Chesapeake Energy to issue $300 million notes to help fund acquisition of Greystone

New York, May 11 - Chesapeake Energy Corp. said it plans to issue $300 million of senior notes to help fund its $425 million acquisition of Greystone Petroleum LLC.

The Oklahoma City-based natural gas producer will also use $125 million of borrowings from its newly expanded $500 million credit facility and cash on hand for the transaction.

Chesapeake said it has not yet fixed timing for the deal but said it will come to market "relatively soon."

"We are in a rising interest rate environment so there's a bias to sooner rather than later," company officials said on a conference call to discuss the acquisition.

Closing for the purchase is scheduled for June 2.

Greystone's major asset is its 16,100 gross acre contiguous leasehold position over the crest of the Sligo Field located in Bossier Parish, La.

Chesapeake anticipates it will acquire an internally estimated 214 billion cubic feet of gas equivalent proved reserves, 51 bcfe of probable and possible reserves and production of 45 million cubic feet of natural gas equivalent production per day.

Chesapeake amended its revolving credit facility on May 7, increasing the borrowing base to $600 million, with commitments of $500 million, from $350 million and extending the maturity to June 30, 2008 from May 2007.

Union Bank of California is administrative agent and collateral agent, BNP Paribas and SunTrust Bank are co-syndication agents, Calyon and Comerica Bank are co-documentation agents and Bank of Scotland, Washington Mutual and Bank of America are co-agents, according to a 10-Q filed with the Securities and Exchange Commission on Monday.

The revolver carries an initial interest rate of Libor plus 150 basis points but can range anywhere from Libor plus 125 to 200 basis points depending on ratings. The initial commitment fee is 30 basis points.

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