Chesapeake Energy Corporation (NYSE:CHK) earned a record $3 billion by selling away bonds in two parts to refinance debt, as the cost against default is nearing a six year low. Chesapeake has been ahead of its competitors since last year, in terms of debt performance, and activist investor Carl Icahn advised the company to increase financial discipline by drilling fewer wells and selling assets.
Yield more than the benchmark
The second largest U.S. gas producer has issued $1.5 billion of floating rate notes due 2019 yielding 325 basis points, which is three times more than the offered rate by London interbank (LIBOR) and an equivalent portion of 4.875% securities due in 2022 at 254 basis points more than benchmarks, according to Data compiled by Bloomberg.
Funds raised will be used by the energy company to settle a term loan maturing in 2017 along with funding a tender offer for debt due 2015 and buy back securities maturing in 2018, according to a regulatory filing. However, Chesapeake Energy Corporation (NYSE:CHK) did not sell the 12 year bond listed, in the filing.
Standard & Poor’s has been reviewing the company’s BB- rating for an increase since Feb. 6, based on the plans to adjust the capital spending as per the cash flow.
After the management reshuffle demands from Icahn, the company’s five year credit default swaps were quoted at 173.2 basis points at 8:15 a.m. in New York. This can be compared to the 167.3 basis points on Feb. 25, the lowest level since December 2007, according to the data.
Top rating for Chesapeake
A few weeks back, Chesapeake Energy Corporation (NYSE:CHK) got bond rating of AAA from Standard & Poor’s rating services. The credit rating agency said that Chesapeake’s “consistent maintenance of its very strong finances, which the rating service expects management to continue to support.” Another rating agency Fitch has been rating Chesapeake with AAA since 2010. Moody Investors assigned the company bonds a rating of Aa1. Three out of three international agencies have assigned a top rating to the company.
Chesapeake Energy Corporation (NYSE:CHK) shares surged 6.47% in the last year, ahead of the competitors, who rose at an average of 5.6% in the Bloomberg USD High yield Corporate Bond Index. The company attained a rating of Ba2 for its debt by Moody’s Investors Service ranks.