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On 5 March, 9fin put out a report on New Fortress Energy’s recent LME, referring to it as a “triple dip.” But was it really a “triple dip”? When George Constanza infamously “double dipped” his chip back in the 90s, he was dipping the same chip into the same bowl twice. While some might argue that it is the chip, and not the bowl, that is key in a double dip analysis, in the context of LMEs we are not so sure.

While the nomenclature around LME transactions is constantly evolving, we at 9fin believe that there is an important distinction to be made between an additional claim on the same assets and an additional claim on a different pool of assets.

In this report, we provide a simplified general description of “double dips” and other variations on the structure. We say “simplified general description” because there are multiple variations on these structures with different levels of complexity.

We also look at the underlying purposes of these structures. Finally, we examine New Fortress Energy’s post-LME structure, and attempt to categorize it within our framework.

What is a “double dip”?

In the context of LMEs, double dip is originally referred to a structure where new money lenders made a loan to a non-guarantor entity and had two separate pari claims against the existing credit group’s assets as credit support for the new money loan.

The two separate pari claims against the existing credit group were generally: (1) a direct claim—based on a secured guarantee by the existing credit group of the new money loan (“Dip 1”); and (2) an indirect claim—via a secured intercompany loan made by the new money borrower to the existing credit group (“Dip 2”), which was itself pledged (along with any other assets) by the non-guarantor entity in favor of the new money lenders.

Importantly, the purpose of the structure was to give the new money lenders two separate pari claims against the existing credit group assets in a bankruptcy scenario, rather than the one claim they would have had if they had just made a loan directly to, and received secured guarantees from, the existing credit group.

Whether both claims would be upheld in a bankruptcy scenario remains to be seen, but the key element of the structure is that there are two separate pari claims against the same assets. The prototype for this structure was the At Home transaction in 2023.

What is a “pari plus”?

Under a pari plus structure, instead of two claims against the existing credit group, the new money lenders have (1) an indirect pari claim against the existing credit group—via a secured intercompany loan to the existing credit group (the “pari” claim); and (2) a direct structurally senior claim against entities and/or assets that do not guarantee the existing credit group debt—based on a guarantee by those non-guarantor entities (the “plus” claim).

Notably, the “plus” claim is not a second claim on the same assets. The purpose of this structure is to give the new money lenders a pari claim on the existing credit group assets plus an additional claim on other assets that do not provide credit support for existing debt. This distinction was created following the Sabre Corporation transaction, later in 2023.

What is a “double dip plus”?

A “double dip plus” is a combination of a “double dip” and a “pari plus” structure where the new money lenders effectively get two separate pari claims against the existing credit group via a double-dip structure (the "double-dip") and an additional claim against entities and/or assets that do not guarantee the existing credit group debt (the "plus").

What is a “triple dip”?

As the name suggests, a “triple dip” is a structure where the new money lenders have three separate claims against the existing credit group. Typically, such a structure would consist of a “double dip” structure (as described above) (Dips 1 and 2) with some kind of additional secured contractual claim against the existing credit group (Dip 3).

New Fortress Energy’s LME

In late 2024, New Fortress Energy implemented a creative combination of drop-down transactions, new notes, secured intercompany loans, and debt exchanges. As a result of the LME, New Fortress Energy was able to increase liquidity and extend the maturity profile of its debt.

Below is a simplified diagram of New Fortress Energy’s post-LME structure. See 9fin’s prior report for a detailed description of the transaction and the group structure.

So, was it a “triple dip”?

Although the new money lenders ended up with three separate paths to recovery, the answer is: technically, no (though it made for a catchier headline). The new money lenders only have two claims against the existing credit group. The other claims are against entities that did not guarantee the existing credit group debt.

Further, unlike the double dip example described earlier in this report, New Fortress Energy's post-LME structure does not give the new money lenders two separate claims for the full amount of the new money (in this case, $2.73 billion) against the existing credit group. Rather, there is one indirect claim against the existing credit group for $1.43 billion and another indirect claim against the existing credit group for $970 million. (We understand that the remaining new money was up-streamed to the existing credit group via dividends.)

Accordingly, even though there are three separate paths to recovery and two claims against the existing credit group, the New Fortress Energy LME is more like a pari plus two transaction than a "triple dip." However, we acknowledge that terms evolve over time and others may not share our view.

As George said all those years ago, “you dip the way you wanna dip; I’ll dip the way I wanna dip.”

Check out this blog on New Fortress Energy’s ever-evolving situation.