Freeport LNG Secures $4.56 Billion Deal in Senior Debt and Mezzanine Financing

Freeport LNG has closed a monumental $4.56 billion deal in senior debt and mezzanine financing backing its third liquefied natural gas train at Quintana Island near Freeport, Texas. The deal was jointly arranged by 27 leading banks, with the majority participating in the debt financing for the second train at the Freeport facility. This financing is significant, not only due to its size but also because it marks the largest fully non-recourse construction financing to date.

Key Takeaways:

• Freeport LNG has secured a $4.56 billion deal in senior debt and mezzanine financing for its third LNG train, with 27 leading banks participating as joint lead arrangers.
• The majority of the banks involved in the deal also participated in the debt financing for the second train at the Freeport facility, which was three times oversubscribed.
• The third train is the only train at the facility in which the sponsor retains 100% of the equity, allowing for 100% mezzanine debt financing.
• Multiple undisclosed institutions are providing the mezzanine debt, totaling $924 million for the third train.
• The $12.5 billion funding, combined with an additional $3 billion for refinancing costs and contingency funds, makes it the largest fully non-recourse construction financing to date.
• SK E&S LNG and Toshiba Corp. have 20-year tolling agreements for the third train, totaling 4.4 million tons per annum.
• Osaka Gas Co. and Chubu Electric Power Co. each have 20-year tolling agreements for the first two trains.
• CB&I, Zachry Industrial, and Chiyoda International Corp. are constructing the first two trains, expected to begin operations in September 2018 and February 2019, respectively.

Statistics:

• Investment: $4.56 billion in senior debt and mezzanine financing for the third LNG train
• Equity raised: $924 million via mezzanine debt for the third train
• Total funding: $12.5 billion for the three train project, including an additional $3 billion for refinancing costs and contingency funds
• Tolling agreements: 20-year agreements with SK E&S LNG and Toshiba Corp. for the third train, totaling 4.4 million tons per annum
• Construction timeline:

+ First train: operations expected in 2018

+ Second train: operations expected in 2019

+ Third train: operations expected in August 2019

Sources:

• Byline: Olivia Feld
• Sources:

+ "Freeport LNG Clinches $4.56 Billion Deal in Senior Debt and Mezzanine Financing" (unspecified date)

+ PFR (12/1) for details on debt financing for the second train

+ PFR (12/1) for details on equity stakes in the first and second trains

+ PFR (2/19) for details on regulatory approvals

+ Unspecified sources for information on bank participation and tolling agreements