Chesapeake Energy Corporation Announces Amendment to Revolving Credit Facility

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The FINANCIAL — Chesapeake Energy Corporation on September 30 announced it has amended its five-year, $4.0 billion revolving credit facility agreement maturing in 2019 with its bank syndicate group. Key attributes include:

Facility moves to a $4.0 billion senior secured revolving credit facility from a senior unsecured revolving credit facility

The initial borrowing base is confirmed at $4.0 billion, consistent with current availability

Previous total leverage ratio financial covenant of 4.0x trailing 12-month earnings before interest, depreciation and amortization (EBITDA) is suspended

Two new financial covenants include a senior secured leverage ratio of 3.5x through 2017 and 3.0x thereafter, and an interest coverage ratio of 1.1x through the first quarter of 2017, increasing incrementally to 1.25x by the end of 2017

Chesapeake’s credit facility may become unsecured when specific conditions set forth in the credit agreement are met. During an unsecured period, the total leverage ratio would be reinstated and the senior secured leverage ratio and interest coverage ratio would no longer apply. While Chesapeake’s obligations under the facility are secured, the amendment gives Chesapeake the ability to incur up to $2.0 billion of junior lien indebtedness. As of September 30, 2015, Chesapeake has $12.0 million in outstanding letters of credit under the facility with the remainder of the $4.0 billion available, according to Chesapeake Energy.

Nick Dell’Osso, Chesapeake’s Chief Financial Officer, commented, “This amendment to our existing revolving credit facility gives Chesapeake greater flexibility and access to our liquidity. The new senior secured leverage ratio which begins at 3.5x and new interest coverage ratio which begins at 1.1x coverage provide us with full access to the facility’s capacity under current market conditions. Along with opportunities for additional proceeds from potential asset divestitures, joint ventures and farm-out agreements, and an estimated reduction in our 2016 cost structure of more than $200 million through production and G&A cost improvements, this amendment places Chesapeake in a position of greater strength and flexibility.”


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