Rentech Nitrogen Partners LP announced March 14 that it has completed the sale of its Pasadena, Texas, facility to Pasadena Commodities International, an affiliate of Interoceanic Corp. (IOC), White Plains, New York, which has been the plant’s long-time distributor for ammonium sulfate.
“We are pleased to be able to announce the successful conclusion of the lengthy process to divest Rentech Nitrogen’s ownership in the Pasadena fertilizer facility,” said Rentech Nitrogen CEO Keith Forman. “The process was extensive, involving almost thirty parties, representing both industry and financial buyers. The facility is being sold to an affiliate of IOC with whom we have had a relationship since our original acquisition of this facility over three years ago. They are familiar to us and we believe they will be good stewards of this asset going forward from every perspective, not the least of which will be maximizing the value of our profits interest. This sale also enables us to proceed toward closing Rentech Nitrogen’s merger with CVR Partners, a transaction we believe will be beneficial to both sets of unitholders.”
IOC has over 30 years of experience marketing fertilizers in both the domestic and international markets. IOC has been marketing product out of the facility for over 10 years, having marketed phosphates when the complex produced those under the ownership of Agrifos Holdings Inc.
Touting the facility as North America’s leading producer of synthetic granulated ammonium sulfate, IOC said it will continue in its capacity and expand distribution capabilities to meet customer needs. It said steady production rates and product quality show the plant’s ability to continue to perform at a high standard.
The transaction calls for an initial cash payment to Rentech Nitrogen of $5 million and a cash working capital adjustment, which is expected to be approximately $6 million, after confirmation of the amount within 90 days of the closing of the transaction. The purchase agreement also includes an earn-out that would be paid to Rentech Nitrogen unitholders equal to 50 percent of the facility’s EBITDA in excess of $8 million earned over the next two years.
Rentech Nitrogen expects to set a record date for the distribution to its unitholders of the $5 million initial cash payment, net of transaction-related fees, which are currently estimated to be approximately $0.6 million, prior to closing the pending merger between Rentech Nitrogen and CVR Partners LP. The cash working capital adjustment and any additional cash payments made by the acquirer relating to the purchase of the Pasadena facility will be made to Rentech Nitrogen’s unitholders as of the same record date within a reasonable time shortly after receiving such cash payments.
Rentech Nitrogen bought Pasadena from Agrifos in 2012 for $158 million (GM Nov. 2, 2012). After a major reorganization in 2014, results improved (see related story inside). The company took a $160.6 million impairment on the asset in 2015, and when added to 2013-2014 impairments totals $217.6 million, according to Green Markets calculations (GM Aug. 24, 2015). The company in the meantime spent $6 million to upgrade its ammonium sulfate capacity and $30 million for a co-generation facility.
In 2015, Pasadena produced 526,000 st of ammonium sulfate, 530,000 st of sulfuric acid, and 71,000 st of ammonium thiosulfate. The ammonium sulfate plant ran at a rate of 87 percent and sulfuric acid at 94.4 percent. The facility used 145,000 st of anhydrous ammonia and 193,000 st of sulfuric acid.
Rentech expects to complete the sale of the rest of its business, which includes its East Dubuque, Ill., nitrogen facility, by the end of March.