Puerto Rico support and conditional FOMB approval lift NFE shares, but balance‑sheet risks remain dominant

What happened

Shares of New Fortress Energy jumped about 11.3% after Puerto Rican officials publicly backed the company’s supply contract and the Financial Oversight and Management Board granted conditional approval following an intense review. The market reaction reflects reduced political/regulatory uncertainty on that specific contract, but the FOMB’s conditional sign‑off and government statements do not address the company’s acute liquidity and capital‑structure strain. DeepValue’s master report still characterizes NFE as a binary, highly leveraged project‑finance equity — net debt/EBITDA roughly 28x, negative interest coverage and explicit going‑concern language from management and auditors. NFE’s survival remains dependent on rolling LNG cargo financing, a $100m backstop and the New 2029 Notes forbearance; the Puerto Rico news improves contract visibility but does not materially shrink ~$8bn+ long‑term debt or ~$31.9bn of total obligations. In short, the headline is a near‑term positive sentiment catalyst, not a fundamental fix — the equity stays exposed to high probability of restructuring or severe dilution absent tangible deleveraging or sustained free‑cash‑flow improvement.

Implication

The FOMB’s conditional approval and Puerto Rican support reduce near‑term political/regulatory uncertainty for that contract and can produce a short‑lived rally in the stock. However, conditional approval does not cure NFE’s fragile balance sheet: extreme leverage, negative interest coverage and dependence on forbearance/cargo financing still dominate the risk profile. Treat today’s pop as sentiment‑driven, not as evidence of solvency; avoid adding to long positions and consider protective hedges or harvesting gains if exposed. Track three concrete triggers closely: (1) announced asset sales or capital raises that materially cut net debt, (2) durable extensions or improvements to cargo financing and the New 2029 Notes forbearance without crippling dilution, and (3) two consecutive quarters of positive free cash flow and interest coverage above 1x. Only after clear progress on those items should investors consider moving from STRONG SELL to a more neutral or speculative stance.

Thesis delta

Marginally positive operational news but no change to the core thesis: the Puerto Rico support and conditional FOMB approval improve contract visibility yet do not address the company’s acute liquidity, leverage, or going‑concern risks. We therefore maintain STRONG SELL; the thesis would only shift if NFE secures material deleveraging or sustained cash‑flow and interest‑coverage recovery that meaningfully reduces restructuring risk.