Cheniere Energy, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Debt

Debt

6 Months Ended

Jun. 30, 2020

Debt Disclosure [Abstract]

Debt

DEBT

As of June 30, 2020 and December 31, 2019, our debt consisted of the following (in millions):



	June 30,			December 31,
	2020			2019
Long-term debt:
SPL
5.625% Senior Secured Notes due 2021 (“2021 SPL Senior Notes”)	$	—		$	2,000
6.25% Senior Secured Notes due 2022 (“2022 SPL Senior Notes”)	1,000			1,000
5.625% Senior Secured Notes due 2023 (“2023 SPL Senior Notes”)	1,500			1,500
5.75% Senior Secured Notes due 2024 (“2024 SPL Senior Notes”)	2,000			2,000
5.625% Senior Secured Notes due 2025 (“2025 SPL Senior Notes”)	2,000			2,000
5.875% Senior Secured Notes due 2026 (“2026 SPL Senior Notes”)	1,500			1,500
5.00% Senior Secured Notes due 2027 (“2027 SPL Senior Notes”)	1,500			1,500
4.200% Senior Secured Notes due 2028 (“2028 SPL Senior Notes”)	1,350			1,350
4.500% Senior Secured Notes due 2030 (“2030 SPL Senior Notes”)	2,000			—
5.00% Senior Secured Notes due 2037 (“2037 SPL Senior Notes”)	800			800
$1.2 billion SPL Working Capital Facility executed in 2020 (“2020 SPL Working Capital Facility”)	—			—
Cheniere Partners
5.250% Senior Notes due 2025 (“2025 CQP Senior Notes”)	1,500			1,500
5.625% Senior Notes due 2026 (“2026 CQP Senior Notes”)	1,100			1,100
4.500% Senior Notes due 2029 (“2029 CQP Senior Notes”)	1,500			1,500
CQP Credit Facilities executed in 2019 (“2019 CQP Credit Facilities”)	—			—
CCH
7.000% Senior Secured Notes due 2024 (“2024 CCH Senior Notes”)	1,250			1,250
5.875% Senior Secured Notes due 2025 (“2025 CCH Senior Notes”)	1,500			1,500
5.125% Senior Secured Notes due 2027 (“2027 CCH Senior Notes”)	1,500			1,500
3.700% Senior Secured Notes due 2029 (“2029 CCH Senior Notes”)	1,500			1,500
4.80% Senior Secured Notes due 2039 (“4.80% CCH Senior Notes”)	727			727
3.925% Senior Secured Notes due 2039 (“3.925% CCH Senior Notes”)	475			475
CCH Credit Facility	3,283			3,283
CCH HoldCo II
11.0% Convertible Senior Secured Notes due 2025 (“2025 CCH HoldCo II Convertible Senior Notes”)	1,278			1,578
Cheniere
4.875% Convertible Unsecured Notes due 2021 (“2021 Cheniere Convertible Unsecured Notes”)	1,216			1,278
4.25% Convertible Senior Notes due 2045 (“2045 Cheniere Convertible Senior Notes”)	625			625
$1.25 billion Cheniere Revolving Credit Facility (“Cheniere Revolving Credit Facility”)	375			—
$2.62 billion Cheniere Term Loan Credit Agreement (“Cheniere Term Loan Facility”)	—			—
Unamortized premium, discount and debt issuance costs, net	(672		)	(692		)
Total long-term debt, net	30,807			30,774

Current debt:
2021 Cheniere Convertible Unsecured Notes	93			—
$1.2 billion SPL Working Capital Facility executed in 2015 (“2015 SPL Working Capital Facility”)	—			—
$1.2 billion CCH Working Capital Facility (“CCH Working Capital Facility”)	141			—
Cheniere Marketing trade finance facilities	6			—
Unamortized premium, discount and debt issuance costs, net	(3		)	—
Total current debt	237			—

