closed apair of financial transactions that CEO Doug Lawler said are "majorsteps" as the company continues its multiyear effort to shore up its balance sheet.
Inone of the transactions, Chesapeake issued $1.25 billion of .The notes, priced at par, bear interest at a rate of 5.5% per year, payablesemiannually, and will mature Sept. 15, 2026, according to an Oct. 5 SECfiling. Net proceeds were earmarked for general corporate purposes, such asdebt repurchases and the repayment of the company's revolving credit facilityand senior notes.
Chesapeakemay be able to convert the debt to equity in three years if the company's stocktrades above 130% of the conversion price for a certain period, according to anews release the same day.
Thecompany also closed an agreement to exchange about 110.3 million shares of itscommon stock for about $1.2 billion in liquidation value of convertiblepreferred stocks. The 134,000 shares of 5.00% cumulativeconvertible preferred stock, 606,271 shares of 5.75% cumulative convertiblepreferred stock and 553,007 shares of 5.75% cumulative convertible preferredstock were exchanged at a discount of about 40%.
"Thesetransactions represent major steps toward reaching our financial goals of [$2billion to $3 billion] of debt reduction and growing production within freecash flow," Lawler said in the news release.
Proforma for the convertible debt issuance, Chesapeake has a cash on hand of $1billion, with no outstanding amount from its revolving bank credit facility, asof Sept. 30. Meanwhile, the exchange brings Chesapeake's outstanding commonshare count to about 886 million.