| Debt |
DEBT
As of March 31, 2016 and December 31, 2015, our debt consisted of the following (in thousands):
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March 31, |
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December 31, |
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2016 |
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2015 |
Long-term debt: |
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SPLNG |
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6.50% Senior Secured Notes due 2020 (“2020 SPLNG Senior Notes”) (1) |
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$ |
420,000 |
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$ |
420,000 |
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SPL |
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5.625% Senior Secured Notes due 2021 (“2021 SPL Senior Notes”), net of unamortized premium of $8,341 and $8,718 |
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2,008,341 |
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2,008,718 |
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6.25% Senior Secured Notes due 2022 (“2022 SPL Senior Notes”) |
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1,000,000 |
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1,000,000 |
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5.625% Senior Secured Notes due 2023 (“2023 SPL Senior Notes”), net of unamortized premium of $6,212 and $6,392 |
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1,506,212 |
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1,506,392 |
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5.75% Senior Secured Notes due 2024 (“2024 SPL Senior Notes”) |
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2,000,000 |
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2,000,000 |
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5.625% Senior Secured Notes due 2025 (“2025 SPL Senior Notes”) |
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2,000,000 |
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2,000,000 |
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2015 SPL Credit Facilities |
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1,505,000 |
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845,000 |
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CTPL |
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$400.0 million Term Loan Facility (“CTPL Term Loan”), net of unamortized discount of zero and $1,429 |
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— |
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398,571 |
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Cheniere Partners |
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2016 CQP Credit Facilities |
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450,000 |
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— |
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CCH |
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2015 CCH Credit Facility |
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3,386,000 |
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2,713,000 |
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CCH HoldCo II |
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11.0% Convertible Senior Notes due 2025 (“2025 CCH HoldCo II Convertible Senior Notes”) |
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1,079,479 |
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1,050,588 |
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Cheniere |
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4.875% Convertible Unsecured Notes due 2021 (“2021 Cheniere Convertible Unsecured Notes”), net of unamortized discount of $165,738 and $174,095 |
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888,296 |
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879,938 |
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4.25% Convertible Senior Notes due 2045 (“2045 Cheniere Convertible Senior Notes”), net of unamortized discount of $318,535 and $319,062 |
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306,465 |
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305,938 |
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Unamortized debt issuance costs (2) |
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(201,694 |
) |
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(207,718 |
) |
Total long-term debt, net |
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16,348,099 |
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14,920,427 |
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Current debt: |
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7.50% Senior Secured Notes due 2016 (“2016 SPLNG Senior Notes”), net of unamortized discount of $3,130 and $4,303 (3) |
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1,662,370 |
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1,661,197 |
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$1.2 billion SPL Working Capital Facility (“SPL Working Capital Facility”) |
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125,000 |
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15,000 |
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Unamortized debt issuance costs (2) |
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(2,052 |
) |
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(2,818 |
) |
Total current debt, net |
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1,785,318 |
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1,673,379 |
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Total debt, net |
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$ |
18,133,417 |
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$ |
16,593,806 |
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(1) |
Must be redeemed or repaid concurrently with the 2016 Senior Notes under the terms of the 2016 CQP Credit Facilities if the obligations under the 2016 Senior Notes are satisfied with borrowings under the 2016 CQP Credit Facilities.
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(2) |
Effective January 1, 2016, we adopted ASU 2015-03 and ASU 2015-15, which require debt issuance costs related to term notes to be presented in the balance sheet as a direct deduction from the debt liability, rather than as an asset, retrospectively for each reporting period presented. As a result, we reclassified $207.8 million and $2.8 million from debt issuance costs, net to long-term debt, net and current debt, net, respectively, as of December 31, 2015.
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(3) |
Matures on November 30, 2016. We currently anticipate satisfying this obligation with borrowings under the 2016 CQP Credit Facilities.
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2016 Debt Issuances and Redemptions
2016 CQP Credit Facilities
In February 2016, Cheniere Partners entered into the $2.8 billion 2016 CQP Credit Facilities which consist of: (1) a $450.0 million CTPL tranche term loan that was used to prepay the $400.0 million CTPL Term Loan in February 2016, (2) an approximately $2.1 billion SPLNG tranche term loan that will be used to redeem or repay the approximately $2.1 billion of the 2016 SPLNG Senior Notes and the 2020 SPLNG Senior Notes (which must be redeemed or repaid concurrently under the terms of the 2016 CQP Credit Facilities), (3) a $125.0 million debt service reserve credit facility (the “DSR Facility”) that may be used to satisfy a six-month debt service reserve requirement and (4) a $115.0 million revolving credit facility that may be used for general business purposes.
The 2016 CQP Credit Facilities accrue interest at a variable rate per annum equal to LIBOR or the base rate (equal to the highest of the prime rate, the federal funds effective rate, as published by the Federal Reserve Bank of New York, plus 0.50% and adjusted one month LIBOR plus 1.0%), plus the applicable margin. The applicable margin for LIBOR loans is 2.25% per annum, and the applicable margin for base rate loans is 1.25% per annum, in each case with a 0.50% step-up beginning on February 25, 2019. Interest on LIBOR loans is due and payable at the end of each applicable LIBOR period (and at the end of every three month period within the LIBOR period, if any), and interest on base rate loans is due and payable at the end of each calendar quarter.
