RNF Rentech Nitrogen Partners, L.P. Common Units Representing Limited Partner Interests

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): March 18, 2016 (March 14, 2016)

 

 

RENTECH NITROGEN PARTNERS, L.P.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware		001-35334		45-2714747
(State or Other Jurisdiction of Incorporation or Organization)		(Commission File Number)		(IRS Employer Identification Number)

10877 Wilshire Boulevard, 10th Floor

Los Angeles, California 90024

(Address of principal executive office) (Zip Code)

(310) 571-9800

(Registrants’ telephone number, including area code)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

x	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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Item 1.01.

Entry into a Material Definitive Agreement.

Membership Interest Purchase Agreement

On March 14, 2016, Rentech Nitrogen Partners, L.P. (the “Partnership”) and Rentech Nitrogen Pasadena Holdings, LLC (“Pasadena Holdings”) entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with Pasadena Commodities International, LLC (the “Buyer”) and Rentech, Inc., solely in its capacity as seller representative (the “Company”). On the same date, the closing under the Purchase Agreement occurred and Buyer purchased 100% of the issued and outstanding membership interests of Pasadena Holdings from the Partnership.

At the closing, the Buyer made an initial cash payment to the Partnership of $5.0 million net of fees described below. The Purchase Agreement provides for a cash working capital adjustment, which is expected to be approximately $6.0 million, after confirmation of the amount within ninety days of the closing of the transaction. The Purchase Agreement also includes a milestone payment which would be paid to Partnership unitholders equal to 50% of the Pasadena facility’s EBITDA, as defined in the Purchase Agreement, in excess of $8.0 million cumulatively earned over the next two years. In addition, the Purchase Agreement includes a liquidity event payment if Buyer sells Pasadena Holdings, or a majority of its assets, prior to March 31, 2019 equal to: (i) 50% of the amount, if any, Buyer receives upon closing the liquidity event; less (ii) the cumulative amount Buyer has paid for Pasadena Holdings under the terms of the Purchase Agreement as of the liquidity event. The cumulative maximum amount that may be paid out as a milestone payment or a liquidity event payment (on a combined basis) is $25 million. The Partnership expects to distribute to its unitholders the $5.0 million initial cash payment, net of estimated transaction-related fees of approximately $0.7 million, on March 31, 2016 to unitholders of record as of March 28, 2016.

Buyer, the Partnership and Pasadena Holdings made customary representations, warranties and covenants in the Purchase Agreement. Under the Purchase Agreement, none of the representations and warranties survived the closing under the Purchase Agreement, and Buyer’s sole and exclusive remedy for claims for any inaccuracy or breach of any representation or warranty of the Partnership or Pasadena Holdings will be to recover from a representations and warranties insurance policy.

Separation Agreement

On March 14, 2016, in connection with the closing under the Purchase Agreement, the Partnership entered into a Separation Agreement (the “Separation Agreement”) with Rentech Nitrogen GP, LLC (the “Partnership GP”) and Pasadena Holdings. The Separation Agreement governs the terms of the separation of Pasadena Holdings’ business from the Partnership’s other business. Among other things, the Separation Agreement generally provides for cross-indemnities principally designed to place financial responsibility for the obligations and liabilities of Pasadena Holdings and its subsidiary’s business with Pasadena Holdings and financial responsibility for the obligations and liabilities of the Partnership’s other business with the Partnership.

The summaries of the Purchase Agreement and Separation Agreement in this Current Report on Form 8-K do not purport to be complete and are qualified by reference to the full text of the aforementioned agreements, which are filed as Exhibit 10.1 and Exhibit 10.2 hereto and incorporated by reference herein.

 

Item 2.01.

Completion of Acquisition or Disposition of Assets.

The information set forth above under Item 1.01 of this Current Report on Form 8-K is hereby incorporated by reference into this Item 2.01.

 

Item 9.01.

Financial Statements and Exhibits.

 

(b)	Pro forma financial statements

The following unaudited pro forma condensed consolidated financial statements are included in this Form 8-K as Exhibit 99.1 and incorporated herein by reference in this Item 9.01:

Unaudited pro forma condensed consolidated financial statements.

