Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance
Sheet Arrangement
of a Registrant.
Amended and Restated Term Loan Facility Agreement, Common Terms Agreement and Related Finance Documents
On May 22, 2018, the Borrower and CCL, CCP and CCP GP (as Guarantors) entered into the Amended and Restated Term Loan Facility Agreement
(the
Term Loan Facility Agreement
) with the lenders party thereto from time to time and Société Générale, as term loan facility agent (the
Term Loan Facility Agent
). The Term Loan
Facility Agreement amends and restates the Borrowers existing term loan facility agreement to provide for approximately $1.5 billion of incremental commitments, increasing the total principal amount outstanding and committed under the
Term Loan Facility Agreement to approximately $6.1 billion. The Term Loan Facility Agreement is being used to fund a portion of the cost of developing, constructing and operating the Borrowers Corpus Christi Liquefaction Project (the
CCL Project
), including Trains 1, 2 and 3 and associated pipeline and other infrastructure at or near the CCL Project, and for related business purposes.
On May 22, 2018, the Borrower and CCL, CCP and CCP GP (as Guarantors) also entered into the Amended and Restated Common Terms Agreement
(the
Common Terms Agreement
) with the Term Loan Facility Agent, the Bank of Nova Scotia, as working capital facility agent, and Société Générale, as intercreditor agent (the
Intercreditor
Agent
).
The Loan Parties operate as legal entities separate and distinct from the Company and its other affiliates, and with
capital structures independent from the Company and its other affiliates.
Conditions Precedent to Disbursement
Disbursements under the term loan facility and related finance documents are subject to customary conditions precedent, including the absence
of defaults, bring-down of certain representations and warranties,
non-impairment
of regulatory authorizations and certifications as to construction progress. The amount of each disbursement requested under
the term loan facility may not exceed the difference between the project costs reasonably expected to be due or incurred within the 60 days following the requested disbursement and
the amount estimated to be on deposit in the
construction account on the date of the disbursement.
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Interest and Fees
Loans under the term loan facility will bear interest at a variable rate per annum equal to LIBOR or the base rate (determined by reference to
the applicable agents prime rate), plus the applicable margin. The applicable margin for LIBOR loans is 1.75%, and the applicable margin for base rate loans is 0.75%. Interest on LIBOR loans is due and payable at the end of each applicable
interest period, and interest on base rate loans is due and payable at the end of each calendar quarter.
The Borrower is required to pay
certain upfront fees to the agents and lenders under the term loan facility together with additional transaction fees and expenses in the aggregate amount of approximately $50 million. The term loan facility provides for a commitment fee
calculated at a rate per annum equal to 40% of the margin for LIBOR loans, multiplied by the outstanding debt commitments. Certain administrative fees must also be paid to the agents under the finance documents.
Repayments
The term loan facility will
mature on June 30, 2024. The principal of loans made under the term loan facility must be repaid in quarterly installments, commencing on the earlier of (i) the first quarterly payment date occurring more than three calendar months
following project completion and (ii) a set date determined by reference to the date under which a certain LNG buyer linked to the last Train to become operational is entitled to terminate its SPA for failure to achieve the date of first
commercial delivery for that agreement. Scheduled amortization will be based upon a
19-year
tailored amortization, commencing the first full quarter after the project completion and designed to achieve a
minimum projected fixed debt service coverage ratio of 1.50x. The term loan facility provides for mandatory repayments under customary circumstances, including mandatory repayments with the proceeds of certain insurance payments and condemnation
awards, upon receipt of certain performance liquidated damages, escrowed amounts, in connection with certain prepayment events triggered under the LNG SPAs as a result of coverage ratios falling below a specified threshold, change of control
occurring after completion (if required by lenders accepting an offer to prepay), if it becomes unlawful for the lender to fund or maintain loans, on receipt of certain proceeds from the sale of project property and in the case of certain failures
to meet restricted payments conditions.
Covenants
The term loan facility and related finance documents include customary representations and affirmative and negative covenants for project
finance facilities and companies of this type and with lenders of the type participating in the financing, including, among others: covenants relating to compliance with laws; conditions to the making of restricted payments, including distributions
(subject to, among other conditions, with certain limited exceptions, the completion of the construction of the relevant Trains, funding of a debt service reserve account equal to six months of debt service and achieving a historical debt service
coverage ratio and fixed projected debt service coverage ratio of at least 1.25x); maintenance of minimum insurance; maintenance of material project agreements (including restrictions on entering into certain change orders under the applicable fixed
price separated turnkey engineering, procurement and construction contracts (
EPC Contracts
) related to Trains 1 and 2 of the CCL Project and related to Train 3 with Bechtel Oil, Gas and Chemicals, Inc.
