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Chesapeake Energy Raises Record $3 Billion in Two-Part Bond Sale

Chesapeake Energy Truck
Chesapeake Energy Corp.’s debt has gained 6.47 percent in the last year, more than the 5.6 percent advance among peers in the Bloomberg USD High Yield Corporate Bond Index. Photographer: Daniel Acker/Bloomberg

April 10 (Bloomberg) -- Chesapeake Energy Corp., the second-largest U.S. gas producer, sold a record $3 billion bond offering in two parts to refinance debt, as the cost to protect its obligations against default approaches a six-year low.

The company issued $1.5 billion of floating-rate notes due 2019 to yield 325 basis points more than the three-month London interbank offered rate and an equivalent portion of 4.875 percent securities maturing in 2022 at 254 basis points more than benchmarks, according to data compiled by Bloomberg.

Proceeds will be used to repay a term loan that matures in 2017, fund a tender offer for debt due 2015 and redeem 2018 securities, according to a regulatory filing today.

Chesapeake didn’t sell a planned 12-year bond that was listed in the filing.

Debt from Chesapeake has outperformed peers in the last year as billionaire investor Carl Icahn prods the Oklahoma City-based company to increase financial discipline by drilling fewer wells and selling assets. Standard & Poor’s placed the company’s BB- rating on review for an increase on Feb. 6, citing its plan to keep capital spending in line with cash flow.

Chesapeake’s debt has gained 6.47 percent in the last year, more than the 5.6 percent advance among peers in the Bloomberg USD High Yield Corporate Bond Index. Moody’s Investors Service ranks the company’s debt Ba2.

The company’s five-year credit-default swaps were quoted at 173.2 basis points at 8:15 a.m. in New York, down from almost 900 basis points two years ago when Icahn first pushed for management changes, according to data compiled by Bloomberg. That’s compared with 167.3 basis points on Feb. 25, the lowest closing level since December 2007, the data show. A basis point equals 0.01 percentage point.

Exxon Mobil Corp. is the biggest U.S. gas producer.

To contact the reporter on this story: Matt Robinson in New York at

To contact the editors responsible for this story: Shannon D. Harrington at John Parry, Chapin Wright

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