CHICAGO — Posey County, Ind. will remarket $1.26 billion of notes Thursday on behalf of Midwest Fertilizer Corp. ahead of plans to put a long term financing in place next year for its controversial fertilizer plant.
It’s expected to be the largest junk-rated private activity bond issue to date when it comes to market. The notes’ termination date will be extended to April 10, 2014 when remarketed.
Midwest Fertilizer, owned by Fatima Group, one of Pakistan’s largest conglomerates, has faced a rocky time since the Indiana Finance Authority originally sold nearly $1.3 billion of notes for the deal last December. The original deal was timed to beat the expiration of the Midwestern Disaster Area Bond program at the end of 2012.
The offering statement does not include financial information about the company. Investors should base their decision solely on the government obligations held in escrow for repayment of the notes and not on the company’s rating, the feasibility of the project, or any other security.
The original plan was to issue six-month notes to give the company time to finalize project details before the July 1 mandatory tender date. But a month after the borrowing, 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.
Indiana Gov. Mike Pence halted the project in January, a day after taking office, 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, acting as conduit.
Dogged by months of negative headlines and entering one of the weakest muni bond markets in years, the company paid a significantly higher interest rate than it did on the original note issue. The notes priced in July saw a rate of 0.75%, up from a 0.20% on the original six-month note issue.
Guggenheim Securities LLC and Citi are underwriters and remarketing agents. Barnes & Thornburg LLP was bond counsel.
Fatima continues to develop a new fertilizer product that is less explosive to address U.S. concerns. A similar project in Iowa was converted to a $1.2 billion long-term bond financing in April.
The Indiana project is still awaiting some environmental permits. It submitted an application for a needed state air permit in August and expects it early next year. Other permit applications to the state and U.S. Army Corps of Engineers are expected to be filed early next year.
The company reported spending about $32 million so far on the $2.1 billion project. The county finalized its incentive package for the project earlier this month, according to the offering statement. The company is also currently in negotiation with companies to provide natural gas service to the site and in talks on hedges to secure stable pricing for natural gas during the early years of the project.