8-KLeadership ChangesMaterial AgreementsFinancial Events+5

Cheniere Energy, Inc. 8-K Report, Material Agreement (Aug 18, 2008)

Filed August 18, 2008For Securities:LNG

Summary

Cheniere Energy, Inc. (LNG) announced on August 18, 2008, the closing of a significant $250 million credit facility with The Bank of New York Mellon as administrative and collateral agent. This facility, provided to its wholly-owned subsidiary Cheniere Common Units Holding, LLC (CCUH), is structured as a term loan maturing in August 2018, bearing a fixed interest rate of 12% per annum. The proceeds are earmarked for repaying existing indebtedness, funding operational needs, and establishing a substantial reserve account to cover obligations related to CMI's terminal use agreement with Sabine Pass LNG. Crucially, the Credit Agreement includes provisions for the exchange of these loans into a newly created Series B Convertible Preferred Stock. This exchange mechanism, detailed in an accompanying Investors' Agreement, also grants lenders certain rights, including the ability to nominate directors to Cheniere's Board. The report also details the collateral securing the loans, which includes equity in domestic subsidiaries, units in Cheniere Energy Partners, L.P. (CQP), and rights to management services agreements. The Series B Preferred Stock itself has unique features, including substantial voting rights and a liquidation preference, and its issuance is subject to specific conversion and registration rights for the holders.

Key Highlights

  • 1Cheniere Energy closed a $250 million credit facility for its subsidiary CCUH, maturing in August 2018 with a 12% fixed interest rate.
  • 2Proceeds will be used to repay $99 million in existing debt, fund working capital, and establish a $135 million reserve account for Sabine Pass LNG terminal use obligations.
  • 3The credit facility allows for the exchange of the loans into Series B Convertible Preferred Stock of Cheniere Energy.
  • 4The Series B Preferred Stock carries significant voting rights, approximating 19.98% of the outstanding Common Stock, and a $5,000 liquidation preference per share.
  • 5Lenders under the credit facility and holders of the Series B Preferred Stock have rights to nominate directors to Cheniere's Board.
  • 6The credit facility is secured by a first-priority security interest in various assets, including equity in domestic subsidiaries and CQP units.
  • 7The company terminated its previous $95 million Credit Suisse Bridge Loan using a portion of the new credit facility proceeds.

Frequently Asked Questions

The primary purpose is to refinance existing debt ($99 million), fund general corporate needs and working capital, and critically, to establish a $135 million reserve account to ensure timely payments under Cheniere Marketing, Inc.'s (CMI) terminal use agreement with Sabine Pass LNG, L.P. (Sabine).

The Series B Preferred Stock is convertible into common stock at a 1-for-1,000 ratio. Each share has a liquidation preference of $5,000. It carries significant voting rights, representing approximately 19.98% of the outstanding Common Stock as of the filing date. Holders also have registration rights for the preferred stock and underlying common stock, and the right to nominate directors to Cheniere's Board.

The credit facility is secured by a first-priority security interest in several assets, including equity in most of the Company's domestic subsidiaries (with some exclusions), the Borrower's holding of Cheniere Energy Partners, L.P. (CQP) common units, rights under management services agreements with Sabine and CQP, and non-real estate assets of the Borrower and pipeline subsidiaries. A dedicated $135 million deposit account also serves as collateral.

A significant portion of the new credit facility proceeds ($99 million plus accrued interest) was used to repay Cheniere Common Units Holding, LLC's existing Credit Suisse Bridge Loan. This effectively terminates the bridge loan agreement and associated liens.