Chesapeake Energy 2000 Annual Report Download - page 48

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During 2000, our interest rate swap resulted in a net $38,000 increase in interest expense. The terms of the
swap agreement are as follows:
Months Notional Amount
May 1998 - April 2001 $230,000,000
May 2001 April 2008 $230,000,000
Fixed Rate Floating Rate
7% Average of three-month Swiss Franc
LIBOR, Deutsche Mark and Australian
Dollar plus 300 basis points
7% U.S. three-month LIBOR plus 300
basis points
If the floating rate is less than the fixed rate, the counterparty will pay us accordingly. If the floating rate
exceeds the fixed rate, we will pay the counterparty. The interest rate swap agreement contains a "knockout
provision" whereby the agreement will terminate on or after May 1, 2001 if the average closing price for the
previous twenty business days for shares of Chesapeake's common stock is greater than or equal to $7.50 per
share. The agreement also provides for a maximum floating rate of 8.5% from May 2001 through April 2008.
Based on current market prices for Chesapeake common stock, we expect the interest rate swap
agreement will terminate in May 2001 under the knockout provision of the agreement discussed above. The
fair value of the swap agreement at December 31, 2000 was not material. Results from interest rate hedging
transactions are reflected as adjustments to interest expense in the corresponding months covered by the swap
agreement.
The table below presents principal cash flows and related weighted average interest rates by expected
maturity dates. The fair value of the long-term debt has been estimated based on quoted market prices.
December 31, 2000
Years of Maturity
-37-
2001 2002 2003 2004 2005 Thereafter Total Fair Value
($ in millions)
Liabilities:
Long-term debt, including current
portion - fixed rate $0.8 $ 0.6 $ $150.0 $500.0 $270.0 $921.4 $894.7
Average interest rate 9.1% 9.1% 7.9% 9.6% 8.8% 9.1%
Long-term debt variable rate $$25.0 $ $ $$$ 25.0 $ 25.0
Average interest rate 9.3% -9.3%