Cheniere Energy Inc. (NYSEMKT: LNG) announced Tuesday morning the sale of two unsecured convertible payable-in-kind (PIK) notes to fund a portion of the company’s costs of developing, constructing and placing into service is Corpus Christi, Texas, natural gas liquefaction project. The Corpus Christi location was originally slated to become a re-gasification plant for imported liquefied natural gas (LNG), but given the abundance of shale gas now available in the United States, Cheniere has sought permission to convert the project to liquefaction plant to export LNG.

In one of the transactions, Hong Kong-based RRJ Capital will purchase $1 billion of the PIK notes issued by Cheniere and will have the right to transfer a portion of the notes to Temasek Holdings, the Singapore government’s sovereign investment fund. The notes have a maturity of six and a half years and accrue interest at a rate of 4.875% per year, payable in kind by increasing the principal amount of the convertible notes outstanding. The notes will be convertible into the common stock of Cheniere at an initial conversion price of $93.64, which represents 130% of the closing price of the common stock of Cheniere on Monday, November 10, 2014.

ALSO READ: 4 Oil Service Stocks With Huge Upside Despite Lower Oil Prices

Cheniere also signed a binding commitment letter with EIG Management Company, a privately held investment management company based in Washington, D.C., under which funds managed by EIG have agreed to purchase approximately $1.5 billion in convertible notes that will be issued by a to-be-formed wholly owned subsidiary of Cheniere that will be the indirect owner of the equity interests in Corpus Christi Liquefaction and Cheniere Corpus Christi Pipeline.

If issued, the convertible notes would have a maturity of 10 years and would accrue interest at a compounded rate of 2.75% per quarter. Interest on the notes would be payable in-kind from the closing date through the substantial completion of the third train of the Corpus Christi and would be payable in cash thereafter. The convertible notes would be eligible for conversion into shares of common stock of Cheniere on or after substantial completion of Train 3 and at the option of EIG six months after substantial completion of Train 3, through one year prior to the maturity date.

The Corpus Christi LNG project comprises three liquefaction plants (called “trains”) capable of producing 13.5 million metric tons annually (roughly 121 million barrels of oil or nearly 650 billion cubic feet of natural gas). Cheniere expects to complete financing for the project this year, and authorization from federal regulators to begin construction is expected late in 2014 or 2015. Operations are not scheduled to commence until 2018. As of mid-July, Cheniere had signed long-term agreements to sell approximately 7.65 million metric tons per year.

Cheniere expects to commence operations at the first two of six trains at the company’s Sabine Pass project in 2015 and 2016. The second two trains are scheduled to begin operations in 2016 and 2017.

Shares of Cheniere Energy were up about 1.3% shortly before noon on Tuesday, in a 52-week range of $38.42 to $85.00.

ALSO READ: How the Election Will Impact Keystone Pipeline, Oil Exports

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.