Chesapeake Seeks $2B Loan to Repay Debt

Oklahoma City-based Chesapeake Energy Corp. is seeking to arrange a $2 billion unsecured, five-year term loan facility in order to repay its remaining outstanding debt under Chesapeake's existing term loan facility arranged in May and its corporate revolving credit facility.

The company has engaged Bank of America, Goldman Sachs Bank USA and Jefferies Finance to assist with arranging the loan, Chesapeake said in a statement on Thursday.

"The board and management believe current corporate loan market conditions offer attractive refinancing opportunities on favorable terms," said Archie Dunham, Chesapeake's non-executive chairman of the board, in a statement.

"By using proceeds of this loan to repay more costly debt and provide excess liquidity, we will enhance our financial flexibility and ensure our ability to complete our planned asset sales efficiently," Dunham commented.

Amounts borrowed under the new term loan facility will be unsecured and will be unconditionally guaranteed on a joint and several basis by Chesapeake's direct and indirect wholly owned domestic subsidiaries that are subsidiary guarantors under the company's existing senior notes indentures.

The new term loan will allow Chesapeake to repay other unsecured indebtedness, including amounts outstanding under the existing term loan facility, Chesapeake's 6.775 percent Senior Notes due 2019, Chesapeake's 7.625 percent Senior Notes due 2013 and up to $1.2 billion of other senior unsecured indebtedness.

Chesapeake is pursuing a major asset sale program to make up for a cash shortfall, with a goal of selling between $17.25 billion and $19 billion in 2012 and 2013. Dow Jones reported Oct. 11 that the company announced it would sell assets in Western Oklahoma. Chesapeake has also sold assets in the Permian Basin and other plays around the United States.

Chesapeake Chief Executive Officer Aubrey K. McClendon said the company was pleased with the progress made towards achieving its long-term debt goals since early 2011 and looked forward to completing those goals thanks to its successful asset sale program.

"We are proud of the production growth we have achieved, particularly the growth of our oil and natural gas liquids production over this period," McClendon said.

The company is pursuing more focused drilling activity to strike a balance over time between drilling capital expenditures and operating cash flows as it transitions from its strategy of identifying and capturing new plays to its asset harvest strategy.

GHS Research analysts concede that Chesapeake has hit the mark on its asset sale front. But GHS is more interested to see if the company's third quarter operations update can repeat the strength of the second quarter in which oil production increased 15 percent sequentially mainly due to the company's Eagle Ford assets.


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