All Posts from June 28, 2010

Majority shareholders file so they can sell CVR shares; company says is formality

CVR Energy Inc., Sugar Land, Texas, said June 24 that its majority shareholders are seeking to sell up to 55,738,127 common shares of the 86,343,102 outstanding, or over 64 percent of the common shares. CVR owns a nitrogen plant in Coffeyville, Kan., as well as an adjoining oil refinery. Proceeds of the sale will go to the shareholders and not to CVR.

A CVR spokesman downplayed the filing, saying it is simply a formality that allows the shareholders to sell in the future should they opt to do so. He noted that a smaller filing has been made in the past and it was a few years before any shares were actually sold. Majority shareholders filed registration documents to sell up to 11.5 million shares in 2008 (GM June 30, 2008).

According to the CVR Securities and Exchange Commission registration statement filed June 24, those selling include Kelso Investment Associates VII LP and related companies, which is selling 31,433,360 shares, or 36.3 percent, of the company; Goldman Sachs Group Inc. and related companies and individuals, which is selling 24,057,296 shares, or 27.8 percent, of the company; and John Lipinski, CVR CEO, selling 247,471 shares.

CVR shares are listed on the New York Stock Exchange. On June 24, they closed at $7.93, with a 52-week low of $6.21 and a high of $13.8894.

The shares may be offered or sold by a selling stockholder at fixed prices, at prevailing market prices at the time of sale, or at prices negotiated with purchasers, through underwriters, broker-dealers, agents, or though any other means described in the plan of distribution in the prospectus. Under the prospectus, the shareholders may sell all, some, or none of their shares. As a result, the sellers could easily sell off some shares and still retain control. Under the terms of agreements between CVR and these shareholders, CVR will pay all expenses of the registration of their shares of CVR common stock, including SEC filing fees, except that selling stockholders will pay all underwriting discounts and selling commissions, if any.

Kelso and Goldman bought the company five years ago for an estimated $700 million to $1 billion, with actual terms not disclosed (GM July 18, 2005, Oct. 2, 2006). Pegasus Partners II LP, which sold the company to Kelso and Goldman, had bought it from the bankrupt Farmland Industries Inc. (GM March 8, 2004, June 27, 2005). There were multiple views as to what Pegasus actually paid and Farmland received; however, initial court documents indicated $281 million, though later documents suggested less. Farmland’s bankruptcy trustee was to complain later that the company may have netted only $11 million in receipts, presumably after all liabilities were paid. U.S. Bankruptcy Judge Jerry Venters, who handled the Farmland case, had once termed the Coffeyville facility as an “albatross” for Farmland; however, within only 16 months it turned into a “golden goose” for Pegasus. Farmland’s bankruptcy trustee actually sued former executives and directors, alleging gross negligence and corporate waste for pumping money into Coffeyville to add a nitrogen plant (GM Feb. 14, 2005).

Soon after buying Coffeyville, oil and nitrogen economics improved. A nitrogen plant that sputtered in startup began to run smoothly with low-cost petroleum coke at a time when natural gas prices were high.

The nitrogen plant is comprised of a 1,225 st/d ammonia unit, a 2,025 st/d UAN unit, and a dual train gasifier complex, each having a capacity of 84 million standard cubic feet per day.

Storm causes anhydrous emergency in Illinois; company, local authorities quickly respond

Emergency and plant personnel worked through the night at a local farm input location to empty a nearly full 12,000-gallon anhydrous ammonia tank damaged by a tornado or microburst that swept through Illinois on Monday, June 21. The emergency occurred at Hintzche Fertilizer, Minooka, Ill., when the storm came through the Hintzche property, damaging roofs, blowing down a radio tower, knocking down trees, shutting off the power, and toppling an empty fertilizer tank onto the ammonia tank.

A total of 15 area agencies on the scene from Minooka, Channahon, Troy, Morris, Joliet, Coal City, Elwood, Wilmington, and Plainfield joined Hintzche personnel to transfer nearly 10,000 gallons of ammonia from the damaged tank to permit removal from the scene. As a precautionary measure, all homes within a one-mile radius of the plant were evacuated, according to the Kendall County Sheriff’s office. Some highway routes were also closed during the emergency.

“We did have either a tornado or a microburst, which was evidenced by some pretty heavy wind damage in the local area,” Hintzche President Dave Hintzsche told Green Markets. “It toppled over a 30,000 gallon upright empty storage tank, which was sort of lifted out of the dike and landed on top of the ammonia tank.”

Hintzche said there was a release of some product after the storm. “But our people were notified about 10:30 p.m., and with local authorities got the area secured. The tank then was emptied in the morning, which turned things into sort of a non-event.”

Hintzche said there were no injuries or environmental damage. “We actually converted the ammonia into aqueous ammonia and transported it to another of our facilities for storage,” he reported, adding that the tank was 70 to 80 percent full at the time.

Dyno Nobel loses research building to fire

Dyno Nobel lost a Saratoga Springs, Utah, administration and lab building to fire June 8. The 4,000-square-foot structure was unoccupied since the fire started after working hours, and no one was injured.

Crews from the Saratoga Springs Fire Department arrived at approximately 2 a.m. and stayed on scene throughout the day, putting out hot spots and monitoring the building. Support was provided by fire departments from nearby Lone Peak, Eagle Mountain, Lehi, Goshen, and Cedar Fort. They also called in hazmat teams from Provo and Orem to monitor the air quality because of a concern that there was the potential for toxic smoke from the ammonium nitrate stored in the area.

Fire Chief Tim Hay told Green Markets that there was some ammonium nitrate in the building itself. “I can’t tell you the exact amount. There was only a few grams of actual explosives (dynamite) used for testing purposes in the building,” Hay reported. He said the fire was contained to the one building.

The closest residents, who live about a mile away, were told to stay inside and shut windows as a precaution.

The firefighters determined it safer to allow the fire to burn itself out and burn up the materials rather than fight it. “When you go to put it out, then you get your personnel closer to the hazardous materials and you endanger them. And a lot of times it’s better for the hazardous materials just to burn up; you get rid of those, and it’s just safer,” Hay told the local press.

There was no indication that explosives were involved.

The research center is one of four Dyno Nobel technology research facilities in the U.S. and Australia developing technologies for use in present and future explosive systems. “At this time, the cause of the fire is under investigation and the cost of the loss of the building is being assessed,” said Brian Wallace, Dyno Nobel Americas president. “We expect that there will be minimal impact to our customers.”