$1.3 billion in bonds issued for fertilizer plant proposed for Posey County

Proceeds from the bonds will be loaned to Midwest Fertilizer Corp., which plans to build a "fully integrated, nitrogen fertilizer manufacturing facility" in Posey County, according to paperwork associated with the bonds' issuance last month. Midwest Fertilizer Corp. is part of Fatima Group, an industrial conglomerate based in Lahore, Pakistan.

The project has not yet been publicly announced, but Midwest Fertilizer Corp. provided details of its plans in a bond financing application submitted last fall.

In that application, the company said it plans to build a plant at the Port of Indiana-Mount Vernon, with an estimated construction start date in the fourth quarter of this year.

The plant would create 309 full-time, permanent positions with an average annual wage of $58,000 plus benefits, and these jobs would be in place by 2015, the application says.

The Indiana Finance Authority, which handled the bond issuance, is an entity designed to help secure financing for state and local governments and business investment throughout the state.

Jim McGoff, who serves as the Indiana Finance Authority's general counsel, said the Midwest Fertilizer Corp. deal was made possible because of a federal disaster relief program.

Because of flooding in 2008, Posey County was among a number of counties in Indiana and other Midwestern states to be declared a Midwestern Disaster Area under the Heartland Disaster Tax Relief Act of 2008. And because of this designation, McGoff said, Indiana was awarded $3.1 billion in Midwestern Disaster Area Bonds. Of that $3.1 billion, Indiana was able to use about $2.2 billion, including the bond issue for the Posey County project.

The purpose of the bond program is to spur economic development to make up for disaster-related job losses. Dec. 31 was the program's expiration date.

In this program the Indiana Finance Authority was what's known as a conduit issuer, McGoff said. This means that the state issues bonds for the benefit of a private third party, but the bonds are not considered part of the state's overall debt load. That also means that the state has no liability in the deal.

"Because it's a federal program, there is no detriment to the state. The program was set to expire Dec. 31, so we're glad a company could take advantage of it before its expiration," McGoff said.

In this deal, McGoff said, the bonds issued last month are backed by U.S. Treasury securities that mature in six months. When those bonds mature July 1, he said, they will likely be reissued for a much longer term, and those bonds will be backed by the credit of the borrower — Midwest Fertilizer Corp.

Under the terms spelled out in the bond paperwork, the company will not have access to the bond proceeds until July 1 at the earliest. In its bond application, the company said it expects that the fertilizer plant's operations will provide the cash flows needed to repay the bonds.

McGoff said the deal was structured this way because the deal was not complete by the Dec. 31 deadline for taking advantage of the disaster bonds program.

This way, McGoff said, the bonds are secured while Midwest Fertilizer Corp. works to finalize its plans.

"They still have additional work to do," he said.

In its bond application, Midwest Fertilizer Corp. said it anticipated that it will receive incentives from both Posey County and the Indiana Economic Development Corp.

Posey County Commissioner Carl Schmitz, who began serving on that body just this month, said Friday that he didn't know much about the project. Schmitz said he expects to learn more from Posey County Economic Development Partnership Executive Director John Taylor on Tuesday, when the commissioners are scheduled to meet. Taylor could not be reached late Friday afternoon.

The Courier & Press also attempted to contact both the Indiana Economic Development Corp. and a representative of Midwest Fertilizer Corp. on Friday. Those attempts were unsuccessful.

This is not the only fertilizer plant planned for Southwestern Indiana.

Last month, Illinois-based Ohio Valley Resources announced its plans to build a nitrogen fertilizer plant just north of Rockport in Spencer County. That company's president and chief executive officer is Doug Wilson of Fairfield, Ill.