RTK - Rentech Inc

[Paarslaars]

Boy this is really tanking every day. I keep telling myself I'm going to start a position soon, but so far this is the definition of a falling knife.

 

Until it isn't, like today... did you buy in?

 

Are any of you guys adding or starting positions yet?

 

I started a position at 1$ a few days ago.

[Patmo]

Boy this is really tanking every day. I keep telling myself I'm going to start a position soon, but so far this is the definition of a falling knife.

 

Until it isn't, like today... did you buy in?

 

Are any of you guys adding or starting positions yet?

 

I started a position at 1$ a few days ago.

 

Yeah I wanted to double down at .7 but dicked around... Dang! Could go down sharply again for no reason though

[heth247]

Raging capital added 172K shares in the last two days

http://phoenix.corporate-ir.net/phoenix.zhtml?c=66629&p=irol-SECText&TEXT=aHR0cDovL2FwaS50ZW5rd2l6YXJkLmNvbS9maWxpbmcueG1sP2lwYWdlPTExNDQyODAzJkRTRVE9MCZTRVE9MCZTUURFU0M9U0VDVElPTl9FTlRJUkUmc3Vic2lkPTU3

 

[wjsco]

I think the point here is recourse vs non-recourse obligations. Fulghum Fibers and NEWP were bought for $35m and $8m or so, and FF has $39m in debt and NEWP has $16m in debt. They probably wont see proceeds from selling the two FF mills, as the FF debt is probably secured by those mills. am i wrong here?

 

But, both of those loans are to their subsidiaries, and are secured by their subsidiaries' assets. They aren't recourse to RTK. So, write them off - make them worth zero.

 

For the Drax contract...they do have $30m in exposure at the corporate level. But also, the investment in Wawa didn't go to waste, they just dont have enough cash to finish the project. But an acquirer would have that cash. If you can sell the Wawa facility to someone who can finish it up, they would probably opt in to the take/pay contract if given the opportunity. Additionally, of the $30m exposure, $20m of that exposure expires in mid 2018. And, they only have to make payments if Draxx's new source of pellets is more expensive than Wawa was going to be.

 

They basically have $42.5m cash ($39m + $3.5m from Kaidi in late 2016), $52m in GSO debt, the Wawa facility and it's take/pay contract, and 7.1 UAN units. Even if they sell the other subsidiaries instead of letting them fold, as mentioned, those subs have more debt than they bought them for. So I don't think much, if anything, will accrue to equity from the sales. maybe im wrong, but i just don't understand how there's any value for equity holders in either of those subs.

 

$10m in net debt (42.5m cash, 52m debt). And then you have Wawa + take/pay. The equipment and machinery they've put into Wawa really is worth something. That's a real asset that someone would buy. Idk exactly how much they spent on it. But, let's lowball it and say they sell the plant for $10m. If they offload the take/pay exposure with the plant, you're left with zero net debt and zero liability under take or pay. You also have given up Wawa, FF, and NEWP. All you have left is 7.1m units of UAN. At $5, that's worth $35m, or 75% upside from here. But those units used to be worth $25-30. Not saying it's going back there. But could easily be $10-15, especially if Trump removes all the coal regulations, which would probably have a major impact on UAN's earnings. At $10, the UAN shares are worth $70m, or ~$3 per RTK share...250% upside or so? At $15, UAN shares are worth $105m, ~$4.5/sh, or 400% upside. It's basically a way to get UAN shares for 40-50% discount to market, which is great, esp if market is undervaluing the company.

 

