Chesapeake Energy has put up most of itself as collateral to maintain access to its $4 billion credit facility—an important move as it struggles to remain afloat amid still-low energy prices. Such a high level of collateral is no surprise as there have been reports recently that lenders have been demanding more since the company’s debt downgrade.

Chesapeake Energy Corporation Soars On New Lending Agreement

Investors are extremely pleased with Monday night’s announcement as today Chesapeake stock skyrocketed, climbing by as much as 25.6% to $5.66 per share in morning trades, making it the S&P 500’s best performer early this morning. The company’s bonds also climbed this morning after the news was released.

Chesapeake Energy remains flexible

The energy giant said that at the time of the April redetermination of its credit facility, its borrowing base was unchanged, with the next redetermination of its borrowing base set for June 2017. As of February, Chesapeake had not drawn on its $4 billion borrowing base. The new agreement offered the company relief on some of the previous covenants while adding new ones.

For example, the lenders suspended the 3.5 times secured leverage ratio until September 2017 when it will be reinstated at the same multiple but will fall after December 2017, according to RBC Capital Markets. Chesapeake Energy’s interest coverage under the agreement declined from 1.1 times to 0.65 times through March 2017 when it will increase quarterly until it reaches 1.25 times by December 2017.

The company must maintain a collateral ratio of 1.25 times, and if it does not, a limit may be placed on its borrowing base. Chesapeake must also maintain a liquidity level of at least $500 million while the current covenants are suspended and $750 million in liquidity if the collateral coverage declines under 1.1 times.

RBC analyst Scott Hanold sees the new credit agreement as positive for the energy giant as its borrowing capacity holds steady and it gains operational flexibility through the extra covenant relief.

Chesapeake puts up hefty amount of collateral

Of course the new and amended covenants not only benefit Chesapeake Energy but the company’s lenders as well. According to The Salt Lake Tribune, the company put up almost all of itself as collateral, including most of its natural gas fields, real estate and derivatives contracts. In the regulatory filing announcing the new credit agreement, Chesapeake said it pledged “substantially all of the company’s assets, including mortgages encumbering 90 percent of all the company’s proved oil and gas properties.” The filing also indicates that the company pledged “all hedge contracts, property, deposit accounts and securities, subject to certain undisclosed carve-outs,” said The Salt Lake Tribune.

Citigroup analysts believe the oil and gas giant will issue a secured first-lien term loan to retire what’s left on its bonds due next year and in 2018. They also said that the new agreement should give the company time to ride out what has been a terrible time for commodities.

Short interest In Chesapeake Energy plunges

Investors have apparently been expecting Chesapeake Energy stock to recover soon as the latest information on short interest in Chesapeake from the New York Stock Exchange showed that it plunged 26% in the last two weeks of March. Sterne Agee CRT analysts Tim Rezvan and James Lizzul said we haven’t seen this low of a level of short interest in the company since May 2015. It peaked in the middle of December at 246 million shares and has plummeted 40% since then to 148 million shares, amounting to 21.7% of outstanding shares. However, the Sterne Agee CRT notes that Chesapeake stock has only gained 1.7% over this time, which they say implies that the longs kept selling while the shorts covered their positions.