By The Star Staff
Financially troubled New Fortress Energy (NFE), the parent company of Genera PR, which is the private operator of the Puerto Rico Electric Power Authority’s legacy power plants, is slated to engage in a note exchange with its investors in an attempt to raise capital and improve liquidity.
The information is contained in the latest S&P credit analysis, which gave a B+ rating to a certain proposed note issuance.
“We assigned our ‘B+’ issue-level rating to the proposed senior secured notes due 2029 (exchanged notes) and a recovery rating of ‘4’, which indicates our expectation for an average (30%-50%; rounded estimate 45%) recovery if a payment default occurs,” the credit rating agency said.
Information obtained by the STAR indicates that NFE, which has a liquefied natural gas facility in San Juan, may be raising an approximately $1 billion bond and then conducting a 2029 bond exchange to pay down notes due in 2025 and 2026. The company has also said it is planning to sell assets.
S&P, nonetheless, revised the liquidity assessment last week to less than adequate.
“Although NFE’s transaction support agreement (TSA) and pending exchange transaction with its noteholders puts the company on a path to improve its capital structure and liquidity profile, its financial flexibility will continue to be constrained in 2025,” the credit rating agency said. “NFE has partially extended $900 million of its revolver to Oct. 15, 2027, and the TSA will provide about $327 million of cash through the intercompany loans. However, NFE currently has no availability under its credit facility, and our forecast assumes NFE will use external financing to fund most of its capital spending in 2025.”
The credit rating agency said it expects NFE to seek to monetize assets to reduce debt and repay the revolver to improve its liquidity profile, moves that were not included in its forecast because of execution risk.
“Furthermore, the revolving credit facility and term loan B springing maturities are still a risk, if it does not refinance or repay its 6.5% of senior secured notes ($499 million pro forma for the exchange transaction) by July 31, 2026. The company’s financial ratios are weak, and credit improvement depends on an aggressive cash flow ramp in 2025,” S&P said.
NFE’s S&P Global Ratings-adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) for the trailing 12 months ended Sept. 30, 2024, is about $1.1 billion, with debt to EBIDTA of about 7.8x. While the company’s third-quarter results were generally in line with expectations, its credit measures could further deteriorate by year-end if the Federal Emergency Management Agency payment of about $500 million is delayed or is realized at a lower amount.
Furthermore, the one-time payment assumes a base level EBITDA of $750 million-$800 million and EBITDA growth of $450 million-$500 million in 2025, mainly from cash flows increasing in Brazil, Nicaragua, Mexico and Jamaica, as well as merchant sales and unidentified growth projects.
“We view this ramp as aggressive with significant risk given the company’s track record,” the firm said.
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