Summary
Chesapeake Energy Corporation (the "Company") has entered into a significant first amendment to its senior revolving credit agreement, dated December 15, 2014. This amendment, effective September 30, 2015, introduces crucial changes aimed at providing the Company with greater financial flexibility, particularly in light of prevailing market conditions. The core of the amendment involves securing the Company's obligations under the credit facility and certain hedging agreements with liens on specific oil and gas properties. This security is temporary and contingent on meeting certain conditions. The amendment also brings about several key changes to the credit agreement's covenants and borrowing terms. Notably, it allows the Company to incur up to $2.0 billion in junior lien indebtedness, shifts the interest rate determination away from credit ratings to the utilization of the borrowing base, suspends the total leverage ratio covenant, and introduces new, more relaxed first lien secured leverage and interest coverage ratios. The borrowing base is set at $4.0 billion, with the next redetermination scheduled for April 2016. These adjustments collectively aim to support Chesapeake Energy's operational and financial strategies.
Key Highlights
- 1Chesapeake Energy amended its senior revolving credit agreement on September 30, 2015.
- 2The amendment secures company obligations with liens on oil and gas properties until specific conditions are met.
- 3The Company is now permitted to incur up to $2.0 billion in junior lien indebtedness.
- 4Interest rates on loans will be based on the percentage of the borrowing base used, not credit ratings.
- 5The total leverage ratio covenant has been suspended.
- 6New covenants include a first lien secured leverage ratio (3.5:1 through 2017, then 3.0:1) and an interest coverage ratio (1.1:1 through Q1 2017, increasing to 1.25:1 by end of 2017).
- 7The borrowing base is set at $4.0 billion, with the next redetermination on April 15, 2016.