Chesapeake Energy gives early update in $550 million tender offer

By Susanna Moon

Chicago, Oct. 12 – Chesapeake Energy Corp. announced the early results in month-long tender offers for five series of notes as of 5 p.m. ET on Oct. 11.

As announced Sept. 27 the company said it will spend up to $550 million to purchase the notes until 11:59 p.m. ET on Oct. 25.

Tendered notes may no longer be withdrawn as of the early deadline.

First, the issuer will pay up to $350 million excluding accrued interest for its $1,737,135,000 of outstanding 8% senior secured second-lien notes due 2022.

For the priority 1 notes, the total purchase price will be $1,092.50 for each $1,000 principal amount.

Holders had tendered $1,315,162,000 of the 8% notes of the early deadline, and the company expects to purchase $320,366,000 of that series, according to a company update on Thursday.

Then the company will accept the priority 2 notes and the priority 3 notes for a purchase price of up to $200 million excluding accrued interest.

For the priority 2 notes, the total purchase price for each $1,000 principal amount will be as follows:

• $1,040 for the $572,621,000 6 5/8% senior notes due 2020; and

• $1,035 for the $278,978,000 6 7/8% senior notes due 2020.

Investors had tendered $135,572,000 of the 6 5/8% notes and $51,258,000 of the 6 7/8% notes as of the early deadline, and the company said it expects to accept for purchase all of the early tendered notes.

For the priority 3 notes, the total purchase price for each $1,000 principal amount will be as follows:

• $1,012.50 for the $550,327,000 6 1/8% senior notes due 2021; and

• $967.50 for the $269,907,000 5 3/8% senior notes due 2021.

Holders had tendered $55,235,000 of the 6 1/8% notes, and the issuer plans to accept for purchase $2,795,000 of those notes.

Finally, investors tendered $62,563,000 of the 5 3/8% notes, and Chesapeake plans to purchase $3,227,000 of the notes.

Specifically, the tender offers for the priority 2 notes will be capped at $200 million. After that, the company will purchase the priority 3 notes for an amount equal to $200 million less the amount used to fund the offers for the priority 2 notes, according to a previous company announcement.

For each series, the total purchase price includes an early tender premium of $30.00 per $1,000 principal amount of notes tendered by the early deadline.

Holders who tender after the early deadline will receive the total amount less the early premium.

The issuer also will pay accrued interest to but excluding the settlement date.

Chesapeake said it reserves the right to modify the tender caps without extending the early deadline or withdrawal deadline.

In accepting tenders for purchase, the company said it will give priority to notes tendered before the early deadline regardless of priority levels.

If the offers are fully subscribed by the early deadline, no more notes will be accepted for purchase in the offers, the company added.

The offers do not contain a minimum tender condition but do require that Chesapeake net proceeds of at least $500 million from a concurrent private offering of senior notes, the release added.

The company said it expects to meet the financing condition.

As reported, Chesapeake priced an upsized $850 million amount of add-on senior notes in two tranches Sept. 27.

Morgan Stanley & Co. LLC (800 624-1808 or 212 761-1057) is the dealer manager. Global Bondholder Services Corp. (866 470-4200 or 212 430-3774) is the depositary and the information agent.

Chesapeake Energy is an Oklahoma City-based oil and gas producer.

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