El Dorado Chemical Co., a unit of LSB Industries Inc., has extended its original ammonium nitrate supply agreement with Orica to Dec. 31, 2010. The extension provides for liquidated damages to be paid by Orica to EDCC under certain conditions if Orica purchases less than 180,000 st during 2006 or less than 210,000 tons in any year thereafter.
In other company news, LSB has received notice from the Securities Exchange Commission of an informal inquiry regarding its change from LIFO to FIFO of certain heat pump inventory in its Climate Control segment, resulting in LSB’s December 2005 restatement of its audited financial statements for year ended Dec. 31, 2004.
LSB has been involved in new litigation this year. Most notable is its attempt in Arkansas to retrieve $2.8 million in business interruption and property claims relating to the outage of an El Dorado, Ark., nitric acid plant during part of 2004 and 2005. To date, LSB has recovered $5.2 million from insurers.
LSB’s Cherokee Nitrogen subsidiary has filed suit in Alabama State Court in Etowah County, Ala., against Meecorp Capital Markets LLC and Lending Solutions Inc. for recovery of actual damages plus punitive damages relating to a loan transaction. Meecorp counterclaimed for the balance of an alleged commitment fee of $100,000, an alleged equity kicker of $200,000, and $3.4 million for loss of opportunity. Cherokee says it is vigorously pursuing this matter and believes it will win, with very remote chances for the defendant.
LSB has recently settled litigation with Southwest Securities Inc., which alleged it was due a $1.7 million fee for helping to retain financing for LSB. LSB said it only had a sixty day agreement with Southwest and that the financing came ten months after the agreement. LSB settled the case for $300,000.
Masinexportimport Foreign Trade Co. recently brought suit against LSB, saying that it is owed over $1.5 million from drafts payable from former LSB subsidiaries. LSB says all of its interest in the units, LSB Corp. and Aerobit Ltd., were sold in 2002, and that it plans to vigorously defend the matter.