A capital infusion — the announcement of which last week lifted Cheniere Energy Inc. shares more than 50% — has closed, the struggling liquefied natural gas (LNG) terminal developer said Monday.
Funds led by GSO Capital Partners LP and its affiliates have closed a $250 million senior secured convertible loan agreement with Cheniere Common Units Holding LLC, a subsidiary of Cheniere Energy. Proceeds will be used to repay a $95 million bridge loan obtained in May, fund a reserve account for payments under Cheniere Marketing Inc.’s terminal use agreement with the Sabine Pass LNG receiving terminal, and for general corporate purposes, the company said.
Cheniere shares were up more than 6% in morning trading Monday but were down about 3% in the afternoon.
Moody’s Investors Service on Monday changed its outlook on Sabine Pass LNG LP to “stable” from “negative” and affirmed its “B2” rating on the company’s senior secured notes, due in 2013 and 2016.
“The stable outlook reflects the recently completed convertible loan financing at an affiliate of Cheniere Energy Inc., Sabine’s parent, that would provide Cheniere sufficient liquidity for the next three years,” said Moody’s analyst Clifford Kim. “Cheniere’s liquidity profile could again face significant pressure starting in the third quarter of 2011 if Cheniere’s business prospects do not substantially improve over the next 18 months.”
The rating agency noted a “very weak” market for U.S. LNG imports, citing growth in domestic gas production. But Moody’s also said global LNG supply is expected to increase next year and in 2010 as several delayed LNG liquefaction projects come on-line.
Cheniere reported a second quarter net loss of more than $132 million (see Daily GPI, Aug. 12). As part of its restructuring, the company in June signed an LNG marketing agreement with J.P. Morgan Ventures Energy Corp., a subsidiary of JPMorgan Chase & Co. (see Daily GPI, June 30).
“We believe that this capital investment, combined with our recent restructuring and significant reduction of annual expenses, will provide us with sufficient liquidity to operate our business for a minimum of three years, whether or not we are successful in our plan of securing cargoes or additional third-party long-term terminal use agreements,” said Cheniere CEO Charif Souki. “GSO is a long-term investor committed to our company’s success, and we look forward to returning our focus to our business plan of maximizing the value of the 2 Bcf/d of regasification capacity held at the Sabine Pass terminal.”
“Cheniere owns and operates world-class assets in both the Sabine Pass Terminal and Creole Trail Pipeline, and our investment is designed to provide the company with needed time to realize the value of those assets for its shareholders,” said GSO Managing Director Dwight Scott.
D. Dwight Scott and Jason New, both GSO senior managing directors, will join the Cheniere board. James Bennett, a managing director at GSO, will join the board of the general partner of Cheniere Energy Partners LP.
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