| Debt |
DEBT
As of March 31, 2017 and December 31, 2016, our debt consisted of the following (in millions):
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March 31, |
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December 31, |
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2017 |
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2016 |
Long-term debt: |
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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 $7 and $7 |
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$ |
2,007 |
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$ |
2,007 |
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6.25% Senior Secured Notes due 2022 (“2022 SPL Senior Notes”) |
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1,000 |
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1,000 |
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5.625% Senior Secured Notes due 2023 (“2023 SPL Senior Notes”), net of unamortized premium of $5 and $6 |
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1,505 |
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1,506 |
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5.75% Senior Secured Notes due 2024 (“2024 SPL Senior Notes”) |
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2,000 |
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2,000 |
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5.625% Senior Secured Notes due 2025 (“2025 SPL Senior Notes”) |
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2,000 |
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2,000 |
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5.875% Senior Secured Notes due 2026 (“2026 SPL Senior Notes”) |
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1,500 |
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1,500 |
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5.00% Senior Secured Notes due 2027 (“2027 SPL Senior Notes”) |
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1,500 |
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1,500 |
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4.200% Senior Secured Notes due 2028 (“2028 SPL Senior Notes”), net of unamortized discount of $1 and zero |
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1,349 |
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— |
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5.00% Senior Secured Notes due 2037 (“2037 SPL Senior Notes”) |
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800 |
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— |
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2015 SPL Credit Facilities |
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— |
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314 |
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Cheniere Partners |
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2016 CQP Credit Facilities |
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2,560 |
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2,560 |
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CCH |
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7.000% Senior Secured Notes due 2024 (“2024 CCH Senior Notes”) |
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1,250 |
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1,250 |
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5.875% Senior Secured Notes due 2025 (“2025 CCH Senior Notes”) |
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1,500 |
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1,500 |
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2015 CCH Credit Facility |
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2,929 |
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2,381 |
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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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1,203 |
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1,171 |
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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 $140 and $146 |
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966 |
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960 |
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4.25% Convertible Senior Notes due 2045 (“2045 Cheniere Convertible Senior Notes”), net of unamortized discount of $316 and $317 |
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309 |
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308 |
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$750 million Cheniere Revolving Credit Facility (“Cheniere Revolving Credit Facility”) |
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— |
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— |
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Unamortized debt issuance costs |
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(290 |
) |
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(269 |
) |
Total long-term debt, net |
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24,088 |
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21,688 |
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Current debt: |
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$1.2 billion SPL Working Capital Facility (“SPL Working Capital Facility”) |
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— |
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224 |
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$350 million CCH Working Capital Facility (“CCH Working Capital Facility”) |
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— |
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— |
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Cheniere Marketing trade finance facilities |
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24 |
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23 |
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Total current debt, net |
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24 |
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247 |
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Total debt, net |
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$ |
24,112 |
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$ |
21,935 |
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2017 Debt Issuances and Redemptions
Senior Notes
In February 2017, SPL issued an aggregate principal amount of $800 million of the 2037 SPL Senior Notes on a private placement basis in reliance on the exemption from registration provided for under Section 4(a)(2) of the Securities Act of 1933, as amended. In March 2017, SPL issued an aggregate principal amount of $1.35 billion, before discount, of the 2028 SPL Senior Notes. Net proceeds of the offerings of the 2037 SPL Senior Notes and the 2028 SPL Senior Notes were $789 million and $1.33 billion, respectively, after deducting the initial purchasers’ commissions (for the 2028 SPL Senior Notes) and estimated fees and expenses. The net proceeds of the 2037 SPL Senior Notes were used to repay the then outstanding borrowings of $369 million under the 2015 SPL Credit Facilities and, along with the net proceeds of the 2028 SPL Senior Notes, the remainder is being used to pay a portion of the capital costs in connection with the construction of Trains 1 through 5 of the SPL Project in lieu of the terminated portion of the commitments under the 2015 SPL Credit Facilities.
In connection with the issuance of the 2037 SPL Senior Notes and the 2028 SPL Senior Notes, SPL terminated the remaining available balance of $1.6 billion under the 2015 SPL Credit Facilities, resulting in a write-off of debt issuance costs associated with the 2015 SPL Credit Facilities of $42 million during the three months ended March 31, 2017.
