Chesapeake Moves Forward with $1.3B Par Note Redemption after Losing Preliminary Injunction Hearing

18 March 2013
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  • On March 14, 2013, the United States District Court for the Southern District of New York held that Chesapeake Energy Corporation (“Chesapeake”) failed to win a preliminary injunction permitting it to redeem $1.3 billion in notes without paying a make whole premium.
  • While holding that it was ambiguous whether March 15 was the final date on which redemption at par must be completed, or whether the redemption may be completed after March 15 as long as the formal notice of redemption at par is provided on or prior to March 15, the court held it was “overwhelmingly likely” that Chesapeake would not be required to consummate an early redemption at make whole if it gave notice of redemption at par on March 15 and then lost the contract interpretation question regarding the final date on which redemption at par must be completed.
  • The case highlights the need for borrowers and their counsel to take special care to avoid ambiguities in drafting and negotiating commercial terms – both in the disclosure documents and principal documentation – relating to its financing arrangements.