Oklahoma City-based Chesapeake Energy Corp. was back in a New York federal court this week fighting with bond trustee Bank of New York Mellon Corp. over hundreds of millions of dollars in contract damages stemming from what was described as a botched bond buyback.
The fight is over a reversed May 2013 order by Manhattan U.S. District Judge Paul A. Engelmayer who said Chesapeake should pay $379.7 million to bond investors because the company waited too long to tell bond investors of a plan to redeem $1.3 million of bonds six years early. The judge ruled Mellon Corp and holders of Chesapeake’s 6.775 notes maturing in 2019 were entitled to a special make-whole price because of the early redemption.
The payout was more than triple what Chesapeake hoped to distribute. Then late last year, Judge Engelmayer tacked on another $59.1 million to the investors, boosting the total payout by Chesapeake to be $438.7 million.
Chesapeake had originally wanted to redeem the bonds early to reduce a debt burden caused under the late former Chief Executive Aubrey McClendon.
The case is Chesapeake Energy Corp v. Bank of New York Mellon Trust Co, U.S. District Court, Southern District of New York, No. 13-01582.