The 2037 SPL Senior Notes and the 2028 SPL Senior Notes accrue interest at fixed rates of 5.00% and 4.200%, respectively, and interest is payable semi-annually in arrears. The terms of the 2037 SPL Senior Notes are governed by an indenture which contains customary terms and events of default and certain covenants that, among other things, limit SPL’s ability and the ability of SPL’s restricted subsidiaries to incur additional indebtedness or issue preferred stock, make certain investments or pay dividends or distributions on capital stock or subordinated indebtedness or purchase, redeem or retire capital stock, sell or transfer assets, including capital stock of SPL’s restricted subsidiaries, restrict dividends or other payments by restricted subsidiaries, incur liens, enter into transactions with affiliates, dissolve, liquidate, consolidate, merge, sell or lease all or substantially all of SPL’s assets and enter into certain LNG sales contracts. The 2028 SPL Senior Notes are governed by the same common indenture as the other senior notes, which also contains customary terms and events of default, covenants and redemption terms.
At any time prior to six months before the respective dates of maturity of the 2037 SPL Senior Notes and the 2028 SPL Senior Notes, SPL may redeem all or part of such notes at a redemption price equal to the “optional redemption” price for the 2037 SPL Senior Notes or the “make-whole” price for the 2028 SPL Senior Notes, as set forth in the respective indentures governing the notes, plus accrued and unpaid interest, if any, to the date of redemption. SPL may also, at any time within six months of the respective maturity dates for the 2037 SPL Senior Notes and the 2028 SPL Senior Notes, redeem all or part of such notes at a redemption price equal to 100% of the principal amount of such notes to be redeemed, plus accrued and unpaid interest, if any, to the date of redemption.
In connection with the issuance of the 2028 SPL Senior Notes, SPL entered into a registration rights agreement (the “SPL Registration Rights Agreement”). Under the terms of the SPL Registration Rights Agreement, SPL has agreed, and any future guarantors will agree, to use commercially reasonable efforts to file with the SEC and cause to become effective a registration statement relating to an offer to exchange any and all of the 2028 SPL Senior Notes for a like aggregate principal amount of debt securities of SPL with terms identical in all material respects to the 2028 SPL Senior Notes sought to be exchanged (other than with respect to restrictions on transfer or to any increase in annual interest rate), within 360 days after March 6, 2017. Under specified circumstances, SPL has also agreed, and any future guarantors will also agree, to use commercially reasonable efforts to cause to become effective a shelf registration statement relating to resales of the 2028 SPL Senior Notes. SPL will be obligated to pay additional interest on the 2028 SPL Senior Notes if it fails to comply with its obligation to register them within the specified time period.
Cheniere Revolving Credit Facility
In March 2017, we entered into the Cheniere Revolving Credit Facility that may be used to fund, through loans and letters of credit, equity capital contributions to CCH HoldCo II and its subsidiaries for the development of the CCL Project and, provided that certain conditions are met, for general corporate purposes. No advances or letters of credit under the Cheniere Revolving Credit Facility are available until either (1) Cheniere’s unrestricted cash and cash equivalents are less than $500 million or (2) Train 4 of the SPL Project has achieved substantial completion. We incurred $16 million of debt issuance costs related to the Cheniere Revolving Credit Facility during the three months ended March 31, 2017.
Loans under the Cheniere Revolving Credit Facility accrue interest at a variable rate per annum equal to LIBOR or the base rate (equal to the highest of (1) the prime rate, (2) the federal funds rate plus 0.50% and (3) one month LIBOR plus 1.00%), plus the applicable margin. The applicable margin for LIBOR loans is 3.25% per annum, and the applicable margin for base rate loans is 2.25% per annum. Interest on LIBOR loans is due and payable at the end of each LIBOR period, and interest on base rate loans is due and payable at the end of each calendar quarter. We will also pay (1) a commitment fee on the average daily amount of undrawn commitments at an annual rate of 0.75%, payable quarterly in arrears, and (2) a letter of credit fee at an annual rate equal to the applicable margin for LIBOR loans on the undrawn portion of all letters of credit issued under the Cheniere Revolving Credit Facility. Draws on any letters of credit will accrue interest at an annual rate equal to the base rate plus 2.0%.
The Cheniere Revolving Credit Facility matures on March 2, 2021 and contains representations, warranties and affirmative and negative covenants customary for companies like Cheniere with lenders of the type participating in the Cheniere Revolving Credit Facility that limit our ability to make restricted payments, including distributions, unless certain conditions are satisfied, as well as limitations on indebtedness, guarantees, hedging, liens, investments and affiliate transactions. Under the terms of the Cheniere Revolving Credit Facility, we are required to ensure that the sum of our unrestricted cash and the amount of undrawn commitments under the Cheniere Revolving Credit Facility is at least equal to the lesser of (1) 20% of the commitments under the Cheniere Revolving Credit Facility and (2) $100 million.
