Cheniere Energy (LNG) Makes Initial $167M Class B Unit Purchase from CEP (CQP); Repays $285M of Term Loans

June 12, 2012 8:36 AM EDT
Cheniere Energy, Inc. (AMEX: LNG) has purchased $167 million Class B units from Cheniere Energy Partners, L.P. (AMEX: CQP).

A portion of the proceeds from the sale were used by Sabine Pass Liquefaction, LLC, a wholly owned subsidiary of Cheniere Partners, to issue a Limited Notice to Proceed to Bechtel Oil, Gas and Chemicals, Inc. under the engineering, procurement and construction contract relating to its construction of the Sabine Pass LNG liquefaction project in Cameron Parish, Louisiana.

CEI has made an initial purchase of 11.1 million of the approximately 33.3 million Class B Units that it has agreed to purchase for an aggregate $500 million under a unit purchase agreement with Cheniere Partners. These units are being purchased in connection with the funding of the first two liquefaction trains of the Liquefaction Project. As previously announced, Cheniere Partners expects to fund $2 billion of the estimated project costs for the first two liquefaction trains with newly issued Class B Units.

The issuance of the Limited Notice to Proceed under the EPC Contract will allow Bechtel to proceed with the site preparation that was permitted in May 2012 by the Federal Energy Regulatory Commission, as well as to continue with detailed engineering and limited procurement activities currently underway. Cheniere Partners expects to issue the full Notice to Proceed to Bechtel upon, among other things, the closing and funding of the debt financings, which were launched over the last two weeks, and the concurrent closing of the equity transactions.

In addition, CEI has repaid all $284.5 million of the outstanding principal and accrued interest to June 11, 2012 under the 2008 Term Loans due August 31, 2018. The Credit Agreement and related agreements have been terminated accordingly and the assets held as collateral under such agreements will be released. Collateral includes, among other things, the equity and assets of Cheniere's pipeline entities, including the Creole Trail Pipeline, approximately 12 million common units of Cheniere Partners and the rights and fees payable under management services agreements with Cheniere Partners and Sabine Pass LNG, L.P., a wholly owned subsidiary of Cheniere Partners. This debt repayment reduces future interest obligations of CEI by approximately $33 million per year, which would have otherwise been payable through the 2008 Loans' maturity in 2018, and reduces debt maturities at CEI to $204.5 million.

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