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New Fortress Energy (NFE), facing financial difficulties and serving as the parent of Genera PR—the private entity managing Puerto Rico Electric Power Authority’s legacy power plants—is poised to initiate a note exchange with its investors to generate funds and enhance liquidity.
This information is provided in the latest S&P credit evaluation, which assigned a B+ rating to a specific proposed note release.
“We have assigned our ‘B+’ issue-level rating to the proposed senior secured notes maturing in 2029 (exchanged notes) along with a recovery rating of ‘4’, which reflects our expectation for an average recovery (30%-50%; rounded estimate 45%) in the event of a payment default,” the credit rating organization stated.
According to information acquired by the STAR, NFE, which has a liquefied natural gas facility in San Juan, could be looking to issue around $1 billion in bonds and subsequently perform a bond exchange in 2029 to settle notes maturing in 2025 and 2026. The company has also indicated intentions to divest assets.
Nonetheless, S&P adjusted the liquidity evaluation last week to a level deemed less than sufficient.
“Although NFE’s transaction support agreement (TSA) and the upcoming exchange with its noteholders could help the company improve its capital structure and liquidity position, its financial flexibility is expected to remain limited in 2025,” the credit rating firm remarked. “NFE has partially extended $900 million of its revolving credit to October 15, 2027, and the TSA is set to provide about $327 million in cash via intercompany loans. Nevertheless, NFE currently does not have availability under its credit facility, and we project that NFE will rely on external financing for most of its capital expenditures in 2025.”
The credit rating agency anticipates NFE will aim to monetize assets to decrease debt and repay the revolving credit to enhance its liquidity situation, although these actions were not factored into its predictions due to execution risk.
“Moreover, the springing maturities of the revolving credit facility and term loan B present a risk if it fails to refinance or repay its 6.5% senior secured notes ($499 million pro forma from the exchange transaction) by July 31, 2026. The company’s financial ratios show weakness, and any improvement in credit is contingent on a robust cash flow increase in 2025,” S&P added.
NFE’s S&P Global Ratings-adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) for the twelve months ending September 30, 2024, is approximately $1.1 billion, with a debt to EBITDA ratio of around 7.8x. Although the company’s third-quarter outcomes were generally as anticipated, its credit measures may decline further by year-end if the Federal Emergency Management Agency payment of about $500 million is postponed or received at a lower figure.
Additionally, the one-time payment is based on an expected EBITDA level of $750 million-$800 million and anticipated EBITDA growth of $450 million-$500 million in 2025, primarily driven by increased cash flows in Brazil, Nicaragua, Mexico, and Jamaica, as well as merchant sales and unidentified growth initiatives.
“We consider this growth target aggressive and carry substantial risk given the company’s historical performance,” the agency concluded.
