Cheniere Secures $2.5B in Loan Pledges From 17 Finance Firms

Edna B. Shearer

Cheniere Energy, Inc. LNG recently announced that it received commitments from 17 financial organizations for $2.5 billion three-year delayed draw senior secured term loan. It also got the authorization to add further commitments from more financial associations.

This Houston, TX-based company’s proceeds from borrowings under the term loan will be utilized to repay the existing 11% convertible senior secured notes due 2025, and also pay back and/or repurchase 4.875% convertible PIK notes due 2021 along with the clearance of associated fees and expenses.

Being the first company to receive an FERC (Federal Energy Regulatory Commission) approval to export 2.6 billion cubic feet per day of LNG from its Sabine Pass terminal, Cheniere Energy certainly enjoys a distinct competitive edge.  However, exporting natural gas by setting up large liquefication plants is a very capital-intensive undertaking with each unit running up exorbitant bills. This, in turn, amassed a huge debt load for Cheniere Energy. The company’s total debt is currently crosses $29 billion with only $2.8 billion left in cash and cash equivalents. Importantly, its debt-to-capitalization as of the first-quarter end stood at 92%, posing a major risk to the company, thereby restricting its financial freedom.

The promises made to its credit facilities appear to better its financial flexibility significantly, thus allowing it to navigate through these challenging times. The Cheniere term loan is likely to close in June 2020.

On first-quarter earnings call, management stated that the worldwide LNG consumption was up by around 10% year over year in the period. However, the company cautioned that demand for fuel is expected to take a hit over the next few quarters as slowdown in global economic activity induced by coronavirus pandemic and high-storage inventory builds lower the requirement for imports. Notably, Cheniere Energy reiterated its guidance for the full year. It anticipates adjusted EBITDA within $3.8-$4.1 billion with distributable cash flow between $1 billion and $1.3 billion.

About the Company

Cheniere Energy is primarily engaged in businesses related to liquefied natural gas (or LNG) through its two business segments: LNG terminal, and LNG and natural gas marketing. The company, through its controlling interest in Cheniere Energy Partners L.P., owns and operates the Sabine Pass LNG terminal (North America’s first large-scale liquefied gas export facility) in Louisiana.

Shares of Cheniere Energy have lost 26.7% in the past year compared with the industry’s 45.7% decline.

Zacks Rank & Key Picks

Cheniere Energy currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the energy space are Oceaneering International Inc OII, Gulfport Energy Corporation GPOR and Chesapeake Energy Corporation CHK, each presently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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