CHICAGO -- Posey County, Ind. on Tuesday will remarket $1.26 billion of short-term notes for construction of a controversial fertilizer plant that has run into significant delays.
It's expected to be one of the largest junk-rated private activity bond sales to date when it comes to market. The notes' termination date will be extended to Nov. 18, 2014 from April 10 when remarketed.
It's the third time the county has remarketed the debt.
The county is acting as a conduit for Midwest Fertilizer, which is owned by Fatima Group, one of Pakistan's largest conglomerates. It plans to build a fertilizer plant, promising 200 permanent jobs, near the county seat of Mount Vernon.
The firm ran into opposition from Indiana Gov. Mike Pence in early 2013, and had to scramble to re-assemble the deal after the state conduit issuer, the Indiana Finance Authority, dropped out and the state withdrew tax credits and subsidies.
A spokesman for the project said last July that they would roll the notes over into long term debt in the first quarter of 2014. The spokesman would not comment on the latest delay, but said that a permanent financing is now planned for later this year.
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.
The financing features $1.26 billion of economic development revenue bonds that were issued last October, after a December 2012 original issue and July 2013 remarketing and. The original deal was timed to beat the expiration of the Midwestern Disaster Area Bond program at the end of 2012.
The original plan was to issue six-month notes to give the company time to finalize project details before the July 2013 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.
Pence halted the project in January 2013, 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 acting as conduit.
In October, dogged by months of negative headlines and 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 is 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 2013.
