Chesapeake Plunges to 13-Year Low After Debt-Delay Measure

  • Gas explorer offers new second-lien notes for near-term bonds
  • Chesapeake facing more writedowns as long as prices are low

Chesapeake Energy Corp., the U.S. natural gas producer that has slashed spending, fired workers and halted dividend payouts to conserve cash, fell to the lowest since 2002 after asking bond holders to accept longer-dated debt instruments.

Chesapeake fell 12 percent to $4.87 at the close in New York, the lowest price since January 2002. The shares have tumbled 75 percent this year for the worst performance in the Standard & Poor’s 500 Index.

It’s 5 3/4 percent bonds maturing in 2023 fell to an all-time low of 39 cents on the dollar to yield 23.749 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

The new, second-lien notes Chesapeake offered on Wednesday in exchange for junior, unsecured debt would give the cash-strapped, debt-laden Oklahoma City-based company as many as five extra years before it would have to repay borrowings. The new notes will mature in 2022, while some of the bonds identified for exchange mature in 2017, according to a filing on Wednesday with the U.S. Securities and Exchange Commission.

Investors who agree to tender their notes by Dec. 15 will receive more for them than if they agree to the swap by a later deadline of Dec. 30, the filing showed. Creditors would need to accept a reduction of principal for the exchanged notes in all but one case.

Chesapeake, which pumps more U.S. gas than any company other than Exxon Mobil Corp., has been attempting to transform from a gas-focused explorer to a crude oil producer after a multiyear glut of gas depressed prices for the fuel. The switch to oil has been stymied as the 17-month slump in crude markets dried up cash for drilling and debt service.

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