Cheniere Partners incurred $48.7 million of debt issuance costs during the three months ended March 31, 2016, and will incur an additional $21.5 million of debt issuance costs when the SPLNG tranche is funded. The prepayment of the CTPL Term Loan resulted in a write-off of unamortized discount and debt issuance costs of $1.5 million during the three months ended March 31, 2016. Cheniere Partners pays a commitment fee equal to an annual rate of 40% of the margin for LIBOR loans multiplied by the average daily amount of the undrawn commitment, payable quarterly in arrears. The DSR Facility and the revolving credit facility are both available for the issuance of letters of credit, which incur a fee equal to an annual rate of 2.25% of the undrawn portion with a 0.50% step-up beginning on February 25, 2019.
The 2016 CQP Credit Facilities mature on February 25, 2020, and the outstanding balance may be repaid, in whole or in part, at any time without premium or penalty, except for interest hedging and interest rate breakage costs. The 2016 CQP Credit Facilities contain conditions precedent for extensions of credit, as well as customary affirmative and negative covenants and limit Cheniere Partners’ ability to make restricted payments, including distributions, to once per fiscal quarter as long as certain conditions are satisfied. Under the terms of the 2016 CQP Credit Facilities, Cheniere Partners is required to hedge not less than 50% of the variable interest rate exposure on its projected aggregate outstanding balance, maintain a minimum debt service coverage ratio of at least 1.15x at the end of each fiscal quarter beginning March 31, 2019 and have a projected debt service coverage ratio of 1.55x in order to incur additional indebtedness to refinance a portion of the existing obligations.
The 2016 CQP Credit Facilities are unconditionally guaranteed by each subsidiary of Cheniere Partners other than: (1) SPL, (2) SPLNG until funding of its tranche term loan and (3) certain of the subsidiaries of Cheniere Partners owning other development projects, as well as certain other specified subsidiaries and members of the foregoing entities.
Credit Facilities
Below is a summary of our credit facilities outstanding as of March 31, 2016 (in thousands):
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2015 SPL Credit Facilities |
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SPL Working Capital Facility |
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2016 CQP Credit Facilities |
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2015 CCH Term Loan Facilities |
Total facility size |
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$ |
4,600,000 |
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$ |
1,200,000 |
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$ |
2,800,000 |
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$ |
8,403,714 |
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Outstanding balance |
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1,505,000 |
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125,000 |
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450,000 |
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3,386,000 |
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Letters of credit issued |
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— |
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236,459 |
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7,500 |
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— |
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Available commitment |
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$ |
3,095,000 |
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$ |
838,541 |
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$ |
2,342,500 |
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$ |
5,017,714 |
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Interest rate |
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LIBOR plus 1.30% - 1.75% or base rate plus 1.75% |
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LIBOR plus 1.75% or base rate plus 0.75% |
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LIBOR plus 2.25% or base rate plus 1.25% (1) |
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LIBOR plus 2.25% or base rate plus 1.25% (2) |
Maturity date |
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Earlier of December 31, 2020 or second anniversary of SPL Trains 1 through 5 completion date |
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December 31, 2020, with various terms for underlying loans |
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February 25, 2020, with principals due quarterly commencing on February 19, 2019 |
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Earlier of May 13, 2022 or second anniversary of CCL Trains 1 and 2 completion date |
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(1) |
There is a 0.50% step-up for both LIBOR and base rate loans beginning on February 25, 2019.
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(2) |
There is a 0.25% step-up for both LIBOR and base rate loans following completion of the first two Trains of the CCL Project.
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Convertible Notes
Below is a summary of our convertible notes outstanding as of March 31, 2016 (in thousands):
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2021 Cheniere Convertible Unsecured Notes |
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2025 CCH HoldCo II Convertible Senior Notes |
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2045 Cheniere Convertible Senior Notes |
Aggregate principal |
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$ |
1,000,000 |
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$ |
1,000,000 |
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$ |
625,000 |
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Debt component, net of discount |
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$ |
888,296 |
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$ |
1,079,479 |
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$ |
306,465 |
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Equity component |
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$ |
203,035 |
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$ |
— |
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$ |
194,082 |
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Interest payment method |
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Paid-in-kind |
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Paid-in-kind (1) |
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Cash |
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Conversion by us (2) |
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— |
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(3) |
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(4) |
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Conversion by holders (2) |
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(5) |
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(6) |
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(7) |
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Conversion basis |
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Cash and/or stock |
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Stock |
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Cash and/or stock |
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Conversion value in excess of principal |
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$ |
— |
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$ |
— |
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$ |
— |
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Maturity date |
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May 28, 2021 |
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March 1, 2025 |
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March 15, 2045 |
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Effective interest rate |
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9.6 |
% |
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11.9 |
% |
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9.4 |
% |
Remaining debt discount and debt issuance costs amortization period (8) |
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5.2 years |
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4.5 years |
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29.0 years |
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(1) |
Prior to the substantial completion of Train 2 of the CCL Project, interest will be paid entirely in kind. Following this date, the interest generally must be paid in cash; however, a portion of the interest may be paid in kind under certain specified circumstances.
