Business Context and Reporting Period
This Form 8-K, filed by CVR Energy, Inc. on August 13, 2015, reports events occurring on August 9, 2015. The filing details a material definitive agreement wherein CVR Partners, LP (a subsidiary of CVR Energy) agreed to acquire Rentech Nitrogen Partners, L.P. and Rentech Nitrogen GP, LLC. CVR Energy indirectly owns 100% of CVR GP, LLC and approximately 53% of CVR Partners' common units.
Key Financial Metrics and Transaction Terms
The filing does not provide standard financial performance metrics such as revenue, profit, cash flow, or margins for the reporting period. The primary financial data relates to the proposed acquisition:
- Merger Consideration: Each outstanding Rentech Nitrogen Common Unit will be converted into 1.04 newly issued CVR Common Units and $2.57 in cash.
- Financing Commitment: Coffeyville Resources, LLC has committed to provide term loan financing of up to $150 million to fund the cash portion of the consideration and transaction expenses. The loan term is one year.
- Termination Fees: Upon termination under certain circumstances, an expense reimbursement payment of $10,000,000 may be required. Additionally, Rentech Nitrogen may be required to pay a termination fee of $31,200,000.
Material Changes and Agreements
The filing outlines several material agreements entered into on August 9, 2015:
- Merger Agreement: Establishes the terms for CVR Partners to acquire Rentech Nitrogen. The transaction is subject to conditions including unitholder approval, SEC registration effectiveness, NYSE listing approval, and the sale or spin-off of Rentech Nitrogen's Pasadena facility.
- Voting and Support Agreement: Executed with major Rentech Nitrogen unitholders (Rentech, Inc., Rentech Nitrogen Holdings, and DSHC, LLC), who collectively own approximately 59.7% of outstanding units. These parties agreed to vote in favor of the merger and are restricted from soliciting alternative proposals.
- Registration Rights Agreement: Grants Rentech Nitrogen Holdings and DSHC the right to require CVR Partners to file a registration statement for the resale of CVR Common Units received in the merger within 30 days of closing.
- Transaction Agreements:
- Rentech Nitrogen Unitholders: Grants the right to appoint two directors to the CVR GP Board, subject to ownership thresholds (15% and 7.5%). Includes a 180-day lock-up on shares and a one-year standstill provision.
- GSO Funds: Similar lock-up (180 days) and standstill (one year) provisions apply to GSO Capital Partners LP and its affiliates.
Outlook, Risks, and Contingencies
The completion of the Merger is contingent upon several conditions, including:
- Adoption of the Merger Agreement by a majority of Rentech Nitrogen Common Unit holders.
- Effectiveness of a Form S-4 registration statement.
- Approval for listing of CVR Common Units on the New York Stock Exchange.
- Sale or spin-off of the Rentech Nitrogen Pasadena facility.
- Absence of events of default under Rentech Nitrogen's 6.500% Second Lien Senior Secured Notes due 2021.
- Expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.
Management commentary is limited to the structural terms of the agreements. The filing includes standard disclaimers that representations and warranties are made solely for the benefit of the parties and may not reflect the actual state of facts.
Key Facts for Investor Verification
- Verify the status of the required sale or spin-off of the Rentech Nitrogen Pasadena facility, a specific closing condition.
- Confirm the approval status of the merger by Rentech Nitrogen unitholders.
- Monitor the effectiveness of the Form S-4 registration statement and NYSE listing approval.
- Assess the impact of the $150 million term loan commitment on CVR Partners' future liquidity and leverage.
- Review the governance changes, specifically the expansion of the CVR GP Board to eleven seats and the appointment rights of Rentech Nitrogen unitholders.