8-KMaterial AgreementsFinancial EventsExhibits & Filings

EXPAND ENERGY Corp 8-K Report, Material Agreement (Aug 24, 2016)

Filed August 24, 2016For Securities:EXEEXEELEXEEWEXEEZ

Summary

Chesapeake Energy Corporation (CHK) filed an 8-K on August 24, 2016, to report on the entry into a new Term Loan Agreement and a related Class A Term Loan Supplement, effective August 23, 2016. The company secured $1.5 billion in Class A Term Loans, primarily to finance tender offers for its senior unsecured notes and for general corporate purposes, including further debt repayment. This new facility is guaranteed by its subsidiaries and secured by liens on the company's assets, though these liens are subordinate to those securing the company's existing Credit Facility. The Class A Term Loans mature in August 2021 and carry an interest rate of LIBOR plus 7.50% (with a 1.00% floor) or Alternate Base Rate plus 6.50% (with a 2.00% floor). The loan includes various repayment premiums that decrease over time, with the option for prepayment at par beginning in the fourth year. Covenants in the agreement restrict the company's ability to incur additional debt, liens, or make certain restricted payments and investments. The filing also details events of default, including cross-default provisions with other indebtedness over $125.0 million.

Key Highlights

  • 1Chesapeake Energy entered into a new $1.5 billion Term Loan Agreement and Class A Term Loan Supplement on August 23, 2016.
  • 2Proceeds are earmarked for tender offers of senior unsecured notes and general corporate purposes, including debt reduction.
  • 3The Class A Term Loans mature on August 23, 2021.
  • 4Interest rate is set at LIBOR + 7.50% (1% floor) or ABR + 6.50% (2% floor).
  • 5The new Term Loans are guaranteed by all subsidiaries that guarantee the company's existing Credit Agreement.
  • 6The loans are secured by first-priority liens on assets that secure the Credit Facility, but these liens are subordinate to the Credit Facility's secured parties.
  • 7The agreement includes covenants restricting additional debt, liens, and certain corporate actions, and requires a 101% prepayment offer in the event of a change of control.

Frequently Asked Questions

The primary purpose of the $1.5 billion in Class A Term Loans is to finance tender offers for Chesapeake Energy's senior unsecured notes. Any remaining funds will be used for further debt repayments and general corporate purposes.

The Class A Term Loans mature on August 23, 2021. The interest rate is LIBOR plus 7.50% per annum (subject to a 1.00% LIBOR floor) or the alternate base rate (ABR) plus 6.50% per annum (subject to a 2.00% ABR floor), at the company's option.

The Term Loan Obligations are guaranteed by all of Chesapeake Energy's subsidiaries that guarantee the existing Credit Agreement. They are secured by first-priority liens on the company's and its subsidiaries' assets that also secure the Credit Facility. However, pursuant to a Collateral Trust Agreement, these liens are subordinate to the secured parties under the Credit Facility, making them second in collateral recovery behind the Credit Facility.

In the event of a change of control of the company, Chesapeake Energy is required to offer to prepay the Term Loans at a purchase price equal to 101% of the aggregate principal amount of Term Loans prepaid.