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February 6, 2016

Fatima Fertilser plans to raise $300mln via bond issue to fund US plant

Business

February 6, 2016

KARACHI: Fatima Fertilizer Company(FCC), major stakeholder in the Midwest Fertilizer (FFC), has planned to raise $300 million through tax increment-financing bonds to fund its manufacturing facility in Indiana, United States, company officials said on Friday.

"Citibank (the financial advisor) has advised that the month of March would be an appropriate time to raise the funds from the international market," Arif Habib, chairman FFC, told the News.

The project will be partially funded by an already secured $1.259bn tax-exempt debt borrowed for the company and facilitated by an Indiana county, under the Heartland Disaster Tax Relief Act of 2008. The remaining funds will be comprised of equity, tax increment-financing bonds, and some term debt.

Recently the Midwest Fertilizer has entered into an agreement with ThyssenKrupp Industrial Solutions to design and build a state-of-the-art nitrogen fertiliser manufacturing facility.  The contract awarded to ThyssenKrupp, which has built 19 ammonia and 21 urea plants over the past 20 years, covers engineering, procurement, construction (EPC) and related services.

Groundbreaking on the project is expected by mid-year and the construction will start after the financial close, also anticipated by mid-2016, with the fertiliser facility scheduled to be fully operational in 2020.  

The principal sponsor and developer of the project is FFC, a part of Fatima Group. Midwest has a 48 percent ownership stake from the Fatima Group. The rest of the ownership is a consortium of international investors.

Fawad Ahmed Mukhtar, chief executive officer, FFC said the company will begin meeting investors soon to discuss expected dollar-denominated bond.

"The road shows will be held in Asia, Europe and the united States for bond sales tapping global markets,” Mukhtar added. "It would be the first private sector's company to raise debt from the international markets since 2013… earlier private firms, including Mobilink and MCB Bank, have done so." he said.

Industry officials said the markets are good, there is a lot of free money and the firm can benefit from that especially in the European market.

Arif Habib said the issue will have the maturity period of 7 year and the assets would be pledged as collateral. "We will make bullet payment to pay off the debt when it gets matured," he added.

Habib said the plant would start commercial production in 36-40 months from the financial close, as arrival of machinery, plant and equipments and construction consume significant time.  At the new plant, which has a projected capital cost of $2.6bn, Midwest will produce ammonia, urea, urea ammonium nitrate (UAN) and diesel exhaust fluid (DEF).

In addition to providing fertiliser output targeted toward eastern corn belt farmers, the plant is expected to generate more than 2,500 construction jobs over a three- to four-year period and create 200 permanent jobs.

Habib said the government and the concerned authorities have already approved the investment. "Economic Coordination Committee of the Cabinet, State Bank of Pakistan and Ministry of Finance; all have approved the transaction," he said. 

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