LNG operator Energos readies inaugural junk bond
Energos is readying a US$2bn loan and bond sale, including a debut high-yield offering, as the Apollo-backed liquefied natural gas company seeks to refinance debt, simplify its capital structure and fund future growth.
The company provides the ships and infrastructure to transport and then convert LNG back to gas in countries that often lack facilities to carry out this process, known as regasification.
“It is a new business model in my mind,” said one investor looking at the bond sale. “If you don’t want to build an LNG import terminal, you can have one of these boats parked [offshore] as a regasification facility.”
Lead left Citigroup is marketing a US$1.5bn secured seven-year non-call three bond, which is expected to be rated BB/BB–. Meanwhile, lead-left arranger Barclays is talking 425bp–450bp over SOFR on a US$500m seven-year term loan B.
The company is also preparing a US$150m super priority working capital facility, according to an investor presentation.
Energos was created in 2022 through a merger between private equity firm Apollo and New Fortress Energy. Apollo now owns 100% of the company after buying NFE’s remaining 20% stake in 2024.
The Connecticut-based borrower owns and operates 13 LNG vessels in South America, the Middle East, Europe and Asia. The long-term take-or-pay contracts on those charters are worth about US$5.8bn, and the ships themselves will back the new debt, according to an investor presentation.
And because of those long-term contracts, which generate all of Energos’ cash flows, the company is fairly well insulated against day-to-day commodity price volatility, said S&P in a note on Wednesday.
“Energos’ weighted-average remaining contract life is 14 years with a mix of investment-grade and speculative-grade customers,” analysts at the rating agency wrote.
Management told investors on Wednesday that Energos provides LNG services to countries that need alternative energy sources, such as Germany, which wants to wean itself off Russian gas supplies, and Egypt, which has suffered blackouts due to heat waves.
Even so, the company’s presence in emerging market countries may put off some US high-yield investors. “Many of the counterparties are EM countries,” said the investor. “We can just buy an [EM sovereign] bond instead of trying to figure out if it is going to pay for LNG.”
Energos also faces counterparty risks with its former owner, Triple C rated New Fortress Energy, which accounts for 23% of its 2025 contracted cash flows, according to S&P.
The bond deal, which is expected to price on October 16, will be a debut for Energos and follows an US$800m five-year non-call two unsecured bond in April from BB+/BB rated Excelerate Energy, which has a similar business model.
That bond, which was priced at par to yield 8%, was trading at a dollar price of around 106.14 to yield around 6.1% on Tuesday, according to MarketAxess data.