Rentech, Inc. (NASDAQ: RTK) today announced that GSO Capital Partners LP
(GSO), the credit investment arm of Blackstone, will invest $150 million
in Rentech in the form of $100 million of convertible preferred stock
and a $50 million term loan. The transactions closed on April 9, 2014.
In connection with this investment, Blackstone/GSO appointed two members
to Rentech’s Board of Directors: Douglas Ostrover, a senior managing
director of Blackstone and co-founder of GSO Capital Partners, and
Patrick Moore, the former chairman and chief executive officer of
Smurfit-Stone Container Corporation, a paper-based packaging company
with significant wood fibre operations. Rentech also announced a
settlement with Concerned Rentech Shareholders (CRS), whereby CRS will
approve an additional member to join Rentech’s Board of Directors and
the board’s newly formed Finance Committee. A slide presentation
regarding today's announcements appears on Rentech’s website, www.rentechinc.com.
Blackstone/GSO Investment
Proceeds from Blackstone/GSO’s investment will fund identified growth
opportunities in Rentech’s wood fibre processing business. These
opportunities are part of Rentech’s long-standing strategic plan for the
wood fibre processing business. This plan was discussed most recently
during the Company’s fourth quarter earnings conference call on March
11, 2014. Successfully executing these growth opportunities is designed
to give Rentech’s wood fibre processing business the scale necessary for
a possible initial public offering as a master limited partnership.
Rentech used proceeds from the convertible preferred stock to repay the
$50 million balance on its revolving margin loan. That facility has now
been terminated, and the units of Rentech Nitrogen Partners, L.P.
(Rentech Nitrogen) that served as collateral have been released.
“This investment by Blackstone’s GSO underscores the strength of our
wood fibre business strategy. The investment is a vote of confidence in
both our fibre and fertilizer businesses by a leading global investor,”
said D. Hunt Ramsbottom, president and chief executive officer of
Rentech. “In addition to funding our immediate growth plans,
Blackstone/GSO’s investment gives Rentech a long-term partner with a
proven track record in successfully evaluating and investing in new
opportunities. Blackstone/GSO can also provide additional capital and
access to investment opportunities as we continue to explore
opportunities in our fibre and nitrogen businesses. We look forward to
working with the Blackstone/GSO team.”
“Rentech owns and operates world-class assets in wood fibre processing
and nitrogen fertilizer production,” said Douglas Ostrover, senior
managing director of Blackstone and co-founder of GSO. “We have been in
conversations with Rentech for nearly two years and have thoroughly
evaluated Rentech’s businesses, assets, and management team. We see
great potential to create value for Rentech’s shareholders. We look
forward to working as a partner with the Company to execute the plans
they have, and to explore additional opportunities in the future.”
Summary of Key Terms
$100 Million Convertible Preferred Stock:
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Conversion price of $2.22, which represents a 23% premium over the
closing price of Rentech’s common stock on April 9, 2014;
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Convertible into approximately 45 million shares of Rentech common
stock, representing approximately 16.5% of common shares on an
as-if-converted basis;
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4.5% preferred dividend per annum;
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Optionally redeemable in 7 years;
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The Company may force conversion after a date which is two years from
issuance if the price of Rentech’s common stock remains above $4.44
for 30 consecutive trading days;
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Approximately 5.5 million common units of Rentech Nitrogen, owned by
Rentech, backstop the redemption value. The number of Rentech Nitrogen
common units is fixed, with no covenants related to Rentech Nitrogen’s
unit price. The units will be released if the price of Rentech’s
common stock is above $4.44 for 90 consecutive trading days, if cash
is substituted for the units, or if the preferred shares are
converted. Rentech will continue to receive cash distributions paid on
the units;
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Issued at 98% of redemption value;
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Two Blackstone/GSO representatives appointed to Rentech’s Board of
Directors (proportional with ownership); and
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No hedging transactions by Blackstone/GSO are permitted unless
Rentech’s common stock price is at least $4.44; No short selling is
permitted at any time.
$50 Million Senior Term Loan:
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Interest rate of LIBOR plus 700 basis points per annum, with a LIBOR
floor of 1.00%;
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The sole collateral for the loan will be approximately 2.8 million
common units of Rentech Nitrogen, owned by Rentech. The number of
Rentech Nitrogen common units provided as collateral is fixed, with no
covenants related to Rentech Nitrogen’s unit price; cash may be
substituted at Rentech’s option. Rentech will continue to receive cash
distributions paid on the units;
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Prepayable without penalty after the first year or at any time, from
proceeds of an IPO of the wood fibre processing business or certain
asset sales;
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Matures five years after closing;
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Issued at 98% of principal; and
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Expandable upon agreement of the parties, with an accordion feature to
increase the term loan by $75 million.
Board of Directors
Rentech also announced changes to its Board of Directors today:
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Douglas Ostrover, senior managing director of Blackstone and
co-founder of GSO Capital Partners, has joined the board. Mr. Ostrover
brings shareholder representation and significant finance experience.
