Calumet Announces New Funding Agreement with Stonebriar

Rhea-AI Summary

Calumet, Inc. (NASDAQ: CLMT) announced new funding agreements with Stonebriar Commercial Finance Key points include:

• Calumet Montana Refining, (CMR) entered a $150 million sale-leaseback agreement with Stonebriar, receiving $110 million initially and $40 million upon a future Eligible Capital Event.
• Montana Renewables, (MRL) modified existing agreements with Stonebriar to allow for early termination.
• The CMR Funding Agreement has an approximate 10.75% cost of capital once fully drawn.
• MRL's existing agreements with Stonebriar, worth $400 million, can now be terminated early upon receipt of proceeds from an Eligible Capital Event, including a potential U.S. Department of Energy loan guarantee.
• If MRL repurchases its assets from Stonebriar on November 1, it would cost approximately $403 million.

Calumet intends to use the proceeds to reduce outstanding borrowings under its revolving credit facility.

Positive

• New $150 million sale-leaseback agreement providing additional funding
• Flexibility to terminate existing MRL agreements early
• Potential for DOE loan guarantee as an Eligible Capital Event
• Reduction of outstanding borrowings under revolving credit facility

Negative

• 10.75% cost of capital for the new CMR Funding Agreement
• Potential $403 million repurchase cost for MRL assets
• Uncertainty regarding DOE loan guarantee approval

Insights

Financial Analyst

This news is significantly impactful for Calumet (CLMT) and its investors. The company has secured $150 million in funding through a sale-leaseback agreement with Stonebriar, which will provide immediate liquidity and financial flexibility. Key points:

• CMR received $110 million upfront, with $40 million contingent on a future event
• Proceeds will reduce revolving credit facility borrowings, improving the balance sheet
• The 10.75% cost of capital is relatively high, reflecting current market conditions
• MRL's amended agreements allow for early termination, potentially linked to a DOE loan guarantee
• If exercised on November 1, the repurchase option would cost $403 million

This deal enhances Calumet's financial position but comes at a cost. The flexibility gained could be important for future strategic moves, especially if the DOE loan guarantee materializes. Investors should monitor the company's ability to leverage this funding for growth and improved profitability.

Energy Sector Analyst

Calumet's funding agreement with Stonebriar is a strategic move in the evolving renewable fuels landscape. The flexibility gained for Montana Renewables (MRL) is particularly noteworthy:

• Early termination option for MRL's $400 million sale-leaseback agreements
• Potential link to a DOE loan guarantee signals government interest in renewable projects
• Repurchase option for MRL assets indicates long-term commitment to renewable fuels

This deal positions Calumet to capitalize on the growing demand for renewable diesel and other sustainable fuels. The company's ability to secure funding and maintain operational flexibility in its renewable segment demonstrates foresight in a rapidly changing energy market. Investors should view this as a positive indicator of Calumet's adaptability and potential for growth in the renewable energy sector.

INDIANAPOLIS, Oct. 3, 2024 /PRNewswire/ -- Calumet, Inc. (NASDAQ: CLMT) (the "Company," "Calumet," "we," "our" or "us") announced today a series of related agreements with Stonebriar Commercial Finance LLC ("Stonebriar").

• Our restricted subsidiary Calumet Montana Refining, LLC ("CMR") entered into a new agreement with Stonebriar in which CMR sold certain of its assets to Stonebriar for $150 million and leased back the same assets ("CMR Funding Agreement").
• Our unrestricted subsidiary Montana Renewables, LLC ("MRL") modified its existing agreements with Stonebriar to allow for their early termination ("MRL Amended Agreements").

CMR Funding Agreement.  The CMR Funding Agreement has closed and CMR received initial proceeds of $110 million, with the remaining $40 million due upon a future Eligible Capital Event (discussed below).  Calumet intends to use the proceeds to reduce outstanding borrowings under its revolving credit facility. This transaction carries an approximate 10.75% cost of capital once fully drawn and offers certain strategic early termination options.

