Chesapeake Energy 2013 Annual Report Download - page 99

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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During 2012, we issued $1.3 billion in aggregate principal amount of our 6.775% Senior Notes due 2019 (the
“2019 Notes”) in a registered public offering. We used the net proceeds of $1.263 billion from the offering to repay
outstanding indebtedness under our corporate revolving bank credit facility. On May 13, 2013, we redeemed the 2019
Notes at par pursuant to notice of special early redemption. We recorded a loss of approximately $33 million associated
with the redemption, including $19 million of unamortized deferred charges and $14 million of discount. As described
in the following paragraph, the special early redemption was the subject of litigation.
In March 2013, the Company brought suit in the U.S. District Court for the Southern District of New York (the
“Court”) against The Bank of New York Mellon Trust Company, N.A. (“BNY Mellon”), the indenture trustee for the 2019
Notes. The Company sought a declaration that the notice it issued on March 15, 2013 to redeem all of the 2019 Notes
at par (plus accrued interest through the redemption date) was timely and effective pursuant to the special early
redemption provision of the supplemental indenture governing the 2019 Notes. BNY Mellon asserted that the March
15, 2013 notice was not effective to redeem the 2019 Notes at par because it was not timely for that purpose and
because of the specific phrasing in the notice that provided it would not be effective unless the Court concluded it was
timely. The Court conducted a trial on the matter in late April and on May 8, 2013 ruled in the Company’s favor. On
May 11, 2013, BNY Mellon filed notice of an appeal of the decision with the United States Court of Appeals for the
Second Circuit and the appeal is currently pending.
No scheduled principal payments are required on our senior notes until February 2015.
COO Senior Notes
The COO senior notes are the unsecured senior obligations of COO and rank equally in right of payment with all
of COO’s other existing and future senior unsecured indebtedness and rank senior in right of payment to all of its future
subordinated indebtedness. The COO senior notes are jointly and severally, fully and unconditionally guaranteed by
all of COO’s wholly owned subsidiaries, other than de minimis subsidiaries. The notes may be redeemed by COO 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 $50 million or more.
Under a registration rights agreement, we agreed to file a registration statement enabling holders of the COO
senior notes to exchange the privately placed COO senior notes for publicly registered notes with substantially the
same terms. The exchange offer was completed in July 2013.
Bank Credit Facilities
During 2013, we had the following two revolving bank credit facilities as sources of liquidity:
Corporate
Credit Facility(a) Oilfield Services Credit Facility(b)
($ 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, 2013 .............................. $ — $ 405
Letters of credit outstanding as of December 31, 2013.................. $ 23 $ —
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(a) Co-borrowers are Chesapeake Exploration, L.L.C., Chesapeake Appalachia, L.L.C. and Chesapeake Louisiana,
L.P.
(b) Borrower is COO.