Ex-Chesapeake CEO McClendon to Testify in Bond Fight

Former Chesapeake Energy Corp. Chief Executive Officer Aubrey McClendon will be deposed as part of a lawsuit between the company and indenture trustee Bank of New York Mellon Corp. over the redemption of bonds, a lawyer said at a hearing in Manhattan federal court.

McClendon, 53, agreed in January to resign no later than today after a shareholder revolt by Carl Icahn and Southeastern Asset Management Inc.’s O. Mason Hawkins cost the CEO his annual bonus and the chairmanship last year. A board inquiry into McClendon’s use of personal stakes in company-owned wells to obtain more than $800 million in private loans cleared him of any intentional wrongdoing in February.

Chesapeake and BNY Mellon are to face off at trial beginning April 23 over the gas producer’s disputed claim it met a deadline to redeem $1.3 billion in bonds early at par, or 100 cents on the dollar. Richard Ziegler, a lawyer for the Oklahoma City, Oklahoma-based company, said today that McClendon will appear for a deposition by BNY Mellon in the case.

Chesapeake, the second-biggest natural gas producer in the U.S., issued the early redemption notice on March 15. A week earlier, the company sued BNY Mellon, seeking a court order that it had until that date to issue the notice and avoid making a $400 million “make whole” payment to investors.

Last week, Chesapeake said hedge funds seeking to withdraw from the dispute, in which they intervened on behalf of BNY Mellon, shouldn’t be allowed to pursue any other litigation.

The case is Chesapeake Energy Corp. v. Bank of New York Mellon Trust Co., 13-cv-01582, U.S. District Court, Southern District of New York (Manhattan).

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