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(d)

Exhibits

 

10.1		Membership Interest Purchase Agreement, dated as of March 14, 2016, by and among Pasadena Commodities International, LLC, as Buyer, Rentech Nitrogen Partners, L.P. as Seller, Rentech, Inc. as Seller Representative and Rentech Nitrogen Pasadena Holdings, LLC, as the Company (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by Rentech, Inc. on March 18, 2016).
10.2		Separation Agreement, dated as of March 14, 2016, by and among Rentech Nitrogen Partners, L.P., Rentech Nitrogen GP, LLC and Rentech Nitrogen Pasadena Holdings, LLC (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by Rentech, Inc. on March 18, 2016).
99.1		Unaudited pro forma condensed consolidated financial statements.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

				RENTECH NITROGEN PARTNERS, L.P. a Delaware limited Partnership
				By:		Rentech Nitrogen GP, LLC
				Its:		General Partner
Date: March 18, 2016				By:		/s/ Colin Morris
						Colin Morris
						Senior Vice President and General Counsel

Exhibit 99.1

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On March 14, 2016, Rentech Nitrogen Partners, L.P. (the “Partnership”) completed the sale of Rentech Nitrogen Pasadena Holdings, LLC (“Pasadena Holdings”) to Pasadena Commodities International, LLC, an affiliate of Interoceanic Corporation. The transaction calls for an initial cash payment to the Partnership of $5.0 million and a cash working capital adjustment, which is expected to be approximately $6.0 million, after confirmation of the amount within ninety days of the closing of the transaction. The purchase agreement also includes a milestone payment which would be paid to the Partnership unitholders equal to 50% of the facility’s EBITDA, as defined in the purchase agreement, in excess of $8.0 million cumulatively earned over the next two years.

The following unaudited pro forma condensed consolidated financial statements have been derived by the application of adjustments to the Partnership’s historical consolidated financial statements. The unaudited pro forma condensed consolidated statements of operations for the three years ended December 31, 2015 are presented as if the disposition had occurred as of January 1, 2013. The unaudited pro forma condensed consolidated balance sheet as of December 31, 2015 is presented as if the disposition had occurred on December 31, 2015.

The unaudited pro forma condensed consolidated financial statements are being provided for informational purposes only and are not necessarily indicative of the results of operations or financial position that would have resulted if the disposition had actually occurred on the dates indicated and are not intended to project the Partnership’s results of operations or financial position for any future period. The unaudited adjustments are based on estimates, available information, and certain assumptions that the Partnership believes are reasonable, as described in the accompanying notes. The pro forma adjustments reflect the impact of events directly attributable to the sale of Pasadena Holdings and related transaction agreements that are factually supportable, and for purposes of the statements of operations, are expected to have a continuing impact on the Partnership. The pro forma financial statements do not reflect any assumed proceeds from the milestone payment. The unaudited pro forma condensed consolidated financial statements and the accompanying notes should be read in conjunction with the historical consolidated financial statements and accompanying notes included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission on March 15, 2016.

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RENTECH NITROGEN PARTNERS, L.P.

Unaudited Pro Forma Condensed Consolidated Balance Sheet

As of December 31, 2015

(Amounts in thousands)

 

