CHICAGO -- The Iowa Fertilizer Co. LLC extended the deadline until later this month for a tender exchange on up to $435 million of bonds from two maturities in its nearly $1.2 billion 2013 issue that funded construction of its nitrogen fertilizer production plant.

The deadline for holders to respond to the exchange offer that would ease near-term payment pressures and to a consent request is Jan. 26, according to a bondholder notice.

The company had always planned to extend repayment on some of its junk-rated private activity debt -- sold with a tax-exemption under the federal government’s Midwestern Disaster Area designation – after the project was up and running. It accelerated its plans to late last year due to the threat tax reform posed to future private activity borrowing.

Iowa Fertilizer Co. plant
The Iowa Fertilizer Co. project launched production in the spring of 2017. The Weitz Co.

The final tax bill preserved PABs but with the exchange plans well underway the company decided to move forward. Officials did decide to push off the solicitation deadline from late December into early in the New Year and then earlier this month extended the deadline from Jan. 5 to Jan. 26.

The company is seeking approval for both an exchange solicitation and a consent solicitation permitting the first. Citi is the dealer.

The company wants to exchange up to $190 million of 2019 bonds and $246 million of 2022 bonds for an equivalent principal amount of the corresponding Series 2017 bonds.

The bonds currently are valued above their original face value, so a cash payment is being offered as part of the exchange equal to 3.77% and 2.12% on the respective 2019 and 2022 bond tendered.

The consent solicitation alters some bond terms allowing for the new borrowing to fund the exchange, allowing for changes in the construction contract, altering various credit and collateral agreements, and giving the company more flexibility in how it funds some reserves.

Holders of a majority of the outstanding principal amount of the existing 2013 bonds and a subsequent 2016 issue must consent. The company completed a $150 million bond exchange in 2016 on a portion of the 2019 maturity that eased fiscal strains on the project which has struggled with financing and construction obstacles.

In addition to the bonding, the owners have contributed $1.4 billion to the more than $3 billion project, according to the notices. The project also received $100 million in state and $30 million in local subsidies.

The project launched production in the spring of 2017 after a series of construction struggles. The Internal Revenue Service also closed an examination of the bonds without a change in their tax-exempt status.

The bonds sold through the Iowa Finance Authority for the project that was developed by Orascom Construction Industries, which was originally based in Egypt and is now based in the Netherlands. The deal was one of the largest ever junk-rated private activity bond issues. It sold under the state's share of $14.6 billion of private-activity borrowing authorized by Congress for qualified projects in designated counties hit hard by storms in the spring of 2008.

An Indiana project later sold bonds under the program, but the project has stalled and the Internal Revenue Service recently concluded that the bonds don’t qualify for tax-exempt status.

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