Cheniere Energy’s outstanding debt
Cheniere Energy’s (LNG) total outstanding debt at the end of first quarter of 2016 was $16.3 billion. That’s $4.2 billion higher than the total debt outstanding in 1Q15. This includes $12.5 billion of debt sitting on the balance sheet of its subsidiary Cheniere Energy Partners (CQP).
Cheniere Energy is heavily dependent on external borrowing in order to fund its projects. This is due to low internally generated cash flows. Boardwalk Pipeline Partners (BWP), Williams Partners (WPZ), and Energy Transfer Partners (ETP) are among the midstream companies with huge outstanding debt.
Currently, Cheniere Energy and its subsidiaries have issued $4.1 billion of new debt in 2016. That includes $2.8 billion of senior secured credit facilities closed by CQP and $1.3 billion of senior secured notes issued by Cheniere Corpus Christi Holdings.
CQP has also recently announced the upsizing and pricing of $1.5 billion in senior secured notes. They’re due in 2026. This transaction was expected to close on June 14, 2016. The proceeds from this issuance would be used mainly to repay debt maturing in 2016. After these repayments, Cheniere Energy and its subsidiary have no debt maturity until 2020.
The $2.8 billion credit facility is priced at a floating rate of LIBOR (London Interbank Offered Rate) plus 225 basis points, or the base rate plus 125 basis points. The retired debt was mostly fixed rate. This is expected to increase Cheniere Energy Partners’ interest rate exposure.
Cheniere Energy and its subsidiaries have significant interest expense due to huge outstanding debt. Cheniere Energy’s interest expense increased to $76.3 million in 1Q16, from $59.6 million in 1Q15. Interest expense might continue to increase in the coming quarters due to recently issued debt.
In the next part of the series, we’ll look at Cheniere Energy’s current valuation.