S&P rates Chesapeake notes BB

Standard & Poor's said it assigned a BB rating to Chesapeake Energy Corp.'s proposed $500 million 6½% senior note issue due 2017 and affirmed the company's BB corporate credit rating, BB senior unsecured debt rating and B preferred stock rating.

The outlook is stable. Pro forma for its recent debt raises, Chesapeake will have $6.1 billion of debt outstanding.

The company will use proceeds from the note issuance to repay revolver borrowings used to finance recent acquisitions. Earlier this month, the company announced that it would be acquiring an estimated 660 billion cubic feet equivalent of proved reserves for $796 million plus 13 drilling rigs for $150 million.

S&P said the ratings on Chesapeake reflect a highly leveraged financial profile, risks associated with an aggressive acquisitive growth strategy and exposure to volatile oil and natural gas prices.

These concerns are partially offset by a large and geographically diverse reserve base with favorable growth prospects, good production visibility and competitive economics, the agency said. The company ranks as the second-largest independent producer of natural gas in the United States.

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