CHICAGO — Rushing to get to market ahead of an end-of- year-deadline, the Iowa Fertilizer Co. will sell $1.2 billion of Midwestern Disaster Area Bonds structured with a mandatory tender in April that gives the company some breathing room to finalize plans for its nitrogen fertilizer plant.
The deal marks one the largest issuances under the $14.6 billion federal program that allows for private-activity bonds for qualified projects in designated counties hit hard by storms in the spring of 2008.
The program expires at the close of 2012. Counties in Arkansas, Indiana, Illinois, Iowa, Missouri, Nebraska and Wisconsin are eligible. The deal will price as soon as Tuesday with Citi serving as the underwriter and remarketing agent. Dorsey & Whitney LLP is the bond counsel and the Iowa Finance Authority which is managing the state’s MDAB allocation will serve as the conduit. The IFA has exhausted its $2.6 billion authorization.
The company — established by Cairo, Egypt-based Orascom Construction Industries — still has contracts and other preliminary project work to complete before seeking out investors based on its own credit worthiness or the project’s viability, so it’s initially using a short-term structure.
Proceeds will be escrowed and invested in U.S. securities. Standard & Poor’s assigned its top short-term marks to the borrowing based on the U.S. rating. A mandatory tender will occur on April 12, 2013. The offering statement does not include any financial information on the company although it does give a brief description of the project in Lee County.
The company has acquired the land, key environmental permits, and has signed various agreements relating to engineering, procurement, and construction of the project. It has also initiated significant engineering and design work and incurred material costs, according to the offering statement.
“The economic feasibility of the project is dependent upon the actual terms of the various contracts, many of which have not yet been completed, and other factors beyond the control of the company,” it reads. “Completion of the foregoing activities, among others, to demonstrate the financial feasibility of the project will be required in order for the remarketing agent to successfully remarket all of the Series 2012 bonds on the termination date.”
If not successfully remarketed or refunded, the bonds will be redeemed for their purchase price. The bond indenture does not allow the company to spend proceeds of the 2012 bonds on the project. Orascom owns nitrogen fertilizer plants in Egypt, the Netherlands, Algeria and the U.S. with an international distribution network throughout the Americas, Africa, Europe, Southeast Asia and the Middle East, according to the offering statement.
Gov. Terry Branstad and Orascom officials announced in September the company’s selection of the state to house the plant. The Iowa Economic Development Authority’s Board has approved more than $100 million in tax credits and other financial incentives. Lee County, which will house the site, has also agreed to forgo $133 million in property taxes.
The project is expected to create 165 permanent jobs and several thousand construction jobs, and save farmers as much as $740 million annually because of reduced transportation and import costs. The nation imports about half of its nitrogen fertilizer.