What if RTK has to pay the full $30m contract exposure to Draxx? Let's say we decide UAN shares are worth $7 each, or ~$50m. Even if they pay the full $30m to Drax, which i don't think will happen, the remaining proceeds = $20m, which is today's mkt cap. If an appropriate price for UAN is $10, so $10*7=$70m, and they pay the full exposure of $30m, the remaining proceeds are worth $40m, or double today's current price. So, basically no margin of safety if UAN's intrinsic value is $7/sh. If it's intrinsic value is $10, your RTK units would be worth $40m, which is a double (and provides a margin of safety). Interestingly, if UAN goes to $10 from $5, that's also a double. So, if RTK owes the full $30m to Draxx, there's no benefit of buying RTK instead of UAN if UAN is worth $10 or less. If UAN moved from $5 to $15, though, and you owned UAN, you'd make +200%. But if you own RTK, you'd get $15*7=$105m/, or a $425% return. So, in the scenario where RTK owes the full $30m to Draxx, UAN and RTK would both return 100% if UAN were to rise to $10. But after $10, the return trajectories differ dramatically. Now, if they only owe $15m to Draxx, or $0, the return trajectories will diverge at a lower price point. So, if RTK owes $15m instead of $30m, maybe the trajectories diverge when UAN is at $7.50. And lastly, if they don't owe anything to Draxx, then the return trajectories will diverge from the outset. To explain this, imagine they have $0 exposure to Draxx bc they sell the contract with Wawa to some buyer. Since they have no net debt (Wawa proceeds repay the $10m remaining net debt), you get $35m of UAN units for $20m. You basically get to buy UAN at a 45% discount to market price..let's say the UAN market price is $5, and you can buy it for $3.00 through RTK. If mkt price moves to $10, that's a 230% return for RTK and only 100% for UAN. And this effect becomes more pronounced the higher those unit prices go. To bring this full circle, if they do owe the $30m to Draxx, 130% of that 230% return (when UAN=$10) will go towards paying the $30m to Draxx, which is why RTK and UAN would both return 100% if UAN moved from $5 to $10.

 

I think they key is to just come up with a normalized earnings power / valuation for UAN. If it's worth at least $10, then buy RTK (and not UAN), because 1) it doesn't matter if RTK owes the full exposure to Draxx if UAN shares are worth $10 each, because you can pay the $30m and still be left with $40m worth of UAN units and 2) returns from owning RTK will be higher when UAN is over $10. And there's upside embedded, in case they a) sell Wawa for more than $10m, or b) owe less than $30m to Draxx.

[evg98]

what multiples do you think they can get for assets....EVA trades at 7.5x EBITDA.  If RTK sells assets for 7x EBITDA and you capitalize corporate, I am not sure there is much equity value.

 

What is the scenario you're thinking of?  Specifically, what assets are being sold and what level of corporate overhead is going to remain after the sale?  I don't see shareholders letting $12 million in annual corporate overhead continue once Wawa is effectively shut down and either Fulghum or NEWP are sold. 

 

 

 

Corporate overhead although reduced will still remain. Most of the G&A expenses at the sub level are rolled into corporate overhead and reported separately. This is an opaque structure and if you go through the previous CC's you would notice the analysts demanding that overheads be reported at the  sub level. My guess is that the overheads will be in the range of $7-8 minus industrials.

 

Right now there is only one board member from activist investor ,Ariel investments but if the Raging capital can get the board seats, then there is some hope that those overheads will be reduced.

 

 

Also note that Kevin Rendino has been on the board since April 2016, apparently due at least in part to pressure by another major holder and activist investor, Lone Star Value Management LLC.  Rendino's term expires at the 2017 annual shareholder's meeting.  See www.olshanlaw.com/resources-mentions-Rentech-Cooperation-Agreement-LoneStar-Value.html  and https://www.sec.gov/Archives/Edgar/data/868725/000156459016016843/rtk-8k_20160427.htm

[heth247]

I think the point here is recourse vs non-recourse obligations. Fulghum Fibers and NEWP were bought for $35m and $8m or so, and FF has $39m in debt and NEWP has $16m in debt. They probably wont see proceeds from selling the two FF mills, as the FF debt is probably secured by those mills. am i wrong here?

 

But, both of those loans are to their subsidiaries, and are secured by their subsidiaries' assets. They aren't recourse to RTK. So, write them off - make them worth zero.

 

For the Drax contract...they do have $30m in exposure at the corporate level. But also, the investment in Wawa didn't go to waste, they just dont have enough cash to finish the project. But an acquirer would have that cash. If you can sell the Wawa facility to someone who can finish it up, they would probably opt in to the take/pay contract if given the opportunity. Additionally, of the $30m exposure, $20m of that exposure expires in mid 2018. And, they only have to make payments if Draxx's new source of pellets is more expensive than Wawa was going to be.

