LNG’s management has bought some time, but at a high price.
Cheniere Energy (AMEX: LNG, Stock Forum) today announced that it has closed a $250 million senior secured convertible loan agreement with GSO Capital Partners LP. The funds will be used primarily to pay off a $95 million bridge loan that Cheniere obtained in May. The company expects the proceeds of the loan to fund its operations for three years, regardless of how successful Cheniere is in purchasing spot LNG cargoes to re-gasify at its Sabine Pass terminal.
The money isn't cheap. Cheniere will pay annual interest of 12%, all of which will accrue for the first three years. As security, Cheniere put up future revenues, the company's common units in Cheniere Energy Partners (AMEX: CQP, Stock Forum), and a bunch of other assets. GSO can convert the loan at any time into up to 19.99% of Cheniere common and preferred stock. GSO also got two sets on Cheniere's board and one seat on CQP's board.
This buys Cheniere's management some time, but at a very high price. The market likes the deal, with Cheniere shares up more than 6% in early trading.
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