INDIANAPOLIS - Calumet, Inc. (NASDAQ: CLMT), a North American manufacturer and marketer of specialty branded products and renewable fuels, announced a new financial arrangement with Stonebriar Commercial Finance LLC. The agreement involves the sale and leaseback of assets by Calumet's subsidiary, Calumet Montana Refining, LLC (CMR), for $150 million.
CMR has received an initial $110 million from the transaction, with the remaining $40 million contingent upon a future Eligible Capital Event. Calumet plans to utilize these funds to reduce its outstanding borrowings under its revolving credit facility. The deal's cost of capital is approximately 10.75%, and it includes strategic early termination options.
In a related move, Montana Renewables, LLC (MRL), another Calumet subsidiary, revised its existing agreements with Stonebriar. These amendments permit early termination following potential proceeds from an Eligible Capital Event, which may include a loan guarantee from the U.S. Department of Energy (DOE). However, there is no assurance that Calumet will receive a conditional commitment for a DOE loan guarantee or funding.
Should MRL decide to terminate the agreements early and repurchase its assets, which include a Renewable Diesel Unit, Renewable Hydrogen Plant, and Pretreatment Unit, the cost would be approximately $403 million if the repurchase occurs on November 1. These assets were part of a sale and leaseback transaction that provided $400 million in funding to MRL during 2021 and 2022.
Calumet's CEO, Todd Borgmann, expressed gratitude to Stonebriar for their ongoing support, noting that the agreements afford Montana Renewables flexibility while allowing Stonebriar to maintain a stake in Calumet's capital structure.
The specifics of these financial dealings will be detailed in the Form 8-K to be filed with the Securities and Exchange Commission.
Investors and interested parties should note that certain statements in this press release may be forward-looking and involve risks and uncertainties. The information is based on a press release statement, and readers are advised to refer to Calumet's filings with the SEC for further details and risk considerations.
In other recent news, Calumet Inc. has been the focus of several significant developments. The company reported a robust Q1 EBITDA of $21.6 million, demonstrating strong financial performance. Calumet also repaid $50 million of its 2025 notes, a move that emphasizes its commitment to reducing debt.
TD Cowen adjusted its outlook on Calumet, lowering the price target but maintaining a Buy rating. This followed a notable increase in the company's share price after the earnings report. Calumet's operational update included positive EBITDA from its Montana Renewables segment, even amid challenging market conditions.
In addition, Calumet amended its credit and monetization agreements and finalized its conversion to a corporation. The company also completed a series of transactions as part of its strategic restructuring, including the termination of a material definitive agreement, an acquisition, and asset disposition.
Calumet's unitholders overwhelmingly approved the conversion of the company from a master limited partnership to a C-Corporation. This strategic shift is expected to attract a broader base of investors. Despite industry challenges, Calumet remains optimistic about future investor engagement and a positive EBITDA contribution from Montana Renewables. These are the recent developments within the company.
InvestingPro Insights
Calumet Specialty Products (NASDAQ:CLMT) Partners, L.P. (NASDAQ: CLMT) has made significant financial moves with its recent sale and leaseback transaction, which aligns with the company's current financial position as revealed by InvestingPro data.
According to InvestingPro, Calumet operates with a significant debt burden, which is reflected in the company's decision to use the $150 million from the sale-leaseback deal to reduce outstanding borrowings under its revolving credit facility. This strategic move could help improve the company's balance sheet, especially considering that InvestingPro data shows short-term obligations currently exceed liquid assets.
The company's focus on financial restructuring comes at a time when its profitability is under pressure. InvestingPro Tips indicate that Calumet is not profitable over the last twelve months, and analysts do not anticipate the company will be profitable this year. This context makes the new financial arrangement even more crucial for Calumet's operational flexibility.
Despite these challenges, Calumet has shown some positive financial indicators. The company's revenue for the last twelve months as of Q2 2023 stands at $4,265.4 million USD, with a quarterly revenue growth of 11.39% in Q2 2023. Additionally, Calumet has demonstrated a strong return over the last five years, according to InvestingPro Tips.
Investors considering Calumet should note that the stock's price movements are quite volatile, as highlighted by InvestingPro. This volatility is evident in the company's recent price performance, with a 3-month price total return of 10.38% but a 1-year return of -3.29%.
For a more comprehensive analysis, InvestingPro offers additional tips and insights, with 10 more tips available for Calumet Specialty Products Partners on the platform.
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