news dump


Like an amoeba, Rayonier is splitting, but not in the interest of promoting organic existence. Rather, the real transformative and productive endeavors, which informed the operations of the original corporation to convert trees into paper and other useful products, is being left behind, as the new moniker, Rayonier Advanced Materials, Inc., is clearly designed to disguise, in the interest of promoting speculation in Real Estate development. I suppose we could say it’s a matter of separating the doers from the seers.

Perhaps at one point in our history, “real estate” was actually descriptive of tangible assets which, through the application of intelligence and labor could be transformed into permanently useful products. More recently, it was all about “location, location” — a relative concept that served as a catch-all, ruling out the vast majority of locales as unsuitable for a variety of unmentionable rationales. Now, perhaps because it has become painfully obvious that a growing homeless population has no relationship whatsoever with the quantity of housing available for occupation, real estate enterprise, as exemplified by the invention of the Real Estate Investment Trust (REIT), is embracing speculation overtly.

Given this renewed commitment to speculation, it is probably entirely appropriate that they’ve recruited John Ellis (Jeb) Bush and former U.S. Senator Blanche Lincoln to sit on the Board of Directors — Bush because, as former Governor of Florida, he presumably knows something about legislative evasion, as well as the real estate business he entered with his college degree in Latin American affairs, and Lincoln because, as the replaced Senator from an Agricultural state, she knows something about agriculture and federal subsidies. Or, in the words of the Rayonier press release:

Her political experience will be invaluable to the Rayonier board in helping the company address a range of public policy and legislative trends.

Never mind that the nominal Democrat was turned out by her constituents and replaced by John Boozman, an optometrist, whom the voters preferred by a 21 point margin. Presumably, Boozman’s enterprise was a success, since he also had time to volunteer at clinics for the indigent and serve on the Rogers School Board.

Rayonier, meanwhile, has put itself in hock to accomplish this self-severance of its parts. According to a report filed with the Securities and Exchange Commission,

On May 22, 2014, Rayonier A.M. Products Inc. (the “Company”), a wholly owned subsidiary of Rayonier Inc. (“Rayonier”), entered into an indenture (the “Indenture”) with Wells Fargo Bank, National Association, as trustee (the “Trustee”), relating to the issuance by the Company of $550,000,000 aggregate principal amount of its 5.50% senior notes due 2024 (the “notes”). Rayonier Advanced Materials Inc. (“RYAM”), which will be the Company’s parent after the previously announced distribution by Rayonier of shares of RYAM common stock to shareholders of Rayonier (the “distribution”), and each of the Company’s wholly-owned subsidiaries (other than Rayonier Foreign Sales Corporation) have jointly and severally guaranteed the notes.

Why a corporation would voluntarily limit itself is a question I can’t answer. One hopes it has nothing to do with the fact that Rayonier is being sued by environmental groups for violating the provisions of the Clean Water Act. But, by its own admission, RYAM seems to have tied its hands.

Subject to certain qualifications and exceptions, the Indenture limits the ability of the Company, RYAM, and any restricted subsidiaries to, among other things, (i) incur, assume or guarantee additional indebtedness, (ii) pay dividends or make distributions or purchase or otherwise acquire or retire for value capital stock, (iii) make any principal payment on, or redeem or repurchase, subordinated debt, (iv) make loans and investments, (v) incur liens, (vi) sell or otherwise dispose of assets, including capital stock of subsidiaries, (vii) consolidate or merge with or into, or sell all or substantially all of its assets to, another person, and (viii) enter into transactions with affiliates.

Perhaps that accounts for the stock being downgraded to “underperform,” notwithstanding the company’s persistent claim (ever since 2008) that

The company’s holdings include approximately 200,000 acres with residential and commercial development potential along the fast-growing Interstate 95 corridor between Savannah, Georgia, and Daytona Beach, Florida.

That “potential” would seem to have got a bit tarnished. And, while the press releases grants that:

While management believes that these forward-looking statements are reasonable when made, forward-looking statements are not guarantees of future performance or events and undue reliance should not be placed on these statements.

That’s an admission from which a reasonable person can only conclude that the Real Estate Investment Trust is not to be trusted. If the buyer has been warned to be wary, then the buyer has no complaint. It’s the same logic they’re trying to pull with the waste water discharge permits they’ve acquired from the Georgia Environmental Protection Division. “We’ve got a permit to pollute, so don’t be surprised when we do.” That the clams are dead and the fish are rotting downstream is not their fault. Being “forward looking” and “speculating” does not mean some people actually see anything — certainly not while they’re sitting in a board room in Jacksonville. But, it’s not so easy to leave the real world behind. The fishermen know.

Neither Rayonier nor Rayonier Advanced Materials assumes any obligation to update these statements except as is required by law.

No wonder the Wall Street Journal disclaims any connection to Rayonier’s Friday news dump.

Image: Georgia Lowcountry by Nikki McLeod from her flickr photo stream and used under a Creative Commons license.

Monica Smith

Monica Smith writes Hannah's Blog. Born in Germany, she came to the United States as a child, living first in California, then after an interval in Chile, in New York. Married to a retired professor at the University of Florida, where she lived for 17 years, she moved to St. Simons Island, Georgia, in 1993 and now divides her time between Georgia and New Hampshire. (New Hampshire, she says, is always interesting during a presidential election.) She and her husband have three children and five grandchildren. Ms. Smith says she "learned long ago that I am not a good team player when I got hired at the Library of Congress, fresh out of college with a degree in political science and proficiency in four foreign languages, to 'edit' library cards and informed my supervisor that if she was going to insist I punch the clock exactly on time, my productivity was going to fall from being the highest to being the same as everyone else's. The supervisor opted to assign me to another building where there was no time-clock. After I had the first of our three children, I decided a paycheck wasn't worth the hassle."