Chesapeake Shores Up Capital With $1.25B Debt Deal

Oct 5 (Reuters) - U.S. natural gas producer Chesapeake Energy Corp closed a private placement of $1.25 billion of debt on Wednesday, shoring up capital for debt repayment 10 months after it said it had no plans to file for bankruptcy.

Chesapeake, struggling with a huge pile of debt taken for shale development, said it could convert the 10-year notes to equity in three years if its stock trades above 130 percent of the conversion price for a specified period.

The company also said it exchanged its common shares for preferred shares representing about $1.2 billion of liquidation value, at a discount of over 40 percent.

"Through the transactions that closed today, we have substantially improved our capital structure," said Chesapeake Chief Executive Doug Lawler.

"These transactions represent major steps toward reaching our financial goals of $2-3 billion of debt reduction and growing production within free cash flow."

The company's total debt stood at about $8.7 billion as of June 30.

The Oklahoma-based company said its cash on hand as of Sept. 30 was about $1 billion, pro forma for the convertible debt issuance.

Shares of the company were up 2 cents at $6.82 in extended trading.

(Reporting by Vishaka George in Bengaluru)