Market Overview

I think you’ll love what you hear,
what you’ll see and the opportunities
that will be set before you.
- Jon Najarian
GET TICKETS

Brigade Capital Management Issues Letter to Board of Directors of OCI Partners

Share:

Brigade Capital Management, LP ("Brigade"), on behalf of a fund managed
by it, sent the following letter to the board of directors of OCI
Partners LP (("OCIP", NYSE:OCIP) regarding the recently announced tender
offer by OCI N.V.

June 11, 2018

Mr. Michael Bennett
Chairman of the Board
OCI GP LLC
P.O.
Box 1647
Nederland, TX 77627

Via E-mail and USPS Priority Mail Express

Dear Mr. Bennett (on behalf of entire board of directors):

Funds managed by Brigade Capital Management LP ("Brigade") beneficially
own a meaningful economic interest in the common units of OCI Partners
LP ("OCIP" or the "Company"). We noted with interest and concern that on
June 4, 2018 OCI N.V. ("OCI") announced that it made a proposal to
tender for the remaining common units of OCIP that it does not currently
own for a consideration of $11.00/unit (the "Tender Offer"). In effect,
this would raise OCI's ownership of OCIP from 88.25% to 100%. We remain
aware that if OCI is able to raise its stake to 90% via this
transaction, it could then effectively squeeze out remaining
non-tendering unitholders as per the conditions outlined in the
partnership agreement.

We view OCI's current offer as another opportunistic attempt (similar to
the one from December 2016 and continuation of the December 2017
strategy when it purchased 7.3 million common units) to acquire 100% of
OCIP at a significant discount to its intrinsic value. In our January 9,
2018 letter to the OCIP Board (herein enclosed along with all past
written correspondences to the Board for your convenience), we have
outlined our assessment of conservative mid-cycle fair value for OCIP
common units at $14.00/unit. At peak cycle, the fair value would rise
meaningfully above that estimate. Only a quick glance at share price
performance of Methanex Corporation since our January 9, 2018 letter
would further bolster our case. And just last week, MMSA – a leading
industry consultant – projected a methanol upcycle through 2023 implying
steadily improving profitability (from already strong current levels)
over the five-year horizon.

We also believe the timing of the Tender Offer is opportunistic as OCIP
is likely to report a very strong second quarter with a distribution to
common unit holders of approximately $0.50/unit, according to our
analysis. Furthermore, despite the generally negative near-term bias to
forward estimates, methanol pricing remains robust and recent spot price
trends in China demonstrate increased strength.

In response to OCI's purchase of 8.4% of OCIP's common units in December
2017 (thereby increasing OCI's ownership from 79.85% to 88.25%), our
January 2018 letters to OCIP's Board look prescient now. In those
letters we warned the Board about the possibility of OCI attempting to
opportunistically reach the 90% ownership threshold in the near term and
we urged the Board to "communicate clearly and promptly to investor
community true prospects of OCIP's financial performance so as to
minimize or fully eliminate the real risk of minority unitholders being
taken advantage of." We were disappointed to see the Board clearly
failing to deliver on that request.

In light of the above considerations, Brigade urges the OCIP Board and
the Conflicts Committee in particular to immediately engage in
negotiations with OCI in order to improve the Tender Offer to a price
reflective of OCIP's fair value. If the Conflicts Committee is unable to
achieve this, we urge the OCIP Board and the Conflicts Committee to
recommend to its common unit holders AGAINST the Tender Offer. We trust
that the Conflicts Committee's review of the Tender Offer, as well as
its deliberations regarding any third party proposals or other
alternatives (including the scenario of OCIP remaining a standalone
entity), will be guided solely by its views as to what is in the best
interests of all OCIP unitholders. We note that all
members of OCIP's board owe a fiduciary duty to all OCIP
unitholders, whether with respect to the OCI proposal or any other
possible bidder or transaction.

Brigade reserves all its legal rights, including a right to challenge a
potential minority squeeze out that results in grossly inadequate
consideration to unitholders. We look forward to further productive
dialogue with the Conflicts Committee and are willing and ready to
engage with committee members as necessary. Please note that we intend
to publicly release a copy of this letter shortly after delivering it to
you.

Very truly yours,

Kunal Banerjee
Partner

Ivan Krsticevic
Partner

About Brigade Capital Management, LP

Brigade Capital Management, LP is an SEC-registered investment advisor
focusing on investing in the global high-yield market and levered
equities. The firm was founded in 2006 and is managed by Donald E.
Morgan, III, CIO and Managing Partner. The firm is headquartered in New
York City with offices in the United Kingdom, Japan and Australia. The
firm employs a multi-strategy, multi-asset class investment approach
focused on leveraged balance sheets. The core strategies include
long/short credit, distressed debt, capital structure arbitrage and
levered equities. Brigade Capital Management, LP's investment process is
fundamentally driven, focusing on asset coverage and free cash flow,
with an emphasis on capital preservation. The team possesses deep sector
expertise throughout the entire leveraged finance market and has
extensive experience in capital restructurings and bankruptcy
reorganization.

View Comments and Join the Discussion!
 
Lightning Fast
Market News Service
$199 Free 14 Day Trial