Rentech Enters into a Series of Transformative Transactions
August 10 2015 - 2:39AM
Business Wire
- Rentech to participate in the merger of
Rentech Nitrogen’s East Dubuque facility into CVR Partners,
announced today
- Rentech Nitrogen’s merger agreement to
deliver 1.04 units of CVR Partners and $2.57 of cash, for each unit
of Rentech Nitrogen, with the value of the Pasadena facility
retained by holders of Rentech Nitrogen
- Rentech and GSO have agreed to exchange
$100 million of convertible preferred stock and $50 million of
debt, for units of CVR Partners to be received in conjunction with
the CVR Partners-Rentech Nitrogen merger, and common stock of
Rentech
- Rentech to improve cash position and
liquidity, de-lever significantly, and retain ownership in a more
diversified nitrogen company
Rentech, Inc. (NASDAQ: RTK) announced today that it has agreed
to vote its 59.7% ownership interest in Rentech Nitrogen Partners,
L.P. (NYSE: RNF) in favor of the proposed merger with CVR Partners
LP. Upon the closing of the merger, Rentech would receive
approximately $318 million in cash and units of CVR Partners, plus
a retained interest in Rentech Nitrogen’s Pasadena facility, based
on the closing unit price of CVR Partners on August 7, 2015.
Rentech and other holders of Rentech Nitrogen would receive the
value of the Pasadena facility upon the disposition of the
asset.
Rentech Nitrogen and CVR Partners will host a conference call
today at 7:00 a.m. PDT regarding the announcement.
Additional details will be provided in an investor presentation
posted on Rentech’s website prior to the call.
Under the terms of the merger agreement, Rentech will receive
$2.57 in cash, 1.04 units of CVR Partners, and the value per unit
of the Pasadena facility, in exchange for each of its 23.25 million
units in Rentech Nitrogen. Rentech estimates its after-tax cash
proceeds to be approximately $16 million, based on preliminary
estimates of the gains to be triggered by these transactions and
excluding any sale proceeds from Pasadena.
Simultaneously with the closing of the merger, $100 million of
outstanding convertible preferred stock held by GSO Capital
Partners (GSO Capital) will be exchanged for $90 million of
newly-received units of CVR Partners and $10 million of
newly-issued common shares of Rentech, Inc. $50 million of debt
owed to GSO Capital will also be exchanged for units of CVR
Partners received in the merger. The number of units and shares
exchanged will be based on a 15 percent discount to the 60-day
volume weighted average price (vwap) ending two days before the
closing of the merger. Rentech will have a one-time option to
repurchase any or all such units of CVR Partners at a price of
1.275 times the pre-closing vwap, during the period from six to
twelve months following the closing of the merger. The remaining
balance of debt owed to GSO Capital will be $45 million at an
interest rate of LIBOR plus 700 basis points per annum, with a
LIBOR floor of 1.00%. The terms of the term loan will be amended as
outlined in the presentation and in related filings.
“The transaction is an important step in executing our strategy
to strengthen our balance sheet and establish Rentech as a
pure-play fibre business. The closing of the transaction recently
announced by Rentech Nitrogen, combined with the repayment of
substantially all of the investments by GSO, would significantly
de-lever Rentech and increase our liquidity. We would continue to
hold significant value of liquid securities in a more-diversified
nitrogen company,” stated Keith Forman, president and CEO of
Rentech.
Rentech will initially own about 21.3% of the new CVR Partners.
After giving effect to the transactions with GSO Capital, Rentech’s
ownership in CVR Partners will decline substantially, in an amount
that can be determined only after the pre-closing prices are known.
Based on the vwap leading up to August 7, Rentech would own
approximately 10% of the new CVR Partners and GSO Capital would own
approximately 11%. The exchange of Rentech Nitrogen units for CVR
Partners units will not generate immediate taxable gains to
Rentech. However, the cash consideration received and the
subsequent exchange of CVR Partners units to retire preferred stock
and debt will create taxable gains to Rentech. Rentech expects to
fully-utilize its federal net operating loss carryforwards, which
were $176.7 million as of December 31, 2014, to partially offset
gains on these transactions.
