CHESAPEAKE ENERGY CORPORATION Item 1.01 Entry into a Material Definitive Agreement.
On
Pursuant to the terms of the RSA and the Restructuring Term Sheet, below is a summary of the treatment that the stakeholders of the Company would receive under the Plan:
· Holders of Other Secured Claims. Each holder of other secured claims would
receive, at the Company's option and in consultation with a requisite number
of holders of claims who are backstopping a rights offering pursuant to the
Plan: (a) payment in full in cash; (b) the collateral securing its secured
claim; (c) reinstatement of its secured claim; or (d) such other treatment
rendering its secured claim unimpaired in accordance with section 1124 of the
Bankruptcy Code.
· Holders of Other Priority Claims. Each holder of other priority claims would
receive treatment in a manner consistent with section 1129(a)(9) of the
Bankruptcy Code.
· Holders of Revolving Credit Facility Claims. On the effective date of the Plan
(the "Plan Effective Date"), each holder of obligations under the Revolving
Credit Facility would receive, at such holder's option, its pro rata share of
either Tranche A RBL Exit Facility Loans or Tranche B RBL Exit Facility Loans,
each on a dollar for dollar basis
· Holders of FLLO Term Loan Facility Claims. On the Plan Effective Date, each
holder of obligations under the FLLO Term Loan Facility would receive its pro
rata share of (i) 76% of the reorganized Company's new common equity interests
(the "New Common Stock"), subject to the terms set forth in the Restructuring
Term Sheet and (ii) the right to participate in a rights offering on the terms
set forth in the Restructuring Term Sheet.
· Holders of Second Lien Notes Claims. On the Plan Effective Date, each holder
of the Second Lien Notes would receive its pro rata share of (i) 12% of the
New Common Stock, subject to the terms set forth in the Restructuring Term
Sheet, (ii) the right to participate in a rights offering on the terms set
forth in the Restructuring Term Sheet, and (iii) warrants to purchase 10% of
New Common Stock on certain terms set forth in the Restructuring Term Sheet,
warrants to purchase another 10% of New Common Stock on certain other terms
set forth in the Restructuring Term Sheet, and 50% of warrants to purchase
another 10% of New Common Stock on certain other terms set forth in the
Restructuring Term Sheet (the "New Class C Warrants ").
· Holders of Unsecured Notes Claims. On the Plan Effective Date, each holder of
the Unsecured Notes would receive its pro rata share of (i) 12% of the New
Common Stock, subject to the terms set forth in the Restructuring Term Sheet
(the "Unsecured Claims Recovery"), and (ii) 50% of the New Class C Warrants .
· Holders of General Unsecured Claims. On the Plan Effective Date, each holder
of allowed general unsecured claims would receive its pro rata share of the
Unsecured Claims Recovery.
· Equity Holders. Each holder of an equity interest in Chesapeake would have
such interest cancelled, released, and extinguished without any distribution.
The RSA contains certain covenants on the part of each of the Company and the Consenting Stakeholders, including limitations on the parties' ability to pursue alternative transactions (subject to customary provisions regarding the ability of the Company's board of directors to satisfy its fiduciary duties), commitments by the Consenting Stakeholders to vote in favor of the Plan and commitments of the Company and the Consenting Stakeholders to negotiate in good faith to finalize the documents and agreements contemplated by and required to implement the Plan. The RSA also provides for certain conditions to the obligations of the parties and for termination upon the occurrence of certain events, including without limitation, the failure to achieve certain milestones . . .
Item 1.03 Bankruptcy or Receivership.
Chapter 11 Filing
On
The Company will continue to operate its business as "debtors-in-possession"
under the jurisdiction of the
DIP Credit Facility
On
The foregoing description of the DIP Credit Facility, the DIP Credit Agreement
and the Exit Credit Facilities does not purport to be complete and is qualified
in its entirety by reference to the final, executed Commitment Letter, a copy of
which is filed herewith as Exhibit 10.2 and is incorporated herein by reference,
which includes as attachments the DIP Credit Agreement and Exit Facilities Term
Sheet, as may be approved by the
Item 2.04 Triggering Events that Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement.