The Cheniere Revolving Credit Facility is secured by a first priority security interest (subject to permitted liens and other customary exceptions) in substantially all of our assets, including our interests in our direct subsidiaries (excluding CCH HoldCo II).
Credit Facilities
Below is a summary (in millions) of our credit facilities outstanding as of March 31, 2017:
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SPL Working Capital Facility |
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2016 CQP Credit Facilities |
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2015 CCH Credit Facility |
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CCH Working Capital Facility |
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Cheniere Revolving Credit Facility |
Original facility size |
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$ |
1,200 |
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$ |
2,800 |
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$ |
8,404 |
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$ |
350 |
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$ |
750 |
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Outstanding balance |
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— |
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2,560 |
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2,929 |
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— |
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— |
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Commitments prepaid or terminated |
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— |
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— |
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2,420 |
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— |
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— |
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Letters of credit issued |
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377 |
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50 |
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— |
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82 |
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— |
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Available commitment |
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$ |
823 |
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$ |
190 |
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$ |
3,055 |
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$ |
268 |
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$ |
750 |
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Interest rate |
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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) |
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LIBOR plus 1.50% - 2.00% or base rate plus 0.50% - 1.00% |
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LIBOR plus 3.25% or base rate plus 2.25% |
Maturity 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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December 14, 2021, with various terms for underlying loans |
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March 2, 2021 |
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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 (in millions) of our convertible notes outstanding as of March 31, 2017:
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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 original principal |
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$ |
1,000 |
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$ |
1,000 |
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$ |
625 |
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Debt component, net of discount |
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$ |
966 |
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$ |
1,203 |
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$ |
309 |
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Equity component |
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$ |
205 |
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$ |
— |
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$ |
194 |
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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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Contractual interest rate |
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4.875 |
% |
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11.0 |
% |
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4.25 |
% |
Effective interest rate |
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8.3 |
% |
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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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4.2 years |
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3.5 years |
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28.0 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 by holders into our common stock.
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Interest Expense
Total interest expense, including interest expense related to our convertible notes, consisted of the following (in millions):
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Three Months Ended March 31, |
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2017 |
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2016 |
Interest cost on convertible notes: |
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Interest per contractual rate |
$ |
53 |
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$ |
49 |
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Amortization of debt discount |
7 |
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9 |
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Amortization of debt issuance costs |
2 |
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1 |
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Total interest cost related to convertible notes |
62 |
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59 |
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Interest cost on debt excluding convertible notes |
292 |
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234 |
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Total interest cost |
354 |
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293 |
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Capitalized interest |
(189 |
) |
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(217 |
) |
Total interest expense, net |
$ |
165 |
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$ |
76 |
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Fair Value Disclosures
The following table (in millions) shows the carrying amount and estimated fair value of our debt:
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March 31, 2017 |
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December 31, 2016 |
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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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$ |
15,611 |
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$ |
16,738 |
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$ |
14,263 |
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$ |
15,210 |
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2037 SPL Senior Notes (2) |
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800 |
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|
826 |
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— |
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— |
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Credit facilities (3) |
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5,513 |
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5,513 |
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|
5,502 |
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|
5,502 |
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2021 Cheniere Convertible Unsecured Notes, net of discount (2) |
|
966 |
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|
1,025 |
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|
960 |
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|
983 |
|
2025 CCH HoldCo II Convertible Senior Notes (2) |
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1,203 |
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1,398 |
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1,171 |
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|
1,328 |
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2045 Cheniere Convertible Senior Notes, net of discount (4) |
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309 |
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|
422 |
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|
308 |
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|
375 |
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(1) |
Includes 2021 SPL Senior Notes, 2022 SPL Senior Notes, 2023 SPL Senior Notes, 2024 SPL Senior Notes, 2025 SPL Senior Notes, 2026 SPL Senior Notes, 2027 SPL Senior Notes, 2028 SPL Senior Notes, 2024 CCH Senior Notes and 2025 CCH Senior Notes. The Level 2 estimated fair value was based on quotes obtained from broker-dealers or market makers of these senior notes and other similar instruments.
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(2) |
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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(3) |
Includes 2015 SPL Credit Facilities, SPL Working Capital Facility, 2016 CQP Credit Facilities, 2015 CCH Credit Facility, CCH Working Capital Facility, Cheniere Revolving Credit Facility and Cheniere Marketing trade finance facilities. 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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(4) |
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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