(
Bechtel
)); limitations on indebtedness, guarantees, liens and investments; maintenance of certain interest rate hedging arrangements; maintenance of a historical debt service coverage ratio of 1.15x and maintenance of and
compliance with various permits. These covenants are subject to certain materiality qualifiers, reasonableness standards, thresholds and grace periods.
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Additional Indebtedness
The Borrower may incur additional senior secured or unsecured indebtedness consisting of working capital debt, replacement senior debt,
permitted development expenditures senior debt and expansion senior debt, so long as, among other requirements, there is no event of default or unmatured event of default and the updated base case forecast demonstrates a fixed projected debt service
coverage ratio of 1.40x (for replacement senior debt) or 1.50x (for permitted development expenditures senior debt and expansion senior debt).
Events
of Default
The term loan facility and related finance documents include customary events of default which are subject to customary
grace periods and materiality standards including, among others:
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nonpayment of amounts payable under the facility;
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breach of certain representations or warranties given in connection with the facility and breach of certain covenants;
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bankruptcy; abandonment; destruction; events of taking;
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invalidity of security interests;
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unsatisfied judgments (prior to completion, any one or more of a judgment in excess of $200 million in the aggregate or a final judgment in excess of $120 million in the aggregate and post completion, one or
more final judgments in excess of $120 million in the aggregate);
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unenforceability or termination of finance documents or material project agreements or certain material defaults under the applicable EPC Contract with Bechtel for the construction of the CCL Project;
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failure to achieve project completion within required timeframes (including meeting certain operational performance tests);
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cross acceleration of indebtedness in excess of $100 million; certain defaults in permits;
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a change in control of the Borrower by the Company or its affiliates
pre-completion
(linked to a 50% ownership/control requirement); and
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failure by the Company to contribute equity as required under the Equity Contribution Agreement.
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Collateral
The loans under the term loan facility and other
pari passu
senior secured obligations under the related finance documents are secured
under the Amended and Restated Common Security and Account Agreement (the
Common Security and Account Agreement
), dated as of May 22, 2018, among the Borrower, CCL, CCP and CCP GP (as Guarantors), the senior creditor group
representatives, the Intercreditor Agent, Société Générale, as security trustee (the
Security Trustee
), and Mizuho Bank, Ltd., as account bank (the
Account Bank
), providing the
secured parties with a first priority lien (subject to customary permitted encumbrances) in substantially all of the assets of the Loan Parties, including the equity interests in CCL, CCP and CCP GP. The Common Security and Account Agreement also
requires the Borrower to establish and maintain certain deposit accounts, which are subject to the control of the Security Trustee. In addition, under the Amended and Restated Holdco Pledge Agreement (the
Holdco Pledge Agreement
)
dated May 22, 2018, among Cheniere CCH HoldCo I, LLC and the Security Trustee, the term loan facility and other
pari passu
senior secured obligations are secured by a pledge of the limited liability company interests in the Borrower. The
term loan facility and other
pari passu
senior secured obligations are further secured by a mortgage over the real property of CCL and CCP. Modifications of the finance documents and the exercise of rights and remedies of the secured
creditors, including enforcement of the liens securing the term loans and the other
pari passu
senior secured indebtedness permitted under the facilities are subject to customary intercreditor arrangements.
Amended and Restated Equity Contribution Agreement
On May 22, 2018, the Company entered into the Amended and Restated Equity Contribution Agreement (the
Equity Contribution
Agreement
) with the Borrower in order to increase the Companys equity funding commitment to the Borrower as a result of the development, construction and operation of Train 3 at the CCL Project. Under the Equity Contribution
Agreement, the Company has agreed to make, or cause to be made, cash equity contributions to the Borrower in an amount up to approximately $1.1 billion (
Equity Funding Amount
). The Company may reduce the Equity Funding Amount
dollar-for-dollar
by amounts of
non-base
case cash flows applied by the Loan Parties to meet project costs prior to project
completion, subject to satisfaction of certain conditions.
Conditions Precedent
The Company will only be required to make contributions in respect of the Equity Funding Amount after the commitments under the Term Loan
Facility Agreement have been reduced to zero and to the extent cash flows from operations of the CCL Project are unavailable for project costs.
Other than the Equity Funding Amount, the Company is not obligated to contribute additional equity amounts.
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Acceleration
At any time prior to project completion, upon the occurrence of a declared event of default and the acceleration of any senior debt pursuant to
the finance documents, or upon bankruptcy of the Company, the Company must pay or cause to be paid, within 10 business days, all remaining equity funding required such that the Borrower has received the full Equity Funding Amount.
The foregoing descriptions of the Term Loan Facility Agreement, the Common Terms Agreement, the Common Security and Account Agreement, the
Holdco Pledge Agreement and the Equity Contribution Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of the agreements, which are filed as Exhibits 10.1, 10.2, 10.3, 10.4 and 10.5,
respectively, to this report and incorporated herein by reference.