U.S. Supreme Court snubs Chesapeake Energy in bonds dispute

By Lawrence Hurley

WASHINGTON (Reuters) - The U.S. Supreme Court on Monday rejected a bid by natural gas company Chesapeake Energy Corp to avoid having to pay $438.7 million to investors in a bonds dispute.

The justices refused to hear the Oklahoma City-based company's appeal of a September 2016 ruling by the New York-based 2nd U.S. Circuit Court of Appeals in favor of bondholders. [nL2N1BR0Y6]

The appeals court said the payout was justified after Chesapeake Energy waited too long to tell bondholders of its plan to redeem $1.3 billion of their debt six years early.

The three-judge panel agreed with bond trustee Bank of New York Mellon Corp that hedge funds and other holders of Chesapeake's 6.775 percent notes maturing in 2019 were contractually entitled to a special "make-whole" price because of the early redemption.

The appeals court upheld a 2015 ruling by U.S. District Judge Paul Engelmayer in Manhattan.

(Reporting by Lawrence Hurley; Additional reporting by Jonathan Stempel; Editing by Will Dunham)

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