Orchids Closes Strategic Alliance with Fabrica de Papel San Francisco

Orchids Paper Products Co., Pryor, Okla., USA, this past week reported the closing of transactions comprising a strategic alliance with Fabrica de Papel San Francisco, S.A. de C.V. (Fabrica), as reported last month. This alliance is expected to allow Orchids to effectively and efficiently service customers in the western U.S.

 

Orchids paid an aggregate of $36.7 million under the agreements, consisting of shares of Orchids common stock having a value of $20 million and cash of $16.7 million, which Orchids will fund with a new term loan from U.S. Bank National Assn.

 "We are excited to begin our partnership with Fabrica," said Jeffrey Schoen, president and CEO of Orchids. "This alliance is expected to allow us to cost effectively provide high-quality products and superior customer service to a portion of the market that was previously difficult to access. It supports our vision of being recognized as a national supplier of high quality consumer tissue products in the value, premium, and ultra-premium tier product categories, and we are confident it will lead to long-term value for our stockholders." 

 

Additionally, Orchids announced its entrance into a credit agreement with U.S. Bank. The $75 million agreement includes a $45 million revolving credit line due June 2019 and a $30 million term loan due June 2020. The agreement has the effect of (i) extending and increasing Orchids' revolving working capital line of credit from $15 million to $25 million, (ii) increasing Orchids' revolving line of credit to include $20 million for the purchase and construction of assets in Oklahoma, and (iii) refinancing and extending Orchids' $10.8 million real estate loan and $7.2 million machinery and equipment loan into a single $30 million term loan, which also provides funding for the $16.7 million to be paid in accordance with the agreements with Fabrica. Borrowings under the agreement will bear interest at variable rates with margins ranging from 1% to 2% above LIBOR.

 

Orchids Paper Products Co. is an integrated producer of tissue paper products serving the at-home private label consumer market. At its operations in northeast Oklahoma, Orchids produces a full line of tissue products, including paper towels, bathroom tissue, and paper napkins, to serve the value through premium quality market segments. Orchids provides these products to retail chains throughout the U.S.

Fabrica de Papel San Francisco. is a privately owned company, starting as a tissue converter in 1958. It has grown to 150,000 metric tons of capacity, one of the largest tissue manufacturers by capacity in Mexico. Fabrica started up the first Valmet NTT paper machine in the world in 2013.