Rentech, Inc. Retires Senior Obligations, Improves Liquidity, & Directs Focus on its Wood Fibre Assets Following Closing of R...
April 01 2016 - 8:01AM
Business Wire
Rentech, Inc. (NASDAQ: RTK) announced today that the closing of
the Rentech Nitrogen Partners, L.P.-CVR Partners, LP (CVR) merger
(Transaction) has enabled it to retire approximately $142 million
of senior obligations to GSO Capital Partners (GSO), improve its
liquidity, reduce future interest expense, and better position
itself to maximize the value of its investments in the wood fibre
processing industry.
Transaction Proceeds
Rentech received $261.9 million in gross consideration for its
approximately 59% interest in Rentech Nitrogen Partners following
today’s closing of the Transaction. The consideration was comprised
of $59.8 million in cash and 24.18 million units of CVR valued
at $202.1 million based on CVR’s closing price yesterday of $8.36
per unit.
GSO Exchange
Rentech utilized a portion of the Transaction proceeds to retire
all $100 million of its Series E Preferred Stock and to repay
approximately $42 million of term debt held by GSO. Under newly
modified terms of the GSO agreement, these repayments were
accomplished by Rentech delivering to GSO 17.0 million CVR units
and $10.0 million in cash. Rentech’s obligations to GSO have been
reduced from $195 million to approximately $53 million. The
remaining $53 million of term debt with GSO will bear an interest
rate of LIBOR plus 700 basis points per annum, with a LIBOR floor
of 1.00% and will mature on April 9, 2019.
Rentech will retain 7.18 million CVR units of the Transaction
consideration. These units, along with other Rentech assets, are
pledged to GSO as collateral for the term
loan. Rentech will receive the cash distributions paid by
CVR on the 7.18 million retained units.
The final exchange terms with GSO were different than originally
agreed to last year and as amended on March 14, 2016. GSO and
Rentech agreed to set the final exchange price of CVR units at
$7.75 per unit in lieu of using the pricing mechanism in the prior
agreement. The original pricing mechanism would have valued the
exchanged CVR units at $5.62 per unit based on a 15% discount to
CVR’s 60-day volume weighted average price two days prior to
closing. The parties also agreed that Rentech would use cash to
repay a portion of the obligations and to retire approximately $142
million instead of $140 million of the obligations. The revised
exchange terms enabled Rentech to retain units equivalent to a 6.3%
ownership interest in CVR and to minimize taxable gains associated
with the Transaction and exchange of units. GSO eliminated the
one-time option granted to Rentech under the original transaction
which would have enabled Rentech to repurchase CVR units at a
future date six to twelve months following the closing. Additional
details about the terms of the agreements with GSO will be provided
in a Form 8-K that Rentech will file with
the Securities and Exchange Commission.
Net Proceeds Following GSO
Exchange
As a result of the Transaction and GSO exchange, Rentech
retained $109.8 million of the total pre-tax proceeds received in
the Transaction, comprised of $49.8 million of cash and 7.18
million CVR units valued at $60.0 million based on yesterday’s
closing price of $8.36 per unit.
Rentech expects to pay $5 - $15 million in estimated cash
taxes related to the Transaction, GSO exchange and the earlier sale
of the Pasadena facility. The estimated tax payments take into
consideration existing net operating loss carryforwards, which
were $196.1 million as of December 31, 2015, and an
estimate of operating losses expected to accrue this year.
Keith Forman, Rentech’s President and CEO, stated, “The
transactions announced today represent a milestone for Rentech. We
say goodbye to a business that has served our shareholders well and
to a team of dedicated professionals at our East Dubuque facility
who have been conscientious guardians and operators of this asset.
We thank them.”
“This transaction affords Rentech the opportunity to reposition
and intensify the focus on our investments in the wood fibre
processing industry. It does so by providing us the liquidity and
strengthened balance sheet to complete the construction and ramp-up
of our Canadian facilities. This outcome would not have been
possible save for the active willingness of GSO Capital to work
with us on the terms of the exchange; both at the inception, in
allowing for repayment of senior obligations in exchange for
equity, and today in further modifying the terms of our agreements
to allow for an outcome of less debt, greater liquidity, and less
dilution than originally called for. As a result, we retain a
meaningful stake in the “new” CVR Partners. We wish CVR well and we
are confident that they will be good stewards of this asset as we
have tried to be,” added Mr. Forman.
Financials
The table below illustrates the pro forma impact as if the
foregoing transactions were completed on December 31, 2015.
Pro Forma Capitalization ($MM)
Actual12/31/15
Pro Forma12/31/15
$ Change
Rentech Cash1 $ 33 $ 86
$ 52
Ownership in CVR Partners2
- $ 60 $ 60
GSO Preferred Stock $ 100
- $ (100 )
GSO Term Loans $ 95
$ 53 $ (42 )
Fulghum Fibres Debt
$ 47 $ 47 -
NEWP Debt $ 16 $ 16
-
QSL Debt3 $ 20
$ 20 -
Total
Obligations $ 278 $ 136
$ (142 )
1 Increase in cash is pre-tax; includes initial proceeds from
sale of Pasadena and excludes future working capital proceeds and
potential milestone payments related to the sale.2 As of March 31,
2016; cost basis of CVR units estimated to be $0 at time of
transaction.3 Cash amount owed under the obligation is $13.7MM; see
Note 15 in our 2015 10-K.
The table below provides Rentech’s anticipated debt service for
2016.
Debt Service for 2016 ($MM)
Interest & Dividends Paid to GSO YTD
$ 3.7
Interest on Remaining GSO Debt for 2016
$ 3.2
Interest on Other Debt $
4.3
Scheduled Amortization on Other Debt $
18.3
The table below provides Rentech’s estimated cash taxes and
capital expenditures for 2016.
Estimated Taxes & CapEx for 2016 ($MM)
State & Federal
Taxes1 $ 5 - $15
Industrial Wood
Pellets CapEx $ 21
Fulghum Fibres & NEWP
CapEx $ 5
1 Represents estimated taxes to be paid in 2016.
About Rentech, Inc.
Rentech, Inc. (NASDAQ: RTK) owns and operates wood fibre
processing and wood pellet production 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’s industrial wood pellet
facilities supply wood pellets used as fuel for power generation in
Canada and the United Kingdom. Please visit www.rentechinc.com for
more information.
Safe Harbor Statement
This press release contains forward-looking statements as
defined in the Private Securities Litigation Reform Act of 1995
about matters such as: our estimated debt service, taxes and
capital expenditures; and our ability to maintain our market
positions and complete ramp-up of the Canadian wood pellet plants
to full capacity. These statements are based on management’s
current expectations and 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 the Company’s prior
press releases and periodic public filings with the Securities and
Exchange Commission, which are available via 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 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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version on businesswire.com: http://www.businesswire.com/news/home/20160401005374/en/
Rentech, Inc.Julie Dawoodjee Cafarella, 310-571-9800Vice
president of Investor Relations and Communicationsir@rentk.com
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