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Ohio Utica Shale

Chesapeake gets $2 billion loan to pay off more-expensive loans

By Bob Downing Published: November 1, 2012

From Reuters:

Chesapeake Energy Corp said today it has arranged an unsecured $2 billion loan to pay off more-expensive loans.

The company said it is setting up a five-year term loan facility and will use proceeds to pay off a loan it obtained in May of this year, as well as other debt.

Chesapeake said last month that it planned to pay off most of a pricey $4 billion bridge loan after receiving $2.8 billion in cash from the sale of some of its oil and natural gas properties in the Permian Basin. It said then that it would pay down the loan to $1.2 billion with plans to repay the full balance by the end of the year.

The loan, made in May, was a lifeline at the time for the U.S. energy company that was staring at a funding shortfall of about $10 billion. So far this year, Chesapeake has sold about $12 billion of its assets, a situation that has alleviated its liquidity crunch.

Chesapeake's investment bankers on the Permian deal, Goldman Sachs and Jefferies Group, provided the loan.

In May, Chesapeake replaced $4 billion in existing debt with the new $4 billion, which came at a steep 8.5 percent interest rate and would rise to more than 11 percent if the company did not pay it off by the end of the year.

Bank of America Corp, Goldman Sachs Group Inc and Jefferies Group Inc. worked with Chesapeake on the new loan facility.

The company is set to post quarterly earnings after the close of the stock market today.

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