Rentech, Inc. (NYSE Amex: RTK) announced today that its Board of
Directors has adopted a tax benefit preservation plan intended to
protect the value of the Company’s net operating loss
carryforwards. The tax benefit preservation plan is similar to tax
benefit preservation plans adopted by many other public companies
with significant tax assets.
Rentech’s net operating loss carryforwards applicable to federal
income taxes currently are in excess of $160 million. However, the
Company’s ability to use these NOLs would be substantially limited
if it were to experience an “ownership change” as defined under
Section 382 of the Internal Revenue Code. In general, an ownership
change would occur if shareholders that own (or are deemed to own)
at least 5 percent or more of Rentech’s outstanding common stock
increased their cumulative ownership in the Company by more than 50
percentage points over their lowest ownership percentage within a
rolling three-year period. The Company believes that no ownership
change as defined in Section 382 has occurred as of the date of
this press release.
As part of the plan, the Company’s Board of Directors declared a
dividend of one preferred stock purchase right for each outstanding
share of Rentech’s common stock. The dividend will be payable to
holders of record as of the close of business on August 19, 2011.
Any shares of Rentech’s common stock issued after the record date
will be issued together with the rights.
The preferred stock purchase rights are not currently
exercisable and initially will trade only with Rentech’s common
stock. However, if any person or group were to acquire 4.99% or
more of Rentech’s outstanding common stock, or if a person or group
that already owns 4.99% or more of Rentech’s outstanding common
stock were to acquire ownership of an additional amount of more
than 1% of Rentech’s outstanding common stock, then, subject to
certain exceptions, the preferred stock purchase rights would
separate from the common stock and become exercisable, giving the
holder the right to purchase shares of Rentech’s common stock
having a market value equal to twice the exercise price of $3.75
per one ten-thousandth of a share of preferred stock, resulting in
significant dilution to the ownership interests of the acquiring
person or group.
“After careful consideration, our Board has implemented this tax
benefit preservation plan to help protect the value of our NOLs and
reduce the likelihood that changes in our investor base could have
the unintended effect of limiting our ability to use our NOLs in
the future,” said D. Hunt Ramsbottom, Rentech’s CEO and President.
“Our NOLs represent a significant corporate asset that we believe
will deliver substantial benefits to our shareholders.”
The tax benefit preservation plan was adopted primarily in
connection with a proposed initial public offering by Rentech
Nitrogen Partners, L.P., a wholly-owned subsidiary of Rentech, of
common units representing limited partner interests. Rentech
Nitrogen Partners, L.P. announced today that it has filed a
registration statement on Form S-1 with the U.S. Securities and
Exchange Commission in connection with the proposed offering. Upon
completion of the offering, Rentech Nitrogen Partners’ assets will
consist of a nitrogen fertilizer facility located in East Dubuque,
Illinois, which is currently owned by Rentech Energy Midwest
Corporation, another wholly-owned subsidiary of Rentech, Inc.
Rentech Nitrogen GP, LLC, another wholly-owned subsidiary of
Rentech, Inc., will be the general partner of the partnership.
Rentech presently intends to maintain a majority ownership
interest in Rentech Nitrogen Partners, L.P. after giving effect to
the contemplated public offering. Rentech further expects that a
substantial portion of its net operating losses would be applied
against taxable gains that would be recognized in connection with
the completion of the initial public offering by Rentech Nitrogen
Partners, L.P. as well against taxable income allocated to Rentech
from the partnership in the future.
The Company’s Board of Directors has established procedures to
consider requests for and to grant exemptions from the tax benefit
preservation plan to allow acquisitions of Rentech’s common stock
if the Board determines that doing so would not limit or impair the
availability of the NOLs.
The rights will expire on August 5, 2014, or on August 5, 2012
if the shareholders do not approve the plan before that date. The
rights may also expire on an earlier date upon the occurrence of
other events, including a determination by the Company’s Board of
Directors that all of the NOLs have been utilized or are no longer
available, or that the plan is no longer necessary to protect the
NOLs. The plan may also be terminated by the Board at any time
before the rights become exercisable.
The issuance of the preferred stock purchase rights will not
affect the Company’s reported earnings or loss per share and is not
taxable to the Company or its shareholders.
Additional information regarding the plan will be set forth in a
Current Report on Form 8-K and in a Registration Statement on Form
8-A that the Company is filing with the Securities and Exchange
Commission.
Morgan Stanley & Co. LLC and Credit Suisse Securities (USA)
LLC will act as joint book-running managers for the proposed
offering of common units by Rentech Nitrogen Partners, L.P. The
offering will be made only by means of a prospectus. When
available, a preliminary prospectus relating to this offering may
be obtained from:
Morgan Stanley & Co. LLC. 180 Varick Street, 2nd Floor New
York, New York 10014 Attn: Prospectus Department
Email: prospectus@morganstanley.com
Credit Suisse Securities (USA) LLC One Madison Avenue New
York, New York 10010 Attn: Prospectus Department Telephone: (800)
221-1037
A registration statement relating to these securities has been
filed with the Securities and Exchange Commission but has not yet
become effective. These securities may not be sold nor may offers
to buy be accepted prior to the time the registration statement
becomes effective.
This press release shall not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of
these securities in any state or jurisdiction in which such offer,
solicitation or sale would be unlawful prior to the registration or
qualification under the securities laws of any such state or
jurisdiction.
About Rentech, Inc.
Rentech, Inc., incorporated in 1981, provides clean energy
solutions and manufactures nitrogen fertilizer products. The
Company's Rentech-SilvaGas and Rentech-ClearFuels biomass
gasification processes can convert multiple cellulosic biomass
feedstocks into synthesis gas (syngas) for production of renewable
fuels and power. Combining the gasification processes with
Rentech's unique application of syngas conditioning and clean-up
technology and the patented Rentech Process based on
Fischer-Tropsch chemistry, Rentech offers an integrated solution
for production of synthetic fuels from cellulosic biomass. The
Rentech Process can also convert syngas from fossil resources into
ultra-clean synthetic jet and diesel fuels, specialty waxes, and
chemicals. Final product upgrading and acid gas removal
technologies are provided under an alliance with UOP, a Honeywell
company. Rentech develops projects and offers licenses for these
technologies for application in synthetic fuels and power
facilities worldwide. Rentech Energy Midwest Corporation, the
Company's wholly-owned subsidiary, manufactures and sells nitrogen
fertilizer products including ammonia, urea ammonia nitrate, urea
granule, and urea solution in the corn-belt region of the central
United States. Rentech has been recognized by Biofuels Digest as
one of the 50 Hottest Companies in Bio-energy and has been named as
one of the Biofuels Digest Companies of the Year for its
innovations and achievements, particularly in aviation
biofuels.
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995:
This press release contains forward-looking statements as
defined in the Private Securities Litigation Reform Act of 1995
about matters such as the value of Rentech’s net operating loss
carryforwards and the ability of Rentech Nitrogen Partners to
complete any public offering of its securities. These statements
are based on management's current expectations and actual results
may differ materially as a result of various risks and
uncertainties, including because of general market conditions.
Other factors that could cause actual results to differ from those
reflected in the forward-looking are set forth in the Company's
press releases and periodic public filings with the Securities and
Exchange Commission. The forward-looking statements in this press
release are made as of the date of this release, and Rentech does
not undertake to revise or update these forward-looking statements,
except to the extent that it is required to do so under applicable
law.
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