Chesapeake Energy 2013 Annual Report Download - page 98

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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The term loan matures on December 2, 2017 and may be voluntarily repaid before November 9, 2015 at par plus
a specified premium and at any time thereafter at par. The term loan may also be refinanced or amended to extend
the maturity date at our option, subject to lender approval.
The term loan credit agreement contains negative covenants substantially similar to those contained in the
Company’s corporate revolving bank credit facility, including covenants that limit our ability to incur indebtedness, grant
liens, make investments, loans and restricted payments and enter into certain business combination transactions.
Other covenants include additional restrictions regarding the incurrence of certain unsecured indebtedness, the
incurrence of secured indebtedness, the disposition of assets and the prepayment of certain indebtedness. The term
loan credit agreement does not contain financial maintenance covenants.
We were in compliance with all covenants under the term loan credit agreement as of December 31, 2013. If we
should fail to perform our obligations under the agreement, the term loan could be terminated and any outstanding
borrowings under the term loan credit agreement could be declared immediately due and payable. The term loan credit
agreement also has cross default provisions that apply to other indebtedness of Chesapeake and its restricted
subsidiaries with an outstanding principal amount in excess of $125 million.
In 2012, we used the proceeds from the term loan, along with proceeds from asset sales, to repay our $4.0 billion
term loan credit facility established in May 2012. We recorded $200 million of losses associated with the repayment,
including $86 million of unamortized deferred charges and $114 million of unamortized debt discount.
Chesapeake Senior Notes and Contingent Convertible Senior Notes
The Chesapeake senior notes and the contingent convertible senior notes are unsecured senior obligations of
Chesapeake and rank equally in right of payment with all of our other existing and future senior unsecured indebtedness
and rank senior in right of payment to all of our future subordinated indebtedness. Chesapeake is a holding company
and owns no operating assets and has no significant operations independent of its subsidiaries. Chesapeake’s
obligations under the senior notes and the contingent convertible senior notes are jointly and severally, fully and
unconditionally guaranteed by certain of our direct and indirect 100% owned subsidiaries. See Note 21 for consolidating
financial information regarding our guarantor and non-guarantor subsidiaries.
We may redeem the senior notes, other than the contingent convertible senior notes, at any time at specified
make-whole or redemption prices. Our senior notes are governed by indentures containing covenants that may limit
our ability and our subsidiaries’ ability to incur certain secured indebtedness, enter into sale/leaseback transactions,
and consolidate, merge or transfer assets. The indentures governing the senior notes and the contingent convertible
senior notes do not have any financial or restricted payment covenants. The senior notes and contingent convertible
senior notes indentures have cross default provisions that apply to other indebtedness the Company or any guarantor
subsidiary may have from time to time with an outstanding principal amount of at least $50 million, depending on the
indenture.
We are required to account for the liability and equity components of our convertible debt instruments separately
and to reflect interest expense at the interest rate of similar nonconvertible debt at the time of issuance. The applicable
rates for our 2.75% Contingent Convertible Senior Notes due 2035, our 2.5% Contingent Convertible Senior Notes
due 2037 and our 2.25% Contingent Convertible Senior Notes due 2038 are 6.86%, 8.0% and 8.0%, respectively.
During 2013, we issued $2.3 billion in aggregate principal amount of senior notes at par in a registered public
offering. The offering included three series of notes: $500 million in aggregate principal amount of 3.25% Senior Notes
due 2016; $700 million in aggregate principal amount of 5.375% Senior Notes due 2021; and $1.1 billion in aggregate
principal amount of 5.75% Senior Notes due 2023. We used a portion of the net proceeds of $2.274 billion to repay
outstanding indebtedness under our corporate revolving bank credit facility and to purchase $217 million in aggregate
principal amount of our 7.625% Senior Notes due 2013 for $221 million and $377 million in aggregate principal amount
of our 6.875% Senior Notes due 2018 for $405 million pursuant to tender offers. We recorded a loss of approximately
$37 million associated with the tender offers, including $32 million in premiums and $5 million of unamortized deferred
charges. During the third quarter of 2013, we retired at maturity the remaining $247 million aggregate principal amount
outstanding of our 7.625% Senior Notes due 2013.