S&P rates Chesapeake, cuts loan

Standard & Poor's said it affirmed its BB- corporate credit rating on Chesapeake Energy Corp. and revised its outlook on the company to positive from stable. In addition, S&P assigned its BB- rating to Chesapeake's $300 million senior unsecured notes due 2014.

Furthermore, S&P lowered its rating on the company's senior secured bank loan facility due 2008 to BB+ from BBB- and assigned a recovery rating of 1 to the credit facility.

S&P said the outlook revision reflects the company's extensive and increasing use of hedges to materially improve the stability of cash flows, while locking in the benefits of the currently favorable commodity price environment, as well as improving credit measures. For ratings to improve, S&P said it is essential that management consistently demonstrate both the ability and willingness to apply excess cash flow to meaningful debt reduction. S&P further expects the company to continue to fund further acquisitions in a balanced manner.

S&P said the ratings on Chesapeake reflect its participation in the volatile, competitive, and highly capital-intensive oil and gas industry and substantial financial leverage.

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