TEXT-Moody's revises FertiNitro Finance outlook .
<a href=reuters.com>Reuters, Thu May 1, 2003 01:24 PM ET (The following statement was released by the rating agency) Approximately $ 250 Million of Debt Securities Affected
NEW YORK, May 1 - Moody's Investors Service changed the rating outlook for the U.S. $250 million secured bonds of FertiNitro Finance Inc. to developing from negative. The rating continues to be Caa2. FertiNitro Finance Inc. is a financing vehicle whose debt is guaranteed by Fertilizantes Nitrogenados de Venezuela, Fertinitro, C.E.C ("FertiNitro"). The change in outlook reflects amendments to Fertinitro's bank debt agreements that will give the project more flexibility after being weakened by numerous difficulties with the start-up and operation of the facilities, and by the national strike in Venezuela.
It also reflects signs of improvement in the operations of the plant as those difficulties are addressed. Under the amendments, 2003 principal repayment obligations have been deferred until 2004-2007, $10 million of sponsor equity has been contributed for capital expenditures, the Second Reliability Test deadline has been extended until at least November 30, 2005, $50 million of additional sponsor equity has been committed for the payment of debt service, and restricted payments are not allowed until parameters surrounding the new Second Reliability Test date are met.
Ammonia and urea production restarted on Train 2 with the resumption of significant gas supplies from PDVSA following the strike. The Train 2 waste heat boiler is now undergoing replacement while Train1 operates with a new waste heat boiler recently installed. Production for Train 2 in March, 2003 was running at or above capacity. Prices have recovered dramatically from the fall of 2002, backed by strong U.S. natural gas prices and a return to favorable conditions in its target U.S. markets. The project's net realization of $190/mt for ammonia and $160/mt for urea of late has supported recovery efforts. The developing outlook reflects expectations of continued operational improvements and higher product floor prices, but also considers the August presidential referendum as it may impact PDVSA and the feedstock gas supply, while cash flow and liquidity remain tight.
FertiNitro is 35%-owned indirectly by Koch Jose Cayman Limited, ultimately majority-owned by Koch Industries Inc. through other Koch subsidiaries ("Koch"), 35%-owned by Petroquimica de Venezuela, S.A. ("Pequiven"), a wholly-owned subsidiary of PDVSA, 20%-owned by Snamprogetti, a wholly-owned subsidiary of Snamprogetti S.p.A., and 10%-owned by Polar Jose Investments, Limited ("Polar"), ultimately owned directly and indirectly by the Polar Group.