OCI NV, Amsterdam, has announced its Middle Eastern Fertiglobe joint venture is closing a $1.1 billion bridge financing facility as part of a capital structure reset to refinance debt and pay dividends to the jv’s two shareholders.
OCI currently owns a 58 percent stake in Fertiglobe and Abu Dhabi National Oil Co. (ADNOC) a 48 percent stake, but the two partners are planning to list the joint venture in an initial public offering (IPO), which could come as soon as October (GM Sept. 17, p. 28). Investors could be offered around a 10-15 percent stake in Fertiglobe through the IPO, sources with knowledge of the matter told Bloomberg.
Abu Dhabi-based Fertiglobe will use around $250 million of the bridge loan to refinance existing debt at the company and at EFC, and the remaining $850 million will go to pay a dividend to the jv’s two shareholders, OCI said in a Sept. 20 statement.
The 30-month facility carries an interest rate starting at 1.05 percent over Libor, with a 0.25 percent increase per quarter from the second year of the loan term. In addition, a new five-year, $300 million revolving credit facility will be put in place to provide ample liquidity.
The new capital structure helps OCI optimize its balance sheet further, gives flexibility to lower cash interest, and supports future growth opportunities in clean ammonia and other decarbonization initiatives for OCI as a whole and Fertiglobe, OCI said.
“As this partnership with ADNOC develops, the benefits we anticipated at the time of formation continue to materialize, and Fertiglobe is increasingly becoming the ideal platform to capture the opportunities offered by the hydrogen economy, while benefiting from a strong sustained recovery in nitrogen markets and generate strong cash flows,” said OCI NV CEO Ahmed El-Hoshy.
“The rightsizing of Fertiglobe’s capital structure marks another milestone in the joint venture company’s growth journey since its creation in 2019, unlocking various strategic avenues of growth.”
In addition to the new capital structure, Fertiglobe intends to adopt a semi-annual dividend distribution policy, with first-half dividends to be paid out in October of the same year and the second-half dividend to be paid out in April of the following calendar year, subject to general meeting approval.
Fertiglobe is targeting at least $315 million in dividends for financial year 2022. It also plans a dividend payout of at least $150 million for the period covering the second half of 2021, which will be paid in April 2022. Dividends will be paid in cash.
“Going forward, Fertiglobe intends to maintain a robust dividend policy designed to return to shareholders substantially all of its distributable free cash flow after providing for growth opportunities and while maintaining an investment grade credit profile,” OCI said.