8-KOther Events

EXPAND ENERGY Corp 8-K Report (Nov 13, 2003)

Filed November 13, 2003For Securities:EXEEXEELEXEEWEXEEZ

Summary

Chesapeake Energy Corporation (CHK) announced on November 12, 2003, significant financing activities through the pricing of both senior notes and convertible preferred stock. The company priced $200 million of 6.875% senior notes due 2016 at a discount, aiming to raise funds for a cash tender offer on its existing 8.5% senior notes and to repay debt incurred from a recent acquisition of south Texas natural gas properties. Additionally, Chesapeake priced a public offering of $150 million of 5% cumulative convertible preferred stock. These preferred shares are convertible into common stock at $16.40 per share and are subject to mandatory conversion under certain conditions. The proceeds from the preferred stock offering will also be used to repay bank debt associated with the Laredo Energy acquisition. These transactions represent a strategic move to optimize the company's capital structure and refinance debt from recent growth initiatives.

Key Highlights

  • 1Chesapeake Energy priced a $200 million offering of 6.875% senior notes due January 15, 2016.
  • 2The senior notes were priced at 98.977% of par, yielding 7.0% to maturity.
  • 3Proceeds from the senior notes will fund a cash tender offer for $111 million of 8.5% Senior Notes due 2012 and repay bank debt.
  • 4Chesapeake also priced a $150 million public offering of 5% cumulative convertible preferred stock.
  • 5The preferred stock is convertible into common stock at $16.40 per share, with a mandatory conversion provision.
  • 6Net proceeds from the preferred stock offering will also be used to repay bank debt related to the Laredo Energy acquisition.
  • 7The company updated its outlook on its website, reflecting changes in interest expense, share count, and hedging positions.

Frequently Asked Questions

Chesapeake Energy raised a total of $350 million through these offerings: $200 million from the senior notes and $150 million from the convertible preferred stock.

The primary use of the funds is to repay existing debt. Specifically, proceeds from the senior notes will be used for a tender offer on existing 8.5% senior notes and to repay bank debt. Proceeds from the preferred stock offering will also be used to repay bank debt incurred for the acquisition of south Texas natural gas properties.

The 5% cumulative convertible preferred stock has a liquidation preference of $100 per share. It pays an annual dividend of $5.00, payable quarterly. Each share is convertible into 6.0962 shares of Chesapeake common stock at an initial conversion price of $16.40 per share. The shares are also subject to mandatory conversion into common stock if the common stock price exceeds 130% of the conversion price for 20 trading days within a 30-day period after November 18, 2006.

Offering the senior notes under Rule 144A means they are being sold in a private placement to qualified institutional buyers (QIBs) and are not registered with the SEC. This allows for a faster and potentially less costly issuance process compared to a public offering, but restricts resale to other QIBs initially.