volume only to be affected by up to 2%.
12:40 pm ET August 19, 2015 (BusinessWire) Print
After the market close on August 18, 2015, Rayonier Advanced Materials (NYSE:RYAM) filed an 8-K with the Securities and Exchange Commission discussing a lawsuit filed in Georgia state court for a declaratory judgment confirming the meaning of certain language in its supply agreement with its largest customer, Eastman Chemical (the "Supply Agreement"). RYAM believes it would be helpful to investors and analysts to provide some additional detail relating to the dispute.
Specifically, the action asks the court to confirm its interpretation of certain provisions of the Supply Agreement which impact the price and, in some cases, the volume required to be purchased by Eastman. The Supply Agreement was entered into by RYAM and Eastman effective January 1, 2012 and goes through calendar year 2018. This dispute relates to the 2016 and future contract years and should not impact either price or volume in 2015.
The primary language at issue involves "meet or release" provisions of the Agreement. These provisions allow Eastman to obtain bona fide third party offers that meet the requirements of the Supply Agreement for similar cellulose specialties products, and would require RYAM to either meet such price or release the volume, thereby allowing Eastman to purchase the volume from the third party. RYAM strongly believes that the language of the Supply Agreement as well as past practices of the parties make clear that the volume subject to this meet or release provision is limited to 7,500 metric tons per year, which is less than 2% of its total expected cellulose specialties sales volume to all RYAM customers in 2015. RYAM is seeking expedited resolution of this matter with the court.
Rayonier Advanced Materials (NYSE: RYAM) shares were slammed Wednesday after it filed declaration judgement vs Eastman Chemical Company (NYSE: EMN), its top customer. Information taken from an 8-K filing is below.
On August 13, 2015, Rayonier Advanced Materials Inc. filed a declaratory judgment action against Eastman Chemical Company in the Superior Court of Gwinnett County, Georgia regarding the Company’s chemical cellulose specialty products contract with Eastman. Eastman was served with this action on August 14, 2015. The Company filed its action in Georgia because the contract provides that it is governed by Georgia law, among other reasons.
The Company’s filing asks the court to confirm the meaning of certain “meet or release” pricing and volume provisions in the agreement that require the Company, under certain circumstances, to respond to offers made to Eastman by other suppliers. The Company seeks a declaration that these provisions apply to a maximum of 7,500 metric tons of product per year. In addition, the Company has asked the court to confirm the meaning of certain contract provisions relating to pricing in future contract years.
On the evening of August 12, the Company learned that Eastman had filed a similar declaratory judgment action on August 4 in the Chancery Court for Sullivan County, Tennessee, concerning the same contract “meet or release” provisions. Eastman’s filing seeks a declaration that all of its contracted volume is subject to the meet or release provision or, in the absence of such interpretation, that the contract is invalid. The Company was served with that action on August 13, 2015.
The Company believes that the contract is valid and enforceable in accordance with its terms as to both price and volume requirements, and that the meet or release provisions should be enforced in accordance with the Company’s position.
Would be good just to see that one is formed. Who knows, may be good for debt holders as well just to have another thorn in managment's and secured debtholder's side.