(RTK) Retires Senior Obligations, Improves Liquidity, and Directs Focus on its Wood Fibre Assets

Rentech, Inc. (NASDAQ: RTK) announced today that the closing of the Rentech Nitrogen Partners, L.P.-CVR Partners, LP (CVR) merger (Transaction) has enabled it to retire approximately $142 million of senior obligations to GSO Capital Partners (GSO), improve its liquidity, reduce future interest expense, and better position itself to maximize the value of its investments in the wood fibre processing industry.

Transaction Proceeds

Rentech received $261.9 million in gross consideration for its approximately 59% interest in Rentech Nitrogen Partners following today’s closing of the Transaction. The consideration was comprised of $59.8 million in cash and 24.18 million units of CVR valued at $202.1 million based on CVR’s closing price yesterday of $8.36 per unit.

GSO Exchange

Rentech utilized a portion of the Transaction proceeds to retire all $100 million of its Series E Preferred Stock and to repay approximately $42 million of term debt held by GSO. Under newly modified terms of the GSO agreement, these repayments were accomplished by Rentech delivering to GSO 17.0 million CVR units and $10.0 million in cash. Rentech’s obligations to GSO have been reduced from $195 million to approximately $53 million. The remaining $53 million of term debt with GSO will bear an interest rate of LIBOR plus 700 basis points per annum, with a LIBOR floor of 1.00% and will mature on April 9, 2019.

Rentech will retain 7.18 million CVR units of the Transaction consideration. These units, along with other Rentech assets, are pledged to GSO as collateral for the term loan. Rentech will receive the cash distributions paid by CVR on the 7.18 million retained units.

The final exchange terms with GSO were different than originally agreed to last year and as amended on March 14, 2016. GSO and Rentech agreed to set the final exchange price of CVR units at $7.75 per unit in lieu of using the pricing mechanism in the prior agreement. The original pricing mechanism would have valued the exchanged CVR units at $5.62 per unit based on a 15% discount to CVR’s 60-day volume weighted average price two days prior to closing. The parties also agreed that Rentech would use cash to repay a portion of the obligations and to retire approximately $142 million instead of $140 million of the obligations. The revised exchange terms enabled Rentech to retain units equivalent to a 6.3% ownership interest in CVR and to minimize taxable gains associated with the Transaction and exchange of units. GSO eliminated the one-time option granted to Rentech under the original transaction which would have enabled Rentech to repurchase CVR units at a future date six to twelve months following the closing. Additional details about the terms of the agreements with GSO will be provided in a Form 8-K that Rentech will file with the Securities and Exchange Commission.

Net Proceeds Following GSO Exchange

As a result of the Transaction and GSO exchange, Rentech retained $109.8 million of the total pre-tax proceeds received in the Transaction, comprised of $49.8 million of cash and 7.18 million CVR units valued at $60.0 million based on yesterday’s closing price of $8.36 per unit.

Rentech expects to pay $5 – $15 million in estimated cash taxes related to the Transaction, GSO exchange and the earlier sale of the Pasadena facility. The estimated tax payments take into consideration existing net operating loss carryforwards, which were $196.1 million as of December 31, 2015, and an estimate of operating losses expected to accrue this year.

Keith Forman, Rentech’s President and CEO, stated, “The transactions announced today represent a milestone for Rentech. We say goodbye to a business that has served our shareholders well and to a team of dedicated professionals at our East Dubuque facility who have been conscientious guardians and operators of this asset. We thank them.”

“This transaction affords Rentech the opportunity to reposition and intensify the focus on our investments in the wood fibre processing industry. It does so by providing us the liquidity and strengthened balance sheet to complete the construction and ramp-up of our Canadian facilities. This outcome would not have been possible save for the active willingness of GSO Capital to work with us on the terms of the exchange; both at the inception, in allowing for repayment of senior obligations in exchange for equity, and today in further modifying the terms of our agreements to allow for an outcome of less debt, greater liquidity, and less dilution than originally called for. As a result, we retain a meaningful stake in the “new” CVR Partners. We wish CVR well and we are confident that they will be good stewards of this asset as we have tried to be,” added Mr. Forman.

Financials

The table below illustrates the pro forma impact as if the foregoing transactions were completed on December 31, 2015.

Pro Forma Capitalization ($MM)
			Actual 12/31/15				Pro Forma 12/31/15				$ Change
Rentech Cash1			$	33			$	86			$	52
Ownership in CVR Partners2				–			$	60			$	60
GSO Preferred Stock			$	100				–			$	(100	)
GSO Term Loans			$	95			$	53			$	(42	)
Fulghum Fibres Debt			$	47			$	47				–
NEWP Debt			$	16			$	16				–
QSL Debt3			$	20			$	20				–
Total Obligations			$	278			$	136			$	(142	)

¹ Increase in cash is pre-tax; includes initial proceeds from sale of Pasadena and excludes future working capital proceeds and potential milestone payments related to the sale.
² As of March 31, 2016; cost basis of CVR units estimated to be $0 at time of transaction.
³ Cash amount owed under the obligation is $13.7MM; see Note 15 in our 2015 10-K.

The table below provides Rentech’s anticipated debt service for 2016.

Debt Service for 2016 ($MM)
Interest & Dividends Paid to GSO YTD			$	3.7
Interest on Remaining GSO Debt for 2016			$	3.2
Interest on Other Debt			$	4.3
Scheduled Amortization on Other Debt			$	18.3

The table below provides Rentech’s estimated cash taxes and capital expenditures for 2016.

Estimated Taxes & CapEx for 2016 ($MM)
State & Federal Taxes1			$	5 – $15
Industrial Wood Pellets CapEx			$	21
Fulghum Fibres & NEWP CapEx			$	5

¹ Represents estimated taxes to be paid in 2016.

About Rentech, Inc.

Rentech, Inc. (NASDAQ: RTK) owns and operates wood fibre processing and wood pellet production businesses. Rentech offers a full range of integrated wood fibre services for commercial and industrial customers around the world, including wood chipping services, operations, marketing, trading and vessel loading, through its subsidiary, Fulghum Fibres. The Company’s New England Wood Pellet subsidiary is a leading producer of bagged wood pellets for the U.S. heating market. Rentech’s industrial wood pellet facilities supply wood pellets used as fuel for power generation in Canada and the United Kingdom. Please visit www.rentechinc.com for more information.

Safe Harbor Statement

This press release contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 about matters such as: our estimated debt service, taxes and capital expenditures; and our ability to maintain our market positions and complete ramp-up of the Canadian wood pellet plants to full capacity. These statements are based on management’s current expectations and actual results may differ materially as a result of various risks and uncertainties. Other factors that could cause actual results to differ from those reflected in the forward-looking statements are set forth in the Company’s prior press releases and periodic public filings with the Securities and Exchange Commission, which are available via Rentech’s website at www.rentechinc.com. The forward-looking statements in this press release are made as of the date of this press release and Rentech does not undertake to revise or update these forward-looking statements, except to the extent that it is required to do so under applicable law.