He has personally overseen GSO’s deployment of $65 billion of capital.
Mr. Ostrover will be the chairman of the board’s Finance Committee.
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Blackstone/GSO appointed Patrick J. Moore, former chairman and chief
executive officer of Smurfit-Stone Container Corporation, to the
board. Mr. Moore brings 24 years of expertise in the packaging and
wood fibre industries as well as significant experience in finance.
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Chairman Emeritus Dennis L. Yakobson has retired from the board,
following thirty-one years of service, including the founding of
Rentech.
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Michael Ray has resigned from the Rentech board. Mr. Ray will continue
to serve as a member of the board of Rentech Nitrogen Partners, L.P.
"We are thrilled to be adding new expertise and fresh perspectives from
two leading figures in their fields," said Halbert S. Washburn, Chairman
of Rentech’s Board of Directors. "On behalf of the full board, I would
like to thank Dennis Yakobson and Mike Ray for their years of service
and many contributions to Rentech."
Settlement with Concerned Rentech Shareholders
Rentech entered into a settlement agreement with CRS. As part of the
agreement and in addition to certain standstill restrictions accepted by
CRS:
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An additional director candidate approved by CRS will be nominated by
the Company for election to its Board of Directors at the 2014 annual
meeting of shareholders, or appointed to the Board of Directors
shortly thereafter. In order to facilitate the election of the
additional director candidate, Rentech will place a proposal on the
ballot for the 2014 annual meeting of shareholders to expand the Board
of Directors by one director;
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The formation of a Finance Committee consisting of five members
including Messrs. Ostrover and Moore and the additional director
candidate approved by CRS. The Finance Committee will be responsible
for approving significant capital expenditures, reviewing and taking
action to reduce Rentech’s cost structure, and reviewing the Company’s
executive compensation practices;
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CRS will withdraw its slate of nominees for the 2014 annual meeting of
shareholders;
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CRS will vote all of its shares in favor of the board’s slate of
director nominees at the 2014 annual meeting of shareholders; and
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CRS will withdraw its preliminary proxy solicitation to call a special
meeting of shareholders.
“We are pleased with the addition of three new independent directors,
all of whom will bring an enhanced focus on creating shareholder value
while mitigating risk. These new directors, who will make up the
majority of the newly established Finance Committee, have our full
support as they conduct a thorough review of the Company’s cost
structure, executive compensation practices, and capital allocation
strategy. Further, we believe Blackstone’s operational depth and
experience in building profitable businesses with strong execution
capabilities will significantly enhance the chances for a successful
launch and subsequent IPO of the Company’s wood fibre opportunity. We
look forward to working with the two new directors from Blackstone and a
newly elected director to create value for all shareholders.”
The agreement will be filed with the Securities and Exchange Commission
as an Exhibit to a Current Report on Form 8-K.
About Douglas Ostrover
Mr. Ostrover is senior managing director of Blackstone and a founder of
GSO Capital Partners. Prior to co-founding GSO Capital in 2005, Mr.
Ostrover held various positions at Credit Suisse First Boston (CSFB). He
served as managing director and chairman of the Leveraged Finance Group,
and global co-head of the Leveraged Finance Group. Prior to joining
CSFB, Mr. Ostrover was managing director in charge of high yield and
distressed sales, trading and research at Donaldson, Lufkin & Jenrette.
Mr. Ostrover is currently on the Board of Directors of the Michael J.
Fox Foundation. Mr. Ostrover received a Bachelor of Arts in economics
from the University of Pennsylvania and an MBA from the Stern School of
Business of New York University.
About Patrick J. Moore
Mr. Moore serves as president and chief executive officer of PJM
Advisors, LLC, an investment and advisory firm. From 2002 until 2011,
Mr. Moore was chairman and chief executive officer of Smurfit-Stone
Container Corporation (formerly Jefferson Smurfit Corporation), a
producer of containerboard and corrugated packaging and one of the
world’s largest paper recyclers. His 24-year tenure at Smurfit also
included service as chief financial officer, vice president and general
manager of the company’s Industrial Packaging division, and treasurer.
Earlier in his career, Mr. Moore held positions in corporate lending,
international banking and corporate administration at Continental Bank
in Chicago. Mr. Moore serves on the Board of Directors for Archer
Daniels Midland Company, a global food processing and commodities
trading company, and Exelis Inc., a global aerospace, defense,
information and services company. Mr. Moore also serves on the North
American Review Board of American Air Liquide Holdings, Inc. and on the
boards of the Metropolitan YMCA of St. Louis, Boys Hope/Girls Hope, St.
Louis Zoological Society and the Big Shoulders Fund. Mr. Moore received
a Bachelor of Science in business administration from DePaul University.
Advisors
Latham & Watkins LLP and Holland & Hart LLP acted as legal counsel to
Rentech, and Credit Suisse Securities (USA) LLC acted as financial
advisor.
Vinson & Elkins LLP, Moelis & Company, Alvarez & Marsal Private Equity
Services, and Nexus PMG, acted as advisors to Blackstone.
