Rentech raises $300M in Rentech Nitrogen IPO

In California, Rentech Nitrogen Partners, L.P. (Rentech Nitrogen) priced of its initial public offering of 15,000,000 common units representing limited partner interests at $20 per common unit. The common units are expected to begin trading on the New York Stock Exchange on November 4, 2011 under the ticker symbol “RNF.” In connection with the offering, Rentech Nitrogen has granted the underwriters a 30-day option to purchase up to 2,250,000 additional common units from Rentech Nitrogen at the initial public offering price, less underwriting discounts and commissions.

Raymond James analyst Pavel Molchanov writes: “With yesterday’s pricing of Rentech Nitrogen Partners’ IPO, Rentech has successfully monetized its principal asset – the East Dubuque fertilizer plant – hence the gains in the stock in recent weeks. For the foreseeable future, we would expect RTK shares to generally trade in parallel with the units of Rentech Nitrogen Partners (RNF), given that the parent company’s cash flow will still come from its 55% ownership of the partnership.

“Corn crops consume more nitrogen fertilizer than any other crop domestically, and thus Iowa and Illinois are the largest corn-growing and nitrogen fertilizer-consuming states. Nitrogen fertilizer prices here are consistently higher than prices in other parts of the country, reflecting the incremental cost of transporting fertilizer into the region.

“Natural gas is the main feedstock for U.S. nitrogen fertilizer producers, and the structural oversupply in the North American gas market inherently improves fertilizer margins. For Rentech Nitrogen, gross margin increased from 32.5% in FY09 to ~43% in FY11, even though the plant’s product prices were off the highs of FY09.”