 

They basically have $42.5m cash ($39m + $3.5m from Kaidi in late 2016), $52m in GSO debt, the Wawa facility and it's take/pay contract, and 7.1 UAN units. Even if they sell the other subsidiaries instead of letting them fold, as mentioned, those subs have more debt than they bought them for. So I don't think much, if anything, will accrue to equity from the sales. maybe im wrong, but i just don't understand how there's any value for equity holders in either of those subs.

 

Your numbers are far off. They bought Fulghum in 2014 for $112MM and assumed $47MM debt for it. They have paid off that debt down to $37MM. So, if they can do a quick sale of Fulghum today for $100MM, they should be able to net at least $60MM.  Your numbers for NEWP are also wrong, but just want to point it out here.

 

Their cash at corporate level is $20MM now, not $39MM, which was at the end of 3Q 2016.

[snow pea]

I got around to poking into this a bit this week.  I can certainly see the potential for a range of outcomes, a lot of which have already been discussed, including many with potentially lovely results for investors at this price.  One that I haven't seen discussed is the possibility of a recap at this share price to the benefit of a select few inside or outside investors, which could dilute the potential benefit to existing investors.  From the press release:

 

"In conjunction with this process and to address potential future liquidity needs, Rentech is considering strategic alternatives that may include, but are not limited to, a sale of the Company, a merger or other business combination, a sale of all or a material portion of the Company’s assets or a recapitalization."

 

I'm not sure whether the increasing stakes of potential activists helps protect minority shareholders against this possibility or exacerbates the risk.  Also, not to be discounted, depending on how it was structured, how other variables turn out, &c, it could actually work out as a good outcome (reduce risk, provide enough liquidity for wawa to get running profitably, etc.) even if there were dilution that initially appears to be to the detriment to minority shareholders.

 

Anyway, I'm curious if anyone else is thinking about this as one of the possible outcomes. 

[KJP]

There is a share price for RTK relative to UAN where you have to decide whether you just ought to be long UAN instead.  But it appears you've got several key facts wrong and are missing some potentially significant liabilities. 

 

Fulghum Fibers and NEWP were bought for $35m and $8m or so, and FF has $39m in debt and NEWP has $16m in debt. They probably wont see proceeds from selling the two FF mills, as the FF debt is probably secured by those mills. am i wrong here?

 

Yes, I think you are wrong.  The initial Fulghum purchase price was $112 million, including $59 million in assumed debt, which has been paid down to $37 million.  The initial purchase price for NEWP (45) + earnout (5) + cost of Allegheny bolt-in acquistion (7) was $57 million, with about $16 million in assumed debt, which has stayed about the same.

 

You may be correct that the $5.5 million Fulghum payment may have to go to repaying a site-specific loan.  There's not enough disclosed information to know one way or the other.

 

For the Drax contract...they do have $30m in exposure at the corporate level.

 

Why is it $30 million rather than $20 million?  I thought the step-down after May 2018 lowered the total liability, rather than being additive.

 

But also, the investment in Wawa didn't go to waste, they just dont have enough cash to finish the project. But an acquirer would have that cash. If you can sell the Wawa facility to someone who can finish it up, they would probably opt in to the take/pay contract if given the opportunity. Additionally, of the $30m exposure, $20m of that exposure expires in mid 2018. And, they only have to make payments if Draxx's new source of pellets is more expensive than Wawa was going to be.

 

Management does not have a handle on what it will take to fix Wawa.  Their previous guidance on it has been wrong.  It is possible that the plant is so fatally flawed that an acquiror would not get an acceptable ROI on the CapEx needed to fix it.  Again, there not enough information here to know what's really going on a Wawa.

 

I think the suggestion that they can get $10 million for Wawa while also passing on all its liabilities is quite optimistic based on what we know.

 

They basically have $42.5m cash ($39m + $3.5m from Kaidi in late 2016), $52m in GSO debt, the Wawa facility and it's take/pay contract, and 7.1 UAN units. Even if they sell the other subsidiaries instead of letting them fold, as mentioned, those subs have more debt than they bought them for. So I don't think much, if anything, will accrue to equity from the sales. maybe im wrong, but i just don't understand how there's any value for equity holders in either of those subs.

 

Not correct on NEWP and Fulghum.  Wawa related liabilities are, at least, Drax, CN Rail and QSL, plus idling costs.  They also have the Atikokan plant.  They also disclosed that as of Feb 2017, they're down to $20 million in US cash (excludes cash held in Canada and South America).

