Summary
Chesapeake Energy Corporation (CHK) filed an 8-K on May 14, 2012, reporting the execution of a new $3.0 billion Term Loan Credit Agreement on May 11, 2012. This new facility was used to repay outstanding debt under the company's corporate revolving credit facility. The term loan is guaranteed by certain wholly-owned domestic subsidiaries but is not secured by any company assets. The agreement includes standard negative covenants, with some more restrictive modifications compared to the revolving credit facility, particularly concerning unsecured debt, dividends, and unrestricted subsidiaries. Notably, it does not contain financial maintenance covenants.
Key Highlights
- 1Entered into a $3.0 billion Term Loan Credit Agreement on May 11, 2012.
- 2Proceeds were used to repay existing debt under the corporate revolving credit facility.
- 3The loan is guaranteed by certain domestic subsidiaries but is unsecured.
- 4Includes restrictive covenants regarding debt incurrence, liens, investments, and dividends.
- 5Maturity date for the term loan is December 2, 2017.
- 6Lenders have an option to exchange loans for fixed rate notes (11.50% interest) starting May 11, 2013.
- 7Repayment of the term loan may involve yield maintenance premiums after January 1, 2013.
Frequently Asked Questions
The primary purpose of the $3.0 billion Term Loan Credit Agreement was to repay existing indebtedness outstanding under Chesapeake Energy Corporation's corporate revolving bank credit facility.
No, the amounts borrowed under the Term Loan Credit Agreement are not secured by any assets of Chesapeake Energy Corporation or its subsidiaries. It is an unsecured facility.
The Term Loan Credit Agreement matures on December 2, 2017. Interest rates can be based on either the Eurodollar rate (LIBOR) plus an Applicable Margin (initially 7.0%) or a base rate plus an Applicable Margin (initially 6.0%). Both rates have floors. Notably, lenders can exchange their loans for fixed rate notes (11.50% interest) starting May 11, 2013, and there may be yield maintenance premiums for prepayments after January 1, 2013.
The agreement contains negative covenants similar to existing facilities but with some more restrictive modifications. These primarily limit the company's ability to incur additional debt (especially unsecured), grant liens, make investments, and pay dividends. While there are no financial maintenance covenants, breaches of covenants or other events of default can lead to acceleration of the loan.