MONTREAL, Sept. 23, 2013 /CNW Telbec/ - Tembec announced today that it has secured additional financing in the amount of $27.8 million to fund a portion of the Temiscaming, Québec, specialty cellulose Cogen project ("Project"). In particular, Tembec has entered into an additional loan in the amount of $17.8 million with Investissement Québec ("IQ") ("IQ Loan") and has entered into an amended and restated credit agreement with Integrated Private Debt Fund III LP ("IPD"), as Agent for the Project's senior lenders, increasing its credit facility by $10 million ("IPD Loan"). This additional $27.8 million in loans increases the total Project financing to $132.8 million, with IQ now committed to $92.8 million of the financing and IPD committed to $40 million. Both the IQ Loan and the IPD Loan remain subject to the satisfaction of certain customary closing conditions, including the granting of new security for the loans.
To the end of August 2013, the Company has spent $131 million on the Project, which has a total estimated cost of $235 million. The Company has utilized a total of $48 million of the previously noted $133 million of project financing. Of the remaining $104 million to be spent, $85 million will be funded by the remaining Project financing and $29 million from the Company's internally generated cash flow.
The Project involves the replacement of three low-pressure boilers with a single new high-pressure boiler designed to burn waste sulphite liquor generated by the specialty cellulose manufacturing process. The Project also includes the installation of a new 50-megawatt electrical turbine. The completion of the boiler portion of the Project is scheduled for April 2014 and the start-up of the turbine should occur in September 2014. The Company anticipates that the Project will improve annual adjusted EBITDA by approximately $48 million. The improvement will include approximately $28 million of incremental electricity revenues, $7 million of operating and maintenance cost reduction and $13 million of productivity and margin enhancements associated with an annual production increase of 15,000 tonnes of specialty cellulose pulp.
The IQ Loan will bear interest at the same rate as that applicable under the initial $75 million loan entered into last year, being 5.5% compounded yearly and is secured by a second priority charge over the Project's assets. The IQ Loan shall be reimbursed in equal monthly payments over a period of four years starting April 30, 2016, and is subject to compliance with certain covenants and undertakings customary with such types of loans. Tembec has also agreed to grant a five year option to IQ to subscribe for 712,000 common shares of the Company at a premium of 30% over the average trading price of the shares over the five business days prior to the issuance of the option.
The IPD Loan will be subject to the current general terms and conditions of the credit facility with IPD. The IPD Loan will bear interest at the greater of 6.35% and the yield on equivalent term Government of Canada bonds plus 4.25% as of the date the funds are advanced. The IPD Loan will be reimbursed in blended monthly instalments over a period of eight years beginning in October 2014 with a balloon payment to be repaid in September 2022.
Tembec is a manufacturer of forest products - lumber, pulp, paper and specialty cellulose - and a global leader in sustainable forest management practices. Principal operations are in Canada and France. Tembec has some 3,400 employees and annual sales of approximately $2 billion. Tembec is listed on the TSX (TMB).
This press release includes "forward-looking statements" within the meaning of securities laws. Such statements relate, without limitation, to the Company's or management's objectives, projections, estimates, expectations or predictions of the future and can be identified by words such as "may", "will", "could", "anticipate", "estimate", "expect" and "project", the negative or variations thereof, and expressions of similar nature. Forward-looking statements are based on certain assumptions and analyses made by the Company in light of its experience, information available to it and its perception of future developments. Such statements are subject to a number of risks and uncertainties, including, but not limited to, changes in foreign exchange rates, product selling prices, raw material and operating costs and other factors identified in the Company's periodic filings with securities regulatory authorities. Many of these risks are beyond the control of the Company and, therefore, may cause actual actions or results to materially differ from those expressed or implied herein. The forward-looking statements contained herein reflect the Company's expectations as of the date hereof and are subject to change after such date. The Company disclaims any intention to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable securities legislation.
For further information:
Executive Vice President, Finances and Chief Financial Officer
Tel.: 819 627-4268
Vice President, Human Resources and Corporate Affairs
Tel.: 416 775-2819