CHICAGO -- Weeks after Indiana dropped state support for a controversial fertilizer plant -- and three weeks before $1.3 billion of notes floated for the plant come due -- the county where the facility would be located said it would step in to help finance the deal.
Posey County in southwest Indiana agreed to issue $1.3 billion of short-term debt by the end of this month to help the borrower refinance the original bonds issued by the Indiana Finance Authority late last year.
Like the IFA, the Posey County Economic Development Commission would act only as a conduit issuer for Midwest Fertilizer Corp., owned by Fatima Group, one of Pakistan’s largest conglomerates.
The new borrowing will give the company more time to finalize project details and secure permits before construction begins, officials said.
Barnes & Thornburg LLP is bond counsel. Guggenheim Securities LLC is the underwriter. Guggenheim was also the banker on the original deal with the IFA.
The facility represents one of the largest economic development projects in the state and is crucial for Posey County, said John Taylor, director of the Posey County Economic Development Partnership.
“This is a $2 billion project with a 10-year projected impact in the region of $8.7 billion,” Taylor said, explaining why the county wants to step in where the state will not tread “It’s 700 permanent jobs.”
The Posey County Board of Commissioners and town council approved the bond issuance in late May. The county will hold a public hearing June 19.
The IFA, Indiana’s borrowing arm, originally issued tax-free Midwestern Disaster Area bonds in December 2012 with a six-month maturity to give the company time to finalize details for the $1.8 billion project before the disaster program expired at the end of the year. The Midwest Fertilizer Corp. was expected to roll the notes into long-term debt after July.
A similar project in Iowa was converted to a $1.2 billion long-term bond financing in April.
But Indiana Gov. Mike Pence put the project on hold in January, days after taking office. He said U.S. defense officials raised concerns that fertilizer made by the Fatima Group was used in improvised explosive devices throughout Pakistan and Afghanistan.
In May, after a four-month review, Pence formally pulled state support for the project. The withdrawn subsidy package included $2.9 billion in conditional tax credits based on the company’s jobs and investment plans and up to $700,000 in training grants. The action did not affect the bond proceeds, which have been held in escrow since the December transaction.
Pence said the company told the U.S. that it has developed a less-explosive chemical, but the U.S. has not yet had time to test the product.