 

 

 

 

[KJP]

 

Also note that Kevin Rendino has been on the board since April 2016, apparently due at least in part to pressure by another major holder and activist investor, Lone Star Value Management LLC.  Rendino's term expires at the 2017 annual shareholder's meeting.  See www.olshanlaw.com/resources-mentions-Rentech-Cooperation-Agreement-LoneStar-Value.html  and https://www.sec.gov/Archives/Edgar/data/868725/000156459016016843/rtk-8k_20160427.htm

 

Lone Star has a contractual right to appoint a board member, correct?

[valcont]

I think the point here is recourse vs non-recourse obligations. Fulghum Fibers and NEWP were bought for $35m and $8m or so, and FF has $39m in debt and NEWP has $16m in debt. They probably wont see proceeds from selling the two FF mills, as the FF debt is probably secured by those mills. am i wrong here?

 

But, both of those loans are to their subsidiaries, and are secured by their subsidiaries' assets. They aren't recourse to RTK. So, write them off - make them worth zero.

 

 

I highly recommend that you read the first few pages of this thread. And the subs's liabilities are recourse to RTK.

[KJP]

I got around to poking into this a bit this week.  I can certainly see the potential for a range of outcomes, a lot of which have already been discussed, including many with potentially lovely results for investors at this price.  One that I haven't seen discussed is the possibility of a recap at this share price to the benefit of a select few inside or outside investors, which could dilute the potential benefit to existing investors.  From the press release:

 

"In conjunction with this process and to address potential future liquidity needs, Rentech is considering strategic alternatives that may include, but are not limited to, a sale of the Company, a merger or other business combination, a sale of all or a material portion of the Company’s assets or a recapitalization."

 

I'm not sure whether the increasing stakes of potential activists helps protect minority shareholders against this possibility or exacerbates the risk.  Also, not to be discounted, depending on how it was structured, how other variables turn out, &c, it could actually work out as a good outcome (reduce risk, provide enough liquidity for wawa to get running profitably, etc.) even if there were dilution that initially appears to be to the detriment to minority shareholders.

 

Anyway, I'm curious if anyone else is thinking about this as one of the possible outcomes.

 

Yes, I have been thinking about it because it may align with management's interests.  Management (and, for that matter, the majority of the board) has no equity stake and their options are way underwater.  The CEO is also a lifetime financial engineer, not a wood products company operator.  In addition, the company has real, profitable businesses in Fulghum and NEWP, so many managers would want to preserve their ability to manage (and get paid for managing) those businesses.  One can imagine that, on those facts, many managers would be quite happy to dilute equityholders massively if it meant resolving the underlying debt issues that threaten their jobs. 

 

I'm not an investment banker or a PE guy, so I can't dream up all the ways to squeeze the existing equityholders, particularly the small ones.

 

 

[valcont]

Yes, I have been thinking about it because it may align with management's interests.  Management (and, for that matter, the majority of the board) has no equity stake and their options are way underwater.  The CEO is also a lifetime financial engineer, not a wood products company operator.  In addition, the company has real, profitable businesses in Fulghum and NEWP, so many managers would want to preserve their ability to manage (and get paid for managing) those businesses.  One can imagine that, on those facts, many managers would be quite happy to dilute equityholders massively if it meant resolving the underlying debt issues that threaten their jobs. 

 

I'm not an investment banker or a PE guy, so I can't dream up all the ways to squeeze the existing equityholders, particularly the small ones.

 

 

One of the board member is from Ariel investments so the board has atleast one voice. And don't forget the Raging Capital's stake. They can do private placement with these investors but they will need shareholder's approval . The only fair way is a rights offering. I guess we'll know in couple weeks.

They better have a good plan other than throwing more money on Wawa.

 

[heth247]

One of the board member is from Ariel investments so the board has atleast one voice. And don't forget the Raging Capital's stake. They can do private placement with these investors but they will need shareholder's approval . The only fair way is a rights offering. I guess we'll know in couple weeks.

They better have a good plan other than throwing more money on Wawa.

