Is Chesapeake Energy (CHK) the Next Enron?
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Today, Jim Cramer confirmed what the market's biggest fear about Chesapeake Energy (NYSE: CHK) is: "It's the Next Enron."
With executive self-dealings, off balance sheet debt, and confusing deal structures it is no wonder why the two have been lumped together.
But while fears exists, Chesapeake is no Enron.
Don't take our word for it, but take cues from two recent market events:
Late Friday, Chesapeake enhanced their financial flexibility with a $3 billion unsecured loan from Goldman Sachs Bank USA and affiliates of Jefferies Group, Inc.. While the loan carries a hefty interest rate of 8.5%, it can be repaid at any time this year without penalty at par value. The loan is somewhat of a bridge as the company will seek to sell asset totaling $9.0-$11.5 billion through the remainder of the year. The company has already received strong interest from prospective buyers of its Permian Basin asset sales process and its Mississippi Lime joint venture process, and the company expects to complete these two transactions in the 2012 third quarter.
In addition to the loan, legendarily investor Carl Icahn is digging into the company and is amassing a "significant" stake.
So, while investor confidence is Chesapeake Energy is clearly shaken, the comapny is no Enron.
With executive self-dealings, off balance sheet debt, and confusing deal structures it is no wonder why the two have been lumped together.
But while fears exists, Chesapeake is no Enron.
Don't take our word for it, but take cues from two recent market events:
Late Friday, Chesapeake enhanced their financial flexibility with a $3 billion unsecured loan from Goldman Sachs Bank USA and affiliates of Jefferies Group, Inc.. While the loan carries a hefty interest rate of 8.5%, it can be repaid at any time this year without penalty at par value. The loan is somewhat of a bridge as the company will seek to sell asset totaling $9.0-$11.5 billion through the remainder of the year. The company has already received strong interest from prospective buyers of its Permian Basin asset sales process and its Mississippi Lime joint venture process, and the company expects to complete these two transactions in the 2012 third quarter.
In addition to the loan, legendarily investor Carl Icahn is digging into the company and is amassing a "significant" stake.
So, while investor confidence is Chesapeake Energy is clearly shaken, the comapny is no Enron.
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