Why New Fortress Energy Plunged This Week

Core Viewpoint - New Fortress Energy's shares plummeted 45.7% following a disastrous second-quarter earnings report, raising concerns about potential bankruptcy due to violations of debt covenants [1][9]. Financial Performance - Revenue decreased by 30% year-over-year to $301.7 million, with a significant net loss of $556 million, which included noncash write-downs of goodwill [3]. - Adjusted EBITDA fell to a loss of $3.7 million from a profit of $120.2 million in the same quarter last year [3]. Debt and Covenant Violations - The decline in profitability has led to violations of covenants on the first lien debt ratio related to the letters of credit facility, with further violations expected by September 30 [4]. - New Fortress has nearly $9 billion in debt and burned over $1 billion in cash in the first half of the year, despite having $821 million in cash on its balance sheet [7]. Operational Challenges - Part of the revenue decline was attributed to an asset sale in Jamaica, while ongoing issues include the cancellation of a grid stabilization project in Puerto Rico [5]. - The company's costs remained relatively unchanged, exacerbating the decline in profits [5]. Market Reaction - Following the earnings report, New Fortress lost half its market value, with the looming prospect of bankruptcy influencing investor sentiment [9].