 

Which one were you referring to? Kevin Rendino? I thought he is from LongStar, not Ariel.  Ariel actually reduced their stakes from 14% to 9.8% at the end of 2016. Raging capital now owns 15%+. Another big holder is Lloyd I. Miller, III, don't know very much about his background....he actually increased his stake from 5.4% to 5.8% at the end of 2016 based on 13G filings.

 

[evg98]

For your reading pleasure - Some more details on the industrial pellets segment of the business, with a focus on the unfolding of the "Wawa woes" in a generally chronological format - I hope this provides some helpful background, and at the least, interesting reading:

 

Here is the original press release announcing entry into the wood pellet business including rationale and forecasts.  Quite rosy predictions back in May of 2013.  3-1/2 yrs later, looking back, one might be more apt file it in the "it sounded good at the time" drawer.

 

http://www.businesswire.com/news/home/20130502005564/en/Rentech-Acquires-Wood-Chip-Processor-Fulghum-Fibres

 

The Wawa facility boasts some 'state of the art' equipment at the front end of the process http://forestnet.com/LSJissues/2014_june_july/pellet.php, manufactured by Continental Biomass Industries http://www.cbi-inc.com/. 

 

According to the website of RDR Industrial, the firm that performed the installation and commissioning services on the Wawa conversion, http://www.rdrindustrial.com/portfolio/rentech/, the scheduled project completion date was October 2014.  From the website -

 

RDR Industrial was awarded the contract to convert Rentech Inc.’s recently acquired fibre processing mills in Atikokan and Wawa into new state of the art wood pellet plants.

 

Utilizing existing structures, the project consists of the installation of structural, mechanical, electrical, instrumentation controls and commissioning for the wood pellet plants.

 

Est. completion October 2014"

 

November 6, 2014 - Not quite there yet.  Progress Report  http://biomassmagazine.com/articles/11187/rentech-reports-pellet-plants-progress-earnings

 

February 20, 2015 - Delays force borrowing. https://www.northernontariobusiness.com/industry-news/forestry/delays-force-rentech-to-borrow-to-finish-pellet-plants-371029

 

March 20, 2015 - a little additional help from the Northern Ontario Heritage Fund  https://www.northernontariobusiness.com/industry-news/forestry/rentech-converts-pellets-into-provincial-cash-371076

 

May 11, 2015 - Wawa begins commissioning in April 2015.  First pellets produced on April 20.  Plant expected to reach capacity by Feb 2016.  http://biomassmagazine.com/articles/11916/rentech-highlights-canadian-pellet-plant-production-in-q1-results

 

May 21, 2015 Presentation of a diversified wood processing business - http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=10&ved=0ahUKEwiW1u37yLvSAhVHzmMKHSpdDbAQFghSMAk&url=http%3A%2F%2Fphx.corporate-ir.net%2FExternal.File%3Fitem%3DUGFyZW50SUQ9NTgxNzcwfENoaWxkSUQ9MjkwNTA0fFR5cGU9MQ%3D%3D%26t%3D1&usg=AFQjCNHyBubO8MyhDGpwguYWG3xoGn4djQ

 

May 27, 2015 Take a breather and watch this - unloading a trailer at Wawa

 

August 2015 - “We will need to modify and replace the log in-feed equipment and a significant portion of conveyance systems at the Wawa plant this fall and into next year to address the construction flaws we discovered during ramp up,” Forman said. http://biomassmagazine.com/articles/12294/rentech-reports-delays-at-atikokan-wawa-pellet-plants

 

November 2015 - Rentech Restarts Wawa Plant. http://biomassmagazine.com/articles/12294/rentech-reports-delays-at-atikokan-wawa-pellet-plants

 

Okay, take another break from the numbers and watch this video to get a slightly different perspective from the people doing the front line work.  You'll get glimpses of the process, the facilities, and of the some of people who help make it all come together. Factor it all into your equation.

