Chesapeake Energy refinances credit as debt grows

 

Chesapeake Energy in Oklahoma City has sold $120 million in senior notes as part of a new credit agreement with 17 banks according to a late December filing with the U.S. Securities Exchange Commission. The move is an apparent refinancing of company debt as the energy firm attempts to avoid insolvency.

The December 27, 2019 filing indicated the purchase agreement by the banks also resulted in a 25% reduction in Chesapeake’s borrowing base.

The filing indicated Chesapeake Energy and 37 of its various subsidiaries entered in a purchase agreement for the issuance and sale of $120 million of its 11.5% Senior Secured second lien notes due 2025. The notes were additional securities “pursuant to certain Indentures dated 12-19 among Chesapeake, the guarantor and Deutsche Bank Trust Company Americas.

The move was connected to a September 2018 Credit Agreement in which Chesapeake had issued nearly $2.2 billion of Second Lien Notes in exchange for nearly $3.2 billion.

Chesapeake’s refinancing step came as company’s debt still is around $10 billion. Much of the debt came as Chesapeake, once the second-largest producer of natural gas in the U.S. started suffering as natural gas prices plummeted. The company attempted in the past few years to convert to oil production rather than natural gas but the debt was still there.

Chesapeake stock has been down more than 60% over the year while the volatile oil and gas industry is down about 18%. On Friday, trading finished at 85 cents a share, down 9.57% from Thursday’s close of 94 cents a share.

The 17 banks that just extended more credit to Chesapeake Energy are: MUFG Union Bank N.A.; MUFG Bank Ltd.; Wells Fargo Bank National Association; MPMorgan Chase Bank, N.A.; Bank of America N.A.; BMO Harris Bank N.A.; Citicorp North America Inc; Credit Agricole Corporate and Investment Bank; Mizuho Bank Ltd.; Royal Bank of Canada; ABN AMRO Capital USA LLC; DNB Capital LLC; Export Development Canada; Goldman Sachs Bank USA; Morgan Stanley Bank N.A.; Morgan Stanley Senior Funding, Inc.; and Natixis New York Branch.