Chesapeake Plans to Pay $500 Million Debt Due Next Month

Chesapeake Energy Corp. is planning to pay $500 million of debt maturing in March, using a combination of cash on hand and other liquidity that may include its credit line, according to a person with knowledge of the matter.

The second largest natural gas producer in the U.S. is also considering selling assets to shore up its capital so it can address more than $1 billion of debt coming due in 2017, said the person, who asked not to be named because the matter is private.

Investors in Chesapeake grew nervous this week as its securities plummeted after a news report on Monday that restructuring lawyers at Kirkland & Ellis were advising the company. Chesapeake’s $500 million of 3.25 percent senior unsecured notes that need to be repaid on March 15 dropped as much as 22 percent on the news.

Creditors are gearing up for negotiations over how to reorganize the energy producer’s debt load of about $10 billion. At least one group of unsecured bondholders has hired advisers to help evaluate the company’s assets in the U.S., another person with knowledge of the matter said.

Strategy Sessions

Chesapeake’s lenders have been mapping out strategies for a restructuring, the person said, and the selloff in its debt and equity that started on Monday has raised the urgency. The company has 14 tranches of outstanding unsecured obligations, and its creditors are figuring out who they can team up with to best position themselves in a reorganization, the person said.

The gas and oil producer said that it was not planning to file for bankruptcy. Evercore Partners Inc. is advising the company. 

Chesapeake’s 2016 senior unsecured notes jumped on the news, trading as high as 94 cents on the dollar at 2:41 p.m. in New York Friday up from 86.25 cents on Thursday, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The company’s shares have lost more than 90 percent of their value in the past 12 months and were trading at $1.63 at 3:02 p.m. Friday in New York.

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