Chesapeake Energy Increases Size of Term Loan to $4 Billion (Update 2)

Chesapeake Energy ($CHK) plans to use the $4 billion unsecured term loan from Goldman and Jefferies (and syndicated to institutional investors) to "repay borrowings under the company's existing corporate revolving credit facility", which, according to CEO Aubrey McClendon, would provide "enhanced financial flexibility to execute our planned asset sales from a position of strength." Aubrey McClendon and CFO Dominic Dell'Osso provided additional information in a conference call with analysts on May 14 (transcript at SeekingAlpha).

CEO Aubrey McClendon on Chesapeake's planned asset sales:

"In addition to the Permian sale and Miss Lime JV, we've identified a number of other assets that are non-core to us. And we will sell enough of those in the second half of 2012 to reach our asset sales target of $9.5 billion to $11 billion for the remainder of the year."

CFO Dominic Dell'Osso on maintenance covenants in Chesapeake's revolving credit facility:

"Remember, our only maintenance covenants are in our revolving credit facility, which is a $4 billion facility secured by a relatively small subset of our $50 billion to $60 billion asset value that Aubrey referred to earlier. These covenants are 4x debt to trailing EBITDA limitation and a 70% debt-to-capitalization ratio."

If interested, here are links to the original term loan credit agreement and 8-K filing at The interest rates are provided in the press release below. Financial drama has been killing the stock recently. Today, CHK hit a low of $14.31 and closed at $14.65 today after S&P downgraded Chesapeake to BB-. Chesapeake Energy's stock, options, corporate bonds, and credit default swaps will be interesting to watch going forward.

More Articles:
Chesapeake May Delay Asset Sales on Loan Agreements (Bloomberg)
Chesapeake Bank Loan Jars Bond Investors (WSJ)
UPDATE 2-RLPC: Chesapeake increases bridge loan to $4B vs $3B (Reuters)
Chesapeake Oil Asset May Fetch an Extra Billion: Energy (Bloomberg)
Chesapeake hikes loan as credit rating fades (Reuters)

Chesapeake Energy Corporation Increases Term Loan to $4.0 Billion Based on Strong Investor Demand

"Chesapeake Energy Corporation (NYSE:CHK - News) today announced it has increased the size of a previously announced unsecured term loan from Goldman Sachs Bank USA and affiliates of Jefferies Group, Inc. from $3.0 billion to $4.0 billion based on strong investor demand. The loan was syndicated to a large group of institutional investors and priced at 97% of par. The net proceeds of the loan to Chesapeake, after customary fees and syndication costs, of approximately $3.8 billion will be used to repay borrowings under the company’s existing corporate revolving credit facility and for general corporate purposes. The loan carries an initial variable annual interest rate through December 31, 2012 of LIBOR plus 7.0%, which is currently 8.5% given the 1.5% LIBOR floor in the loan agreement. The loan, which ranks pari passu with Chesapeake’s outstanding senior notes, matures on December 2, 2017 and may be repaid at any time in 2012 without penalty at par value.

Chesapeake expects to use a portion of the proceeds from planned asset sales to repay the loan in full before the end of 2012. Giving effect to the increase in the size of the loan, the company currently has more than $4.7 billion of liquidity including unrestricted cash on hand and available borrowing capacity under its revolving bank credit facilities.

Aubrey K. McClendon, Chairman and Chief Executive Officer, said, “We appreciate this strong vote of confidence from investors. As discussed in yesterday’s conference call, this will give us greatly enhanced financial flexibility to execute our planned asset sales from a position of strength and to complete our transformation from a natural gas-focused producer to a more balanced liquids-focused producer.”

Source: BusinessWire at Yahoo Finance