MRL Amended Agreements.  The existing sale and leaseback agreements between MRL and Stonebriar encompass MRL's Renewable Diesel Unit, Renewable Hydrogen Plant, and Pretreatment Unit.  These agreements generated $400 million of funding to MRL during 2021 and 2022.  The agreements have now been amended to allow for their early termination upon the receipt of proceeds from an Eligible Capital Event including a loan guarantee from the U.S. Department of Energy ("DOE"). There can be no assurance that the Company will be awarded a conditional commitment for a loan guarantee from the DOE or that any DOE-guaranteed loan will be funded. Upon termination, MRL can repurchase all of its assets from Stonebriar for an amount declining with time.  If the repurchase occurs on November 1 of this year, it would cost approximately $403 million.

"I'd like to thank Stonebriar for their continued support," said Todd Borgmann, CEO.  "Collectively these agreements provide flexibility for Montana Renewables while allowing Stonebriar to retain a position in Calumet's capital structure."

For more information, please see the Form 8-K that will be filed with the Securities and Exchange Commission (the "SEC").

About Calumet

Calumet, Inc. (NASDAQ: CLMT) manufactures, formulates, and markets a diversified slate of specialty branded products and renewable fuels to customers across a broad range of consumer-facing and industrial markets. Calumet is headquartered in Indianapolis, Indiana and operates twelve facilities throughout North America.

Cautionary Statement Regarding Forward-Looking Statements
Certain statements and information in this press release may constitute "forward-looking statements." The words "will," "may," "intend," "believe," "expect," "outlook," "forecast," "anticipate," "estimate," "continue," "plan," "should," "could," "would," or other similar expressions are intended to identify forward-looking statements, which are generally not historical in nature. The statements discussed in this press release that are not purely historical data are forward-looking statements, including, but not limited to, the statements regarding (i) our expectations regarding the remaining $40 million of the purchase price pursuant to the CMR Funding Agreement and the intended use of proceeds therefrom, (ii) our expectations regarding the potential DOE loan facility, (iii) whether and when the potential DOE loan facility will be funded and (iv) our ability to meet our financial commitments, debt service obligations, debt instrument covenants, contingencies and anticipated capital expenditures. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause our actual results to differ materially from our historical experience and our present expectations or projections. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements included in the most recent Annual Report on Form 10-K of Calumet Specialty Products Partners, L.P. (the "Partnership") and other filings with the SEC by us or the Partnership. The risk factors and other factors noted in the Partnership's most recent Annual Report on Form 10-K and other filings with the SEC by us or the Partnership could cause our actual results to differ materially from those contained in any forward-looking statement. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the foregoing. Existing and prospective investors are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date of this press release. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise, except to the extent required by applicable law.

View original content:https://www.prnewswire.com/news-releases/calumet-announces-new-funding-agreement-with-stonebriar-302267283.html

SOURCE Calumet, Inc.

FAQ

What is the value of Calumet's new funding agreement with Stonebriar?

Calumet's subsidiary, Calumet Montana Refining, (CMR), entered into a $150 million sale-leaseback agreement with Stonebriar Commercial Finance

How much initial funding did Calumet (CLMT) receive from the new agreement?

Calumet received initial proceeds of $110 million, with the remaining $40 million due upon a future Eligible Capital Event.

What is the cost of capital for Calumet's new funding agreement?

The new CMR Funding Agreement carries an approximate 10.75% cost of capital once fully drawn.

How much would it cost for Montana Renewables to repurchase its assets from Stonebriar on November 1?

If Montana Renewables, (MRL) repurchases its assets from Stonebriar on November 1, it would cost approximately $403 million.

What is the potential Eligible Capital Event mentioned in Calumet's (CLMT) press release?

A potential Eligible Capital Event includes receiving a loan guarantee from the U.S. Department of Energy (DOE), although there is no assurance it will be awarded or funded.