Chesapeake Energy to delay 8 1/8% exchange offer completion

New York, Dec. 22 - Chesapeake Energy Corp. (Ba3/BB-) said it will not complete its previously announced offer to exchange new debt for up to $500 million principal amount of its outstanding 8 1/8% senior notes due 2011 without extending the expiration date as well as withdrawal rights in order to give holders an opportunity to review information related to planned acquisitions by the company. The offer currently is scheduled to expire on Dec. 29.

Chesapeake separately announced plans Dec. 22 to acquire $510 million of Mid-Continent, Permian Basin and onshore Gulf Coast oil and natural gas assets, which are expected to be fully closed by January, subject to customary closing conditions. It said that it anticipates financing the acquisitions using about 50% common equity and 50% borrowings.

Chesapeake said that to date $380 million of the 8 1/8% notes have been tendered for exchange by their holders. It said that a final determination regarding the exchange offer will be made and announced within the next few days.

On Dec. 1, Chesapeake said it would offer to exchange new debt for the 8 1/8% notes, with holders having the option to select to receive either new 7¾% senior notes due 2015 or new 6 7/8% senior notes due 2016 in exchange for the existing 8 1/8% notes.

Specifically, Chesapeake said it would offer to issue $1,033.23 in principal amount of 7¾% notes or $1,107.68 in principal amount of 6 7/8% notes for each $1,000 principal amount of the 8 1/8% notes tendered by holders and accepted by the company for purchase. Accrued and unpaid interest due on all 8 1/8% notes accepted by the company would be settled by adjusting the principal amount of 7¾% and/or 6 7/8% notes to be issued.

Chesapeake set 5 p.m. ET on Dec. 12 as the now-expired early tender deadline and said that the exchange offer would expire at midnight ET on Dec. 29.

Chesapeake said that in addition to its issuance of the new notes of whichever series in exchange for the existing notes and their accrued interest, it would offer an early tender payment of $10 cash per $1,000 principal amount of the 8 1/8% notes validly tendered by the early tender deadline and accepted for purchase by the company.

It said that holders would not have to choose the same option for all the 2011 notes that they might tender. If more than $500 million in aggregate principal amount of the 2011 notes were to be validly tendered and not withdrawn, the company said it would accept tenders from holders on a pro- rata basis.

The 7¾% notes to be issued in the offer will be issued as additional notes of the same series as Chesapeake's already outstanding 7¾% senior notes due 2015, which were originally issued on Dec. 20, 2002, of which $236.7 million principal amount is currently outstanding.

The 6 7/8% notes to be issued in the offer will be issued as additional notes of the same series as the company's already outstanding 6 7/8% senior notes due 2016, $200 million of which were which were issued on Nov. 26.

The exchange offer will be subject to certain customary conditions. However, it will not be subject to a minimum tender condition.

On Dec. 15, Chesapeake said that had received valid tenders of $377.1 million of the 8 1/8% senior notes due 2011 by the Dec. 12 early tender deadline. As of that deadline, some $125.2 million of the 8 1/8% notes had been tendered in exchange for the new 7¾% notes, and about $251.8 million of the notes had been tendered in exchange for the new 6 7/8% notes. It said that notes tendered under the terms of the offer could no longer be withdrawn.

Banc of America Securities LLC (contact High Yield Special Products at 888 292-0070 or collect at 704 388-4813), Deutsche Bank Securities (contact High Yield Capital Markets collect at 212 250-7466) and Lehman Brothers (800 438-3242 or collect at 212 528-7581) will act as joint lead dealer managers. The information agent is D.F. King & Co. (800 431-9633 or collect at 212 269-5550).

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