New Fortress Energy Inc. current report, 15 April 2021

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Business Context and Reporting Period

New Fortress Energy Inc. filed this Form 8-K regarding transactions completed on April 15, 2021. The filing reports the completion of the mergers with Golar LNG Partners LP (GMLP) and Hygo Energy Transition Ltd. It is a transaction filing rather than a periodic financial-results report; it does not provide current-period revenue, profit, cash flow, or operating-margin results for NFE.

Key Financial and Capital Structure Information

  • NFE entered into a $200 million revolving credit facility maturing in 2026, with a potential one-year extension. A $100 million letter-of-credit sub-facility is included.
  • Borrowings under the revolver bear interest at LIBOR plus 2.50% when usage is 50% or less of commitments and LIBOR plus 2.75% when usage exceeds 50%, subject to a 0.00% LIBOR floor.
  • The revolver is senior secured, guaranteed by specified domestic and foreign subsidiaries, and ranks pari passu with NFE’s existing 6.750% Senior Secured Notes due 2025 and 6.50% Senior Secured Notes due 2026.
  • GMLP common units were converted into cash consideration of $3.55 per unit. GMLP’s 8.75% Series A cumulative redeemable preferred units remained outstanding.
  • Hygo sellers received 31,372,549 NFE Class A common shares in aggregate, plus $580 million in cash: GLNG received 18,627,451 shares and $50 million, while Stonepeak received 12,745,098 shares and $530 million.
  • As of December 31, 2020, disclosed acquired or consolidated debt included GMLP’s 50% share of Hilli debt of approximately $389.3 million, a $277 million Nanook facility, an approximately $113.4 million Penguin facility, and a $118.2 million Celsius facility. The filing states that NFE expects to consolidate the relevant vessel facilities.
  • As of December 31, 2020, CELSE-related financing included R$2.571 billion of CELSE debentures, R$689.4 million outstanding under the GE Credit Facility, and additional project financing denominated in Brazilian reais and U.S. dollars. The CELSE facilities mature in April 2032; the GE Credit Facility matures in November 2024.
  • Distributions on GMLP’s preferred units accrue at 8.75% annually and may generally be redeemed on or after October 31, 2022.

Material Changes Versus the Prior Comparable Period

  • NFE expanded its corporate structure and asset base by making GMLP and Hygo indirect subsidiaries through the completed mergers.
  • The transactions added vessel, floating storage and regasification, power-generation, and related infrastructure assets, together with their associated debt, guarantees, covenants, and potential consolidation obligations.
  • NFE issued a substantial amount of common stock and paid significant cash consideration to complete the Hygo acquisition.
  • NFE established additional secured liquidity through the new $200 million revolving credit facility, subject to financial covenants and borrowing-base-related repayment requirements.
  • GMLP and Hygo historical audited financial statements and NFE pro forma combined financial information for the year ended December 31, 2020 were incorporated by reference from a prior Form 8-K. This filing itself does not reproduce those financial statements.

Outlook, Risks, Contingencies, and Unusual Items

  • The revolver contains restrictions on dividends, restricted payments, indebtedness, asset sales, liens, affiliate transactions, mergers, and other actions. It also includes total debt-to-capitalization and, at specified usage levels, first-lien-debt-to-EBITDA covenants.
  • Default triggers include payment defaults, covenant breaches, acceleration of other material debt, material judgments, bankruptcy or insolvency, impairment of collateral or guarantees, and change of control.
  • CELSE project financing includes a requirement to maintain a historical debt-service-coverage ratio of at least 1.10 to 1.00 for a relevant twelve-month period beginning on or after March 31, 2021, together with restrictions on distributions, additional debt, liens, capital expenditures, and related-party transactions.
  • GMLP-related obligations include liquidity, net-worth, asset-value, and leverage requirements, including a maximum net debt-to-EBITDA ratio of 6.5 to 1. The filing states that NFE expected to provide a letter of undertaking supporting GMLP’s guarantee obligations relating to Hilli debt.
  • The filing provides no earnings guidance, revenue outlook, cash-flow forecast, or management forecast. The principal forward-looking information concerns expected consolidation of certain vessel financing arrangements and the operation of the acquired businesses.
  • Brazilian law was stated to prohibit voluntary prepayment of the CELSE debentures, except for scheduled amortization, as of the filing date; any permitted redemption could require a make-whole premium.

Important Facts for Investors to Verify

  1. Review the incorporated audited GMLP and Hygo financial statements and the December 31, 2020 pro forma combined financial statements.
  2. Confirm the final purchase-accounting treatment, assumed debt balances, guarantees, noncontrolling interests, and any required vessel-financing consolidations.
  3. Assess NFE’s compliance with the new revolver’s leverage and first-lien-debt-to-EBITDA covenants and determine actual facility utilization.
  4. Evaluate liquidity, refinancing, currency, interest-rate, and debt-service risks associated with the CELSE, Hilli, Nanook, Penguin, Celsius, and other acquired facilities.
  5. Review the Shareholders’ Agreement for transfer restrictions and registration rights affecting the shares issued to GLNG and Stonepeak.
  6. Determine the effect of the mergers and newly issued shares on NFE’s ownership structure, diluted share count, earnings, and per-share metrics.