Trade your unsecured paper for a slightly-higher-in-the-food-chain second lien, at a discount.
The stock is down another 10.6% at $4.93.
Mr. Icahn owns some above $23 which is going to make it difficult to recoup the losses in his lifetime.(current age: 79)
From the Motley Fool:
Chesapeake Energy Corporation's Stock Slammed After Note Exchange Offer
Deeply indebted natural gas driller is offering to exchange new second lien notes for some of its unsecured notes.
Shares of Chesapeake Energy (NYSE:CHK) dropped by as much as 10% by 10:30 a.m. EST Thursday. Fueling the slump was an announcement by the company that it is offering to exchange up to $1.5 billion of new 8% Senior Secured Second Lien notes due in 2022 for certain outstanding unsecured notes. It's an exchange that some in the market are reading as a sign of financial distress.
So what: Chesapeake Energy is looking to either push back the maturity of some of its near-term notes and/or exchange some of its longer term notes at a deep discount by exchanging a portion of its outstanding notes for new second lien notes. For the near-term notes, which include $1.7 billion of notes maturing in 2017 and 2018, the company is offering up to 100% and 97% of the face value of its 2017 notes and 82.5% of the face value of the 2018 notes. Meanwhile, for maturities beyond 2018 the company is offering exchanges at deep discounts to face value of between 56.5% to 60.875%.
The company has set up an acceptance priority level, with the nearest term notes holding the highest priority. This suggests that those holding the longer-term notes might not be able to exchange them, even if they wanted to because they are much lower priority.....MOREMoneyBeat has some additional insight:
Chesapeake Energy Corp.’s bonds are trading off again, driven this time by the shale driller’s late-Wednesday offer to exchange a slew of its bonds at a discount for new, higher-ranking debt.
The Oklahoma City company joins a growing roster of energy companies seeking to lessen their indebtedness through such deals.
Linn Energy Co., Exco Resources Inc., Halcon Resources Corp. others have engaged in similar transactions this year. The deals differ—in some cases only offering the exchange to a limited set of big creditors—but they all force creditors to consider taking a haircut to move up in the pecking order for repayment.
It’s a trade investors in money-losing energy companies have been willing to make as oil and gas prices have both fallen more than 20% this year, hurting the low-ranking debt of oil-and-gas companies and forcing some into bankruptcies that proved rough for creditors. Samson Resources Corp.’s restructuring is set to wipe out bondholders’ stake. Even high-ranking creditors of Samson and other companies haven’t been spared some pain.
While Chesapeake isn’t near bankruptcy, such situations have given investors a keen appreciation for their place in line for repayment. The deal is set to add an up-to-$1.5 billion layer of new bonds that outrank the company’s existing notes. Holders of bonds bearing 4.875% interest due in 2022 would get as little as $515 in new notes for every $1,000 in principal amount of their old debt. Holders of bonds maturing sooner would take a slimmer discount....MORE
