Chesapeake's Half-Billion Dollar Tab Spurs Credit Line Concerns

Chesapeake would be reluctant to pay out $500 million from its cash reserve “in this commodity environment when it needs every dollar of liquidity,” Brian Gibbons, a debt analyst at Creditsights Inc., said in a note to clients.

Icahn Result

Chesapeake rose 1.7 percent to $2.08 at 10:06 a.m. in New York, following Monday’s 33 percent plunge that erased $678 million in market value in one day. For activist investor Carl Icahn, the second-largest Chesapeake shareholder and driver of the 2013 investor revolt that deposed co-founder Aubrey McClendon, Monday’s collapse resulted in a paper loss of about $75 million on the value of his holdings, assuming his stake hasn’t changed since the latest filing compiled by Bloomberg. 

The billionaire owned about 73 million shares as of Sept. 30. In December, Icahn told T. Boone Pickens during a podcast that he was “‘stuck” in some energy investments and that “it’s going to be tough for a while.” Icahn wasn’t immediately available to comment further, according to a spokesperson.

Chesapeake’s shares initially lost more than half their value after a Debtwire report that it had brought on restructuring attorneys from Kirkland & Ellis LLP to help sort out its balance sheet. After the company issued a statement dismissing the report, the stock pared losses.

Chesapeake is not alone in fighting market fears over potential restructuring. Houston-based Halcon Resources Corp. said Monday it had "significant liquidity" after a report that it had retained the Weil, Gotschal law firm to explore bankruptcy. Even the industry’s biggest player, Exxon, has been jolted; last week, Standard & Poor’s warned it may downgrade Exxon’s AAA credit rating for the first time since the Great Depression.

To contact the reporter on this story: Joe Carroll in Chicago at jcarroll8@bloomberg.net To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Jim Efstathiou Jr., Steven Frank