Chesapeake Energy emerges from bankruptcy with $7.8 billion of debt equitized

By Sarah Lizee

Olympia, Wash., Feb. 9 – Chesapeake Energy Corp. successfully concluded its restructuring process and emerged from Chapter 11, satisfying all conditions under its plan of reorganization, according to a press release.

Under the plan, roughly $7.8 billion of debt has been equitized, and the company’s preferred and common equity interests have been canceled as of Tuesday.

The company's new common shares will be listed on the Nasdaq exchange under the ticker symbol “CHK” and are expected to start trading on Wednesday.

At emergence, Chesapeake will have around 100 million new common shares issued and outstanding, with additional shares to be issued upon exercise of three tranches of warrants, each with exercise provisions.

The new warrants will also be listed on the Nasdaq exchange under the ticker symbols “CHKEW” for the series A warrants, “CHKEZ” for the series B warrants and “CHKEL” for the series C warrants.

As of Tuesday, Chesapeake's principal amount of debt outstanding was about $1.27 billion, compared to $9.095 billion as of June 30, 2020.

New credit facility, notes

Upon emergence, the company entered into a credit facility with a $2.5 billion borrowing base, consisting of a $221 million non-revolving loan facility maturing 2025 and a $1.75 billion revolver maturing 2024.

MUFG Bank, Ltd. is the administrative and collateral agent, and is a joint lead arranger and joint bookrunner alongside Bank of America, NA, BMO Capital Markets Corp., Wells Fargo Securities, LLC, Citibank, NA, JPMorgan Chase Bank, NA and Royal Bank of Canada.

Interest is Libor plus 325 basis points to 425 bps, subject to a 1% Libor floor, based on the percentage of the borrowing base being used.

The company is required to pay a commitment fee of 50 bps per annum on the average daily unused portion of the current aggregate commitments under the loans due 2024. The company is also required to pay customary letter-of-credit and fronting fees.

Financial covenants include a first-lien leverage ratio of not more than 2.75 to 1.00, a total leverage ratio of not more than 3.5 to 1.0, a current ratio of not less than 1 to 1 and, except when testing is not required under the credit agreement, an asset coverage ratio of not less than 1.5 to 1.0.

Chesapeake had roughly $50 million borrowed on the facility as of Tuesday, as well as $51 million reserved for undrawn letters of credit outstanding.

On Friday, Chesapeake issued $1 billion of new senior notes, which replaced the committed exit first-lien last out term loan the company had negotiated for in connection with filing for Chapter 11.

New board

A new board of directors was appointed and includes chairman Michael Wichterich, Timothy S. Duncan, Benjamin C. Duster, IV, Sarah Emerson, Matthew M. Gallagher, Brian Steck and Doug Lawler.

The board is establishing the company's first environmental and social governance committee.

Plan terms

The plan was confirmed by the U.S. Bankruptcy Court for the Southern District of Texas on Jan. 14, as previously reported.

Under the plan, holders of other secured claims were to receive payment in full in cash, the collateral securing their claims, or reinstatement of their claims.

Holders of other priority claims were to receive treatment in a manner consistent with 1129(a)(9) of the Bankruptcy Code.

Holders of revolving credit facility claims were to receive the revolving exit facility loans on a dollar-for-dollar basis.

Holders of FLLO term loan facility claims were to receive their pro rata share of 76% of the new common stock, subject to dilution on account of the management incentive plan, the rights offering, the put option premium and the new warrants; and the FLLO rights.

Holders of second-lien notes claims were to receive their pro rata share of 12% of the new common stock, subject to dilution on account of the management incentive plan; the rights offering, the put option premium and the new warrants; the second-lien rights; the new class A warrants; the new class B warrants and 50% of the new class C warrants.

On the effective date, the unsecured notes claims were to be deemed allowed in full, and each holder of an allowed unsecured notes claim was to receive its pro rata share of the unsecured claims recovery.

Holders of general unsecured claims were to receive their pro rata share of the general unsecured claims recovery amount.

Intercompany claims and intercompany interests were to be reinstated or canceled with no distribution.

Existing equity interests were canceled with no distribution.

Chesapeake is an Oklahoma City-based oil and natural gas company. The company filed bankruptcy on June 28, 2020 under Chapter 11 case number 20-33233.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.