Total debt, net	$	31,044		$	30,774

2020 Material Debt Activities

Cheniere Term Loan Facility

In June 2020, we entered into the $2.62 billion delayed draw Cheniere Term Loan Facility, which was subsequently increased to $2.695 billion in July 2020. In July 2020, borrowings under the Cheniere Term Loan Facility were used to (1) redeem the remaining outstanding principal amount of the 2025 CCH HoldCo II Convertible Senior Notes, subsequent to the $300 million redemption in March 2020, pursuant to the amended and restated note purchase agreement for the 2025 CCH HoldCo II Convertible Senior Notes which allowed CCH HoldCo II to redeem the outstanding notes with cash at a price of $1,080 per $1,000 principal amount, (2) repurchase $844 million in aggregate principal amount of outstanding 2021 Cheniere Convertible Unsecured Notes at individually negotiated prices from a small number of investors and (3) pay the related fees and expenses. The remaining borrowings under the Cheniere Term Loan Facility are expected to be used to repay and/or repurchase a portion of the remaining principal amount of the 2021 Cheniere Convertible Unsecured Notes and for the payment of related fees and expenses.

Loans under the Cheniere Term Loan Facility accrue interest at a variable rate per annum equal to LIBOR or the base rate plus the applicable margin. The applicable margin for LIBOR and base rate loans range from (1) 2.00% to 2.75% and 1.00% to 1.75% per annum, respectively, in the first year (2) 2.50% to 3.25% and 1.50% to 2.25% per annum, respectively, in the second year and (3) 3.00% to 3.75% and 2.00% to 2.75% per annum, respectively, in the third year until maturity, in each case, based on the credit ratings then in effect assigned to loans under the Cheniere Term Loan Facility. 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 pay a commitment fee equal to 30% of the margin for LIBOR loans multiplied by the average daily amount of undrawn commitments. If the Cheniere Term Loan Facility is still outstanding on the first anniversary of the Closing Date, as defined by the credit agreement, we will pay duration fees in an amount equal to 0.25% of the aggregate amount of commitments as of July 10, 2020, which was the date the loans were first borrowed under the Cheniere Term Loan Facility (the “Payment Date”). Furthermore, if the Cheniere Term Loan Facility is still outstanding on the second anniversary of the Closing Date, as defined by the credit agreement, we will pay 0.50% of the aggregate amount of commitments as of the Payment Date. Annual administrative fees must also be paid to the administrative agent for the Cheniere Term Loan Facility.

The Cheniere Term Loan Facility matures on June 18, 2023. Subject to customary exceptions, we are required to make mandatory prepayments with respect to the Cheniere Term Loan Facility using the net proceeds of certain events on a pro rata basis and on terms consistent with required prepayments under the Cheniere Revolving Credit Facility. Loans under the Cheniere Term Loan Facility may be voluntarily prepaid, in whole or in part, at any time, without premium or penalty. Borrowings under the Cheniere Term Loan Facility are subject to customary conditions precedent. The Cheniere Term Loan Facility includes representations, warranties, affirmative and negative covenants and events of default customary for companies like us with lenders of the type participating in the Cheniere Term Loan Facility and consistent with the equivalent provisions contained in the Cheniere Revolving Credit Facility.

The Cheniere Term Loan Facility is secured by a first priority security interest (subject to permitted liens and other customary exceptions) on a pari passu basis with the Cheniere Revolving Credit Facility in substantially all of our assets and equity interests in direct subsidiaries (other than certain excluded subsidiaries). Upon redemption of the 2025 CCH HoldCo II Convertible Senior Notes in July 2020, the equity interests in CCH HoldCo II were pledged as collateral to secure the obligations under the Cheniere Revolving Credit Facility and the Cheniere Term Loan Facility.

2030 SPL Senior Notes

In May 2020, SPL issued an aggregate principal amount of $2.0 billion of the 2030 SPL Senior Notes. The proceeds of the notes, along with cash on hand, were used to redeem all of SPL’s outstanding 2021 SPL Senior Notes, resulting in the recognition of debt extinguishment costs of $43 million for the three and six months ended June 30, 2020 relating to the payment of early redemption fees and write off of unamortized debt premium and issuance costs.

