A unit of Cheniere Energy Inc. has secured a $250 million convertible loan through funds led by GSO Capital Partners LP.
Proceeds from the private equity loan, through its Cheniere Common Units Holding LLC subsidiary, will be used to repay a $95 million bridge loan obtained in May and to fund a reserve account for payments under Cheniere’s usage agreement with the Sabine Pass liquefied natural gas receiving terminal.
We believe that this capital investment, combined with our recent restructuring and significant reduction of annual expenses, will provide us with sufficient liquidity to operate our business for a minimum of three years, whether or not we are successful in our plan of securing cargoes or additional third-party long-term terminal use agreements,said Charif Souki, Cheniere Energy chairman, president and chief executive.

The bridge loan was seen as critical to Cheniere’s stability considering it is not expected to receive key LNG shipments at Sabine Pass until mid-2009.

The 10-year loans have an annual interest rate of 12 percent over the first three years with maturity in 2018.

The principal amount of $250 million can be exchanged in whole or in part for a newly created series of preferred stock, exchangeable into 50 million shares of common stock at a conversion price of $5 per share.

In connection with the transaction, Houston-based Cheniere Energy (AMEX: LNG) increased the number of its directors to 12 from 9 and added two directors designated by GSO, D. Dwight Scott and Jason New. An additional independent director approved by the Cheniere board and GSO will be added within 30 days, the company said.

The general partner of Cheniere Energy Partners also increased its number of directors, adding GSO nominee James Bennett.

GSO Capital Partners was acquired by Blackstone Group LP in March.

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