Rentech Nitrogen unitholders will have the right to receive
pro-rata distribution of the net proceeds of a future potential
disposition of the Pasadena facility. If the sale of the Pasadena
facility were competed prior to the closing of the merger, the net
proceeds from the sale would be paid to unitholders at or before
the closing of the merger in a special distribution. If the sale of
the Pasadena facility to a third party were not completed by the
closing of the merger, the Pasadena facility would be transferred
to a separate entity that would enable the unitholders of Rentech
Nitrogen to retain the rights to their pro-rata shares of cash
flows and net proceeds from the sale of the facility. There can be
no assurances that the Pasadena facility can be sold prior to the
closing date of the merger or at all.
The combined entity of CVR Partners will operate two nitrogen
fertilizer facilities that will produce approximately 1.9 million
sellable tons of nitrogen products annually. CVR Partners expects
this transaction to be accretive to its cash distributions per unit
beginning in 2016. The partnership also expects to realize
meaningful EBITDA synergies.
CVR Partners will appoint to its board two individuals
designated by Rentech upon closing of the transaction. The units
that Rentech and GSO Capital will receive in connection with the
merger will be subject to restrictions on sale for six months after
the closing date of the transaction.
The transaction is subject to approval by a majority of the
outstanding Rentech Nitrogen units. Rentech has agreed, subject to
certain terms and conditions, to vote its 59.7% stake in Rentech
Nitrogen in favor of the transaction. The completion of the merger
is also subject to the disposition of the Pasadena facility, either
by sale to a third party, or through retention by unitholders of
Rentech Nitrogen of a separate entity that owns the Pasadena
facility. Completion of the merger, assuming the requisite
unitholder vote is obtained, and subject to the terms and
conditions outlined in the merger agreement, is expected to occur
by the end of 2015, and no later than May 31, 2016.
Evercore is serving as financial advisor to Rentech and Latham
& Watkins is serving as Rentech’s legal advisor.
Conference Call
CVR Partners and Rentech Nitrogen will host a conference call
today at 7:00 a.m. PDT to discuss the announcement. Callers may
listen to the live call, which will be followed by a question and
answer segment, by dialing (877) 407-8029. Management will be
referencing a presentation that will be available on Rentech
Nitrogen’s website under the Investor Relations sections. An audio
webcast of the call can be accessed at www.rentechnitrogen.com
within the Investor Relations portion of the site under the
Presentations section. A replay will be available by audio webcast
and teleconference for 14 days. The replay teleconference will be
available by dialing (877) 660-6853 and entering conference ID
13617298.
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.
Safe Harbor Statement
This press release contains forward-looking statements about
matters such as: the ability of the parties to satisfy the
conditions precedent and consummate the proposed merger, the timing
of consummation of the proposed merger, the ability to secure
shareholder and regulatory approvals in a timely manner or on the
terms desired or anticipated, the ability to remove the Pasadena
facility from Rentech Nitrogen Partners, the ability of CVR
Partners to integrate the acquired operations, the ability to
implement the anticipated business plans of the combined company
following closing and achieve anticipated benefits and savings,
risks related to disruption of management's attention from ongoing
business operations due to the pending merger, the effect of the
announcement of the proposed merger on either party's relationships
with their respective customers, vendors, lenders, operating
results and businesses generally, and the outcome of any legal
proceedings related to the proposed merger. These statements are
based on management’s current expectations. Actual results may
differ materially as a result of various risks and uncertainties.
Other factors that could cause actual results to differ from those
reflected in the forward-looking statements are set forth in
Rentech’s prior press releases and periodic public filings with the
Securities and Exchange Commission, which are available on
Rentech’s website at www.rentechinc.com. The forward-looking statements
in this press release are made as of the date of this press
release. 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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version on businesswire.com: http://www.businesswire.com/news/home/20150810005443/en/
Rentech, Inc.Julie Dawoodjee CafarellaVice president of
Investor Relations and Communications310-571-9800ir@rentk.com
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