Chesapeake Energy 2012 Annual Report Download - page 116

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
106
by all of COO’s wholly owned subsidiaries, other than de minimis subsidiaries. The notes may be redeemed at any
time at specified make-whole or redemption prices and, prior to November 15, 2014, up to 35% of the aggregate
principal amount may be redeemed in connection with certain equity offerings. Holders of the COO notes have the
right to require COO to repurchase their notes upon a change of control on the terms set forth in the indenture, and
COO must offer to repurchase the notes upon certain asset sales. The COO senior notes are subject to covenants
that may, among other things, limit the ability of COO and its subsidiaries to make restricted payments, incur
indebtedness, issue preferred stock, create liens, and consolidate, merge or transfer assets. The COO senior notes
have cross default provisions that apply to other indebtedness COO or any of its guarantor subsidiaries may have
from time to time with an outstanding principal amount of $50 million or more.
Under a registration rights agreement, we agreed to file a registration statement within 365 days after the closing
of the COO senior notes offering enabling holders of the COO senior notes to exchange the privately placed COO
senior notes for publicly registered notes with substantially the same terms. We are required to use our commercially
reasonable best efforts to cause the registration statement to become effective as soon as practicable after filing and
to consummate the exchange offer on the earliest practicable date after such date, but in no event later than 60 days
after the date the registration statement has become effective. We also agreed to make additional interest payments
to holders, up to a maximum of 1% per annum, of the COO senior notes if we do not comply with our obligations under
the registration rights agreement. We did not file a registration statement within 365 days after the closing of the COO
senior notes and in 2012 accrued approximately $1 million of additional expense we expect to incur related to this
delay.
Bank Credit Facilities
During 2012, we used three revolving bank credit facilities as sources of liquidity. In June 2012, we paid off and
terminated our midstream credit facility. Our two remaining revolving bank credit facilities are described below.
Corporate
Credit Facility(a)
Oilfield Services
Credit Facility(b)
($ in millions)
Facility structure .............................................................................
Senior secured
revolving
Senior secured
revolving
Maturity date .................................................................................. December 2015 November 2016
Borrowing capacity ......................................................................... $ 4,000 $ 500
Amount outstanding as of December 31, 2012 .............................. $ — $ 418
Letters of credit outstanding as of December 31, 2012 .................. $31$—
___________________________________________
(a) Co-borrowers are Chesapeake Exploration, L.L.C., Chesapeake Appalachia, L.L.C. and Chesapeake Louisiana,
L.P.
(b) Borrower is COO.
Our credit facilities do not contain material adverse change or adequate assurance covenants. Although the
applicable interest rates under our corporate credit facility fluctuate slightly based on our long-term senior unsecured
credit ratings, our credit facilities do not contain provisions which would trigger an acceleration of amounts due under
the respective facilities or a requirement to post additional collateral in the event of a downgrade of our credit ratings.
Corporate Credit Facility. Our $4.0 billion syndicated revolving bank credit facility is used for general corporate
purposes. Borrowings under the facility are secured by proved reserves and bear interest at our option at either (i) the
greater of the reference rate of Union Bank, N.A. or the federal funds effective rate plus 0.50%, both of which are
subject to a margin that varies from 0.50% to 1.25% per annum according to our senior unsecured long-term debt
ratings, or (ii) the Eurodollar rate, which is based on LIBOR, plus a margin that varies from 1.50% to 2.25% per annum
according to our senior unsecured long-term debt ratings. These margins may be increased pursuant to the terms of
the recent credit facility amendment discussed below. The collateral value and borrowing base are determined
periodically. The unused portion of the facility is subject to a commitment fee of 0.50% per annum. Interest is payable
quarterly or, if LIBOR applies, it may be payable at more frequent intervals.