About Rentech, Inc.
Rentech, Inc. (www.rentechinc.com)
owns and operates wood fibre processing and nitrogen fertilizer
manufacturing businesses. The wood fibre processing business provides
wood chipping services, operations, marketing and trading services, and
vessel loading through a wholly-owned subsidiary, Fulghum Fibres, Inc.
Rentech is also developing wood pellet production facilities. Rentech
also manufactures and sells nitrogen fertilizer through its
publicly-traded subsidiary, Rentech Nitrogen Partners, L.P. (RNF).
About GSO Capital Partners LP
Blackstone is one of the world’s leading investment and advisory firms.
Blackstone seeks to create positive economic impact and long-term value
for its investors, the companies it invests in, the companies it advises
and the broader global economy. The firm does this through the
commitment of its extraordinary people and flexible capital. GSO Capital
Partners LP is the global credit platform of Blackstone. GSO, together
with its affiliates, has approximately $65 billion of assets currently
under management and is one of the largest credit-focused alternative
asset managers in the world and a major participant in the leveraged
finance marketplace. GSO seeks to generate superior risk-adjusted
returns in its credit business by investing in a broad array of
strategies including mezzanine, distressed investing, leveraged loans
and other special situation strategies. Blackstone’s alternative asset
management businesses include investment vehicles focused on private
equity, hedge fund solutions, secondary funds, and multi asset class
exposures falling outside of other funds’ mandates. Blackstone also
provides various financial advisory services, including mergers and
acquisitions advisory, restructuring and reorganization advisory and
fund placement services. Further information is available at www.blackstone.com.
Follow Blackstone on Twitter @Blackstone.
About Concerned Rentech Shareholders
Concerned Rentech Shareholders, a group led by Engaged Capital, LLC and
Lone Star Value Management, LLC, are together one of the largest
stockholders of Rentech, Inc. with aggregate ownership of approximately
4.7% of the outstanding shares of RTK.
Engaged Capital, LLC is a limited liability company owned by its
principals and formed to create long-term shareholder value by bringing
an owner’s perspective to the managements and boards of under-valued
public companies. Engaged Capital manages both a long-only and
long/short North American equity fund. Engaged Capital’s efforts and
resources are dedicated to a single investment style, “Constructive
Activism” with a focus on delivering superior, long-term, risk-adjusted
returns for investors. Engaged Capital is based in Newport Beach,
California. Further information is available at www.engagedcapital.com
Lone Star Value Management, LLC is an investment firm that invests in
undervalued securities and engages with its portfolio companies in a
constructive way to help maximize value for all shareholders. Lone Star
Value was founded by Jeff Eberwein who was formerly a Portfolio Manager
at Soros Fund Management and Viking Global Investors. Lone Star Value is
based in Old Greenwich, CT. Further information is available at http://lonestarvm.com
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 Company’s wood fibre processing business opportunities; its plans to
take its wood fibre processing business public as a master limited
partnership; and potential sources of additional capital. 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.
References to an initial public offering of Rentech’s wood fibre
business in this news release are being made solely to advise Rentech’s
investors regarding the company’s current business plan. This release
does not constitute an offer to sell or a solicitation of an offer to
buy any securities. Any such offer or solicitation will be made only by
means of a prospectus.
Additional Information and Where You Can Find It
Rentech, its directors and certain of its executive officers may be
deemed to be participants in the solicitation of proxies from
shareholders in connection with its annual meeting of shareholders to be
held in 2014 (the “2014 Annual Meeting”). Rentech plans to file a proxy
statement and white proxy card with the SEC in connection with the
solicitation of proxies for the 2014 Annual Meeting (the “2014 Proxy
Statement”). Additional information regarding the identity of these
potential participants and their direct or indirect interests, by
security holdings or otherwise, will be set forth in the 2014 Proxy
Statement and other materials to be filed with the SEC in connection
with the 2014 Meeting. This information can also be found in Rentech’s
definitive proxy statement for its annual meeting of shareholders held
in 2013, filed with the SEC on April 30, 2013 (the “2013 Proxy
Statement”). To the extent holdings of Rentech’s common stock have
changed since the amounts printed in the 2013 Proxy Statement, such
changes have been or will be reflected on Statements of Change in
Ownership on Form 4 filed with the SEC.
SHAREHOLDERS ARE URGED TO READ THE 2014 PROXY STATEMENT AND WHITE PROXY
CARD (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO), 2013 PROXY
STATEMENT AND ANY OTHER RELEVANT DOCUMENTS THAT RENTECH HAS FILED OR
WILL FILE WITH THE SEC BECAUSE THEY CONTAIN IMPORTANT INFORMATION.
Shareholders will be able to obtain, free of charge, copies of the 2014
Proxy Statement (when available), 2013 Proxy Statement and any other
documents filed or to be filed by Rentech with the SEC in connection
with the 2013 Meeting at the SEC’s website (http://www.sec.gov).
Copyright Business Wire 2014