 

November 9, 2015 - Q3 2015 Results - Wawa full capacity target moved back to 2ne half of 2016. http://www.rentechinc.com/reference-docs/3Q15%20RTK%20Press%20Release%20FINAL%2011-9-15.pdf

 

March 2016 - "We are preparing for the final phase of corrections to the conveyors at both plants by this summer. We are optimistic that these final conveyor replacements will enable the plants to continue ramp-up to full capacity." http://www.bioenergy-news.com/display_news/10303/Rentech_provides_update_on_wood_pellet_production/

 

May 2016 - Rentech Q1 2016: domestic pellet sales down big, rebound expected http://biomassmagazine.com/articles/13248/rentech-q1-2016-domestic-pellet-sales-down-big-rebound-expected

 

Stop at this point of interest - Map of U.S. and Canadian Pellet Production Locations https://issuu.com/bbiinternational/docs/pelletmap16_issuu

 

September 2016 - Pellet Plants continue to improve - http://atikokanprogress.ca/2016/09/13/rentechs-canadian-pellet-plants-continue-to-improve/

 

November 2016 - ...or, not so much...  EAD gets a shot at fixing things.  "Rentech retains EAD to perform engineering, project management, constructions management, and design to convert two decommisioined fiber mills into wood pellet plants." http://eadcorporate.com/project/ead-converts-fiber-mills-wood-pellet-plats-rentech/

 

February, 21 2017 - Rentech throws in the towel https://www.northernontariobusiness.com/regional-news/northeastern-ontario/cash-strapped-rentech-pulls-plug-on-wawa-pellet-mill-541492

 

Feb 21, 2017 and thereafter - The Lawyers have a heydey

Goldberg Law PC announces....

Levi & Korsinsky, LLP notifies shareholders...

Brower, Piven...

Bronstein, Gewertz & Grossman...

Vincent Wong...

Khang & Khang LLP...

Rosen Law...

Johnson & Weaver...

Gainey McKenna & Eagleston...

Glancy Prongay & Murray...

Lundin Law PC...

Howard G. Smith...

 

I guess now I'm going to have to find some time to read through all this myself.

[heth247]

I got around to poking into this a bit this week.  I can certainly see the potential for a range of outcomes, a lot of which have already been discussed, including many with potentially lovely results for investors at this price.  One that I haven't seen discussed is the possibility of a recap at this share price to the benefit of a select few inside or outside investors, which could dilute the potential benefit to existing investors.  From the press release:

 

"In conjunction with this process and to address potential future liquidity needs, Rentech is considering strategic alternatives that may include, but are not limited to, a sale of the Company, a merger or other business combination, a sale of all or a material portion of the Company’s assets or a recapitalization."

 

I'm not sure whether the increasing stakes of potential activists helps protect minority shareholders against this possibility or exacerbates the risk.  Also, not to be discounted, depending on how it was structured, how other variables turn out, &c, it could actually work out as a good outcome (reduce risk, provide enough liquidity for wawa to get running profitably, etc.) even if there were dilution that initially appears to be to the detriment to minority shareholders.

 

Anyway, I'm curious if anyone else is thinking about this as one of the possible outcomes.

 

Yes, I have been thinking about it because it may align with management's interests.  Management (and, for that matter, the majority of the board) has no equity stake and their options are way underwater.  The CEO is also a lifetime financial engineer, not a wood products company operator.  In addition, the company has real, profitable businesses in Fulghum and NEWP, so many managers would want to preserve their ability to manage (and get paid for managing) those businesses.  One can imagine that, on those facts, many managers would be quite happy to dilute equityholders massively if it meant resolving the underlying debt issues that threaten their jobs. 

 

I'm not an investment banker or a PE guy, so I can't dream up all the ways to squeeze the existing equityholders, particularly the small ones.

 

 

I think even assume that they issue 30MM (150% dilution) shares at $1, to get $30MM liquidity to address short term liability, the stock probably can still be worth $2 (for 50MM shares) in a couple of years when the cold winter returns and UAN recovers, provided that they completely shut down Wawa and reduce SGA at corporate.  What I don't want to see is that they issue shares then to try again to make Wawa work, throwing more money into the fire pit.

 

Can they issue preferred again? Just like what they did in the past via Series E preferred with GSO? That one basically looked like a temporary Mezzanine equity to fund their invest in Wawa while they are looking to sell RNP. Once RNP was sold, it was paid off quickly.

 

 

 

[evg98]

 

Also note that Kevin Rendino has been on the board since April 2016, apparently due at least in part to pressure by another major holder and activist investor, Lone Star Value Management LLC.  Rendino's term expires at the 2017 annual shareholder's meeting.  See www.olshanlaw.com/resources-mentions-Rentech-Cooperation-Agreement-LoneStar-Value.html  and https://www.sec.gov/Archives/Edgar/data/868725/000156459016016843/rtk-8k_20160427.htm

 

Lone Star has a contractual right to appoint a board member, correct?

