Chesapeake to Sell $2.3B of Senior Notes

Chesapeake Energy Corp. intends to offer $2.3 billion of senior notes to help fund a tender offer for roughly $938 million in outstanding senior notes.

The natural-gas producer said it plans to issue the $2.3 billion of senior notes in three separate series: one maturing in 2016, another maturing in 2021 and the last maturing in 2023.

The company also launched a tender offer for all of the $464.1 million principal amount outstanding in 7.625% senior notes due 2013 and all of the $473.7 million principal amount outstanding in 6.875% senior notes due 2018.

The total price per $1,000 principal amount, including a $30 early-tender premium, will be $1,020.00 for the 2013 notes and $1,074.50 for the 2018 notes.

The company said the remaining proceeds will be used to redeem its 6.775% senior notes due 2019, pending a favorable ruling in a declaratory judgment playing out in U.S. District Court in New York.

Chesapeake Energy wants to buy back $1.3 billion of the 2019 bonds. But a group of hedge funds have said the company failed to give proper notice to buy back the bonds and demanded a 30% premium, or roughly $400 million.

U.S. District Judge Paul Engelmayer, in a ruling Thursday, refused to declare that Chesapeake could redeem bonds at face value. But, he added it was "overwhelmingly clear" that Chesapeake cannot be forced to pay a premium in a game of "Gotcha." He asked to see more information.

Patrick McGee contributed to this report.

Copyright (c) 2012 Dow Jones & Company, Inc.

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