Rentech Secures Additional Loan Commitment of up to $63 Million from Blackstone’s GSO Capital Partners
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.
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