CHICAGO -- Indiana Gov. Mike Pence announced he will reopen talks with a Pakistan-based company that is building a controversial $1.3 billion, bond-funded fertilizer plant in the state.
Pence said April 8 he would consider economic incentives for the project after Fatima Group and the government of Pakistan took steps to address U.S. defense officials' concerns by making their company products less available to terrorists to use as explosives.
Posey County, Ind., where the plant is to be located, in early April remarketed $1.26 billion of notes to finance the plant's construction. The company has remarketed the notes three times due to various delays, and now says it hopes to roll the notes over into long-term debt by the fall.
The county is acting as a conduit for Midwest Fertilizer, which is owned by Fatima Group, one of Pakistan's largest conglomerates.
The firm first ran into opposition from Pence in early 2013, just days after he took office. U.S. defense officials raised concerns about the use of Fatima's fertilizer product in explosive devices deployed against American soldiers.
The company had planned to finance the private activity bond deal through the Indiana Finance Authority and take advantage of substantial state subsidies, but Pence formally dropped all support by May 2013.
The company turned to Posey County, which agreed to act as a conduit.
"Following Indiana's withdrawal of support for this project, U.S. officials have reported that the government of Pakistan and Fatima Group have provided an unprecedented level of cooperation and transparency in addressing the concerns that precipitated the withdrawal of our support," Pence said in a statement.
The state will reconsider offering economic incentives for the project "with the confidence that we have done so in a manner that puts the interests of our soldiers and their families first," the governor said.
When it comes to market for long-term financing, the $1.26 billion bond deal is expected to be the largest junk-rated private activity bond sale to date.
The nitrogen fertilizer plant is expected to carry a price tag of $2.4 billion. In addition to the $1.26 billion, the company wants to borrow up to another $400 million and use cash for the remaining $800 million by Fatima and other equity partners. The company has hired Citi, one of the deal's remarketers, and BGM Partners to help it find additional project sponsors.
Guggenheim Securities LLC and Citi are underwriters and remarketing agents. Barnes & Thornburg LLP is bond counsel.
