LNG

Cheniere Energy, Inc. - Form 8-K Summary

Business Context and Reporting Period

Date: January 16, 2015
Company: Cheniere Energy, Inc.
Event: Entry into a Material Definitive Agreement (Note Purchase Agreement).
Context: Cheniere CCH HoldCo II, LLC (a wholly-owned subsidiary) entered into an agreement to issue $1.5 billion in convertible notes to fund the Corpus Christi Liquefaction Project, a natural gas liquefaction and export facility near Corpus Christi, Texas.

Key Financial Metrics and Transaction Details

• Principal Amount: $1.5 billion aggregate principal amount of convertible notes.
• Purchase Price: 100% of the principal amount.
• Interest Rate: 11% per annum, payable quarterly in arrears.
• Interest Payment Terms:
  • Pre-Commercial Operation: Paid entirely in kind (PIK).
  • Post-Commercial Operation: Paid in cash to the extent of cash on hand plus excess cash flow; any shortfall paid in kind.
• Maturity: 10 years from the Closing Date.
• Security: Secured by a pledge of 100% of equity interests in the Issuer and CCH Direct Parent, plus a security interest in distribution accounts.
• Use of Proceeds: Partial funding of project costs for the Corpus Christi Liquefaction Project and transaction fees/expenses.

Material Changes and Conditions

This filing represents a new material definitive agreement and does not report changes to prior period financial results. The transaction is subject to specific conditions precedent, including:

• Cheniere must contribute cash to the Issuer to meet initial project equity requirements.
• Closing of senior debt project financing for the Corpus Christi Liquefaction Project must occur.
• The Closing Date must occur by June 30, 2015, or the agreement may be terminated.

Guidance, Outlook, and Conversion Terms

Conversion Features: The Notes are convertible into Cheniere Common Stock subject to the following terms:

• Issuer Option: Available after the Commercial Operation Date at a price equal to the lower of (x) 10% discount to 90-day VWAP or (y) 10% discount to closing price.
• Holder Option: Available after the six-month anniversary of the Commercial Operation Date at the 90-day VWAP.
• Cap on Conversion: Total shares issued cannot exceed 47,108,466 shares (approx. 19.9% of outstanding shares as of Jan 12, 2015).
• Market Cap Condition: Cheniere's market capitalization must be at least $13.7 billion immediately prior to conversion.
• Minimum Conversion: Minimum aggregate principal of $250 million per conversion event.

Governance Rights:

• EIG Management Company, LLC may appoint a non-voting observer to the CCH board while at least $500 million of Notes are outstanding.
• If EIG Note Holders acquire >10% of Cheniere Common Stock (and hold >5%), EIG may appoint one member to Cheniere's board of directors.

Risks and Contingencies:

• The transaction is contingent on the closing of senior debt financing.
• Interest payments prior to commercial operations are non-cash (PIK), increasing the principal balance.
• Conversion is restricted by market capitalization thresholds and dilution events.

Investor Verification Checklist

• Verify the closing status of the senior debt project financing for the Corpus Christi Liquefaction Project.
• Confirm the projected "Commercial Operation Date" for the third liquefaction train to understand when cash interest payments begin.
• Monitor Cheniere's market capitalization relative to the $13.7 billion threshold required for conversions.
• Review the impact of the 11% PIK interest rate on the company's leverage ratios prior to commercial operations.
• Check for any updates regarding the June 30, 2015 termination deadline for the Note Purchase Agreement.