Chesapeake increases tender offer and finalizes $1.5 billion bank loan

Oklahoma City’s Chesapeake Energy announced Tuesday it will increase its offer to buy Senior Notes  and at the same time said it finalized pricing of a $1.5 billion bank loan.

The cash tender offer is for 6.875% Senior Notes due 2025 for Chesapeake subsidiaries Brazos Valley Longhorn, LLC and Brazos Valley Longhorn Finance Corp. The tender offer was amended to increase the consideration from $920 per $1,000 principal amount of notes to $950 per $1,000 principal amount. As a result of the increase, the new total consideration is $1,000 per $1,000 principal amount.

Chesapeake also announced today that Holders representing at least a majority of the outstanding aggregate principal amount of the Notes have committed to tender their Notes and deliver the related Consents in the Tender Offer at or prior to the Early Tender Date.

The company announced it has priced its proposed term loan of $1.5 billion from JPMorgan Chase Bank, N.A., Morgan Stanley Senior Funding, Inc., BofA Securities, Inc. and MUFG Union Bank, N.A. Chesapeake plans to use the net proceeds to finance the tender offer.

Chesapeake expects these transactions to improve its financial flexibility, as they will allow Brazos Valley and its subsidiaries to support Chesapeake’s current and future debt.

(PRNewsfoto/Chesapeake Energy Corporation)

Doug Lawler, President and Chief Executive Officer of Chesapeake Energy, stated, “We are very pleased to have the financing in place to eliminate Brazos Valley’s separate capital structure. Combining into a single financing structure increases our flexibility, enhances our credit profile and improves our ability to continue to meet our financial obligations as we focus on reducing debt, improving our cost structure and positioning the company to deliver increased shareholder returns.”

The term loan will have a 4.5-year term and bear interest at a rate of LIBOR plus 8.00% per annum and be issued at 98% of par. The term loan will be secured by the same collateral securing Chesapeake’s existing revolving credit facility (with a position in the collateral proceeds waterfall junior to its existing revolving credit facility).

The term loan is expected to close on or around December 23, 2019, subject to the execution of the final documentation, the success of the consent solicitation and other customary conditions.