Investing.com -- Moody’s Ratings has downgraded the ratings of New Fortress Energy Inc. (NASDAQ: NFE ), including its corporate family rating (CFR) to Caa1 from B2, and its probability of default rating (PDR) to Caa1-PD from B2-PD. The rating agency also downgraded NFE’s senior secured term loans B to B3 from B2, and rated a $425 million add-on senior secured term loan B as B3. Additionally, Moody’s downgraded the legacy 2026 and 2029 senior secured notes to Caa2 from B3, and the senior secured notes under NFE Financing LLC to B3 from B2. The Speculative Grade Liquidity rating was also downgraded to SGL-4 from SGL-3. The outlook for all ratings remains negative.
The downgrade reflects the high financial risks that NFE faces, including a high amount of debt, leverage, and interest costs relative to its EBITDA and operating cash flow. Moody’s noted that NFE’s EBITDA guidance for 2025 has been lowered to approximately $1 billion, and it is not expected to generate enough operating cash flows to maintain solid debt service coverage. The company continues to borrow to fund its capital expenditures and plans to raise funds from divestments to meet its debt maturities in 2025-2026 and to reduce debt.
Governance risks were also considered in the rating action, as reflected in NFE’s revised G-5 score and CIS-5 credit impact score. These scores are primarily linked to its financial policy and the risks arising from a complex organizational structure. The company’s debt-funded expansion keeps the leverage consistently above the levels targeted by its stated financial policy.
NFE has been focusing on optimizing its asset footprint and reducing debt after a period of rapid expansion funded by borrowing. Over the last six months, the company has extended its maturities and raised cash through borrowing and equity placement. In 2025, NFE is actively pursuing divestments of some of its cash-producing assets to reduce debt and debt service costs, aiming to achieve a sustainable capital structure.
NFE’s CFR is supported by its significant energy infrastructure assets, including its operating FLNG (OL: FLNG ) facility in Mexico, and natural gas terminals and several generation facilities, both operating and under construction, in Brazil, Puerto Rico, Nicaragua, and Jamaica. The company plans to reduce its capital expenditures in 2025 but will continue to invest in the completion of its core projects, including the construction of its second FLNG facility and its projects in Brazil, and will continue to expand its operations in Puerto Rico.
The negative outlook on the ratings reflects execution risks associated with the divestment-led deleveraging strategy and uncertainty about NFE’s ability to improve debt service coverage and achieve a tenable capital structure through divestments.
NFE has weak liquidity and will rely on its significant cash balances, committed borrowing facilities, and expected proceeds from various claims to support its liquidity amid limited operating cash flow available after debt service payments in 2025. At the end of 2024, NFE reported $493 million in unrestricted cash. In March 2025, NFE renegotiated the terms of one of its supply contracts in Puerto Rico and will receive an additional $110 million in cash proceeds as part of this settlement.
At the end of 2024, the company had no availability under its $1 billion senior secured revolver facility. The maturity of the revolver facility was extended to October 2027 in the amount of $900 million, with $100 million maturing in April 2026. NFE also agreed to reduce the outstanding balance under the revolver by $270 million by September 30, 2025.
In November 2024, NFE placed PortoCem Debentures due 2040 to fund the completion of the PortoCem Power plant in Brazil. In Q1 2025, NFE completed a $425 million add-on term loan B facility, with proceeds to be used to fund the completion of the second FLNG facility and for other corporate needs.
The company’s next maturity is $509 million notes in September 2026, which will follow the maturities under the Revolver facility in 2025 and 2026. NFE’s term loan B facilities mature in 2028. However, the maturity will accelerate to July 2026, in advance of the 2026 secured notes maturity, if these notes remain outstanding.
The recently exchanged senior secured 2029 notes are rated B3, one notch higher than the Caa1 CFR. These debt instruments benefit from several significant security and guarantees packages that provide greater collateral coverage and support better recovery expectations for these instruments. The legacy 2026 and 2029 notes are rated Caa2, reflecting their lower collateral coverage and recovery expectations.
NFE recently executed the second amendment to its Term Loan agreement, which comprised the addition of $425 million of add-on senior secured term loan B commitments, rated B3. All undrawn commitments under term loan A were canceled. The amendment of the term loan B agreement kept the existing terms, including cross default provisions, annual amortization requirement, and cash sweep provisions.
Failure to reduce debt and significantly improve debt service affordability and coverage, including a delay in the execution of the divestment strategy resulting in the 2026 notes becoming current, could result in a downgrade of the CFR. An upgrade of the CFR depends on strong execution of the deleveraging plan and a significant reduction in financial risks. This would require a substantial reduction in debt and interest costs, and some improvement in recurring operating earnings, such that interest coverage improves with EBITDA / Interest sustained at around 1.5x. An upgrade will also require NFE to build financial flexibility, reduce reliance on debt by generating some free cash flow, and to maintain an adequate liquidity position.
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