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Related Issuers
Rating Action:

Moody's rates Rayonier's new senior unsecured notes Baa3; outlook stable

12 May 2021

Approximately $400 million of rated debt

Toronto, May 12, 2021 -- Moody's Investors Service ("Moody's") assigned a Baa3 rating to Rayonier L.P.'s proposed $400 million senior unsecured notes. Rayonier Inc guarantees Rayonier L.P.'s debt (together, "Rayonier"). Rayonier's ratings are unchanged. The outlook remains stable. Rayonier intends to use the proceeds of this offering to repay its $250 million incremental term loan facility and general corporate purposes, which may include the repayment of the 3.75% $325 million senior unsecured notes due April 2022 at or prior to maturity.

"The notes issuance is leverage neutral and Rayonier's existing ratings remain unchanged, reflecting our expectation that company will maintain strong asset coverage and that leverage will decline to below 4.5x over the next 12 to 18 months" said Ed Sustar, Senior Vice President with Moody's.

Assignments:

..Issuer: Rayonier, L.P.

....Senior Unsecured Regular Bond/Debenture, Assigned Baa3

RATINGS RATIONALE

Rayonier (Baa3) benefits from 1) its productive timberlands with very strong timber asset value coverage (Moody's estimate of the company's timberland value relative to its adjusted debt of 3.4x December 2020), 2) stable earnings with high adjusted EBITDA margins (41% December 2020) and 3) strong liquidity, including the company's significant unencumbered land ownership that can be readily sold to augment liquidity. Rayonier receives two notches of lift to its credit rating attributed to the company's strong timberland value relative to its debt. The company's timberland holdings provide significant financial flexibility by generating recurring operating earnings, offering debt reduction capabilities and enhancing liquidity.

Rayonier is constrained by 1) its modest free cash flow due to the high dividend payout requirements of a Real Estate Investment Trust (REIT), 2) limited scale and product diversification relative to its peers, and 3) high leverage (5x December 2020, excluding large timber dispositions), which we expect will decline slightly to below 4.5x over the next 12 to 18 months.

Rayonier has strong liquidity with about $400 million of sources and essentially no debt maturities in 2021. As of March 31, 2021 Rayonier had cash on hand of approximately $80 million, and essentially full availability under its $300 million revolving credit facility (matures in April 2025). Moody's estimates that Rayonier will generate about $15 million of free cash flow (after dividends) over the next 12 months. We expect Rayonier will be in compliance with its financial covenants. If needed, the company could sell non-core assets (such as its Timber Funds business) or some of its timberland to augment liquidity..

The stable outlook reflects our expectation that Rayonier will maintain strong timber asset coverage as the company's leverage improves to below 4.5x in the next 12 to 18 months. Operating earnings will improve as the company fully integrates the May 2020 acquisition of Pope Resources and from incremental sales volumes from the company's New Zealand and Pacific Northwest segments. We expect sawlog prices to increase modestly in 2021 (compared to 2020) in the regions where Rayonier operates.

Rayonier's principal business is growing trees, which is an environmental benefit through carbon capture. Rayonier estimated that the net amount of carbon sequestered by its forests (after harvesting and corporate and forestry-related emissions) in 2019 was about 5.7 million tonnes of carbon dioxide equivalents. The company is exposed to social risks such as labor relations and health and safety issues. The company has established expertise in complying with these risks and has incorporated procedures to address them in their operational planning and business models.

Rayonier is a public company with well-established governance structures. As a REIT, the company regularly distributes a significant portion of its cash flow to its shareholders. Rayonier's significant asset coverage and management's commitment to maintaining an investment grade credit profile are important underlying factors for the company's Baa3 rating.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING

Factors that could lead to an upgrade

» further growth in Rayonier's size and product diversity

» maintenance of strong timberland coverage: timberland asset value/debt coverage above 2x (3.4x as of December 2020)

» adjusted debt to EBITDA (excluding large timberland dispositions) approaching 3x (5x as of December 2020) on a sustainable basis

Factors that could lead to a downgrade

» timberland asset value/debt coverage declines below 1.5x (3.4x as of December 2020)

» adjusted debt to EBITDA (excluding large timberland dispositions) will be sustained above 4.5x (5x as of December 2020)

» material asset encumbrances or significant asset sales

Headquartered in Wildlight, Florida, Rayonier is a Real Estate Investment Trust (REIT) that owns, leases or manages about 2.7 million acres of timberland in the US South, Pacific Northwest and New Zealand (through a 77% interest in Matariki Forestry Group).

The principal methodology used in this rating was Paper and Forest Products Industry published in October 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1105007. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The rating has been disclosed to the rated entity or its designated agent(s) and issued [with/with no] amendment resulting from that disclosure.

This rating is solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1263068.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Ed Sustar
Senior Vice President
Corporate Finance Group
Moody's Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Donald S. Carter, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
© 2022 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody’s Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $5,000,000. MCO and Moody’s Investors Service also maintain policies and procedures to address the independence of Moody’s Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody’s Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY100,000 to approximately JPY550,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​
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