Summary
Cheniere Energy, Inc. (LNG) announced the entry into a $2.62 billion delayed draw term loan credit facility on June 18, 2020. This new facility, which ranks pari passu with its existing revolving credit facility, is primarily intended to refinance existing debt, specifically the 11.0% Convertible Senior Secured Notes due 2025 and the 4.875% Convertible PIK Notes due 2021. The company has secured commitments from a broad syndicate of lenders, indicating continued access to capital markets. The refinancing aims to improve Cheniere's debt structure and potentially lower its overall cost of capital, which is a positive development for investors.
Key Highlights
- 1Secured a new $2.62 billion delayed draw term loan credit facility.
- 2The new facility ranks pari passu with the existing $1.25 billion revolving credit facility.
- 3Proceeds will be used to repay existing convertible notes, including 11.0% notes due 2025 and 4.875% notes due 2021.
- 4The agreement involves a large syndicate of prominent lenders.
- 5The facility includes financial covenants related to leverage ratio (not to exceed 5.75:1.00) and debt service coverage ratio (not less than 1.15:1.00) after a certain period.
- 6Interest rates are variable, based on LIBOR or base rate plus an applicable margin that adjusts based on credit ratings and time.
- 7The loan matures on June 18, 2023, and is secured by a first priority security interest on substantially all of CEI's assets.
Frequently Asked Questions
The primary purpose of this new $2.62 billion delayed draw term loan credit facility is to refinance existing debt. Specifically, it is intended to repay the outstanding 11.0% Convertible Senior Secured Notes due 2025 and the 4.875% Convertible PIK Notes due 2021, along with associated fees and expenses.
The new Term Loan Facility ranks pari passu (on an equal footing) with Cheniere's existing $1.25 billion revolving credit facility. Both facilities are secured by a first priority security interest on substantially all of Cheniere's assets.
The Term Loan Facility includes a financial covenant requiring Cheniere's leverage ratio not to exceed 5.75:1.00 when outstanding loans exceed 30% of the aggregate commitments. Additionally, beginning after December 30, 2021 (or the Guaranteed Substantial Completion Date for Train Three of the Corpus Christi LNG terminal), the company must maintain a twelve-month historical and projected debt service coverage ratio of at least 1.15 to 1.00.
The Term Loan Facility matures on June 18, 2023. Loans under the facility will bear interest at a variable rate equal to LIBOR or the base rate plus an applicable margin. The applicable margin for both LIBOR and base rate loans increases over time and is dependent on the credit ratings assigned to the loans.