Chesapeake details plans to refinance debt

Mar 19, 2013 (The Oklahoman - McClatchy-Tribune Information Services via COMTEX) -- Chesapeake Energy Corp. on Monday announced plans to help improve its balance sheet by refinancing up to $2.3 billion in debt.

The Oklahoma City natural gas and oil company said it plans to issue $2.3 billion in new long-term debt to be used in part to pay for its planned debt buyback program.

The new offering will be comprised of three series of notes: $500 million in 3.25 percent senior notes due 2016, $700 million in 5.375 percent senior notes due 2021 and $1.1 billion in 5.75 percent senior notes due 2023.

The new notes are scheduled for issuance April 1, the same day outgoing CEO Aubrey McClendon said he will leave the company.

Proceeds of the sale would be used in part to buy back more expensive debt, Chesapeake said.

"The purpose of the tender offer is to reduce interest costs and to lengthen the maturity profile of our outstanding indebtedness," the company said in Monday's filings.

Chesapeake on Monday announced plans to buy back at least some of its 7.625 percent senior notes due 2013 and 6.875 percent senior notes due 2018.

The company also hopes to buy back its $1.3 billion in 6.775 percent senior notes due 2019, although that issue has been more difficult.

Bondholder Bank of New York Mellon sued earlier this year, saying Chesapeake must pay an additional $400 million in interest because it waited too long to announce its buyback plan.

U.S. District Judge Paul Engelmayer of the Southern District of New York on Thursday denied Chesapeake's request for a preliminary order, but said it is "overwhelmingly likely" that he eventually would side with the Oklahoma City company's interpretation.

Threat of cyber attacks listed Chesapeake Energy Corp. on Monday warned investors about potential cyber attacks.

Listed among a 14-page section on potential risks affecting Chesapeake and its debt offerings, the Oklahoma City oil and natural gas company said it has been "the subject of cyber attacks on our internal systems and through those of third parties, but these incidents did not have a material adverse impact on our results of operations." Specifically, Chesapeake said "unauthorized access to our seismic data, reserves information or other proprietary or commercially sensitive information could lead to data corruption, communications interruptions or other disruptions in our exploration or production operations or planned business transactions." A Chesapeake spokesman on Monday declined to comment about any specific hacking incident.

Hacking as a means of corporate espionage has become a growing concern in recent years.

The U.S. Securities and Exchange Commission in 2011 said companies must report material losses from hacking attacks, including any information "a reasonable investor would consider important to an investment decision." Chesapeake's reference to the risks of potential cyber attacks first appeared in the company's annual regulatory report released March 1.

Credit ratings agency Moody's Investors Service on Monday assigned Chesapeake's new notes a Ba3 debt rating, which is three notches below investment-grade.

Moody's also gave the debt a negative outlook.

"The negative outlook highlights our concern regarding the company completing sufficient asset sales this year to both fund its capital expenditures and meaningfully reduce debt," Moody's said in a statement.

Chesapeake has said it needs to sell $4 billion to $7 billion in assets this year to fully fund its planned drilling program.

"While this funding gap is much lower than 2012, we are concerned that the company may be challenged to sustain its overall production levels as forecast with the lower level of capital investment," Moody's stated.

Chesapeake in 2012 completed almost $12 billion in asset sales.

Last month, the company announced a $1.02 billion joint venture with Chinese oil company Sinopec International Petroleum Exploration and Production Corp. in the Mississippi Lime of northern Oklahoma and western Kansas.

Chesapeake shares slipped 29 cents, or 1.3 percent, Monday to close at $22.17 on the New York Stock Exchange.

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