 

From the April 26, 2016 8-K https://www.sec.gov/Archives/edgar/data/868725/000156459016016843/rtk-8k_20160427.htm  -- "Lone Star Value has certain rights to recommend a substitute director if Mr. Rendino is unable to serve as a director, resigns or is removed during the term of the “Standstill Period” (as defined in the Cooperation Agreement). "

 

I don't see anything that clearly states that Lone Star has the right to appoint a board member after Rendino's term expires though.  I'll have to see if I can find the expiration of the "standstill period" referred to in the 8-K.

 

-- Okay, I found it -- in the full text of the 'Cooperation Agreement'  (attached Exhibit 10.1 of the 8-K)  https://www.sec.gov/Archives/edgar/data/868725/000156459016016843/rtk-ex101_6.htm

 

(ii)the term  “Standstill Period” shall mean the period commencing on the date of this Agreement and ending on the earlier to occur of (x) the day following the completion of the Company’s 2017 Annual Meeting or (y) the date that is 15 days prior to the last date that a shareholder may properly notify the Company that it intends to nominate a candidate for election as a director at the 2017 Annual Meeting (such date, the “Nomination Deadline”) if, with respect to this clause (y) the Company has not notified Lone Star Value in writing at least 30 days prior to the Nomination Deadline that the Company will nominate the Additional Director for reelection at the 2017 Annual Meeting. 

 

 

So the independent director seat would have to be renegotiated again when the original term expires.

[valcont]

One of the board member is from Ariel investments so the board has atleast one voice. And don't forget the Raging Capital's stake. They can do private placement with these investors but they will need shareholder's approval . The only fair way is a rights offering. I guess we'll know in couple weeks.

They better have a good plan other than throwing more money on Wawa.

 

Which one were you referring to? Kevin Rendino? I thought he is from LongStar, not Ariel.  Ariel actually reduced their stakes from 14% to 9.8% at the end of 2016. Raging capital now owns 15%+. Another big holder is Lloyd I. Miller, III, don't know very much about his background....he actually increased his stake from 5.4% to 5.8% at the end of 2016 based on 13G filings.

 

My bad. I was referring to Lone star value.

[evg98]

Drax looking to purchase two pellet mills in the U.S to help secure it's own pellet requirements.

https://bioenergyinternational.com/pellets-solid-fuels/sellers-push-forward-bankruptcy-sale-of-german-pellets-us-facilities

 

Quoted from https://bioenergyinternational.com/pellets-solid-fuels/drax-bidder-in-german-pellets-us-plant-auctions

 

Drax has previously indicated its intention to expand its self-supply wood pellet operations “to support 20-30 percent”

[KJP]

For your reading pleasure

 

Horror fans will enjoy that reading list.  To add to it, I've attached the 2013 presentation accompanying Rentech's purchase of the Industrial pellet mills and Fulghum, which I think has been pulled from the website. 

RTK_Wood_Fibre_Announcement_Presentation_5_2_13_FINAL.pdf

[heth247]

Drax looking to purchase two pellet mills in the U.S to help secure it's own pellet requirements.

https://bioenergyinternational.com/pellets-solid-fuels/sellers-push-forward-bankruptcy-sale-of-german-pellets-us-facilities

 

Quoted from https://bioenergyinternational.com/pellets-solid-fuels/drax-bidder-in-german-pellets-us-plant-auctions

 

Drax has previously indicated its intention to expand its self-supply wood pellet operations “to support 20-30 percent”

 

That's interesting. If Drax can take over the Industrial for a reasonable price and cancel out the penalty, that would be a win-win.

[evg98]

Drax looking to purchase two pellet mills in the U.S to help secure it's own pellet requirements.

https://bioenergyinternational.com/pellets-solid-fuels/sellers-push-forward-bankruptcy-sale-of-german-pellets-us-facilities

 

Quoted from https://bioenergyinternational.com/pellets-solid-fuels/drax-bidder-in-german-pellets-us-plant-auctions

 

Drax has previously indicated its intention to expand its self-supply wood pellet operations “to support 20-30 percent”

 

That's interesting. If Drax can take over the Industrial for a reasonable price and cancel out the penalty, that would be a win-win.

