Chesapeake Energy 2015 Annual Report Download - page 29

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However, we cannot assure you that we would be able to implement alternative financing plans, if necessary, on
commercially reasonable terms or at all, or that undertaking alternative financing plans, if necessary, would allow us
to meet our debt obligations and capital requirements or that these actions would be permitted under the terms of our
various debt instruments. If commodity prices remain at depressed levels and we are unsuccessful in implementing
our alternative financing plans or otherwise improving our liquidity, we may not be able to fund budgeted capital
expenditures or meet our debt service requirements in 2017 and beyond.
Our inability to generate sufficient cash flow to satisfy our debt obligations or to obtain alternative financing could
materially and adversely affect our business, financial condition, results of operations, cash flows and liquidity. Any
failure to make scheduled payments of interest and principal on our outstanding indebtedness would likely result in a
further reduction of our credit rating, which could significantly harm our ability to incur additional indebtedness on
acceptable terms. Further, if for any reason we are unable to meet our debt service and repayment obligations, we
would be in default under the terms of the agreements governing our debt, which would allow our creditors under those
agreements to declare all outstanding indebtedness thereunder to be due and payable (which would in turn trigger
cross-acceleration or cross-default rights between the relevant agreements), the lenders under our credit facility could
terminate their commitments to extend credit, and the lenders could foreclose against our assets securing their
borrowings and we could be forced into bankruptcy or liquidation. In addition, the lenders under our credit facility could
compel us to apply our available cash to repay our borrowings. If the amounts outstanding under the credit facility or
any of our other significant indebtedness were to be accelerated, we cannot assure you that our assets would be
sufficient to repay in full the money owed to the lenders or to our other debt holders.
Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service
obligations to increase significantly.
Borrowings under our credit facility and floating rate senior notes due 2019 bear interest at variable rates and
expose us to interest rate risk. If interest rates increase and we are unable to effectively hedge our interest rate risk,
our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed
remained the same, and our net income and cash available for servicing our indebtedness would decrease.
Restrictive covenants in our credit facility could limit our growth and our ability to finance our operations,
fund our capital needs, respond to changing conditions and engage in other business activities that may be
in our best interests.
Our credit facility imposes operating and financial restrictions on us. These restrictions limit our ability and that
of our restricted subsidiaries to, among other things:
• incur additional indebtedness;
• make investments or loans;
• create liens;
• consummate mergers and similar fundamental changes;
• make restricted payments;
• make investments in unrestricted subsidiaries; and
• enter into transactions with affiliates.
We may be prevented from taking advantage of business opportunities that arise because of the limitations
imposed on us by the restrictive covenants under our credit facility. The restrictions contained in the credit facility could:
• limit our ability to plan for, or react to, market conditions, to meet capital needs or otherwise to restrict our
activities or business plan; and
• adversely affect our ability to finance our operations, enter into acquisitions or to engage in other business
activities that would be in our interest.
Also, our credit facility requires us to maintain compliance with specified financial ratios and satisfy certain financial
condition tests. Our ability to comply with these ratios and financial condition tests may be affected by events beyond
our control and, as a result, we may be unable to meet these ratios and financial condition tests. These financial ratio
restrictions and financial condition tests could limit our ability to obtain future financings, make needed capital
expenditures, withstand a continued downturn in our business or a downturn in the economy in general or otherwise
conduct necessary corporate activities. Further declines in oil, NGL and natural gas prices, or a prolonged period of