Business Context and Reporting Period
Company: Cheniere Energy, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: March 2, 2017
Event: Entry into a Material Definitive Agreement (Revolving Credit Facility).
Key Financial Metrics and Facility Terms
- Facility Size: $750 million Revolving Credit Facility.
- Maturity Date: March 2, 2021.
- Interest Rates:
- LIBOR loans: LIBOR + 3.25% per annum.
- Base rate loans: Base rate + 2.25% per annum.
- Letter of credit draws: Base rate + 2.0% per annum.
- Fees:
- Commitment fee: 0.75% per annum on undrawn commitments.
- Letter of credit fee: Applicable LIBOR margin on undrawn LC portion.
- Collateral: First priority security interest in substantially all assets of Cheniere Energy, Inc., including equity interests in direct subsidiaries (excluding Cheniere CCH HoldCo II, LLC).
- Financial Covenant: Sum of unrestricted cash and undrawn commitments must equal at least the lesser of 20% of commitments or $100 million.
Material Changes and Usage of Proceeds
The filing discloses the establishment of new debt capacity. Proceeds are designated for:
- Equity capital contributions to Cheniere CCH HoldCo II, LLC and subsidiaries.
- Funding the development of Corpus Christi natural gas liquefaction facilities and related pipelines.
- General corporate purposes (up to 20% of aggregate commitments), subject to specific liquidity and project contribution conditions.
Availability Conditions: Loans and letters of credit are not available until either (i) unrestricted cash falls below $500 million or (ii) the fourth liquefaction train of the Sabine Pass project achieves substantial completion.
Management Commentary, Risks, and Covenants
Covenants and Restrictions:
- Restricted Payments: Dividends and other restricted payments are subject to conditions, including the substantial completion of the Sabine Pass fourth train and limits on outstanding loans (not exceeding 10% of commitments).
- Mandatory Prepayments: Required from net proceeds of asset sales or new indebtedness (with reinvestment exceptions).
- Events of Default: Include non-payment, cross-defaults (>$50 million), cross-acceleration (>$250 million), breach of covenants, and bankruptcy.
Risks: The facility is secured by substantially all company assets. Failure to meet financial covenants or conditions precedent could restrict access to liquidity and dividend payments.
Investor Verification Checklist
- Verify the current status of the Sabine Pass fourth liquefaction train to determine if the facility is currently drawable.
- Confirm current unrestricted cash levels to assess if the $500 million threshold for general availability has been met.
- Review the specific terms of the Equity Contribution Agreement (ECA) regarding the Corpus Christi project to understand the cap on general corporate purpose borrowing.
- Monitor compliance with the financial covenant requiring unrestricted cash plus undrawn commitments to exceed the lesser of 20% of commitments or $100 million.
- Assess the impact of the new debt on the company's leverage ratios and ability to pay dividends under the restricted payment covenants.