Judge Paul Engelmayer of the Southern District Court of New York denied the request of Chesapeake Energy Corporation (NYSE:CHK) for preliminary injunction against The Bank of New York Mellon Corporation (NYSE:BK) and the adhoc note holder group related to the acceptance of early redemption notice for its senior notes worth $1.3 billion.
Despite the court ruling, the second largest oil and natural gas producer in the United States went ahead and issued a notice to repurchase its 6.775 percent notes due in 2009. Chesapeake Energy Corporation (NYSE:CHK) proceeded with its plan for an early redemption to prevent the payment of a higher “make whole” price, which the company estimated to be around $400 million.
Judge Engelmayer said that Chesapeake Energy Corporation (NYSE:CHK) failed to demonstrate that it will suffer from irreparable damage without the preliminary injunction and the chances for the company to pay a make whole price is remote.
The court stated, “It is overwhelmingly likely that an untimely notice of Special Early Redemption would be held null and void, and not as requiring under the entirely different make whole price.”
Judge Engelmayer previously criticized The Bank of New York Mellon Corporation (NYSE:BK) and the adhoc note holder group for asking the court to automatically compel Chesapeake Energy Corporation (NYSE:CHK) to redeem the notes at a higher make whole price. He described their motion as “trickery” and it is just like “holding a sword” directed against the oil and natural gas producer.
Domenic J. Dell’Osso Jr., Chesapeake’s Chief Financial Officer said, “As the litigation proceeds, the company intends to present to the court additional facts which Chesapeake believes demonstrate the company’s and the underwriters’ joint and clear intent that the company would have until March 15 to issue any notice of Special Early redemption. We appreciate that the court has indicated that it will attempt to issue its ruling before the May 13, 2013, redemption date. We look forward to making our case within the next two months for the Court to issue a declaratory judgment that the company’s March 15, 2013 notice is timely and effective under the Special Early redemption provision of the indenture.”
The stock price of Chesapeake Energy Corporation (NYSE:CHK) is up by nearly 1 percent to $22.65 per share on Friday around noon in New York.