Chesapeake Energy 2015 Annual Report Download - page 47

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Strategic Developments
Debt Exchanges and Repurchases
In November 2015, as required by the terms of the indenture for our 2.75% Contingent Convertible Senior Notes
due 2035 (the 2035 Notes), each holder was provided the option to require us to purchase on November 15, 2015, all
or a portion of such holder’s 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 the 2035 Notes that
were tendered and not withdrawn.
In December 2015, we privately exchanged newly issued 8.00% Senior Secured Second Lien Notes due 2022
(Second Lien Notes) for certain outstanding senior unsecured notes and contingent convertible notes (Existing Notes).
Approximately $3.9 billion of the Existing Notes were exchanged for approximately $2.4 billion aggregate principal
amount of the Second Lien Notes. See Note 3 of the notes to our consolidated financial statements included in Item
8 of this report for further details related to this exchange.
In December 2015, we repurchased in the open market approximately $119 million aggregate principal amount
of our 3.25% Senior Notes due 2016 for $114 million.
Credit Facility Amendments
In September and December 2015, we amended our $4.0 billion senior revolving credit facility dated December
15, 2014, and maturing December 2019, which is used for general corporate purposes. Pursuant to the amended credit
agreement, we are required to secure our obligations under the facility with liens on certain of our oil and natural gas
properties, with such liens to be released upon the satisfaction of specific conditions. The amended credit facility
provides that, while the obligations are required to be secured, (i) we have the right to incur junior lien indebtedness
of up to $4.0 billion; (ii) our use of the facility will be subject to a borrowing base; (iii) the rate of interest on outstanding
loans, as well as fees on undrawn commitments, will vary based on the percentage of the borrowing base used, rather
than on our credit ratings; (iv) the total leverage ratio covenant will be suspended; and (v) the amended credit facility
will be subject to a first lien secured leverage ratio and an interest coverage ratio. The permitted junior lien debt basket
of $4.0 billion may be further increased upon the satisfaction of certain conditions, including the following: (i) after
giving effect to all debt secured by such junior liens and the uses of such debt in retirement of other indebtedness, our
net annual cash interest expense would increase by no more than $75 million, and (ii) we have exchanged debt secured
by such junior liens for more than $2.0 billion aggregate principal amount of outstanding senior notes with maturities
or initial put dates in 2017 through 2019. The amended credit facility requires us to maintain, as of the last day of each
fiscal quarter while it is required to be secured by a portion of our oil and natural gas properties, (i) a first lien secured
leverage ratio of no more than 3.5 to 1 through 2017 and 3.0 to 1.0 thereafter, and (ii) an interest rate coverage ratio
of at least 1.1 to 1.0 through the first quarter of 2017, increasing to 1.25 to 1.0 by the end of 2017. The amendment
sets the borrowing base at $4.0 billion. This amendment gives us greater flexibility and access to our liquidity.
Through the amendments discussed above, the total commitments under the credit facility remain at $4.0 billion,
subject to reduction in connection with issuances of junior lien indebtedness by us after April 15, 2016, the date of the
first borrowing base redetermination. No adjustment to the total commitment has occurred or will occur for any junior
lien indebtedness issuance that occurs before April 15, 2016.
Workforce Reduction
On September 29, 2015, we reduced our workforce by approximately 15% as part of an overall plan to reduce
costs and better align our workforce with the needs of our business and current oil and natural gas commodity prices.
In connection with the reduction, we incurred a total charge of approximately $55 million in 2015 for one-time termination
benefits.