Fitch to rate Chesapeake convertibles B+

Fitch Ratings said it affirmed Chesapeake Energy Corp.'s issuer default rating and senior unsecured debt at BB and senior secured revolving credit facility at BBB- and will assign a B+ rating to its proposed $1.7 billion convertible preferred stock offering.

The outlook was revised to stable from negative.

The company announced plans to issue $600 million of preferred stock earlier in the week and since that time has seen significant interest in the offering, so it now plans to close $1.7 billion of preferreds on Monday with an option to issue an additional $900 million by June 16, the agency said.

Fitch said a number of negative issues related to Chesapeake's credit profile have been addressed: the senior unsecured lenders' position in the capital structure has been improved with the replacement with senior debt with the preferreds; reduced interest and dividend expenditures will be realized both upon the retirement of debt with the proceeds and upon the future potential conversion of the preferreds; and future refinancing needs have been addressed as debt reduction is expected to be targeted at a portion of the company's 2013 maturities, all of its 2014 maturities and a portion of its 2016 maturities.

Chesapeake's ratings continue to be supported by the size and low-risk profile of its oil and gas reserves, the agency said, and the company continues to post very robust reserve replacement results.

As of March 31, the debt-to-EBITDAX ratio was 2.7 times.

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