 

Yes, I agree that would be a win-win.  Unfortunately, the two mills the article refers to are not owned by Rentech.  These mills are owned by a German company, and they are located in Texas and Louisiana.  I would sure like to know why Rentech has had such trouble working out the problems at Wawa. From everything I've read so far, it doesn't seem like they were trying to do anything way beyond what hasn't been done before.  There are a lot of pellet mills out there already, so the general process and design should be proven.  You would think that they could have tapped the industry knowledge base to get it figured out and make the thing work.  I'm no expert on pellet mills though, and I guess it just goes to show how risky large industrial construction projects can be.

[heth247]

Drax looking to purchase two pellet mills in the U.S to help secure it's own pellet requirements.

https://bioenergyinternational.com/pellets-solid-fuels/sellers-push-forward-bankruptcy-sale-of-german-pellets-us-facilities

 

Quoted from https://bioenergyinternational.com/pellets-solid-fuels/drax-bidder-in-german-pellets-us-plant-auctions

 

Drax has previously indicated its intention to expand its self-supply wood pellet operations “to support 20-30 percent”

 

That's interesting. If Drax can take over the Industrial for a reasonable price and cancel out the penalty, that would be a win-win.

 

Yes, I agree that would be a win-win.  Unfortunately, the two mills the article refers to are not owned by Rentech.  These mills are owned by a German company, and they are located in Texas and Louisiana.  I would sure like to know why Rentech has had such trouble working out the problems at Wawa. From everything I've read so far, it doesn't seem like they were trying to do anything way beyond what hasn't been done before.  There are a lot of pellet mills out there already, so the general process and design should be proven.  You would think that they could have tapped the industry knowledge base to get it figured out and make the thing work.  I'm no expert on pellet mills though, and I guess it just goes to show how risky large industrial construction projects can be.

 

I know those two are not RTK's. But it was interesting to know that Drax is willing to bid on bankrupt mills in order to get supply. So obviously the demand is there. The key questions are at what price the economics will work for the buyer. I am not an expert on this. (Heck, even those contractors RTK hired underestimate the amount of money and effort that are needed).

[igor]

Thanks to the posters above for all those links.

 

I know those two are not RTK's. But it was interesting to know that Drax is willing to bid on bankrupt mills in order to get supply. So obviously the demand is there. The key questions are at what price the economics will work for the buyer. I am not an expert on this. (Heck, even those contractors RTK hired underestimate the amount of money and effort that are needed).

 

I just wanted to add RE: "demand is there" that I know of one example of a plant that has been struggling to find a buyer or liquidate. It's Viridis Energy.

[heth247]

Thanks to the posters above for all those links.

 

I know those two are not RTK's. But it was interesting to know that Drax is willing to bid on bankrupt mills in order to get supply. So obviously the demand is there. The key questions are at what price the economics will work for the buyer. I am not an expert on this. (Heck, even those contractors RTK hired underestimate the amount of money and effort that are needed).

 

I just wanted to add RE: "demand is there" that I know of one example of a plant that has been struggling to find a buyer or liquidate. It's Viridis Energy.

 

I did some research on Viridis, it seems that its Scotia Atlantic sub cannot find a buyer because of difficulty to secure long term contract:

http://thechronicleherald.ca/business/1393180-no-buyer-for-idle-pellet-plant-in-middle-musquodoboit

 

Its Okanagan sub is already sold to American Biomass last Oct. in 2016.

 

 

[igor]

I did some research on Viridis, it seems that its Scotia Atlantic sub cannot find a buyer because of difficulty to secure long term contract:

http://thechronicleherald.ca/business/1393180-no-buyer-for-idle-pellet-plant-in-middle-musquodoboit

 

Its Okanagan sub is already sold to American Biomass last Oct. in 2016.

 

Thanks for taking a look. There are no official filings about this, but it didn't sound like the plant was among the acquired assets:

"American Biomass announced Tuesday it was acquiring the brand name, trademarks and customer lists of Okanagan Wood Pellets from Viridis Energy Inc. of Vancouver, Canada, according to CEO David Nydam." http://www.unionleader.com/apps/pbcs.dll/article?AID=/20161019/NEWS02/161019168&template=printart