Business Context and Reporting Period
FTAI Infrastructure Inc. filed this Form 8-K on June 29, 2023, under Item 7.01 (Regulation FD Disclosure) and Item 8.01 (Other Events). The filing supports a proposed offering of additional 10.500% senior secured notes due 2027 and provides selected first-quarter 2023 operating information. The filing is not a quarterly financial statement.
The company operates infrastructure businesses in railroad, crude oil and refined products terminals, natural gas liquids infrastructure, and power and gas. It also disclosed the announced transaction under which Fortress Investment Group and Mubadala Investment Company would acquire 100% of Fortress equity currently held indirectly by SoftBank; Fortress is expected to remain an independent investment manager.
Key Financial Metrics and Capital Structure
| Metric | Three months ended March 31, 2023 | Three months ended December 31, 2022 |
|---|---|---|
| Railroad net income attributable to stockholders | $8.1 million | $8.5 million |
| Railroad Adjusted EBITDA | $17.2 million | $13.5 million |
| Jefferson net loss attributable to stockholders | $9.2 million | $9.6 million |
| Jefferson Adjusted EBITDA | $6.5 million | $4.5 million |
| Repauno net loss attributable to stockholders | $8.8 million | $4.8 million |
| Repauno Adjusted EBITDA | $(4.9) million | $(1.9) million |
| Power and Gas net income attributable to stockholders | $8.5 million | $(16.9) million |
| Power and Gas Adjusted EBITDA | $11.3 million | $(6.6) million |
| Four core segments Adjusted EBITDA | $30.1 million | $9.5 million |
First-quarter 2023 consolidated segment net income attributable to stockholders was a loss of $1.4 million, compared with a loss of $22.8 million in the prior quarter. The reconciliation includes $19.2 million of depreciation and amortization, $9.4 million of interest expense, $1.1 million of changes in fair value of non-hedge derivatives, and $1.3 million of railroad severance expense.
The filing does not provide consolidated revenue, operating margin, net cash flow, cash balances, or total liquidity. Historical Adjusted EBITDA is a non-GAAP measure and should not be treated as a substitute for U.S. GAAP results or cash flow.
On May 18, 2023, the company entered into a $25.0 million secured Bridge Loan maturing December 31, 2023. Interest is payable at the Base Rate plus 6.50% or, if elected, Adjusted Term SOFR plus 7.50%. The facility is secured by company collateral, has superpriority payment status relative to the notes, and requires a Consolidated First Lien Leverage Ratio of no more than 11.50 to 1.00.
The company’s existing senior secured notes bear interest at 10.500% and mature in 2027. It expects Series A preferred stockholders to purchase up to $33.4 million of the additional notes.
Material Changes Versus the Prior Comparable Period
- Four-core-segment Adjusted EBITDA increased to $30.1 million from $9.5 million, primarily reflecting improved Power and Gas results and higher Railroad and Jefferson performance.
- Power and Gas shifted from a $16.9 million net loss and $6.6 million Adjusted EBITDA loss to $8.5 million of net income and $11.3 million of Adjusted EBITDA.
- Jefferson throughput increased 59% to 163.2 KBBLs per day from 102.4 KBBLs per day, attributed to commencement of the Exxon marine contract.
- Railroad Adjusted EBITDA increased to $17.2 million from $13.5 million, while net income declined modestly to $8.1 million from $8.5 million.
- Repauno’s Adjusted EBITDA loss widened to $4.9 million from $1.9 million, including costs to prepare for a multi-year butane throughput contract that commenced in the second quarter of 2023.
- The company obtained Series A holder consent to amend the preferred stock designation and facilitate the additional notes offering. The amendment is expected to be filed immediately before the offering closes.
Offering, Outlook, Risks, and Unusual Items
Subject to market conditions, the company intends to offer $100 million aggregate principal amount of additional 10.500% senior secured notes due 2027. The notes will be issued under the existing indenture, form a single class with the existing notes, and be guaranteed by certain subsidiaries. The offering is expected to be conducted under Rule 144A and Regulation S and will not be registered under the Securities Act.
Net proceeds are intended to repay the Transtar revolver and the Bridge Loan, terminate the related commitments, and fund general corporate purposes. Completion, pricing, and proceeds are not assured.
Management estimates, for illustrative purposes only, that the portfolio could generate more than $200 million of annual Adjusted EBITDA after corporate expenses over time. Illustrative potential includes more than $100 million from Transtar, approximately $80 million from Jefferson, $10 million from Repauno Phase 1 plus $40 million to $50 million from Phase 2, and approximately $60 million from Long Ridge following additional capacity and approvals. These are hypothetical targets, not guidance or projections.
The company is not providing forward-looking U.S. GAAP guidance or quantitative reconciliation of forward-looking non-GAAP measures because development and construction timing, cost overruns, interest expense, and project revenues cannot be predicted with reasonable certainty. Key risks include failure to complete the notes offering, inability to repay or refinance debt, compliance with the Bridge Loan leverage covenant, construction and development delays, cost overruns, utilization and pricing assumptions, required approvals, derivative fair-value volatility, and execution of commercial contracts.
Important Facts for Investors to Verify
- Whether the additional notes offering closed, its final principal amount, pricing, covenants, and use of proceeds.
- Whether the Bridge Loan and Transtar revolver were repaid and their commitments terminated.
- The company’s current cash balance, total debt, liquidity, and compliance with the 11.50-to-1.00 first-lien leverage covenant.
- Reconciliations of Adjusted EBITDA to U.S. GAAP results and the effect of non-recurring, derivative, and non-controlling-interest adjustments.
- Actual Jefferson throughput, Repauno contract performance, Long Ridge capacity approvals, and Transtar third-party growth.
- The status and terms of the Fortress and Mubadala transaction and any resulting effects on the company’s relationship with Fortress.