Debt

12 Months Ended

Dec. 31, 2018

DEBT

Rayonier’s debt consisted of the following at December 31, 2018 and 2017:



	2018			2017
Term Credit Agreement due 2024 at a variable interest rate of 4.0% at December 31, 2018		$350,000			$350,000
Senior Notes due 2022 at a fixed interest rate of 3.75%	325,000			325,000
Incremental Term Loan Agreement due 2026 at a variable interest rate of 4.2% at December 31, 2018	300,000			300,000
Revolving Credit Facility due 2020 at a variable interest rate of 2.8% at December 31, 2017	—			50,000
New Zealand subsidiary noncontrolling interest shareholder loan at 0% interest rate	—			3,375
Total debt	975,000			1,028,375
Less: Current maturities of long-term debt	—			(3,375		)
Less: Deferred financing costs	(2,433		)	(2,996		)
Long-term debt, net of deferred financing costs		$972,567			$1,022,004

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



2019	—
2020	—
2021	—
2022	325,000
2023	—
Thereafter	650,000
Total debt		$975,000

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, 2018, the periodic interest rate on the term loan facility was LIBOR plus 1.625%. Monthly payments of interest only are due on this loan through maturity. 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 swaps and estimated patronage refunds. For additional information on the Company’s interest rate swaps see Note 13 — Derivative Financial Instruments and Hedging Activities.

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. Semi-annual payments of interest only are due on these notes through maturity. See Note 23 - Consolidating Financial Statements for further information regarding the subsidiary 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. 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, 2018, the periodic interest rate on the incremental term loan was LIBOR plus 1.900%. Monthly payments of interest only are due on this loan through maturity. 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. For additional information on the Company’s interest rate swaps see Note 13 — Derivative Financial Instruments and Hedging Activities.

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, 2018, the periodic interest rate on the revolving credit facility was LIBOR plus 1.250%, with an unused commitment fee of 0.175%. Monthly payments of interest only are due on this loan through maturity. At December 31, 2018, the Company had $189.8 million of available borrowings under this facility, net of $10.2 million to secure its outstanding letters of credit.

NEW ZEALAND SUBSIDIARY DEBT

In April 2013, Rayonier acquired an additional 39% interest in its New Zealand subsidiary, bringing its total ownership to 65%, and as a result, the New Zealand subsidiary’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 subsidiary increased to 77%. See Note 7 — New Zealand Subsidiary for further information.

SHAREHOLDER LOAN

The shareholder loan, which was fully repaid in the first quarter of 2018, was an interest-free loan from the noncontrolling New Zealand subsidiary partner. The loan was unsecured and subordinated to the Working Capital Facilities of the New Zealand subsidiary. Although Rayonier Inc. was not liable for this loan, the shareholder loan instrument contained features with characteristics of both debt and equity and was therefore required to be classified as debt and consolidated. As the loan was effectively at par, the carrying amount was deemed to be the fair value. The entire balance of the shareholder loan was classified as short-term debt at December 31, 2017.

WORKING CAPITAL FACILITIES

In June 2016, the New Zealand subsidiary entered into a 12-month NZ$20 million working capital facility and an 18-month NZ$20 million working capital facility. Both working capital facilities were renewed in 2017 for a total of NZ$40 million. In June 2018, one working capital facility was renewed for an additional 12-month term. The second facility lapsed on December 31, 2018. The NZ$20 million Working Capital Facility is available for short-term operating cash flow needs of the New Zealand subsidiary. 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. During the year ended December 31, 2018, the New Zealand subsidiary made borrowings and repayments of $1.0 million on its working capital facility. At December 31, 2018, there was no outstanding balance on the working capital facility.

DEBT COVENANTS

In connection with the Company’s $350 million term credit agreement (the “Term Credit Agreement”), $300 million incremental term loan agreement (the “Incremental Term Loan Agreement”) and $200 million revolving credit facility (the “Revolving Credit Facility”), customary covenants must be met, the most significant of which include interest coverage and leverage ratios.

In addition to these financial covenants listed above, the Senior Notes, Term Credit Agreement, Incremental Term Loan Agreement and Revolving Credit Facility include customary covenants that limit the incurrence of debt and the disposition of assets, among others. At December 31, 2018, the Company was in compliance with all covenants.