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Chesapeake borrowing base affirmed at $4B, redetermination delayed to mid-2017

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Essential Energy Insights - February 2021

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Chesapeake borrowing base affirmed at $4B, redetermination delayed to mid-2017

Chesapeake Energy Corp. on April 11 said its securedrevolving credit facility agreement maturing in 2019 was reaffirmed at $4.0billion and the scheduled borrowing base redetermination was postponed untilJune 2017.

The company agreed to pledge additional assets ascollateral under the amended credit agreement.

The agreement was also amended to include a collateralvalue coverage test that could limit Chesapeake's borrowing capacity if itscollateral coverage ratio falls below 1.25x, tested as of March 31, 2017.

The amendment includes temporary covenant relief asthe credit facility's senior secured leverage ratio was suspended untilSeptember 2017, reverting to 3.5x through December 2017 and decreasing to 3.0xthereafter, according to the release.

The credit facility's interest coverage ratio covenantwas cut to 0.65x through March 2017 from 1.1x previously. This will increase to0.7x through June 2017 and revert to 1.2x in September 2017 and to 1.25x thereafter.

Under the amended agreement, Chesapeake will maintaina $500 million minimum liquidity amount at all times during the suspension ofmaintenance covenants, which would increase to $750 million if the collateralcoverage ratio falls below 1.1x, tested as of Dec. 31.

Chesapeake was also given the ability to incur up to$2.5 billion of first-lien indebtedness secured on a pari passu basis with theexisting obligations under the credit agreement, subject to payment priority infavor of the existing lenders and subject to other limitations on junior liendebt in the credit agreement, according to the release.