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DEBT | 6 Months Ended
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Jun. 30, 2021
Debt Disclosure [Abstract] |
DEBT | DEBT Our debt consisted of the following at June 30, 2021:
| June 30, 2021
Debt, excluding Timber Funds: |
Term Credit Agreement borrowings due 2028 at a variable interest rate of 1.7% at June 30, 2021 (a) | $350,000 |
Senior Notes due 2022 at a fixed interest rate of 3.75% | 325,000 |
Senior Notes due 2031 at a fixed interest rate of 2.75% | 450,000 |
Incremental Term Loan Agreement borrowings due 2026 at a variable interest rate of 1.7% at June 30, 2021 (b) | 200,000 |
New Zealand subsidiary noncontrolling interests shareholder loan due 2025 at a fixed interest rate of 2.95% | 24,171 |
Northwest Farm Credit Services Credit Facility with quarterly interest-only payments, with the following tranches |
Due 2025 at a fixed interest rate of 6.1% | 10,000 |
Due 2028 at a fixed interest rate of 4.1% | 11,000 |
Due 2029 at a fixed interest rate of 5.3% | 16,000 |
Due 2029 at a fixed interest rate of 5.4% | 8,000 |
Total principal debt, excluding Timber Funds | 1,394,171 |
Add: Fair value adjustments, excluding Timber Funds | 7,478 |
Less: Unamortized discounts, excluding Timber Funds | (3,583) |
Less: Current maturities of long-term debt, excluding Timber Funds | (199,830) |
Less: Deferred financing costs, excluding Timber Funds | (5,348) |
Total long-term debt, excluding Timber Funds | 1,192,888 |
Debt, Timber Funds: |
Fund II Mortgages Payable, collateralized by Fund II timberlands with quarterly interest payments, as follows: (c) |
Due 2022 at a variable interest rate of 2.0% at June 30, 2021 | 11,000 |
Due 2022 at a variable interest rate of 2.0% at June 30, 2021 | 14,000 |
Fund III Mortgages Payable, collateralized by Fund III timberlands with quarterly interest payments, as follows: (d) |
Due 2023 at a fixed interest rate of 5.1% | 17,980 |
Due 2024 at a fixed interest rate of 4.5% | 14,400 |
Total principal debt, Timber Funds | 57,380 |
Add: Fair value adjustments, Timber Funds | 2,382 |
Less: Deferred financing costs, Timber Funds | (7) |
Total long-term debt, Timber Funds | 59,755 |
Total long-term debt | $1,252,643 |
(a) As of June 30, 2021, the periodic interest rate on the term credit agreement (the “Term Credit Agreement”) was LIBOR plus 1.600%. We estimate the effective fixed interest rate on the term loan facility to be approximately 3.1% after consideration of interest rate swaps and estimated patronage refunds. (b) As of June 30, 2021, the periodic interest rate on the incremental term loan (the “Incremental Term Loan Agreement”) was LIBOR plus 1.650%. We estimate the effective fixed interest rate on the incremental term loan facility to be approximately 2.4% after consideration of interest rate swaps and estimated patronage refunds. (c) As of June 30, 2021, the periodic interest rate on the Fund II Mortgages Payable was 3-month LIBOR plus 1.700%. (d) As of June 30, 2021, we estimate the effective fixed interest rate on the Fund III Mortgages Payable due 2023 and 2024 to be approximately 3.9% and 3.2%, respectively, after consideration of estimated patronage refunds. Principal payments due during the next five years and thereafter are as follows:
| Excluding Timber Funds | Timber Funds | Total
2021 | — |  | — |  | — |
2022 | 325,000 |  | 25,000 |  | 350,000 |
2023 | — |  | 17,980 |  | 17,980 |
2024 | — |  | 14,400 |  | 14,400 |
2025 | 34,171 |  | — |  | 34,171 |
Thereafter | 1,035,000 |  | — |  | 1,035,000 |
Total Debt | $1,394,171 |  | $57,380 |  | $1,451,551 |
2021 DEBT ACTIVITY U.S. Debt — Excluding Timber Funds In May 2021, we issued and sold $450 million aggregate principal amount of 2.75% senior notes due 2031 (the “Senior Notes due 2031”). The Senior Notes due 2031 were sold at an issue price of 99.195% of their face value, before underwriters discount. Our net proceeds after deducting approximately $3.9 million of underwriting discounts and expenses, were approximately $442.5 million. The discount and debt issuance costs will be amortized to interest expense over the term of the notes using the effective interest method. A portion of the proceeds were used to repay $250 million outstanding under our 2020 Incremental Term Loan Agreement. The remainder will be used for general corporate purposes, which may also