Business Context and Reporting Period
Company: Cheniere Energy Partners, L.P.
Filing Type: Form 8-K (Current Report)
Date of Report: February 25, 2016
Event: Entry into a Material Definitive Agreement (Credit and Guaranty Agreement).
Key Financial Metrics and Debt Structure
The Partnership entered into the "CQP Credit Facilities" to incur debt up to an aggregate amount of $2.8 billion. The facilities consist of:
- CCTP Tranche Term Loan: Approximately $450 million (funded Feb 29, 2016).
- SPLNG Tranche Term Loan: Approximately $2.1 billion.
- Debt Service Reserve (DSR) Facility: Approximately $125 million.
- Revolving Credit Facility: Approximately $115 million.
Interest Rates: LIBOR + 2.25% or Base Rate + 1.25%, with a 0.50% step-up beginning February 25, 2019.
Upfront Fees: Approximately $37 million (paid Feb 29, 2016) and approximately $22 million (upon SPLNG tranche funding).
Maturity: February 25, 2020.
Amortization: Quarterly installments commencing February 25, 2019, based on an 18-year assumed schedule.
Material Changes and Use of Proceeds
The new credit facilities were utilized to refinance existing debt and fund operations:
- Prepayment: The $450 million CCTP tranche was used to prepay a $400 million senior secured term loan at Cheniere Creole Trail Pipeline, L.P. (CCTP).
- Redemption/Repayment: Proceeds will be used to redeem or repay approximately $1.7 billion in senior secured notes due 2016 and $420 million in senior secured notes due 2020 issued by Sabine Pass LNG, L.P. (SPLNG).
- Other Uses: Payment of transaction costs, make-whole amounts, and general business purposes.
Covenants, Risks, and Management Commentary
Covenants:
- Debt Service Coverage Ratio (DSCR): Must maintain a minimum DSCR of 1.15x at the end of each fiscal quarter beginning March 31, 2019. Restricted payments require a 12-month forward/backward looking 1.25x DSCR test.
- Interest Rate Protection: Must maintain protection agreements for at least 50% of the projected aggregate outstanding balance (excluding DSR and Revolving) within 45 days of closing.
- Restricted Payments: Limited to once per fiscal quarter, capped at Available Cash, subject to DSCR and reserve funding conditions.
Events of Default: Include failure to make payments, cross-defaults (thresholds of $75 million for Partnership/Subsidiaries and $250 million for SPL), loss of 100% ownership in CCTP/SPLNG, change of control, and judgments exceeding $75 million.
Collateral: Secured by a first priority lien on substantially all existing and future tangible and intangible assets of the Partnership and Subsidiary Guarantors.
Investor Verification Checklist
- Verify the funding date and execution of the $2.1 billion SPLNG tranche term loan.
- Confirm the successful redemption of the $1.7 billion notes due 2016 and $420 million notes due 2020.
- Monitor compliance with the 1.15x minimum DSCR covenant starting March 31, 2019.
- Review the establishment of the 6-month debt service reserve via the DSR Facility or letters of credit.
- Assess the impact of the 0.50% interest rate step-up effective February 25, 2019, on future cash flows.