Chesapeake Energy has filed for Chapter 11 bankruptcy protection, the company said to day, adding that it had signed a restructuring support agreement with creditors.
The restructuring support agreement, which involves most of the company’s creditors, is contingent on Chesapeake managing to eliminate some $7 billion in debt during the Chapter 11 restructuring, the company said.
“We are fundamentally resetting Chesapeake's capital structure and business to address our legacy financial weaknesses and capitalize on our substantial operational strengths,” said Chesapeake’s chief executive, Doug Lawler. “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.”
Reports about a looming bankruptcy for one of the biggest and oldest shale oil independents in the U.S. first emerged in mid-June, after the company missed a payment on a bond due June 15.
This is not the first time Chesapeake has had dramatic troubles. During the last crisis, between 2014 and 2016, Chesapeake risked bankruptcy, but managed to avoid court proceedings through a series of out-of-court debt exchanges. Now, bankruptcy has become the only option, making Chesapeake the largest shale player to date to throw in the towel.
To help it through the restructuring, the company has now secured close to $1 billion in debtor-in-possession financing that a court first has to approve before the company can use it. Chesapeake also said some of its creditors have agreed to a $2.5-billion exit financing package, made up of a revolving credit facility and a term loan.
Chesapeake had a total debt load of $9 billion at the time of its last financial report and few ways to reduce it meaningfully amid the oil and gas price depression on global markets.
By Irina Slav for Oilprice.com
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