Business Context and Reporting Period
This Form 8-K filing by Cheniere Energy Partners, L.P. (the "Partnership") reports on events occurring on February 28, 2017, and March 6, 2017. The filing details a material definitive agreement entered into by Sabine Pass Liquefaction, LLC ("SPL"), a wholly owned subsidiary of the Partnership, to issue senior secured notes.
Key Financial Metrics
- Debt Issuance: $1.35 billion aggregate principal amount of 4.200% Senior Secured Notes due 2028.
- Interest Rate: 4.200% per annum, payable semi-annually in cash in arrears.
- Yield: 4.211% (issued at 99.903% of par).
- Maturity Date: March 15, 2028.
- First Interest Payment: September 15, 2017.
- Security Status: Senior secured obligations of SPL, ranking equal to existing senior secured indebtedness and effectively senior to unsecured senior indebtedness to the extent of collateral value.
- Guarantees: Not guaranteed as of the issue date; will be guaranteed in the future by all of SPL's future restricted subsidiaries.
Material Changes
The primary material change is the creation of a direct financial obligation through the issuance of the Notes. The transaction closed on March 6, 2017, pursuant to a Purchase Agreement dated February 28, 2017. The Notes were sold on a private placement basis in reliance on Section 4(a)(2) of the Securities Act and Rule 144A and Regulation S. This issuance increases the Partnership's leverage and alters its capital structure with the addition of long-term fixed-rate debt.
Outlook, Covenants, and Risks
- Redemption Terms: SPL may redeem the Notes prior to September 15, 2027, at a "make-whole" price. On or after September 15, 2027, the Notes may be redeemed at 100% of principal plus accrued interest.
- Covenants: The Notes Indenture includes covenants limiting SPL's ability to incur additional indebtedness, issue preferred stock, make certain investments, pay dividends, sell assets, or enter into certain LNG sales contracts. These covenants are subject to limitations and exceptions.
- Registration Rights: SPL agreed to use commercially reasonable efforts to file a registration statement for an exchange offer within 360 days of the issue date. Failure to comply may result in additional interest payments.
- Conflicts of Interest: Initial Purchasers and their affiliates provide investment and commercial banking services to SPL and the Partnership for customary fees.
Investor Verification Checklist
- Verify the full text of the Purchase Agreement (Exhibit 1.1) for specific conditions to closing and indemnification obligations.
- Review the Tenth Supplemental Indenture (Exhibit 4.1) for detailed definitions of "make-whole" pricing and specific covenant limitations.
- Confirm the timeline for the filing of the registration statement required under the Registration Rights Agreement (Exhibit 10.1) to assess potential additional interest costs.
- Monitor future filings to identify which restricted subsidiaries will provide guarantees for the Notes.