Energy

Chesapeake Issues More Stock to Pay Down Debt

Thinkstock

The country’s second-largest natural gas producer, Chesapeake Energy Corp. (NYSE: CHK), announced Thursday morning that it had agreed to issue some 28.1 million shares of common stock in exchange for $153 million in outstanding debt. At Wednesday’s closing price of $4.36 per share, the value of the shares is approximately $122.5 million.

The transaction indicates that there is at least one person or entity that believes Chesapeake is on the road to recovery. After all, giving up a first-in-line bond for last-in-line common stock in the event of a bankruptcy is about as strong a show of support as a creditor can make. Chesapeake’s share price will need to rise more than $1.00 per share to make up the full amount of the exchanged debt.

Chesapeake is extinguishing obligations on the following notes:

  • $90 million aggregate principal amount of its 2.5% contingent convertible senior notes due 2037 (with May 2017 put rights)
  • $38 million aggregate principal amount of its 6.5% senior notes due 2017
  • $10 million aggregate principal amount of its 2.25% contingent convertible senior notes due 2038 (with 2018 put rights)
  • $15 million aggregate principal amount of its floating rate senior notes due 2019


Last week when Chesapeake reported first-quarter results, the company announced the sale of lease rights to Newfield Exploration for some $470 million.

Chesapeake also said at the time that it has either closed or has signed sales agreements valued at about $1.2 billion so far in 2016, and from which the company expects to realize about $950 million in net proceeds. At the end of March, the company’s long-term debt totaled approximately $10.1 billion.

While this sort of deal is a good thing for Chesapeake, natural gas prices closer to $3 per thousand cubic feet would go a lot further to putting the company in a more solid financial position. Natural gas for June delivery traded at $2.17 per million BTUs shortly after Thursday’s storage report.

Is Your Money Earning the Best Possible Rate? (Sponsor)

Let’s face it: If your money is just sitting in a checking account, you’re losing value every single day. With most checking accounts offering little to no interest, the cash you worked so hard to save is gradually being eroded by inflation.

However, by moving that money into a high-yield savings account, you can put your cash to work, growing steadily with little to no effort on your part. In just a few clicks, you can set up a high-yield savings account and start earning interest immediately.

There are plenty of reputable banks and online platforms that offer competitive rates, and many of them come with zero fees and no minimum balance requirements. Click here to see if you’re earning the best possible rate on your money!

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.