include repayment of our 3.75% Senior Notes due 2022 at or prior to maturity. In May 2021, we repaid the $250 million outstanding under our 2020 Incremental Term Loan Agreement. We recognized a loss on early extinguishment of debt of $0.6 million, representing the write-off of unamortized deferred financing costs. The loss on early extinguishment of debt has been recognized in the Consolidated Statements of Income and Comprehensive Income under the caption “Interest and other miscellaneous (expense) income, net.” In June 2021, we entered into a Fourth Amendment and Incremental Term Loan Agreement, to amend certain terms of the Credit Agreement and to provide a senior unsecured delayed draw incremental term loan facility (the “2021 Incremental Term Loan Facility”) in an aggregate amount of $200 million. The Fourth Amendment to the Credit Agreement provides for an extension of the maturity date of our $300 million Revolving Credit Facility from April 1, 2025 to June 1, 2026. In addition, the amendment provides for modifications to adjust the pricing grid under the credit agreement to decrease the applicable margin for our Revolving Credit Facility from LIBOR plus 1.500% to LIBOR plus 1.2500%. As a result of the revolver modification, approximately $0.3 million in lender fees have been deferred and will be amortized to interest expense over the term of the revolver. The Fourth Amendment to the Credit Agreement also provides for modifications to adjust the pricing grid under the credit agreement to decrease the applicable margin for our $300 million 2016 Incremental Term Loan Facility from LIBOR plus 1.900% to LIBOR plus 1.6500%. As a result of the debt modification, approximately $0.3 million in third-party expenses have been recognized in the Consolidated Statements of Income and Comprehensive Income under the caption “Interest and other miscellaneous (expense) income, net.” The 2021 Incremental Term Loan Facility provides us the ability to make an advance of $200 million on or before June 1, 2022. As of June 30, 2021, no advance has been made under this facility. We expect to use a future advance of $125 million under the 2021 Incremental Term Loan Facility to refinance a portion of the 3.750% Senior Notes due 2022 on a long-term basis, and as such, have excluded $125 million of principal from current maturities of long-term debt, net, in our Consolidated Balance sheets. Any advance above $125 million may be used to repay other debt or for other general corporate purposes. We have deferred $0.3 million of commitment fees, which will be amortized to interest expense over the term of the access period, through June 1, 2022. Additionally, we deferred $0.2 million in debt issuance costs, which will be amortized to interest expense over the term of the facility, once any future advance is made. In June 2021, we refinanced our $45 million credit facility with Northwest Farm Credit Services (NWFCS). In the refinancing, maturity dates on tranches 6 and 7 were amended from November 1, 2033 to June 1, 2029 and the maturity date on tranche 8 was amended from October 1, 2036 to June 1, 2029. In addition to shortening the maturity terms, collateral was removed from each tranche outstanding with NWFCS. As a result of the debt modification, approximately $0.1 million in lender fees have been capitalized and will be amortized to interest expense over the terms of the tranches. In June 2021, we prepaid $100 million on the $300 million Incremental Term Loan Agreement. In connection with the partial prepayment, we recognized a loss on early extinguishment of debt of $0.1 million, representing the write-off of one-third of the unamortized deferred financing costs. The loss on early extinguishment of debt has been recorded in the Consolidated Statements of Income and Comprehensive Income under the caption “Interest and other miscellaneous (expense) income, net.” During the six months ended June 30, 2021, we made no borrowings or repayments on our Revolving Credit Facility. At June 30, 2021, we had available borrowings of $299.1 million under the Revolving Credit Facility, net of $0.9 million to secure our outstanding letters of credit. New Zealand Debt In June 2021, the New Zealand subsidiary renewed its NZ$20 million working capital facility for an additional 12-month term. During the six months ended June 30, 2021, the New Zealand