Howard Shainker Bullish on Rentech and Rentech Nitrogen Partners

Editors note: Howard gave a great presentation. Some stated it was the best. Howard spoke faster than David Einhorn AKA lightening speed. Below are our informal notes on two very interesting stocks:

Howard used to work for Dan Loeb’ third point. Howard now manages a hedge fund with his partner called Bow Street LLC. Blackstone seeded the fund with a large investment.

The stock pitched was an MLP, Rentech Nitrogen Partners, L.P. RNF, which trades at 14% dividend.

Since IPO in Noember they gave guidence of $2.34 on unit of $20.

They sell ammonia, which is up 5%

UAN up 19%, and Nat gas up 19%

We like corn because of an emerging middle class in China and . Ethanol mandates are a long term driver. Corn inventories are down very low, both in the US and internationally. The crop was very weak last year and Argentina, the second largest corn exporter had bad weather.

Corn is very nitrogen intensive, extremely profitable for farmers.

Corn is highly correlation to nitrogen.

Natual gas prices have collapsed, and there are a 100 years of reserves.

The US imports 50% of its nitrogen from mostly Western Europe and Ukraine. Brent Crude is used in the input, which is $110 today.

No new facilities have been built in US since 1970s.

The company is lower on cost curve than import competition. All imports go through New Orleans, it is very hard to get it up the Mississipi.

The company is in the heart of the corn-belt, and has zero transportation costs.

RNF compared to UAN yield would put the price at $42.67.

Why is it cheap? It IPO-ed in Novemember, when the S&P was down 7%.

The company has not paid the first distribution yet. It does not show up on yield screener.

Market is largely unfamiliar with the company.


Natural gas might increase in price.


Rentech, Inc. (RTK) is even better because it is is RNF at a discount. RTK owns 60% of RNF. Their stake in RNF alone is worth more than their market cap. Their market cap is 60% cash.

They have a lot of NOLs.

They have some clean tech. This segment has not been profitable for 30 years.

However in the last call they announced huge decrease in capex and R&D.

They could sell their units.

Cash on balance sheet and RNF stake would be close to $3.00 a share. Our target price is closer to $4.00 a share.

RTK has the same board as RNF.


Hedge play; buy the stock and short UAN? It would be a good hedge but it would be expensive because of dividend yield.

Posion pill in place to prevent buyout at low price? They have one in place and it makes sense for them to monetize clean tech. However unclear what exactly that looks like.

What happens if ethanol mandates change? Ethanol mandates are going up. The more work Howard has done around DC, it seems politically toxic to take away.

Since the IPO the company is getting a lot of questions. They have a board that has skin in the game and they are evaluating what to do with the cash. RNF realizes they cant spend too much on clean tech.

The CEO of RTK is a clean tech person, however he realizes the need to exist this sector.

When asked why company headquarters are in Los Angeles and not near company operations, Howard did not have a good answer but joked that Los Angeles has nicer weather.

When asked which he owns, Howard responded that he owns both.