						Pro Forma Adjustments
		Partnership Historical				Adjustment to Eliminate Pasadena Holdings (1)				Adj. (2)				Adj. (3)				Adj. (4)				Pro Forma
Current Assets
Cash		$	15,823			$	(8,589	)		$	10,621				—				—			$	7,234
											—			$	(311	)			—
											—				—			$	(10,310	)
Accounts receivable			11,451				(2,450	)			—				—				—				9,001
Inventories			32,116				(21,758	)			—				—				—				10,358
Prepaid expenses and other current assets			5,745				(3,512	)			—				—				—				2,233
Other receivables			374				(344	)			—				—				—				30
Total current assets			65,509				(36,653	)			10,621				(311	)			(10,310	)			28,856
Property, plant and equipment, net			152,078				(1,810	)			—				—				—				150,268
Construction in progress			23,712				(895	)			—				—				—				22,817
Other assets			71				(71	)			—				—				—				—
Total assets		$	241,370			$	(39,429	)		$	10,621			$	(311	)		$	(10,310	)		$	201,941
Current liabilities
Accounts payable		$	12,022				(5,015	)		$	—			$	—			$	—			$	7,007
Payable to general partner			4,605				(377	)			—				—				—				4,228
Accrued liabilities			15,212				(5,644	)			—				—				—				9,568
Deferred revenue			16,982				(10,786	)			—				—				—				6,196
Accrued interest			4,650				—				—				—				—				4,650
Total current liabilities			53,471				(21,822	)			—				—				—				31,649
Long-term liabilities
Debt			347,575				—				—				—				—				347,575
Asset retirement obligation			4,498				(4,047	)			—				—				—				451
Other			2,092				(1,541	)			—				—				—				551
Total long-term liabilities			354,165				(5,588	)			—				—				—				348,577
Total liabilities			407,636				(27,410	)			—				—				—				380,226
Partners’ capital (deficit)
Common unitholders			(166,555	)			(11,730	)			10,621				(311	)			(10,310	)			(178,285	)
Accumulated other comprehensive income			289				(289	)			—				—				—				—
Total Partners’ capital (deficit)			(166,266	)			(12,019	)			10,621				(311	)			(10,310	)			(178,285	)
Total liabilities and partners’ capital (deficit)		$	241,370			$	(39,429	)		$	10,621			$	(311	)		$	(10,310	)		$	201,941

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RENTECH NITROGEN PARTNERS, L.P.

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the year ended December 31, 2015

(Amounts in thousands, except per unit data)

 

		Partnership Historical				Pro Forma Adjustment to Eliminate Pasadena Holdings (1)				Pro Forma
Revenues		$	340,731			$	(139,387	)		$	201,344
Cost of sales			239,969				(134,731	)			105,238
Gross profit			100,762				(4,656	)			96,106
Operating expenses
Selling, general and administrative expense			19,794				(3,937	)			15,857
Depreciation and amortization			1,035				(755	)			280
Pasadena asset impairment			160,622				(160,622	)			—
Other expense, net			410				—				410
Total operating expenses			181,861				(165,314	)			16,547
Operating income (loss)			(81,099	)			160,658				79,559
Other income (expense), net
Interest expense			(21,701	)			—				(21,701	)
Other income, net			1,341				(1,425	)			(84	)
Total other expenses, net			(20,360	)			(1,425	)			(21,785	)
Income (loss) before income taxes			(101,459	)			159,233				57,774
Income tax expense			67				(45	)			22
Net income (loss)		$	(101,526	)		$	159,278			$	57,752
Net income (loss) per common unit allocated to common unitholders - Basic and diluted		$	(2.62	)						$	1.47
Weighted-average units used to compute net income (loss) per common unit:
Basic and diluted			38,924								38,924

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RENTECH NITROGEN PARTNERS, L.P.

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the year ended December 31, 2014

(Amounts in thousands, except per unit data)

 

		Partnership Historical				Pro Forma Adjustment to Eliminate Pasadena Holdings (1)				Pro Forma
Revenues		$	334,612			$	(138,233	)		$	196,379
Cost of sales			274,135				(152,541	)			121,594
Gross profit			60,477				14,308				74,785
Operating expenses
Selling, general and administrative expense			18,011				(5,078	)			12,933
Depreciation and amortization			1,509				(1,315	)			194
Pasadena goodwill impairment			27,202				(27,202	)			—
Other expense, net			542				(5	)			537
Total operating expenses			47,264				(33,600	)			13,664
Operating income			13,213				47,908				61,121
Other income (expense), net
Interest expense			(19,057	)			—				(19,057	)
Agrifos settlement			5,632				—				5,632
Loss on debt extinguishment			(635	)			—				(635	)
Other income, net			(197	)			—				(197	)
Total other expenses, net			(14,257	)			—				(14,257	)
Income (loss) before income taxes			(1,044	)			47,908				46,864
Income tax expense			18				(18	)			—
Net income (loss)		$	(1,062	)		$	47,926			$	46,864
Net income (loss) per common unit allocated to common unitholders - Basic and diluted		$	(0.03	)						$	1.20
Weighted-average units used to compute net income (loss) per common unit:
Basic and diluted			38,898								38,898

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RENTECH NITROGEN PARTNERS, L.P.

