Cheniere, subsidiaries to pay down at least $1 billion debt annually

By Devika Patel

Knoxville, Tenn., Nov. 5 – Cheniere Energy Inc. announced a new capital allocation plan in September under which it plans to pay down at least $1 billion of debt per year through 2024 or once it has achieved investment-grade metrics.

“Our capital allocation plan centers around three primary principles which include: a strong and sustainable balance sheet, funding financially disciplined growth and returning significant amounts of capital to our shareholders over time,” president and chief executive officer Jack A. Fusco said on the company’s third quarter ended Sept. 30 earnings conference call on Thursday.

“To achieve these goals, we have committed to paying down on at least $1 billion of debt annually through 2024 or until we achieve investment-grade credit metrics.

“In line with these plans, we have repaid $750 million of debt across the structure in the first three quarters of 2021, so we are on pace to meet or exceed the $1 billion target this year,” Fusco said.

In the third quarter, a subsidiary garnered the lowest-yielding bond the Cheniere group has ever sold and extended maturities.

“During the third quarter, we issued $750 million of fully amortizing 2.742% public senior secured notes due 2039 at [Cheniere Corpus Christi Holdings, LLC] and used the net proceeds to refinance a portion of the borrowings under the [Cheniere Corpus Christi Holdings]’s credit facility due 2024,” senior vice president and chief financial officer Zach Davis.

“This transaction, the lowest yielding bond ever secured by Cheniere, not only extended the maturity of our borrowings but also better matched our contracted cash flows with the timing of debt repayment,” Davis said.

Later, another subsidiary boasted the lowest pricing for a 10-year high yield issuance in the energy sector.

“In September, we issued $1.2 billion of 3.25% senior notes due 2032 at [Cheniere Energy Partners LP],” Davis said.

“This transaction executed on every aspect of our capital allocation strategy.

“We used the proceeds to refinance [Cheniere Energy Partners]’s 5.625% senior notes due 2026 and a portion of the 6.25% senior secured notes due 2022 at [Sabine Pass Liquefaction, LLC] were refinanced with the indebtedness migrated to [Cheniere Energy Partners].

“Not only do we achieve the lowest pricing for a 10-year high yield issuance in energy, we efficiently migrated debt from the projects and further de-secured our consolidated balance sheet,” Davis said.

The company expects to redeem about $500 million more of the $700 million remaining Sabine Pass Liquefaction notes with long-term Sabine Pass Liquefaction notes issued through a private placement this quarter, and the remaining $200 million of 2022 Sabine Pass Liquefaction notes will be repaid with cash flow.

“Pro forma for the payment made in October with a portion of the proceeds from the Cheniere Energy Partners 2032 [notes] along with cash on hand, there’s approximately $700 million currently remaining on the 2022 [Sabine Pass Liquefaction] notes,” Davis said.

“We expect to redeem approximately $500 million of this amount via committed long-term amortizing fixed rate notes at [Sabine Pass Liquefaction] we entered into on a private placement basis, which are expected to be funded this quarter.

“The remaining approximately $200 million is expected to be paid down with cash flow,” Davis said.

The company also revised its revolver.

“In October, we amended our existing $1.25 billion [Cheniere Energy, Inc.] revolving credit facility with 23 financial institutions extending the maturity to 2026 and lowering our borrowing rate,” Davis said.

Cash and cash equivalents were $2,203,000,000 as of Sept. 30, 2021, compared to $1,628,000,000 as of Dec. 31, 2020.

Net long-term debt was $29,481,000 as of Sept. 30, 2021, compared to $30,471,000,000 as of Dec. 31, 2020.

Cheniere Energy is a Houston-based energy company.

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