Chesapeake Fails to Buy Back Bonds

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Last Friday, Chesapeake Energy Corp issued an announcement that it would commence its plan of buying back US$1.3 billion worth of notes, directly challenging its bondholders wishes. The American natural gas company issued its bond redemption notice to its 6.775% at maturity on 2019 or 100 cents on the dollar or at par value.

In pursuing its redemption despite failing to cause the issuance of an order from US District Judge Paul Engelmayer to require the Bank of New York Mellon Corp to follow the plan, the holders of the US$250 million of the notes continue to oppose the planned redemption claiming that the company failed to act in the allotted time. In denying the petition for injunction, the judge said the company had failed to establish the resulting irreparable harm should the act be not allowed.

This was done to prevent Chesapeake from paying US$400 million in payment to be able to close the gap of a US$4 billion shortfall by the end of the year.

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