IPO Preview: Rentech, Enduro

NEW YORK (TheStreet -- "Imaginative investment bankers" is how IPO Desktop President Francis Gaskins explains Rentech Nitrogen Partners' (RNF) public offering.

The fertilizer business is a spin-off from parent company Rentech (RTK) and the idea is to make market caps grow quickly too. The nitrogen fertilizer facility has been in operation since 1965 and has had a long consistent track record of producing nitrogen-based products for the corn belt.

Rentech Nitrogen is looking to sell 15 million shares with the pricing range set at $19 to 21 each, so it would raise $300 million at the midpoint, and enjoy a market cap of around $765 million. If all goes well, Rentech, the parent, will be harvesting cash as it will reap $226 million worth of the proceeds, along with $460 million in newly created limited partnership interests.

Rentech Nitrogen only gets $48 million and is spending $8 million on plant expansion, with the remaining $40 million going for working capital. But because it's a limited partnership, the company will be valued at the expected payout, and in this case, that's 11.7%. The question is whether Rentech Nitrogen can deliver that kind of yield when its competitors, CVR Partners (UAN) and Terra Nitrogen (TNH) pay 8.9% and 9.2% respectively. The parent company paid out nothing in the June quarter. Gaskins likes CVR Partners better than Rentech.

Meanwhile, Enduro Royalty Trust (NDRO) is another IPO that may be a better deal for the insiders than it is for the unsuspecting public.

The oil trust reportedly priced its offering late Wednesday, selling 13.2 million units at $22 each to raise more than $290 million. That was below an expected range of $23-$25 per unit.

The company was assembled by oil industry veterans who buy properties from big names like Conoco-Phillips (COP) and Denbury Resources (DNR) and then re-package them to sell to the public.

The properties tend to be declining or "mature" oil fields that they get cheaply, but sell at a much higher price with the sophisticated players getting the best of the deal. The draw for the IPO is that Enduro says it will have a yield of 6.75%. Gaskins said, "This is basically a financial transaction to create net worth for the oil executives (and perhaps the investment bankers) putting this deal together."

--Written by Debra Borchardt in New York.



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