Chesapeake Energy 2012 Annual Report Download - page 65

55
Our actual indebtedness to EBITDA ratio as of December 31, 2012 was approximately 3.91 to 1.00. The ratio
compares consolidated indebtedness to consolidated EBITDA, both non-GAAP financial measures that are defined in
the credit facility agreement, for the 12-month period ending on the measurement date. Consolidated indebtedness
consists of outstanding indebtedness, less the cash and cash equivalents of Chesapeake and certain of our subsidiaries.
Consolidated EBITDA consists of the net income of Chesapeake and certain of our subsidiaries, excluding income
from investments and non-cash income plus interest expense, taxes, depreciation, amortization expense and other
non-cash expenses, and is calculated on a pro forma basis to give effect to any acquisitions, divestitures or other
changes.
The credit facility amendment increases the applicable margin by 0.25% for borrowings under the corporate credit
facility on each day during the Amendment Effective Period when borrowings exceed 50% of the borrowing capacity
and requires us to pay a fee to each lender in an amount equal to 0.05% of its revolving commitment if the Amendment
Effective Period is in effect on June 30, 2013. Based on current commitment levels, this would result in an additional
payment of $2 million. In addition, the amendment does not allow our collateral value securing the borrowings to be
more than $75 million below the collateral value that was in effect as of September 30, 2012 during the Amendment
Effective Period.
Oilfield Services Credit Facility. Our $500 million syndicated oilfield services revolving bank credit facility is used
to fund capital expenditures and for general corporate purposes associated with our oilfield services operations. The
facility may be expanded from $500 million to $900 million at COO’s option, subject to additional bank participation.
Borrowings under the credit facility are secured by all of the equity interests and assets of COO and its wholly owned
subsidiaries (the restricted subsidiaries for this facility, but they are unrestricted subsidiaries under Chesapeake's senior
notes, contingent convertible senior notes, term loan and corporate revolving bank credit facility), and bear interest at
a variable interest rate. For further discussion of the terms of our oilfield services credit facility, see Note 3 of the notes
to our consolidated financial statements included in Item 8 of this report.
Midstream Credit Facility. Prior to June 15, 2012, we utilized a $600 million midstream syndicated senior secured
revolving bank credit facility to fund capital expenditures to build natural gas gathering and other systems in support
of our drilling program and for general corporate purposes associated with our midstream operations. With the
anticipated sale of the substantial majority of our midstream business in the second half of 2012, on June 15, 2012,
we paid off and terminated our midstream credit facility.
Hedging Facility
We have a multi-counterparty secured hedging facility with 17 counterparties that have committed to provide
approximately 6.4 tcfe of hedging capacity for natural gas, oil and NGL price derivatives and 6.4 tcfe for basis derivatives
with an aggregate mark-to-market capacity of $17.0 billion under the terms of the facility. For further discussion of the
terms of our hedging facility, see Note 9 of the notes to our consolidated financial statements included in Item 8 of this
report.
Term Loans
May 2012 Term Loans. In May 2012, we entered into $4.0 billion of unsecured term loans under a credit agreement
that provided for term loans in an aggregate principal amount of $4.0 billion. The net proceeds of the term loans of
approximately $3.789 billion after discount, customary fees and syndication costs were used to repay borrowings under
our corporate revolving credit facility and for general corporate purposes. The term loans were issued at a discount of
3%, or $120 million, and the customary fees and syndication costs incurred were approximately $91 million. In October
and November 2012, we used proceeds from asset sales and our new term loan (the November 2012 term loan
described below) to fully repay the May 2012 term loans. We recorded $200 million of associated losses with the
repayment, including $86 million of deferred charges and $114 million of debt discount.
November 2012 Term Loan. In November 2012, we established an unsecured five-year term loan credit facility
in an aggregate principal amount of $2.0 billion for net proceeds of $1.935 billion (November 2012 term loan). Our
obligations under the facility rank equally with our outstanding senior notes and contingent convertible senior notes
and are unconditionally guaranteed on a joint and several basis by our direct and indirect wholly owned subsidiaries
that are subsidiary guarantors under the indentures for such notes. Amounts borrowed under the new facility, which
priced at 98% of par, bear interest at LIBOR plus 4.5%. The LIBOR rate is subject to a floor of 1.25% per annum. The
new facility is non-callable in the first year but may be voluntarily repaid without penalty in the second and third years
at par plus a specified call premium and may be voluntarily repaid at any time thereafter at par. We used the net
proceeds of the new term loan to fully repay the remaining outstanding borrowings under our May 2012 term loans