Chesapeake Raising Another $2.3 Billion in Capital

The breakdown of the offering by size and maturity is as follows:

• $500,000,000 3.250% Senior Notes due in 2016
• $700,000,000 5.375% Senior Notes due in 2021
• $1,100,000,000 5.750% Senior Notes due in 2023

As of December 31, 2012, Chesapeake’s net debt was listed as $14.457 billion on an adjusted basis. Its adjusted cash position at the same time was listed as $2.09 billion. If you use the historical data instead of the adjusted basis, that cash balance was only $287 million and the debt was listed as $12.157 billion on a new basis.

As you will see, the underwriting syndicate for this bond offering was huge. The joint book-running managers are listed as Morgan Stanley, Credit Suisse, Citigroup, Goldman Sachs, and Wells Fargo Securities. Senior co-managers were listed as Barclays, BofA Merrill Lynch, Credit Agricole CIB, Deutsche Bank Securities, DNB Markets, Jefferies, Mitsubishi UFJ Securities, Mizuho Securities, Natixis, Nomura, RBS, Scotiabank, and UBS Investment Bank. Co-managers are listed as Comerica Securities, Macquarie Capital, PNC Capital Markets, Santander, SMBC Nikko, and TD Securities.

With such a huge underwriting group, we have two points here. One is that we might be worried about how easy it is for a company like Chesapeake to go out and raise cash. Another point is on the opposite end of the spectrum, and that is that perhaps that the natural gas giant wants to have as many investment banking relationships that it can get its hands on as it embarks on a serious management transition away from co-founder Aubrey McClendon.

As a reminder, it was just this morning that we saw Stern Agee downgrade the common shares of Chesapeake down to Underperform from an already-cautious Neutral rating. Its target price is a mere $20 for the stock, and we would note that Stern Agee was not listed in the syndicate group above.

Chesapeake shares are down 5% at $21.05 against a 52-week trading range of $13.32 to $26.09.