Quarterly report pursuant to Section 13 or 15(d)

Debt

v3.20.2
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”)
 

 

Unamortized premium, discount and debt issuance costs, net
 
(184
)
 
(171
)
Total long-term debt, net
 
17,566


17,579

 
 
 
 
 
Current debt:
 
 
 
 
$1.2 billion SPL Working Capital Facility executed in 2015 (“2015 SPL Working Capital Facility”)
 

 

Total debt, net
 
$
17,566

 
$
17,579



2020 Material Debt Activities

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
Original facility size
 
$
1,200

 
$
1,500

Less:
 
 
 
 
Outstanding balance
 

 

Commitments prepaid or terminated
 

 
750

Letters of credit issued
 
409

 

Available commitment
 
$
791

 
$
750

 
 
 
 
 
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%
Weighted average interest rate of outstanding balance
 
n/a
 
n/a
Maturity date
 
March 19, 2025
 
May 29, 2024


Restrictive Debt Covenants

As of June 30, 2020, we and SPL were in compliance with all covenants related to our respective debt agreements.

Interest Expense

Total interest expense, net of capitalized interest consisted of the following (in millions):
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2020
 
2019
 
2020
 
2019
Total interest cost
 
$
259

 
$
237

 
$
513

 
$
472

Capitalized interest
 
(23
)
 
(7
)
 
(43
)
 
(55
)
Total interest expense, net of capitalized interest
 
$
236


$
230

 
$
470


$
417


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)
 
$
16,950

 
$
18,416

 
$
16,950

 
$
18,320

2037 SPL Senior Notes (2)
 
800

 
948

 
800

 
934

Credit facilities (3)
 

 

 

 

 
(1)
Includes (1) the SPL Senior Notes except the 2037 SPL Senior Notes and (2) the 2025 CQP Senior Notes, 2026 CQP Senior Notes and 2029 CQP 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 and 2019 CQP Credit 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.