Chesapeake Energy 2014 Annual Report Download - page 98

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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a loss of approximately $99 million associated with the purchase and redemption of the 9.5% Senior Notes due 2015,
which consisted of $87 million in premiums, $9 million of unamortized discount and $3 million of unamortized deferred
charges.
During 2013, we issued $2.3 billion in aggregate principal amount of senior notes at par. 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 revolving credit facility and purchase certain senior notes. We purchased $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 during 2013. 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 2013, we also redeemed $1.3 billion in aggregate principal amount of our 6.775%
Senior Notes due 2019 (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, our redemption of the 2019 Notes has been the subject
of litigation. On July 15, 2013, we retired at maturity the remaining $247 million aggregate principal amount outstanding
of our 7.625% Senior Notes due 2013.
In March 2013, the Company brought suit in the U.S. District Court for the Southern District of New York against
The Bank of New York Mellon Trust Company, N.A., the indenture trustee for the 2019 Notes. The Company sought
and ultimately obtained a judgment declaring 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 for that redemption pursuant
to the special early redemption provision of the supplemental indenture governing the 2019 Notes. In May 2013, as a
result of that ruling, the 2019 Notes were redeemed at par. In November 2014, the U.S. Court of Appeals for the Second
Circuit, on appeal by the indenture trustee, reversed the District Court’s declaratory judgment and held that the notice
was not effective to redeem the 2019 Notes at par because it was not timely for that purpose. The Court of Appeals
remanded the case to the District Court for a determination whether the redemption notice triggered a redemption at
the make-whole price specified in the indenture, instead of at par. The Company sought a rehearing by the Court of
Appeals en banc in December 2014, and that petition was denied on February 6, 2015. On February 13, 2015, the
indenture trustee filed a motion in the District Court for entry of a judgment requiring the Company to pay the make-
whole price, as defined in the indenture, less the par amount paid in the 2013 redemption plus prejudgment interest
at the statutory 9% rate from the redemption date. The Company intends to oppose the trustee’s motion vigorously.
On December 30, 2014, six former holders of the 2019 Notes filed a putative class action against the Company
on behalf of all former holders who sold the 2019 Notes after the Company issued the notice of early redemption in
March 2013 but before the notes were redeemed at par in May 2013. These former holders allege that the Company
breached the indenture by issuing a wrongful notice of special early redemption, and that this breach caused the market
value of the notes to decline, injuring them when they sold their 2019 Notes. This suit has been assigned to the same
District Court judge as the suit described above. The Company intends to defend itself against this claim vigorously.
No scheduled principal payments are required on our senior notes until 2016 unless the holders of our 2.75%
Contingent Convertible Senior Notes due 2035 exercise their individual demand repurchase rights on November 15,
2015, which would require us to repurchase all or a portion of the $396 million principal amount of notes.
Revolving Credit Facility
In December 2014, we entered into a new five-year $4.0 billion senior unsecured revolving credit facility to use
for general corporate purposes. The new credit facility replaced our then-existing $4.0 billion senior secured revolving
credit facility that was scheduled to mature in December 2015. The aggregate commitments under the facility may be
increased up to an additional $1.0 billion, and the December 2019 maturity date may be extended for two one-year
periods at our request and with the consent of the participating lenders. As of December 31, 2014, we had no outstanding
borrowings under the facility and utilized $15 million of the facility for various letters of credit. Borrowings under the
facility are currently unsecured; however, we will be required to provide collateral and the facility will be subject to a
borrowing base if our credit rating declines to Ba3 (Moody’s Investors Services, Inc.) or BB- (Standard & Poor’s Ratings
Services) or lower.