Chesapeake Energy Corp. entered into a private securities exchange agreement to issue a total of 250,721,554 common shares for approximately $588 million of preferred shares and senior notes, according to a Sept. 10 news release.
The company would exchange the shares, with a face value of one cent per share, for about $40.0 million of its 5.75% convertible preferred stock, $112.7 million of its 4.875% senior notes due 2022, $129.3 million of its 5.75% senior notes due 2023, $155.8 million of its 5.5% convertible senior notes due 2026 and $150.0 million of its 8.00% senior notes due 2027.
"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," Chesapeake President, CEO and director Doug Lawler said in the release.
The private exchange deal is an indication that the debt market is open with investors or companies aiming to reduce its debt, Suntrust Robinson Humphrey analyst Neal Dingmann said in a Sept. 10 note. "We view today's transaction as another positive step to address the [$11 billion] in debt and preferred equity," Dingmann said.
Chesapeake is an Oklahoma-based producer of oil, gas and NGLs with interest in oil and natural gas resource plays, including the Eagle Ford Shale and Appalachian Basin.
