CHICAGO — For the fourth time, Posey County, Ind. is remarketing $1.26 billion of short-term notes issued to fund a controversial $2.5 billion fertilizer plant.
It's expected to be one of the largest junk-rated private activity deals to date when the notes are ultimately rolled over into long-term debt.
"A project of this size, it's going to take a long time to get things where they need them," said John Taylor, executive director of the Posey County Economic Development Partnership. Taylor said the firm is still finalizing engineering details and hiring a construction team.
"It's taking longer than they expected," he said. "The state's on board, the locals are on board, everything moving along, but slowly."
Midwest Fertilizer, owned by Fatima Group, one of Pakistan's largest conglomerates, owns the planned $2.5 billion plant, a nitrogen fertilizer manufacturing facility.
The state, through the Indiana Finance Authority, originally issued $1.3 billion of debt for the project in December 2012, pushing short term notes to market to beat the expiration date of the Midwestern Disaster Area Bond program.
Officials said at the time they expected to refinance the notes into long-term debt before a July 1, 2013 mandatory tender date.
But the company has instead remarketed the debt four times over two years, each time saying that the most recent remarketing would be the last. An attorney with Pillsbury Winthrop Shaw Pittman LLP, said Wednesday in an email that a permanent financing is now expected next spring.
At first, the project ran into political opposition. Indiana in early 2013 dropped its support for the project after U.S. defense officials raised concerns about the use of Fatima's fertilizer product in explosive devices deployed against American soldiers in Afghanistan and Pakistan.
Gov. Mike Pence, just a day after taking office, halted the project in January 2013 and formally dropped all state support in mid-May.
The company scrambled to arrange a new deal with Posey County, site of the proposed plant. The county stepped in as conduit, and has since remarketed the notes three times.
In April 2014, just a few days after the third refinancing, Pence said Fatima had addressed some of the U.S.'s concerns by making its products less explosive, and that he would reopen talks with the company.
The project is expected to carry a final price tag of $2.55 billion. In addition to the $1.3 billion of bonds, the company expects to borrow up to $400 million, and Fatima and other partners will kick in up to $900 million in equity, according to bond documents.
Posey County has offered the company tax increment incentives valued at $144 million and up to $480,000 in employment incentives, documents show.
The company said it's still in the process of bringing in additional "project sponsors," and has hired Citi and BGM Partners to help find additional partners.
The new notes have an extended termination mandatory tender date of April 2, 2015.
Citi and Guggenheim Securities are the remarketing agents. Barnes & Thornburg LLP is bond counsel.
