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Chesapeake commences $850M senior notes private placement to refinance debt

launcheda private placement of $850 million of senior notes to eligible purchasers fordebt financing purposes.

The senior notesdue 2026 will be convertible to cash, Chesapeake common stock or a combinationof both, according to a Sept. 29 news release. Initial purchasers would begiven a 30-day overallotment option for an additional $150 million of seniornotes, which, if exercised, may boost the issuance to $1.0 billion.

Netproceeds from the private placement would be used for general corporatepurposes such as debt repurchases and repayment of credit facility and seniornotes set to mature in the near-term. Chesapeake also previously launched $1.5billion tender offersin multiple tranches, also to refinancedebts.

Capital OneSecurities Inc. analysts view the transaction as a net positive for Chesapeakeas it allows for "near-term breathing room," according to a Sept. 29note. Capital One said it expected Chesapeake to expend its liquidity bymid-2020, but the new issuance would extend the liquidity wall to the end of2020.

S&PGlobal Ratings upgraded Chesapeake's corporate credit rating to CCC+ from SD,or selective default, as it recognizes the company's efforts to improve andsupport its near-term liquidity. The ratings outlook remains negative asChesapeake's high debt leverage persists.

The ratingagency assigned a CCC- issue-level rating and 6 recovery rating to the seniornotes in the private placement. The recovery rating shows a negligibleexpectation for recovery of principal in case of payment default, S&PGlobal Ratings said in a Sept. 29 release.

S&PGlobal Ratings believes that Chesapeake's credit measures will strengthen overthe next 12 to 18 months as the benefits of its recent transactions takeeffect. Besides the previous tender and senior note offers, these transactionsinclude Chesapeake's unloading of its BarnettShale assets to TotalSA, which is expected to reduce gathering and processing costswhile raising cash flow.

S&P Global Ratingsand S&P Global Market Intelligence are owned by S&P Global Inc.