Bank of New York Mellon Corp. asked a federal judge to reject a bid by Chesapeake Energy Corp. (CHK) for a preliminary injunction that would allow it to redeem more than $1.3 billion in notes early and avoid new interest.
Chesapeake sued March 8 seeking a court order that it can redeem the 6.775 percent notes, arguing that a notice issued in the next three days will be timely to redeem them at par and not at the higher “make whole” price.
“Chesapeake, having missed the deadline to redeem the notes at par, now demands an advisory opinion from the court, seeking to guarantee the idiosyncratic treatment of a future redemption notice which has not yet been made,” Bank of New York Mellon, the indenture trustee for the notes, said in the filing today in Manhattan federal court.
Chesapeake, an oil and natural gas producer based in Oklahoma City, can’t prove it has a likelihood of success in the case, the bank argued, citing a standard for obtaining such an order. The bank also said Chesapeake shouldn’t be granted the injunction because it isn’t in danger of “irreparable harm.”
The notes climbed to a record on the day the lawsuit was filed. Adam Cohen, the founder of Covenant Review, an independent research firm in New York, said at the time that the jump was a wager the natural gas producer has run out of time to repurchase the debt at par, or 100 cents, as allowed by the debt’s covenants.
In a separate court filing today, several investors, calling themselves an “ad hoc noteholder group,” asked court permission to intervene, or participate, in the litigation.
They include Archer Capital Management LP, Ares Management LLC, Aurelius Capital Management LP, Carlson Capital LP, Cetus Capital LLC, Latigo Partners LLC, Monarch Alternative Capital LP, P. Schoenfeld Asset Management LP, River Birch Capital LLC and Taconic Capital Advisors LP.
Michael Kehs, a spokesman for Chesapeake, declined to comment on Bank of New York Mellon’s filing.
The case is Chesapeake Energy Corp. v. The Bank of New York Mellon Trust Co., 13-cv-01582, U.S. District Court, Southern District of New York (Manhattan).