What is the primary purpose of this $822 million credit facility?

The $822 million senior secured credit facility is primarily intended to finance a substantial majority of the costs associated with constructing and bringing the Sabine Pass LNG liquefied natural gas receiving terminal in Cameron Parish, Louisiana, into operation.

What are the key terms regarding interest rates and repayment for this facility?

The credit facility carries a variable interest rate equal to LIBOR plus an applicable margin ranging from 1.25% to 1.625%. Repayment of principal will occur in semi-annual installments, commencing six months after the commercial start date of the Terminal Use Agreement with Total LNG USA, Inc., or by October 1, 2009. The loans have a 19-year amortization profile with a final balloon payment due on February 25, 2015.

How is Cheniere Energy mitigating interest rate risk on this facility?

Cheniere Energy, through its subsidiary Sabine Pass LNG, has entered into swap agreements with HSBC Bank USA and Société Générale to hedge against rising interest rates. These agreements cover up to $700 million of the credit facility drawings, fixing the LIBOR component of the interest rate at specific levels through March 2012.

What are some of the major restrictions or covenants imposed by the credit facility?

The credit facility includes several covenants designed to protect lenders. These restrict Sabine Pass LNG's ability to make distributions if debt service coverage ratios fall below certain thresholds (1.25:1.0), incur additional debt or guarantees, make certain investments, modify project agreements significantly, or dispose of assets above specified limits. It also mandates the maintenance of certain hedging arrangements and requires project completion by a certain date (May 1, 2009).

LNG 8-K: Material Agreements & Financial Events

Summary

Cheniere Energy, Inc. (LNG) announced a significant development in its Sabine Pass LNG project through a Form 8-K filed on March 2, 2005, detailing a $822 million senior secured credit facility. This facility, secured by a syndicate of 47 financial institutions with Société Générale as Administrative Agent, is primarily intended to finance the construction and operation of the Sabine Pass LNG liquefied natural gas receiving terminal in Cameron Parish, Louisiana. The closing of this credit facility marks a crucial step in moving the substantial infrastructure project forward. Key terms of the credit facility include a variable interest rate based on LIBOR plus a margin, and a commitment fee on undrawn amounts. The facility has specific conditions for borrowing and repayment schedules, including a 19-year amortization profile with a balloon payment in February 2015. The report also outlines various covenants restricting Sabine Pass LNG's actions, such as limitations on distributions, further indebtedness, and material project modifications, designed to protect lenders. The company has also entered into swap agreements to hedge against rising interest rates up to $700 million, providing some certainty on a portion of its financing costs.

Key Highlights

1Cheniere Energy's subsidiary, Sabine Pass LNG, L.P., closed an $822 million senior secured credit facility on February 25, 2005.
2The credit facility is designated to fund the majority of the construction and operational costs for the Sabine Pass LNG receiving terminal in Louisiana.
3The facility is provided by a syndicate of 47 financial institutions, with Société Générale acting as Administrative Agent.
4Borrowings will bear interest at LIBOR plus a variable margin (1.25%-1.625%) and include a 0.50% commitment fee on undrawn amounts.
5Repayment begins semi-annually after project commencement or a specified date, with a final maturity on February 25, 2015.
6Sabine Pass LNG entered into swap agreements to hedge interest rate risk on up to $700 million of borrowings.
7The credit facility imposes various covenants and conditions precedent, including minimum equity contributions and project completion timelines, to protect the lenders.

Cheniere Energy, Inc. 8-K Report, Material Agreement (Mar 2, 2005)

Summary

Key Highlights

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