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the year ended December 31, 2013

(Amounts in thousands, except per unit data)

 

						Pro Forma Adjustments
		Partnership Historical				Adjustment to Eliminate Pasadena Holdings (1)				Adj. (2)				Pro Forma
Revenues		$	311,375			$	(133,675	)		$	—			$	177,700
Cost of sales			240,021				(143,204	)			—				96,817
Gross profit			71,354				9,529				—				80,883
Operating expenses
Selling, general and administrative expense			17,285				(4,764	)			—				12,521
Depreciation and amortization			4,077				(3,886	)			—				191
Pasadena impairment			30,029				(30,029	)			—				—
Loss on sale of Pasadena Holdings			—				—				148,157				148,157
Other expense, net			806				—				—				806
Total operating expenses			52,197				(38,679	)			148,157				161,675
Operating income (loss)			19,157				48,208				(148,157	)			(80,792	)
Other income (expense), net
Interest expense			(14,098	)			—				—				(14,098	)
Loss on debt extinguishment			(6,001	)			—				—				(6,001	)
Gain on fair value adjustment to earn-out consideration			4,920				—				—				4,920
Other income, net			(6	)			9				—				3
Total other expenses, net			(15,185	)			9				—				(15,176	)
Income (loss) before income taxes			3,972				48,217				(148,157	)			(95,968	)
Income tax benefit			(96	)			(141	)			—				(237	)
Net income (loss)		$	4,068			$	48,358			$	(148,157	)		$	(95,731	)
Net income (loss) per common unit allocated to common unitholders - Basic and diluted		$	0.10								—			$	(2.46	)
Weighted-average units used to compute net income (loss) per common unit:
Basic			38,850								—				38,850
Diluted			38,945												38,850

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RENTECH NITROGEN PARTNERS, L.P.

Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

The unaudited pro forma condensed consolidated financial statements give effect to the sale of Pasadena Holdings’ related assets and liabilities. The unaudited pro forma condensed consolidated statements of operations for the three years ended December 31, 2015 are presented as if the sale occurred on January 1, 2013. The unaudited pro forma condensed consolidated balance sheet as of December 31, 2015 is presented as if the sale occurred on that date.

Pro Forma Adjustments to the Unaudited Pro Forma Consolidated Balance Sheet

 

(1)	Reflects the deconsolidation of the Pasadena Holdings’ assets and liabilities as if the disposition occurred on December 31, 2015. All amounts are derived from the historical consolidated financial statements of Rentech, Inc. (the “Company”).

 

(2)

Reflects estimated net sales proceeds to the Partnership, which is comprised of an initial cash payment of $5.0 million, less transaction costs of approximately $0.4 million, plus a working capital payment of $6.0 million. The working capital payment will be based off actual working capital as of March 14, 2016 pursuant to the Purchase Agreement, but for purposes of the pro forma balance sheet the adjustment has been applied to working capital as of December 31, 2015.

 

(3)	Reflects additional transaction costs of approximately $0.3 million incurred in 2016.

 

(4)	Reflects estimated distributions of net proceeds to the Partnership unitholders, which is comprised of an initial cash payment of $5.0 million, less transaction costs of $0.7 million, plus a working capital payment of $6.0 million.

Pro Forma Adjustments to the Unaudited Pro Forma Consolidated Statements of Operations

 

(1)	Reflects the deconsolidation of Pasadena Holdings’ results of operations as if the disposition occurred on January 1, 2013. All amounts are derived from the Company’s historical consolidated financial statements.

 

(2)

Reflects loss on sale of Pasadena Holdings, net of allocation of loss to noncontrolling interests, which is comprised of $11.0 million of estimated gross proceeds, less $0.7 million of estimated transactions costs, compared to Pasadena Holdings’ net book value of $158.5 million as of January 1, 2013.