subsidiary made no borrowings or repayments on its working capital facility. At June 30, 2021, the New Zealand subsidiary had NZ$20.0 million of available borrowings under its working capital facility. As of June 30, 2021, the outstanding balance on the shareholder loan is $24.2 million. Except for changes in the New Zealand foreign exchange rate, there have been no adjustments to the carrying value of the shareholder loan since its inception. See Note 6 — Noncontrolling Interests for more information regarding the New Zealand subsidiary. In July 2021, the New Zealand subsidiary recorded a noncontrolling interest share redemption and loan payable in the amount of $28.2 million. The shareholder loan is due in 2026 at a fixed rate of 3.64%. See Note 1 — Basis of Presentation for more information regarding subsequent events related to the New Zealand subsidiary. DEBT COVENANTS — EXCLUDING TIMBER FUNDS In connection with our $350 million Term Credit Agreement, $200 million Incremental Term Loan Agreement, $200 million 2021 Incremental Term Loan Agreement and $300 million Revolving Credit Facility, customary covenants must be met, the most significant of which include interest coverage and leverage ratios. The covenants listed below, which are the most significant financial covenants in effect as of June 30, 2021, are calculated on a trailing 12-month basis:
| Covenant Requirement |  | Actual Ratio |  | Favorable
Covenant EBITDA to consolidated interest expense should not be less than | 2.5 to 1 |  | 7.8 to 1 |  | 5.3
Covenant debt to covenant net worth plus covenant debt shall not exceed | 65 | % |  | 46 | % |  | 19 | %
In connection with our $45 million NWFCS Credit Facility, customary covenants must be met, the most significant of which include interest coverage and debt-to-capitalization ratios. The covenants listed below, which are the most significant financial covenants in effect as of June 30, 2021, are calculated on a trailing 12-month basis:
| Covenant Requirement |  | Actual Ratio |  | Favorable
Covenant EBITDA to consolidated interest expense should not be less than | 2.5 to 1 |  | 7.8 to 1 |  | 5.3
Covenant debt to covenant net worth plus covenant debt shall not exceed | 65 | % |  | 46 | % |  | 19 | %
In addition to these financial covenants listed above, the 2022 Notes, 2031 Notes, Term Credit Agreement, Incremental Term Loan Agreement, 2021 Incremental Term Loan Facility, Revolving Credit Facility, and NWFCS Credit Facility include customary covenants that limit the incurrence of debt and the disposition of assets, among others. At June 30, 2021, we were in compliance with all applicable covenants. DEBT COVENANTS — TIMBER FUNDS The Fund II Mortgages Payable to MetLife contain a requirement to maintain a loan-to-value ratio of less than 50%, with the denominator defined as fair market value of the timberland pledged as collateral. The Fund III Mortgages Payable to NWFCS contain a requirement to maintain a minimum interest coverage ratio of 1.5:1, minimum working capital of $500,000, and a loan-to-value ratio of less than 50%, with the denominator defined as fair market value. Both Timber Funds are in compliance with their respective debt covenants as of June 30, 2021.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1B -Subparagraph (h) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1C -Subparagraph (c) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495334-112611 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1I -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1I -Subparagraph (d) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(c)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1B -Subparagraph (g) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1C -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495334-112611 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1C -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495334-112611 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1E -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495348-112611 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1I -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611 Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1B -Subparagraph (i) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611 + Details
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