Note 9 - Debt

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Debt Disclosure [Text Block]

Note 9 — Debt

Our debt consists of long-term secured debt securities and credit agreements with banks and other lenders.  Debt issuances are placed directly by us or through securities dealers, underwriters, or lead arrangers and are held by institutional investors, banks and other lenders.

Debt is recorded on our Consolidated Balance Sheets at outstanding principal value, net of unamortized debt issuance costs related to term notes and loans. Debt issuance costs consist primarily of arrangement fees, professional fees, legal fees and in certain cases, commitment fees. If debt issuance costs are incurred in connection with a line of credit arrangement or on undrawn funds, the debt issuance costs are presented as an asset on our Consolidated Balance Sheets. Discounts, premiums and debt issuance costs directly related to the issuance of debt are amortized over the life of the debt and are recorded in interest expense, net of capitalized interest using the effective interest method.

We classify debt as current or non-current on our Consolidated Balance Sheets based on contractual maturity; however, long-term debt extinguished after the balance sheet date but before the financial statements are issued would be classified based on facts and circumstances existing as of the balance sheet date.

Debt consisted of the following (in thousands):

	September 30, 2023		December 31, 2022
Senior Secured Notes and Loans
6.67% Senior Secured Notes due 2033	$	700,000	$	—
6.72% Senior Secured Loans due 2033		356,000		—
Total Senior Secured Notes and Loans		1,056,000		—
Credit Facilities
CD Senior Working Capital Facility		—		—
CD Credit Facility		327,000		—
TCF Credit Facility		26,000		—
Total Debt		1,409,000		—
Current Portion of debt		—		—
Non-current portion of unamortized debt issuance costs, net		27,175		—
Total non-current debt, net of unamortized debt issuance costs	$	1,381,825	$	—

Senior Secured Notes and Loans

Rio Grande 6.67% Senior Secured Notes due 2033

The 6.67% Senior Secured Notes (the “Senior Secured Notes”) are senior secured obligations of Rio Grande, ranking senior in right of payment to any and all of Rio Grande’s future indebtedness that is subordinated to the Senior Secured Notes and equal in right of payment with Rio Grande’s other existing and future indebtedness that is senior and secured by the same collateral securing the Senior Secured Notes.  The Senior Secured Notes are secured on a first-priority basis by a security interest in all of the membership interests in Rio Grande and substantially all of Rio Grande’s assets, pari passu with the Senior Secured Loans, the CD Credit Agreement and the loans made under the TCF Credit Facility.  

Rio Grande 6.72% Senior Secured Loans due 2033

The 6.72% Senior Secured Loans (the “Senior Secured Loans”) are senior secured obligations of Rio Grande, ranking senior in right of payment to any and all of Rio Grande’s future indebtedness that is subordinated to the Senior Secured Loans and equal in right of payment with Rio Grande’s other existing and future indebtedness that is senior and secured by the same collateral securing the Senior Secured Loans.  The Senior Secured Loans are secured on a first-priority basis by a security interest in all of the membership interests in Rio Grande and substantially all of Rio Grande’s assets, pari passu with the Senior Secured Notes, the CD Credit Agreement and the loans made under the TCF Credit Facility.  

Debt Maturities

Years Ending December 31,	Principal Payments
2023	$	—
2024		—
2025		—
2026		—
2027		—
Thereafter		1,409,000
Total	$	1,409,000

Credit Facilities

Below is a summary of our committed credit facilities outstanding as of September 30, 2023 (in thousands):

	CD Senior Working Capital Facility (1)			CD Credit Facility (1)			TCF Credit Facility (2)
Total Facility Size	$	500,000		$	9,963,000		$	800,000
Less:
Outstanding balance		—			327,000			26,000
Letters of credit issued		66,362			—			—
Available commitment	$	433,638		$	9,636,000		$	774,000
Priority ranking	Senior secured			Senior secured			Senior secured
Interest rate on outstanding balance	SOFR plus margin of 2.25%			SOFR plus margin of 2.25%			SOFR plus margin of 2.25%
Commitment fees on undrawn balance		0.68	%		0.68	%		0.68	%
Maturity Date	July 12, 2030			July 12, 2030			July 12, 2030

⁽¹⁾   The obligations of Rio Grande under the CD Senior Working Capital Facility and CD Credit Facility are secured by substantially all of the assets of Rio Grande as well as a pledge of all of the membership interests in Rio Grande on a first-priority basis, pari passu with the Senior Secured Notes, the Senior Secured Loans and the loans made under the TCF Credit Facility.  

⁽²⁾ The obligations of Rio Grande under the TCF Credit Agreement are secured by substantially all of the assets of Rio Grande as well as a pledge of all of the membership interests in Rio Grande on a first-priority basis, pari passu with the Senior Secured Notes, the Senior Secured Loans and the loans made under the CD Credit Agreement. Total Energies Holdings SAS (“Total Holdings”) provides contingent credit support to the lenders under the TCF Credit Agreement to pay past due amounts owing from Rio Grande under the agreement upon demand.

