Business Context and Reporting Period
This Form 8-K, filed on March 3, 2011, reports events occurring on February 28, 2011, for PolyOne Corporation (now Avient Corp). The filing details the completion of a material definitive agreement and the disposition of assets involving the Sunbelt Chlor Alkali Partnership.
Key Financial Metrics and Transaction Details
PolyOne sold its 50% equity interest in the Sunbelt Chlor Alkali Partnership to Olin Corporation. The aggregate purchase price consists of:
- Cash Proceeds: $132.3 million received at closing.
- Debt Assumption: Olin assumed PolyOne's guarantee of $42.7 million in senior secured notes issued by the Partnership.
- Earn-out Potential: PolyOne is eligible for annual earn-out payments for fiscal years 2011, 2012, and 2013 based on the Partnership's cash flow objectives.
- Distributions: PolyOne will receive its share of distributable cash generated by the Partnership from January 1, 2011, through the closing date.
The filing references unaudited condensed pro forma consolidated financial statements as of December 31, 2010, but does not provide specific revenue, profit, or margin figures within the text of this report.
Material Changes
As a result of the transaction, Olin now owns 100% of the equity interests in the Sunbelt Chlor Alkali Partnership. PolyOne has exited the joint venture, removing the associated assets and liabilities from its direct ownership, subject to the earn-out provisions and the transfer of the note guarantee.
Outlook, Risks, and Contingencies
Guarantee Transfer: PolyOne and Olin agreed to seek consent from Series G Note holders to transfer the $42.7 million guarantee to Olin. Upon successful transfer, PolyOne's indemnification obligations will terminate. Until then, Olin has indemnified PolyOne for costs arising from defaults after the closing date.
Future Cash Flows: Future earnings are contingent on the Partnership meeting specific cash flow thresholds for the earn-out payments over the next three fiscal years.
Investor Verification Checklist
- Verify the final status of the Series G Note holder consent required to transfer the $42.7 million guarantee to Olin.
- Review the specific cash flow thresholds defined in the Purchase Agreement (Exhibit 2.1) to assess the probability of earn-out payments.
- Examine the unaudited pro forma financial statements (Exhibit 99.1) to understand the immediate impact on PolyOne's balance sheet and income statement.
- Confirm the exact amount of distributable cash received from the Partnership for the period of January 1, 2011, to February 28, 2011.