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Chesapeake Increases Unsecured Loan To $4 Billion Amid Demand

By Matthieu Wirz, Angel Gonzalez and Melodie Warner Chesapeake Energy Corp. (CHK) has increased the size of its unsecured loan being sold to institutional investors to $4 billion from $3 billion amid strong investor demand, according to a source familiar with the matter. Goldman Sachs Bank USA (GS) and Jefferies Group Inc. (JEF) are syndicating the loan, which the oil and natural-gas producer will use to repay its secured revolving credit line. The news comes one day after Chesapeake executives, including Chief Executive Aubrey McClendon, told investors that the original loan, disclosed Friday, gave the embattled company enough liquidity to execute several planned asset sales "from a position of strength." Analysts, however, voiced continued concerns about the company's financial situation, and credit watchdog Standard & Poor's on Tuesday downgraded its ratings a notch to double-B-minus from double-B, a step further into junk territory. S&P also gave it a negative outlook to reflect the mounting turmoil the company faces, and the likelihood it will face "an even wider gap between its operating cash flow and planned capital expenditures than we had previously anticipated." Chesapeake shares, which rose on Monday after the executives' presentation, closed down 5.6% at $14.65 on Tuesday. Argus Research analyst Phil Weiss said Tuesday that Chesapeake's "near-term cash needs are growing," and "its spending levels are unsustainable and ill-advisable elevated." The new loan Chesapeake secured from Goldman Sachs and Jefferies will pay an 8.5% interest rate through December before stepping up to 11% in January, offering a steep premium to the company's bonds, which traded at a yield of around 7% prior to the announcement of the new financing. Disclosure of the loan's pricing prompted investors to sell out of the lower-yielding bonds and place orders for the new deal, said one hedge fund manager who hoped to buy a piece of the loan. Chesapeake's bond yields, which move in opposite direction to price, rose to more than 8% in trading Monday before falling back to a 7.5%-8% range Tuesday, according to MarketAxess. In a filing Monday with the Securities and Exchange Commission, the California Public Employees' Retirement System, which in mid-April owned about 1.8 million shares of Chesapeake stock, asked fellow shareholders to vote in the upcoming annual meeting for its proposal to eliminate the supermajority requirement needed to amend or adopt bylaws at the company. CalPERS cited concerns with compensation and transparency due to recent revelations about McLendon's borrowings to fund his participation in a controversial program where he owned a small stake in every well drilled by Chesapeake. "We are concerned with the apparent misalignment between shareowners and the company," it said. Chesapeake's annual shareholder meeting is scheduled for June 8. -By Matthieu Wirz, The Wall Street Journal, and Angel Gonzalez, Dow Jones Newswires; 713-547-9214;angel.gonzalez@dowjones.com -0-

Stock News for Chesapeake (CHK)
DateTimeHeadline
02/09/201617:02:00MARKET SNAPSHOT: U.S. Stocks End Flat After Seesaw Session Amid...
02/09/201616:56:00MARKET SNAPSHOT: U.S. Stocks End Flat After Seesaw Session Amid...
02/09/201615:50:00MARKET SNAPSHOT: U.S. Stocks Turn Positive As Materials, Health...
02/09/201613:25:00MARKET SNAPSHOT: U.S. Stocks Retreat, Led By Energy Sector, As...
02/09/201610:59:00MARKET SNAPSHOT: Tech Stocks Gain, Energy Plays Drops As Benchmarks...
02/09/201610:16:00MARKET SNAPSHOT: U.S. Stocks Struggle To Push Higher Amid Global...
02/09/201603:02:00Chesapeake Woes Rattle Pipeline Partners
02/08/201620:14:00Chesapeake Says It Doesn't Plan to Pursue Bankruptcy -- 3rd Update
02/08/201617:19:00Chesapeake Says It Doesn't Plan to Pursue Bankruptcy -- 2nd Update
02/08/201616:42:00Dow Pares Losses to End Volatile Session Off 1.1%
02/08/201616:22:00Stocks Pare Losses Ahead of Closing Bell
02/08/201613:30:00Chesapeake Says It Doesn't Plan to Pursue Bankruptcy -- Update
02/08/201613:21:00Stocks Sink as Bank, Energy Shares Tumble
02/08/201612:53:00MARKET SNAPSHOT: Stocks Battered Again; S&P On Track For Lowest...
02/08/201612:20:00Chesapeake Says It Doesn't Plan to Pursue Bankruptcy
02/08/201612:10:00Chesapeake Says It Doesn't Plan to Pursue Bankruptcy
02/08/201611:35:00MARKET SNAPSHOT: Stocks Drop On Global Growth Fears; Dow Down...
02/08/201611:18:00Chesapeake Energy Corporation Statement
02/08/201611:02:00MARKET SNAPSHOT: U.S. Stocks Tumble To 22-month Low As Energy...
02/03/201608:00:00Chesapeake Energy Corporation Provides 2015 Fourth Quarter And...

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