Cheniere Energy Partners / Inc. way down in heavy trading

CPQ

LNG

8-K

I've been following this company off and on for a few months now and almost pulled the trigger on some of the MLP units a week or two ago. I'm glad I didn't.



Highlights from an 8-K filed today:

Sabine Pass LNG-GP, LLC, the general partner of Sabine Pass, received a letter dated February 15, 2011 (the "Letter") from lawyers representing Centerbridge Partners, L.P. and its affiliates (collectively, "Centerbridge"), claiming to be significant holders of the Notes and alleging that Sabine Pass is in default under the terms of the Indenture. Sabine Pass believes that all of the allegations in the Letter are without merit and that Sabine Pass is in full compliance with the Indenture.

Centerbridge principally alleges in the Letter that the affiliate payments received by Sabine Pass from Cheniere Energy Investments, LLC ("Cheniere Investments"), a wholly owned subsidiary of Cheniere Energy Partners, L.P., under the Terminal Use Agreement between Sabine Pass and Cheniere Investments are not revenue of Sabine Pass under United States Generally Accepted Accounting Principles ("GAAP"). Therefore,

Centerbridge alleges that Sabine Pass recorded revenue and earnings in 2010 on a basis that is not in accordance with GAAP and that, consequently, Sabine Pass reported financial statements that are materially false and misleading in violation of the terms of the Indenture. Centerbridge alleges that Sabine Pass is in default under the terms of the Indenture. If an event of default had occurred and were continuing, the maturity date of the Notes could be accelerated, in which case the Notes would be repayable at par.

Centerbridge's assertions are wrong. Management has confirmed that revenues received from Cheniere Investments qualify as revenue under GAAP, that Cheniere Investments is engaged in the LNG business, and that Cheniere Investments has economic substance. Cheniere Energy, Inc. engages a nationally-recognized, independent, registered public accounting firm, different than its auditor, as its advisor to, among other things, assist it in determining that revenues are accounted for properly according to GAAP. That firm has agreed with management that the revenue treatment was proper.