposition of assets, among others. At December 31, 2015, the Company was in compliance with all covenants.