S&P Raises Chesapeake Energy (CHK) to 'BB+' Following Updated Outlook

Standard & Poor's Ratings Services said today it raised its corporate credit rating on Chesapeake Energy Corp. (NYSE: CHK) to 'BB+' from 'BB-'. The outlook is stable. We also raised our issue-level rating on Chesapeake's senior unsecured debt to 'BB+' from 'BB-'. (The recovery rating remains '3', which indicates our expectation for a meaningful (50% to 70%) recovery in the event of a default.) We have also raised our rating on Chesapeake's preferred stock to 'B+' from 'B-'. The liquidity assessment was revised to "strong" from "adequate." The comparable rating analysis assessment was revised to "favorable" from "unfavorable."

Standard & Poor's rating outlook on Chesapeake Energy Corp. is stable. The current rating already reflects the reduction in financial leverage that we expect to occur over the one-year period addressed by the outlook.

"The rating could be raised further if Chesapeake can generate significant positive free cash flow in its core operations, such that free operating cash flow to total debt were sustainably above 15%. Likewise, if the company could achieve and sustain debt to EBITDA below 2x," said Standard & Poor's credit analyst Scott Sprinzen.

On the other hand, the rating could be jeopardized if, contrary to our expectations, there were some combination of a failure to complete pending asset sales, operating setbacks, or a growth strategy and financial policy that were more aggressive than we now anticipate.

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