The 2030 SPL Senior Notes mature on May 15, 2030 and accrue interest at a fixed rate of 4.500% per annum, which is payable semi-annually in cash in arrears. The 2030 SPL Senior Notes are governed by the same base indenture (the “SPL Indenture”) as all other series of the SPL senior notes (collectively, the “SPL Senior Notes”), except for the 2037 SPL Senior Notes, and are further governed by the Eighth Supplemental Indenture and the Eleventh Supplemental Indenture (together with the SPL Indenture,

the “2030 SPL Notes Indenture”). The 2030 SPL Notes Indenture 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, transfer assets, including capital stock of SPL’s restricted subsidiaries, restrict dividends or other payments by restricted subsidiaries, incur liens, sell assets, enter into transactions with affiliates and consolidate, merge or sell, lease or otherwise dispose of all or substantially all of SPL’s assets and enter into certain LNG sales contracts.

The 2030 SPL Senior Notes are SPL’s senior secured obligation, ranking equally in right of payment with its other existing and future unsubordinated debt and senior to any of its future subordinated debt.

At any time prior to November 15, 2029, SPL may redeem all or a part of the 2030 SPL Senior Notes at a redemption price equal to the ‘make-whole’ price set forth in the Eleventh Supplemental Indenture, plus accrued and unpaid interest, if any, to the date of redemption. SPL may also, at any time on or after November 15, 2029, redeem the 2030 SPL Senior Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the 2030 SPL Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to the date of redemption.

In connection with the closing of the 2030 SPL Senior Notes offering, SPL entered into a registration rights agreement (the “SPL Registration Rights Agreement”). Under the SPL Registration Rights Agreement, SPL and any future guarantors of the 2030 SPL Senior Notes, have agreed to file with the SEC and cause to become effective a registration statement relating to an offer to exchange any and all of the 2030 SPL Senior Notes for a like aggregate principal amount of debt securities of SPL with terms identical in all material respects to the 2030 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 the notes issuance date of May 8, 2020. Under specified circumstances, SPL has agreed to cause to become effective a shelf registration statement relating to resales of the 2030 SPL Senior Notes. SPL will be obligated to pay additional interest on the 2030 SPL Senior Notes if it fails to comply with its obligations to register the 2030 SPL Senior Notes within the specified time period.

2020 SPL Working Capital Facility

In March 2020, SPL entered into the 2020 SPL Working Capital Facility with aggregate commitments of $1.2 billion, which replaced the 2015 SPL Working Capital Facility. The 2020 SPL Working Capital Facility is intended to be used for loans to SPL (“SPL Revolving Loans”), swing line loans to SPL (“SPL Swing Line Loans”) and the issuance of letters of credit on behalf of SPL, primarily for (1) the refinancing of the 2015 SPL Working Capital Facility, (2) fees and expenses related to the 2020 SPL Working Capital Facility, (3) SPL and its future subsidiaries’ gas purchase obligations and (4) SPL and certain of its future subsidiaries’ general corporate purposes. SPL may, from time to time, request increases in the commitments under the 2020 SPL Working Capital Facility of up to $800 million.

Loans under the 2020 SPL Working Capital Facility accrue interest at a variable rate per annum equal to LIBOR or the base rate (equal to the highest of the senior facility agent’s published prime rate, the federal funds rate, as published by the Federal Reserve Bank of New York, plus 0.50% and one month LIBOR plus 1%), plus the applicable margin. The applicable margin for LIBOR loans under the 2020 SPL Working Capital Facility is 1.125% to 1.750% per annum (depending on the then-current rating of SPL), and the applicable margin for base rate loans under the 2020 SPL Working Capital Facility is 0.125% to 0.750% per annum (depending on the then-current rating of SPL). Interest on LIBOR loans is due and payable at the end of each applicable LIBOR period, and interest on base rate loans is due and payable at the end of each fiscal quarter. Interest on loans deemed to be made in connection with a draw upon a letter of credit is due and payable on the date the loan becomes due.

