Fitch Ratings has assigned a final rating of ‘BBB-’ to Cheniere Corpus Christi Holdings, LLC’s (CCH) $750,000,000 2039 series notes. The Rating Outlook is Stable.
CCH’s ratings reflect cash flows from the sale of liquefied natural gas (LNG). The cash flows provide sufficient coverage of debt service, considering that revenues are generated from long-term Sale and Purchase Agreements (SPAs) with investment-grade and unrated counterparties, with the unrated share rising significantly toward the end of the SPA tenors.
The SPAs provide a fixed capacity component that effectively compensates the project for fixed and variable expenses, and provides a pass through of natural gas supply costs. All three trains have reached completion and are operational, with Train 3 reaching completion ahead of schedule in March 2021. Firm pipeline capacity and a deeply liquid domestic gas market sufficiently mitigate natural gas supply risk. The proven liquefaction technology and well-defined cost profile should help ensure stable, long-term operations.
Fitch’s financial analysis applies stressed merchant prices to the project’s capacity to reflect the risk associated with unrated off-takers. Fitch’s rating case also utilizes stressed operational assumptions, including lower production levels, low natural gas prices, higher operating costs and stressed refinancing rates, resulting in a minimum project life coverage ratio (PLCR) of 1.50x in 2025. Relative to CCH’s mix of revenues from rated and unrated entities, the rating case PLCR is considered consistent with an investment-grade rating.
CCH’s Long-Term Issuer Default Rating (IDR) is equivalent to the ratings on the senior secured borrowings. CCH is structured as a bankruptcy remote, special purpose vehicle and is rated as a project finance entity with no recovery estimate incorporated into the rating. As such, the IDR is considered equivalent to the issuer’s lowest rated security (i.e. the senior secured bonds). If CCH issued subordinate or unsecured debt that is rated below the secured debt, the IDR may be downgraded to the lower rating level.