Business Context and Reporting Period
This Form 8-K filing by Cheniere Energy Partners, L.P. (CQP) reports events occurring on May 29, 2019, and June 3, 2019. The primary focus is the entry into a new credit facility and the commencement of construction for Train 6 of the Sabine Pass Liquefaction Project.
Key Financial Metrics and Debt Structure
The filing details the establishment of the "CQP Credit Facilities" with an aggregate capacity of $1.5 billion, structured as follows:
- Term Facility: Approximately $750 million.
- Revolving Facility: Approximately $750 million.
On June 3, 2019, the Partnership borrowed approximately $227 million under the Term Facility. The facilities carry variable interest rates based on LIBOR or base rate plus margins ranging from 0.25% to 2.125%, depending on credit ratings and facility type. Upfront fees totaled approximately $11 million. The debt matures on the fifth anniversary of the closing date (May 29, 2024), with principal repayments commencing on the fourth anniversary.
Material Changes and Strategic Actions
The filing reports two significant material changes:
- Final Investment Decision (FID): On May 29, 2019, the board approved the FID for the development, construction, and operation of Train 6 at the Sabine Pass Liquefaction Project.
- Notice to Proceed: On June 3, 2019, CQP issued a notice to proceed to Bechtel Oil, Gas and Chemicals, Inc. to commence construction of Train 6.
The new credit facilities are designated to fund the Train 6 Facilities and, subject to sublimits, general corporate purposes.
Covenants, Risks, and Contingencies
The Credit and Guaranty Agreement includes standard affirmative and negative covenants restricting additional indebtedness, liens, asset sales, and affiliate transactions. Specific financial covenants include:
- Restricted Payments: Limited to one payment per quarter not exceeding Available Cash, subject to a 1.25x debt service coverage ratio test and a fully funded 6-month debt service reserve.
- Events of Default: Include cross-defaults on indebtedness over $150 million, cross-acceleration of Sabine Pass LNG-LP, LLC indebtedness over $500 million, and change of control (linked to Cheniere Energy, Inc. retaining 50% ownership/control).
- Collateral: The facilities are 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 full text of the Credit and Guaranty Agreement (Exhibit 10.1) for specific definitions of "Available Cash" and "Debt Service Coverage Ratio."
- Confirm the timeline and budget for the Train 6 construction project as outlined in the June 3, 2019 Corporate Presentation (Exhibit 99.1).
- Monitor the Partnership's credit rating, as interest rate margins on the Revolving Facility are tied to rating levels.
- Review the status of the 6-month debt service reserve requirement to ensure compliance with restricted payment covenants.