Oklahoma City-based Chesapeake Energy Corporation lost its appeal in a $438 million bond dispute by a unanimous 3-0 vote of the U.S. Second Circuit Court of Appeals on Thursday.
The Manhattan federal appeals court agreed with bond trustee, BONY Mellon, that bondholders were contractually entitled to a special “make-whole” price due to the early redemption. The court further indicated the payment was justified because Chesapeake waited too long to tell investors of its plan to redeem Chesapeake’s 6.775% notes maturing in 2019, or roughly $1.3 billion of their debt six years early.
“We are disappointed with the ruling and will continue to pursue our legal options,” said Gordon Pennoyer, a spokesman for Chesapeake. “We were prepared for this potential outcome and have reserved the liquidity to address it.”
According to a Reuters report, the payment comprised $379.7 million of contract-based damages including nearly $59 million in interest. That amount is stark in comparison to the $100 million that Chesapeake hoped to distribute in “restitutionary” damages.