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The Arkansas Teacher Retirement System will make a short-term loan of up to $26 million to Highland LLC, which operates a wood pellet manufacturing plant in the Pine Bluff industrial park near White Hall, the system's board of trustees has decided.

In July 2016, the system's trustees authorized an investment of up to $25 million for 31 percent equity ownership of Highland LLC, which operates the pellet plant that is still under construction. The plant has a 10-year agreement to supply the Drax Group with more than 600,000 tons of wood pellets a year, according to the system's staff.

Highland is reviewing opportunities to refinance some of its existing debt as the facility nears completion and production increases, the system's staff said in a written report to the trustees. The trustees voted Friday on the loan.

The current debt to be refinanced is with Astec, which makes Highland's wood pellet production equipment, the system's staff reported.

"The Astec loan was intended only for construction financing and now construction is winding down," according to the system staff report. "The Highland plant is in the final stages of being completed and all but one line of the manufacturing equipment are in production. Highland is expected to maintain its existing long-term financing until sometime in 2018."

The refinancing of the shorter-term debt with Astec presents investment opportunities for the teacher retirement system, the staff report said.

The proposed loan of up to $26 million would have a beginning interest rate of 9 percent for a term of about three years, the system's staff said.

"Based on certain criteria such as the favorable refinancing of the existing long term financing at an interest rate of 6% or less, the ATRS interest rate would be lowered to 8.5 % from the time of the refinancing of the long term debt until maturity of the ATRS loan," the staff report said.

Refinancing Highland's long-term debt to a 6 percent interest rate would be a significant decrease and would increase Highland's cash flow and available funds, according to the report.

The system's staff has worked over the past several months to analyze this potential loan to Highland and hired Simmons Bank to review the proposed investment, and both the staff and Simmons Bank recommended lending up to $26 million, according to the system staff report.

Highland LLC's other owners include Boston-based Highland Pellets Ltd.; Taylor and Lunsford Land and Timber Co. Profit Sharing Plan and Trust of Sheridan; David Lunsford of Sheridan; Bobby Taylor of Sheridan; and Shelby Taylor Trucking Inc. of Sheridan, said system Director George Hopkins. Highland Pellets has 68.38 percent equity ownership of the firm, Hopkins said.

The system is state government's largest retirement system with more than $16 billion in investments and more than 100,000 working and retired members.

Metro on 09/11/2017

Print Headline: Retirement system to make $26M loan to pellet company


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  • LContreras
    September 19, 2017 at 4:46 p.m.

    Selling our forests to replace coal, at the UK coal-fired 4,000 Mega Watt power station, is a great way of increasing greenhouse gas emissions and accelerate the climate chaos.

    Deforestation eliminates the carbon sink, and burning wood-pellets generates massive amounts of carbon dioxide and highly toxic particulate matter.

    Using Arkansas Teachers Retirement Funds, again, for Highland Pellets (HP), shows no one else wants to invest in false energy solutions.

    This loan is a great deal for HP, a Boston venture capital firm, and Simons Bank.

    This is a lousy deal for Arkansas Teachers. Their retirement funds are used for high-risk unsustainable projects, the AEDC piggy bank.

    Zilkha Biomass Energy was ready to build the massive Monticello pellet mill in 2015. Did Simons Bank ask why “Zilkha, the UK National Grid Clean Line Energy partners,” decided to tuck their tails and go home?

    Only in Arkansas!