Chesapeake Energy (CHK) Offers Update on 2019 Notes Redemption Litigation; Has Engaged in Talks with U.S. DOJ, USPS, State Agency Reps

September 29, 2016 7:46 AM EDT

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Chesapeake Energy (NYSE: CHK) disclosed the following in a U.S. SEC filing on Thursday:

Item 8.01. Other Events.

On September 29, 2016, Chesapeake Energy Corporation issued a press release regarding the commencement of a private placement to eligible purchasers of $850 million aggregate principal amount of convertible senior notes due 2026. A copy of the press release is filed as Exhibit 99.1 and incorporated by reference in this current report.

In connection with the private placement, we are providing the following information, which is also disclosed in the confidential offering circular for the private placement:

Litigation Concerning Redemption of 2019 Notes

As previously disclosed, in connection with the litigation related to our notice issued on March 15, 2013 to redeem all of our 6.775% Senior Notes due 2019 (the “2019 Notes”) at par (plus accrued interest through the redemption date) pursuant to the special early redemption provision of the supplemental indenture governing the 2019 Notes, we filed a notice of appeal on July 27, 2015 of an amended judgment entered on July 17, 2015 by the U.S. District Court for the Southern District of New York awarding the trustee for the 2019 Notes $380 million plus prejudgment interest in the amount of $59 million. We posted a supersedeas bond in the amount of $461 million (reflected as an outstanding letter of credit under our Credit Facility) to stay execution of the judgment while appellate proceedings are pending. We accrued a loss contingency of $100 million for this matter in 2014 and accrued an additional $339 million in 2015. On September 15, 2016, the United States Court of Appeals for the Second Circuit affirmed the trial court’s ruling. We intend to seek a rehearing en banc of the appeal by the U.S. Court of Appeals for the Second Circuit and may file a writ of certiorari with the United States Supreme Court.

Regulatory Proceedings

As previously disclosed, we have received, from the U.S. Department of Justice (“DOJ”) and certain state governmental agencies and authorities, subpoenas and demands for documents, information and testimony in connection with investigations into possible violations of federal and state antitrust laws relating to our purchase and lease of oil and natural gas rights in various states. We also have received DOJ, U.S. Postal Service and state subpoenas seeking information on our royalty payment practices. In addition, we have received a DOJ subpoena seeking information on our accounting methodology for the acquisition and classification of oil and gas properties and related matters. We have engaged in discussions with the DOJ, U.S. Postal Service and state agency representatives and continue to respond to such subpoenas and demands.



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