Business Context and Reporting Period
Company: Cheniere Energy, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: September 14, 2007
Event: Entry into a Material Definitive Agreement (Item 1.01) and Creation of a Direct Financial Obligation (Item 2.03).
Context: Cheniere Marketing, Inc., a direct wholly owned subsidiary of Cheniere Energy, Inc., closed a new revolving credit facility to support its natural gas trading and working capital requirements.
Key Financial Metrics and Facility Terms
Credit Facility Size: $100,000,000 total commitment.
Structure: Revolving credit facility with BNP Paribas as the initial lender and administrative agent.
Allocation: Up to $35,000,000 in revolving loans and up to $100,000,000 in letters of credit. The aggregate of outstanding loans and letters of credit cannot exceed $100,000,000 or the borrowing base (cash, receivables, inventory).
Outstanding Balance: $0 as of the filing date.
Interest Rates: Variable rate of LIBOR plus 1.50% (or Prime/Cost of Funds plus 1.50%).
Fees: 0.375% commitment fee on available commitments; 1.375% (or 1.50% for certain LCs) fee on letters of credit.
Maturity: Loans mature two months after incurrence or September 12, 2008, whichever is earlier.
Collateral: Security interest in all personal property relating to the Borrower's natural gas business (excluding liquefied natural gas business).
Material Changes and Covenants
This filing represents a new financing arrangement rather than a change in historical performance metrics. The agreement imposes the following negative covenants on the Borrower:
- Working Capital: Must not be less than $40,000,000.
- Tangible Net Worth: Must not be less than $40,000,000.
- Leverage Ratio: Must not exceed 7.5 to 1.0.
- Capital Expenditures: Limited to $5,000,000 in the aggregate.
- Restrictions: Prohibitions on incurring liens on collateral, merging, selling assets, or engaging in businesses other than those currently conducted.
Collateral Trust: A separate security interest was granted to secure obligations owed to Crest Investment Company, which is expressly senior to the security interest for the BNP Paribas Credit Facility.
Guidance, Risks, and Contingencies
Use of Proceeds: Restricted to financing, securing, or guaranteeing performance related to the purchase, sale, storage, transfer, or exchange of natural gas and approved products, supporting commodity/derivative contracts, and funding working capital.
Events of Default: Include nonpayment, material misrepresentation, failure to comply with covenants, cross-default on indebtedness of $10,000,000 or more, insolvency, ERISA events, judgments of $10,000,000 or more, and failure to maintain 70% ownership by Cheniere Energy, Inc. in the Borrower.
Management Commentary: The filing does not contain forward-looking guidance or management commentary beyond the terms of the agreement.
Investor Verification Checklist
- Verify the current borrowing base calculation (cash, receivables, inventory) to determine actual available liquidity under the $100 million cap.
- Confirm compliance with the $40 million minimum working capital and tangible net worth covenants.
- Review the seniority of the Crest Investment Company debt relative to this new facility.
- Monitor the $5 million aggregate capital expenditure limit to ensure no covenant breach occurs.
- Check for any outstanding letters of credit or loans drawn against the facility since the filing date.