DEBT

Rayonier’s debt consisted of the following at December 31, 2016 and 2015:



	2016			2015
Term Credit Agreement borrowings due 2024 at a variable interest rate of 2.3% at December 31, 2016		$350,000			$170,000
Senior Notes due 2022 at a fixed interest rate of 3.75%	325,000			325,000
Incremental Term Loan Agreement borrowings due 2026 at a variable interest rate of 2.5% at December 31, 2016	300,000			—
Mortgage notes due 2017 at fixed interest rates of 4.35% (a)	31,676			42,638
Revolving Credit Facility borrowings due 2020 at a variable interest rate of 1.9% at December 31, 2016	25,000			97,000
Solid waste bonds due 2020 at a variable interest rate of 2.0% at December 31, 2016	15,000			15,000
New Zealand JV noncontrolling interest shareholder loan at 0% interest rate	18,796			23,242
New Zealand JV Revolving Credit Facility due 2016 at a variable interest rate of 3.54% at December 31, 2015	—			160,999
Total debt	1,065,472			833,879
Less: Current maturities of long-term debt	(31,676		)	—
Less: Deferred financing costs	(3,591		)	(3,325		)
Long-term debt, net of deferred financing costs		$1,030,205			$830,554

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



2017 (a)		$31,500
2018	—
2019	—
2020	40,000
2021	—
Thereafter	993,796
Total debt		$1,065,296


(a)	The mortgage notes due in 2017 were recorded at a premium of $0.2 million and $0.6 million as of December 31, 2016 and 2015, respectively. Upon maturity the liability will be $31.5 million.

Term Credit Agreement

In August 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 nine-year $350 million term loan facility. The periodic interest rate on the term loan facility is subject to a pricing grid based on the Company’s leverage ratio, as defined in the credit agreement. As of December 31, 2016, the periodic interest rate on the term loan facility was LIBOR plus 1.625%. Following the closing of the term loan, the Company entered into several interest rate swap transactions to fix the cost of the term loan facility over its nine-year term. The term credit agreement allows the Company to receive annual patronage payments, 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 on the term loan facility to be approximately 3.3% after consideration of the interest rate swap and estimated patronage refunds.

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.

Incremental Term Loan Agreement

In April 2016, the Company entered into an incremental term loan agreement with CoBank, ACB, as administrative agent, and a syndicate of Farm Credit institutions to provide a 10-year, $300 million incremental term loan. Proceeds from the new term loan were used to fund Rayonier’s portion of the Menasha acquisition net of the proceeds received from the Washington disposition, to repay approximately $105 million outstanding on the Company’s revolving credit facility and for general corporate purposes. The periodic interest rate on the incremental term loan agreement is subject to a pricing grid based on the Company’s leverage ratio, as defined in the credit agreement. As of December 31, 2016, the periodic interest rate on the incremental term loan was LIBOR plus 1.900%. Following the closing of the incremental term loan, the Company entered into several interest rate swap transactions to fix the cost of the facility over its 10-year term. The Company estimates the effective interest rate on the incremental term loan facility to be approximately 2.8% after consideration of the interest rate swaps and estimated patronage payments.

$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 2016, 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, 2016, the carrying value of the debt outstanding was $31.7 million; however, the liability will be $31.5 million at maturity.

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 subject to a pricing grid based on the Company’s leverage ratio, as defined in the credit agreement. As of December 31, 2016, the periodic interest rate on the revolving credit facility was LIBOR plus 1.250%, with an unused commitment fee of 0.175%. At December 31, 2016, the Company had $169.6 million of available borrowings under this facility, net of $5.4 million to secure its outstanding letters of credit.

Joint Venture Debt

In April 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. On March 3, 2016, as a result of a capital contribution, the Company’s ownership interest in the New Zealand JV increased to 77%. See Note 7 — Joint Venture Investment for further information.

Shareholder Loan

The shareholder loan is an interest-free loan from the noncontrolling New Zealand JV partner in the amount of $19 million. This loan represents part of the noncontrolling party’s investment in the New Zealand JV. The loan is unsecured and subordinated to the Working Capital Facilities of the New Zealand JV. 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, 2016 due to its absence of a fixed maturity date.

Working Capital Facilities

In June 2016, the New Zealand JV entered into a 12-month NZ$20 million working capital facility and an 18-month NZ$20 million working capital facility, replacing the previous NZ$40 million facility that expired in June 2016. The NZ$40 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 90-day New Zealand Bank bill rate (“BKBM”). The margins are set for the term of the facility. At December 31, 2016, there was no outstanding balance on the Working Capital Facility.

Senior Secured Facilities Agreement

The New Zealand JV was party to a NZ$275 million variable rate Senior Secured Facilities Agreement comprised of two tranches, Tranche A, a NZ$235 million revolving cash advance facility and Tranche B, a NZ$40 million working capital facility that expired June 2016. On March 3, 2016, the Company used proceeds from the term loan facility to fund a capital contribution into the New Zealand JV. The New Zealand JV in turn used the proceeds for full repayment of the outstanding amount of $155 million under its Tranche A credit facility.

Debt Covenants

In connection with the Company’s $350 million term credit agreement, $300 million incremental term loan agreement and $200 million revolving credit facility, 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, 2016, the Company was in compliance with all covenants.