New Fortress Energy secures short-term forbearance on 2029 notes, spotlighting ongoing liquidity strain

What happened

New Fortress Energy, already operating with extreme leverage (net debt/EBITDA ~28x) and negative interest coverage, has entered into a forbearance agreement with representatives of holders of its new senior secured notes due 2029. The agreement effectively pushes the interest payment originally scheduled for November 17, 2025 to December 15, 2025, providing roughly one month of incremental breathing room. This move is consistent with prior disclosures that the company’s liquidity plan relies on delaying certain payments, rolling short‑term facilities, and using a limited backstop to meet near‑term obligations. While the company characterizes the period as one in which it will continue to work constructively with stakeholders, the need for formal forbearance underscores the tightness of NFE’s cash position despite progress at its Fast LNG and Brazil power projects. Overall, the development reinforces that capital structure and refinancing risk remain central to the NFE equity story, even as the operating platform benefits from supportive LNG market fundamentals.

Implication

For equity holders, the need to obtain a forbearance and push out a scheduled interest payment confirms that balance sheet stress is not just theoretical but actively shaping capital allocation, increasing the risk of future dilutive or otherwise creditor‑friendly solutions. The move may preserve near‑term optionality to advance Fast LNG and Brazilian power projects, but it also sends a negative signal to credit markets that could further raise NFE’s cost of capital or narrow its financing options. Existing shareholders should assume higher probability of scenarios involving restrictive covenants, asset sales, or equity issuance, particularly if operating cash flow does not inflect meaningfully higher over the next 12–18 months. Prospective investors should treat NFE as a high‑risk, event‑driven situation where timing and terms of refinancings matter as much as project execution, and size positions accordingly. Until the company can demonstrate durable positive interest coverage and term out key obligations on non‑distressed terms, the risk/reward profile remains skewed to the downside for common equity holders.

Thesis delta

The prior SELL thesis centered on extreme leverage, negative interest coverage, and a liquidity plan dependent on delaying payments and rolling short‑term financing; the new forbearance agreement is fully consistent with this framework and incrementally validates those concerns. This development modestly worsens the qualitative assessment of refinancing risk and creditor confidence but does not yet provide evidence of a durable solution to NFE’s capital structure issues. As a result, the rating remains SELL, with slightly higher conviction that balance sheet stress could crystallize in outcomes unfavorable to existing equity holders if operating cash flow ramps more slowly than planned.