Rentech Secures Additional Loan Commitment of up to $63 Million from Blackstone’s GSO Capital Partners
February 17 2015 - 6:00AM
Business Wire
Company Provides Update on Canadian Wood
Pellet Projects and Expense Reduction Plan
Rentech, Inc. (NASDAQ: RTK) announced today that GSO Capital
Partners LP (GSO), the credit investment arm of Blackstone, has
increased its credit facility for Rentech by up to $63 million. The
majority of the proceeds from this new facility are expected to
fund completion of Rentech’s Canadian wood pellet projects through
positive cash flow. Rentech now estimates the cost to complete the
construction of its Canadian wood pellet projects to be $125 to
$130 million.
“We appreciate the support GSO Capital Partners continues to
provide us, this time in the form of additional term loans,” said
Keith Forman, President and CEO of Rentech. “The task at hand
remains clear--to complete the construction and commissioning of,
and to place into service, our new pellet facilities in Canada.
This will be done in as timely and safe a manner as possible to
preserve profitability for our investors. At the same time, we will
continue our focus on operating our fertilizer assets profitably,
safely and efficiently. We will work to simplify our capital
structure and add to our liquidity in the future. Our focus
on cost containment is an ongoing process and will
continue to evolve, as indeed our company will evolve, over the
next year.”
GSO Term Loan
The new lending commitment, in the form of a two-tranche delayed
draw term loan, will be available for up to one year. One tranche
of the term loan allows Rentech to borrow up to $45 million, of
which Rentech has initially borrowed $25 million. The company
expects the $45 million tranche to fund construction, working
capital and other costs of the Atikokan and Wawa pellet projects
until they generate positive cash flow. Rentech may utilize the
remaining commitment, of up to $18 million, in the event of certain
unplanned downtime at the East Dubuque facility, or unfavorable
changes in commodity prices that affect cash distributions from
Rentech Nitrogen Partners.
The term loans mature on April 9, 2019. The loans are secured
by, among other things, a fixed number of units of Rentech Nitrogen
owned by Rentech as well as certain other assets of Rentech and its
subsidiaries. The new loan has an interest rate of LIBOR plus 900
basis points per annum, with a LIBOR floor of 1.00%. Rentech also
increased the collateral securing its obligations under the
preferred stock holders' existing put option right agreements.
Additional details about the terms of the financing will be
provided in a Form 8-K that Rentech will file with the Securities
and Exchange Commission.
Canadian Wood Pellet Projects
Update
Rentech expects that the new term loan, together with its other
cash resources, will be sufficient to fund its Atikokan and Wawa
pellet projects until they have been commissioned and begin to
generate positive cash flow. Rentech currently estimates that the
cost to acquire and construct the two plants will be $125 to $130
million, up from $105 million. The majority of the increase is due
to delays in construction and higher labor costs for installation
of electrical and mechanical components. Rentech expects that
working capital and the cost to commission the plants will add
approximately $6 to $10 million to the estimated total project
cost. Rentech does not expect the plants to generate positive
EBITDA or cash flow for the year 2015. Annual stabilized EBITDA
projected for both plants remains in line with previous guidance of
C$17 to C$20 million.
The Atikokan facility is currently in the commissioning phase
and is producing and selling pellets to Ontario Power Generation.
Rentech expects the Atikokan facility to be operating at full
capacity in six to 12 months.
The Wawa facility is nearing completion of construction. Rentech
expects the facility to begin startup and commissioning in the
second quarter of 2015 and to operate at full capacity within one
year from the start of commissioning.
Expense Reduction Plan
Under the supervision of the Finance Committee, the company
engaged an independent consulting firm to assess its cost
structure. The company has taken actions to reduce its projected
consolidated cash operating costs and expenses in 2015 by
approximately $15 million compared to 2014. Cash selling, general
and administrative (SG&A) expenses in 2015 for Rentech
(excluding Rentech Nitrogen) are expected to be approximately $10
million lower than in 2014, which includes cost savings due to
discontinuing energy technologies. Rentech Nitrogen expects 2015
cash operating costs and expenses to be approximately $5 million
lower than in 2014, due to, among other things, cost savings from
the restructuring of the Pasadena facility. The projection for 2015
reflects $3 million of nonrecurring SG&A expense due to the
delayed startup of the Atikokan and Wawa plants. Rentech expects to
further discuss its outlook for 2015 on March 17 when it reports
results for 2014.
About Rentech, Inc.
Rentech, Inc. (NASDAQ: RTK) owns and operates wood fibre
processing, wood pellet production and nitrogen fertilizer
manufacturing businesses. Rentech offers a full range of integrated
wood fibre services for commercial and industrial customers around
the world, including wood chipping services, operations, marketing,
trading and vessel loading, through its subsidiary, Fulghum Fibres.
The Company’s New England Wood Pellet subsidiary is a leading
producer of bagged wood pellets for the U.S. heating market.
Rentech manufactures and sells nitrogen fertilizer through its
publicly-traded subsidiary, Rentech Nitrogen Partners, L.P. (NYSE:
RNF). Please visit www.rentechinc.com and www.rentechnitrogen.com
for more information.
Forward Looking
Statements
This news release contains forward-looking statements as defined
in the Private Securities Litigation Reform Act of 1995 about
matters such as: the estimated cost of acquiring and constructing
the Atikokan and Wawa plants; working capital and startup costs of
the two plants; cash flow and EBITDA projections for the plants;
timelines associated with various phases of the plants, including
operating at full capacity; and anticipated cost savings in 2015.
These statements are based on management’s current expectations and
actual results may differ materially as a result of various risks
and uncertainties. Factors that could cause actual results to
differ from those reflected in the forward-looking statements are
set forth in Rentech’s press releases and periodic reports filed
with the Securities and Exchange Commission, which are available
via Rentech’s website at www.rentechinc.com. The forward-looking
statements in this news 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.
Rentech, Inc.Julie Dawoodjee CafarellaVice president of
Investor Relations and Communications310-571-9800ir@rentk.com
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