New Fortress Energy Announces Transaction Support Agreement with Select Senior Note Holders

New Fortress Energy LLC Announces Material Agreement

On September 30, 2024, New Fortress Energy Inc. entered into a Transaction Support Agreement with specific holders of the company’s existing Senior Notes. This agreement includes the company’s 6.750% Senior Notes due in 2025, 6.500% Senior Notes due in 2026, and 8.75% Senior Secured Notes due in 2029. The intention of the agreement is to facilitate a series of transactions aimed at extending the maturity profile of the company’s debt while enhancing liquidity and financial flexibility.

The planned transactions consist of:

1. Redeeming all Existing 2025 Notes using a portion of the net proceeds from a new issuance of $1.2 billion in 12.000% senior secured notes due in 2029 to be issued by a newly formed subsidiary.
2. Exchanging approximately $1.4 billion of Existing 2026 and 2029 Notes for additional New Notes in a private exchange arrangement.

Any remaining net cash proceeds from these transactions will be utilized for general corporate purposes. The arrangement will be executed under terms satisfactory to both the company and the majority of the Supporting Holders.

The Supporting Holders have committed to exchange all their Existing 2026 and 2029 Notes for New Notes and to purchase New Notes for cash. These obligations are contingent upon the company raising at least $250 million in equity, amending existing credit agreements, and satisfying other customary conditions.

Upon successful completion, holders of the New Notes will receive a secured interest in assets of the new subsidiary, which will include up to a 49% stake in the holding company that owns the company’s Brazilian operations, along with certain other assets.

Additionally, the Supporting Holders consented to amendments related to the Existing 2026 and 2029 Notes that allow the company to execute certain actions concerning collateral and covenants. The Transaction Support Agreement includes various customary terms, and the company has committed to work exclusively with the Supporting Holders until November 30, 2024, to consummate the transactions.

The company also expects to issue shares of its Series B Convertible Preferred Stock around October 1, 2024, and disclosed ongoing compliance with its financial covenants through the end of the fiscal year 2025.

Controlled Company Status and Governance Changes

Currently, affiliates of certain entities hold more than 50% of the voting power of the company’s Class A common stock, allowing it to be classified as a "controlled company" under governance standards. To prepare for potential changes in this control structure, certain board members have resigned from the Compensation Committee, and new members have been appointed. The company’s board has also introduced updated corporate governance guidelines to align with market standards.

Risks to Consider

1. Regulatory Challenges: The company’s operations are subject to numerous approvals and permits at various government levels. Delays and challenges in obtaining these approvals can impact business operations.

2. Stock Price Volatility: The anticipated issuance of additional shares may lead to decreased share prices and trading volatility, which could negatively affect shareholder value.

3. Debt Obligations: Increasing debt could limit flexibility and require a substantial portion of cash flow for interest and principal payments, potentially leading to adverse operational conditions.

4. Transaction Uncertainty: The completion of the proposed transactions is contingent on multiple conditions and may not occur as planned, impacting the company’s financial health.

5. Future Dilution: Further equity raises could dilute current shareholders’ ownership stakes and may lead to reduced market prices.

The company cautions that failure to meet financial covenants or secure needed permits may pose significant risks to its operations and financial condition. Future transactions and expansion efforts might also be affected by external market conditions, regulatory challenges, and competition.