Chesapeake intends to use the proceedings to strengthen its balance sheet and restructure its legacy contractual obligations to achieve a more sustainable capital structure. Chesapeake will operate in the ordinary course during the Chapter 11 process.
Chesapeake entered into a Restructuring Support Agreement (RSA) with 100% of the lenders under its revolving credit facility, holders of approximately 87% of the obligations under its Term Loan Agreement, approximately 60% of its senior secured second lien notes due 2025, and approximately 27% of its senior unsecured notes, pursuant to which Chesapeake will implement a Chapter 11 plan of reorganisation to eliminate approximately US$7 billion of debt.
As part of the RSA, the company has secured US$925 million in debtor-in-possession (DIP) financing from certain lenders under Chesapeake's revolving credit facility, which will be available upon Court approval. The financing package will provide Chesapeake the capital necessary to fund its operations during the Court-supervised Chapter 11 reorganisation proceedings. The company and certain lenders under Chesapeake's revolving credit facility have also agreed to the principal terms of a US$2.5 billion exit financing, consisting of a new $1.75 billion revolving credit facility and a new US$750 million term loan. Additionally, the Company has the support of its term loan lenders and secured note holders to backstop a US$600 million rights offering upon exit.
Doug Lawler, Chesapeake's President and CEO, stated: "We are fundamentally resetting Chesapeake's capital structure and business to address our legacy financial weaknesses and capitalise on our substantial operational strengths. By eliminating approximately US$7 billion of debt and addressing the legacy contractual obligations that have hindered our performance, we are positioning Chesapeake to capitalise on our diverse operating platform and proven track record of improving capital and operating efficiencies and technical excellence. With these demonstrated strengths, and the benefit of an appropriately sized capital structure, Chesapeake will be uniquely positioned to emerge from the Chapter 11 process as a stronger and more competitive enterprise."
Lawler added: "In addition to securing financing to fund our ongoing operations and facilitate our exit from this process, we are pleased to have the support of our term loan lenders and secured note holders to backstop a US$600 million rights offering, demonstrating their confidence in Chesapeake's operating platform and future. We deeply appreciate the hard work and commitment of our employees, who remain focused on safely and efficiently executing our business. We look forward to working productively with our suppliers, business partners and all stakeholders throughout this process."
Lawler concluded: "Over the last several years, our dedicated employees have transformed Chesapeake's business — improving capital efficiency and operational performance, eliminating costs, reducing debt and diversifying our portfolio. Despite having removed over $20 billion of leverage and financial commitments, we believe this restructuring is necessary for the long-term success and value creation of the business."
Chesapeake has filed customary motions with the Court seeking a variety of "first-day" relief, including authority to pay owner royalties, employee wages and benefits, and certain vendors and suppliers in the ordinary course for goods and services provided.
Read the article online at: https://www.oilfieldtechnology.com/hydraulic-fracturing/29062020/chesapeake-energy-files-for-bankruptcy-protection/
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