Chesapeake Energy begins exchange offer for 10 series of notes

By Marisa Wong

Morgantown, W.Va., Dec. 2 – Chesapeake Energy Corp. has begun private offers to exchange up to $1.5 billion of newly issued 8% senior secured second-lien notes due 2022 for its outstanding senior notes from 10 series, according to an 8-K filing with the Securities and Exchange Commission.

The outstanding series are Chesapeake’s $363.6 million (based on the exchange rate on Nov. 30) 6¼% euro-denominated senior notes due 2017; $660.4 million 6½% senior notes due 2017; $668.6 million 7¼% senior notes due 2018; $1.5 billion floating-rate senior notes due 2019; $1.3 billion 6 5/8% senior notes due 2020; $500 million 6 7/8% senior notes due 2020; $1 billion 6 1/8% senior notes due 2021; $700 million 5 3/8% senior notes due 2021; $1.5 billion 4 7/8% senior notes due 2022; and $1.1 billion 5¾% senior notes due 2023.

The notes are listed in order of acceptance priority level, with the 2020 notes sharing a priority level of 5 and the 2021, 2022 and 2023 notes sharing a priority level of six.

Holders who tender their notes for exchange by 5 p.m. ET on Dec. 15, the early tender date, will be eligible to receive the early tender exchange consideration. Holders tendering after the early deadline will only be eligible to receive the late tender exchange consideration, which is the early tender exchange consideration less $50.

The early tender exchange consideration per $1,000 principal amount is $1,000 for the 6¼% notes due 2017, $970 for the 6½% notes due 2017, $825 for the 2018 notes, $600 for the 2019 notes, $610 for the 6 5/8% notes due 2020, $608.75 for the 6 7/8% notes due 2020, $577.50 for the 6 1/8% notes due 2021, $570 for the 5 3/8% notes due 2021, $565 for the 2022 notes and $567.50 for the 2023 notes.

The offer will expire at 11:59 p.m. ET on Dec. 30.

Settlement is expected to occur on Dec. 31. The company may choose to settle early tenders at any time after the early tender date and before the expiration date.

The company will also pay accrued interest.

Tenders may be withdrawn at any time on or prior to 5 p.m. ET on Dec. 15.

If the exchange offer is oversubscribed, the principal amounts of each series of existing notes that are accepted will be determined according to priority level. Once all notes tendered in a certain priority level have been accepted, notes from the next priority level may be accepted. If the remaining portion of the offer cap is adequate to exchange some but not all of the notes within the next priority level, notes in that level will be accepted on a pro rata basis, and no notes with a lower acceptance priority level will be accepted for exchange.

All notes that are tendered for exchange by the early deadline will have priority over notes tendered after the early deadline, even if those notes tendered after the early deadline have a higher acceptance priority level and even if the company does not elect to have an early settlement date.

In addition, if the amount tendered by the early tender date constitutes a principal amount of notes that, if accepted, would result in the issuance of second-lien notes having an aggregate principal amount equal to or exceeding the offer cap, the company will not accept any notes tendered for exchange after the early deadline, regardless of the acceptance priority level of those notes, unless the company increases the maximum exchange amount.

The second-lien notes will be denominated in dollars. An equivalent dollar principal amount of the euro-denominated existing notes, based on the exchange rate as of 5 p.m. ET on Dec. 11, will be used when determining the consideration to be received per $1,000 principal amount of existing notes tendered.

The offer is not conditioned on any minimum amount of notes being tendered.

Global Bondholder Services Corp. (866 470-4300 or 212 430-3774 for banks and brokers) is the information agent and depositary.

The natural gas producer is based in Oklahoma City.

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