Chesapeake Energy has announced it made an agreement with an unnamed firm to exchange more than 250 million shares of common stock valued at a penny a share in return for nearly $588 million in senior notes. It’s a move to unload debt for the Oklahoma City-based energy company.
The company entered into a privately negotiated securities exchange where it agreed to issue 250,721,554 shares of the company’s common stock valued at $0.01 a share. The stock offering is in exchange for $40 million in its 5.75% convertible preferred stock, $112.7 million of 5.875% senior notes due 2022, $129.3 million in 5.75% senior notes due 2023, $155.8 million in 5.5% convertible senior notes due 2026 and $150 million in 8.00% senior notes due 2027.
The company stated that it might engage in similar transactions in the future but is under no obligation to do so.
Doug Lawler, Chesapeake’s President and Chief Executive Officer, commented, “We had an opportunity to partner with a large, multi-asset investment manager who believes in the long-term value of our common shares and, in doing so, retired a portion of our debt and preferred stock at a significant discount to its par value and reduced our annual interest and preferred dividend payments by approximately $35 million.”
Lawler said the company will continue to focus on further debt reduction including the sale of non-core assets.