What is the main dispute between Cheniere Energy and Centerbridge Partners?

The main dispute centers on whether affiliate payments received by Cheniere's subsidiary, Sabine Pass LNG, L.P., from Cheniere Investments under a Terminal Use Agreement are recognized as revenue in accordance with Generally Accepted Accounting Principles (GAAP). Centerbridge alleges these are not proper revenues, implying Sabine Pass is in default of its debt agreements.

What are the potential consequences if Centerbridge's claims are valid?

If Centerbridge's allegations of default were proven true, it could lead to an acceleration of the maturity date for Sabine Pass's senior notes, making the entire principal amount repayable immediately at par value.

What is Cheniere Energy's defense against these allegations?

Cheniere Energy strongly denies Centerbridge's claims. Management asserts that the revenues are compliant with GAAP, supported by advice from an independent accounting firm and the unqualified audit opinions received on their 2010 financial statements. They also stated that Sabine Pass is in full compliance with the indenture.

Has Cheniere taken any legal action regarding this dispute?

Yes, Cheniere Energy, Inc. has filed a lawsuit against Centerbridge Partners, L.P. and its affiliates in Texas state court. The lawsuit seeks damages for defamation, business disparagement, and tortious interference with business relationships, alleging that Centerbridge's actions have disrupted their businesses.

LNG 8-K SEC Disclosure

Summary

Cheniere Energy, Inc. (LNG) has filed an 8-K report detailing a dispute with Centerbridge Partners, L.P. and its affiliates concerning the accounting treatment of revenue recognized by its subsidiary, Sabine Pass LNG, L.P. Centerbridge, claiming to be a significant holder of Sabine Pass's senior notes, alleges that affiliate payments from Cheniere Investments under a Terminal Use Agreement are not GAAP-compliant revenue, and therefore Sabine Pass is in default of its indenture obligations. The company strongly refutes these claims, stating that independent accounting advice confirms the revenue recognition is in accordance with GAAP and that Sabine Pass is in full compliance with the indenture. To address the allegations and potential financial repercussions, Cheniere Energy, Inc. has filed a lawsuit against Centerbridge for defamation, business disparagement, and tortious interference. This dispute arises shortly after the filing of their respective 2010 annual reports, which included unqualified audit opinions from Ernst & Young LLP, further supporting Cheniere's position on the proper accounting of these revenues. Investors should monitor the legal proceedings and the company's ongoing communications regarding compliance and financial reporting.

Key Highlights

1Sabine Pass LNG, L.P. (90.6% owned subsidiary) issued $2,215.5 million in senior notes across two tranches due 2013 and 2016.
2Centerbridge Partners, L.P. and affiliates allege Sabine Pass is in default of its senior note indenture.
3The alleged default stems from Centerbridge's claim that affiliate payments from Cheniere Investments are not GAAP-compliant revenue.
4Cheniere Energy strongly denies Centerbridge's allegations, asserting that the revenue is GAAP-compliant and Sabine Pass is in full compliance with the indenture.
5An independent, nationally-recognized accounting firm has advised Cheniere and agreed that the revenue treatment is proper.
6Cheniere Energy, Inc., Sabine Pass LNG, L.P., and Cheniere Energy Partners, L.P. filed unqualified 2010 10-K reports on March 3, 2011, with audit opinions dated March 2, 2011.
7Cheniere has filed a lawsuit against Centerbridge for defamation, business disparagement, and tortious interference with business relationships.

Cheniere Energy, Inc. 8-K Report, Corporate Update (Mar 8, 2011)

Summary

Key Highlights

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