SPL pays a commitment fee equal to an annual rate of 0.1% to 0.3% (depending on the then-current rating of SPL), which accrues on the daily amount of the total commitment less the sum of (1) the outstanding principal amount of SPL Revolving Loans, (2) letters of credit issued and (3) the outstanding principal amount of SPL Swing Line Loans. If draws are made upon a letter of credit issued under the 2020 SPL Working Capital Facility and SPL does not elect for such draw to be deemed an SPL LC Loan (an “SPL LC Draw”), SPL is required to pay the full amount of the SPL LC Draw on or prior to noon eastern time on the business day of the SPL LC Draw. An SPL LC Draw accrues interest at the base rate plus the applicable margin. As of June 30, 2020, no SPL LC Draws had been made upon any letters of credit issued under the 2020 SPL Working Capital Facility.

The 2020 SPL Working Capital Facility matures on March 19, 2025, but may be extended with consent of the lenders. The 2020 SPL Working Capital Facility provides for mandatory prepayments under customary circumstances.

The 2020 SPL Working Capital Facility contains customary conditions precedent for extensions of credit, as well as customary affirmative and negative covenants. SPL is restricted from making certain distributions under agreements governing its indebtedness generally until, among other requirements, satisfaction of a 12-month forward-looking and backward-looking 1.25:1.00 debt service reserve ratio test. The obligations of SPL under the 2020 SPL Working Capital Facility are secured by substantially all of the assets of SPL as well as a pledge of all of the membership interests in SPL and certain future subsidiaries of SPL on a pari passu basis by a first priority lien with the SPL Senior Notes.

Credit Facilities

Below is a summary of our credit facilities outstanding as of June 30, 2020 (in millions):



	2020 SPL Working Capital Facility		2019 CQP Credit Facilities		CCH Credit Facility		CCH Working Capital Facility		Cheniere Revolving Credit Facility		Cheniere Term Loan Facility (1)
Original facility size	$	1,200	$	1,500	$	8,404	$	350	$	750	$	2,620
Incremental commitments	—		—		1,566		850		500		—
Less:
Outstanding balance	—		—		3,283		141		375		—
Commitments prepaid or terminated	—		750		6,687		—		—		—
Letters of credit issued	409		—		—		392		313		—
Available commitment	$	791	$	750	$	—	$	667	$	562	$	2,620

Interest rate on available balance	LIBOR plus 1.125% - 1.750% or base rate plus 0.125% - 0.750%		LIBOR plus 1.25% - 2.125% or base rate plus 0.25% - 1.125%		LIBOR plus 1.75% or base rate plus 0.75%		LIBOR plus 1.25% - 1.75% or base rate plus 0.25% - 0.75%		LIBOR plus 1.75% - 2.50% or base rate plus 0.75% - 1.50%		(2)
Weighted average interest rate of outstanding balance	n/a		n/a		1.93%		1.43%		1.93%		n/a
Maturity date	March 19, 2025		May 29, 2024		June 30, 2024		June 29, 2023		December 13, 2022		June 18, 2023


(1)	In July 2020, we received incremental commitments of $75 million and borrowed $2,323 million under the Cheniere Term Loan Facility, which reduced the available commitment to $372 million following these transactions.


(2)	LIBOR plus (1) 2.00% to 2.75% per annum in the first year, (2) 2.50% to 3.25% per annum in the second year and (3) 3.00% to 3.75% per annum in the third year until maturity, or base rate plus (1) 1.00% to 1.75% per annum in the first year, (2) 1.50% to 2.25% per annum in the second year and (3) 2.00% to 2.75% per annum in the third year until maturity.

Convertible Notes

Below is a summary of our convertible notes outstanding as of June 30, 2020 (in millions):



	2021 Cheniere Convertible Unsecured Notes (1)			2025 CCH HoldCo II Convertible Senior Notes			2045 Cheniere Convertible Senior Notes
Aggregate original principal	$	1,000		$	1,000		$	625
Add: interest paid-in-kind	309			578			—
Less: aggregate principal redeemed	—			(300		)	—
Aggregate remaining principal	$	1,309		$	1,278		$	625

