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New Fortress Energy Inc. (NFE) announced a private offering of $750 million senior secured notes due 2029, with an 8.750% interest rate. The offering size increased by $250 million from the initial plan. The proceeds will be used to repay existing debts and for general corporate purposes.
The announcement by New Fortress Energy Inc. regarding the upsizing of its senior secured notes offering from $500 million to $750 million is a significant financial move that warrants a detailed analysis. The decision to increase the offering size by $250 million may indicate a strong demand from qualified institutional buyers, suggesting investor confidence in the company’s creditworthiness and future prospects. Additionally, the fixed interest rate of 8.750% is notably higher than current average corporate bond yields, which could reflect a risk premium demanded by investors due to the specific risks associated with the energy sector or the company’s financial position.
From a balance sheet perspective, using the net proceeds to repay a portion of existing debt is a strategic move that could improve the company’s debt maturity profile and reduce future refinancing risk. However, the repurchase of existing senior secured notes due 2025 at this juncture also implies that the company is proactively managing its debt obligations, possibly to take advantage of current market conditions or to alleviate potential liquidity concerns. Stakeholders should monitor how this refinancing impacts the company’s leverage ratios and interest coverage metrics.
The legal intricacies of the offering, especially the fact that the notes and the guarantees thereof were offered under Rule 144A and Regulation S, cater to a specific investor base. Rule 144A allows for the resale of certain securities to qualified institutional buyers, which can facilitate liquidity in the secondary market. However, the notes not being registered under the Securities Act or any state securities laws means they are subject to restrictions on their transferability, limiting the potential investor base to those who are willing to accept these limitations.
The collateral arrangement, which is substantially the same as the company’s existing first lien obligations, provides a layer of security for investors but also indicates that the company’s assets are further encumbered, potentially affecting future borrowing capacity. It is essential for investors to understand the terms of the collateral and how it might affect their position in the event of default.
Examining the broader market implications, the issuance of high-yield debt such as these senior secured notes by New Fortress Energy Inc. reflects a trend in the energy sector where companies often require substantial capital to fund operations and growth initiatives. In the context of the energy market, where volatility can be high due to fluctuating commodity prices and regulatory changes, the company’s move to secure long-term financing at a fixed rate might be seen as a hedge against potential interest rate increases in the future.
For the energy sector, this financing activity could signal a period of strategic financial restructuring as companies prepare for market shifts. It’s important for stakeholders to consider the cyclical nature of the energy industry and how New Fortress Energy’s financial strategy aligns with expected market trends. The company’s actions may also serve as an indicator for the credit market’s appetite for energy sector debt, which could influence the financing strategies of other firms within the industry.
NEW YORK–(BUSINESS WIRE)– New Fortress Energy Inc. (NASDAQ: NFE) (the “Company”) announced today the pricing of its previously announced private offering of $750 million aggregate principal amount of senior secured notes due 2029 (the “Notes”). The aggregate principal amount represents an increase in the size of the offering of $250 million from the previously announced offering of $500 million. The Notes will bear interest at 8.750% per annum and will be issued at an issue price equal to 100% of principal, plus accrued interest, if any, from March 8, 2024. The closing of the offering is subject to certain limited conditions.
Subject to certain exceptions and thresholds, the Notes will be guaranteed on a senior secured basis by each domestic subsidiary and foreign subsidiary that is a wholly-owned restricted subsidiary of the Company that is a guarantor under its existing senior secured notes. The Notes will be secured by substantially the same collateral as the Company’s existing first lien obligations under its existing senior secured notes.
The Company intends to use the net proceeds from the offering to repay a portion of its outstanding indebtedness, including to repurchase up to $375 million of the Company’s existing senior secured notes due 2025 pursuant to its tender offer announced on March 5, 2024, together with any fees and related expenses, and/or for general corporate purposes.
The Notes and the guarantees thereof were offered in the United States to qualified institutional buyers under Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and to persons outside of the United States under Regulation S under the Securities Act. The Notes and the guarantees thereof will not be registered under the Securities Act or any state securities laws, and, unless so registered, may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.
This press release does not constitute an offer to sell or a solicitation of an offer to buy the securities described herein, nor shall there be any sale of these securities in any state or other jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.
About New Fortress Energy Inc.
New Fortress Energy Inc. (Nasdaq: NFE) is a global energy infrastructure company founded to help address energy poverty and accelerate the world’s transition to reliable, affordable, and clean energy. The company owns and operates natural gas and liquefied natural gas (LNG) infrastructure and an integrated fleet of ships and logistics assets to rapidly deliver turnkey energy solutions to global markets. Collectively, the company’s assets and operations reinforce global energy security, enable economic growth, enhance environmental stewardship and transform local industries and communities around the world.
Cautionary Language Regarding Forward-Looking Statements
This press release contains certain statements and information that may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including but not limited to statements regarding the consummation of the offering or the Company’s anticipated use of the net proceeds from the offering. All statements contained in this press release other than historical information are forward-looking statements that involve known and unknown risks and relate to future events, our future financial performance or our projected business results. You can identify these forward-looking statements by the use of forward-looking words such as “expects,” “may,” “will,” “can,” “could,” “should,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” “believes,” “schedules,” “progress,” “targets,” “budgets,” “outlook,” “trends,” “forecasts,” “projects,” “guidance,” “focus,” “on track,” “goals,” “objectives,” “strategies,” “opportunities,” “poised,” or the negative version of those words or other comparable words. Such forward-looking statements are necessarily estimates based upon current information and involve a number of risks, uncertainties and other factors, many of which are outside of the Company’s control. Actual results or events may differ materially from the results anticipated in these forward-looking statements.
Any forward-looking statement speaks only as of the date on which it is made, and we undertake no duty to update or revise any forward-looking statements, even though our situation may change in the future or we may become aware of new or updated information relating to such forward-looking statements. New factors emerge from time to time, and it is not possible for the Company to predict all such factors. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements included in New Fortress Energy Inc.’s annual and quarterly reports filed with the Securities and Exchange Commission, which could cause its actual results to differ materially from those contained in any forward-looking statement.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240305172562/en/
Investor Relations:
Chance Pipitone
ir@newfortressenergy.com
Media Relations:
Ben Porritt
press@newfortressenergy.com
(516) 268-7403
Source: New Fortress Energy Inc.
The ticker symbol of New Fortress Energy Inc. is NFE.
The senior secured notes due 2029 will bear an interest rate of 8.750% per annum.
The offering size increased by $250 million from the initial plan of $500 million.
The net proceeds from the offering will be used to repay existing debts, including repurchasing up to $375 million of the Company’s existing senior secured notes due 2025, and for general corporate purposes.
The closing of the offering is subject to certain limited conditions.