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(2) |
Conversion is subject to various limitations and conditions. |
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(3) |
Convertible on or after the later of March 1, 2020 and the substantial completion of Train 2 of the CCL Project, provided that our market capitalization is not less than $10.0 billion (“Eligible Conversion Date”). The conversion price is the lower of (1) a 10% discount to the average of the daily volume-weighted average price (“VWAP”) of our common stock for the 90 trading day period prior to the date notice is provided, and (2) a 10% discount to the closing price of our common stock on the trading day preceding the date notice is provided.
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(4) |
Redeemable at any time after March 15, 2020 at a redemption price payable in cash equal to the accreted amount of the 2045 Cheniere Convertible Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to such redemption date.
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(5) |
Initially convertible at $93.64 (subject to adjustment upon the occurrence of certain specified events), provided that the closing price of our common stock is greater than or equal to the conversion price on the conversion date.
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(6) |
Convertible on or after the six-month anniversary of the Eligible Conversion Date, provided that our total market capitalization is not less than $10.0 billion, at a price equal to the average of the daily VWAP of our common stock for the 90 trading day period prior to the date on which notice of conversion is provided.
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(7) |
Prior to December 15, 2044, convertible only under certain circumstances as specified in the indenture; thereafter, holders may convert their notes regardless of these circumstances. The conversion rate will initially equal 7.2265 shares of our common stock per $1,000 principal amount of the 2045 Cheniere Convertible Senior Notes, which corresponds to an initial conversion price of approximately $138.38 per share of our common stock (subject to adjustment upon the occurrence of certain specified events).
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(8) |
We amortize any debt discount and debt issuance costs using the effective interest over the period through contractual maturity except for the 2025 CCH HoldCo II Convertible Senior Notes, which are amortized through the date they are first convertible into our common stock. |
Interest Expense
Total interest expense, including interest expense related to our convertible notes, consisted of the following (in thousands):
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Three Months Ended March 31, |
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2016 |
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2015 |
Interest cost on convertible notes: |
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Interest per contractual rate |
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$ |
49,040 |
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$ |
13,939 |
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Amortization of debt discount |
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8,885 |
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6,598 |
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Amortization of debt issuance costs |
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1,151 |
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14 |
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Total interest cost related to convertible notes |
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59,076 |
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20,551 |
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Interest cost on other debt |
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234,216 |
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160,087 |
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Total interest cost |
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293,292 |
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180,638 |
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Capitalized interest |
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(216,955 |
) |
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(121,026 |
) |
Total interest expense, net |
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$ |
76,337 |
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$ |
59,612 |
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Fair Value Disclosures
The following table (in thousands) shows the carrying amount and estimated fair value of our debt:
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March 31, 2016 |
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December 31, 2015 |
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Carrying
Amount |
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Estimated
Fair Value |
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Carrying
Amount |
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Estimated
Fair Value |
Senior Notes, net of premium or discount (1) |
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$ |
10,596,923 |
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$ |
10,299,660 |
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$ |
10,596,307 |
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$ |
9,525,809 |
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CTPL Term Loan, net of discount (2) |
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— |
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— |
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398,571 |
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400,000 |
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Credit facilities (2) (3) |
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5,466,000 |
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5,466,000 |
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3,573,000 |
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3,573,000 |
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2021 Cheniere Convertible Unsecured Notes, net of discount (4) |
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888,296 |
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858,091 |
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879,938 |
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825,413 |
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2025 CCH HoldCo II Convertible Senior Notes (4) |
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1,079,479 |
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1,071,219 |
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1,050,588 |
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914,363 |
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2045 Cheniere Convertible Senior Notes, net of discount (5) |
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306,465 |
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334,375 |
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305,938 |
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331,919 |
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(1) |
Includes 2016 SPLNG Senior Notes, net of discount; 2020 SPLNG Senior Notes; 2021 SPL Senior Notes, net of premium; 2022 SPL Senior Notes; 2023 SPL Senior Notes, net of premium; 2024 SPL Senior Notes and 2025 SPL Senior Notes (collectively, the “Senior Notes”). The Level 2 estimated fair value was based on quotes obtained from broker-dealers or market makers of our Senior Notes and other similar instruments.
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(2) |
The Level 3 estimated fair value approximates the principal amount because the interest rates are variable and reflective of market rates and the debt may be repaid, in full or in part, at any time without penalty. |
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(3) |
Includes 2015 SPL Credit Facilities, SPL Working Capital Facility, 2016 CQP Credit Facilities and 2015 CCH Credit Facility.
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(4) |
The Level 3 estimated fair value was calculated based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, including our stock price and interest rates based on debt issued by parties with comparable credit ratings to us and inputs that are not observable in the market. |
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(5) |
The Level 1 estimated fair value was based on unadjusted quoted prices in active markets for identical liabilities that we had the ability to access at the measurement date. |
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