Citi’s Marisa Moss and her team met with Chesapeake Energy (CHK) management recently, however, they weren’t able to persuade her that things are going well.Recently:
Moss reiterated an Underperform rating on the company’s debt, writing that their levered capital structure is unsustainable, given the ongoing low commodity prices it faces.
More detail from the note:
Exchange Offer Review: On December 2nd, Chesapeake announced it was offering unsecured note holders the option to exchange into a new $1.5BN 8.00% second lien note due 2022. Shorter-dated notes were given a higher priority level in the case of oversubscription as well as a higher exchange consideration. On December 16th, Chesapeake announced the preliminary results of the exchange ($2.8BN of total par amount was tendered translating into a $1.7BN 2nd lien), pushed back the early deadline to December 18th, and announced it had increased the maximum potential size of the new second lien to $3.0BN from $1.5BN. In particular, we think the company pushed back the deadline in the hopes that additional short-maturity paper would tender.
Early Tender Results Are In (Again): On December 21st, Chesapeake announced its final early tender results. The total amount tendered increased to $3.8BN from $2.8BN, which equates to a $2.35BN 2nd lien size and represents ~41% of the total par amount of unsecured notes....MORE
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