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.