Rentech to combine with CVR Partners, plans disposition of Pasadena facility, exchanges GSO stock

By Lisa Kerner

Charlotte, N.C., Aug. 10 – Rentech, Inc. announced it will vote its 59.7% ownership interest in Rentech Nitrogen Partners, LP in favor of a proposed merger with CVR Partners LP. The planned merger is one of a series of “transformative transactions” the company has planned, according to a news release.

Under the merger agreement, Rentech will receive about $318 million in cash and units of CVR Partners, plus a retained interest in Rentech Nitrogen’s Pasadena facility. Rentech and other holders of Rentech Nitrogen would receive the value of the Pasadena facility upon the disposition of the asset.

Specifically, 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. After-tax cash proceeds to Rentech are estimated at about $16 million.

The transaction, with a total enterprise value of roughly $839 million, is expected to close by Dec. 31 and not later than May 31, 2016.

CVR and Rentech will have combined cash and cash equivalents of $105 million, combined net debt of $459 million and net debt-to-2015 EBITDA of 2.1 times post-closing.

Currently, Rentech has cash and cash equivalents to 32 million, net debt of $307 million, and net debt-to-2015 EBITDA of three times, according a slide presentation accompanying the companies’ conference call on Monday.

During the call, management would not discuss any plans for debt or detail the $12 million of expected synergies. Rentech is holding its earnings conference call on Tuesday.

GSO debt

Simultaneously with the closing of the merger, $100 million of outstanding convertible preferred stock held by GSO Capital Partners will be exchanged for $90 million of newly received units of CVR Partners and $10 million of newly issued common shares of Rentech, Inc., the release stated.

In addition, $50 million of debt owed to GSO Capital will also be exchanged for units of CVR Partners received in the merger.

According to Rentech, the remaining $45 million of debt owed to GSO Capital will be at an interest rate of Libor plus 700 basis points per annum, with a Libor floor of 1%. The terms of the term loan will be amended as outlined in the presentation and in related filings.

The merger and the stock conversion will “significantly de-lever Rentech and increase our liquidity,” said Rentech president and chief executive officer Keith Forman.

Los Angeles-based Rentech owns and operates wood fiber processing, wood pellet production and nitrogen fertilizer manufacturing businesses.

CVR is a Sugar Land, Texas-based refiner and marketer of transportation fuels and producer of nitrogen fertilizers.

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