The filing of the Chapter 11 Cases described above in Item 1.03 constitutes an event of default that accelerated the Company's obligations under the following debt instruments (the "Debt Instruments"):
·$2,003 million , including letters of credit, outstanding under the Revolving Credit Facility. ·$1,500 million outstanding under the FLLO Term Loan. ·$2,330 million in outstanding aggregate principal amount of the Second Lien Notes issued pursuant to the Second Lien Notes Indenture. ·$176 million in outstanding aggregate principal amount of the 6.625% Senior Notes due 2020 issued pursuant to the 6.625% Senior Notes due 2020 Indenture. ·$74 million in outstanding aggregate principal amount of the 6.875% Senior Notes due 2020 issued pursuant to the 6.875% Senior Notes due 2020 Indenture. ·$166 million in outstanding aggregate principal amount of the 6.125% Senior Notes due 2021 issued pursuant to the 6.125% Senior Notes due 2021 Indenture. ·$127 million in outstanding aggregate principal amount of the 5.375% Senior Notes due 2021 issued pursuant to the 5.375% Senior Notes due 2021 Indenture. ·$272 million in outstanding aggregate principal amount of the 4.875% Senior Notes due 2022 issued pursuant to the 4.875% Senior Notes due 2022 Indenture. ·$168 million in outstanding aggregate principal amount of the 5.750% Senior Notes due 2023 issued pursuant to the 5.750% Senior Notes due 2023. ·$623 million in outstanding aggregate principal amount of the 7.000% Senior Notes due 2024 issued pursuant to the 7.000% Senior Notes due 2024 Indenture. ·$246 million in outstanding aggregate principal amount of the 8.000% Senior Notes due 2025 issued pursuant to the 8.000% Senior Notes due 2025 Indenture. ·$46 million in outstanding aggregate principal amount of the 8.000% Senior Notes due 2026 issued pursuant to the 8.000% Senior Notes due 2026 Indenture. ·$119 million in outstanding aggregate principal amount of the 7.500% Senior Notes due 2026 issued pursuant to the 7.500% Senior Notes due 2026 Indenture. ·$253 million in outstanding aggregate principal amount of the 8.000% Senior Notes due 2027 issued pursuant to the 8.000% Senior Notes due 2027 Indenture. ·$1,064 million in outstanding aggregate principal amount of the Convertible Notes issued pursuant to the Convertible Notes Indenture. ·$2 million in outstanding aggregate principal amount of the WildHorse Notes pursuant to the WildHorse Notes Indenture.
The Debt Instruments provide that, as a result of the Chapter 11 Cases, the principal and interest due thereunder shall be immediately due and payable. Any efforts to enforce such payment obligations under the Debt Instruments are automatically stayed as a result of the Chapter 11 Cases, and the creditors' rights of enforcement in respect of the Debt Instruments are subject to the applicable provisions of the Bankruptcy Code.
Item 7.01 Regulation FD Disclosure.
Press Release
In connection with the filing of the Chapter 11 Cases, Chesapeake issued a press
release on
Cleansing Material
Prior to the filing of the Chapter 11 Cases, the Company entered into confidentiality agreements (collectively, the "NDAs") with certain of the Consenting Stakeholders. Pursuant to the NDAs, the Company agreed to publicly disclose certain information, including material non-public information disclosed to such Consenting Stakeholders (the "Cleansing Material") upon the occurrence of certain events set forth in the NDAs. A copy of the Cleansing Material is attached to this Form 8-K as Exhibit 99.2.
The information included in this Form 8-K under Item 7.01 and Exhibits 99.1 and 99.2 are being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to liabilities of that Section, unless the registrant specifically states that the information is to be considered "filed" under the Exchange Act or incorporates it by reference into a filing under the Exchange Act or the Securities Act of 1933, as amended (the "Securities Act").
Additional Information on the Chapter 11 Cases.
Court filings and information about the Chapter 11 Cases can be found at a
website maintained by the Company's noticing and claims agent,
Item 8.01 Other Events.
Cautionary Note Regarding Chesapeake's Common Stock
Chesapeake cautions that trading in Chesapeake's securities during the pendency of the Chapter 11 Cases is highly speculative and poses substantial risks. Trading prices for Chesapeake's securities may bear little or no relationship to the actual recovery, if any, by holders of Chesapeake's securities in the Chapter 11 Cases. Chesapeake expects that its equity holders could experience a significant or complete loss on their investment, depending on the outcome of the Chapter 11 Cases.
Forward Looking Statements
This Current Report on Form 8-K includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. Forward looking statements are statements other than statements of
historical fact. They are generally identified by the words the words "believe,"
"expect," "anticipate," "estimate," "intend," "plan," "may," "should," "could,"
"will," "would," and "will be," and variations of such words and similar
expressions, although not all forward-looking statements contain these
identifying words. They include statements regarding our current expectations or
forecasts of future events, including matters relating to the continuing effects
of the COVID-19 pandemic and the impact thereof on our business, financial
condition and results of operations; actions by, or disputes among or between,
members of OPEC+; market factors, market prices; our ability to meet debt
service requirements; our expectations regarding the borrowing base under our
revolving credit facility; our evaluation of strategic alternatives,
cost-cutting measures, reductions in capital expenditures, refinancing
transactions, capital exchange transactions, asset divestitures, operational
efficiencies, future impairments, cost savings due to operational and capital
efficiencies related to the WildHorse Merger; the operation or effects of the
Section 382 Rights Plan and the use of NOLs to offset future taxable income.
Such forward-looking statements are subject to risks and uncertainties that
could cause actual results to differ materially from those expressed in, or
implied by, such statements. Although we believe the expectations and forecasts
reflected in the forward-looking statements are reasonable, we can give no
assurance they will prove to have been correct. They can be affected by
inaccurate or changed assumptions or by known or unknown risks and
uncertainties. These risks and uncertainties include, but are not limited to:
the impact of the COVID-19 pandemic and its effect on our business, financial
condition, employees, contractors, vendors and the global demand for oil and
natural gas and
Item 9.01 Exhibits.
(d)
Exhibit No. Document Description
10.1* Restructuring Support Agreement, dated June 28, 2020 .
10.2* Commitment Letter, dated June 28, 2020 .
99.1 Chesapeake Energy Corporation press release, dated June 28,
2020 .
99.2 Consenting Stakeholder Cleansing Materials.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document and contained in Exhibit 101).
* Certain schedules and similar attachments have been omitted. The Company
agrees to furnish a supplemental copy of any omitted schedule or attachment to
the
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