Ch­e­sa­peake to re­deem $1.3 bil­lion notes

The Pak Banker - - 6BUSINESS -

In a di­rect chal­lenge to its bond­hold­ers, Ch­e­sa­peake En­ergy Corp went ahead with its plan to buy back $1.3 bil­lion of notes early.

Ch­e­sa­peake, the sec­ond-largest US nat­u­ral gas com­pany, said it is­sued a no­tice to re­deem the bonds, 6.775 per cent notes ma­tur­ing in 2019, at 100 cents on the dol­lar, or par.

It is pur­su­ing the re­demp­tion de­spite fail­ing at a Thurs­day hear­ing to per­suade US District Judge Paul En­gel­mayer in Man­hat­tan to force bond trustee Bank of New York Mel­lon Corp to ac­cept the plan. Bank of New York Mel­lon and in­vestors hold­ing $250 mil­lion of the notes op­pose the pro­posed re­demp­tion, say­ing Ch­e­sa­peake acted too late.

The in­vestor group ar­gued that any re­demp- tion should in­clude an ex­tra “make-whole” pay­ment that Ch­e­sa­peake has said could cost it an ex­tra $400 mil­lion.

Ch­e­sa­peake is hop­ing to avoid the $400 mil­lion pay­ment as it tries to close a po­ten­tial $4 bil­lion cash short­fall this year.

In morn­ing trad­ing, the price of the notes fell 3.25 cents to 104 cents on the dol­lar, boost­ing the yield to 5.97 per cent from 5.34 per cent, ac­cord­ing to bond pric­ing ser­vice Trace. The price had risen to a record high of 108 cents on Thurs­day.

The dis­pute is sep­a­rate from a US Se­cu­ri­ties and Ex­change Com­mis­sion probe into a perk that granted Ch­e­sa­peake’s de­part­ing chief ex­ec­u­tive, Aubrey McClen­don, a stake in com­pany wells, and a US De­part­ment of Jus­tice probe into pos­si­ble an­titrust vi­o­la­tions over Michi­gan land trans­ac­tions.

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