Neenah, Inc. (NYSE:NP) announced today that the Company is seeking to refinance its $175 million of unsecured Senior Notes which are due in May 2021. The Company anticipates refinancing the Notes with the proceeds of a new $200 million Term Loan B facility with a tenor up to seven years.
The objectives of the refinancing are to increase the Company’s financial flexibility and extend its weighted average debt maturity. Terms of the potential refinancing will be disclosed upon the completion of the transaction, which is expected later this month. The proposed refinancing is subject to market and other conditions, and there can be no assurance that it will be completed.
In conjunction with the intended refinancing, the Company is providing an update on expected second quarter results. Key items are as follows:
*Year-on-year net sales are expected to decline at the top end of the 30 to 40 percent range indicated on the Company’s last earnings call. The decline in net sales for the first two months of the second quarter was 41 percent, with Technical Products net sales down 32 percent and Fine Paper & Packaging net sales 53 percent lower.
*While market conditions remain fluid, sales comparisons appear to have begun to improve modestly in June with the reopening of global economic activity, and are expected to further improve in the second half of the year.
*To manage inventories and costs in line with the lower sales, the Company is taking additional manufacturing downtime and has implemented further spending reductions. The negative impact on operating income in the second quarter from the added downtime, due primarily to unabsorbed fixed costs, is approximately $4 million.
*Liquidity at the end of May of approximately $190 million remained in line with expected levels and cash from operations in the second quarter is expected to be robust due to careful control of working capital.
*In light of the global macroeconomic uncertainties brought on by the COVID-19 pandemic, the Company has begun to analyze the carrying values of its assets and to assess whether non-cash adjustments may be required to write down the value of certain of these assets in the course of preparing financial statements for the second quarter.
*The Company will provide further details during its earnings call in August.
“Coupled with our previously announced measures, the actions we’re taking in the second quarter will allow us to enter the second half of the year with an improved cost position and a stronger balance sheet,” said Julie Schertell, Chief Executive Officer. “The strength of our business was evident in the first quarter, and I’m confident that as the economy recovers, Neenah will be well-positioned to resume executing our growth strategies. The planned refinancing of our debt provides added flexibility and will allow us to pursue opportunities that can increase our long-term growth rate, while maintaining a prudent financial position.”