Kirkland & Ellis is serving as legal counsel, Alvarez & Marsal is serving as restructuring advisor, Rothschild & Co and Intrepid Financial Partners are serving as financial advisors, and Reevemark is serving as communications advisor to Chesapeake Energy, which voluntarily filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of Texas to facilitate a comprehensive balance sheet restructuring. Chesapeake intends to use the proceedings to strengthen its balance sheet and restructure its legacy contractual obligations to achieve a more sustainable capital structure. Chesapeake will operate in the ordinary course during the Chapter 11 process.
Chesapeake entered into a restructuring support agreement with 100% of the lenders under its revolving credit facility, holders of approximately 87% of the obligations under its term loan agreement, approximately 60% of its senior secured second lien notes due 2025, and approximately 27% of its senior unsecured notes, pursuant to which Chesapeake will implement a Chapter 11 plan of reorganization to eliminate approximately $7 billion of debt.
As part of the agreement, Chesapeake secured $925 million in debtor-in-possession financing from certain lenders under Chesapeake’s revolving credit facility, which will be available upon court approval. The financing package will provide Chesapeake the capital necessary to fund its operations during the court-supervised Chapter 11 reorganization proceedings. The company and certain lenders under Chesapeake’s revolving credit facility also agreed to the principal terms of a $2.5 billion exit financing, consisting of a new $1.75 billion revolving credit facility and a new $750 million term loan. Additionally, Chesepeake has the support of its term loan lenders and secured note holders to backstop a $600 million rights offering upon exit.
“We are fundamentally resetting Chesapeake’s capital structure and business to address our legacy financial weaknesses and capitalize on our substantial operational strengths,” Doug Lawler, president and CEO of Chesapeake, said. “By eliminating approximately $7 billion of debt and addressing the legacy contractual obligations that have hindered our performance, we are positioning Chesapeake to capitalize on our diverse operating platform and proven track record of improving capital and operating efficiencies and technical excellence. With these demonstrated strengths, and the benefit of an appropriately sized capital structure, Chesapeake will be uniquely positioned to emerge from the Chapter 11 process as a stronger and more competitive enterprise.
“In addition to securing financing to fund our ongoing operations and facilitate our exit from this process, we are pleased to have the support of our term loan lenders and secured note holders to backstop a $600 million rights offering, demonstrating their confidence in Chesapeake’s operating platform and future. We deeply appreciate the hard work and commitment of our employees, who remain focused on safely and efficiently executing our business. We look forward to working productively with our suppliers, business partners and all stakeholders throughout this process.
“Over the last several years, our dedicated employees have transformed Chesapeake’s business — improving capital efficiency and operational performance, eliminating costs, reducing debt and diversifying our portfolio. Despite having removed over $20 billion of leverage and financial commitments, we believe this restructuring is necessary for the long-term success and value creation of the business.”
Wachtell, Lipton, Rosen & Katz is serving as legal counsel to Chesapeake’s board of directors.
Sidley Austin is serving as legal counsel, RPA Advisors is serving as financial advisor and Houlihan Lokey Capital is serving as investment banker to MUFG Union Bank, the DIP facility agent and exit facilities agent.
Davis Polk & Wardell and Vinson & Elkins are serving as co-legal counsel and Perella Weinberg Partners and Tudor, Pickering, Holt & Co. are serving as investment bankers to an ad hoc group of Chesapeake’s first lien last out term loan lenders.
Akin Gump Strauss Hauer & Feld is serving as legal counsel, FTI Consulting is serving as financial advisor and Moelis & Company is serving as investment banker to Franklin Advisers.
Headquartered in Oklahoma City, OK, Chesapeake Energy is focused on discovering and developing a resource base of unconventional oil and natural gas assets onshore in the United States.