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Mississippi Chemical resumes full production

Yazoo City company bounces back with new financing option

by David Lush
DBJ Contributing Writer

The financial picture for Mississippi Chemical Corporation has taken a decidedly positive turn following the resumption to full production of its ammonium nitrate facility in Yazoo City and recent court approval for a financing option for the company.

On May 15, 2003, Mississippi Chemical filed for reorganization in federal bankruptcy court in Jackson under Chapter 11 of the U.S. Bankruptcy. At that time, several of the company’s existing lenders indicated they would provide the company with up to $37.5 million in debtor-in-possession (DIP) financing subject to approval of the bankruptcy court.
The company recently received court approval for a $32.5 million DIP revolving credit facility with a consortium of lenders led by Harris Trust and Savings Bank. In addition to the financing, Mississippi Chemical has reported that it has approximately $11 million cash on hand to fund ongoing operations.

Charles O. Dunn, president and CEO of Mississippi Chemical, says, “We are pleased to have secured this financing, which should be adequate to implement our planned reorganization. The combination of this credit facility, cash on hand and the restart of our key facilities not only strengthens our ability to serve our customers’ and suppliers’ needs going forward, but also enhances our presence in the marketplace. This process is advancing well, and our focus going forward will be to realize the best use for each of our assets.”

Melinda Hood, director of communications for Mississippi Chemical Corporation, says, “It’s a positive move for the company having the DIP financing approved and in place. This allows more flexibility financially as we move through the bankruptcy process. We’re into the fall season of agriculture, which is positive. We’re experiencing better pricing for our products and that helps the company’s bottom line.”

Also adding to the company’s positive financial outlook is a recent definitive agreement for the sale of Mississippi Chemical’s 50 percent equity interest in Point Lisas Nitrogen Limited (PLNL), formerly Farmland MissChem Limited (FMCL), and related shipping company to Koch Nitrogen Company.

Point Lisas Nitrogen Limited, which is jointly owned by Mississippi Chemical and an affiliate of Koch Nitrogen, owns and operates a 1,850 metric-tons-per-day ammonia plant in The Republic of Trinidad and Tobago. The total value of the proposed transaction is estimated to be $127 million, including around $92 million in cash proceeds. The remaining $35 million represents assumed liabilities.

“The divestiture of this asset represents a significant liquidity event and is a positive step in the direction of restructuring the company so we can emerge from the Chapter 11 bankruptcy process in an organized and timely manner,” says Dunn in a company press release on the sale.

“We will continue to utilize our existing terminal infrastructure to serve our ammonia customer base through a combination of supply from offshore purchases and our domestic production assets. We do not anticipate any change in our ability to serve our existing customer base or any restriction in opportunities for future growth,” he says.
“The sale of our Trinidad facility is a very positive fact for the company and for our liquidity issues as we make decisions regarding our reorganization plan as we emerge from bankruptcy,” says Hood.

This agreement represents a “stalking horse” bid that must be approved by the U.S. Bankruptcy Court in Jackson. Once approved, the next step will be an auction process where other interested parties may submit bids. The sale of the PLNL interest is expected to close sometime during December 2003.

“Koch Nitrogen is very interested in acquiring the other half of Point Lisas Nitrogen,” says Brock Nelson, business development vice president of Koch Nitrogen. “We believe that supply diversity is the key to long-term success in this industry. Our knowledge of the facility and its employees strengthens our belief that this is an excellent business fit.”
Koch Nitrogen Company and its affiliates produce, distribute and globally market nitrogen fertilizers, including anhydrous ammonia, urea and UAN. Koch Nitrogen is a subsidiary of privately held Koch Industries, Inc., which owns a diverse group of companies engaged in trading, investment and operations around the world.

As for the resumption of plant operations, Hood says, “the Yazoo City facility is fully operational and we’re fully staffed there. At the Yazoo City plant facility we have about 350 employees and in the administration corporate facility we have about employees. In all, we have about 1,100 employees that work for the company system wide.”

The company has also resumed full production of the West potash facility in Carlsbad, New Mexico while the East potash facility, also in Carlsbad, is in the process of restarting and expects to be fully operational by the end of October.

In addition to its corporate headquarters in Yazoo City, Mississippi Chemical subsidiaries have fertilizer plant locations across the U.S. and in the Caribbean. A wholly owned subsidiary, MissChem Nitrogen, L.L.C. produces nitrogen products in Yazoo City.
Triad Nitrogen, L.L.C. is a wholly owned subsidiary producing nitrogen in Donaldsonville, Louisiana. Mississippi Potash, Inc. is a wholly owned subsidiary producing potash fertilizer at its two operating mines and refineries in Carlsbad, New Mexico. Mississippi Phosphates Corporation, another wholly owned subsidiary, is a producer of phosphate fertilizer in Pascagoula. Farmland MissChem Limited is a joint venture operation in The Republic of Trinidad and Tobago that produces ammonia, a nitrogen fertilizer.

The voluntary bankruptcy proceedings involving the company, filed in May of 2003, are running the course but “we don’t have a definitive time line, yet, when we will be out of bankruptcy,” says Hood. “I expect that it will be within a year’s time, or less. It still depends on a variety of factors regarding the company’s reorganization during bankruptcy as well as the agriculture economy and the natural gas markets.”

“Over the past five years, the combination of the depression in the agricultural sector and the extreme increase and volatility in the price of domestic natural gas, the company’s primary raw material, has resulted in substantial financial losses for the company,” says Dunn. “Despite widespread actions to materially reduce our operating costs, it is apparent to the company’s management and our lenders that the cumulative effect of these losses, along with the current industry environment, requires that the capital structure of the company be modified significantly.”

The company still expects that its trade suppliers, unsecured trade creditors, employees and customers will not be materially adversely affected by the outcome of this process.
“We will do all that we can to see that the restructuring goes as expeditiously as possible. We have a very dedicated workforce and some excellent operating assets. We expect to emerge from this process as a stronger, more flexible company with an ability to better focus our attention on the needs of our customers,” Dunn concluded.

Hood, though, sees the future looking brighter for Mississippi Chemical Corporation due to the DIP activity, the sale of the Trinidad facility and the upturn in the agriculture market.
“All of those factors are working towards putting the company in a much stronger financial position. We will continue to provide for our customers and do what is necessary to keep this company strong,” she says. DBJ