Joint bookrunners Goldman Sachs, Citi, and MUFG have upsized Chesapeake Energy’s first-lien, last-out term loan to $1.5 billion, from $1 billion, and tightened pricing, according to market sources. Pricing was expected later today.
Price talk for the five-year loan is now L+750 with a 1% LIBOR floor, offered at par. Recall initial guidance including a spread range of L+750–775 and an OID of 99. The loan is non-callable for two years, with a first call at par plus 50% of the coupon, stepping to 25% and par.
Proceeds from the deal will be used to fund a tender offer for up to $500 million of the borrower’s outstanding bonds in terms of purchase price. The tender prioritizes the company’s shortest-dated bonds. It will redeem up to $400 million (purchase price) of its 6.35% euro senior notes due 2017, 6.5% senior notes due 2017, and 7.25% senior notes due 2018.
Up to $250 million will be spent on the second-priority floating-rate senior notes due 2019 and the third-priority notes, which comprise the following paper: 6.625% senior notes due 2020; 6.875% senior notes due 2020; 6.125% senior notes due 2021; 5.375% senior notes due 2021; 4.875% senior notes due 2022; and 5.75% senior notes due 2023.
The new debt will be secured against the same collateral that is tied to the company’s revolver. In case of default, payments to new term loan creditors will waterfall down after the revolver is repaid. The loan will carry an unconditional guarantee from Chesapeake’s directly and indirectly held wholly owned domestic subsidiaries, with the same guarantee in place for the revolving credit.
Agencies assigned issue ratings of B–/Caa1 and the recovery rating from S&P Global Ratings is 1. S&P Global also downgraded the corporate rating to CC, from CCC. Moody’s affirmed the corporate rating at Caa2. Outlooks are negative and positive, respectively. — Jon Hemingway/Rachel McGovern
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