Restrictive Debt Covenants

The CD Credit Facility and the TCF Credit Facility (collectively, the “Facilities”) include certain covenants and events of default that are supplemental to the covenants and events of default set forth in the P1 Common Terms Agreement and that are customary for project financing facilities of this type, including a requirement that interest rates for a minimum of 75% of the projected principal amount of Senior Secured Debt outstanding be hedged or have fixed interest rates. In addition, certain covenants and events of default in the Facilities are more restrictive than the corresponding covenants and events of default in the P1 Common Terms Agreement, including covenants limiting Rio Grande’s ability to incur additional indebtedness, make certain investments or pay dividends (which are subject to customary conditions set out in the Facilities and certain related financing documents) or distributions on equity interests or subordinated indebtedness or purchase, redeem, or retire equity interests, sell or transfer assets, incur liens, dissolve, liquidate, consolidate, merge, sell, or lease all or substantially all of Rio Grande’s assets or enter into certain LNG sales contracts. The Facilities include a requirement for Rio Grande to maintain a historical debt service coverage ratio of at least 1.10:1.00 at the end of each fiscal quarter starting from the Initial Principal Payment Date, a default of which may be cured with equity contributions.

The Senior Secured Notes also contain customary terms and events of default and certain covenants that, among other things, limit Rio Grande’s ability to incur additional indebtedness, make certain investments or pay dividends or distributions on equity interests or subordinated indebtedness or purchase, redeem, or retire equity interests, sell or transfer assets, incur liens, dissolve, liquidate, consolidate, merge, or sell or lease all or substantially all of Rio Grande’s assets. The Senior Secured Notes further require Rio Grande to submit certain reports and information to the trustee and holders of the Senior Secured Notes, maintain certain LNG offtake agreements, and maintain a debt service coverage ratio of at least 1.10:1.00 at the end of each fiscal quarter starting from the Initial Principal Payment Date. With respect to certain events, including a change of control event and receipt of certain proceeds from asset sales, events of loss or liquidated damages, the indenture governing the Senior Secured Notes requires Rio Grande to make an offer to repurchase the Senior Secured Notes at 101% (with respect to a change of control event) or par (with respect to each other event), in each case on the terms specified in the Indenture. The Senior Secured Notes covenants are subject to a number of important limitations and exceptions, including the terms and covenants contained in the P1 Common Terms Agreement.

The Senior Secured Loan Agreement contains customary terms and events of default and certain covenants that, among other things, limit Rio Grande’s ability to incur additional indebtedness, make certain investments or pay dividends or distributions on equity interests or subordinated indebtedness or purchase, redeem, or retire equity interests, sell or transfer assets, incur liens, dissolve, liquidate, consolidate, merge, or sell or lease all or substantially all of Rio Grande’s assets. The Senior Secured Loan Agreement further requires Rio Grande to submit certain reports and information to the Administrative Agent and the lenders, maintain certain LNG offtake agreements, and maintain a debt service coverage ratio of at least 1.10:1.00 at the end of each fiscal quarter starting from the first quarterly payment date to occur on or after the date that is ninety days following the project completion date. With respect to certain events, including a change of control event and receipt of certain proceeds from asset sales, events of loss or liquidated damages, the Senior Secured Loan Agreement requires Rio Grande to make an offer to the lenders to have their Senior Secured Loans prepaid at 101% (with respect to a change of control event) or par (with respect to each other event), in each case, on the terms specified in the Senior Secured Loan Agreement. The Senior Secured Loan Agreement covenants are subject to a number of important limitations and exceptions, including the terms and covenants contained in the P1 Common Terms Agreement.

As of September 30, 2023, Rio Grande was in compliance with all covenants related to its respective debt agreements.

Interest Expense

Total interest expense, net of capitalized interest, consisted of the following (in thousands):

	September 30, 2023			December 31, 2022
Interest cost of Non-current Debt
Interest per contractual rate	$	16,169		$	—
Amortization of debt issuance costs		25,670			—
Total Interest cost		41,839			—
Capitalized interest		(9,303	)		—
Total interest expense, net of capitalized interest	$	32,536		$	—

Fair Value Disclosures

The following table shows the carrying amount and estimated fair value of our debt (in thousands):

	September 30, 2023				December 31, 2023
	Carrying Amount		Estimated Fair Value (1)		Carrying Amount		Estimated Fair Value
Senior Notes - Level 2	$	700,000	$	700,000	$	—	$	—
Senior Loans - Level 2		356,000		356,000		—		—

⁽¹⁾ The Level 2 estimated fair value approximates the carrying amount due to the close proximity of the issuance of the debt and September 30, 2023.