Debt component, net of discount and debt issuance costs	$	1,271		$	1,264		$	316
Equity component	$	211		$	—		$	194
Interest payment method	Paid-in-kind			Paid-in-kind / cash (2)			Cash
Conversion by us (3)	—			(4)			(5)
Conversion by holders (3)	(6)			(4)			(7)
Conversion basis	Cash and/or stock			Cash and/or stock			Cash and/or stock
Conversion value in excess of principal	$	—		n/a			$	—
Maturity date	May 28, 2021			May 13, 2025			March 15, 2045
Contractual interest rate	4.875		%	11.0		%	4.25		%
Effective interest rate (8)	8.1		%	15.6		%	9.4		%
Remaining debt discount and debt issuance costs amortization period (9)	0.9 years			0.3 years			24.7 years

(1)

In July 2020, we subsequently repurchased $844 million in aggregate principal amount of outstanding notes at individually negotiated prices from a small number of investors. The aggregate remaining principal after this repurchase was $465 million, which exceeded the remaining commitments under the Cheniere Term Loan Facility by $93 million. As such, $93 million has been reflected as current debt on our Consolidated Balance Sheet as of June 30, 2020.


(2)	Prior to the substantial completion of Train 2 of the CCL Project in August 2019, interest was paid entirely in kind. Following substantial completion, the interest has been paid in cash; however, a portion of the interest may, in the future, be paid in kind under certain specified circumstances.


(3)	Conversion is subject to various limitations and conditions.

(4)

Convertible into cash or stock at our option on or after March 1, 2020 until September 2, 2020, and into stock upon conversion notice by us or note holders after September 2, 2020, provided that our market capitalization is not less than $10.0 billion (“Eligible Conversion Date”). The conversion price for stock 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. The conversion price for cash is $1,080 per $1,000 principal amount of the notes. We redeemed an aggregate outstanding principal amount of $300 million in March 2020 and redeemed the remaining outstanding principal amount in July 2020, both with cash.


(5)	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.


(6)	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.

(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).


(8)	Rate to accrete the discounted carrying value of the convertible notes to the face value over the remaining amortization period.


(9)	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.

Restrictive Debt Covenants

As of June 30, 2020, each of our issuers was in compliance with all covenants related to their respective debt agreements.

Interest Expense

Total interest expense, net of capitalized interest, including interest expense related to our convertible notes, consisted of the following (in millions):



	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Interest cost on convertible notes:
Interest per contractual rate	$	57		$	64		$	120		$	126
Amortization of debt discount	20			9			34			19
Amortization of debt issuance costs	4			3			7			6
Total interest cost related to convertible notes	81			76			161			151
Interest cost on debt and finance leases excluding convertible notes	388			382			779			755
Total interest cost	469			458			940			906
Capitalized interest	(62		)	(86		)	(121		)	(287		)
Total interest expense, net of capitalized interest	$	407		$	372		$	819		$	619

Fair Value Disclosures

The following table shows the carrying amount and estimated fair value of our debt (in millions):



	June 30, 2020				December 31, 2019
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Senior notes (1)	$	22,700	$	24,698	$	22,700	$	24,650
2037 SPL Senior Notes (2)	800		948		800		934
4.80% CCH Senior Notes (2)	727		841		727		830
3.925% CCH Senior Notes (2)	475		502		475		495
Credit facilities (3)	3,805		3,805		3,283		3,283
2021 Cheniere Convertible Unsecured Notes (2)	1,309		1,332		1,278		1,312
2025 CCH HoldCo II Convertible Senior Notes (2)	1,278		1,495		1,578		1,807
2045 Cheniere Convertible Senior Notes (4)	625		394		625		498

(1)

Includes (1) the SPL Senior Notes except the 2037 SPL Senior Notes, (2) all series of the CQP senior notes including the 2025 CQP Senior Notes, 2026 CQP Senior Notes and 2029 CQP Senior Notes and (3) the CCH senior notes sold on a private placement basis in reliance on Section 4(a)(2) of the Securities Act and Rule 144A and Regulation S thereunder including the 2024 CCH Senior Notes, 2025 CCH Senior Notes, 2027 CCH Senior Notes and 2029 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.


(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.


(3)	Includes 2015 SPL Working Capital Facility, 2020 SPL Working Capital Facility, 2019 CQP Credit Facilities, CCH Credit Facility, CCH Working Capital Facility, Cheniere Revolving Credit Facility, Cheniere Term Loan 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.

(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.