Fitch Ratings placed Freeport LNG Investments LLLP on rating watch negative, down from stable, to reflect the credit impact of a recent LNG release and fire at Freeport’s three train, 15 million tonnes per annum liquefaction facility in Quintana Island, Texas.

The Quintana facility is expected to return to partial operations in 90 days and full operations in late 2022, the Houston-based company said last week. Notwithstanding, the recent incident at the facility has only exacerbated tightness in global LNG markets. 

“The primary rating concern for Freeport LNG is that the sole source of revenue is dividends from the three liquefaction plants, owned by three operating companies,” Fitch said June 21 in a rating action commentary. 

“In parallel, Freeport LNG’s debt is structurally subordinate to the cash flow needs at the operating companies, which have approximately $12 billion of project debt. Freeport LNG’s debt is also structurally subordinated to an approximately $1.2 billion note at FLEX Intermediate Holdco LLC, an intermediate holding company,” the rating agency said.

Fitch believes Freeport LNG needs to make use of one of the measures provided under its debt structure to timely make the next two quarterly debt service payments; however, the agency expects the payments to be made.

Freeport LNG’s Quintana facility is now the seventh largest in the world and second largest in the U.S. It currently accounts for nearly 20% of U.S. LNG exports and regulatory approval has been received for construction of a fourth liquefaction train. 

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