Reuters: Chesapeake CEO Borrowed $1.1B Using Stake In Wells As Collateral
The chief executive of Chesapeake Energy Corp. (CHK) has borrowed as much as $1.1 billion over the last three years, pledging as collateral his stakes in the company's oil and natural gas wells, Reuters reported Wednesday, citing documents it has reviewed.
Aubrey McClendon is using the loan proceeds to finance the opportunity to buy into the same well stakes, according to the report.
For their part, McClendon and Chesapeake say the loans are private transactions and the company isn't required to disclose or vet them.
"I do not believe this is material to Chesapeake," McClendon said in an email response to questions from Reuters.
"There are no covenants or obligations in my loan documents or mortgages that bind Chesapeake in any way," he said.
McClendon declined to comment on the loans when contacted by Dow Jones Newswires.
The Reuters report said academics, analysts and lawyers it interviewed expressed concerns about potential conflicts of interests.
Chesapeake general counsel Henry Hood told Reuters that language in the loan agreements contained "typical boilerplate language" used in oil and gas mortgages and that the loans don't create the possibility of a conflict of interest as the company has a first lien on McClendon's shares of company wells.
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