Chesapeake Energy 2015 Annual Report Download - page 100

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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During 2015, as required by the terms of the indenture for our 2.75% Contingent Convertible Senior Notes due
2035 (the 2035 Notes), the holders were provided the option to require us to purchase on November 15, 2015, all or
a portion of the holders’ 2035 Notes at par plus accrued and unpaid interest up to, but excluding, November 15, 2015.
On November 16, 2015, we paid an aggregate of approximately $394 million to purchase all of the 2035 Notes that
were tendered and not withdrawn. An aggregate of $2 million principal amount of the 2035 Notes remains outstanding
as of December 31, 2015.
During 2015, we repurchased in the open market approximately $119 million aggregate principal amount of our
3.25% Senior Notes due 2016 for cash. We recorded a gain of approximately $5 million associated with the repurchase.
During 2014, we issued $3.0 billion in aggregate principal amount of senior notes at par. The offering included
two series of notes: $1.5 billion in aggregate principal amount of Floating Rate Senior Notes due 2019 and $1.5 billion
in aggregate principal amount of 4.875% Senior Notes due 2022. We used a portion of the net proceeds of $2.966
billion to repay the borrowings under, and terminate, our term loan credit facility. We used the remaining proceeds
along with cash on hand to redeem the remaining $97 million principal amount of the 6.875% Senior Notes due 2018
and to purchase and redeem the remaining $1.265 billion principal amount of the 9.5% Senior Notes due 2015 for
$1.454 billion. We recorded a loss of approximately $6 million associated with the redemption of the 6.875% Senior
Notes due 2018, which consisted of $5 million in premiums and $1 million of unamortized deferred charges. We recorded
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 moved 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 from the
redemption date. On March 20, 2015, the Company filed its opposition to the Trustee’s motion and cross-moved for a
judgment requiring the Company to pay restitution in an amount that would disgorge the benefit the Company achieved
from refinancing the 2019 Notes in 2013 and that would return the parties to the economic positions they would have
been in if the par redemption had never taken place. On July 10, 2015, the District Court granted the Trustee’s motion
and denied the Company’s cross-motion and entered an amended judgment on July 17, 2015 awarding the Trustee
$380 million plus prejudgment interest in the amount of $59 million. The Company filed a notice of appeal on July 27,
2015 and posted a supersedeas bond to stay execution of the judgment while appellate proceedings are pending.